Author: Mike Holman

Categories
Real Estate

Anecdotes and Advice from a First Time Home Buyer Part 11

My friend Christine has kindly agreed to write a series of posts on her experiences with buying a home for the first time which will be posted occasionally. See Part 10 – Home owner insurance.

 

Other bits and drabs

We were glad that as first-time homeowners, we did not have another property to sell before moving. We just had to give notice on our apartment, pack up our things, and find a way to transport them to our new home. We found that moving companies fell into two extremes, from expensive established companies charging at least $400 to seemingly fly-by-night individuals. Neither of these options appealed to us, so we rented a truck from Budget for around $100 after taxes, insurance and mileage charges. We were also fortunate at being able to convince some strong friends and family members to help out.

Beyond the big picture items, other items to do when moving to a new home are to set up the utilities (gas, electricity, telephone, Internet and cable).

Consider changing the locks for peace of mind. While Home Depot and other hardware stores sell locks that you can install yourself, locksmiths install high security locks that are more costly but are more difficult to pick and force open. We learned from our locksmith that metal doors are not necessarily stronger, as they can be hollow and thus easier to kick down. Lock plates and security strips along the side of the door serve to reinforce a door. Solid-core wooden doors are apparently the strongest.

Depending on your comfort level, you may also wish to invest in a security system. Monitoring costs for home security ranges from $25-$40 per month depending on the size of your home and the types of devices you choose to install. While it is not cheap, a security system does reduce your home insurance by 5-20% per year depending on the options that you choose and the criteria of your insurance company. Remember though that whoever you let into your home to install new locks or security devices should be legitimate and trustworthy.

And finally, notify everyone, including the government about your change in address. The mail redirect service through Canada Post costs $36 for six months and helps ensure that you will continue to receive mail and bills from anyone you may have forgotten to contact.

A happy ending to our story

After many months of fluctuating emotions, ranging from despondency at the options to resignation at having to buy a condo, the home search has ended happily. My husband and I were able to find a house that we wish to stay in for the long-term. We were able to remain in a target neighbourhood and maintain our downtown lifestyles by increasing our budget and going with a smaller home, both worthwhile sacrifices in our eyes.

The cover story in the March issue of Toronto Life Magazine looks at how the current housing market has caused some homeowners to overextend themselves financially. The housing prices in Toronto are crazy, but one should always be careful to crunch the numbers and not fly too close to the margin.

Getting more “house” for less money by moving farther out simply depressed us, and our main thoughts were of how long it would take us to be able to afford move back downtown. By choosing a place in the location we wanted, we are motivated to make things work and are happy to make changes to our lifestyles. The lesson we learned from our search was to be certain of one’s key requirements, whether they be location, price, a garden, etc., and ensuring that you and your partner are in agreement. Finally, do not be rushed into a decision. There will always be other houses on the market. At the end of the day, a house is still just a house and should not be an undue cause of stress.

This post thus concludes my home buying saga. With home ownership come many new responsibilities, thus new adventures await…

Thanks a lot Christine for your great series on buying a house. Maybe you can follow up with some renovation tips? 🙂

Categories
Announcements

Friday Linkstuff

That’s right – the link post is moving from Saturday to…well this week it will be Friday. 🙂 We’ve decided to do the link post during the week and cut back on one of the regular posts.  Summer hours!  🙂

First off – Squawkfox did a very creative and exciting job on the stripped down, bare necessities version of Festival of Frugality – her best move was picking Mr. Cheap’s Everyman’s guide to earning $30/month in passive income post as a “tighty whitey”. If nothing else then please go and check out the photos and find out what a “tighty whitey” is.

Where Does All My Money Go did a neat video on how to read a stock quote – it’s a beginner type tutorial but if you want to hear the soothing sound of Preet’s silky voice then check it out.

Million Dollar Journey is wondering if BCE is a buying opportunity.

Categories
Opinion

Tips For Packing Light On A Plane (Especially If You Have Kids)

Recently we went on a vacation which required a somewhat lengthy plane ride to get there – about 7.5 hours. Now this is not the longest flight I’ve ever taken by a long shot, however it was the first one with a 2 year old kid and a 2 month old infant.

Typically my wife and I are not “light” packers since we’ve only traveled in the car after starting our family. Our “car packing” method involves packing as much stuff as we can fit in the car. 🙂

Read 8 tips to avoid problems at the airport.

