Tuesday, July 31, 2007

A Personal Story of the Market Correction

Since I just did my last net worth update at the end of June I'm in a nice spot to have a good look at what the world wide market correction did last week to my holdings. So using my RRSP account as a model I had a value at the end June of $12,800.

The account current market value today is $13,200 with a book value of $13,300. I did recently add some money to this account in the last month. So overall I lost all my yearly profit and $100 of my own money during the correction. So I would estimate I'm down around $500 at the most or 3.8% in this account.

So given all the media coverage of the event and the coverage in various blogs you would think this correction was a bit bigger. Yet this is the reason you diversify your portfolio. So if the markets tank they will be hard pressed to take you portfolio too far down.

Overall my net worth change I would bet would be less than 2%. So next time they tell you the 'sky is falling' do try to keep the long view.

Monday, July 30, 2007

The Dangers of More

It's an interesting ideal in our culture, the constant drive to get more and better. It drives new cell phones, books, cars, clothes, houses and just about every product out there in a constant need to sell people more junk they really don't need.

Just how bad is all this. Well the other day I thinking about what was the last thing I bought. It was a chocolate bar. The strange thing about the purchase was the fact I 'felt' like buying something. Like somehow we can't live without buying something for days on end. This awoke a interesting debate in my head about how much of everything I buy is driven by some marketing rather than an actual need.

So after a few days of observing my own shopping habits I determined I'm not heavily driven by marketing. Actually I fairly good at ignoring it most of the time, yet it still manages to get to me. For example, my last grocery shopping trip we had a coupon that if you spend over $250 you could save $30 off your bill. So like a good consumer we loaded up on stuff we didn't need to get the deal. I have to wonder how much cheaper would my bill had been if I didn't worry about the coupon in the first place?

You see that is the danger of more. You surrender your reason and get things you really don't need and even don't want all that much. You end up wasting money just to get 'the deal' or you get the larger house because you think you need the room. So after an additional $50,000 of mortgage you realize what you need to do if sort through your junk and toss 50% of it and then you could have saved $50,000.

More is dangerous because you often don't see what it is doing to you until after the fact. The SUV looks all shiny and nice until you start paying for the gas bills every week. So next time you go shopping just try and pause for a second and ask, "Why am I buying this? How often will I use it?" If you can't give yourself a good reason to buy it, other than 'It's on sale' then perhaps you should just put it back.

Friday, July 27, 2007

Reader Question #7

Alex from Montreal is in a bit of housing problem and sent me an email on it.

Q: I read one of your blog posts titled "Living in a hot housing market" and it brought up some questions. I'll give you a brief resume first:

I currently own a rental property in Montreal that is definitely in a hot sector. I was lucky to purchase it 2 years ago for under 110k even though it's evaluated at $250k. Add the mortgage cost, condo fees and taxes and it comes up to roughly $800/mo. It is currently being rented
for $1000/mo, which means I actually make profit from this (that's a good thing, right?).

My questions:
- Would it be a *waste* of money to rent an apartment (for myself) at $650/mo?

I ask this because everyone has to live somewhere. I understand that my *real* cost of owning would actually be $450/mo, but doesn't that defeat the purpose of having a rental property in the first place? If i'm renting for $650/mo, then i'm not making any profit, anymore.

I hope that makes sense because the $250k evaluation seems rather interesting.

A: Ah yes that wonderful question of should I cash out in a hot house market. It does get bloody tempting to do it. I should know it's crossed my mind as well recently.

The answer really depends on do you view the condo as an investment or a home. If you think of it as an investment selling it becomes an obvious choice. After all if you sell it at market price of $250,000 less fees (~8%) should easily have $230,000 left over. Assuming you have a 100% mortgage of $110,000, you could clear $230,000-$110,000 = $120,000. If you took that and invested it, you could skim off around 4% a year leaving the capital mostly in tact and you could have an extra $400/month which you could apply against your rent. Leaving you with a $250/month true cost for a place to live. Lets face it you don't get much cheaper than that and it would be providing more income than your condo currently does.

Yet if you view as the condo as a home, you might want to consider hanging onto it. Since you are going to need a place to live somewhere and if you sell and try to move in somewhere else in the same market you new place is likely to be just as overpriced. Leaving you with no real gain by moving. When looking at your primary residence there is a significant advantage of owning your own home in retirement. Any future house value increases become meaningless beyond your property tax bill, unlike renting where it tends to follow the market a bit closer for costs.

In the end it depends on your viewpoint and personal situation. For example, my wife is currently sick of moving, so regardless of my house value, I'm very unlikely to sell it. So that's my ideas on the topic, I wish you the best and let me know what you decide.

