The Boyfriend

“How are we going to be able to do this when I give up the car in the spring?”

I look over at my boyfriend, who is sitting behind the wheel. We have just spent the day doing couple-y errands, including a run to Canadian Tire and a leisurely 2pm lunch. Outside, the rain is falling in a steady drizzle. I rub my hands together; I’m trying to imagine how different it would be if we were walking against the wind, which is currently launching a vicious assault on my Mazda.

He shrugs. “There are other ways. We’ll make it work. You’ll make it work.”  The certainty in his voice quiets my inner neuroses. It is all going to be okay.

The Issue

To car, or not to car, that is the question. Whether ’tis nobler in the mind to suffer the slings and arrows of outrageous insurance, or take arms against a sea of rising fuel costs, and by opposing end them: to drive, to park no more. Thus Conscience does make Cowards of us all.

Yes, I just rewrote Hamlet … the Prince of Denmark is, after all, famous for his angst and inner conflict.

This week, my head has played host to a full-on financial/psychological/emotional warzone. Coming to terms with the fact that my car is no longer working in my favour has been physically painful, with some side effects including nausea and nightmares. But it many respects it feels like learning to walk again. On Saturday, I loaned my car to my boyfriend for the day, so that he could go to Costco and I could get a sense of what planning a party was like, sans auto. I walked to the Loblaws Supercentre (8 minutes), and carried home approximately 50lbs worth of groceries: one fully loaded backpack, two overflowing reusable grocery bags, and a plastic bag with a pie. I felt every pound on the walk back. But something else I felt was a new independence; a separation from my reliance on four wheels.

So why does it hurt so much to think about letting it go?

Mostly, because it’s been a symbol of pride and accomplishment for me. It was the one stable thing I had when I was couchsurfing for six weeks, an escape hatch out of the city, and my unofficial moving truck. I am able to visit my family whenever I want. Not only that, but it’s prestigious.  Here I am, 24 years old, with a fully paid-off Mazda. I can only think of one other twenty-something friend in the city with a car to her name.

Hence the psychological battle. Logistically, it makes an infinite amount of sense for me to go car free. Not only will I save a ton of money, but based on my job and lifestyle, it is not necessary. If anything, the mobility encourages consumerism, enabling me to easily drive to stores to pick up items that I would have considered twice had I needed to plan the trip via TTC.

But I love that little car. I’ll cry the day I let it go, even knowing it’s the right thing to do. It’ll be a two tonne weight off of my shoulders, but I’ll miss the burden.

The Coworker’s Reaction

“There’s nothing good on television right now.  It is so annoying.”  My coworker/semi-boss is sitting at a computer screen, printing off MLS listings.

“Mm,” I say.

“Oh yeah, I forgot that you don’t have cable!”  He snaps his gum. “God, I don’t know how you do it. I need cable to decompress when I get home.  What do you even do when you go home?”

“Mostly write,” I say, smiling. “Or train at the gym. Or read, play piano, clean, attend my half marathon group, visit friends, surf the web…”  I trail off, deciding to test the waters. “Actually,” I venture, “I think you’re going to think I’m even more crazy than you already do. I’m considering selling my car.”

I think I broke him.

Alright, I’m messing with him a little. He’s a great guy, but let me help you visualize him. His sunglasses are Prada. His wool coat is Hugo Boss, or “Hugo” as he calls it (apparently they’re on first name terms). He drives a BMW, and shows up at the office every morning with a Venti Latté. He oozes luxury real estate, which is good, because that is his business. We get along very well, but sometimes his presence results in me issuing anti-materialistic proclamations, to help neutralize the atmosphere.

“Dude…” he stammers. “What?”

I detail everything, but he’s not listening. His eyes are still bugging out of his head. I’m kind of enjoying the shock factor.

“Do you want my honest opinion?” He says, shaking his head. “I think you have to have a car to work here.  Even though the errands might be rare, they’re important.  What, do you think you’re just going to bike along the Bridle Path to get the boss his feature sheets?”

Um, yeah, that was the plan. But I’m not enjoying it anymore. I’m starting to panic a little. What if I am handcuffed to my car as long as I work for my boss?

“Besides,” he continues, “don’t you want a car?”

I look him straight in the eye. “No.”

Clean up, aisle three. Someone bring some Clorox wipes to help scrape his brains off the walls.

The Boss’s Son

“Can I ask you a question?”

It’s Friday afternoon.  I’m at my desk, and my boss’s son, who is slowly taking over the family business, is sitting at the desk adjacent to mine.  He is bent over one of the four offers he’s been involved with this week, with that squishy expression he gets whenever he’s feeling overwhelmed.  I decide to forge ahead and ask the question to get it off my chest.

“Sure,” he says, his eyes still glued to the offers. “What’s up?”

I hedge, not knowing how to begin. “Well,” I start, “I wanted to talk to your dad about it, but since he’s away, I figured I’d run it by you first.”

I have his full attention now. “What is it?”

