I started this blog over a year ago to help get our personal finances in order and prepare for our wedding and eventually starting a family. Well as these things tend to go, life got busy, the wedding came and went, now here I am in the delivery room with a lot of the same financial questions.

Babies have a way of changing perspective especially on the day of their arrival. With this new perspective I need to get the following done in the next 2 weeks:

1. Confirm My Beneficiaries: Technically this should of been done when I got married but this has now become a even higher priority item. I need to make sure that my wife is in a position to receive the money from all of my accounts to support our child.
2. Get Life Insurance: I’ve slowly been working towards this by losing weight to get a better premium but I still haven’t made up my mind on whether I want term or life and exactly how much insurance. I need to calculate all of our future expenses and determine the amount we’ll need.
3. Set Up An Education Fund: As soon as the baby is born I’m off to the bank to setup an resp. Luckily I have a fairly good idea what I want to do. However I haven’t given in the analysis that I would like to make sure I’ve done my due diligence.

The future seems so exciting now that my baby is due to arrive in about 3 hours, hopefully. My list of things to-do reflects my thought to the future and the care of my wife and baby.

--mfd-

P.S. If you’re wondering how I found the time to write this during labor all I can say is this “Bless the miracle of the epidural and the support of a doula”.

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Whenever you go to a store or a dealership the salespeople focus in. They have their defined list of tactics to get the sale. Don’t be fooled by their tricks and be cautious about who you trust with your money:

1. Calls you by your first name often – By using your first name they are trying to establish some trust with you so it can be exploited.
2. Mentions their family - Joe the sales guy is out to get you but not Joe the family man. He’s a regular guy just like you and will give you the best deal. Not!
3. Last one in stock – Its a pressure tactic to get you to commit to a sale. If at any point you feel pressured you should leave even if it is the last one in stock.
4. Have another offer – Another common pressure tactic. If there is another offer then congratulate that person and move on.
5. Special promotion today only – This is the third pressure tactic. Once again just walk away if you are feeling the pressure. There will be other promotions and you will get your item at the price you want.
6. Tells you what you need – This applies to both good and bad salesmen. With a good salesman you go in for a minivan and walk out with a minivan with all of the features you need. With a bad salesmen you go in for a minivan and leave with a Porsche.
7. Talks himself up – A salesmen will try to talk about how great of a sales person they are and the kind of figures they put up. They are trying to draw you into a false sense of security. Because he puts up great numbers doesn’t mean he is giving you the best price.
8. Spin the financing – They quote the financing price using longer periods or weekly payments to make it sound cheaper then it is

Talk Back:
Are there any other sales tactics that you’ve experienced ?

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It’s quite common in the personal finance community to be “hating” on the extended warranties. Some of the main points people make about warranties are the “warranty costs more then the item” and “if it breaks it will do it within the first 6 months and will be covered under standard warranty”. Now I don’t necessarily disagree with these statements however they always seem to look at warranties from a negative perspective.  Warranties are just another form of insurance and when properly accessed are a great way to protect yourself.

Things to consider

• Cost of the item – Generally speaking the original cost shouldn’t have that much of an impact on your decision to buy an extended warranty but I decided to list it first because it is important emotionally. If you’ve gone out of the way and purchased a high end item the last thing you want is it breaking right after the standard warranty runs out. This can definitely be a stressful and frustrating experience that seems to increase as your original purchase price increases.
• Servicing Your Needs – When you made the decision to purchase this item one of the things you should have done was decide what your needs where and how this item will meet those needs. Well in order to get an extended warranty you should understand how this item will continue to meet those needs and for how long. This may require a deeper look at the industry and determining what major technology shifts are on the horizon. This will help you decide how long you’ll be satisfied with the item and therefore the length of warranty required.
• Repairability – This is a real “black box” for people. Before making any purchase you should always do research at what it costs to repair an item. You will need to know cost of the components, cost of the labor and difficulty of repairing items. An example that I use all the time is PC vs Laptop. PC’s easily come apart and components are relatively cheap. Laptops on the other hand are small, difficult to take apart and the components can get expensive.
• Cost To Replace – If the item retains its value then your the necessity for a warranty becomes greater.  Or if you purchased a higher end item then it stands to reason that you will probably replace it with an item of equal cost. In eihter case it will cost you a pretty penny to get a brand new one so a warranty is a good mechanism to protect yourself from an unplanned purchase.
• Cost Of The Warranty – There is no single answer for this. This value will change based on the various criteria outline above. Obviously the cheaper the better.