Have a good weekend,

Thursday, July 26, 2007

Wander Reading #6

Here we go again a few items on the net I liked in the last while.

First up I've got one from Violent Acres on calculating profitability for a rental property. I liked this one since it shows you should determine your rent first and your minimum profit and then back calculate what you can pay for the property.

Middle Class Millionaire has an interesting post on Bicycle Trusts which I found very useful, but it appears to be US based, so I'm not sure how applicable it is to Canada.

Then over at Get Rich Slowly their were two great posts on living in a small town or smaller city. Very entertaining to see the debates on those.

Last but not least, Growth in Value has a great post on the pitfalls of being a bit knowledgeable on personal finance.

Hope you enjoy reading,

Wednesday, July 25, 2007

Reader's Question #6 - Part II

During last week I started to answer a long reader's question. Here is part II of that question.

Q:My father-in-law wanted to gift each grandchild $25,000 while he was alive. Due to a sudden decline in health he never got around to doing this. We are going to gift the money as per his wishes even though it is not in the Will. Our initial plan was to put it in an Informal Trust with the Financial Planner. Now I want to avoid him and do any future investing ourselves. I am very interested in Index Funds and not confident enough to jump into Exchange Traded Funds yet. But my understanding is that they are not great for taxable investment money because as the Index changes and the Fund is updated, Capital Gains are earned. Given that this money will belong to our children, we don't want it subject to tax in our hands.

In your opinion, how would an investor best take advantage of the Market to set up an investment on behalf of their children(ages six and four years and two months old). RESP's are already in place.

A: Really good question. How do you invest for your children if you already got the RESP in place and got enough in there to max out your Canada Education Savings Grant? An Informal Trust could be a good option yet they do present some issues you need to know about and fully understand (See this page from the Canadian Banker's Association - you will need to scroll down to near the bottom).

An informal trust is set up to provide taxable invests to a child which they will receive control of those assets once they hit the age of majority. To set one up you need three people: one person to donate the money, one to administer the money and the third person is the child which will benefit from the money. The trust income is taxable, but depending on what type will either be taxable in the donor's hand or the child's. Since the child can use the basic personal tax deduction they can typically get the invest income tax free or with low tax. The trick to all of this to ensure the income is coming in the correct form to avoid being taxed in the donor's hands. For example interest and dividend income is taxed in the donor's hands, while reinvested interest and dividend income and capital gains are typically not taxed in the donor's name if the trust is set up properly.

So overall the informal trust is a good format since you don't have any limits on money you can invest and if you keep the income from it low you can avoid tax in the donor's hands. Also the trust can be used for anything, it is not tied to the child's education. Yet there is also bit of downside that after the child is the age of majority you have no legal say on what they spend the trust money on.

As on how to setup the investments within the account I suggest you step back a minute and look a the big picture. You have two accounts for each child. One tax deferred (RESP) and one taxable (Informal Trust). So you want to take advantage of this fact to child's benefit. The best way to do this is make sure all the stable interest portion of the child's money is put in the RESP account to defer tax on that interest and then have all your capital gain and dividend income in your informal trust. Why both the capital gain and dividend income in the trust? They are often hard to separate. If you have one, you typically have the other in a fund. So the risk is the donor may get taxed on some dividend income, yet if you place this in the lowing income spouse's name there shouldn't be too much tax paid overall.

Generally this is complex issue that you will need to seek some professional consul on to ensure you minimize everyone's tax bill. As to the exact blend of investments to use, it is always a bit of challenge picking them out for kids. Since there is typically a shorter time horizon involved (less than 20 years) you want to ensure you stay fairly conservative overall. Index funds can be used, but keep in mind you will also have to be adjusting the balance on the account to become more conservative over time. I'm currently in a Dividend Mutual Fund for my son and we are going to start shifting over part of it to more conservative investments by age 5. At that point 25% of the account will be changed over. After that I'll move an additional 5% a year to more conservative investments, so by the time he turns 18 most of his RESP money will be in low risk investments. In your case you will need to do something similar, but over two different accounts.

I hope all that helps.

Tuesday, July 24, 2007

Finanical Implications of Global Warming

Global Warming is generally agreed by most people to have some serious implications to everyone's lives. Often experts explain things like more severe weather and shifting rainfall patterns (for example see the latest from Environment Canada).

Perhaps this is the wrong approach after all I can't really understand things unless you talk in terms I can relate to. For example, why can't they take the information and hand it off to an economist and have them come up with some changes your personal spending. Now that is something I could relate too.

