New job

I normally like the nomadic nature of my dying industry, in that in provides me with a built-in opportunity to try new things and develop my skills, but I can't deny that there isn't a fair amount of nervousness to be had as one contract runs out and I don't know where and when the next one begins.

After a diligent month of letter-bombing the city with my resume and mining every contact I have that isn't nailed down, it seems I've once again managed to land on my feet, and secure another year of gainful employment. I'm particularly excited about the fact that for the first time, I'm getting away from the dead-tree medium and moving exclusively into the world of online journalism. (There's a distant, distant chance this might turn into an opportunity to blog about finance/investing and get paid for it, but that's very nebulous at this point...)

Besides the duties (which I'm quite excited about) my new job has the added bonus of coming with a not insignificant raise from what I've been earning so far -- to the tune of about 17%, before taxes. As my cousin Jacques might say, "ne pas too shabby."

I'm a big believer in the principle that good financial habits can build into big things over time, and as such, I've been able to build a decent little nest egg over the last few years, without really sacrificing too much of the fun that life has to offer. Currently, as soon as my paycheque comes in, about 25% of my gross salary goes directly into my PC Financial high interest savings account, which functions as a sort of catch-all account until I divert it into other things (RRSPs, Visa bills, big purchases, or whatever.)

It's a system that's worked quite well for me so far, so the obvious answer to the question of what to do with these new funds might be to increase the amount I divert into that account. But I have a different idea.

I think I'm going to keep my PC account as a legitimate long-term savings and investing fund, and open another high-interest savings account (or possibly just dust the cobwebs off of my fallow ING Direct account -- I haven't checked if their rates have gotten any more competitive) to be my designated "fun" account.

I think putting that psychological barrier between the accounts will be a good thing. The new account will be the one I dip into for the vacations, gifts and *cough* plasma televisions I'm thinking about getting over the next 12 months.

At any rate, big things and good news in GIV-land. 

For the time being :)

Five secrets

Inspired by Blatantly ripping off Canadian Capitalist's list of his five favourite financial secrets, I thought I'd bang out my Top 5 for you all, in no particular order.

1 -- Live below your means
I know it can be hard to pay off all your bills every month, let alone put aside a little extra for a rainy day. But I'm constantly amazed by the gains that can be had from living just a little bit below your means. Whether it's $5 a day, or $20 a week or whatever, the benefits of seeing that little buffer zone in one's chequing account and not immediately blowing it are immeasurable. I'm lucky enough right now that my situation allows me to put aside something in the neighbourhood of a quarter of my paycheque into a savings account. I know that won't always be the case as things like mortgages and kids come along, but for now, I'm socking it away while the socking's good. I don't advocate denying yourself the things you truly enjoy in life. But you'll be amazed how culling the meaningless expenses from your life can add up to big financial gains without hitting your standard of living. Try spending 10% less this month than you did last month and see how fast it adds up.

2 -- Don't pay needless fees
This one is a biggie for me. I'm quite happy to spend money on the things that are truly important to me, and I don't even make myself feel guilty for doing so when I do. But if there's one thing that I derive absolutely no pleasure from whatsoever it's the dozens of bank fees/convenience charges/system access fees/ticket surcharges that nickel and dime us all to death every month. I had a conversation with a friend recently about bank fees, the gist of which was -- in today's day and age there is no reason to pay bank fees. None. Whether it's PC Financial, ING Direct or another fringe player, get to know them, and don't take your current bank's B.S. a day longer than necessary. Use them. Love them. Another friend somehow managed to spend an amazing $47 in on month on bank fees one month a few years ago, I surmised when we looked at one of his bank statements. That's astounding! $47! Remember that the next time you're convincing yourself, drunk in a bar, that the $2 service charge to use the white label ATM in the lobby is somehow 'worth it.'

3 -- Make it automatic
As per item #1, the easiest way to make sure you'll have a little left over at the end of the month, is to make it automatic. Don't put whatever you have left over at the end of the month into savings, because we both know there won't be any left over. At least, there certainly wasn't when I tried to do it that way. Move the money you put into savings up in your priority list by setting up an automatic withdrawal. I get paid every Thursday morning, at midnight. At 12:01 a.m., my savings account gets a deposit out of that, forcing me to live off the rest. Obviously, I dip into it from time to time as circumstances require it. But just by putting in in there at step 1 (as opposed to step 17) I make it much more likely to stay there.

