Domain Jumps

Hold onto your hats everyone I'm going to try to jump over to my own host this weekend. As such I'm switching this blog back to it's old blogspot domain this weekend to act as a back up.

So check your bookmarks to determine which one you have.

http://canadian-dream-free-at-45.blogspot.com - This one will be the backup copy by Monday.

http://blog.canadian-dream-free-at-45.com - This will be the new host by Monday.

I'm going to try to import all the previous posts and fix the RSS feed as well by Monday. So check the new host address first on Monday, if there is a new post the transfer went well. If the transfers has issues I can't resolve by Monday I will post an update to the backup blog.

I'm begin the switch first thing on Aug 11, 2007.

How to Kill A Mortgage

Yesterday I had a comment by Telly asking if I intend to be mortgage free by 45 (my retirement date). Yes I do want to have that gone by then. I was actually playing with a few calculators earlier this week so I will outline a few different ideas.

1) Do Nothing

This first plan is the easiest. I don't pay down a extra cent until I turn 45 and then I pay out the remaining balance with some of my retirement savings.

2) Mild Acceleration

My current time line to be mortgage free is 19 years which isn't too far from my plan to retire at 45 (16 years). So another option is to save myself a lot of interest costs and prepay just enough of the mortgage to ensure it is gone by the time I'm 45. I estimate I would need to pay off approximately $9000 in the next two years which is completely doable.

3) Completely flatten the mortgage

Of course this option was a bit fun to figure out. If I put every spare cent I have against the mortgage I can be complete debt free in just over 8 years. Which also has some appeal since then my cost of living drops off the deep end and I could look at doing semi-early retirement perhaps by age 40.

Conclusion:

Right now I'm thinking about doing option 2, since I'm very close to trigging my mortgage equity plan with my bank. So if I drop the mortgage fast and decide I need some money to invest I can pull it out and if I use it to invest in a taxable account we can right off the interest against our taxes (Basically I could do a small version of the Smith maneuver).

I must admit option 3 also has some appeal. Yet for now I think I'll try for option 2 for now. Any one else been in a similar situation, if so what did you do?

The Retirement Experiment

I recently was talking to a couple that are rapidly closing in on their retirement date. They have been planning a bit around their retirement. They got a new place to live, a new car and replaced anything that was getting old to ensure they would have reduced replacement costs in retirement. Now they are completely debt free and are starting up an interesting experiment.

They plan to live on their new lower income for six month prior to their retirement date to adjust themselves to their predicted spending in retirement. They call this their retirement experiment. I rather like the idea myself, so I did a little digging into my own spending.

Currently after tax and deductions we take home around $3700 a month. If I deduct my current mortgage payments (principle and interest) I'm down to about $2600 and then if I drop off my extra retirement savings I'm down to $1900/month. If I convert that to a yearly amount I'm already living off just $22,800 with a small child. So if I can split around $27,000 a year between my wife and me prior to tax in retirement I should end up with a higher standard of living than I have now.

So to all people who say "You can't live off $25,000/year after tax" Your right. I'm living already on less than that right now. So what would your retirement experiment look like?

How Much House is Enough?

Recently I've been reading a few architecture books and interior design books on a quest to answer the question: How much of a house is enough?

After all if you are in a larger house than you need you will have higher mortgage payments, heating bills as well as other utilities. Basically buying the wrong house will potentially cost you $1000's over the years for a few extra rooms you might not even use. Yet for the average person, how do you know what is enough? Here is a few steps to help you determine that.

Step 1 - What do you do?

First off we need to determine what you use your current space for. Do you nap on the weekend on your family room couch? Do you watch two hours of TV every night? Can you remember the last time you ate in your dining room? Write down a list with what you typically do in a week and how much space you need to do it and how long you do it for. This is a necessary step to determine what you actually use your house for rather than what you think you use it for. I've often seen people get a house with a particular room and they think they will use it more. After two months they realize they never needed the room in the first place (the classic example of this is a formal living room which sits unused for 97% of the year).

Step 2 - Purge junk

People often cloud their idea of how much space they need to live with how much storage they need for their junk. The simple solution is get rid of the junk and then you can honestly say weather you need 1200 sq feet of living space or can get by on just 1000 sq feet. A good guideline is if you haven't used the item in question in two years then get rid of it. Or another way of looking at it is everything in your home should fall into two main categories: is it useful or do you find it beautiful? If it doesn't fall into either category then it is usually a good idea to get rid of it.

