April 29th, 2013
Its been a while since I submitted and managed to get one of my posts up at the Carnival of Personal finance but today I’m happy to pass along that I have done just this. My post from last week about being Overleveraged made it in. There are always some interesting articles so definitely go check it out:
A couple posts that caught my attention:
April 24th, 2013
Ever since moving into the new house we’ve been feeling the pinch, there are more costs and just keeping things going seems like a struggle. The first of the month feels like a punch to the gut and the worst part about it is that while our debt is going down it doesn’t feel like we’re making real progress and forget about savings.
We have entered the wonderful world of being “house poor”, but its not the house thats doing this to us; that wonderful new house is something that we love and shouldn’t be a problem considering our financial situation. My wife and I make good money and we don’t spend extravagantly on gadgets and things. You could find some room for improvement in our lifestyle but at the end of the day we also need to be able to enjoy life a bit. So what’s the problem?
At the end of the day we’ve come to the conclusion that we’re almost overleveraged as defined: .
Occurs when a business is carrying too much debt, and is unable to pay interest payments from loans. Overleveraged companies are unable to pay their expenses because of over excessive costs. (http://www.investopedia.com/terms/o/overleveraged.asp)
We make more than enough money and if we were more cautious and frugal with our spending it wouldn’t be an issue but we’ve already trimmed a bunch of fat from our spending and its just not worth trimming that much more without really changing our lifestyle. And since we moved in last fall we’ve been trying to find that happy balance between lifestyle and paying everything down. We don’t want to give up having a few drinks (at home because the bar is too expensive) or being able to keep the car.
As I’ve mentioned before we aren’t the epitome of frugality but we also don’t spend a poorly. We tried to balance it and when looking at everything at the end of the day we did find that there was a big money sink; The issue is simple – we have 1 property too many. We really looked at everything at at the end of the day keeping the cottage and our current debt load meant that we’d be stuck in a very slow repayment of everything for years. The culprit became clear as did the solution.
A couple years back we purchased a cottage because it was something we both wanted, we’ve used the place extensively and even made a bit of money renting it out. We didn’t overleverage ourselves to get the place and could keep it. But unfortunately there are a lot of hidden costs with owning a vacation home, insurance, taxes and even the cost of driving there are something that can be easily hidden. So while the mortgage itself isn’t that bad when you add everything together along with all of our other debt selling the place really is the best possible option.
So in order to fix that feeling of being overleveraged we’re going to sell the cottage, its sad but when you look at the numbers removing that financial hemorrhage we’d be out of debt in about 2 years and could start saving and investing a lot.
The emotional side of this – we really like the cottage and have wonderful memories from there; its just when you look at the cold hard numbers and take away the cottage things start looking very rosy; extremely rosy with a lot of possibilities of having no debt maybe paying down the mortgage sooner or gasp invest in something.
At the end of the day we’re going to net out about even on the sale of the place, there isn’t a lot of money to be made but what will happen is we’ll remove the monthly expenses and be able to pay down a lot of debt. Once the property sells it should average out to an improvement in monthly cash flow by almost $2,000 which is huge! So while the emotional side of this came into the picture seeing the numbers really closed the deal for us. We’ve listed the cottage and hopefully it sells relatively quickly. There is still some rental income that we’re likely to get this summer but not much. In the meantime we just need to keep everything paid and up to snuff.
When you get into a situation like the one we found ourselves in the luxury of owning a cottage really became that a luxury. We took a hard look at the numbers and removed the emotion of the purchase; that helped us find the solution. Everyone situation is a bit different but in order to make headway and remove the weight of debt that we’ve got it became very clear. The numbers don’t lie; always go back to the numbers.
April 15th, 2013
All of a sudden April has crept up on us and hopefully the nicer weather comes with it. My daughter has been saying April showers bring May flowers and while she’s excited about seeing flowers I think about the yard that needs to be tamed. Now that April is here we’ve tabulated our monthly metrics for March and it was a great month from a net worth perspective as we were up another 5%.
