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Ever since Neil and I paid-off our consumer debt, and have since funded an emergency account in case anything happens to either of us or our jobs, we’ve been working on how to make our money do the most for us. I work hard, it should too!

An interesting perspective we got from our investment manager had to do with the amount we’re paying on our mortgage. The first thing a lot of people think of when it comes to money management is being mortgage-free. Us included.

Our current mortgage has a number of accelerated repayment options, including the option to up to double each payment. With the record-low interest rates, we’d easily been doing this, and because anything above the required payment goes directly against the principle, we were down to about 9 years (at current rates anyhow) to be mortgage free.

But is that getting us the best return right now?

Housing is, admittedly, a shit investment in terms of growth. Most of the time it keeps up with inflation, and there are all sorts of other soft benefits to owning a home, but in terms of cash in the bank at the end of the day, it’s not often your best choice.

In the meantime, we’ve got a big backlog of RRSP contribution room from our years of being young and much less responsible than we are now, and try as we might, we can’t find a better place to put our money than in the government sponsored tax deferral accounts. And then into TFSAs. Even at a modest rate of return, it’ll far outpace any “investment gain” we’d achieve on our house, and we get to take advantage of the additional tax savings now.

So, back up to 20 years left on the mortgage, but at least it’s happy, party, fun times with our big! new! refund cheques! right? Not so fast.

One of the things we always wondered a bit about while watching yet another episode of Till Debt Do Us Part was how these average people in financial ruin were going to have oodles of money by the time they retired if they followed the plan Gail set out for them.

We currently put more money into retirement savings each month than many of these families were told to in the show, and according to our calculations, were being quickly outpaced by people putting half as much into their savings. What were we missing?

Thanks to the magic of TV editing, we finally caught an episode where Gail said “and if, once you’ve paid off your debt, you take that monthly amount and put it into retirement savings, and reinvest your tax returns every year, you’ll have ‘thismany’ dollars when you retire.”

Ah Hah! Reinvest the tax return!

When we met, Neil hadn’t even filed his taxes for the previous three years. I had always gotten modest returns, and used them to either pay my Visa bill, or as some sort of bonus “play money” windfall to be squandered. Even last year we used our returns partly for fun stuff and partly for debt repayment.

This year though, it goes straight back into the RRSPs. Which, combined with our new, higher contributions, will net us a return that’s (stunningly) more than the salary I made my first year out of University. Which goes back into the RRSPs again, and so the circle continues until we’ve maxed out our backlog (about 3 years from now).

Before making those two changes we were pushing hard and really hoping for a market turnaround that would give us a favourable average rate of return by the time we turn 50 (which is when we’d like to retire) to have enough to retire on. We were aiming for a million 2030 dollars, which would see us through to 99 (we both come from long-lived families) if you included selling our home if it also appreciated enough to keep up with inflation.

Now, we’re on track to have a little over 2 million at retirement, not counting our house, even taking into account a much lower average rate of return over the life of our investments. It seems immensely cool, and I still can’t quite believe it, but so far I haven’t been able to break it.

It’s kindof amazing that in just a couple years I’ve gone from being so detached from money that I didn’t even open some bills, to being this active in what we do with it and trying to make the most of it. And it’s super rewarding to see that paying off!

… I do not think it means what you think it means!

I’m talking about Sustainability. The latest in a long series of buzzwords that’s been appropriated to make people feel better about their choices – not the first, and certainly not the last. But definitely the one I find most annoying right now.

sus·tain·a·ble (s?-st?’n?-b?l)
adj.
1. Capable of being sustained.
2. Capable of being continued with minimal long-term effect on the environment: sustainable agriculture.
3. To keep up or keep going, as an action or process: to sustain a conversation.

There are dozens of programs out there that claim to operate under the banner of sustainability. The problem comes when you actually look at these programs, and realize their “sustainability” only exists in a vacuum. And the world just doesn’t operate that way.

Two conversations about sustainability I’ve had lately revolve around agriculture and real-estate. One promoting sustainability, one illustrating unsustainability. Both, after scratching the surface, dead wrong.

Sustainable Food Program

I recently heard of an initiative up at my Alma Mater, SFU, as they’re trying to bring “sustainable food” to the hill. In partnership with the Fraser Valley Food Network’s South Fraser Harvest Box program, SFU Local Food is bringing Harvest Boxes up the mountain once a month for students to purchase. Local food, from local farms, for locals to eat. Hooray for supporting sustainable agriculture!

Except, this program is subsidized by the United Way and the Fraser Health Authority.

Suddenly, it doesn’t look so sustainable.

If this program requires funding from the aforementioned organizations to survive, then what’s sustainable about it? The program promises to give farmers a fair wage while bringing affordable food to residents at SFU. If there needs to be fund raising intervention in the middle of the process, it means either the farmers can’t afford to farm & distribute on what people are able to pay, or people are unwilling to pay for the true cost of their food.