I sigh, and proceed to explain my desire to sell my car in the spring. I discuss my proximity to the office, my preference to cycle, my dislike of driving on city roads, my anxiety about the onslaught of expenses.  I specifically state that I’m not making a backwards attempt at a raise, that in fact I am quite happy with my salary; but I’m alarmed at how much has to be diverted into car related expenses, nearly one out of every four paycheques. I confess that I want to purchase a property in the next 3-4 years, and that the money I save could be used as a juicy down payment. Finally, I admit that I just don’t want a car as long as I live in Toronto, it has been taking a toll on my emotions.

He’s quiet. I sit patiently. His expression shifts.

“Cars are expensive. I completely understand. Let me talk to my dad. But please don’t worry about it, we will figure it out. You don’t have to be saddled with living beyond your means just because we want you to run errands.”

The pit of fear in my stomach dissolves. “Thank you,” I gush, and I mean it. The option is now there. I don’t have to have a car if I don’t want to. The ball is in my court.

The Resources

I’ve been reading some great car-free resources the past week, including this MSN article, and a Get Rich Slowly blogpost about a woman in an almost-identical situation to me.

I’d also like to point out that when I sell my car, it is not a “defeat.”  I am not inadequate for willingly giving up a vehicle that I fought hard to keep. My circumstances have changed, and I am making an intelligent decision. My car is now a liability – it costs approximately $6,000/year to run. That money could be invested in assets, which will get me closer to achieving my financial goals than if I were a car owner.

There’s also this great site that measures how many planets it would take if everyone lived your lifestyle.  I would need 3.54 earths, and I”m pretty good. Another sobering reminder of why we should all reconsider our habits.

I’m ready to make the change.

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Little Mazda 3, it’s time for us to have a sit-down.

I love you. I really do. But I have to ask myself, is this really working?

I bought my car on July 27, 2010. I bought it because I had recently attained my license in real estate, and there’s no way that you can be a realtor without owning a vehicle. My heart was bursting with pride.

But the second I bought it, I became stressed, sometimes so badly that it affected my health. I sometimes didn’t eat or sleep out of sheer financial worry. At the time, I was employed as a real estate assistant, making $30,000 per year. That worked out to a cashflow of approximately $1850/month. My car loan was $275/month. My insurance was $220/month. Gas was $120/month (since I’d go home once a month, working out to be about $40/trip). Tally it all up, and I was paying a whopping $615/month, not including parking, maintenance, etc. No matter how I budgeted, there was no way that I could go a single month without dipping into my emergency fund.

My monthly pay at my new job is closer to $2,675, which fluctuates monthly depending on bonus. I don’t have car loan payments anymore since I paid the vehicle off in full at the end of September.

Surely my life will be so much simpler now, I thought (naively). I have enough cashflow to pay for my car, in my head a mere $400 (ish) a month.

Silly, silly me.

Since paying off my car in full in September, I have been living paycheque to paycheque. I have been desperate to replenish my emergency fund, which is currently sitting at a very unhealthy $300. At first I didn’t understand.  Now without car payments, I should have been able to apply what I was paying biweekly ($137.36/biweekly) to my savings, and still be comfortable!  What happened?

Life happened. In addition to the unavoidable expenses outlined in my previous posts, I had a very minor accident. Last Wednesday in a parking lot, as I backed out ever so slowly and cautiously (I am an uber-safe driver), I somehow managed to swipe someone’s bumper who was pulling into a spot right behind me. The parking lot was exceptionally small and there was maybe $100 worth of damage done to my car, which I can fix with a touch-up pen. Hers … well, she got scratched, but not dented at all. I estimated the paint job on her car to be $300-400, right on the corner of her bumper. My boss’s auto shop offered to do the work for $385.  Because she needs her vehicle for work, I was prepared to pay for her rental car for the day as well.  I was stressed and miserable, because I was afraid it would cost $550, which is money that I simply don’t have right now.  So, after two days of research and quotes, I offered her $550 in cash to take care of the whole thing, so that I could have it over with before my birthday on Saturday (what a great birthday present to myself).

Uh oh. This lady then sends me a separate estimate for $700, which the shop left “open-ended” because she thought there may be some damage under her bumper from the force of the accident (bearing in mind that my speed was probably 5k/hour).  Not only that, but she informed me that it would take 3 days to fix, meaning I’d be paying for her rental car for 3 days. Two words: Yeah. Right.

I initially didn’t want to involve insurance because the last thing I wanted was a strike on my record. HOWEVER, after calling my insurance company and receiving their advice, I discovered that because I’m not claiming any damage on MY vehicle, the deductible does not apply. So I don’t have to pay a dime for her repairs. It will go on my record instead for 6 years, but the circumstances will be taken into effect. Namely that I didn’t hit a bus full of innocent schoolchildren. My crime is substantially less.

That being said, when my insurance renews in July 2012, I could be looking at a 10-15% increase of premiums. That would work out to be $20-30 extra per month at my current rate, which after four years will wind up being as much as I’d owe her if we didn’t involve insurance, but at least this way I’ll know that she isn’t extorting me for more than what she deserves.

The event acted as a catalyst for the vehicular frustration I’ve been feeling for the past 16 months. Which eventually left me wondering: why do I own a vehicle in Toronto?

Now that I’m working purely in administration, I still use my car for work, but rarely. Sometimes, it’ll be once or twice a week, and sometimes it will be for some time sensitive documents.  Since joining my current team in June, I’ve logged about 300k of work-related mileage on my car.

