A quick update – Months of Silence
November 2nd, 2011
Every so often I take a look at this site because I feel a pang of guilt that I haven’t written on here in so long but life has been so busy lately that I just haven’t had much opportunity. The reality is that I let work take over too much of my life recently and between everything going on I just haven’t had much time for myself in general. Now I wanted to clear up something and that is I have not given up on this site, I refuse to let it quietly become one of the millions of dead blogs out there. If there comes a day that I want to stop writing on here I’ll just shut it down or pass it onto someone who is interested.
If I’m so busy then why am I all of a sudden writing? Well it all comes down to the being busy; things on the work front have been going great and I have been taking on a new role which has increased how much time I work. But after working too many 60 hour weeks and staying up late for the umpteenth time I was reading Leo Babauta’s site (ZenHabits) and I got jolted a little bit and it wasn’t a single post but a slow realization. The level of effort I was putting into everything left very little for me and my interests. Until this past week my xbox was not even plugged into the TV (I haven’t been an avid gamer for years but I still enjoy playing from time to time). The net result is that after reading though a whole boatload of material on Leo’s site I realized that I do need to get back to a few basics.
This writing (not just on this site) has always been one of those but also so has my interest in finances. Interests were aligning… there was possibility in the air! So I picked up a few books and just decided that I needed to get back to a few of my interests at least a little bit at a time.
So to the quick update – I’ve been working pretty intensely for the past year and a half and with a 3 year old in the house the work is endless, oh yeah we added the cottage this summer so we were up there a lot to get it ready for rental and just to use it.
The cottage did rent for the latter part of the summer and we managed to get some funds in for that. This year its all going to cover the amount of money we’ve invested in getting the cottage the way we like it (read: ready for renting). But the experience did teach us a few very valuable lessons: hiring out help does not have to be scary or challenging. Letting people into your property as a renter (even for a week) can produce some anxiety but it doesn’t have to.
From a financial point of view the cottage has altered out financial reality a bit but so far it hasn’t dramatically changed our lifestyle (other than we go up there). We are still managing to keep our finances in order though like way to many people we’re still carrying debt.
The idea of our personal finances hasn’t really left my mind, I keep tabs on my finances and investments and still read new books and blogs though not as many as I used to. Most recently I finished Ramit Sethi’s I will teach you to be Rich which I quite enjoyed and the timing was perfectly in line with my slow move to get back and writing.
In a nutshell that is a quick update – baring some drastic changes over the next few months hopefully I won’t remain as quiet as I have been. A life of all work and no play is pointless.
Posted in News/Misc | No Comments
Ready for Renting
August 7th, 2011
As many of you know my wife and I purchased a cottage at the beginning of the spring with the intent of both using it and renting it out. We spent a great deal of time and money and learned a great a lot about the process in general and I wanted to share that with everyone.
First off one of the key criteria for us when we were looking for a cottage was the potential for renting for part of the summer in order to help offset the cost of the mortgage. We picked a larger starter cottage on a small lake. There is a thriving market for cottage rentals in the area and our real estate agent was able to confirm that there would be a lot of interest for this cottage.
What we did!
Well needless to say this cottage was not rent-able on day one of our taking possession. While the cottage didn’t have anything actually wrong with it, it did require some TLC; OK a whole lot of TLC. We painted virtually the whole house inside with the exception of the main living room and the bathroom. Outside we needed to clean up and paint the two decks with some minor updates needing to be done to one of them to bring it up to code.
We also furnished the place; normally when you purchase a cottage a portion of the furnishings are included. In this case if we didn’t have it written down in the contract it was gone when we got there (including a few light fixtures). The place now looks very nice and we’re very proud and happy with it.
Getting Renters
When it came to getting renters we decided that it wasn’t worth it taking the risk this year and attempt to find renters on our own. We found a local agency that we took on to find us renters. They don’t charge any money up front they only take a percentage when they rent the cottage out. The percentage seems pretty high at 20% but well worth not having to deal with the hassles tied to finding and dealing with renters. This company also offers additional services such as cleaning and some maintenance but we were able to find some people on our own for this.
So far using the agency has been working well; we’re onto our second renters (so the august mortgage is covered!!) and they are working on finding us some long term renters for the winter which would be great. I’m happy with the setup even if they are getting a substantial percentage; I think its worth it.
What’s Next?
As i mentioned we are hoping to keep this cottage rented throughout the winter months which would really help with covering the mortgage the the whole year and ideally could mean we don’t pay for the mortgage. We are also looking into getting the bathroom renovated because quite frankly someone built it in the 60’s and it needs some attention and updating. But we’re only starting to investigate this as its an expense we’ll have to factor in.