For example, if we take Environment Canada's rainfall map and do a little creative thinking about Canada's crops you are forced into some interesting conclusions. Like yes likely we will get a longer growing season overall with more rain, but not where we need it most ( the southern prairies). Instead that is going to dry out and we can kiss goodbye some great farm land. Which will force farming towards the north with poorer soil and more natural lakes and rivers which could flood with increased rain. So overall we would lose farmland. That would result in reduced wheat and canola yields which would be further reduced to do severe weather which could destroy crops in various areas. Overall your baking is going to cost more and your cooking oil is likely to cost more. If you add in the severe weather factor then the price is likely to be significantly more unstable as it will be hard to tell if you have a good crop until you can get it off the field and sold before bad weather strikes.

So imagine they did that for not just Canada, but the world? How expensive would your coffee get if growing conditions change in South America? How often would go to your timeshare if the warm island you knew was now a barren desert? Could you afford flood insurance in Canada if it happened more frequently everywhere?

For me that would be useful climate data and likely get a much better response from the general public that just rainfall patterns.

Monday, July 23, 2007

So You Want to Do Your Own Investing?

A comment on my last post got me thinking about how to determine if you can do your own investing. After all if your constantly chasing the latest 'hot' investment or selling off at the slightest dip, you can do a lot of damage to your own money.

So what do you need to do your own investing? Surprisingly not a lot, but it does require some honest self assessment.

Step 1 - Are you an active or passive investor? If you are stock geek and can honest say you will read every little bit information about every company you own (and any company that you are thinking about owning) and also be willing to do additional industry research. Then congratulations you might have the knowledge base to do active trading in individual stocks. Yet you will also need to assess your ability to handle loss and your emotional involvement. So if you can't sleep at night with a 10% loss to a stock you own then you should not be an active investor.

So if you failed the above test you are a passive investor. Don't worry this isn't a bad thing, its just realizing your own limitations and working with them. Your goal in being a passive investor is to use index stocks and ETF's to remove much of the emotional decision from buying a stock. I think every one likes to think they can be an active investor, but the reality is very few people can do it well.

I had a fortunate experience when I was a teenager to do a stock invest project in school where a group of us actually bought a penny stock and watched it come up and then crash down. So I learned the hard way. I'm not an active investor.

Step 2 - Research your strategy. Now investing weather it is active or passive can follow many different paths depending on your risk tolerance and your goals. Now you have to look into your local library's personal finance section and start reading. Your immediate goal is to read at least 10 books before deciding what will work for you (for suggested reading check out the book review posts on this site and other blogs).

Step 3 - Remove emotional issues. Review the strategy to remove as much emotional decision making out of it as possible. After all your number one enemy will be yourself in doing your own investing. That's why I use a series of index funds and balance them once a year. There is no emotion in the decision. I just sell and buy to get myself back to my original investment targets.

Obviously I can't cover everything about doing your own investing in one post, but for most people I think it can be a good thing for one main reason. No one in the world care more about your money than you. At the same time if you know you are emotional and lack the discipline to execute you own investment plan, then you should seriously consider using a advisor. After all those fees might be worth it if it keeps you from losing too much money.

Friday, July 20, 2007

Reader Question #6

I recently go the single longest email question I have ever got from a reader. It's so long in fact I've had to break it off into two parts and do a bit of summary on it.

Colleen a reader from Ontario got a bit of windfall of some money. She ended up investing with Financial Planner in Spring 2006 and is now has a large amount of money in DSC (Deferred Sales Charge) type funds. So if she pulls them out early she gets hit with a large charge to get out of under performing funds. That's the bad news. The good news is she has taken this lesson is learning about investing herself and getting educated. As such she has two questions. Today we will have a look at the following question.

Q: Given recent creation of a Military Reserves Pension Plan, we have the opportunity to buy back all my husband's previous military service. For his twelve years or so of service, the buyback cost is in the ballpark of $70,000. The Financial Planner says to make sure we invest the money in our RRSP's first (through him of course) since we have the room and then transfer it to the military RPP. Reason being, we could take full advantage of deferring tax on that money through an RRSP. Now my understanding is that my own pension contributions through work defer taxes the same way. That is, whether in an RPP or RRSP, the contributions have the same tax advantages.

My concern is that this advisor has some financial incentive for himself in mind.

A: You are correct. When you put money into a pension plan your money has the same treatment as an RRSP for deferring taxes. So I would be questioning any advise this Planner is giving you as he seems to want to line his pocket with your money. If you feel the pension plan can offer a good rate of a return with low fees, then go for it.