For the plane ride and subsequent trip we decided to “pack light” which is a theme we kept referring to as we packed to keep us in line. Our plan was to limit our luggage to one large suitcase, two carry-on bags and two car seats.

Here are some of the strategies and thoughts we went through when packing. Obviously your situation might be quite different especially if you have more or less kids but hopefully this will help if you are thinking of a similar trip.

Carry-on luggage

My attitude with carry-on luggage is that you should have as little as possible, unless that is your only luggage. It should only contain items you need for the plane ride itself and anything that you absolutely cannot lose. Things like passports, tickets, camera, cell phone (if applicable) would be in this category. Since we had the two small kids, most of our carry-on luggage was basically 2 diaper bags which contained the following:

  • Diapers – we estimated that our son uses a diaper every 2 hours, so we ended up packing enough for the 7 hour flight plus a couple hours in the airport. Our daughter can go through 1 per hour so we packed more for her. We also needed a package of wipes as well. Make sure you have the right diapers – I had a bit of a scare at the airport because I thought my wife had only packed diapers for our daughter. I asked around, but there was no place to buy diapers at the airport, so it was fortunate that I had made a mistake when going through the diaper bags, otherwise I’m not sure what we would have done. 🙂
  • Clothes – our newborn daughter is a rather prolific puker, so we packed an extra set of clothes for her along with an extra shirt for my wife. On the way back my wife got showered pretty good and unfortunately we forgot to pack any extra clothes for her so she had to endure an uncomfortable couple of hours in the plane.
  • Food – without kids you really don’t need any extra food, although a sandwich can be nice. In our case using food as a distraction for our 2 year old son really helped get through the flight. Grapes, strawberries, sandwich meat, crackers all came in handy. Normally we try to give him healthy foods but if you are desperate, junk food is ok too.
  • Toys, books – if you are traveling with young kids then don’t even bother bringing a book for yourself since it will never get opened. We brought a couple small stuffed toys for our son and two of his bedtime books with the misguided notion that we could get him to sleep on the plane. The stuffed toys came in handy, but the books were a waste of time.

Stowaway luggage

For the regular luggage we brought one big suitcase which had to contain most of the clothes, toiletries etc that we needed for the trip. We were planning to be staying in hotels for part of the trip and with relatives for the remainder. Since we could easily do laundry at the relatives, we only had to pack clothes for the longest length of time we would be staying in hotels which was three days. At first I assumed that I could use each change of clothes for 2 days (which is not my normal state of affairs) but when we were finished packing and had loads of extra room then I changed my assumption to 1 day per change of clothes.

Things to think about

  • How long can you wear each item of clothing?
  • How many pairs of shoes do you need?
  • How often will you be able to do laundry on the trip?
  • What will you wear on the plane?
  • Can you buy items there?

You can buy items there

Unless you are traveling to the Antarctica, you should be able to purchase any items you need when you are traveling. Of course if you are going canoe tripping then this article is probably not for you.

Here are some things that we bought at our destination – some of them planned – some of them not.

  • Shampoo – I’ve had nothing but bad experiences flying with shampoo so I never bring it.
  • Shaving cream – see above statement about shampoo.
  • Razors – if you have to buy shaving cream, you might as well buy razors too.
  • Toothpaste – in the interest of saving space we brought a small tube along and purchased a larger one on arrival.
  • T-shirts – I’m not sure what happened with my t-shirts, but I ended up with very few of them after a couple of days so I went and bought 3 cheap ones for about $10 each.
  • Pack’n’play – we didn’t bring one of these because we knew our son could climb out of it. Our first night in a hotel was a nightmare because my son couldn’t get to sleep with other people in the room so he basically ran around until about midnight. The first relative we stayed at had a pack’n’play and he was ok sleeping in it (even though he could climb out). Once we left that relative’s house we immediately bought one for about $75. We ended up giving it to an owner of one of the last hotels we stayed at.
  • Toys – we bought a toy truck for $10 which our son liked so much we ended up taking it home with us.
  • Hairdryer – the one we brought cost $10 at Zellers and lasted about 5 minutes, so we went and bought one. We left it at the last hotel.
  • Booster seat for eating at a table – this is one item we never bought only because we couldn’t find one, but we really needed it!!!

