You WIN! (Now please pay up)

Am I the only one who thinks winning a car is ironic?  Possibly, it seems that a vehicle is one of the most popular prizes these days.  From fast food restaurants to charity draws they all seem to tempt you with a shiny new vehicle (usually fancy and top of the line.)  Personally, this seems more of a punishment than a win.

Assuming that you actually take the prize instead of asking for the cash equivalent the "win" is probably going to cost you money.  Why?  In most cases I would assume that the car you win is bigger/fancier than the one the you currently have (otherwise why would you try and win it?)  As a result of winning you are going to:

-Pay more for insurance, the car is new and expensive and will cost more to replace hence the hike in your monthly payments.  Add extra if the car is sporty since the insurance company assumes that people who drive sporty cars are more dangerous drivers.

-Pay more for gas, I have yet to see a hybrid as a prize but I've seen lots SUV's and vans.  Needless to say your fuel efficiency is going down with these vehicles and your costs are going up.

-Pay more for your next car.  Let's be honest, when this car wears out are you going to be happy downgrading to what you had before?  Or have you adapted to your new normal?  If it's the later it's going to cost you.

-Pay more for maintenance (maybe).  Ok, I'll admit that this is fairly variable.  A new car may need less maintenance at the beginning (especially if you are driving an old car) but the more bells and whistles it has the more there is to break.

In other words why on earth would you want to win a car?  On the other hand I would love to win a TFSA or RRSP contribution, but I haven't seen any of those about.  What's up with that?

Mortgage Plan Revisited – Yearly 10%

Following yesterdays post I am looking at what I’ll need to make my 10% principal payments over the next four years.  The payments are laid out as follows:

Year 1 - $15,200 - PAID!

Year 2 - $15,200 - Sitting in bank account waiting to be paid

Year 3 - $15,200 - $4,697.90 sitting in bank account

Year 4 - $15,200 – Not saved yet

Year 5  - $1,900 – Not saved yet

Amount still needed - $27,602.10

The biggest way to take a bite out of that would be to get funding for my Masters tuition thus freeing up the $15,700 that I have set aside.  Other sources of money are

Tax Returns - $1050/year for four years.  ($4,200)

Yearly bonus - $300/year for four years.  ($1,200)

Tutoring 3hrs/week until September.  ($720)

Tutoring 1.5hrs/week past September.  ($4,590)

If all of these pan out I would be short $1,192.10.  That said I may be able to pick up extra hours with my day job, or more students after I finish my Masters.  I estimated low on my tax returns and assumed that my yearly bonus would not go up at all.  In a pinch, near the end I could dip into the $9,000 that I have put aside for a car but am not planning on using as long as I have two working legs and the bus system keeps running. 

In other words . . . bring it on world, that mortgage is toast! 

Mortgage Plan Revisited – Monthly Payments

A lot has happened since I first formulated my Mortgage Plan.  While the numbers for how I can make the mortgage disappear are still valid I have had to go back and take a look at where the money is coming from.  The biggest change has been that I will not be seeing disability benefits at my current pay level.  I wish I could tell you why but I don’t actually know how the calculations work.  Apparently they just type people’s information into the computer and it spits out an answer.  No one I spoke to seems to be able to do the calculations themselves.  Add to that the fact that I have been accepted to start my Masters in September and could potentially see a 20% pay cut. 

As things stand I:

- made my 10% lump sum payment for the year

- have enough money from rent to cover my double ups until September

- am on track to finish saving for a car and emergency savings by September

- have $19,913.45 in savings to put towards my mortgage

So I have decided to take a slightly different approach to the problem and divided it in half; the monthly double ups and the yearly 10%. 

I am challenging myself to come up with the money for double ups ($1,422.56 this year and $1,564.80 next November) entirely from my monthly paycheck. 

If my pay drops to 80% I will see $2878.71 every month while I do my Masters.  I am hoping to divide it as follows:

Mortgage – $1,564.80 (as of next November so I’ll plan for it now)

House Maintenance - $250.00

Housing Taxes - $182.50

House Insurance - $72.00

Utilities – $230

Savings - $290

Transportation – $15 (I’ll get a “free” bus pass with my tuition)

Food - $100

Cell – $25

Internet - $50

Health Insurance – $23.52

Clothes - $5

Gifts - $5

Misc - $10

Big Ticket Item - $25

Entertainment - $10

Social/Sports - $5

Financial Planning - $14

Left over - $1.89

Yes, I realize that it is a supper squeaky budget, but at the drop of a hat I can move my mortgage payments back to $646.62, thus freeing up $918.18 a month.  The sooner I make extra payments the more of an impact they have on interest earned.  Since I’m always up for a challenge I plan on giving this a go and seeing what happens. 

Freeniture not furniture

On occasion when I have visitors to my house I'll get the comment, "looks like you need to go to the furniture store."  Normally I'll just smile and nod.  You see I own somewhat of a large house for one person and most of my furniture came with me from my university apartment.  Because of that one bed room is almost empty, my front room held a solitary (though quite comfy chair) and I have an area of the basement that is not furnished at all.  At the end of the day though, I had no need to go to the furniture store.  After all I had a bed to sleep on, a dresser for storage, a table to eat at, and the comfiest chair in the world.  I needed nothing else.  After all I can only sit on one chair at a time.

I knew that more furnishings would come into my house eventually, which is a good thing seeing as I am hosting a number of relatives for my brother's wedding this summer and I am in the process of being approved as a foster parent.  So I kept my eyes peeled looking for freeniture instead of furniture.