An example

I recently went through this process and decided to purchase the extended 3 year warranty on my 42″ Sony XBR 5 TV. Here’s I how I came to the decision:

• Cost of the item: The TV cost us $2600, which is no small amount especially since you could get a similar sized LCD at the time for $900.  I have a hard time dealing with a product that turns out to be a lemon and get easily frustrated when it happens. I needed peace of mind with such an expensive purchase.
• Servicing Your Needs – This TV has all the bells and whistles at the time of purchase. It had the latest refresh rate and a one of the best contrast ratios. Now there are TVs with better options but what I have right now is good enough. I’m not enough of a videophile that I’ll notice minor technology advancements. Not to mention when the warranty runs out in 3 years we will most likely be moving out of our condo and into a home. When that happens we’ll probably be purchasing a second TV with the latest upgrades so I need the current TV to last until then.
• Repairabilty – LCDs are very compact in the back and are difficult to repair. Usually even if something small breaks it will require the replacement of a much larger component to fix it. My father in-law has exactly the same TV and had to get it repaired. If he didn’t have the warranty it would have cost him $1800 which is a staggering amount when you take into consideration the cost of a new TV.
• Cost to Replace – If this TV broke to the point where it wasn’t worth it to repair then I would probably go out and spend another $2600 on a similar caliber TV. I’ve had crappy TVs in the past where the different shades of black all look the same and you can’t make out anything in a dark scene. I’ve been there and done that so I’d definitely spend the money on a good TV.
• Cost Of The Warranty – The extended warranty cost $350 for 3 years. That is a mere 14% of the total cost of the TV. Considering everything above I felt this was a worth while premium to pay for the piece of mind.  Had the warranty cost more then that I probably wouldn’t have gotten it but I felt the price was reasonable.

Conclusion

There are a lot of warranties out there that are big rip offs and aren’t worth a second thought.  However just blindly turning them down is careless as well. Hear out what the warranty covers and what it costs. Consider the criteria above and you may find its worth the extra bit of cash to protect investment.

Have you ever bought an extended warranty  and why?  Do you blindly turn down the extended warranty options ?

-mfd-

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Another increase in August which is good. It seems we are still trying to get our footing back on some solid ground after the wedding. We manage to put some cash into savings. At first glance it may look like we took a big hit in savings but that’s because we put a large lump sum payment into the mortgage. We still manage to save about $1000 this month but the biggest gains came from our investments.  Its going to hurt next month when the market does its seasonal correction.

In addition we were looking into buying out our lease at the end of the term in 6 months. However as in all things in life it quite isn’t going to work out that way and we are now looking to purchase a new vehicle. This means a big down payment and several years of financing. A car is an albatross especially when you are leasing.  September is definitely going to be a bad month for our net worth.

Savings: We currently maintain $4500 in our personal checking accounts so we don’t have to pay any banking fees. The rest in our accounts is being set aside for an emergency fund which we hope will reach $30k.

Mortgage: There is debate on how one should include their home in their net worth. Some people try and track the present value of their mortgage and others prefer to use their purchase price and leave it at that. I’m in the latter camp. I feel tracking the value of your home on a month to month basis isn’t worth while. We have no intention of selling since we need a place to live and it takes away from true net worth growth of saving and investing properly.

Line of Credit: This is a line of credit that I took out to invest in the market. This will remain the same as I will continue to only pay the interest since I’m claiming it on my taxes. I will eventually pay down the loan I just haven’t decided on when.

Vehicle: We are currently leasing our vehicle. This is preexisting to my fiance and I meeting. Our intention is to ultimately purchase the car once the lease expires. Unfortunately it looks like when all the added items tallied up the final price came out to a lot more then what we are willing to pay. We are looking to purchase a new vehicle now. We won’t be tracking its value as it is a depreciating asset and serves no purpose in helping us achieve our goals. It’s benefit comes in the way of us running this car for as long as possible allowing us to save and invest more.

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Kids are almost back to school and some may already be back and parents are looking to save some money . I’ve enlisted the help of a teacher (my wife) to get the inside scoop on how parents can save. Here’s what she came up with:

1. Say no to binders:  Don’t get your child those big binders since duotangs are often provided. As well teachers prefer to keep the subjects separate rather then have everything in one.
2. Label clothes: Label your child’s shoes, hats, mits, and jackets as they tend to get mixed up and lost. They’ll eventually end up in a lost and found bin and it will make it much easier for you to identify the items.
3. Seasonal discount clothing: Buy their new back to school clothing at the end of September.The weather will be warm enough for them to use their summer clothes while you wait for the fall/winter clothing to go on sale.
4. Meal programs: Look into utilizing school breakfast and lunch programs as they can provide healthy meals in a cost effective manner.
5. After school sports: Speak to teachers and administrators about what athletic activities are being offered or what you would like your children to take part in. You can get the school to start up activities if there is enough interest.
6. Reusable water bottles:  Purchase a reusable water bottle instead of a disposable ones as the disposable ones tend to sit there all day and get thrown out at the end of the day by the teacher.
7. Homework clubs: Look into after school home work clubs to help avoid expensive tutoring costs.
8. Fund Raisers: Keep an eye on school fund raisers as you can purchase items and even Christmas gifts while supporting your child’s school. A prime example are magazine subscriptions offered by QSP which has something for everyone. P.S. if your child’s school doesn’t have a fundraiser then look into starting one!
9. The school library: Rather then purchasing books have your child look at the school library. If they don’t have a novel that your child is interested then discuss it with the librarian as they are responsible with keeping the library stocked with the latest age appropriate books.

What school saving tips do you have? Any teachers out there have some money saving tips for parents ?

-mfd-

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Due to my little break its been a while since I’ve posted a net worth update. I hadn’t posted an update for June or July so both will be included in this single update. As well I feel its necessary to do a midyear review to get some insight into my progress thus far.

It’s also fitting that I do this review now because we are done with the wedding. One of the biggest hindrances for us this past year has been our ability to save and grow our net worth organically. Rather then moving money over to our savings account we were keeping the money in our chequing which isn’t being tracked as part of our net worth. Now that everything is over with I hope to see our savings increase as well since the wedding has been nearly completely paid for. The only outstanding item is the final payment for the photographer which will be settled once we receive the photos.

June

In June we manage to squeeze out an increase of 1.78%. Unfortunately we had very little money go towards savings. The wedding was creeping up and money was flowing out. The only saving grace was the increase in our investment accounts. The markets continue to go up and so do the value of our investments accounts.

July

July turned out to be a better month with an increase of nearly 6%. Cash continued to flow out but we ended up on top due to the generous wedding gifts from family and friends. I wish we could continue to see savings increase in this fashion but that will most likely have to wait until after August. Like I said earlier, we have just a few more things to pay for from the wedding and the honeymoon and then we are done. July was another great month on the markets and it helps make up for all of those lows earlier in the year. I know this can’t last forever but I’ll be smart about it and enjoy these market increases while I can. July also turned out to be a 3 payment month on our mortgage. This allowed use to pay more of our principal than normal. Yah to that!

Midyear Review

Ah yes the midyear review. I’ve seen a lot of ups and downs the last 7 months and this review will help provide a clearer picture of whats happened thus far. Overall things have been good up to this point with an increase of nearly 30%. I’m happy to say that most of that was not from the amazing upswing in the market even though I had an increase of almost 55%. At first glance it may appear that we haven’t done so well on savings with only a $3800 increase. However at the beginning of the year I was hording my RRSP contributions in a savings account which was then moved over to my RRSP account in February. This pretty much means there was a big drop in savings from the beginning of the year which we had to replenish. Overall I’m happy with our progress this year but I also realize its unsustainable. All we can do is work hard and let the coins drop where they may.

Savings: We currently maintain $4500 in our personal checking accounts so we don’t have to pay any banking fees. The rest in our accounts is being set aside for an emergency fund which we hope will reach $30k.

Mortgage: There is debate on how one should include their home in their net worth. Some people try and track the present value of their mortgage and others prefer to use their purchase price and leave it at that. I’m in the latter camp. I feel tracking the value of your home on a month to month basis isn’t worth while. We have no intention of selling since we need a place to live and it takes away from true net worth growth of saving and investing properly.

Line of Credit: This is a line of credit that I took out to invest in the market. This will remain the same as I will continue to only pay the interest since I’m claiming it on my taxes. I will eventually pay down the loan I just haven’t decided on when.

Vehicle: We are currently leasing our vehicle. This is preexisting to my fiance and I meeting. Our intention is to ultimately purchase the car once the lease expires. We won’t be tracking its value as it is a depreciating asset and serves no purpose in helping us achieve our goals. It’s benefit comes in the way of us running this car for as long as possible allowing us to save and invest more.

-mfd-

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Well May has been another good month with an increase of 5%. The investments are doing well and we finally stopped hording so much cash and moved some into savings.  I continue to save my RRSP money in a savings account and hope to make a contribution in the next few months.  All in all everything continues to look good. We really want to get the wedding over with so our savings routine can have some normality again.

Savings: We currently maintain $4500 in our personal checking accounts so we don’t have to pay any banking fees. The rest in our accounts is being set aside for an emergency fund which we hope will reach $30k.