Aside from that, I really don’t like using my car in Toronto. Traffic is horrible; it can take me 45 minutes to drive 10k within the city to visit a friend. Then, I have to figure out parking. No parking between 8am-6pm, no parking between 12am-7am without valid permit, no parking on this side of the street Nov 30-April 14 (snow route), 2hr parking limit from 7pm-12am, etc.  Even after I have been so careful to park in an appropriate spot, I have sometimes come back to find a little yellow flag fluttering beneath my wiper, kindly informing me that I owe the City of Toronto $30 for improper parking.

From March to October, I prefer cycling, and always try to leave the car home, even to get groceries. Driving sucks.

But, the car has been super convenient for visiting my family.  My parents live in a remote rural area, about 2.5 hours away from the city. Owning a car gives me the freedom to visit them whenever I want. Or if I want to go to Montreal with my bf, we can just go, no planning required. Visiting other relatives is also a breeze. I really appreciate my car for out-of-city activities and travel.

And that is why God invented rental cars for weekends, and Zipcars for in-city.

So what is my car really costing me per year?

$2640/year (insurance, and that’s WITH a clean record) + $1800/year (gas) + $600/year (maintenance, cosmetic repairs, Green P parking, misc.) + $576/year (parking at my apartment)

= $5,616/year (anticipated).  Or, approximately 18% of my net income.

Versus Public Transportation, Cycling and Car Rentals

$726/year (metropass for 4 months during the winter, plus TTC tokens for rainy days) + $1200/year (renting a car every 5 or 6 weeks to go home, $30/day + taxes + gas) + $500/year (misc travel, go trains, group trips, etc.)

= $2426/year (anticipated). Or, approximately 7.9% of my net income.

The amount of money that I’m throwing at my insurance with a clean record is sickening. The sad thing is that it’s the cheapest rate I could find in Toronto, what with being under 25 and all. But my BF made me feel a lot better … he informed me of all the accidents he’s had, and how his insurance still remained reasonable since he was in Montreal at the time.

I’ll be leaving Toronto in 2-3 years. Hopefully, I’m going to travel around the world before I bike across Canada.  Then I’ll be settling in a different city, and I’ll begin to put down roots. At that point, I’d probably like a car, since my cost of living will be lower, and anywhere is better than the GTA as far as commuting infrastructure is concerned.

So my current thought is that, come spring, I will probably try to sell my vehicle.  Maybe I’ll pull a Krystal Yee and get a little scooter, so that I can still run errands for my boss from March-November, it’s going to depend on how the conversation goes. For now, I’ll at least enjoy my car throughout the bitter cold of December, January and February of 2011-2012.

I do love my car. I fought for it tooth and nail, and paid the entire thing off in 14 months. It gives me independence, mobility, comfort and convenience. But the stress of owning a car in Toronto also gives me a migraine. And with an additional cost of $3,190/year, or $265/month as opposed to cycling and public transit, I don’t know if it’s worth it. If I bank the difference of $265 a month, plus put the $8500 that I think I could net from the sale of the car, after 2-3 years I think that I could have a great down payment, or I could buy another used car with all cash. Plus, I wouldn’t have to worry about storing the vehicle while I took off for 8 months to travel and cycle the globe.

Either way, it’s been a huge learning experience for me, and I’m very proud about paying off a car in full, without any assistance. Car drama seems to be a staple of most 20-sometimes, and I am no exception.

Thoughts??

If cycling in Toronto is good enough for Rachel McAdams, it's good enough for me.

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Ladies and Gentlemen, I have a very important announcement to make, one that I’ve been longing to make for the past 14 months: I have paid off my car loan in full.

It all started last weekend. I was home on my parents’ farm, and my mother had decided to host a “just because” dinner, since so many of my relatives live in the area.  When my Aunt D and Uncle L arrived, Uncle L told me that he had been following my blog very closely and had a few financial suggestions for me.

I have to admit, I wasn’t really stoked at the thought of having a money conversation. Even though I blog about my finances on a regular basis, I felt slightly on edge at the thought of having a money discussion with an Uncle, which is something I’d never done before.

That conversation actually changed my entire financial game plan, and I’m so grateful for it.

After my family played a couple rounds of Apples to Apples, Uncle L asked to do the money chat, so we sat down and I listened.

In our conversation that followed, I learned that Uncle L is not yet 50, has no mortgage, and no debt of any kind. He lives in a large house on a nice street, with a pool and yard that backs onto a park. He accomplished this by working full time, in addition to a part time business that he owned and operated (he worked as a DJ and wedding videographer for a long time), and in addition to fixing ATMs when he was fresh out of university. He has paid off three houses in full.

How? Debt is the enemy and must be destroyed with every ounce of fire power that you’ve got. He and my Aunt made that their focus, and the result is that they live completely debt free.

He asked how much my interest rate was on my car loan, and I answered truthfully: 7.09%.  One of the pitfalls of buying used is that you can’t get a decent rate, unless there’s some massive promo going on. He told me straight up that was really, really high.  I agreed.

