Categories
Personal Finance

December Networth

Since my move last month, things have been a little bit more expensive. In addition to the extra $170 / month in rent, I’ve been having to pay for applications to schools (~$90 / school) and to order transcripts ($8 each, at least two needed for each school).

Rent – $670
VOIP – $20
internet – $45
variable – $735
total – $1,470

My passive income rose slightly to $313.37, which is about 21% of my current expenses (way down from a high of 26%). Luckily I got the first payment from my passive real estate investment ($500) and payment from a contract I did a while ago ($500), so combined with my income from the condo I’m about even. This is good considering that I’m not working

My stocks were WAY down, until the rally last Tuesday pulled them back up which also helped my networth. It currently stands at:

Mortgage: $92,104.80
E-Trade: $24,790.36
Cash: $6,173.57
Condo: $143,500.00
Building: $12,553.50

Networth: $94,912.63

I took a bit of a risk and bought a bit of Washington Mutual ($2500 worth) mid month on margin. It promptly dropped significantly and has rebounded a bit, but killer dividend yield or not I’m worried I’m red lining in the investments a bit too much (and am probably not going to do any more buying until income starts coming in again or I’ve at least been accepted somewhere).

Like everyone, I expect the holidays to be a bit more expensive then a typical month. I haven’t had to touch my line-of-credit (which is ready and waiting with $20K once I’ve used up my cash) and I’m currently hoping / expecting my cash reserves to last until I start my PhD program (in May or Sept). The University of Alberta and the University of Waterloo are looking like the two strongest contenders right now…

Categories
Opinion

Looking for a Good Woman

SWM seeks a good woman who:

  • Knows how to keep books, do taxes, and earns a good income
  • Knowledge of Canadian investment or real estates laws and taxation rules would be a plus
  • Can manage rental property duties such as:  screening tenants, small repairs, renovation estimates, managing contractors, rough property appraisals, negotiations, etc
  • Lives frugally, doesn’t like expensive food, vacations or entertainment
  • Ideally owns an extensive investment portfolio and / or real estate

Please include pictures of the real estate and copies of your portfolio holdings when you contact Mr. Cheap at [email protected].

Categories
Announcements

Applying for a PhD

As regular readers know, I’m currently moving towards becoming Dr. Cheap. The first step in any graduate program is being accepted. This is somewhat different then applying for an undergrad, but luckily I’ve gone though a Masters program so I pretty well know what to expect.

If you want to read more about grad school from someone who has been through it all – check out the new site Ivory Tower Unlocked.

In very general terms, one of the biggest differences between graduate work in Canada and graduate work elsewhere in the world is that for research / academic programs (e.g. not law, medical or business school) there is usually funding provided to cover tuition and living expenses while in the program. The living expenses is enough that some grad students can even afford to have a car (its about $22K / year for Masters students and $24K / year for PhD candidates). Many people, even here in Canada, don’t realize that you can make money while studying, instead of going into debt.

In fact, amazingly, this is even true for international students. The “official” explanation why we’d want to use government funds to pay people from other countries to learn (then take that knowledge and benefit their own economy instead of ours) is that it creates a superior academic environment, which then benefits the schools’ other profs, students and country. Beats me if this actually works out, I’m just glad that many foreign students decide to settle down in Canada after finishing their grad work (we should offer automatic citizenship after graduation from an advanced degree to encourage those who might stay). My best friends, while working on my Masters, were all Chinese, so I certainly benefited from this.

The application process itself is quite similar to a Masters application and varies little between schools. You fill out various demographic info (like your address, SIN, etc). Recently this has gone on-line, which is cool compared to the old fashioned paper forms I filled out years ago. You need to get recommendations from 3 academic sources (which is a pain in the butt). These are professors that you had a good relationship with who’ll fill out a form saying “he’s a good guy”. Profs act like they’re doing you the biggest favour in the world filling out these damn things (for my Masters I had a reference belly ache that I’d only given him a MONTH to fill it out).

You need to order transcripts from your previous degrees, which is only annoying in that it takes a little while and costs a bit of money (~$8 / transcript). Speaking of costs, most schools will charge you $80-$90 to apply (money grubbing bastards!).

International students have to submit a GRE (to prove they’re smart) and a TOEFL (to prove they can speak English). Its definitely nice, as a Canadian, that I don’t have to prepare for and take an aptitude test.

The applications also require your CV (which is subtly different from a resume – more academic), supplemental info (which is often restating information from your transcripts so that lazy profs who are considering supervising you don’t have to do much reading) and a form where you discuss your research interests (which usually involves looking at faculty at an institution and deciding, by surprise coincidence, you’re interested in EXACTLY their area of research, what a shock!).