Step 3 - Change your thinking about rooms

Often a fatal flaw with people and their homes is they think they need a different room for each activity. Most of the time all you need is a different area for each activity. For example, watching TV really doesn't take up much sq feet to do. So why can't you also put in a space a small chair and a lamp for reading and perhaps a corner space for the family computer in the same room as the TV? Basically in this step you take your list from step 1 and review your house in terms of activities and areas. Be honest with yourself here. For example, I don't have a formal dining room. Why? I'm likely only going to use it twice a year and everyone would end up not fitting at the same table anyway. So I save the sq feet and just keep a folding table in the basement which I can fit between my regular eating area and my kitchen when I do need extra seating at a dinner.

Step 4 - Retreating and Gathering

Perhaps one of the most useful concepts I came across in my research for this post was the idea of retreating and gathering. Basically a home to work well needs space for people to be together (gathering - like a seating area or the kitchen table) or be apart (retreating - working on the computer by yourself or reading book in a corner chair). Yet to do this you don't need different rooms. You can create spots in a the same room all you have to do is define the areas a bit. Area rugs and furniture placement work well for this, but just about anything can help define a space (for example, a bookshelf, a lamp and a chair in a corner for reading).

An example of where this is useful for me was realizing I needed a second TV watching spot in my home. My wife and I usually watch completely different TV or movies so after the kid goes to bed it we can retreat to different areas and not want to steal the remote out of the other one's hand. Up until this house that second TV area was always in our bedroom or my study area.

So hopefully this post got you thinking about your space a bit. I obviously can't teach you everything in a few hundred words when it took me a few thousand words to get it myself. So for some additional reading I'll list a few different resources:

Living in Style without Losing your Mind - Marco Pasnella - At a 167 pages with lots of pictures this a short, but highly useful read on interior design is a must read for everyone. The book is funny and answers that eternal question of why does that paint color look so different on my wall than on the paint chip?

The Not So Big House: A Blueprint for the Way we Really Live - Sarah Susanka - At 193 pages this is another great book that is short with lots of pictures. Written from the view of architecture this book provides some basic insight into why those McMansions in the suburbs never feel like home.

Switching High Interest Savings Accounts?

Earlier this summer Royal Bank tried to tempt me over to their new high interest savings account yet at the time their rate was going to be dropping to 3.25% after the introduction period. So I told them no thanks I have a higher rate with my current ING account.

Now it is the opposite. Royal is now at 3.75% while ING is trailing at 3.5% and I recall the last time interest rates when up it took ING a very long time to raise their rate up. Royal also has the advantage of being my primary bank at the moment, so going over to them would be very easy.

Perhaps the only thing I would like to know from anyone with a RBC high interest savings account is how fast do the transfers take place? (I can't find anything on this on their website). Since that is the only thing that vaguely annoys me about ING.

Or perhaps I should look beyond Royal to someone else entirely? I can do the research into other options, I'm just curious for a current customers viewpoint on the service at each place.

Thanks for any feedback you can provide and have a good long weekend (no post on Monday).

Site Redesign Questions

Well after playing with my current blog design for months I'm ready to move along to another design. So this post has two main functions. One to warn you that I'm going to be playing with other templates so at times the blog will look horrible as I work out the bugs. The other function is to let you have your say on what you would like to see or what you currently dislike about the blog.

So if you dislike where the menu or links are let me know. If you like a particular template you have seen elsewhere also let me know. Do you like the three column format or do you prefer a two column format? I'm take suggestions via comments on this post or by email at candian.dream.free.at.45[at]gmail.com. Feel free to be brutally honest about everything as I'm not really attached to much of anything.

Thanks for your help,
CD

The Water War - Part II

A while back now I started working on ideas on how to reduce my water bill. So far the bulk of what I have done was change my habits around water. Yet just last week I changed out my downstairs toilet to a 6L flush model from my old 13L flush model.

I had originally planned to install a dual flush toilet downstairs due to the daycare, yet I changed my mind. Why? The capital costs involved were not really worth it. For example, I bought a 6L flush at Rona for $129 + tax, while a dual flush would have cost $225 + tax. The difference between the lower flush setting on the dual flush is 6 L - 4.1 L = 1.9L for the extra $96. Now given my water consumption charge is $0.88 per 1000L, that would mean I would have to use the lower flush option about 57,400 times before I would break even on the cost. So if I assume a generous 9 flushes a day I would have to use the toilet for about 17 years to break even. So you get the idea. It's not really worth doing unless you are going to live in a house for 20 years or more.

On another front I finally got most of the pieces I need to build my rain barrels. I was a bit stuck on what to use to the overflow system when I watched a rainstorm last month and saw how much water can fall in a short period of time. My downspouts looked like fire hoses. I've settled on using some PVC piping to do the job. So now I just need some time to put it all together and install them.

I'll keep you all posted on the savings on these changes make on my next water bill. Oh, yes, for those who want to know the 6L, white toilet from Rona flushes down everything with no problems in one flush.

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.

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.

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,
CD

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,
CD

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.

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.

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.

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.

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.

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.

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.

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.

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.