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Wednesday, November 25, 2009

Financial Literacy In Schools

I am a few weeks late, but it looks like starting in 2011 in Ontario that Grades 4-12 curriculum will involve financial education for all! I can't wait.

Link

Monday, November 23, 2009

The Middle Class Getting Squeezed...and tuition

I was killing time this afternoon before I do my tutoring gig, so here are some good links from Yahoo Finance:

Squeezed - The middle class getting squeezed. A great article showing how us bloggers have it wrong: the problem isn't that the middle class are wasteful spenders with their lattes, it is that housing prices rising and spending power dropping over the past 25 years have finally hit us. An interesting article to say the least!

Who Should Pay For Your Child's Education - Another good article showing people how to save for their children's education. The consensus in the staff room today was that the parents should match what their children save. So if your kids save $5000 for tuition, you give them $5000 to help them out.

How To Teach Children The Value of Money - Another link showing the basics for families and children. It says (as usual) that finance should be taught in the school system, and although I am trying, it still isn't happening on a widespread basis. My finance unit is coming up before Christmas for my Grade 11 class so there will be more updates then for sure.

Happy reading!

Saturday, November 21, 2009

Net Worth Update - November 21st, 2009

Just a disclaimer before I begin: with Christmas on the way, I made a few extra purchases this month and I signed up for a course. A course is considered to be good credit (because it will eventually turn into me making more money at my job), so although it is hurting my bottom line this week, in the long term it is a positive.

Every time I get paid (every two weeks), I update my net worth. The idea behind this is that my goals are that my liabilities drop every two weeks, and by tracking them in this way, I am able to get a nice picture of where I stand financially. Its not a perfect balance sheet that I have (because of student loans I have a negative net worth), but the progress is what I am looking for.

ASSETS:
- up $518.23 from November 6th, 2009
- up $8513.19 from November 21st, 2008(one year ago)

These assets include my house (I give it 1% appreciation each year in my appreciation), my RRSP and my TFSA. My assets are continuing to slowly rise as the stock market inches up towards the end of the year. This is making me feel better, even after a really poor end to 2008 that the bounce back happen very quickly. Every book that I have read has confirmed this, but its nice to experience it too!

LIABILITIES:
- worse $63.28 from November 6th, 2009
- better $12,587.47 from November 21st, 2008(one year ago)

These liabilities include my mortgage, student loans and a consolidation loan (mainly for my Masters Degree for teaching). I am now up to five tutoring jobs, where the extra money that I earn goes to paying off my liabilities. As mentioned in the intro, I signed up for a $900 course which hurt my financial statements for this week. As a positive, this is the first time (since I signed up for my last course in May) that my liabilities got worse. I'll have to bounce back next week with a vengeance!

NET WORTH:
- better $454.95 from November 6th, 2009
- better $21,100.66 from November 21st, 2008 (one year ago!)

This is the nice thing about going on automatic pilot for my finances: even in times where I have to spend more (Christmas, courses, etc.) it still goes in the right direction. For me to imagine that I am $21,000 better than I was a year ago boggles the mind!

The last thing I am going to track is the value of the TSX. I have some asset allocation goals that are dependent on the value of the TSX.

TSX Graph
Current Value: 11,579.33
Highest Value in Last 2 Years: 15073.13 June 18th, 2008

Tuesday, November 17, 2009

Christmas and Money

Today's post is just a few ways that I am trying to cut back a little at Christmas this year. I am one of those people that goes overboard when it comes to giving (or shopping in general) at Christmas time. I will go shopping and come back with a tonne more stuff than I planned to get.

This year will hopefully be a little different, and I'll show you how. The main problem that I get into is that I will go into a store with a goal of what I want to buy for someone, and then come back with that gift, along with other small gifts for other people. I will still buy for those people a major gift, but the small gifts really add up. It is what has made stores like WalMart extremely successful over the years!

This year I will try to make a lot of my purchases online. The advantage of this is that it is more difficult for me to get distracted and make additional purchases. When I have to make a direct purchase, I will just bring cash with me. I have been saving up $20 per paycheque to put towards Christmas all year, so when my cash runs out my spending runs out as well.

You can make a budget for what you want to spend on each person. I know that budgets aren't sexy, but they are effective. If you announce to your family, "lets spend $100 per person this year", no one will be offended. Some people really go overboard and try to be the person who gives the best gifts, so by doing this we all have a limit to be set to.

Finally, I make a list of what I want to purchase. Rather than going to the store and saying "I have $50 that I want to spend on Billy" and then scrambling around to find him something, plan it out beforehand so you can shop around a bit. Shopping with lists makes it more difficult to make some of these small purchases which really add up. Also, planning your shopping in advance rather than waiting to the last minute gives you a chance to check prices as time goes on, rather than paying whatever the store wants you to pay the week before Christmas.

Friday, November 13, 2009

Rental Properties

I will eventually be a landlord. That is my next financial goal (other than paying off my student loans). It has been said that 90% of the world's millionaires got started through real estate. I have been renting out parts of my house since it was purchased and will continue to do so with a second property eventually.

The reason for this post was a discussion in the staff room during my prep yesterday. At least two or three teachers have rental properties, and one of them was complaining about a tenant that he had and said to me, "Don't ever get started in a rental property!". I countered that with on paper it looks really good and the numbers work out and he said "It's not worth it!".