4 -- Don't always follow the herd
Sometimes, the herd is going in the right direction. But not always. There's a word for the act of going against the grain in investing circles -- it's known as being a contrarian. Most of the world's greatest investors built their wealth by doing precisely what everyone else isn't doing. Sometimes, that means closing your eyes and buying when everyone else is selling. Even outside any investment decisions, stop and reflect on why, exactly, you're doing the things you do, or buying the things you buy. Use your head: "Why am I doing this? What benefit am I getting out of this? Could I be better off doing something else?"

5 -- Keep your goals in mind
A little more nebulous, but still just as helpful, I've found. It isn't always the easy thing to deny yourself some treat, or stick to a plan. One thing I've found works quite well is to visualize what exactly you're working for. You're a lot more likely to stick to your savings plan when you can imagine the car you're saving for, or the dream home you want, than just blindly saving every cent, without ever having a concept of a reward for it. Any time I'm tempted to go off the rails, I think of the things that really matter to me, and how inconsequential everyday sacrifices (like bringing coffee from home, for example) gets me closer to them.

Those are my 5. What are yours?

Every little bit helps

I've gotta say, it's rare that one of the Big Banks comes up with a promotion that doesn't immediately make me raise my suspicious eyebrows, but I'm pretty impressed with Scotiabank's recent savings-incentive program, Bank the Rest.

Essentially, the program takes extra cash every time an enrolee makes a debit transaction from their chequing account and puts the difference into a high-interest savings account where it accrues a lot more interest that it would otherwise have done. The program can be set to round up to the nearest $1 or $5. If you spend $6.23 on lunch, for example, Scotia would take an extra 77 cents, round the transaction up to $7, and deposit the difference into a savings account for you. Best of all, it's free of charge. The net result? A banking customer who wouldn't otherwise have the discipline to save some rainy day funds gets an automatic savings account that build in tiny increments over time. In exchange, Scotiabank no doubt gets a few new members for its Money Master High Interest Savings account.

Obviously, this isn't the sort of program that a regular saver would find much use for. But I'm inclined to applaud Scotiabank's attempt to turn a few compulsive spenders into accidental savers.

If you find it difficult to find the will to put away a little excess cash every month, I'd encourage you to consider this program (especially if you're already a Scotiabank customer.) I promise, you won't notice the extra 90-odd cents every time you make a debit transaction. And you'll be amazed how quickly it can add up.

Budget reaction -- Hooray for TFSA!

I really can't emphasize enough how pleased I am by the prospect of the tax-free savings accounts the Tories unveiled in the budget today.

The star's James Daw has an excellent recap here, and Canadian Capitalist offers his usual insightful analysis here. ROB's Rob Carrick chimes in here. I suspect the Canadian personal finance blogosphere will be all atwitter with TFSA-related posts in the very near future, but for those to lazy to click, here's the 10-cent version of what's happened. Starting in 2009, Canadians over the age of 18 will be able to deposit up to $5000 a year into these accounts, and will never have to pay any tax on interest or capital gains on assets within the account. There's no limitations on taking money out of the account, and in fact investors will be able to reuse contribution room after making withdrawals. As some astute readers on CC's thread have already pointed out, the TFSA will function a bit like a Canadian version of a Roth IRA -- albeit an even more flexible one.

There are a lot of things to like about this. I'm particularly impressed by the fact that there doesn't appear to be many restrictions on what the funds have to be used for -- as opposed to RESPs and RRSPs which can only be cashed in under certain conditions, and are subject to taxes and penalties for breaking those rules. Even if the upside doesn't end up coming in as advertised, at the very least this proposal is bereft of downside. Whether it's to save for a downpayment on a house, an emergency fund, or a conventional taxable investment account for stocks and ETFs, I can't see any reason why Canadians wouldn't use these new TFSAs as a potent wealth-building tool. I can assure you, time is running out for my taxable investment account once these little beauties see the light of day, although I do wonder what sort of tax implications there would be for transferring stocks out of a taxable account into TFSA. Would the CRA consider me to have sold them and repurchased them as they do when you transfer stocks into an RRSP? I suspect so, but time will tell.

The only "bad" thing (such as it is) is that unlike RRSP contributions which are tax deductible and thus give me a nice fat cheque every April, TFSA contributions aren't. So the government isn't paying me to save for my future, as they do with RRSPs. But on every other level, these accounts help make it more and more worthwhile for Canadians to start saving more -- unless I've missed something, 100% of every dollar you earn from an investment in one of these accounts goes into your pocket at the end of the day, a claim that can be made of very few things. You have to like that.