The program touts a discount of 2-3x what one would pay in a grocery store for similar products – why does it need to be so staggeringly inexpensive? And this is not just for students, as advertised on the website. Anyone living at SFU (including those in the half-million dollar condos) may participate.

A truly sustainable system would be able to support access to fresh, local food, while paying farmers and distributors a fair wage, and ensuring those who really can’t afford it are still able to participate.

Hiding the true cost of food under the umbrella of “charitable subsidy” is certainly not doing sustainability any favours.

What happens when the funding disappears because of cuts, or just someone’s “better idea” for allocating dollars? Or when someone moves away from SFU, having no idea what the true cost of sustainable food is? My guess is they go back to purchasing unsustainable food.

All this program has done is given some farmers and eaters the proverbial fish, rather than teaching them how to operate in a sustainable system.

That Crash, it’s coming, any day now…

On the flip side, I’ve seen a couple graphs floating around about the “unsustainability” of Vancouver’s real estate prices, based on whether the average Vancouver resident can afford to own a home. The lament is loud… “real-estate is unsustainable, since locals can’t afford to live here!”

Wrong.

About one-million Vancouverites (the population within the city limits) beg to differ. They can certainly afford to live here – they already do. What they can’t afford to do is buy real estate here.

Anyone who’s done the most cursory of learning about financial planning should know that owning real estate is not necessary to be fiscally secure today and into the future. What is necessary is paying no more for housing (including rent/mortgage, heating, insurance and taxes if applicable) than 35% of one’s household net income and saving another 10% for retirement. I know plenty of people who are able to do that on one income, never mind the “three incomes” the Canadian Housing Price Chart states are necessary to afford a mortgage in Vancouver.

As for the housing market, if you believe that Vancouver residents purchasing homes are both necessary and sufficient to sustain the market, you’re trapped in that vacuum again.

A huge proportion Over half of residences in downtown Vancouver are owned by foreign investors. Property values skyrocketed in the mid 1990′s as wealthy Asian investors moved their money into foreign assets in anticipation of Hong Kong going back to China. And since then, as Vancouver’s appeal has grown as an international destination, and as the city consistently ranks in just about any top 10 list of “best places to live in the world” it’s not surprising that our fair area has the wealthiest postal code in the country and our premium properties are in high demand.

The only way a crash is going to come is if renters are so unable to afford their homes that investors are forced to sell at a loss, because they’re no longer able to carry the property with the income it’s generating. Considering vacancy rates here have been hovering around 2% for as long as I can remember, that seems unlikely. Even with the recent economic crash, there was only a slight correction in late 2008/early 2009, and values are quickly climbing again.

Is anything sustainable?

Really, I have no idea. Everything comes at a cost – whether it’s the environmental impact of making batteries in China (one of the most toxic manufacturing processes in existence) for your electric car to “save the planet,” or subsidizing food cost and distribution to bribe people into thinking they’re making sustainable food choices, to confusing an idea of resource allocation “fairness” with actual market sustainability in terms of who we think should own things.

I think we have to make the best choices we can, based on what we know. But before you blindly follow something because someone has tagged it “(un)sustainable,” perhaps step out of the vacuum and look at the whole picture. You may be surprised at what true sustainability really looks like.

I’ve outlined our months of budgeting to get rid of consumer debt, the tools we used to manage it all and some of the tricks we learned along the way. The last installment in the official budget series is the all-important “what now?”

While it’s nice not to have the big worries of our outstanding line of credit and unfiled taxes hanging over our heads, we are certainly not completely out of the proverbial financial woods.

We’ve now taken the amount we were putting toward the debt, and have reallocated it into a few different categories, henceforth referred to (and labeled in our spreadsheets) as: Fun, House/Dog/Taxes/Car, and OHSHIT!

Fun is pretty self-explanatory. That’s anything from fancy dinners out, clothing and IKEA trips to major purchases like a new TV to replace our aging tube set, vacations, and sailing lessons.

House/Dog/Taxes/Car is our non-life-altering emergency fund. We’ve figured out how much we need to save each month to pay for annual expenses like car insurance, the dog’s annual vet visit, home insurance, property tax, major car services. We know these things are all coming eventually, and we know approximately when. We’ve also added a bit extra to the savings goals for that account to cover things that are entirely likely to happen someday, like a major car repair, major dog repair, major house repair or insurance deductible.

The OHSHIT! account is for the big ones, and we hope we never have to spend it. Job loss. Limb loss. Life loss. Anything that would result in one or both of us losing our ability to earn income for any period of time. We’re also looking into disability insurance, to cover the gap between work insurance coverage/government assistance programs and our current salaries, so if the unthinkable does happen, we can focus on getting through the ordeal, without also worrying about things like losing the house or being able to buy gas or groceries.