We can afford this cottage without having the rental income but it becomes a true investment the moment that rental income starts flowing in. Having someone else pay for your mortgage means you can pay it off that much sooner (assuming you continue to contribute as well). I’m excited about this and really hope it continues to work out.
Posted in Investments, Real-Estate | 1 Comment
Properties are time sinks – An update.
July 12th, 2011
There are times in our lives when we are so busy that we just have to pick and choose the things that we can realistically do. We set our priorities with what is happening around us. For example when your wife is about to give birth to your first child you don’t go on a hunting trip last minute with your buddies. Most of the choices in our lives are fairly straightforward and we know which ones are important.
I am slowly coming out of one of these patches; the past few months have been down right crazy and mostly because of our cottage purchase. We’ve been back and forth to the cottage pretty much every week working on it and getting it all cleaned up and ready for use. While its been busy it has also been a lot of fun. I’ve enjoyed it but its time to start dusting off the other things that I used to do.
There is one nice thing about a short forced break: it makes you re-proritize and at the end some of the things that were a priority before really weren’t or aren’t that important. Others you find that you miss and want to get back to. I found that I missed writing so its time to come back to it. The best part is that in the process of getting our cottage ready for use and for renting there were a lot of lessons to be learned and a new way of looking at our finances to make everything work.
Hopefully in the process of going quiet for a few months I haven’t lost too many readers but now that the cleanup is mostly done I can put some time and effort back to writing and this site.
Another thing that I’ve managed to do is to start re-balancing my work life balance and that by itself has been a challenge but I am starting to see improvement. More to come on this in the next few weeks as well as our recent adventures.
Posted in News/Misc | 3 Comments
Emotional Attachment
April 25th, 2011
Today I read a post over at Zen Habits about Simplifying your Life with Balance and part of the post really resonated with me. In our lives we become emotionally attached to things regardless of what they are. I know that in the past I have kept little rocks from trips because of something that had happened as a reminder. But at the end of the day I still have the memory and now I’m just carting a rock around (they’ve been tossed out). Does that diminish the emotional value of the memento? No it doesn’t but having too many of these can become a very large rock collection.
This emotional attachment by itself is not a bad thing as long as there is balance (as the post says); the funny thing is when money comes into the picture that attachment becomes stronger. When you put your money behind something stupid you are more likely to stick with it no matter if it’s continuing to cost you money. Personally I’ve held onto things that i purchased long long after I stopped using them; mostly because I had paid a lot of money. I emotionally invested myself in that purchase and getting rid of it became hard for me (in my case it was an old laptop that i have since thrown out).
Why does money make the emotional attachment of our decisions so much harder to break?
Unfortunately I’m not a psychologist so I can’t fully answer this question but I can give some personal perspective. When we spend on on a purchase means we are trading our hard earned money and effort for that item. When we realize that the money has been spent in error or not been fully realized we carry a certain guilt with it especially if its a lot of money. We have trouble getting rid of something simply because of how much money we spent on it and personally I’ve seen the emotional attachment holding steady when logic has acknowledged the item was junk.
Since starting this blog a few years ago I have become much less materialistic in my ways (to the chagrin of my wife to can’t find me Christmas presents anymore). With that said I still feel the urge to spend on toys and gadgets that I won’t use. But what really helped me solidify the self control not to spend was experiencing this emotional attachment to that stupid laptop. I now understand that if I put money into something it is sunk money and it shouldn’t carry any additional weight. Does this mean it won’t ever happen again to me? No I might buy an iPad tomorrow and refuse to get rid of it for years even though I don’t use it. I am clearly aware that money I spend on something might mean my attachment to it is stronger so I try to really understand if the purchase is really an item I need.
Being emotionally attached to something in your life can make it incredibly hard to change; as long as you know where that attachment comes from it will make it easier for you to decide if you really want to keep that thing or activity in your life.
Posted in Commentary, Financial Situation | No Comments
Net Worth Assessment (February)
April 24th, 2011
Its now the middle of April and the grass is starting to show some signs of green and I am only now getting to posting my Net Worth Assessment from a couple months ago. No do not expect there to be any Enron like cover ups it was just a very busy period of time as my wife and I were looking for cottages and I am not playing a bit of catch up. I wanted to make sure these posts made it up and though they are late they are here.
The month of February was an interesting month because of the cottage hunting we ended up getting our house re-appraised. If you’ve ever done this and had the assessment go in your favor it has a huge impact to your bottom line. In other words if the house goes up in value you have more equity in the house. That is exactly what happened here. While the month over month differences were minimal the liabilities went down but which is good.