Summary

Well, there you have it – start with a desired amount of luggage, plan as best you can, bring money to make up for your mistakes/omissions and enjoy your trip! 🙂

 

Categories
Investing

Lending Club – Why I Chose Not To Invest In Peer-To-Peer Lending

In the blogosphere there seems to be a lot of excitement about peer-to-peer lending which is the ability to lend money to other individuals through companies such as Prosper and Lending Club. While I can understand how some investors will always be interested in a new investment product I don’t really understand the widespread excitement and interest level for this one.

Some of the things people should think about when considering P2P lending:

Diversification

Lending to one person is kind of like investing in a very small risky stock such as a junior mining company or a startup biotech company. You really don’t know much about that borrower and if something happens to them such as a medical emergency then your loan to them might be at risk. You can mitigate this risk by lending using a portfolio plan but I suggest that while this does reduce your risk, it doesn’t change the basic asset class which is still quite risky. A portfolio of p2p loans is like a mutual fund with numerous junior mining companies). You reduce the risk of any one company failing but aren’t protected against events that affect all junior mining companies ie falling metal prices.
One of the big risks that I would be concerned about is if interest rates go up. Presumably people who borrow on p2p are people who can’t get the loan from a bank at a normal rate – I would assume these people have already maxed out their credit or at a minimum have a lot of debt which makes them very vulnerable if interest rates increase.

Same as the old bank

Brip Blap wrote an interesting post on P2P which indicates that the lender “is the bank”. I have to disagree with this because I think Prosper or Lending Club is the bank. The only thing that really changes is that the p2p lender gets to choose who the borrower is which is not the case when you give money to a regular bank to get interest. Another issue I have is that Prosper and Lending Club seem to be spending a lot of money to get clients – advertising, free money giveaways. Where does this money come from? As far as cutting out the middle man – P2P institutions charge for the loans so I don’t really see how they are very much different from banks.

Statistics

Another concern I have is that I think the interest rates are too good to be true. If a borrower is willing to take my money for 10% then I know that they couldn’t get that same loan at a bank. This is problematic for two reasons –

  1. The banks are far better at analyzing debtor risk than you or I (too bad they couldn’t analyze subprime securitization loans) so if they don’t feel the person is worth the risk at 10% then you are not getting a deal – you are getting a high risk loan.
  2. If the person seems to have reasonable credit then they might have maxed out all their available credit which implies to me that their credit score is meaningless in that situation.

The fact that p2p has not been around very long also means that any default rates are probably understated. A loan can go into default at any time in the three year term so looking at default rates before three years is not going to be very accurate. Also – with the default rates do they do it by time periods? ie years? if not then any new loans will decrease the default rate dramatically.

Taxation

In the US, interest income is treated as regular income for taxation purposes. Dividends and capital gains are given preferential treatment and you will pay less than than on interest. You will be better off taxation wise to have all three of those investment types in a tax-sheltered account such as a 401(k) or ROTH account. If however you have investments in a taxable account then ideally it should not be fixed income such as bonds or P2P loans. Since P2P loans are not eligible for tax sheltered accounts then the extra taxes will reduce returns significantly.

Asset allocation

Asset allocation or the type of assets you invest in (ie stocks, bonds, cash) is a critical step in the investment process. Personally I have 25% of my investments in fixed income and 75% in equities (stocks). Regardless of the expected rate of return, P2P lending is considered fixed income and it should fit into your desired asset allocation.

Basic economics

If something is too good to be true then it probably isn’t. Currently you can get approximately 4% interest on guaranteed certificates or accounts. If you invest in P2P loans and have an expected return of 10% then that puts you in a much higher risk level and there is a reasonable chance that you could lose 10% or more (much like equities).

Bottom line

I have no plans to invest in p2p loans anytime soon because they don’t fit my investment plan. I do want to make it clear that I’m not suggesting that p2p loans should be avoided or that they are a bad thing. If you know what you are investing in and it fits your investment objectives then go ahead and lend away!

More peer-to-peer lending posts

Moolanomy questions if peer-to-peer lending is ready for the big time.
Cash Money Life answers Moolanomy in his post as to whether p2p lending is safe.

Categories
Announcements

Saturday LinkStuff

Frequent commenter Shevy has started her own blog which I urge you to check out since it’s pretty good. Her most recent post is a response to a comment I made this week about not traveling with my kids ever again!