After you get your application in (definitely by the deadline, the earlier the better), they make it available for professors who have funding for graduate students. Profs apply for funding, and as part of the application they talk about how many grad students they’re going to take on (which the people awarding the grants view as a good thing). They then use this money to take on graduate students (so profs who get lots of grants, have lots of money and can take on lots of students). If you get a scholarship, which Mr. Cheap was too late to apply for, you become inexpensive for a prof (plus they’re reassured that you’re a smart cookie: if you get NSERC or OGS you can pick the school and prof you want to work with).

Once you’ve been accepted, you start your program (which often involves course work at the start). You get a check every month and have to be a TA usually to earn part of it (which is light work throughout the term, maybe 10 hours a week). Usually within 5-7 years you finish your thesis, which is a major project that represents new knowledge in the area you’re working in (the trick is to pick a very specialized area so that not many people have done work in it and its easy to come up with something new).

Less then 50% of people who start a PhD finishes (and virtually no one who starts a part time PhD finishes). Often you’ll do research in an area, find there isn’t anything interesting to do a thesis on, and after 2 years you have to start over from scratch (which has happened to friends of mine, it is obviously incredibly demoralizing, and this is often the point people drop out at).

In terms of interpersonal dynamics at a university, I like to think of it as a family. Undergrads are babies (they’re cute and can be safely and easily ignored), professors are parents, Masters students are children, and PhD candidates are surly teenagers. You develop a love/hate relationship with your supervisor that is very similar to a parent/child relationship (at least it was for me). They help you, but at that same time are often quite patronizing.

Anyone who has finished grad work (Wooly Woman for one), what do you think of this write up? Does it match your experience?

Categories
Real Estate

Real Estate Agents – The Other Side of the Coin

It’s no secret that Mike and I aren’t big fans of real estate agents. A couple times when we’ve gotten together, it’s been clear that the value of agents is a running debate in the Pillars household, and I was delighted to throw my support behind Mike (at least when his wife was out of earshot).

Our general view is that while agents provide value (advertising and showing the house, providing referrals to mortgage brokers and lawyers, and helping explain some of the relevant laws on the seller side) it’s not worth 5% of the sale price. What we REALLY take exception to, if Mike will let me speak for both of us, is that they get a percentage of the sale price, which gives them an incentive to sell as quickly as possible, rather than to get the highest price.

Larry MacDonald wrote about the agent monopoly, and recently sold his house himself (without an agent).

As with many things though, there is another story. Part of the reason agents get paid so well on the sales that go through is that MANY of them don’t. Much as volatile stocks have a greater return, jobs with uncertainty of compensation (such as commission work), often pay better. An agent can easily have a run of bad luck, not make any sales (and therefore not make any money). Additionally, they have to put a brave face on it and not complain (since who would want to work with an agent who was struggling? We all want the best!).

The buyer’s agreement is another double edges sword. It’s an agreement that you’ll only buy from the agent you sign with (if you buy a property on your own or with another agent, they can sue you for part of the commission). Some agents try to sell this as a benefit to the buyer, which is insulting. HOWEVER, some buyers pull a dirty trick where they get an agent to help them find a house, then buy it themselves (or with a friend who is an agent), and cheat the original agent out of their commission. A rant on a real estate agents blog I found recently details her… passionate… reaction when she saw this happen on HGTV’s “Property Virgins”.

Speaking of which, my ex and I were ALMOST on “Property Virgins”. We wrote them a nice little e-mail (attached a picture) and they called us back. Unfortunately my ex spilled the beans about my rental condo, and they said I wasn’t a virgin (which kind of hurt) and we therefore weren’t eligible. In retrospect it might be a good thing, as the show probably would have been about us breaking up rather than buying a property :-).

Categories
Personal Finance

H&R Block Tax Course

Some time ago I posted that I was going to take H&R Block’s tax course (Telly recommended against it). I signed up, paid my $300 fee, went to the first class, and dropped out afterwards.

Telly’s warning was 100% on target. Henceforth, I intend to do anything Mike *OR* Telly tell me to. My one fear is that they’ll give me conflicting instructions…

The course focused on VERY SLOW learners. When he was “teaching us” how to fill out the name and address portion of the tax form, the instructions said to put “YOUR CITY and YOUR PROVINCE in the blanks”. Pretty self-explanatory, right? He told us, LITERALLY 5 or 6 times “now, here you’re going to put Toronto, or Mississauga, or whatever your city is in the blank, don’t write your city!”. The second time he said it, I looked at him and smiled (I assumed he was joking), he gave me an encouraging grin and a nod back, which clearly said “people have made this mistake before”.

If you thinking about buying tax preparation software then consider software programs such as TurboTax or TurboTax Canada (formerly QuickTax).