Other than those, we’re continuing to contribute to our RRSPs and opening TFSAs.

When you add it all up, we…. don’t have much more money to spend on day-to-day frivolities than we did while we were paying down debt. I suppose those weekly dinners at Lumiere won’t be a reality after all.

The difference is, we’ll still be able to have and do fun things in the near and distant future (we have lofty dreams of buying a sailboat), without going back into debt for them. And if we’re able to stick to our plan, we should continue to be able to have them, even if other emergencies and the various obstacles life throws our way interfere. And then, whaddya know, we’re living within our means.

Frankly, even though day-to-day life is still pretty modest, it’s way more fun putting money into a bank account with a picture of a sailboat on it, than one with a picture of all the interest we were paying.

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And speaking of money, if you have some burning a hole in your pocket, why not contribute to my efforts at the 2009 Blogathon! I’ll be posting every 30-minutes for 24 hours straight to benefit the BC SPCA!

Of course I can’t suggest you go into debt or compromise your own financial plan to donate, but maybe find a way to forego a couple lattes or a new pair of party shoes and help the animals this month instead!

Of course the fundamentals of any balanced budget is that you can’t spend more than you make. It’s a no-brainer. It’s also not always easy (possible, yes, easy, no) to make sure that actually happens on a month-to-month basis.

With a large amount of credit available and/or minimum payments you could also make for “just one more month,” putting off really paying down debt, it’s easy to spend more than you make. I know this. I have been there.

Spending Less

We knew to be successful at paying down our debt, we’d have to spend less wherever possible. And this is where we found the power of making the most of stuff we already had.

I don’t know if everyone is like this, but when we really started going through our cupboards & drawers, we had a lot of extra stuff hanging around. Most of it was consumables that we regularly spent a small fortune on.

Our pantry was full of odd dry goods we rarely used and drinks we kept around. These became the makings of many new interesting recipes and cocktails we hadn’t previously thought of.

We also had a freezer full of leftovers and “rainy day” purchases that seemed like a good idea at the time. Well, it’s a rainy day now in budget land. No, it wasn’t always enjoyable or even tasty (the freezer is sometimes where dishes we didn’t really like go to die, because we don’t feel right just throwing them away – until we clean out the freezer months later). But it was frugal.

For the ladies (and the metrosexual men) – I found I had tons of half-used and trial-sized cosmetics and personal care products kicking around under the sinks. Sure, when I felt like I had all the cash in the world to blow on new versions, these seemed like garbage. But when pinching every penny, these kept me lotioned and potioned and pretty for the entire first half of the year.

And of course clothing – a small blip on the radar, but when we cleaned out our drawers and closet we found things we’d forgotten we had, which put off the immediate feeling of needing to purchase more.

So, we are were (!) lazy, forgetful, slobbish and wasteful with all that extra stuff hanging around. But using it up, as an immediate budget-saver, really helped us get through some of the tighter months. And of course, it had the added bonus of getting us cleaning up our act regarding the stuff we horde.

Making More

Neil and I both work full time at fairly demanding jobs. We’re paid respectable wages and certainly weren’t about to get raises in this economy.

But there are so many other ways one can ensure more money comes in.

One of those was to sell off our hockey tickets for the season. We share half-season’s tickets with my family, and so had an allotment of games we had already purchased tickets for. By selling these to friends and acquaintances, we turned a sunk cost into cash, and spun that cash into a few smaller-budget entertainment outings.

Along the previous theme of getting rid of excess stuff, we sold a bunch of books we no longer wanted to a used bookstore. If you have extra things around that someone may want, put in a bit of effort and turn it into cash – you’ll be amazed at how much you can get, and how far you can stretch those few extra dollars.

The other big way we “made more” was to really sort out our accounting and taxes. As I mentioned previously, we were paying way too much in taxes and didn’t have the best grasp of our personal situation. It seems counter-intuitive to hire someone to do a job when you’re trying to save money, but the fees we have paid to our accountant have been more than covered (sometimes 10 times over) by the benefits we have gotten by using him to do our taxes and tax planning, rather than doing it ourselves.

Having someone on your side who can help you navigate the waters and maximize your returns is a very good investment, and if you can cover the initial fees, you will come out ahead. Also, if any locals would like a referral to our accountant, drop me a line.

Really, none of these ways of spending less and making more are rocket science, but it takes both a desire to do whatever it takes and a bit of creativity in approaching your own situation to make it work.

Next up: The final installment in the official budget series; where do we go from here?

Now that we’re debt-free, I wanted to share some of the tools we used on the way there.

Actually, there was just one tool: Google Spreadsheets. In it, we built our budget, and kept track of everything we realized needed keeping track of. The visibility into exactly how much money we expected to be coming in and out at all times, as I’ve mentioned before, was the key to making this successful. More successful than we’d intially planned for in fact, considering the “bonuses” that came our way throughout the process that we were able to take advantage of.