I had the advantage of lots of time, I moved to my new house in November and my brother's wedding / approval to foster won't come until June/July.  Patience won out for me twice in the past week.  First find was a look-like-new couch that was being moved out of my office building to make room for another desk.  A co-worker with a pick-up was kind enough to deliver it to my house after my boss asked me if I wanted it.  (Though the programmers and I were a bit put out to see it go, not that anyone sat on the couch, rather we would no longer have a place to store our stuff!)

The second find was equally awesome.  I chanced to see a lovely little dresser on someone's front lawn Saturday morning.  This one is a fixer-upper for sure.  It needs a new paint job and some of the drawers need a bit of fixing, but I figure I can do that myself for minimal costs.  To be entirely honest I am really looking forward to the project.  It should be a great learning experience and I am planning on having a lot of fun doing it.  I also had a good bit of fun bringing it home.  As you can see from the picture the drawers came home in my snazzy wagon.  The base I ended up carrying home by hand.  The whole process took almost two hours.  I know that some people are gasping at the idea of spending two hours carrying home a piece of furniture that will need to be fixed.  Just go to the store, it's not worth it!  They might say.  But to me it is worth it.  I got out in the sun and used my muscles for something other than sitting and typing.  I spent the time planning how best to fix it up and figuring out what I'd need, trying to use my ingenuity to keep the costs low.  Add to that the amusing and encouraging remarks that you'll get from people when they see you walking along with a dresser balanced on your back!  So much more entertaining than two hours at the movies.

Have a question?  I'd love to hear it!

Reader Question - My Financial Road

I got an interesting question this week.  

"How did you get started on your financial road? I am 51 and wanting to get things in order. "
-Anonymous

It's interesting because it's complex.  How much of my success do I chalk up to my personality, to my child hood or my planning as a young adult.  There are many, many reasons why I am in such as comfortable financial position so I've decided to whittle it down to what are (likely) the three most important factors.  

1. I was able to earn and manage money at a young age.  I learned it's value by working for it and then using it to buy what I wanted.  I also learned the importance of saving and giving it away.  You can check out detailed posts on how talking to kids about money is important, learning to handle money as a kid, and making money mistakes early on.  

2. I always lived on less than I earned.  When I started earning money as a young child 40% went to savings and 10% went to charity.  I only spent half of it.  When I earned money lifeguarding as a teenager every penny was saved.  Working for minimum wage over my university years I lived on 50% or less of what I took home and invested the rest.  Currently I live on 48% of my income and the rest either gets tucked into my RRSP or goes to building equity in my house by paying down my mortgage faster.  This may be a difficult idea for somebody who is use to living off 90% of their income, but try deflating your lifestyle a bit.  I am willing to bet that you lived on a lot less than you do now 10 - 20 years ago.  I am also willing to bet that you were just as happy 10 - 20 years ago as you are now.  So start moving back to your old spending habits.  

3. I know what I want and I plan for it.  Even though I'm not sure what my life will look like when I retire I know how much I'll need to maintain my current lifestyle and I'm working towards it.  I planed and researched my investment strategy in detail over a couple of years.  I also planned for the purchase of my house and saved for it for four years.  At all these points I knew what I wanted, where I was, and I made a detailed plan to cover the distance.  

Have a question?  I'd love to hear it!

Food Waste - Growing Things Addition

I feel terrible about my food waste usually.  This time however I can some what justify it as it helped give root to budding new organisms.  See?

Ok so mould may not be the most exciting of organisms but still, it gave us Penicillin.  Sacrificed to grow this fine culture was half a dozen home made crackers that I had forgotten I had when I ran out of home made cheese to put on top of them.

On the other hand these went bad in 2 weeks.  I've had store bought crackers that wouldn't mould after 2 months.  Kind of makes you wonder what they put in so that mould wouldn't find them edible.  I have a new policy, if it won't rot, decompose, grow (like nuts and seed), or mould it's not fit for my consumption.  That said mould wasn't the only thing growing at my place this week.

These are the plum blossoms that erupted yesterday.  Hopefully I'll be enjoying their fruit all summer long!

Pay Day May 2013

So my monthly pay check is in for a total of $3,598.39

Housing 40% - $1,439.35

Mortgage - $646.62

House Maintenance - $315.00

Housing Taxes - $182.50

House Insurance - $72.00

Utilities – $223.23

Total – $1,439.35

Savings 10% - $359.83 – All going to my RRSP

Debt 10% - $359.83

Transportation 15% - $539.75

Bus Pass – $68.25

Train - $0

Other - $0

Car Savings – $471.50

Total - $539.75

Life 25% - $899.63

Emergency Savings - $240.10

Travel - $175

Food - $160

Cell – $30

Internet - $50

Health Insurance – $23.52

Clothes - $10

Gifts - $10

Misc - $10

Big Ticket Item - $100

Entertainment - $10

Social/Sports - $5

Financial Planning - $5

Slush – $71.01

Total - $899.63

I’ve entered a nice grove on the budget front with only minor adjustments being made each month.  Looking forward to reaching my savings goals for my Emergency fund and car savings so that those funds can be redirected towards my mortgage.  On top of my day job I earned $30 from tutoring and $420 from renting one of my spare rooms to a colleague.  I’m hoping to average $30 a week tutoring until September and my housemate will be here for another two months.  It’s nice to see some alternative income coming in.