Something I’ve been counting on as “cash” but really isn’t were my stocks in my TFSA. The market right now is extremely volatile. The spectre of the European debt crisis is haunting the back of investors’ minds. Stocks are rising and falling at a rapid rate, based on what appears to me to be pure speculation.  Do I think that there’s going to be another recession?  Yes. Absolutely. I had that feeling even before my uncle had this chat with me. However, it took this discussion for me to really feel motivated to cash out with a marginal profit, and apply that towards my car loan and pay it off in full.

So I took my emergency fund, my piddly little emergency fund, my stocks, combined them, and paid off the remaining $8427.57.

How does this change things?  In theory, it shouldn’t change anything. I still want to apply biweekly payments to my emergency fund, savings, and retirement, the only difference should really be that I’m saving myself $50 monthly in interest.

In reality, it is going to offer me a higher degree of flexibility with my finances. For example, if I can’t make a payment into my savings for some reason or another, I don’t have to.  I won’t default on anything.  It won’t show up on my credit report, and I can make the payment up elsewhere.

But wait, said I, what about my emergency fund???  As of right now, there is $800 in it, and I also owe it $200 for helping me limp from this month to next without using my credit card. Well, says Uncle L, that’s what a line of credit is for.  It’s not ideal, but using a line of credit in dire circumstances is vastly superior to keeping a flush emergency fund while having debt at a rate of 7.09%. When I told him that I have up to $12,000 in credit card limits and my line of credit, he was pleased as punch. I’m doing well at my job and I have a good feeling of security here, and I’m planning on remaining here as long as it is mutually good. I’m loving my work as a part time editor and writer, and the extra money that that brings in is very helpful.

There were several other important points in our discussion but I’m going to save that for another post.  But I am now debt free.  I am going to wait a month before beginning my payments back to myself, so I can top up my chequing and feel a bit more comfortable. I also have some purchases I need to make – I need to get a video camera so I can start vlogging on my new blog, and I also want to finally get around to buying a couch.  These are baby steps, but paying off my debt was a giant leap forward.

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This is one of my inspirational images for how I want the place to look...

I have a place to live! 

My apologies for being missing in action the past week, it has been atrociously hectic.  I’m leaving for a camping trip to Algonquin Park today for four days, with my boyfriend and two other couples.  AND their French Bulldog named Lucy.  CUUUUTE!!!!!!

I’m still loving my job, and feel very valued and liked by the agents here.  There’s no gossiping or backbiting about other members of the team, and even when they’re frustrated about a deal going poorly, compared to what I’ve been used to, their anger is like rainbow sparkles.

But onto the apartment – I decided to get a unit in a highrise in the North-East part of the city, off of the subway line.  I have a car, and rarely use the subway anyways, and being on the subway line automatically bumps up rent by a couple of hundred dollars per month.  The building is literally right next door to a library (heaven!), a Goodlife gym, a grocery supercentre, and is connected to a TON of biking trails.  It’s also a 15 minute drive to my office, which is perfect.  My car insurance went down too, since the area has fewer accidents. 

So for a one bedroom in a nice highrise on the third floor, overlooking some trees, west-facing, with a pool in the building, I am paying $947 a month, inclusive of all utilities and including my underground parking.  I am very pleased with this number. 

Here’s the downer though – I have to pay first and last month’s rent, plus a $50 refundable deposit for the garage fob, plus a half month’s rent since I am moving in July 15th.  So in total, that’s a whopping  $2,417.50, which I’ll be paying by certified cheque.  I also have to buy a bed, some new bookcases, and eventually a couch.  Kitchen table is all taken care of, I’m borrowing my mother’s beautiful maple table that I grew up with, and I can hardly wait to have guests over.  I love to cook, and if I do say so myself, I am very good at it.  The table is beautiful too, much nicer than anything I could afford on my own.  I’m going to treasure it :)

More living room inspiration! I like beachy cottage, meets spa, meets country-in-the-city!

I have also decided that I definitely want to paint the unit with my own colours.  The lady in the rental office wasn’t happy about it, but honestly, they repaint every time a tenant leaves, so I don’t think it’s a big deal.  She also warned me that there may be a fine if I paint the walls and they have to repaint it, so once I know what that is, I’ll reevaluate.  At this point, I want to personalize the apartment so much that I don’t care about the fine (*insert financial red flag here*).  I’m thinking a soft grey-blue for the bedroom and a pale almond colour for the Living Room.  Next time I go home to the farm, I’m going to also see if there are any old barn windows I can take with me back to the city.  My idea is to press some flowers, put them in the window panes, and hang it up in my dining room.     

I also want to purchase a new road bike, in time for my triathlon in August.  I ride my bike on a regular basis, almost daily, and the bike I have right now is a POS. 

So it’s looking to be an expensive few months.  BUT once all these moving costs balance themselves out and stabilize, I’ll be able to focus hardcore on paying off my car loan.  I won’t have to pay rent until September 1st, and I can meanwhile replenish my emergency fund, start saving into my RRSP, and kill the car loan.  I’m almost under $9,000 and I am so thrilled!

That’s my motto for the next six months:  kill the car loan!

