Category: Personal Finance

On June 1st (actually May 31st, I got excited and couldn’t wait until the next day 😉 ) I chugged through my financial figures to have a look at what my current networth is. The variables that I’m considering are:

Mortgage: $93,174.21
E-Trade: $10,058.30
Cash: $11,145.49
Condo: $143,500.00
Loan: $5,000

Networth: $76,529.58

The condo value is debatable (until I sell it, the value is somewhat unknown), but $143,500 is quite a conservative figure (similar units in the same building are selling in the $160’s). The loan is basically $5,000 that I lent to a friend (I know, I know, bad idea) that I’m hoping to get back in September. The stock portion is very volatile, so I’m not sure what the best way to include it is (I commented on this on “A Canadian and her money” and I think it annoyed her :-), but that’s the shares’ value as of June 1st.

This is a 9.29% gain ($7,096) over May, which is good but primarily comes from a lucrative contract I’m working right now (and suffering every day for, so I don’t think these gain rates are sustainable). This contract is paying around $6400 / month, and the rest came from getting my tax refund, a GIC coming due, some gains on the stocks I bought, etc (e.g. lucky circumstances, nothing I can repeat month-to-month). Additionally, there’ll be taxes to be paid on this next year (no withholding at source), so this is a before-taxes number (I’m expecting to be at around a 33% marginal tax rate next year).

Last months gain was around 7.82% ($5,539) which is probably closer to what I should expect.

My current estimate of my monthly expenses are around $2,140.00, which I’m trying to bring down, so my gross in May was somewhere around $9K).

I’m earning about $250 / month from my condo (I’ll post details on this later, but its around a 7.5% ROI), and an estimated $67 / month from the stocks and cash (assuming 4% return / year, I’m hopeful that the stocks will do significantly better then this). Therefore passive investments (before taxes) cover 14.8% of my monthly expenses. Given that my passive income was around $150 in December, this is an excellent gain (more than double the passive income in less than half a year).

I don’t really care too much about my assets vs. liabilities, so I won’t bother with that.

What should happen if you put a post-dated check into an bank’s ATM before the check’s date?

In my naive view of the world, the bank should put a hold on all funds deposited in the ATM. When they are verified by a human, cash should immediately be credited, and check funds should be released when the check clears (or if you have a good relationship with your bank released immediately and the funds pulled back if there’s a problem with the check). If the date hasn’t occurred yet, the check should be held until that date, then processed.

Tellers do this if you try to deposit a post-dated check. They’ll accept it (at least at my bank), but warn you that it won’t be processed until the date on the check.

I did this with a check that was dated June 1st. I deposited it on May 28th (while I was thinking of it) to one of TD Canada Trust’s ATMs, and expected the funds to be released on the 1st. Instead, they processed the check, and tried to pull the funds out of a Bank of Montreal account. The person who wrote me the check hadn’t transferred funds in to cover it yet (why should he, its a post dated check?) and the check bounced out of his account (and charged him $5). We both called our banks, and the only thing they could offer was that I shouldn’t deposit post-dated checks in the ATMs.

His bank wouldn’t even refund the $5, which from my perspective is totally outrageous (and I’m a Bank of Montreal shareholder!!!). They said they’d look at the check, and if it was cashed before the date on it they’d refund his $5, but they charge $5 to look at the check, so he wouldn’t get any money back (how offensive is that?).

AND, he’s going to have to write me a new check (which I told him to take $5 off of since he definitely shouldn’t be paying for it – he didn’t do anything wrong). Apparently TD Canada Trust won’t charge me anything when the check is returned (which is good), but they’ll pull the funds back out of my account (which would have caused me problems, but since I’m forewarned I canceled a transfer so it should be all good on my end).

All they’d have to do to fix this flaw in their process is have the person who opens the deposit envelope check the check and make sure the date isn’t in the future. If it is, then put it in a file for processing on the proper day (and if its far in the future, maybe put a hold of the depositor’s account). Simple, but not something they’re willing to do.

Morals of the story: Take post-dated checks to be deposited to the tellers, don’t put them in machines and its far better to be a bank owner then a bank customer.

My mortgage is coming due at the end of July and I decided to shop around to get the best rate I could. In the past few years I’ve been renewing with one year terms at TD Canada Trust where my mortgage guy always gave me reasonable rates which I verified by talking to other people I knew who were mortgage shopping. ING Direct website is also a good indicator of competitive mortgage rates. Last year I didn’t think I got a competitive renewal rate but I renewed anyways because of extenuating financial circumstances – 2 mortgages, maxed out line of credits, baby was due same week as the mortgage etc etc. This year I’m down to one mortgage and the LOCs are paid off so it’s time to go shopping!

I used a mortgage broker who was recommended by two different friends of mine. She gave us a quote of 5.19% for 5 years for a $190k mortgage with a LOC up to $250k. The LOC requires a lawyer to setup and there is a $500 cash back for the legal fee so I don’t have to pay it. I also asked if she would cover the $270 fee that TD is charging for allowing me the privilege of not renewing my mortgage with them and she agreed (sometimes you just have to ask). By way of comparison ING Direct had 5.24% for their fixed five year mortgage and TD (my current bank) offered a whopping 5.49% for five years. Almost a third of a percent is a steep price to pay for the convenience of staying with TD.

I feel good about putting in a proper effort to get a good mortgage rate. I wasn’t that concerned about what the exact value of the best rate, since there is nothing I can do about that, but I really didn’t want to sign up for a mortgage thinking that there was a better deal out there if only I had searched a bit harder.