Otherwise you might want to stick with a RRSP, but this time invest the money with someone else. You could start with a simple Couch Potatoe type portfolio made up with index funds from you local bank (shop around for who has the lowest fees (MER) on their funds) if you think you will be contributing on a monthly basis.

Either way I would stop giving your planner any more money and then have a hard look at the fee structure for the DSC and decide what would it cost you to get out of these funds sooner than later and take your money elsewhere. Often the emotional pain of living with those DSC funds can be an incentive to take your losses and move on to better things. After all if your funds are not doing well how much more money will you lose hanging onto them waiting for your DSC to drop.

I hope that helps. Any other ideas from other reader's would be welcome. I'll get to Colleen's second question about investing for her kids next week.

Thursday, July 19, 2007

Living Car Free?

The Money Diva recently had a post on how much a car was costing her. It turned out to be a huge $8000 per year.

This got me thinking back to the number of times people have asked me why I don't have a second car. I reply I don't really need one and I'm barely using the first car. You see I get a ride to work most days and those few I don't get a ride I take the bus. Why the bus? Well parking downtown will cost me at least $8/day plus gas and the bus with tickets only $3.40 round trip. Then my wife works at home so she doesn't need the car. Overall I would estimate my car sits in the garage at least 3 days a week without moving. So you see I really don't need a second car.

Yet MD's post got me thinking how much is my car costing me. It was in the beginning a lease vehicle which we bought out. So overall lease payments and buy out cost me about $24,000. If I keep the car for ten years I estimate my average insurance cost will be about $1000/year and we spend about $1400/year on gas. I would then guess around another $200 on oil changes and let's add another $400/year for other maintenance (ie: replacing a windshield, tires, etc).

Overall my operating costs and purchase would average about $5400/year if I keep the car for ten years. Ouch, that is a lot of money. Yet if I got rid of the car I would need to spend money on taxi rides and bus fares and road trips would be a problem to visit some of our family who don't live near anything with bus service. So in the end you could likely save some money, yet what are you losing? I know some people who can easily exist without a car, while others just can't manage it. It depends on where you live and what you use nearby.

Overall I'm going to keep the car, but I do now appreciate what it is costing me to keep the thing. So next time I drive somewhere I'm going to be a bit more grateful I have a car and stop taking it for granted.

Wednesday, July 18, 2007

Saving Money on Cooling

A friend of mine recently told me that they estimated that out of their last power bill half of it was due to using their air conditioner in the summer. He noticed my house was fairly cool, but I didn't have mine on.

I have to confess. I have central air in my house, but I almost never turn it on since I know it is such an energy hog. This summer for example, I don't think I have used it yet. I typically only turn it on with the house temperature gets above 27C (80F) and then I only use it to cool down the house so I can sleep at night.

So how do you live without air conditioning? Fairly easily, but there are a few steps.

Step 1 - Plug leaks - Most people wait until fall to install weather stripping and prevent air leakage in your house. I have never understood that. I did as soon as I move in because it keep the heat in the house during winter and also keeps the cool in during the summer. Plug every little leak you can and watch your power bill drop in the summer.

Step 2 - Overnight Cooling - If you overnight low gets down to under 21C (70F) make sure you open all the windows you can in your house. If you have a basement door open that as well before you go to bed. This will create a natural draft in the house which will dump out the hot air from your top floor and bring up the cool air from your basement. I can typically get my house down to the overnight low if I open up my windows an hour before sunset and close them first thing when I wake up the next morning.

Step 3 - Manage Daytime Heating - Close all your drapes/blinds that get sunlight on them. For example I close off the north side of my house first thing in the morning since that when I get sun there. In the afternoon the south side of the house gets baked so I close those off too. Try to avoid drying laundry, using the oven and stove top to produce extra heat during the daytime. Summer is about BBQ season for a reason, you want to keep the house cool. Also try to use the microwave more if it saves turning on your stove top.

Also if you haven't switched to Compact Florescent Light bulbs I suggest doing it now. As regular bulbs are the worst in hot weather. You pay extra power to run a regular bulb which generates extra heat in your house (since 80% of the energy is converted to heat) and then you pay more money to use your air conditioning to cool off the house to get rid of the extra heat.

Step 4 - Cheap Man's Air - My last trick I use before turning on the air is just a modification of step 2. Except I use it during the day. I open up my basement door and turn on a fan at the base of the basement steps to blow cool air up. Then I go upstairs to the top floor and turn on both bathroom fans to suck out the hottest air in the house. The again creates a draft to cool the house, but this time I'm helping it along with a fan in the basement. The trick here is to avoid opening a window which could move the hotter outside air into your house (since heat tends to move from a hot area to a cool area). Powering fans is MUCH cheaper than running an air conditioner compressor. I recall reading on a website that you can run a ceiling fan for an entire month for about $3 to 5 dollars.