He was getting ready to file the paperwork to get a tenant evicted from one of his properties (he has five that he rents out) who didn't pay the rent. He said that after he filed the paperwork, it would take a minimum of 44 days for them to get out (by law). Plus this would have to be done at his expense (the legal paperwork and the hiring of a "sheriff" as he called it to remove the person from the house if necessary).

He also said that he was selling all of his properties because of this bad experience (we'll see in a few days when he cools down if he still feels the same way...I'll chat with him on Monday). I asked him if he could ask for financial references and be more picky with his tenants but he said that he did ask for financial bank statements, but that he had difficulties with his properties staying vacant for two reasons: the lost income in a month and the fact that insurance companies don't like insuring vacant properties (because there is more chance for vandalism and theft).

Another teacher also chimed in and said that also wouldn't recommend rentals. They have had two really great tenants, and one horrible one, and the horrible tenant has pushed them away from it. I asked the first teacher about renting to students and he said that it was probably a better idea because you know what to expect with students, and that they have more cash and their parents will also sign the lease agreement so you shouldn't get stiffed for money. I would imagine that the maintenance would be much higher on a place like that.

For my own foray into real estate, there is a college in my town, so either I will begin with a house that I will rent to college students, or I will get a duplex or whatever and only post for them at places where me or my friends work at, ensuring that I get people in there with a real salary. The teacher said to me, "Remember, people who are good tenants eventually buy their own houses...the ones that rent forever are poor tenants". A few things for me to keep in mind.

Saturday, November 7, 2009

Net Worth Update - November 7th, 2009

With the first signs of winter on the way, this will be a shivering update to my net worth.

Every time I get paid (every two weeks), I update my net worth. The idea behind this is that my goals are that my liabilities drop every two weeks, and by tracking them in this way, I am able to get a nice picture of where I stand financially. Its not a perfect balance sheet that I have (because of student loans I have a negative net worth), but the progress is what I am looking for.

ASSETS:
- up $198.74 from October 24th, 2009
- up $7579.78 from November 7th, 2008(one year ago)

These assets include my house (I give it 1% appreciation each year in my appreciation), my RRSP and my TFSA. Again, the markets stayed about flat (or dropped), but my regular contributions continued and I continue at an all-time high.

LIABILITIES:
- better $574.63 from October 24th, 2009
- better $12,647.00 from November 7th, 2008(one year ago)

These liabilities include my mortgage, student loans and a consolidation loan (mainly for my Masters Degree for teaching). I am now up to five tutoring jobs, where the extra money that I earn goes to paying off my liabilities. The numbers dropped a bit because I did some charity contributions on my Mastercard this week but the warm feeling that you get from donating will help from my lower numbers than usual.

NET WORTH:
- better $773.36 from October 24th, 2009
- better $20,226.78 from November 7th, 2008 (one year ago!)

Decent numbers once again. I have to keep reminding myself that positive gains each paycheque and consistency is going to get me going in the right direction. My long term goals are to be student-loan free by the time I'm 35 (that being all my bills paid except my mortgage by age 35). I am still on track to do that as I continue to inch along. Christmas is coming around the corner though...

The last thing I am going to track is the value of the TSX. I have some asset allocation goals that are dependent on the value of the TSX.

TSX Graph
Current Value: 11,250.42
Highest Value in Last 2 Years: 15073.13 June 18th, 2008

Friday, November 6, 2009

Emergency Funds

Until recently, I never really saw the need for an emergency fund. Financial experts (and financial book writers) always stressed the need for three to twenty-four months of expenses to have saved in the case of an emergency (like losing your job). Others call it the "sleep well at night factor", that you feel better about yourself and your finances if you have several thousand dollars at hand.

I have started an emergency fund, which I have yet to touch. It will only end up with a few thousand dollars in it at the absolute most, because I have a tough time conceiving an emergency that will cost more than that. Why did I decide to do this? For a few reasons, but mainly because I always feel it is better to be ahead than behind, and my old emergency fund plan would put me behind financially.

What was the old plan? Probably the same as most peoples: credit cards and lines of credit. What I did several years ago was dip into a line of credit or a credit card whenever I needed money, whether it was an "emergency" or not. If I needed money for something, I would either borrow it (from family or my "emergency" fund) and then be behind financially. By just having a few thousand set aside, if I need this money for anything I will just be able to access it.

My old self would say "how can you just leave the money sitting there? Shouldn't you either be using it to pay off a bill or to invest in an RRSP?". My lines of thought have changed that if you don't have at least $1000, the potential for large hits on a credit card or line of credit in a year are inevitable. My money goes into my Tax Free Savings Account, so it is still invested in low-cost mutual funds, so I'm not losing any savings potential.

I give regular contributions to this fund. When I get significantly over $1000 (or whatever number I choose...I am approaching $1000 now) I can then choose to do something with the excess money (an extra pay on my mortgage, a last minute investment in my RRSPs, a down payment on a second property (hint, hint)). By not having an emergency fund, I open myself up to the possibility of constant borrowing, and we all know that you can only get ahead by savings (and investments) rather than borrowing.