In our Budget spreadsheet, we’ve got 5 tabs going at all times:

1. The overall budget – where all the money should go
2. The monthly ledger – where all the money is going (with lines struck out as things are paid)
3. Last month’s ledger – where the money went (for comparison)
4. Trigger list of possible expenses that might come up in any given month
5. Schedule of all our bills, and when they’re due (annual and monthly)

When it comes to fund allocation, one of the biggest challenges for building a budget (or any financial planning endeavor, really) is figuring out how much to put where. What I really want out of life is to walk up to an expert and say “here is a complete list of my income/assets/liabilities” and have them tell me what to do with it all. Sure, I could learn everything about finance myself, but frankly, I’m not that interested. Unfortunately, I have yet to find that expert. Luckily, for day-to-day expenses, this budget spreadsheet comes very close.

It’s from Gail Vaz-Oxlade’s website, and it helps that her attitude toward financial strategies and planning advice aligns very closely with our own. She breaks down a budget into categories on which you should spend what percentage of your income, making allowances for debt repayment, long-term savings and life in the meantime. It would certainly get tricky when you have more debt than you can pay off with 10% of your net income in 2-3 years, or are locked into paying significantly more than the recommended allotment for housing, transportation and the like – but for the average household, a bit of massaging to suit your individual needs and it should all work out.

The other thing we did was make a monthly ledger with money we knew was coming in (usually just our salaries) and all the expenses we knew were going out. Building the “out” list every month was crucial, and we did it based on a trigger list (borrowed from the GTD methodology) of potential expenses, so we didn’t forget things like celebrations, car repairs, clothes needed, personal care or staples we needed to stock up on.

Neither Neil, nor I are particularly good with writing down every penny we spend. We are occasionally careless, and succumb to impulses, so the strategy that worked best for us in the end was to align our spending based on Gail’s budget spreadsheet, build our monthly ledger to include all the money that had to go out for various bills and expenses, and take out the rest in cash in two lumps at the beginning and middle of every month (which aligns with when we get paid). Facing the dwindling pile each day meant we could always take a $20 for our wallets to grab a coffee or go out for lunch, but each of those impulses very obviously came at the expense of other things. There were many weeks we lived off of whatever was in the freezer and pantry (lots of soup, rice and pasta) because we spent our last $15 on a bottle of wine.

In the end though, it kept us on track with what we were trying to achieve, and I hope reading about our experience helps someone else get to debt-free as well.

Next Installment: how we minimized costs and “made more money” over the past six months.

January, February, March, April, May

Reader’s Digest Version: we’re consumer debt free!

Scroll down to the bottom to enter to win a pair of tickets to see Zinadine Zidane play in an exhibition soccer match in Vancouver on Sunday, July 12!

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We made it!

Part of getting our financial house in order was to get a lot of our taxes in order as well. One of the major contributors to our debt was a huge tax bill from a few years back (a big enough bill that Canada Revenue suggested we pay in installments) that we weren’t expecting at all. It turns out that we’d missed changing our address with one financial institution and weren’t getting tax forms for an RRSP account. Since we tend to “set it and forget it” with retirement savings, we didn’t really notice they were missing. To make matters worse, this is the fund that Neil’s work does RRSP matching to, so we were paying extra taxes, since RRSP matching is a taxable benefit, without getting any deductions.

So we had our accountant file amendments for past years, and the not-insignificant cheque arrived in the mail right at the end of June! It easily covered the remaining balance on our line of credit, and like that, we’re debt free!

It’s really quite amazing the amount of windfalls we’ve seen from just making sure we’re paying attention to our finances. Except, they’re not so much windfalls, as the reclaiming of money we were otherwise throwing away. I’d heard of people who were so careless with their life and finances that they wasted hundreds or thousands of dollars a year on unclaimed taxes & benefits, NSF fees, late charges and the like. I never imagined I’d be one of them.

Oh but I was. We were. And now, we’re not!

Also, having our emergency account going the entire time meant that our plan was never derailed, and windfalls were exactly that – bonuses, instead of a chance to catch up.

I’ll do another post soon to share some of the tips and tools that worked best for us, and where we go from here. But for now, it’s time to celebrate!

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One of the things that helped us get through the belt-tightening of the budget exercise, especially in the early days, was to take advantage of some gift certificates, airmiles points and coupons we had around the house. Entertainment that doesn’t bust the budget is that much more relaxing!

And I’ve got two pairs of tickets to see Zinadine Zidane play an exhibition match with the Vancouver Whitecaps on Sunday, July 12th at 7:00pm.

To enter, comment and let us know why you need some free entertainment this weekend. I’ll randomly draw the winners from all the entries at 5:00pm today and email your congrats. You can pick the tickets up at the game on Sunday.

