Tuesday, 21 May 2013

2013 Goals:

2013 Goals

Personal Finance Goals:
- Create a budget and stick to it
- Salary Goal: $40,000 this year (from July to Dec): My base salary should be $36,500, and working overtime on some days offs should bump me up to $40,000
- Debt Goal: Reduce student debt to $20,000 this year: Should be feasible if I contribute $1000 per month plus my reimbursed moving expenses
- Investment Goal: $3000 Retirement portfolio: Already have $1500, and save an additional $250 x 6 months should get me to this goal

Professional Goals
- Pass both licensing exams
- Become competent in 2 sub-specializations
- Create an LinkedIn profile

Personal Goals:
- Make new friends in Alberta
- Exercise more
- Volunteer
- Improve leadership skills
- Look for a relationship or some enjoyable dates

Saturday, 18 May 2013

Paying off Student Debt vs Investing: My situation

My situation:
6 years of post secondary education leaves me with $39,500 government student loans which just entered grace period May 1st.

For me, I have approx. $30,000 Canada loan and $9,500 Ontario loan, and I'm expecting about $3000 OSOG (Ontario Student Opportunity Grant) in the fall to help me with the latter. Now, my job offer from Calgary comes with a $13000 tuition reimbursement (non taxable income that I get right away) and relocation assistance (paid after the 3 month probation). 
Now, $2500 for first month's rent and security deposit, ~$3000 moving expenses (which will be reimbursed). I want to keep $1500 for some miscellaneous expenses. So that leaves me with $6000 that I want use to pay down OSAP.

Once I start receiving my paycheques, I want to use $500 biweekly to pay off my student loan. The next step is to look at my expenses for the first month and to work out a budget backwards.

There are 2 ways to have more money: cut back or make more money. I hope to live on a modest budget, then once I'm settled down and done with probation, I can pick up some extra Saturday shifts at work. Maybe I can also apply for some casual positions so I can increase my income. If I can, I also want to save about 10% of my income. I should come up with a 2013 goals page soon to keep me motivated. 

Friday, 17 May 2013

Paying Off Student Debt vs. Investing

This topic is close to my heart, because it is an issue I am currently struggling with. After much number crunching, I think it ultimately comes down to what decision are you most comfortable with making.

I'm a new graduate with a job on the horizon and a huge student debt after 6 years of post-secondary studies. All of my loans are through OSAP, I have no private student loans.

I have called National Student Loan Service Centre to find out the sizes of the Canada and the Ontario portions of the loan because they have different interest rates and different interest start date. The Canada portion of the student loan has an interest of prime + 2.5% (5.5% right now), and while you don't have to repay during the grace period, the interest accumulation has already started. The Ontario portion of the loan has an interest of prime + 1.0% (4% right now) and interest charges start after the 6 month grace period. The good news is any payment you make during the grace period goes straight into your principal, and from my phone call to NSLSC, it goes to the Canada portion. Now, if you're like me and have been benefiting from Ontario Student Opportunity Grant (OSOG) which limits your debt to:

$7,300: the most you will need to pay back for a 2-term academic year.
$10,950: the most you will need to pay back for a 3-term academic year.
Then the Ontario portion of your student debt will be much smaller than the Canada portion.
Now, I know over the long term, a balanced portfolio such as the sample portfolios on Canadian Couch Potato will give return at around 6%. Also, since I'm young, start investing early will get the compounding going and help me tremendously for retirement savings. Using the paying down debt vs investing calculator at:


My break even point is at 5.19% performance of investments, and slightly lower once you factor in the Ontario portion of the loan too. The logical thing to do will be pay back my scheduled payments and invest the rest in a TFSA account. However, I'm not comfortable carrying debt for a long time, and once interest rate goes up, the advantage of investing over paying down debt will be minimized. Also, there is volatility with investment. On the other hand, paying down debt is pretty much a safe bet.

So my decision is to pay down my student debt as much as I can during the grace period, then once the loan enters repayment, use a 2:1 ration of paying off debt to investing.

The take home message: paying down debt and investing are both good options, do the math and make a decision you will be comfortable with. The more important point is DO IT NOW, don't delay. (This was mentioned in the Wealth Barber Returns by David Chilton too. ^^)

Thursday, 16 May 2013

Book Review: The Wealthy Barber Returns

This is a book review of The Wealthy Barber Returns

Even though I called this a book review, it's more snippets of my thoughts.

The Wealthy Barber Returns is David Chilton's newest book and a follow-up of sorts to his bestseller The Wealthy Barber. The book contains many short, easy-to-read chapters. The author David Chilton is very funny and his book is filled with self-deprecating humour.

Interesting points that stood out for me:

Think of your purchases in turn of how long you have to work (or your hourly rate after taxes & deduction)
Be grateful for what you have: the best things in life aren't things.
Keep an expenses summary: it could help control your spending subconsciously, and if not, help with your budget.
Emergency funds don't work, we will always come up with excuses to spend: I'm not sure how much I agree with this point, perhaps I should give my parents money for the emergency fund so I don't spend it?