So best of luck to everyone as you keep cool this summer.

Tuesday, July 17, 2007

The CPP/EI Max Out Raise

Recently while looking at my pay stub. I realized I'm closing in on maxing out my Canada Pension Plan (CPP) and Employment Insurance (EI) contributions in the next few months. So the question becomes what I'm going to do with my increased take home pay for the last few months of the year?

I thought about saving it towards my early retirement plan, but instead I think I'm going to bank up the money for something else. I haven't decided what exactly, but it will be something for my family or myself. Perhaps some extra money for a vacation or a renovation to the home.

So why am I planning on spending this little pool of extra cash? Well first off I didn't plan for it anywhere so it is just an unexpected bonus. I was already a good little saver early this summer when I got a small bonus from work and put it directly on my RRSP account. So I think it is time to get some balance and take this little 'raise' and spend it.

After all we can't be good little savers all the time. It drives you a little crazy after a while if all you do is save. So don't ever feel bad about the occasional complete selfish moments in your life. We all have them at some point.

Monday, July 16, 2007

Back to the Grind

So after fourteen days of not working I'm heading back to the grind this morning. I wish I could say that I'm ready to go and looking forward to it, but the truth of the matter was I really liked my time off. I wish I could enter semi retirement right now.

Yet this is not going to happen. This becomes the true problem with early retirement as a goal. I am constantly wanting it even if I know that I will be working for about another sixteen years.

So how do you get over this? There is no recipe or formula that works for everyone. I suggest most people make their lives as happy as possible right now and that takes out some of the sting. Remember money is nice, but try to focus on what really makes you the most happy for the least money. Playing with your kids or sex with your spouse don't cost a cent and can often be better for your health than many other forms of relaxation.

In the end, early retirement should be just the evolution of your life rather than your sole goal of going to work each day. Otherwise you can find your retirement a lonely place with few friends and enjoyments.

Friday, July 13, 2007

Cutting Out Clutter

Like most homes I have far too many things. I have junk and clutter hiding around every closet it seems and it has been getting worse since we last moved to a bigger house almost a year ago. So for the last few days I've been on a war with my house getting rid of clutter.

The reason for this sudden change was I just got sick of all the stuff taking up my time. Then I realized it was costing me to actually keep this junk/clutter. I have to move it, clean around it, worry about it, avoid it and then pay my insurance company money to insure it while I make up my mind. All this time for clutter and junk? What have I been thinking?!?

To start we started with our closet upstairs I purged the excess clothes and then moved onto the bathroom and got rid of all of those small bottle of lotion and shampoo we seem to collect for no reason. Then I hit up my study which I have been avoiding. I finally filed the last six months of phone bills and then my wife got a much needed second file cabinet for all her daycare business files. I'm not done yet, but I already feeling about 300% better going back to work next week with a much cleaner study. I can finally stop feeling guilty every time I sit down in the room about not getting to my 'to file' pile.

So next time you start avoiding some clutter I suggest you don't avoid it and just get it over with. You will feel better and be saving yourself some time down the road and perhaps a bit of money by not having to pay someone else to clean up your junk.

Wednesday, July 11, 2007

Taking a Long Vacation

I'm into my second week of vacation here and I have to say I really am enjoying this second week at home. I'm not relaxing as much as my first week off, but I'm getting a ton of things done around the house and I'm not in a big rush to get in done in two days like a normal weekend.

This will result in me going back to work recharged since I had a week away from everything last week and I also get the benefit of having less to worry about at home since I clear off much of my to do list. Not to mention the house will be cleaned, the fridge will be full and the grass will be cut as I head back to work next week.

Perhaps the only drawback to a vacation at home would be the fact if you don't get away for a while it might not feel like a vacation. The upside of coarse is the home vacation is cheap. In total for two weeks off I will spend $500 on my vacation including gas, shopping and entertainment.

So next time you book time off considering taking a long period off. You might be able to sample the best of both a vacation away and at home.

Monday, July 09, 2007

When Avoiding Risk is Too Much

During my last net worth update you might of noticed I had a fair amount of cash sitting in our ING account. The reason was I was expecting some news which would have let me use that cash in a private investment. Well that information was delayed and then delayed again, so I was talking to my wife about what we should do and she suggested just investing the cash elsewhere. She made one comment that really hit home for me "What's the worst that could happen? You lose some cash, but if you make a good return in the mean time you could off set that. At least it would be making more than the 3.5% in the ING account. " I was so focused on not losing that money I lost track of the bigger picture.