Here are the numbers:
| Jan 31 Balance | Feb 28 Balance | |
| Liabilities | ||
| Consumer Credit | $9,463.85 |
$10,692.64
|
| Lines of Credit | $30,086.17 |
$29,693.15
|
| Mortgage | $240,701.26 |
$240,022.21
|
| Car Loan | $20,484.30 |
$20,149.34
|
| Total Liabilities | $300,735.58 |
$300,556.94
|
| Assets | ||
| House | $360,000.00 | $375,000.00 |
| Investments | $40,790.25 |
$43,636.63
|
| Total Assets | $400,790.25 |
$418,636.63
|
| Net Worth | $100,054.67 |
$118,079.69
|
| Growth |
$18,025.02
|
|
| % Increase |
18.02%
|
So Most of the important categories went down with the exception of consumer credit – I used some of this to pay for hotel rooms while we were running around looking for the cottage as well as a few other expenses (we went away for a weekend to treat ourselves). Other than this one splurge category everything seems to be in order. Even without the increase in the value of our house the increase would have been good.
Up next – the March numbers: this is where things get a bit wacky with two properties.
Posted in Budgeting and Planning, Financial Situation, Monthly Planning | No Comments
We Bought a Cottage!
April 3rd, 2011
Over the years there have been a few goals that both my wife and I have wanted to accomplish and one of these was to own a cottage. We nearly accomplished this a few years back but the deal fell through and rather than finding a new deal we decided to get married instead. I think this was the better choice personally. But the idea of owning a cottage for our own never really left and we’ve been keeping an eye on the market to see if anything was out there.
In February I was looking around on MLS and discovered that there were in fact cottages that could potentially be in our price range. We have been trying to get our finances in order and as part of that we were very clear on what we could and what we could not afford. To see cottages within that range was exciting and we started doing more investigation.
Where we live cottages are often extremely expensive so to find affordable cottages meant that the housing market had gone soft (which it did in 2008/2009) and the prices would be rebounding. It also meant that the cottages we would be looking at were more than likely going to be out of the way pieces of crap. Out of all of the cottages that we looked few of them were uninhabitable in my opinion and at only a small handful were worth considering. We ended up finding one that was perfect for us and our little girl.
Why buy a cottage?
One of the first questions that came to mind when we saw cottages in our price range was why buy a cottage now? We would be making our financial situation that much tighter by doing this. The answer is pretty simple: rental income! Cottages seem to be pretty easy to rent and this rental income can easily cover the mortgage on the place. In our case we would be able to use the cottage most of the time and rent it out a couple weeks during the summer months to offset our costs.
If we were to rent this cottage out all summer we could have a year round property paid for by our renters. Our goal is not to do this but to supplement the cost of carrying the property with the rental income. We want to enjoy the place too.
How we did it
If you look back to my January financial statement post you’re probably wondering where we invented the money for this cottage as we did not have a massive down-payment just laying around to be used. We are fortunate enough to have purchased our house at a great price and the renovations we’ve completed over the past couple years have dramatically increased our property value. Very simply we had enough equity in our home to be able to pull money out as a down-payment without putting ourselves at risk from an equity in the house point of view.
The net result is that we now have two properties that we have more than 20% down on and mortgages that we will be able to handle without any difficulty. The best part is that one of these properties has the potential to become a self sustaining income property.
What we considered
A cottage is still a property so a lot of factors needed to be considered before the purchase. Here’s a list of things that we covered during our search:
- Physical property (a house inspection was completed as part of the sale)
- Insurance was factored in (including additional insurance for renting the property)
- Location (how much are we going to spend to get there regularly)
- Utility and Tax costs
- Resale value
- Potential Income
- Required renovations
- Expected Maintenance costs
The net result was that not only did the above criteria work with the property we got but we were sure that we wouldn’t be overextending ourselves when it came to actually carrying costs.
At the end of the day we’re both very excited and we can’t wait to start using it (we get the keys in a month)! Our financials will change as a result of this but I believe that this will be for only for the better.
Posted in Extra Income, Financial Situation, Real-Estate | 3 Comments
Update – Spring Silence
April 3rd, 2011
While this is not a very prolific blog like many of those out there; all too often it is because of everything else going on in my life and this latest round of silence was another one of these times. It was a combination of a few things that kept me away from the computer and from posting, while most of these are not exciting there are a few that were.
In this case I ended up absolutely bogged down with work to the point of working at home 3+ hours each night. Now some of this work does fall into the interesting and exciting camp but at the end of the day it is work. I am expecting things to lighten up starting in April and the goal will be to keep them this way. I don’t mind putting in a bit of extra time at work but working 11 hour days and weekends is a bit much and takes away from family.