Good Luck!

January. February. March. April.

And May has already come and gone! This was really a banner month for us. One of those months that illustrated how much freedom being responsible with finances delivers.

May is the month in which Neil finds out if the company he works for has met their corporate goals, and what, if anything, the resulting annual bonus will be. As is recommended by pretty much any financial planner, we built our budget around what *is* instead of what might happen, so we hadn’t planned on the bonus, and weren’t depending on receiving it.

Not only that, but because we’ve been careful with where our money goes and have a good grasp on the state of all our accounts, the bonus (when it did come this year–hooray!) didn’t just disappear into paying off some of the balance on a credit account. We know exactly where it went, and feel really good about it!

I’m going to do the numbers a bit differently this month. By outlining exactly what our combination of variable spending and debt repayment is, it’s pretty easy to extrapolate what Neil’s bonus was. The bonuses are tied to salary and performance; I know some of his colleagues read, and sharing that information breaks a few confidentiality requirements he has.

What I can tell you is that by being prepared and on plan with our spending/debt repayment, and having a savings account set up with some ideas of acquiring Big Red, we were able to act on a great deal that came up for a car and pay off a large chunk of that consumer debt, moving our Debt-Free date up to July 31, instead of Sept. 30.

Looking back over the previous months, it becomes pretty obvious that it’s not just “spending less than $X per month” that is key to fiscal solvency (I started off thinking it was just that, with the initial $1000/month goal).

It’s the consistent visibility into the amounts going in and out, knowing what expenses might be coming up, having an emergency account set up for the unexpected things that always manage to sneak in anyhow, and of course after all the necessities have been paid for, ensuring what’s going out is less than what’s coming in (which, of course, starts with keeping records that give one visibility into the amounts going in and out, and cue Elton John “it’s the ciiiiiiiiirrrrrrrcle of liiiiiiiiife…”).

So, at the end of this month we owe $4908 on our line of credit. It will be paid off in 2 months. We acquired a car, and we realized we have just enough in our savings account to pay our property tax bill in July. And it feels really, really good!

I sortof feel like a bit of a smug arse, posting about how awesome we feel we are (and perhaps like I’m inviting a bit of a reality-check karma smackdown). But then, we put a lot of effort into getting ourselves into a good financial place.

It’s funny, because as much as people seem loathe to be really honest about financial trouble, it’s pretty obvious that people are much more comfortable saying “man, I owe so much on my credit card” rather than celebrating being responsible and being out of debt.

So, in the comments, celebrate! Are you being uber-successful with your budget? Are you getting out of debt or there already? Share how you’re doing it and how good it feels.

January. February. March.

We’ve spent April being much more accountable with our spending, which brings with it a lot more peace of mind than we had in March. Unfortunately, now that we’re back to keeping careful track of our money, it’s become obvious we’re pretty consistently going over on our monthly variable costs allowance. This month we missed the $1000 mark by $266.62.

And yet our budget is still on plan and our debt-payoff still on track.

Clearly it’s time to re-evaluate.

When we started down this road we were going on the assumption that what we’d identified as our fixed expenses wouldn’t change much from month to month, and if they did, we’d either adjust by taking needed extras out of savings, or by putting unexpected windfalls onto the debt.

It hasn’t exactly worked out that way.

Starting out with the $1000/month goal was much easier when we had a full larder, a stocked freezer, wardrobes in good repair and a bunch of extra personal care products and unspent gift cards stashed around the house. We were able to use a lot of the funds we’d ordinarily have to spend on keeping ourselves fed and clothed to instead keep us social and entertained. We also had things around that were sunk costs, like our season’s hockey tickets – long since paid for, but instead of going to the games, we’d sell the tickets to get an influx of cash into our coffers and choose a cheaper activity.

One of my favourite pieces of financial advice (again from Gail Vaz-Oxlade) is: to make your budget balance, you need to either spend less or earn more. And we’ve found little ways to earn more every single month to add to that $1000. It’s not always by finding ways to bring more in, sometimes it’s because another budget category wasn’t fully utilized (our transportation budget always seems to come in under our budgeted amount).

We’ve realized over the past four months that $1000 for our basic food, clothing and entertainment needs is a lot less feasible than we originally thought. We still try to aim for it, and still opt for more frugal choices than we used to make, which is definite progress!

This means our debt isn’t being paid off any faster than we’d originally anticipated, but it is being paid off at the rate we’d set for ourselves, which is enough for me. At this pace, we’ll be debt-free by the end of October. Well within our original “end of the calendar year” target.

As I said back at the beginning of this exercise, working hard to pay off the debt is one thing. But when everything is said and done, building up sustainable financial habits to carry us into the future are far more important.