Change can be good

I changed jobs a few months ago, and a somewhat-unexpected cost of that change is that my hours have been turned completely around. I used to have a fairly conventional 9-to-5 (ish) gig, but I now find myself not going into the office until the early afternoon and subsequently not getting home until 9 or sometime 10 o'clock.

On the surface, it doesn't really bother me. I sort of take the position that one day I'll have to grow up and get a "normal" job that forces me to deal with gridlock traffic or crowded subways and a blaring alarm at 7 a.m. -- why not enjoy my ability to sleep in until 10 and stay out as late as I want for as long as I can? But it's safe to say this sort of arrangement poses a problem when dealing with family members who have a more conventional schedule. In my case, "family" consists of my girlfriend (whom I've lived with for a few years) who has a regular 9-to-5 gig.

My getting home near 10 o'clock is particularly troublesome, however, with regards to planning and having meals. She gets home at 6, and quite logically, starts to think about dinner after a long day. But she's a peach, so she generally gets cracking on the cooking in the interim, while I hurry home as soon as I can. Best case scenario? We're sitting down together for 9.

How do abnormal meal hours relate to personal finance? I'm glad you asked. Before this recent change of ours, one thing we used to do quite a bit was go out for dinner. Not out or laziness or inability to cook for ourselves (we're actually quite good in the kitchen, if I do say so myself) but because we enjoyed the experience of dining out.

I'd say we averaged one dinner costing about $100 (for both of us, wine included) every few weeks. I can already hear the latte factor diaspora throwing up a little in their mouths, furiously calculating what that money would have done after 20 years in a no-load index fund, but what can I say -- it was an extravagance I was willing to allow myself because we both enjoyed it and I managed to save my couple of hundred a month into a rainy day fund anyway.

But now? We haven't been out for dinner once since my new job started. It hasn't really been a conscious effort, but when you're getting home from work at like, 9:30, and one of you has to be up at 7, it's not really an option. We eat dinner at home out of necessity, and that tends to be a lot cheaper.

My free time, ergo, tends to be before work in the mornings and early afternoon -- not exactly prime socializing time. So it's not even just my food budget that's been slashed -- it's entertainment too. Going out to have a few beers after work, watch the hockey game, eat chicken wings and convince oneself that the waitress thinks you're hilarious used to be a major outlet of my disposal income. But I don't really do that anymore either, since I don't seem to be living on the same schedule as anybody else I know.

It all adds up, is what I'm trying to say, so I find myself with a lot more cash around than I used to. Finding ways to spend it during the hours of 9 a.m. and noon proves difficult. I also get a modest shift differential stipend for working during evening hours. My new job pays less, on paper, than my old one did. But for the reasons outlined above, I actually find myself with more cash in my pocket at the end of the month than I used to.

Just one more way money issues can often work themselves out in ways you didn't imagine.

Cliches become cliches for a reason

It seems Moneyrelations tagged me, a while back, in Moolanomy's My One Money Advice (MOMA) Meme challenge (although really, for simplicity's sale, you may as well call it the "what's your favourite financial cliche?)

Since I'm uninspired to write about anything else today, let's give'r a go.

Of all the platitudes that get tossed around ("buy low, sell high" ; "penny-wise, pound foolish" and the like) I'd have to say the one that I really keep close to my heart is "pay yourself first."

People who wait until the end of the month, until every other demand has been paid first before slipping the remainder into the piggy bank are, in my experience, likely to save far less money than people that reverse the order.

My automatic savings program grabs 25% of my paycheque every week about 2 hours after it comes into my chequing account. So right away, when I'm budgeting how I'm going to pay for everything else this month, that money doesn't enter into it. If belts need to be tightened and something needs to be temporarily suspended, money I tuck away for my future isn't the first thing to get the axe. Maybe there'll be one less beer after the game that week, but that sum I ferret away is sacrosanct.

What can I say, the system works for me. Try it for yourself.

More bank notes

Since my experience with PC Financial's high-interest savings account has been largely positive, I've been mulling over switching to their no-fee daily bank account for my everyday chequing account.

I currently have a chequing account with RBC, a Visa card there too, and I keep my investments in an RBC Directinvesting account. That didn't really happen by design, but over the years I've grown to appreciate the convenience of having all my accounts in one place and being able to transfer money easily. I'm certainly not with RBC because they're the cheapest. I pay $4 per month to maintain my chequing account there, and $0 for the Visa because I pay my bill on time in full every month. In the past few years I've moved from about 20-30 debit transactions per month to less than 5 as I've been very diligent about putting absolutely everything I can on Visa for the points.