I’m hoping to not move from this apartment for at least two years.  My cousins are in the area and I absolutely adore these girls.  Once the car loan is killed, I’m hoping this is going to be my final apartment before I purchase a condo.  I think I’m going to be very, very happy here.  I know I’ve said this before, but this time, I’m positive that it’s true.  My mother has a good feeling about it, and mom’s instincts are rarely wrong!

Inspiration for my future bedroom

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It’s been a very busy week for me (strange, because I’ve been unemployed since Monday afternoon) and I have some great updates career/financial wise.

My job interview for the Bridle Path position went so well that I was hired on the spot. I was supposed to start tomorrow at 12pm (I had booked my car for maintenance at 8am already), but then my boss forgot he needed to get some things in order before I came in, so I start Wednesday 9am. Essentially, I’m doing everything that I did at my old job once removed, but getting paid appropriately. I asked for a salary of $42,000 and got it. This is guaranteed, and will keep me comfortable – however, he’s also going to set a sales target for himself. If I help him achieve it (aka harrass him on a daily basis to follow up on his leads, etc.) then I’ll be awarded a bonus of between $5,000 and $10,000 (look out, new boss, you are TOTALLY hitting that goal, so help me God). I’ll be awarded an annual raise, and I can take personal time whenever I need to, as long as I don’t abuse it. There’s nothing near the office so I’ll be saving a ton of money by preparing my own lunches.  It was made clear to me that as long as I do a good job, I will be rewarded, although my request for $42k is a guaranteed minimum.

I’m thrilled because I’ll be issued a formal letter outlining my salary and bonuses. I will NOT be doing sales, which I am so happy with, as my previous bosses have used sales as an excuse to not pay me more. I have absolutely no interest in being a salesperson whatsoever. I love houses, but like I mentioned in my previous post, my strength really lies in being the go-to support system, not the star. At least at this point in my life. And that’s just fine with me, because it will allow me to have a life, which combined with my friends and family, is what it’s all about.

I’ve started the freelancing technical writing work which I have found very challenging, but in a good way.  So far, I’ve been able to pick things up relatively quickly, but it involves a lot of poring over multiple documents and compiling it into a single, coherent document for presentation.  It’s not really freelancing per se since I’m only working for the one person and organization, but for the sake of goal setting I’ll keep referring to it as such.  I’m going to aim to do between 10 and 15 hours above and beyond my full time job with this work, which should help me easily attain my goal of paying off the remainder of my car loan before Christmas.

I am excited to start my new job, but it feels different from the other times.  Both of my other full time jobs were positions that I desperately wanted.  I wanted my first job because it was my entry into the real estate industry at an office that I adored, and I wanted my second job because I needed more money and because I was having huge difficulties with my one boss.  Now, I’m in a place where I feel comfortable accepting this position, but not as I have in the past, like a drowning person desperately clinging to a raft that turned out to be a hungry shark.  This time, I feel confident in my abilities and experience, and able to assert my expectations.  This job definitely isn’t going to be a walk in the park, but I’m walking in with reasonable and fair expectations.  In the past, I’ve been quickly disappointed when verbal promises were broken.  This time, it’s in writing, and my boss has made it clear that he likes to keep his employees both longterm and happy.

What this means, between my new job and my part time work, is I will FINALLY be in the $50k range that I have been aching to be in for so long.  If I get this bonus, and I’m able to keep up with the part time work, I may be able to push it to $60k.  It’s taken 2+ years and so many broken promises to get here, but this is AMAZING for my age, and if I’m able to hit this target, I’ll be so lucky and grateful.

My motto is going to be save, save, save.  Step 1:  Pay off car.  Step 2:  Finish Kilimanjaro travel fund  Step 3:  Save for emergency fund/down payment.  Step 4:  Buy property.  Step 5:  Travel all the while.

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I have written a very special message at the end of this post, so even if you just skim my writing, please read the ending in full.  Thank you!

In August, I’m going to have a party.  It’s going to be the Money Rabbit Pays Off Her Car In Full Party.  Hopefully, the roofdeck of my new condo building will be completed by then, because I’m going to have cheese fondue, homemade bread, and everyone can bring a bottle of wine (only if it’s under $10.)  I’m inviting all my friends, because I am unashamed about the fact that I think paying off debt is something to be celebrated.

This morning as I was driving into work, an advertisement for the Rich Dad, Poor Dad seminars came on in my car.  After watching a W5 exposé on these programs I get very suspicious whenever I hear an ad for one, but considering that Rich Dad was one of the first books on personal finance that I read, I decided to pay attention to the commercial.

In the Rich Dad books, one of the major concepts is that you have to really examine your own personal spreadsheet and ensure that your cashflow is going towards a collection of assets, not liabilities.  Kiyosaki argues that everything in life is either an asset or a liability, and its the people who are able to categorize their Ls and their As and accumulate more of the latter are the ones who end up wealthy.

Right now, I definitely agree with this.  Something I’ve been batting around in the back of my mind is paying off my car loan sooner than anticipated.  Right now, I’m paying $137.36 biweekly, and I’ll be finished the remainder of my loan by April 2014.  The kicker?  It’s financed at 7.09% interest.