This is a great result but its easy when the starting point was fairly small to begin with; its going to be pretty hard to keep this pace going for the whole year but if we do that would be fantastic. Now what this nice rosy number does not tell you is how challenging it has been to keep up with all of the debt load and mortgages and just life in general. The progress is going in the right direction but at what cost.
The question that comes to mind is are we over-leveraged? We’ve been into our new house for 4 months and 3 into the new year and I thought that we’d settle into an easier pattern but its still a struggle so I am thinking that the answer to the above question is yes and we’re doing something about it that I’ll post later this week.
In the meantime I’m going to enjoy the fact that our net worth continues to increase regardless of what it actually means from a cash flow perspective (even if for a day).
April 2nd, 2013
At the beginning of last month I challenged myself to brown bagging it for a month and I have to say that it has been an interesting month. I have to admit that I was very worried about the challenge because I would eat out for lunch pretty much every day. So this radical shift to brown bagging it was something I wasn’t sure was going to work.
The background here is that when I first started working I would socialize with my co-workers during lunch and it became a very ingrained habit. The results actually astonished me
My challenge was:
I am challenging myself to brown bag it as much as possible during the work week and then put the money I would have spent against one of my credit cards.
I managed to brown bag it every day in March! I didn’t go out once and in the process I’ve managed to get into a new habit of bringing in my lunch. I have also put that additional money onto one of my consumer credit cards.
My expectation was that I would be able to complete most of the challenge with a few trips out but it became a routine to make sure that I had food for myself during the day. I’ve been eating a lot more fruits and there are virtually no leftovers in the house now which is great. So this challenge was a complete success and has shown me that I can easily start changing habits that I thought were hard. I think i need to find the next challenge.
March 18th, 2013
When I was growing up there was always food in the fridge even on grocery days the fridge was pretty full. A lot of that food that was sitting in the fridge was on the verge of going bad or bits of leftovers that no one was going to eat. I still remember being asked by my mom to clean out the crispers of the fridge on the weekend when my parents were out of town so that my dad wouldn’t see and complain about the wasted food.
It was never really bad but there was almost always something going bad in the fridge and I’d love to tell you I learnt my lesson as a teenager seeing the wasted food. But if I had then I wouldn’t be writing this article from experience, it would be a theoretical piece.
Naturally with a small family of my own now we have to buy food regularly to keep ourselves fed and this involves the weekly trips to the grocery store to get food. And for a couple years the exact same thing started to happen as when I was growing up – once a month or so I would open up the fridge and think: “What is that in the crisper? It has to be bad by now” and inevitably it would be. The offending item and a bunch of other newly found items in need of a trip to the landfill would be taken out and disposed of.
I was always conscious of this on a few fronts:
- Why are we wasting food?
- There is so much money being wasted here
- Why did we buy this in the first place?
Now it is inevitable that some things will go bad in the fridge before they’re eaten. We’re not perfect so this will happen, but when our weekly grocery bills were approaching $200 per week and there was always something being wasted it was starting to grate on me.
Enter meal planning!
At the new house we got a nice new fridge as part of the kitchen renos – perfect a blank slate. I was going to keep moldy food out of this one once and for all which meant we couldn’t let food just waste away in the fridge. This is where some basic meal planning came in and saved us a small fortune in money.
Now before we go to the grocery store we don’t start with a shopping list but with a list of meals we want for the week. Its not planned out to every tiny detail but at least we’ve got an idea what 6 or so dinners we’re going to have during the week. Then we check if we have some of the components no point getting a bag of potatoes when we’ve got a mostly full one in the pantry.
We’re still not perfect but definitely getting a lot better. I think I’ve thrown out some leftovers that no one was going to eat but it’s a lot less than before. Both my wife and I are now more conscious of what we have in the fridge and cupboards and get what we need rather than something that catches our eye while we’re in the store.