And for this month’s details:

Biggest Win: Our tax refunds. Last year we were hit with a huge bill that we weren’t expecting or prepared for. After that nasty surprise we approached tax planning through 2008 with the attention it deserves and have a nice sum back which has allowed us to attend the Provenance series – fun, fantastic events that also support a cause near and dear to our hearts.

Biggest Fail: For the first time in a long time, we can’t identify any major catastrophe that befell us that we couldn’t handle (we ended up having a car we were using towed – but our savings account is now more than robust enough to take care of a tow and a parking ticket) or horrible mistake we made. And that feels really, really good.

Debt Paid down in April: $2800

Amount left to go: $14,153.21

Discretionary spending for the month: $1266.62 and we’re okay with that.

Remember the woe and gnashing of teeth and rending of garments I kicked up over our last power bill?

The next one has arrived.

And we are pleased!!!

Our power consumption went way back down to a completely reasonable 962kWh for the past 57 days. That’s fully 1/3 the amount of power we used in the previous billing cycle, and our slick $68.12 bill reflects that.

And thanks everyone for all your power-saving tips from the last entry. We spent much of February and March with sweaters and slippers on, and the shades drawn to keep as much heat in as possible. We kept it a cool 19 degrees inside (down to 16 when we weren’t home and overnight), and kept things romantic with the lights down low a little more often.

We didn’t change out our chest freezer, so it’s good to know that wasn’t one of the huge energy-sucking culprits, nor did we do any less cooking and baking than usual.

Now that we know the double-whammy of an unusually cold snap and being home all day for the duration of it is what did us in, we’ll be prepared if that situation arises again. I can tell you now that there will be a little extra in the emergency fund for not only the higher power bill, but also for the extra blankets and sweaters we’ll be wrapping ourselves in for those few weeks!

January. February.

Oh March. What the hell happened.

I went to look back through our statements to find out where the money went this month, and it turns out I have absolutely no idea.

Thankfully our plans to pay our line of credit, mortgage, etc. have been automated. So we did fine in that regard. And we didn’t use our credit cards. But any extra cash I had after purchasing the MacBook, as well as an undetermined amount of change from our change jar just sortof… evaporated.

Biggest Win: Managing to pay the amounts planned on our line of credit account.

Biggest Fail: Losing track of where our money was going. We certainly didn’t do anything fancy or exciting with it, since we realized on the last weekend of the month that we’d run out of cash and had to adjust some plans. But other than realizing where “the end” was, we don’t have much of an idea about where any of the money went.

Numbers this month:

Debt paid down in March: $2900.00

Amount left to go: $16004.88

Discretionary spending for the month: no idea. More than $1000… not much more, but no idea how much. Oh, plus the fancy new MacBook for about $1500

Lessons Learned: The biggest bummer about “losing” the extra money we had is that one is not having put anything extra toward our debt. If we’d have stuck to our variable spending budget we would’ve been able to pay down our account those few hundred dollars more.

So we’re back to writing everything down, and hoping that paying more careful attention to the budget in April makes sure we’re back on track.

Posting’s been light this past little while as I get used to new routines, husband home, time change, etc.

But here’s a quick link to a great post I found on Gail Vaz-Oxlade’s blog (she of the Till Debt Do Us Part tv show) about transitioning from renting to home ownership.

I’ve been having conversations with quite a few friends lately who are looking at purchasing their first home in the near future. Her post outlines almost exactly the process we went through as we were working toward buying, and it worked really well for us right from saving for the down payment through making it through the sales process to living with a mortgage.

So now we come to the Gail’s Great Advice part. This is where you figure out if you’re ready for the responsibility of home ownership. If you can come up with $2,277.05 a month for your savings (less whatever you may be paying to keep a roof over your head right now), then you’re ready.

Hey, I’m not talking about if you can THEORETICALLY come up with the money. I’m talking about taking that money and socking it away every single month. So if you’re currently paying $1,000 a month to keep a roof over your head, you’d be committing to socking away $1,277.05 every month to your Home Buying Account.

She’s also got some great tips for coming up with the real monthly cost of home ownership (above and beyond the mortgage), which is also helpful. But we did one extra thing that she doesn’t mention: finding out what we could actually afford each month in terms of housing, then working backward.

The general rule of thumb is to spend no more than 30% of your gross income (that’s income before taxes) on your total housing cost: mortgage, utilities, taxes and maintenance. Knowing what we could afford before we started looking at properties, then extrapolating what percentage of that would be our mortgage and aiming for house prices that would give us that monthly payment amount in the mortgage terms we want (we were aiming for a 25-year or less mortgage) gave us a firm point to hold on to for a sanity check as we looked at different places.

Mostly I posted this because it makes me feel smart to have come up with a strategy, all by ourselves, that a financial planner is recommending. And it’s always nice to see real-world examples of these somewhat abstract suggestions. It worked for us, so of course I can recommend it.