I usually say savings trump other factors , but part of me appreciates that I benefit from their size and heft when it comes to things like customer service when something goes wrong or having to find a bank machine somewhere nearby. If I were to count the advantages of keeping my everyday cash with RBC, I'd have to say they are the proximity to bank machines, ability to make same-day transactions (for paying off Visa or moving money into my investment account when an opportunity presents itself. Taking money out of my PC Financial savings, for example, would currently take at least two business days while I transfer it online to RBC and then find a bank machine to get it out.)

To me, $4 a month ($48 a year) seems a reasonable price for that. But let's do a little more detailed cost-benefit analysis here.

The obvious advantage of the no-fee chequing account at PC Financial? As the name implies, it's the 'no fee' part. That's a $48 annual savings right off the bat. But there's more. PC Financial offers 250 PC points every month for keeping $1000 in the account. Assuming I moved $1000 float from savings into the account to get that reward, I'd accrue 3000 PC points per year -- assuming I didn't use the account at all for things like buying groceries, which would boost my points. How much is 3000 PC points worth? As far as I can tell, about $3 worth of groceries. So my total savings in this scenario are now $48 worth of annual fees saved, plus $3 in benefits. I'm going to assume that things like customer service and prevalence of CIBC bank machines (who run PC's finance division) are a wash, so they don't enter into it.

Is $51 enough to make the switch? Honestly, I don't think so, but there are a few more factors to consider. Like the interest I lose from moving that $1000 out of my 4.25% savings and into effectively, an account that pays me 0% interest. That's $42.50 a year on the other side of the ledger. The benefits are getting smaller.

From where I sit, the only way this makes sense financially is if I play for keeps -- don't use the PC account merely as a "points-generating" mechanism, but actually use if for everyday use. I'd really start racking up some grocery points then. But I really like my RBC Visa card and would want to keep it. My plan to get free rewards from it is working perfectly. If that were the case, and I was going to use a PC account for things like my paycheque and debit transactions, but keep my RBC Visa and investment accounts open, I'd be well-served to keep the RBC chequing account open in some manner as an intermediary to them. Maybe converting it into a pay-as-you-go account would be best, where I'd pay $0 in principle, but a nominal fee (I think it's 50 cents) every time I made a transaction like paying my Visa bill or moving money into savings.

Forgive the jumbled structure of my thoughts on this one, but it's an insight into how my brain works. I'd love any insights from people who've done what I'm thinking of doing.

Essentially, my concerns boil down to this: Can you actually function without in some way being a customer of the big banks, and only use the fringe discount products? Or is that getting too cute by half?

I'd hate to go to the hassle of switching all those accounts over only to figure out the savings I accrued were nowhere near the cost in hassle I paid to get them.

Pay yourself first -- no, really

Buy low, sell high. Diversify your assets. Invest globally.

Of all the investing maxims, the one that's always made a lot of sense to me was "pay yourself first" and this month has been an excellent example of why it works.

What with moving, paying for a vacation and the prevalence of those all-too-appealing pints on a patio with friends this time of year, my expenses have been out of whack of late.

In general, I suppose that's OK to do from time to time. I mean, what's the point of having a rainy-day fund, if you won't open it up when it starts to drizzle? But it's not a habit you want to get into.

As it stands, about a quarter of my paycheque gets automatically diverted into my emergency savings fund on payday. It does what its supposed to do in that its automatic -- I literally forget I'm doing it. I was reminded of why that's important today when I was wondering how exactly I was going to manage to pay all my bills AND put some aside this month. I was trying to find the money to put into savings when it occurred to me that it's already been done for me.

Granted, I still don't have very much breathing space in the ol' budget this month. But when you put money aside for yourself before you even consider how to divvy up the rest, it's amazing how fast those contributions can add up.

Paying for vacations

Later this summer, I'll be going to Shanghai for a sort of working holiday. I'm looking forward to the trip immensely, both as a chance to recharge my batteries, but also catch a glimpse of the breathtaking economic growth in China first hand.

The reason this is personal-finance related is I have to figure out a way to pay for the damn thing. I'm still technically a contract worker, so I'll be taking unpaid time off to go. That makes it doubly expensive because not only am I losing out on income via lost hours, I'll be dipping into savings to finance the trip. It's one thing to be swimming for yourself. Or even treading water. But it's quite another to be free-diving below the surface (As an aside, this is definitely why my brief periods of unemployment have tended to make the financial problems they create exponentially larger. One of the advantages of having a job is that not only are you earning money, but you're also not hanging around at home, spending cash on food and entertainment to fill the time every day.)