The second and more exciting thing was that in February my wife and i started looking at cottages to buy. This was a very long process because by their nature cottages are not a 10 minute drive away. I will post about this in a separate entrybut the net result is that we were able to find a cottage and we take possession in May.
Finally, and most recently, I’ve been dealing with a few health issues – probably related to working myself too hard for the better part of the last year. I’m OK and the issues were minor but they did illustrate to me the fact that health has to come first which it hasn’t. Again I will post about this separately.
Overall its just been a very busy couple months and I’m looking forward to some down time which will start to happen with the cottage and some planning on the work front. Stay tuned – I’ve got lots of stuff to share now.
Posted in News/Misc | No Comments
Money and Family don’t Mix
February 20th, 2011
If you try to take some oil and water and mix the two of them together they will always separate. The two just don’t mix no matter how much you shake or stir. I have always been wary of money matters when it comes to friends and family because just like oil and water the two just don’t go well together.
I know that there are many situations where people have borrowed money from their family and it has been successful but I think a lot of this has to do with the attitudes of all parties involved. Unfortunately when it comes to money people’s attitudes and behaviours change very quickly. This was recently made very clear to me in my own dealings with my family.
The Story
When I was in my early twenties I had accumulated a fair amount of debt which my parents helped me pay off. The agreement at the time was that it would be a loan and I would pay them back and I started paying them monthly. This changed when I went back to school; they suspended the payments and it was known that I would pay them back some day. Since then I’ve gotten married, bought a house and had a a daughter and really don’t have the spare money to pay my parents back.
I still fully intend to pay them back. Until now the story has been pretty straightforward and nothing bad has happened but a few months ago my parents started to remind me about the money. Again I have no issue about this but a couple weeks ago now they simply said I would need to pay them back (initially they said all of it at once). They are not in any financial debt nor are they pressed for the money. When I pressed them why they are so keen on this they told me they’re getting close to retirement and want to invest the money.
This is where the emotion starts to come in; they’re starting to get worried about this but they just spend a year with the equivalent of 3 incomes due to a severance package and they took a couple expensive trips and overspent. They are asking me to put myself into debt so they can invest because they didn’t manage their money well?
The Result
I have kept the story short so far and it has not been concluded but for me a few things have become very clear. I no longer trust my parents with money nearly as much as before and it has soured my relationship with them a bit. The good news is they are not being unreasonable which is a good thing as this could have a very bad impact to our relationship.
The Conclusion
I am now a parent and as such I am much more responsible with my money; I’m not perfect and I still struggle getting everything right but the net result is that I have learnt a lot from this situation. I would lend my daughter money if she needed it and I would make it a loan if the situation warranted it. But the difference here is that I would never assume I was going to get the money back nor would I plan on receiving it within a short time frame. Lets be honest here as a parent you want to help your children and at some point you will rely on them so why make a mess of a relationship by confusing it with money?
Money and family don’t mix and this also applies to money and friends. I’ve never lent money to friends that I was expecting back – if your friends ask for help; help them but you should never let it destroy the friendship the way only money can.
Posted in Commentary, Debt | 3 Comments
Net Worth Assessment (January)
January 30th, 2011
I’ve never been a huge fan of the net worth statement though I understand its importance; for me it only paints a one sided picture of how you’re doing financially. Essentially net worth is your assets minus your liabilities and it’s really a snapshot at the time you do the statement. It doesn’t really tell you how you’re doing financially because you might have a great net worth statement but be spending so far beyond your means that it doesn’t matter because you’re already in financial hot water.
With that said this is a tool that can be used as a measuring stick on how you’re doing from month to month and as part of my overall goal to get my finances in order I decided that I needed to track my net worth regularly. I tracked my net worth as of end of each month starting with December 31st and this year and I am going to do this the first of the month for the rest of the year (using my balances at the end of the month).
For the month of January here is my net worth:
| Dec 31 Balance | 31-Jan-11 (Calculated Jan 30) | |
| Liabilities | ||
| Consumer Credit | $10,183.89 | $9,463.85 |
| Lines of Credit | $30,787.46 | $30,086.17 |
| Mortgage | $241,378.68 | $240,701.26 |
| Car Loan | $20,924.80 | $20,484.30 |
| Total Liabilities | $303,274.83 | $300,735.58 |
| Assets | ||
| House | $360,000.00 | $360,000.00 |
| Investments | $41,790.55 | $40,790.25 |
| Total Assets | $401,790.55 | $400,790.25 |
| Net Worth | $98,515.72 | $100,054.67 |
| Growth | $1,538.95 | |
| % Increase | 1.56% |
A couple things of note – the house value is approximate because between the last assessment we did about a year ago and the average selling price in our neighbourhood is $65,000 I split the difference leaning towards the banks side to be safe. Essentially I believe that we would be able to sell the house at that price without any problems and would likely get more. The second thing some of the savvy folks out there will notice is that I have a car loan in my liabilities but no car in my assets; this is done intentionally and yes I still have the car. When I was last meeting with my banker he indicated that they often don’t consider the value of a car as an asset because it can vary so much. If I were to include this then my net worth would likely increase by about $12-15,000.