Anyone else have some good strategies that have worked as they traveled the long road to homebuying? Any other tips or lessons learned to pass on to others who are moving down that path?

Along with adjusting to the schedule and commute of my new job, I’ve been living the single life. Neil’s been gone for a week, and isn’t heading home for another few days. This has made it really easy to slip into some old, inefficient habits, especially in the kitchen. When I’m home alone, it’s almost all I can do to get up early enough to walk the dog and get myself put together to get on the bus and head to work, then get home, walk the dog again, get a few chores done, get things ready for the next day, and crash into bed. Then get up the next day and do it all over again.

Feeding myself well doesn’t end up very high on the priority list, and when I do need to eat I find I’m reaching for the old, easy, expensive standbys: Pizza. Take out. Fast Food. Toast. Okay, toast isn’t that expensive. But toast alone isn’t all that healthy either.

Before the great budget challenge of 2009, I wouldn’t have blinked about spending what I have this past week on food. But now, seeing the money I’ve spent on convenience and knowing the bounty I could’ve bought with the same amount of cash (or just the amount of cash I could’ve spent on other things) and not much more effort, it’s kindof disheartening.

It’s another reminder that this whole budget exercise is as much about state of mind as state of wallet.

I’m reminded of a quote from Alice Waters on a recent episode of the Splendid Table Podcast (on not wanting to waste the local produce she’s worked so hard to source & obtain): “We used to base most of our food decisions on ‘what do I want,’ now we start thinking about meals with ‘what do I have?’”

I’ve been operating in “what do I want” mode for the past week, basing my food decisions on fast and easy, rather than affordable and healthy.

Which is dumb. Because if I take three minutes to look through the fridge, freezer and pantry, I have: bread, wraps, eggs, rice, pasta, chili, soup, beans, frozen fruit, frozen veggies, etc. etc. etc.

I have a bounty of food available, if I’d take the time to look for a couple minutes and do a minimal amount of thinking and prep. And I’d probably feel a world better by feeding my body real food as opposed to fast food. Not to mention having some extra funds for things I really want, instead of blowing it on short-term instant but fleeting gratification.

If you made your next meal with what you have already instead of what you want, what would it be? And what are you waiting for?

See January Here.

Oh February. For such a short month, you packed a big wallop!

We once again managed to stick within our $1000/month budget. Sortof.

I did manage to sell a computer monitor we had kicking around for $75, and spent that in addition to the $1000. We’ve done the same thing in the past with things like hockey tickets (sell them instead of going to the games, and spend the money on something else). I don’t consider it cheating, to find ways to make more money or use existing resources or sunk costs to supplement our existing budget. Do you? I can see arguments for both sides.

Other than that:

Biggest Fails: First there was that hydro bill, and then there was getting laid off.

Biggest Wins: Thanks to setting up a small savings account, we had enough money in there to cover the un-budgeted-for Hydro bill (and unexpected expenses are what that account is for), and of course there was that whole getting re-employed almost immediately, and ending up going from planning for a big deficit, to having a nice windfall!

Numbers this month:

Debt paid down in February: $1800.00 Since my last paycheque from the old job comes in at the end of February and counts toward our March budget, and we’ll be past the contribution deadline for RRSP’s for the 2008 tax year, we should see our debt repayment start to really take off next month.

Amount left to go: $19,646.20

Discretionary Spending for the Month: $1075 (including the $40 we “borrowed” against February at the end of January)

Lessons Learned: Getting the news that I was getting laid off was a huge blow. It’s a hard one to escape these days, but knowing it’s common doesn’t make it any less devastating.

Having such a good handle on our budget, and knowing exactly how much money we are spending each month, and where we could immediately cut back and shuffle to make things work took a lot of the immediate pressure off and left me free to wallow with a bit less worry. This whole budgeting exercise has been worth it for that alone.

As soon as I got the news about losing my job, I’d canceled the dog walker and my personal trainer. Now that I’m back working again, I’ve re-instated the dog walker, but I’ve been holding off on the trainer. I really, really enjoyed it, but it was super expensive ($75/week). Unfortunately, “breaking up” with a trainer is like breaking up with a hairdresser. Awkward.

So I’ve just neglected to let the training company know that I’ve found new employment, and I’m trying to find new ideas for getting back to the gym (preferably with a trainer or some sort), under much less expensive circumstances. Who’s got some ideas for me?

So you know how I was hoping that March would finally be the month were we wouldn’t have to deal with yet another “big thing” hit to our budget?

I found out yesterday that won’t be the case.

As of March 6th I no longer have a paycheque coming in.

It was the typical story of late, I was one of many let go in this round, and got the standard “it’s not you, it’s us” line – and yes, it is “them” but it doesn’t make it suck any less for “me.”