I had mentioned previously that our general financial plan to prepare for retirement was to pay off all debts, max out my rrsp room, and hopefully invest outside the rrsp as well. I don’t want to ignite the immortal rrsp vs. mortgage debate since it appears that either option or any combination is a financially prudent course of action, but I would like to share my approach for my situation.

In our case, we do both rrsp contributions and extra mortgage payments. I don’t maximize the rrsp for now because I’d rather focus more on the mortgage since it worries me a lot more than the any lack of rrsp does at this point in time. On the other hand, being in a high tax bracket I like to make rrsp contributions because the money left over after taxes is not all that much. On the other hand again, the mortgage doesn’t go down very quickly if you don’t make extra payments.

I’ve read a number of rrsp vs. mortgage debates where the rrsp side argues that future investment returns will be higher than the current mortgage rates and vice-versa but the reality is that if you are planning to pay off your mortgage in 10-15 years as I am (or even quicker) then it’s debatable how much confidence someone can have in assuming a certain rate of return on their investments since 10-15 years is not really a long time when you’re talking about equities. Another factor is the mortgage rate assumption, a lot of investors just take the current rates and assume they won’t change when they do their calculations but are the rates really going to stay in a narrow range over the next five, ten, fifteen years? Assumptions are great for getting an “idea” of what might happen but they are really just guesses.

To conclude, I don’t know if it really matters that much exactly how we go about (eventually) maxing my rrsp and paying off the mortgage as long as we do it in a way that feels most comfortable.

I’ve often thought that a really great financial product would be a combination high-interest savings, checking, mortgage and line-of-credit (LOC) account.

Basically you’d set it up, and could have your paycheck deposted in it or whatever. You’d get Prime-2% interest on your savings (4% currently, comparable to PC Financial or ING Direct). You could write checks out of it and pay bills and whatnot.

If you had been authorized for an UNSECURED, if your accont ever dropped below zero, instead of being charged overdraft or whatever, you’d suddenly go from being paid Prime-2% to PAYING Prime+1%. Just like a regular LOC, they’d expect $50 or 3% to be paid on it per month (or whatever) and you could keep paying bills and writing checks.

If you bought property, and borrowed money for it, you’d then have a SECURED LOC that would come before the unsecured. You’d get credit up to your equity (75% of the properties value) and the borrowed amount applied against this and pay Prime-1% (like a variable rate mortgage). If you ever exceeded the 75%, you’d switch into the unsecured and pay a premium on the “overflow”.

This would obviously be dangerous to people who can’t manage their finances, but the world shouldn’t be designed for the lowest common denominator. Banks profit on each of these products individually, so I imagine they’d do ok with them all combined (and have ALL of that customers business). It would be much easier for the customer to manage their finances with 1 account instead of three.

Any ideas on how I can set up my own bank and offer this? 🙂

I got into real-estate (as a first time buyer and invester) last year, and had intended to blog my way through the process. I’ve now reached the point where I’ve competed the process (I own a condo with a tenant in place), so its probably time to start the blog .

Since the first real estate adventure is complete, I think I’m going to try and take a wider perspective and actually blog about all my money adventures (not just landlording).

Money is interesting in that it means such different things to different people. I hate being forced to do boring tasks and having to grin and take it when idiot bosses throw their weight around. For me, money is freedom and security, being able to do what you want, without having to worry about ending up eating dog food on the street.

This this end, like many other, my ulimate goal would be to have passive income that equals my living expenses and then have complete control over how I spend whatever time I have remaining on this planet however I want (probably reading and drinking coffee would take up a large part of it).

I consider passive income as money that comes in that doesn’t require very much ongoing effort. I like to think of my condo as a passive investment, even though I had to replace the dryer duct recently, simply because once I’ve done maintenance work on the condo, I hope that there will be a long period of time where I just cash rent checks and pay the bills (every property owner’s dream).

To give some numbers, I do computer contract work and charge $40 / hour for full-time, longer-term (3+ months) work. This works out to about $80K / year income before taxes (and being self-employed I can deduct a few work related things).

For the last week, I’ve been carrying a notebook with me everywhere I go and jotting down what I spend. This morning I plugged the numbers into a spreadsheet and have hopefully determined a rough cost-of-living estimate for myself.

For my fixed monthy costs:
Rent – $440 (1/2 of $880 rent paid by gf on 1 bedroom apt)
Cable – $40
VOIP – $22.45
locker – $12.50
phone+internet – $40.25
transit pass – $99.25
Cleaning – $45
Total: $699.45

Over a week, my variable spending was $396.26, which works out to a total monthly “cost of living” of about $2,348.26. I think this was actually a fairly representative week as I sent my mother some flowers for mother’s day, ate out at a pricier restaurant and had a night on the town, bought a book, etc. Hopefully if anything most weeks should be cheaper (which I’m hoping to keep tracking and determine).

The thing that blew my mind was that I’m spending $195.21 weekly on food (groceries, lunches at subway, dinner out once in the week). That seemed reasonable to me, until I did some hunting and apparently the average Canadian HOUSEHOLD spends $150 / week on food! I found some US numbers, and apparently single men spend the most on food weekly, and they spend on average $60 / week.

I was always convinced that it would be tough to eat much cheaper than I do, but apparently some people are doing it in a major way. I’ve always felt $7 is a reasonable value for a Sub (try buying deli meats, bread and veggies at the grocery store and your total will hit $7 in a hurry!) and friends always tell me you can eat way cheaper than that at home – I guess they’re right.

I lost a ton of weight (about 70 pounds), so I’m not too eager to start eating cheap and badly, but I definitely want to figure out a healthy way to spend around $60 / week on food (ideally if it was easy too that would be even better :-).

Any ideas?