This course also didn’t cover business income or income from rental properties, two areas that I was very interested in learning about. In the end I figured I could spend 66 hour and teach myself more than I’d learn at the slow pace in the class.

Luckily, they give very generous refunds near the beginning of the course (I think I got 80% of my fee returned to me). Unless you’re a fairly slow learner, or you want to work for H&R Block (I think that’s why a lot of people take the course), I’d just buy some books at Chapters and read through them for 6 hours every week.

Categories
Personal Finance

Unified Theory of Everything Financial – Canadian Edition

Over on Marketwatch, Paul B. Farrell posted that ‘Dilbert’ deserves the economics Nobel Prize for his ‘Unified Theory of Everything Financial’.

As with most things Scott Adams writes, I think he’s actually half-serious, and with 129 words he puts together a pretty good plan (for the original, see the article).

In a blatant rip off, reeking of lack of material to post about, here’s the Canadian version:

  1. Make a will

  2. Pay off your credit cards

  3. Get term life insurance if you have a family to support

  4. Fund your RRSP to the maximum

  5. Buy a house if you want to live in a house and can afford it

  6. Put six months worth of expenses in a money-market account

  7. Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement

  8. If any of this confuses you, or you have something special going on (retirement, college planning, tax issues), hire a fee-based financial planner, not one who charges a percentage of your portfolio

Supposedly he originally wanted to publish it as a one page book, but when his publisher wouldn’t let him, he included it in “Dilbert and the Way of the Weasels” instead. Truth be told, I find it hard to argue with any part of it, probably over 90% of people would do better following this simple plan than whatever they’re doing now. I might switched the order of 5 & 6 and add “spend less than you earn” as #1. Disturbingly, as much as I think this makes sense, the only thing from his list I’ve done is #2 (I’ve never carried a balance on a credit card).

Any other suggestions for changes? Would you recommend this as advice to a friend who wanted to “start investing and become more financially savvy but didn’t know where to start”? Should we e-mail Stockholm?

NOTE: I realize that any unified theory would include Canada. Its called a joke you nerd! That’s right, walk away tough guy, walk away. (bloggers take note: that’s how you deal with imaginary hecklers)

Categories
Real Estate

Real Estate Video Game

I’ve often thought that an interesting game would be a simulation that takes you through a few decades of a real estate investor’s career. Yes, yes I’ve heard of monopoly, you’re very funny!

What I envision would involve analyzing properties, determining the cash flow, and dealing with unexpected changes in market conditions and interest rates and whatnot. Probably it’d work better as a single player game, or if it was a multi-player game it would be fairly non-competitive.

Robert T Kiyosaki has a game, “Cash Flow” which is a step towards this idea (and he even made it with the idea of using it to help teach people about money), however its pretty lame (and I’d find it frightening if anyone actually felt better prepared to manage their finances after playing it).

Probably the game I’d imagine would in some way involve people balancing their time and money. They’d find and manage properties (with more potential problems as they got more properties), decide when to keep properties or when to sell them. Potentially it could work off of the computer as a game with cards or something (but there’d be a lot of book keeping tracking mortgages and whatnot). If it was on a computer, I’d make it as much of a simulation (instead of a game) as possible, and hopefully get it to mimic the real world as much as possible.

I’d ideally love it if it illustrated the idea of exponential gains, that things start of slow, and really pick up speed once compounding kicks in (which I don’t think is a very intuitive concept for many of us, we usually have a very linear perspective on life).

Nothing at all like what I’m describing, but I came across a silly, fun real estate game: Mansion Impossible. You should be able to figure out within 20 or 30 seconds what the strategy is then follow it until you win.

Categories
Personal Finance

November Networth

I’ve moved again and am not working any more (lots of changes for me, that’s life in the cheap lane I guess). My new cost of living is:

Rent – $670
VOIP – $22.45
internet – $45
variable – ~$580
total – $1,317

My passive income is at $311.47 (there was a nice little $11 / month dividend increase from my ROC stock), which is covering just under 24% of my new cost of living. This means I’m bleeding about $1K / month while applying for grad school.

In terms of networth and cash, I actually improved my cash position by $634 this month (got my final check from where I was working right before the end of the month).

This puts my networth figures at:

Mortgage: $92,296.12
E-Trade: $24,831.02
Cash: $6,414.83
Condo: $143,500.00
Building: $12,553.50 (what I put into it, it’ll take a bit more time before I can make any sort of estimate what my position is worth)

Networth: $94,812.58

as of November 1st.

With no significant money coming in, my plans are mostly to stay the course (there isn’t a lot of costs for me to cut, unfortunately), get the ball rolling with grad school applications, then look around for something to bring in a bit of cash until I start (perhaps some contract programming, perhaps a short term business venture, perhaps something else, any suggestions?).