I couldn’t be more thankful that Neil and I were already so well on track with our budget – it made it much easier to know where and how to cut expenses, and put our minds at ease pretty quickly.

I’ve cut out my personal trainer and the dog walker. Those were no-brainers. We’ve stopped contributing to our savings account (and hopefully we won’t have to draw from what’s already in there).

We’ve also cut the amount we’re putting into our RRSP’s to the minimum we can contribute to avoid a huge tax bill next year.

And because our mortgage is a variable interest rate line of credit, we’re cutting back on that payment just a smidge for a few months. We were paying about 40% interest, 60% principle, and we’ve changed it to 50/50. That move gives us enough room to keep things just on the comfortable side of tight. We’re both okay with doing that, but I’m curious what exactly the implications would be carrying that extra bit of principle into the future when rates rise. Any financial-types care to do the math on that for me?

Depending on the month and when EI starts rolling in (if I’m not employed again before it does), we’ll be able to keep up with paying almost $2000 to get rid of our consumer debt (currently at a higher rate of interest than our mortgage). That’s not quite enough to pay it off by the end of the year (it gets us paid off in February 2010), so we’ll need to play catch-up with our payments once I’m working again if we want to bring it all in by the end of 2009.

That leaves us with between $800-$1000/month for our variable expenses.

Of course, we’re really hoping all these measures are temporary and I’ll be working in no time. I’ve got a great network of people who’ve already passed on a few leads, and I’m really very good at what I do (now is not the time for modesty).

If you’re curious about how you can help, please pass on any marketing/communication jobs you happen to see coming up. I really thrive working in fast-paced, mid-size high-tech companies, but have also enjoyed working with non-profits, sport & recreation and even government. If you’re interested in my specific skill-set, I’m happy to send over a resume for you to schill on my behalf.

Other than that, if you’re local, I would also LOVE offers to get together just for some company. It’s one thing to be home alone all day because I’m not working, and another to be home alone all evening because the husband is out of town, but I’m about to be subjected to two weeks of both at the same time, which promises to be lonely at best, unbearable at worst. If you want to come visit me, I’m happy to have you over for tea (or coffee, or scotch, or whatever). If you suggest going out, you’re buying!

And boy am I ever paying for it.

One of the fun bits about living in a new construction project (especially one that’s built during a construction boom and labour shortage) is the delays in setting up and billing for basic services. Like electricity.

We moved in January 5th. We had power the whole time, but they didn’t get around to installing individual meters until July 18th. They were tracking power usage from that point, but didn’t manage to bill for it until the December 4th billing cycle. Our bill for that period was pretty average – about $40/month for late summer and fall. It is a little more than I’m used to paying (past bills for similar-sized places were around $30-$35/month), but not drastically.

Unfortunately, the brilliant stars at BC Hydro, despite our repeated calls to ensure our account was set-up/transferred properly, were still unable to get our address correct until two days ago. They’d been sending the December bill to our old address. The bills for our new place were going to the place with the account we had already closed where someone else is already paying for power, despite having us on record as living at the new address, which is also the place the power they’re billing for is being consumed.

The vast ineptitude of crown corporations never fails to impress me.

Anyhow, they finally sorted out the billing thing (after charging us $2.88 in “late payments” for their mistake) and our bill came in the mail yesterday. Except now it includes the December 4 – February 4th billing period.

I opened it and nearly shat myself.

We’d managed to use nearly as much power in the last two months as the entire 4.5 months before that.

I blame winter, and the fact that we’re now in a corner, instead of middle apartment, with a LOT more windows.

But it’s really just a huge FUCK YOU from the world that I didn’t really feel we needed at the moment.

We live in a brand new place, with (allegedly) highly-rated windows and insulation and brand new Energy Star appliances. We’ve taken the extra steps of installing programmable thermostats, and replacing as many lightbulbs as we can with compact fluorescent bulbs (unfortunately some form-factors are hard to get our hands on, like dimmable chandelier torchiere lights). We used LED Christmas lights.

We aren’t intensely vigilant about power consumption – we haven’t tried to rig up any sort of solar or wind generators, but we are absolutely conscious about it.

We don’t leave every light in the house burning day and night. We turn off lights in rooms we’re not in. We don’t leave idle appliances plugged in. We don’t turn the heat up to sauna-like temperatures.

This is one of those “emergency” expenses that we’re going to have to pull out of our savings account to meet. I just don’t have an extra $400 around to hand over to the power company. And it absolutely chaps my ass. I’m now in a serious funk about not being able to make it on our plan. There were already the taxes in January, which I was hoping would be the end of it. We’re now only a few days into February and already have the power bill fiasco. What kind of assholery will the universe deliver in March?

I’m also sortof at a loss about what we can do to reduce our next hydro bill. Other than learning to love candles and sweaters more than I already do – what else is there?