I currently have 124 shares in Bank of Nova Scotia.  I also have 20 shares of Royal Bank.  On any given day, my stocks usually hover around $8400.  I receive approximately $280 per year in dividends from both of these investments, which I in turn reinvest in new shares.  Although both of my stocks have performed very well during the recovery of the Canadian economy, I don’t think I can reasonably expect them to exceed 8% this year, even including the cash from the dividends that I receive.

So here’s my current plan.  Right now, my Emergency Fund is sitting at approximately $3,000, since I had to take out $2,250 to put down on my rent for my new apartment.  Once I get my Emergency Fund up to $5,500, I’m going to cash out my stocks and pay off my car loan.  I’m hoping to do this by August 2011.  In order to do this, I have to save $500 a month for the next four months.

I hope to God this is true considering gas prices right now. Next car will have to be a hybrid.

Mentally, I’ve been seeing my stocks moreso as a cash emergency fund than what they really are, which is an investment.  I’ve been thinking, “Oh, if I ever need money I can always cash out my stocks.  When I buy my first property, I’ll just cash out my stocks to use as a down payment.”  I see that large sum of money in my bank account and I think “I’m fine!  I have $8400 in the bank, I’m good.”  I think I’m also sentimental about continuing to hold onto the shares, since I’ve been a shareholder since 2007 and they’re my first stock market investment.  However, what I DON’T see in my account is the negative $9530 that is the remainder of my car loan, heavily pressing against my monthly cashflow.  Because that debt isn’t visible to me in my day to day banking, it’s easy to think that my stocks, which are visible and tangible, outweigh the loan.

However, it definitely doesn’t.  So once I get my Emergency Fund up to $5,500, I’m cashing out my stocks, paying off the loan, and then applying the same payments of $137 to my savings on a biweekly basis, to begin the formation of a downpayment.  This will bring my monthly auto costs down from $650 a month to $375 ($200 insurance, plus gas and parking).

Right now, I think the stocks and the loan cancel each other out in terms of building my networth.  If I were to wait out the duration of my loan, that would be just under three full years of a networth stalemate between the asset and the liability.  By paying off my only existing liability faster, I’ll be able to build my assets faster, which will in turn lead to a higher networth in a shorter period of time. I’m still planning on hitting my goal of $1,000,000 in assets by the time I’m 30, so I’ve got to get moving and ditch the liabilities.

I’d also like to take a few moments to get on my soapbox and plug a friend’s project.  My friend Joanne is doing an amazing fundraiser for the recent disaster in Japan called Project A Thousand Paper Cranes.  Essentially, for every $5 that is donated, she will fold one paper crane with a special message of hope inside, with the goal of 1000 paper cranes ($5000).  She is partnered with Save the Children, who were there almost immediately after the disaster to provide relief for the children who lost their families and their homes in just a few hours.

Joanne is just an ordinary person doing an extraordinary thing, with a deep concern for the Japanese children who have gone through this tragedy.  She has never been previously affiliated with any charities, and is essentially running this entire project from her bedroom.  She worked with Holy Spirit Elementary School and worked with the teachers to teach the kids there how to fold cranes (the kids wrote personal messages to the kids in Japan), and she has spent countless hours trying to raise money for this project.  She is also partnered with two other schools in Edmonton and Quebec to fold the cranes and raise money.

Essentially, she got this whole thing up and running with no experience, but a lot of passion, and THAT is a truly amazing thing and shows what we all could do if we just pushed ourselves to keep going.

If you do donate to this project, you will get an income tax receipt.  It literally takes no more than 5 minutes to donate.

Last weekend, Joanne’s papercranes were in full display at the Cherry Blossoms festival in High Park.  She’s going again this weekend – it’s supposed to rain, but if you do have any interest in the project I sincerely recommend checking it out.

TO DATE, SHE HAS ONLY RAISED $800, AFTER MANY SLEEPLESS NIGHTS.  I am begging my readers to please, please, please take the time and donate $5 to Japan.  It’s not much more than a frappucino at Starbucks.  She has already folded close to 1000 cranes, so at this point, your donation will be to “adopt” one of her beautiful, colourful creations.  Please check out her website (which I linked to in the bold paragraph) and see if it’s something you’d like to get behind.

Joanne's Paper Cranes from Last Weekend in High Park. They were a smash hit with the tourists! (not a lot donated money though)

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One of the downsides of TD Canada Trust’s online banking is that there is sometimes a delay with online banking.  For example, my auto loan updated itself this morning saying it had received the payments and is now sitting at $9,972 (HOORAY!)  However, that money doesn’t show up as being taken out of my account.  So imagine my surprise this morning when I thought that money had in fact been taken out, but REALLY it was an RRSP payment.  You know, the ones I thought that I had cancelled.

Funny story.  I started writing the above paragraph yesterday afternoon, and was already pretty devastated about having to go through another really tight month, when SURPRISE!!!  Last night after work, I had been attending a meeting with my boss and she invited me a couple streets over back to her house for a glass of wine.  I accepted, and I asked if I needed to buy more parking time, because I had been paid on the other street until 6pm.  She said no, it’s the same on both streets, and I took her word.