So we moved around $4500 over to her investment account and picked up some more EIT.UN shares last week with a yield of 12.5%. With that current yield being 3.5 times greater than the ING account we really only need about 2 months of distributions to break even as compared to the ING account (after trading fees). After that point, it is all increased yield (also note that about 40% of the distributions will be treated as capital gains when my wife sells the shares which will be taxed less than the interest in the ING account). Also this plan provides a nice investment right now in case the other one falls apart.

I also thought about the fear of lose of capital. If I'm truly that scared of it we can always put a sell order on the shares and get out if the value drops too much. Overall risk can be managed, you just have to know your objectives and what you can tolerate and then plan accordingly. Don't let the fear of lose cause you to make bad decisions like I was doing.

Sunday, July 08, 2007


Ok, I'm not really back. I'm still on vacation, but I'll be putting some posts up this week.

Thanks to Frugal Trader from Million Dollar Journey for looking after my blog while I was gone. It was most appreciated!

I've just finished looking at the comments while I was gone, but if you sent me an email it might take a few days for me to get back to you.

Friday, July 06, 2007

How to Feed a Family on $300/month

On a recent post Jordan Clark asked me how I managed to feed my family of three for about $300/month including our house hold goods like garbage bags and paper towel. I thought this might be an interesting post, so I ran through my last grocery bill to see where that money goes.

First off I should explain the basics of how things work for us. We do one big grocery run at the start of the month and try to keep it around $250. Then with my wife running a daycare we get some leftovers from the business that get passed along into the house. I would estimate that gives us around an extra $50/month in ‘free’ food. Then during the month we get milk, fruit, and a hand full of other items for perhaps $50 total. So in reality we spend about $350/month on food, but I only pay for $300.

Perhaps some of the most important things we do with our food are buy in bulk where ever possible and make as many things as possible from scratch. I bake all my own muffins and cakes. I’m fairly fearless with trying new things in the kitchen and I have found you can substitute or not use many of those exotic ingredients in some recipes. For example, skip the cinder vinegar just use apple juice with a spoonful of white vinegar.

We also tend to eat lots of fresh fruit and veggies and we only buy things when they are reasonably priced (in season). So I tend to freeze some of favorites for use later in the winter (mango, blueberries, raspberries, Saskatoon berries). We also keep a small garden out back and enjoy fresh salads in the summer months and I have fresh herbs growing in the front room.

I’ve also gotten good at finding out who grows what where. For example, my one neighbor is an old lady with a huge apple tree. She can’t possible eat them all so I met her last year when she gave use two bags full of apples. My mother keeps a huge garden at the lake so I go picking there frequently and freeze beans and other veggies when they are at their peak. My sister in law’s grandma has a huge garden as well so I got two bags of berries last year from her. I also learned another friend has a huge apple tree in his yard I will go picking later this year.

I tend to them freeze what we can in our little apartment sized deep freeze and then can some items as well. For example, last year I made a huge batch of apple sauce and canned it. The kid and I ate that off and on until after Christmas.

We are also very good at watching for sales and loading up on items when they are dirt cheap. We also tend to avoid ‘name brand’ and prefab food items as they are often very over priced. We do keep some prefab items in the house, but we use those when we don’t want to cook and save the cost of eating out. For example, we always have a frozen pizza in the freezer for that once in a while feeling of I want a pizza, but don’t want to make the dough for it.

Basically I eat very well, but I just refuse to pay huge amounts of money for it, so we watch what we buy and cook at home.

Wednesday, July 04, 2007

Interveiw with The Money Diva

As bloggers goes the Money Diva has been a refreshing blast onto the Canadian Blog scene. She has a huge net worth, well written posts and a good sense of humor. Overall her blog is a joy to read and I was very grateful she recently took some time to let me interview her.

CD: On a recent visit to your blog I noticed a little redesign on the layout with some obvious sex appeal. So how much fun do you have being one of the few female personal finance bloggers in Canada?

MD: My new site design is meant to be sexy without taking it too seriously. I think that you have to have fun with what you're doing or there's no point. There do seem to be far more men than women in the PF blogosphere, but I rarely write from a specifically "female" perspective. I actually get very few comments that relate to my gender so I'm not sure how much people care.

CD: Good point. I have to admit once in a while I look at your net worth and feel a touch of envy. How did you manage to accumulate such a high net worth at your age?