All in all, while it is an enjoyable read, I find most of the concepts to be repeats of what I already know. But this book would be great for someone new to personal finance.

Thursday, 9 May 2013

Moving to another city for a higher paying job: is it worth it?

Obviously the title of the post is more ambitious compared to the actual content of this post. Here I want to share somethings you might want to consider before you make the move.

So you have a job offer with higher pay from another part of the country, should you go?

The first thing to evaluate is if the job really does pay more factoring in the possible expenses. For example, moving expenses can cost you thousands. From Toronto to Calgary, a large U-haul truck rental costs about 3000 dollars. Some moving companies charge a bit less, but you should still be looking at around 1500 to 2000 dollars for moving the contents of a bachelor/one bedroom. Are you driving or having the car moved over? Don't forget the gas money for the ~1000 dollars to move the car. If you are living at home right now, don't forget to add the cost of renting an appartment. Is there a difference in car insurance between the cities? Any differences in income tax rates? If you consider all these costs, would you still end up making more money the first year?
A great tool for this part is paycheck city's salary calculator for your take home pay:

Next thing to look at is whether you are really willing to leave behind what you have now. Do you have a family in the current city, a significant other? Are they coming with you? Are you tied down with a mortgage or do you own a property? Can you rent out the property, preferably with a positive cash flow?

Do you think you can work at this job long term, or is it a make money and leave type of thing?
How are different are the lifestyles between the two cities?
Do you think you will be able to fit into the community well?

So far I have been talking about similiar jobs, one has higher pay. Now it's time to think about your career, is the opportunity better for you in the mid- to long term?

Are you comfortable with this decision? Do you think you will regret not taking this job or taking this job more?

Personally I will be moving from Toronto to Calgary this summer. Part of it is that the job offer I received had tempting financial incentives, but most of the reasons are personal. I have always wanted to visit the Canadian Rockies, and moving to Calgary will hopefully afford me ample opportunity to explore them leisurely. Another is I wanted something new in my life, I was getting a bit tired of the routine here in Toronto. Also, I wanted my own place. I know it is financially responsible to perhaps keep living at home a few more years, but I crave the freedom of having my own place and that is too expensive in Toronto considering what my salary will be. Also, if I lived at home in Toronto, I will spent an average of 2.5 hours commuting each day. On the other hand, in Calgary, I can spent most of that time working, and have four 9 hour day work weeks. I can work more on my day offs or explore the Rockies like I wanted.

Wednesday, 8 May 2013

Great financial blogs and websites!

canadiancouchpotato.com - your complete guide to index investing, `nuff said.
www.canadiancapatalist.com - great articles and guides on how to invest
www.milliondollarjourney.com - great resource, many articles on many topics
www.savespendsplurge.com - the most entertaining PF blog I've come across, also one of the most thought-provoking

Book review: Millionaire Teacher

The first real blog post - a book review of Millionaire Teacher by Andrew Hallam.

Being frugal, I read this book in the neighbourhood Chapters. But, as I finished the book, I decided I probably need to own a copy, and I will tell you why.
This book is a guide of how to build wealth on a middle class salary. It is very well written, the author has an earnest way of sharing his insights and does not come across as preaching.
Some of the topics are reiterated in millions of other financial blogs and personal finance books:
- Pay off high interest debt (ex. credit card debt!)
- Start investing early and let compound interest work its magic
- Be frugal
Some more interesting topics:
- Don`t give your kids free money: I do agree with this, being the only child, I have to say I have been at the receiving end of a nice RESP account built by my parents. While I had worked summer jobs from time to time growing up, I never had to work since I had an allowance and my parents would give me money if I asked. But I have to give my parents lots of credit, somehow I turn out to be conscious spender. I think it has to do with my parents drilling the idea 'money can be spent but not wasted' into me ever since I can remember. When money is given freely, it is not as valuable to the individual.
- Index investment and financial advisors` conflict of interest: I can speak from personal experience, it is not easy to buy TD e-series! When you open a mutual fund account at TD, the advisor will do all he/she can to talk you out of it.
- If you love to stock pick as a hobby, it should be no more than 10% of your portfolio and how to pick the businesses to invest in: Andrew gave some great guidelines. I conclude that I should just stick to index investing, and read about others' exciting stock picking stories.
I find this book an enjoyable read and a great reminder of what I need to do to stay on track and achieve financial freedom.
If you are interested in the author`s investment prinicples, you can find it at (I`m not making profit recommending this book or the author`s website ):
The author`s website: http://andrewhallam.com/


I have started this blog with hopes that posting about my financial situation will help me stay on track. ^^
I wish to share my journey of pursuing financial freedom.
A little about me:
I'm a 24 year-old Canadian new graduate with sizable student debt from my 6 years of post-secondary education, but fortunately, I have secured a job across the country with good financial incentives that will help me with paying off my debt.
I enjoy reading, shopping, movies and food. My dream is to achieve financial freedom while enjoying my life.