Turns out she was wrong.  You need to pay until 9pm on her street.  So yesterday, it cost me $33.50 just to drive my car to work-related places.  Knowing my bosses, there’s no WAY I could expense that.  So.  In case you were reading between the lines and sensing some dissatisfaction between me and my job, imagine my delight at discovering a $30 parking ticket on a Friday night at 7pm after a long week.

Here’s the good news:  my Goodlife membership from March 1st until August 31st is only $225.  That’s six month’s worth of membership.  My coordinator told me there would be an HST charge on that, but apparently it’s actually rolled in there.  That means it’s literally half of what I was paying to be a member of Extreme Fitness.  Plus, having the clubs within walking distance of my work and my house is worth its weight in gold.  Only problem is that if I do end up moving, I really won’t have any clubs near me.

So what do I have to last me for the next 26 days?  Bearing in mind that my original plan was to be able to make it to my paycheque AFTER the next in just cash (since my next paycheque is what I use to pay my insurance, rent, car payment).

Approximately $290.  Over 26 days.  For food, necessities and gas.  I’m going home for a weekend, so that’ll cost about $30.  I’m also having my hair done, which will HAVE to go on my credit card.  And believe me, I need this haircut.

Get me through this, Sir John A.!

Essentially, I have to live on under $10 a day.  It’s totally doable.  But I’m going to have to get creative.  Breakfasts aren’t an issue, they’re very inexpensive.  Lunches and dinners will be the tough part.  Things like potatoes, bread, pasta, soups, bananas, apples, baby carrots, chickpeas, and the like will be my friends.  My enemies:  cheese (my downfall), cookies, sweet non-necessities, enriched soy milks (a necessity for post workouts), restaurants, coffee and tea.

Awhile ago, I was considering doing a feature on something like coconut milk, because it’s about $0.79 per can and can form the base of many delicious recipes.  NOW what I’m going to be doing is that in addition to my “What I Spent,”  I’ll be adding in “What I Ate,” and attempt to give a cost breakdown of each meal.

It’s going to be tough, but I know I can do it :)

I NEVER want to be in this situation EVER again.  The good news is that my emergency fund will be completely replenished by May, even sooner if I’m successful in selling my flute.  Then, I’ll be focusing entirely on paying off my car.

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Before I begin this post, I just wanted to give an update and say that I have ceased my RRSP payments and will now be saving $100 biweekly in cash, to be put entirely towards my emergency fund and car payment.  I’ve been mulling over what to do for awhile, but I just want to get my car loan off of my shoulders.  I think with accelerated payments, I will be able to probably have it paid off by my goal time, December 31st 2011.  It’s a TON of money but I know I can do it.

This post is in honour of my grandparents, and for grandparents everywhere who impart valuable lessons.  I also have to be careful … last night as I was writing this, it turned into a bit of a rant, so this version is the slimmed-down, less angry version.

What inspired this post was the following email, sent as a “back in the day” throwback embedded in a Valentines email to all the grandkids:

“… 50 years ago on February 24th, 1961,  we moved into this house. We had hardly any furniture (but enough to manage). We moved here from a one bedroom apartment, because we needed the extra space. As luck would have it, our car stopped working that day. It wasn’t worth fixing, so we were carless for the next two years. Those were the days when people went without until enough money was acquired to make a purchase. The exception was real estate where plans were available for people to make a down payment with mortgages for many years ahead. It likely would have been possible for us to have made some kind of deal like that at a car lot, but it was expensive to pay interest all the time. Anyways, we managed fine, and got our groceries by taking our new large baby buggy to a large grocery store over on Main Street.”

My Grandparents' 1960s Grocery Cart

This email really stuck with me because it reminded me that “back in the day,” if you wanted something, you saved for it.  I think mostly everyone can agree that the current cultural mindset is “buy now with credit, pay back later.”

Everywhere I look nowadays, there is inevitably an ad screaming:  “Pay 0% financing!”   “Get 1000 bonus points when you sign up for our credit card!”   “Sign up now for your free line of credit!”

These ads are of course competing with the multitude of debt organizations out there, such as In Charge Canada, which advertises in premium spots on my morning radio show, so they are presumably making a killing off of the poor shmucks who sign up for all this “free” money.

Many personal finance bloggers started their blog during or after they bail themselves out of debt (just check out my blog roll, most of the authors featured there have been in some kind of debt during their lives and figured out various ways of defeating it).  Debt is all too common and almost expected.  It’s rare for me to find anyone who says they don’t have a debt of any kind, with the exception of a mortgage.  Student debt, credit card debt, financed with interest auto loans, it’s all pretty much the norm.

Sometimes I get jealous of my friends who have the perfectly coordinated IKEA living rooms, new iPhones, flat screen TVs, and new clothes from Queen West (a trendy fashion strip in Toronto).  I also get jealous at my friends who eat out all the time, buy pitchers of beer without blinking, and go on ski trips up North.  I think everyone knows people like this in their lives, the people that you look at and go, “How the heck do they afford it?”

I really don’t want to speculate on their finances, and perhaps they really can afford all these shiny toys.  But Canadian households on average simply can’t.  Not only is the average Canadian household debt $100,000, the Western world is struggling with crippling debt.  The thought of a country in debt actually terrifies me.  a) when are we planning on paying it back, and to whom? and b) how the hell are we going to do it when our individual debt is six figures?

