Financial Update

It has been a while, so here is the most up to date information on what I have done (and what I plan to do) before the baby comes:

- frugala paid off a loan for me, so rather than charging her the equivalent of rent, she keeps her entire paycheque and I pay for all tbe mortgage and bills (minus half groceries, car stuff and dog stuff)
- I have received two raises since September: for the first one I increased my mortgage payment and increased my RRSP. For the second one I increased my RRSP and my TFSA (the TFSA increase will turn into the baby's university savings)
- I save $300 every two weeks now: $225 goes into my TFSA and $75 goes into my RRSP. From the $225, for every $1100 I accumulate, I take $1000 and pay something off (be it a loan, or a credit card, or a mortage or hopefully one day into the RRSP). The idea is to minimize the loans and to slowly build up an emergency fund (from the extra $100 that get put into there)
- I have started two part time jobs, where to money gets funnelled into my TFSA (for the purposes mentioned above). I work for Homework Help, where I get paid to tutor math in the evenings. I also tutor 3-4 students each week (it was supposed to be 4 but the last one has cancelled the last three weeks, so I am counting on three now). The idea of these extra jobs is to use the money for savings and/or paying things off, not for the regular expenses for week to week. This is important, because when second semester starts (February), we are getting close to baby time and my energy will (properly) go to my family rather than gaining extra cash. The plan is to have my credit cards at zero and another student loan paid off by the time the baby is born.
- When the TSX hit around 12500, I dumped half of my Canadian Index fund into a bond index, with all of my current contributions going into the Canadian Index fund. The TSX has continued to rise, but I have taken my profits from it. Long term I think this is going to work. I will only re-balance next when the TSX hits 13500.
- Finally I have been thinking about using the Smith Manoeuvre (this will be once my student loans get paid off). The idea is that you borrow for investment purposes, and then the loan is tax deductible, and with the tax benefits you put that towards your non-deductible loans. It makes a lot of sense as you gain equity in your house. The plan for me would be to pay minimal on your loans, and then increase the loan for the amount of equity that you have on your house. Theoretically, when you are done paying your mortgage, you can either pay off your Smith loan, or continue to keep it and keep the deductions and increase your investments with the extra money. There will be considerable more planning as we get closer, but it makes a lot of sense. There will be little change in the daily handling of my finances, but there will be a much larger tax deduction and more investments in the long haul.

Thanks for reading!
I have been updating our net worth on spreadsheets, and will update the post either later today or this week.

New Baby and New Yearly Goal

frugala and I are pregnant! We formally announced it at our six month wedding anniversary on Saturday so I can talk about it on the blogosphere. With a baby on the way, for the next school year I am going to shift my plans from saving to paying off debt.

I got a new job at the Homework Help centre, which will pay me about $130 per week, and along with tutoring on the side, I should have more disposable cash this year. The plan will be to get my student loans paid off before the baby is born (or at least close to that time).

Right now I save $200 per paycheque and put $500 towards my mortgage and $400 towards my student loans (monthly). Out of my money from the Homework Help, all will go towards my student loans. I should get two raises this year, one from seniority and one from moving up to the highest category. I estimate this will be about $200, so I will take $100 from that. My mortgage will go up to $525 and my savings will go to $275. The shift will be that $75 will go to my RRSP and $200 going to my TFSA. Then every time my TFSA gets to $1100, $1000 will be removed to pay towards a student loan. In this way, lots will be paid off my loans. As well $200 x 26 pays per year is $5200 so I shouldn't get into trouble with the government over the $5000 cap on the TFSA (considering that I have undercontributed for the first two years).

In this way I am still making my regular payments, and the extras are coming out of my TFSA. I will comment on the effectiveness in the upcoming weeks (once it happens in September), as well as the price of having a baby and how the extra work on the side is going. It is a plan anyway...

Planning and Spending and Back To School

This post will be a bit of a rant. In this morning's local paper, I read that it will be difficult for parents to send their children back to school because of the expenses related to the beginning of the year (notebooks, calculators, etc.).

I am a big believer in a few things when it comes to money. #1) if you realize that expenses will come up, you should plan for them. That is, Christmas, back to school shopping, birthdays, etc. I have a bucket dedicated to "clothing", so that when I need a new pair of winter boots this winter I won't need to go to MasterCard. As well, I am a teacher so I bought myself a new shirt and tie and pants for the school year out of this. I have another bucket dedicated to "XMas", so I will be able to comfortably give around the holidays and not feel financially burdened by it. I don't contribute that much to each bucket ($20 every two weeks), but it is nice to have that cash set aside so when I do need to make a purchase I can easily do so.

#2) If you aren't saving 10% of your income you are living beyond your means. What does that mean? Simply, if you paycheque is $500, you should save at least $50 out of it. If you can't afford to do it, you may have to make some changes in your life: another part time job on this side, finding a cheaper place to live, going down to one (or no) vehicle, cutting some discretionary spending. I try to do most of these things: I tutor, where all this money goes toward paying off bills, and I also worked summer school. I had renters for the last two years in my condo to help defray the costs. I have no vehicle, and knew this would be the case so I purchased my condo close to my school. As far as discretionary spending goes, I set aside $200 every two weeks that goes towards groceries, gifts, clothing, video games, courses and upgrades on the condo, and leave $80 for me to spend on what I want. Once I run out of money, I have to stop spending. My lifetime goal is to have my MasterCard at $0. Is it easy to do this? Not at first, but it gets easier every paycheque to do.