Overall I have to say I’m quite happy about this because the liabilities have decreased by a little over $2,500 which is quite respectable and if it wasn’t for my making some changes in investments I think the overall increase might have been slightly higher. Based on the January results I am going to attempt the following goal for February and March: Increase my net worth each month between 1.5-2% each of the two months. I believe that this goal is entirely achievable since the repayments should remain the same and my investment contributions will slowly increase the assets.
The next big challenge will be to take a look at my expenses for the month and really figure out where my money is going and how to adjust this so less of it is going to unnecessary items.
Posted in Budgeting and Planning, Financial Situation, Monthly Planning | No Comments
Goal: Get Finances in Order
January 16th, 2011
A few days ago I wrote that this was the Year of Recovery for me and that I would post about some of my goals with my financial goals being first. I’ve been giving this much thought and getting my finances in order is the goal but unfortunately this is a bit of an ambiguous goal with no clear direction nor anything truly measurable by which to determine success. But rest assured there is a lot more than just a flimsy statement behind this goal.
The overall goal is: Get my finances in Order
The immediate and shorter term goal is assess the state of my finances in detail this month in order to be able to set some measurable and attainable goals. I’ve been reading and writing about finances for years now and I know how to approach most of the tasks for this goal. But I also know that I am not an expert in these matters and for some of these items I’ll be reaching out to professionals (you should too especially if you’re not sure about something).
The Assessment of my financial state breaks down as follows:
- Determine Net Worth
- Determine Expenses and Cash Flow
- Centralize banking with fewer institutions
- Automate wherever possible
- State of Investments
Determine Net Worth
In general this is a pretty straightforward activity because you take your assets and subtract your liabilities and the number you’re left with is your net worth. By itself I don’t think that this number has much real value because it only paints a portion of the picture of your financial state. But what it does do is give you a snapshot of where you stand which can be a great benchmark for measurement.
Determine Expenses and Cash Flow
The second and arguably the more important part of the financial puzzle for me is Cashflow and this is determined by knowing how much money you’ve got coming in versus going out. To know this in details you need to know exactly where your money is going. To accomplish this i am going to track all of my spending for the month in a spreadsheet. I know this isn’t the most advanced approach but it works for me because I use Google’s Docs and I can access this online at all times. This lets me enter an expense pretty much right away so I don’t accidentally forget about it. With this information I can determine what changes need to be made and to measure the results. I don’t expect surprises but a detailed breakdown will reveal all.
Centralize Banking with fewer institutions
I’ve placed this on the list because I had my banking and investments in 4 institutions and the reality is that this is pointless and makes keeping an eye on everything a pain in the ass. To start this off I’ve already met with my financial adviser and I have started the process of transferring all of my investments to one institution and one banker that I trust. I am confident in his abilities and his recommendations. My banking has been taken down to two institutions and I’m going to see what’s involved in getting it down to one!
Automate wherever possible
This action really belongs with the centralized banking because as I find where everything is I’m going to ensure that there is no need for me to write checks or manually pay anything. Not automating it means that I can make a mistake way too easily or forget something which I definitely don’t want to happen. By automating payments as well as investment contributions means everything happens at set times and I don’t have to worry about if a payment is has come out or not.
State of Investments
Finally the state of my investments; I don’t have a lot of investments which by itself is not great but the little that I had were not actively being looked at or reassessed. The good news is that I was making contributions but they were small amounts to a few institutions and in the end it really wasn’t adding up to anything substantial. I’ve already centralized this with my financial adviser at one institution and I’m happy with the current setup. I’ll post about this in more detail later this month.
Overall these steps are meant to give me information so that I know exactly where my finances are, what investments I have, what my worth is, and most importantly knowing where my money is going and what its doing. I know that some of it is going to waste and the cashflow assessment will tell me where any how then I’ll be able to make some changes and start putting more of my money to good use rather than to waste. I’ll share more in the coming weeks about this assessment so that if anyone is interested you can see what I’m doing to get the big picture with my money and how I am working towards the overall foal of getting my finances in order
Posted in Budgeting and Planning, Financial Situation | 1 Comment