My best guess is that not wasting food is saving us about $50 per week. I could be a bit off but if this is really the case then we’ve just saved $2,600 per year on our groceries and its making ends meet a lot easier as this is a variable cost.
March 6th, 2013
Yesterday I wrote about how brown bagging can save you over $2,500 per year and today I’m going to take action on this. I am challenging myself to brown bag it as much as possible during the work week and then put the money I would have spent against one of my credit cards.
It would be nice to use this money to treat myself to something but the reality is my debt load is what is currently annoying me and its something I would like to get rid of. So being that this is more important than spending the money frivolously.
Here are the rules of this challenge:
Try to brown bag it as many working days as possible during the month of March.
For the purposes of this challenge I am going to use the $10 per work day average so the budget for this month is $210.
I expect I’ll still get out for lunch once or twice but the challenge will be to not eat out and as of writing this I am 4 work days in without spending a dime. So the goal is to spend at least $150 less so the measure of success will be spending less than $60 during the whole month on lunch.
Whatever is left at the end of the month in this budget will go to pay down my Visa.
At the end of the month I’ll post a summary result, I expect getting into the habit of bringing in my lunch will be the hardest but once I get there this challenge should have just found a way for me to pay down some debt considerably over the course of the year.
As a complete piece of curios I am going to use the month of January as a historical benchmark for how much I’ve spent in the past out for lunch. In January I spent an incredible $313 on feeding myself at the office. This is something that can easily be adjusted and brought down in order to get through more debt.
March 5th, 2013
Picture this scenario: its approaching lunch time and you’ve spent the morning working on something at your desk. You look over at the clock and its 12:15, time to have something to eat. You grab your jacket and go get some lunch from the food court. This is a pretty common thing for many people, I know it is for me.
This little trip to the food court isn’t too expensive as an individual trip, maybe costing $10 (possibly less), but if you add it up over the course of a year this becomes really bloody expensive. For arguments sake lets say this daily lunch costs you on average $10, it might be more or less depending on where you live and there is the possibility that you’ll go to a nicer lunch sometimes.So we’ll use that as the amount.
The year has 365 days and 104 days of that year are weekend days (again we’re just using an average). That leaves us with 261 workdays in an average year.
Here’s where the math becomes scary if you spend $10 on lunch on each of those 261 days that will cost you $2,610!!
I know that I enjoy going out for lunch because it gives me time to socialize with friends and a way to get out of the office for a bit. Even if for a short period of time I get a break. The example I’m showing here can easily be much more expensive if you spend more daily. It’s also part of the reason I first got into trouble with debt all those many years ago.
So by brown bagging it and bring in a lunch you can save yourself over $2,500 a year which can go a long way to paying down some debt,
The toughest thing for me by bringing in lunch I loose some break and socializing time but that is something that can very easily be worked around.
Getting out of the office (taking a break) – This one is easy, go for a walk. I can just hear some of my friends saying that isn’t as much fun but at the end of the day if you want to get out of the office you can get out of the office, you don’t need to spend money to do get the break.
Socializing – this one is a bit harder because if the only chance you have to socialize with your work friends is at lunch and you’ve got a group that you go with then there isn’t much you can do about it. You can find some other way to socialize that might not cost as much money. If the cost of this lunch is going to impact your friendship then maybe the friendship wasn’t quite as important to all parties.
Having time for yourself – this is also my time for myself, during the day I can be engrossed with my work, on the phone with clients, helping with my daughter, talking to my wife and there isn’t much time for me to just think things through. Again this is something that doesn’t need involve lunch or even money.
I’m writing about this topic because I struggle with it on a regular basis. I see how much money I spend on lunches and at the same time I’m carrying a debt load. It just doesn’t make sense. There are some intangible benefits to getting away from my desk for a bit each day no matter what the specific reason. We can overcome our mental excuses to keep doing this but if you could really use the extra money then this is an easy way to save yourself about $2,500 a year and to put this into context I’ve bought cars for less money than that.