Right now, I have a hybrid of my grandparents’ sensibility and generation Y’s need it now attitude, leaning more towards my grandparents.  I shop at Value Village for the majority of my clothing.  I contribute regularly to my savings.  I never buy anything on credit that I can’t pay within the same billing cycle.

But it’s not very glamorous.  I live in a 300 sqft basement bachelor apartment.  I don’t have enough room for a kitchen table, so I eat on my bed.  I can’t really entertain friends if they come over, and I can’t afford to eat out very often, maybe once a week.  I never buy books or movies, I always borrow them from the library instead, and on the rare occassions that I go to the bar, I never order more than two glasses of wine, tops.  I make for pretty boring company sometimes, and I do frequently have to turn events and parties down.  I recently had to miss my friend’s musical theatre show in Mississauga, because the gas money and the ticket would have just been too much.

Any longtime blogger and financial writer will tell you the same thing:  it gets way better, just keep at it, spend less than you earn and save the difference.  But do you ever just feel like you’ve been at it for so long that you just want to say screw it, and blow all your savings on a crazy trip to Costa Rica?

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On February 13th, I received the following comment on my NetworthIQ profile, which I didn’t actually notice until now:

“Given your risk profile I would cut back on your equity exposure and settle the high interest debt. It is pretty ambitious to get an after tax rate of return of higher than 7% notwithstanding your low tax bracket and extreme market volatility of the past few years. If the shares are in a TFSA, a consistent 7% rate of return is still pretty ambitious. Even the extra contributions to the RRSP vs. debt may not be the best long-term decision given your low tax bracket, ambitions to move to a higher tax bracket, and current borrowing cost I would stop the contributions until your have paid down the debt or lowered your borrowing cost.

As an alternative, you could keep your risky equity positions and reduce your borrowing cost through a margin account using your securities as collateral, this would lower your overall borrowing cost (and risk from a lenders perspective) while allowing you to deduct the interest for tax purposes (if structured correctly).”

Well, there are a couple of points I’d like to discuss here.  First is that my riskiest equities are my stocks, which are both blue-chip high dividend paying bank stock, and are actually extremely safe as far as stock investing goes.  Unless Bank of Scotia or RBC go out of business, I’m guaranteed a lovely safe investment.  Not exactly what I’d call risky equity positions.

Second, my RRSP mutual fund has an average rate of 12% per year.  In October, my RRSP was worth under $8000.  I’ve contributed no more than $300 to it, and now it’s close to $9000.  I think that speaks for itself.

However, I’m not here to defend, merely to debunk any misconceptions.  But the comment still made me think.  What would happen if I took the $200 I’m putting aside monthly to my RRSP and to my emergency fund, and instead apply approximately $475 a month towards my car loan.  I would easily cut the term of my loan in half, and be finished in a year and a half instead of the three years that I’m currently scheduled for. Read the rest of this entry »

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I almost began this post by saying how turbulent 2010 was for me, but considering that 2009 was even more so, I guess it’s actually a somewhat normal year by comparison. Here is a brief summary of what happened in my life.

In January 2010 I was renting a room in a house in Leslieville from a crazy neurotic landlady.  She told me when I moved in that we would split the cleaning of the house…what I didn’t realize is that her definition of cleaning the house was a weekly 3-hour scrubbing from top to bottom.  I was desperate to leave and find my own place with no crazy roommates, and I found my current abode, a 275sqft basement bachelor apartment off of the Danforth in the city’s East end.  I liked that it came with a garden, and a parking spot for the car I knew I would eventually buy.

It was also in January that I received an offer of employment for my current position.  I had actually worked for this company part time for three months, but then in October received a full time job offer, which I couldn’t turn down (I was working two jobs at the time).  They came back in January, and I was very excited to return, especially because it was in my chosen field.  So I gave my two weeks notice, and came back, this time in a higher level capacity.

For the next few months, I studied like crazy to become qualified to reach the next level.  I ploughed through the heavy course material all while working full time.  The spring and summer were lovely – I gardened all spring and played beach volleyball all summer.  It was pretty low-key, with the exception of the fact that I was working like crazy to complete my courses.

Yogic Gardening - that's me!!!

In July 2010, I finally bought my first car.  It’s a 2006 Mazda 3, and the total with taxes+an additional 3 year warranty was $14,998.  I have it financed at a 7.09% interest rate (definitely not the best…if I had to do it all again, I would take my time, not rush it, and see if I could secure a lender with a better rate).

In August 2010 I completed my courses and was officially registered.  I learned the real price of owning a car in the city.  My insurance rate is through the roof … I’m under 25 and have never been on an insurance policy.  The cheapest I could find was $237 a month, and that’s only because I bundled it with tenant’s insurance for an additional $30 a month.  It was going to be $257 anyways, so I figured, why not insure my apartment as well?

I also cropped off my long blonde hair in favour of a more professional chin-length ‘do.  I wanted to show the world that I was ready for this next step…fortunately, it complements my bone structure, or lack thereof, quite nicely. Read the rest of this entry »

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