I'm hoping to write a few stories while I'm there just to make it worth my while, but this will no doubt make a dent in my financial plan. My goal for the year is to have a net worth of $40K by Christmas. With my new place and this trip, that seems like a bit of a stretch at this point, but we'll see just how disciplined I can be.

It's time to put my thinking cap on to drum up a little income above and beyond my 9-to-5er.

Under 25? Stop reading this site and go have some fun

"If I promise to stop blindly putting my money into whatever mutual fund my adviser recommends, will you promise me that you'll do something frivolous for yourself this year?" my sister asked me the other night.

She was about to get a substantial raise at work, and asked me to drive with her to a family function so she could pick my brain for financial advice on the way. When I'd finished my tirade about why she owes it to herself to at least read the portfolio updates she's regularly sent, she told me that if I was willing to help her she'd try. The conversation then turned to my own obsession with finding permanent employment in the media, and her making me promise to buy myself something nice or go on a trip every once in a while instead of religiously diverting my paycheque into my ING high-interest savings account.

As much as I'm proud of myself for diligently tracking ny net worth online, contributing to my RRSPs every year, accumulating a more diversified dividend-heavy stock portfolio and ferreting away money for a downpayment on a home in the next few years, I must admit -- even I think I get carried away sometimes. I'm currently saving somewhere in the neighbourhood of about 35% of my monthly income every month.

I'm 26, and that means I'm precisely the audience that Rob Carrick was writing to in his excellent column in Report on Business this morning.

The gist? if you're under 25, it's OK to spend a little cash and enjoy your life while you can. The financial services indsutry will get their claws into you at some point, so there's no point in hurrying the process until you have to.

To me, that's just more of what makes Rob probably the best financial columnist in the country.

To Rob Carrick and my sister, I say: it's a deal. I'm planning a few road-trip vacations in the next little while.

To the personal finance bloggosphere, I say: don't worry -- I'm sure I won't go nuts.

Free money? Good. Unexpected free money? Better

When I set up my automated savings program at ING Direct to automatically deduct a chunk of every paycheque back in September, I liked the idea mainly because it would force me to save. It wasn’t too difficult to get myself to live off of about 3/4 of my usual paycheque. And the balance would be socked away, working for me at a generous 3.5% rate, making my eventual downpayment on a house as big as it could be.

Sure, an added bonus was the possibility that I’d win one of the bank’s quarterly draws for $10,000, but I wasn’t really counting on it.

But when I checked my account today, there was great little bit of news for me:

11-Dec-2006  ASP Setup Bonus - $20

Apparently ING has been good enough to front me an extra $20, just for setting up the automated payment program. Sure it’s only 20 bucks, but it really brought a smile to my face. Especially since I didn’t know that was part of the deal when I set up the process.

What a great bank.

I'm losing my will to save

Yes, yes, I know that saving a little bit every paycheque and putting it aside for a rainy day is one of the best things I can do for myself.

And I also know that buying a house as early as possible and socking money into an RRSP in my 20's will put me in a better financial position that about 99% of my peers.

But dammit -- it's hard. I've been a good little saver this year ($7,000 into my RRSP for the year, and it's increased in value by about 15% already) and my automatic savings program diverts a good chunk of my paycheque into a high-interest savings account before I can even sniff it.

Sure, the ever-so-slowly up-moving squiggly line that represents my net worth does give me a nice little sense of accomplishment -- but my self-satisfied smugness is no match from the joy I'd derive from liquidating my Combine enemies on a brand, spanking new Xbox 360 system. Nor is it any match for, say, tossing back mojitos like Lindsay Lohan at a frat party while lounging around on the beach at one of these places, for example.

In short, I need a bit of a break. Christmas is coming up, and in addition to the myriad gifts I'm planning to give to friends and family, I think some treats for me are in order.

But don't worry, pfblogosphere. I'm sure my little anti-frugality protest will be short lived. Come January, I'll once again be waist-deep in the forests of paper that the financial press annually puts out on where to park those tax-free RRSP dollars. And I don't think the new video game console I've been jonesing for qualifies as a buy-and-hold investment.

If I don't re-discover my saving mojo, I'm sure you people will remind me of it.

I'm just sayin' -- if the diet ain't fun, you're not going to stick with it.