March 1st, 2013
I’m not entirely sure why February was so busy but it really ended up busier than I expected it would have. The month just seemed to melt away day by day and all of a sudden we’re into March. From a financial perspective this month was very similar to last month in that our net worth increased a bit, only 2.2% this month but it is about what I expected. The main difference is last month a significant portion of largest mortgage was applied to principle rather than interest. While I’m not sure why this occurred it definitely helped to increase last months net worth increase.
Overall we were able to get a bit more caught up on our bills and payments. The spending adjustments we made last month carried through and we were able to cut back on variable spending. With a bit of planning we have lowered our weekly grocery bill by about 10-15% and I think there is still a bit of room for improvement.
I’m also starting to see the benefits of this weekly tracking and monthly budgeting in that I know what the magic number is for us each month. The magic number being the cost that would keep us living below our means. I’m getting more and more encouraged that being careful with our funds and diligent about paying down debt will bear fruit sooner rather than later.
Aside from the net worth increase I’m quite happy that we’ve been able to pay off close to $600 on one of our credit cards since the beginning of the year. This is definitely a step in the right direction.
February 1st, 2013
As the month closes out I wanted to get back into the habit of posting an update for the month that show’s how we’ve done this month and that 5.9% increase is encouraging even if it is a little deceiving.
Why deceiving you ask? Our net worth numbers are a bit deflated because of the property values that we have in there; our primary residence was purchased at a great price and we completed a lot of renos which were done mostly on credit. Hence the real property value would be much higher and the actual dollar increase would be a much smaller percentage of what I think is a more realistic net worth.
If I’ve confused you it might be because on my net worth statement I use the sale price of our properties rather than market value. I do this because that is the value of the asset that the bank has.
Now onto the rest of the monthly update – it really isn’t as exciting as the 5.9% but we are starting to get on top of the finances. We’ve started making small adjustments in our spending and likely this weekend we’ll sit down and update our actual expenses to make sure that we’re actually are spending less than we make (It’ll be close).
Our investments remained flat like they have over the past couple years; after we get our spending and debt under control we’ll have to re-evaluate where our investments are because they’re not producing much.
January 31st, 2013
Your contractor just charged you $100 per hour to… [insert easy task here]
Have you ever run into that before? I know I have on more than one occasion.
One of the best ways to save money on a task or service is to do it yourself. You could pay a house cleaner to clean your place once a week or you can do it yourself; one costs you money the other costs you a bit of time. If you’re rolling in the money then lets be honest it doesn’t matter one bit. But chances are you’re not rolling in the money.
Doing things yourself (DIY) is an easy way to save yourself a ton of money. There are a lot of things that most people would back away from and call in an expert when they really don’t need to. Doing something yourself doesn’t mean it needs to be hard nor in many cases does it have to have someone with 10 years experience.
I wanted to give you an example of this: we’ve done a few renovations I’ve had some chances to DIY some of it. In most cases this involved tearing out walls in order to fix a room or a whole floor. The first DIY piece that I took on in almost every case is the demolition; not everyone can do demo but most people can and you can save yourself lots of money. Next on the list is Drywall – this one was a bit harder and I completely fucked a few things up and spent hours fixing them but I learnt and pretty much from the first attempt I saved money, literally thousands of dollars for each renovation. The best part is that I now save money on every reno involving drywall.
Now these examples are tied my house renos because that is something I’ve been working on recently. This is simply an example doing something yourself can be as simple as painting a room, steam cleaning your own carpet, washing your windows and the list can really go on and on.
Before you really have a chance to object to this thinking you don’t need to be an expert to do something yourself. I wouldn’t suggest rewiring your house or rebuilding your car’s engine on day one. But there are a lot of things that you can do with either a little research and patience that can save you thousands.
You can save yourself tons of money by doing things yourself and if you’re scared of messing up take heart that the you probably can’t mess it up that badly and if you can you can still bring the pro in. Do your homework and save yourself some money.