MD: I got lucky and had good habits. I was able to keep my spending down when my income shot up, and I made a couple of good real estate purchases. I don't think that accumulating net worth is the smooth curve that the books show. Life throws good stuff at you sometimes and if you seize the opportunity then the effect can be significant. And conversely, you have to be able to manage when things don't go as planned.

CD: So are more into the idea of financial independence or early retirement? Why and when do you expect to get there?

MD: I suppose financial independence because I enjoy certain parts of working and I don't think that I want early and permanent retirement, although early mini-retirements are certainly an attractive option. I'd say that by age 45 I should be at a point where working becomes completely optional - you have the right idea there, I'd say!

CD: Thanks, I’m always glad to find people with similar goals. So far your blog has been going well, what's the most important thing you learned so far from blogging?

MD: Blogging has introduced me to a lot of people who have great intelligence and insight! My favorite part of blogging is the community.

CD: So with the community do you find it difficult to balance your business/blog/personal life like some of the other blogger have run into?

MD: Yes, balance is always difficult. Ironically when one part is going poorly another will often go well because I use it as an avoidance technique.

CD: Well that’s interesting. So to finish off what do you think the one thing people really need to do if they want to become better with their own finances?

MD: Spend less than you earn. It all starts from there....

CD: Well folks there’s another PF blogger interview for you. Thanks again MD for your time and best of luck with your blog.

Reader's Story: "What Do You Really Want?"

A while back I had the following comment by Turney left on my post about Living Below Your Means.

(LBYM)What a quaint idea! All kidding aside, my husband and I have done this all our working and non-working lives and we've been able to do all sorts of things most people only dream of. While we fully retired when we were 50, we're now 55 and we've been semi-retired since we were 40. We are very conservative investors but pay minimal tax due to those dividend paying stocks and limited withdrawals from our RRSp's. Consequently our investments are growing not decreasing. It's too bad more investment advisors don't give you the scoop on actual taxes payable with a conservative portfolio. Forget those mutual funds that have high MER's and trade stocks incessantly.

Another key to LBYM is that as Canada is one of the richest countries in the world, we can live very easily with items that have been discarded by people. Second-hand stores are abound with wonderful almost new items. And you are helping the environment. We have a lot to learn from our parents who never threw anything useful out.

It's all about making choices. What do you really want? You can't have it all but you can have many adventures. Last winter, we took a month and travelled by local bus through Mexico at for the cost of one week for two at an expensive resort. What memories!

In response to this I asked Turney to provide some more details about how they semi-retired at 40. She was kind enough to provide a wonderful story that I hope you will enjoy.

First, we paid off the mortgage on our first $28,000 house in 5 years. This was done by living on one income , mine, even though I only worked as a piano teacher at home. My husband was only taking home $150 a week at the time and the mortgage was $250 a month at 13% interest rate. We then saved for our next home for 3 years and bought a nice 2 bedroom bungalow in a small town. My husband could walk to work , so we only needed one small car and I worked at home. No babysitters for our son, either.

After buying the new house, I went to university and got a 4 year degree in 3 years and then my C.A. designation. Commuted with friends and bought very little. However, we always traveled, usually camping. Since our 40's we have taken extensive trips. I worked part time and my husband was now working part time also.

Our hobbies or interests are very inexpensive, hiking, biking and in the winter cross-country skiing.
We now travel in the winter but our 5th wheel is 30 years old and in very good shape. However, we carry kayaks, bicycles and a small motorcycle. We use solar panels so that we don't need to pay exorbitant camping fees. The total cost of a Dodge truck, 5th wheel and all our equipment is under $25,000. and we will probably be able to sell the 5th wheel for what we paid for it when we decide to sell. My husband is very capable of fixing and maintaining what we own, so we have saved a small fortune over the years. I also love cooking, so we eat out very little.

The C.A. designation has enabled me to keep our taxes low and choose the right investments for our situation. Dividend paying stock and capital gains split between us keep our income very low.
We live very well for under $30,000 a year. But don't think we have really sacrificed everything to reach this goal. We had had a lot of fun too even when we were saving.

It really means that you need to keep your expenses as low as possible. Living close to our work really helped us. Having inexpensive hobbies helped us. Travelling on the cheap helped too. Being self-sufficient was a huge help. No debt was a big factor. Waiting and saving for what we wanted was very important too.

Hope I don't sound too preachy. Good luck to you in your endeavour. I'm sure it will work out if this is what you want.


So there you go folks a story of how anyone can really retire early. All it takes is answering one question, As Turney said, “What do you really want?”