Blunt Money is the one blog in our new network that I wasn’t familiar with until recently and I have to say I’ve been pleasantly surprised since I really like reading her stuff. Here are a couple of articles I enjoyed:

  • Are single stocks too risky? She questions Dave Ramsey’s advice on this one.
  • Staying Motivated. Blunt talks about how she and her husband have done the ‘easy’ work on their new business and now have to find the motivation to get the other 90% of the work done. I can relate to this as I have another website I’m planning to “launch” (as we say in the biz) but getting it ready with material etc is just plain hard work. Of course I can use my new baby as an excuse, but I can only do that for so long!

Million Dollar Journey talks about his idea of retirement and invited his readers to share their visions.

Amateur Asset Allocator (one of my favourite blogs lately) says that investing in bank stocks will pay off in the long run. A good post if you own any bank stocks!

Canadian Capitalist talks about one of my favourite subjects – ETFs!! Vanguard has a new all-world ETF and he explains why it’s not so great.

Financial Blogger talks about the bizarre Quebec tradition of everyone moving on the same day.

Clever Dude wrote about how he gave his economic stimulus check to his father-in-law’s church and the father-in-law wasn’t too happy.

Squawkfox created a neat calculator for gas mileage which I’m going to try. She also created a video which explains how to use it

Moneyning signed up for some “free stuff” and is wondering if he got scammed. Nothing is for free!!!

Categories
Personal Finance

Converting Euros To Dollars In Canada

As a result of a recent trip, I have a number of euros that I wanted to convert to Canadian dollars. I thought it would be interesting to take a look at different options to convert the money and determine what the different conversion rates are and if it is worthwhile to try to get a lower rate. In my case I only have 460 euros which is about $736 Canadian dollars so this exercise might end up being somewhat academic since I’m not going to put a lot of effort just to save 1%. It might however be beneficial to know how to get better rates in case I want to convert larger amounts in the future.

I’ve decided to investigate two alternatives:

  1. Go to a bank branch and get the money converted.
  2. Go to a proper currency exchange company ie Thomas Cook – this is much less convenient since I’ll probably have to go downtown to accomplish this one.

I phoned my bank and got the spot rates for Euros to Canadian dollars. They will give me 1.5234 Canadian dollars for each euro for a total of $700.76. Interestingly the conversion rate to buy is 1.6602 which implies a 4% fee for this conversion – seems like quite a bit.

Then I called Thomas Cook and got a sell rate of 1.509 which only nets me $694.14 which is $6.62 less than CIBC. This difference isn’t enough to be significant but for larger amounts it could be relevant.

Of course these results are also dependent on all being executed at the same time – the realities of the currency exchange markets could mean that a big currency swing from one day to the next could outweigh the different rates charged.  I ended up going to my local CIBC branch and after waiting in line for 5-10 minutes, I got my $700 loonies!

Does anyone have any other ideas about how to convert money at a good rate?  Is it worth even discussing for smaller (ie less than $5k) amounts?

Categories
Announcements

Happy Canada Day!

No post today so enjoy your Canada Day holiday.  For our American readers, get ready for the big July 4 holiday.

Categories
Announcements

The Personal Finance Network

Mr. Cheap and I are proud to announce that we have joined up with some other bloggers and created a new blog network called the “Personal Finance Network”. In case you are wondering exactly what a blog network is, it is generally a group of blogs that collaborate together and help promote member blogs via links. There are a number of potential benefits to the individual member blogs but I think the biggest one is the possibility of increasing our regular readership by getting some referrals from the other blogs. The readers of our blog won’t notice much difference except more links to the other member blogs.

Without further delay, here are the members of the Personal Finance Network:

Blunt Money – an American woman who talks about a variety of finance related topics.

Canadian Capitalist – most of our regular readers know him and his highly regarded blog. Mostly Canadian-related and investment topics.

Clever Dude – a very clever (or so he claims) American who is pretty funny and writes about “Family, Marriage, Finances, Life” – in other words pretty much anything!

MoneyNing lives in California but grew up in Canada so although he wasn’t born here, I’m including him as an honourary Canuck!

Squawkfox – another Canuck who writes very interesting posts on very interesting topics. Regular readers will recognize this blog as well.

Quest For Four Pillars – and of course this blog which you are probably already familiar with.

Please note that because of Canada Day there will be no post on Tuesday.