Tuesday, July 03, 2007

Interview with JD Roth of Get Rich Slowly

I recently had the chance to interview J.D.Roth of the incredibly popular personal finance blog, Get Rich Slowly.

CD: Get Rich Slowly is considered one the most successful personal finance blogs out there with a staggering 24,000+ subscribers and 8000+ visitors daily. What do you think makes your blog so popular?

JD: I don't know. I've wondered this myself. I suspect that it's because I mix things up. I post some moderately technical things ("how to open an IRA"), but I also post anecdotes from my daily life. I post about bank interest rates, but I also post tips for hosting a garage sale. It also helps that I post frequently, and that I write well.

Another aspect that probably helps is that I'm willing to engage my readers: I post questions from them, I reply via e-mail, etc. I really do try to make Get Rich Slowly a site that can deal with readers' personal finance issues.

CD: Your blog often includes personal references to your own life and your own struggle with debt. Do you ever have the problem of keeping your personal life separate from your blog because of this?

JD: Interesting question. I'm not a private person. I've always been open and public. Obviously there are certain things that I'm not going to share with anything but my wife, but my personality is such that I don't mind sharing what happens in my life, even when these things are bad. I'm not going to publish my social security number are publicize my bank accounts, but I'm perfectly willing to talk about the sorts of financial choices I make.

CD: You post with an almost inhuman output (for example 10 posts in the last 5 days). Do you find that pace exhausting at times, if so how do you deal with feelings of burnout?

JD: ABSOLUTELY! It is very exhausting. This is probably the top issue I've wrestled with over the past few months. My wife and many other people I respect have suggested I cut my posting rate in half, yet my gut tells me to continue at the present pace. But continuing at the present pace is causing some degree of burnout.

When I experience fatigue, I've found it's best to just get up and do something else for a day or two, something completely unrelated to money or to personal finance. For example, one night when I was feeling burned out, I went roller-skating. It was a cathartic experience. For hours I didn't think of my writing, and when I came back the next day, I was more productive than ever.

CD: On top of the excellent blog you have also started a forum for your readers recently. Why did you start the forum and are you happy with the results so far?

JD: I started the forum for several reasons. First of all, I was sinking beneath a mass of e-mail. As you can tell from how long it took me to reply to this message, I'm buried in the stuff. I'm beginning to dig my way out, and the forum is largely responsible. When people write with questions, I can now shunt them to the forum. It's great.

Second, some of my readers were asking for more information. They wanted to talk about personal finance even more. A forum seemed like an ideal place to do this. Finally, I was hoping that the forum might generate some good story idea. So far it's worked like a charm!

CD:Your posts are always so well written and edited that I have to ask if you are considering writing a Get Rich Slowly book? If so, when would you like to have it out?

JD: Yes, I've considered a Get Rich Slowly book. I don't have any timeline for it. The real problem is deciding what to write about. There are so many personal finance how-to guides that it's difficult to separate oneself from the pack. I do actually have a couple of unique angles in mind, and I'd like to pursue them. Maybe when I cut back to part time at my day job I can begin to focus an hour a day on the book.

CD:What are you long term finance goals? If they include retirement, when do you want to retire?

JD: My single long-term financial goal is to generate enough semi-passive income that I can semi-retire. I know that's vague. What I mean is that I want to be generating enough income outside a traditional job so that I don't have to hold one down. This basically means developing my writing to a point that I'm able to live off the income it generates. When I reach that point, I can quit and stay home to write all day. This isn't the same as retirement, but it's close enough for me -- it's doing something that I love every day.

CD: Personal finance as a topic tends to have an almost unlimited amount of ways to present the same core information. Do you find it difficult to come up with new ways to examine those core principles such as living below your means and index investing?

JD: Excellent question. Yes, some days I find it difficult to find new information to present, or difficult to present the old information in a new way. On other days, though, I think that I'll never run out of things to write about.

CD: Do you have any goals for the Get Rich Slowly blog?

JD: I do. My aim is to have 100,000 subscribers and 1,000,000 monthly visitors by the end of 2009. Those are lofty goals, I know. But they're also really ancillary to my primary aim. Mostly I just want to write about money in a way that helps others. I had a hell of a time with my finances over the past decade, and if there's anything I can do to help others avoid the same sorts of trauma, that pleases me. My real goal is to be of service to others.

Oh yeah -- as I mentioned, I would love to be able to make my living from my blogs, whether just GRS or all of them combined. I'm on my way there, but still have a ways to go.

CD: Well thanks for your time JD. It’s been a pleasure chatting with you.