Mortgage: There is debate on how one should include their home in their net worth. Some people try and track the present value of their mortgage and others prefer to use their purchase price and leave it at that. I’m in the latter camp. I feel tracking the value of your home on a month to month basis isn’t worth while. We have no intention of selling since we need a place to live and it takes away from true net worth growth of saving and investing properly.

Line of Credit: This is a line of credit that I took out to invest in the market. This will remain the same as I will continue to only pay the interest since I’m claiming it on my taxes. I will eventually pay down the loan I just haven’t decided on when.

Vehicle: We are currently leasing our vehicle. This is preexisting to my fiance and I meeting. Our intention is to ultimately purchase the car once the lease expires. We won’t be tracking its value as it is a depreciating asset and serves no purpose in helping us achieve our goals. It’s benefit comes in the way of us running this car for as long as possible allowing us to save and invest morre.

-mfd-

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Monday night was the beginning of a 20 hour shift for me. I started at 10PM Monday and finished at 6PM Tuesday.  This isn’t the first time I’ve worked these sort of hours  and probably won’t be the last. The hours are somewhat excessive so I’m never surprised when I get asked “Why do you do it?”.

Why I do it..

I do it because I am capable and while I am capable I will work as hard as I can to meet my goals. It’s really that simple. From my perspective I have very little holding me back. There are people who travel the world because they don’t have responsibilities preventing them from doing so. This sort of logic applies to working as well. By working and earning as much as you can before things like marriage and more specifically kids come into the picture you can establish yourself on sturdier financial footing. Going forward in life I will be comfortable knowing the following:

• That I have a fully funded emergency fund
• That I have a substantial RRSP which will have 25 years to compound annually
• That I have a healthy investment portfolio that can grow for 25 years
• That I will have plenty of equity built up in our home by pre-paying our mortgage and lowering the length of the mortgage

These are the reasons I do this. For me it is worth the short term strain for the long term peace of mind.

A little parable

Going along these same lines I want to tell you about someone I use to work with. This person had an uncle who owned 2 hotels. He also mentioned that his uncle was just at the beginning of a 6 month vacation around the world. Upon hearing this I made a comment about how his uncle was living the dream. He decided to fill me in on his uncle’s secret to success. It came down to choice. At a point in his life he had to decide “Do I want to work 80 hours a week for 10 years or do I want to work 20 hours a week for 40 years”. With life you get out what you put in. In this case he sacrificed for the short term to live well in the long term. This was his decision and it may not be the same for everyone. I’d like to pose the question to you:

Would you work 80 hrs/week for 10 years or 20 hrs/week for 40 years? In either case you end with enough money to retire comfortably be financially independent for the rest of your life.

-mfd-

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This month was another big month where we saw our net worth increase by nearly 10%. Not only did the market trend further upwards but the banks soared even further causing my investment portfolio to increase by 24%. Savings had an increase of 76% mostly from my tax return. I had a return of $8k and it will only sit in the savings account until after the wedding where it will be applied against our mortgage. Aside from that we continue to horde cash in our savings accounts that aren’t tracked in our net worth.   We are using this money as a buffer for any wedding expenses that come up. On top of that we have already spent around $5k on the honeymoon which I can’t wait to go on. Come August we’ll see a big leap in our net worth once we can finally put those cash reserves into our savings.

Savings: We currently maintain $4500 in our personal checking accounts so we don’t have to pay any banking fees. The rest in our accounts is being set aside for an emergency fund which we hope will reach $30k.

Mortgage: There is debate on how one should include their home in their net worth. Some people try and track the present value of their mortgage and others prefer to use their purchase price and leave it at that. I’m in the latter camp. I feel tracking the value of your home on a month to month basis isn’t worth while. We have no intention of selling since we need a place to live and it takes away from true net worth growth of saving and investing properly.

Line of Credit: This is a line of credit that I took out to invest in the market. This will remain the same as I will continue to only pay the interest since I’m claiming it on my taxes. I will eventually pay down the loan I just haven’t decided on when.

Vehicle: We are currently leasing our vehicle. This is preexisting to my fiance and I meeting. Our intention is to ultimately purchase the car once the lease expires. We won’t be tracking its value as it is a depreciating asset and serves no purpose in helping us achieve our goals. It’s benefit comes in the way of us running this car for as long as possible allowing us to save and invest more.

How is your net worth doing after the upswing in the market in march ?

-mfd-

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Yesterday I got home and checked the mail. One of the bills was a  credit card bill. I open it up just to review it and I found something oddly strange about the statement, it appears that my credit limit had been decreased to $5000 from $7500. The most interesting part was the reason included in the statement:

NOTE: Due to your recent credit history your credit limit has been lowered to $5000

WHAT THE ….

Calling The Credit Card

I call up the credit card company to try and sorted it out since everything appeared in order on my recent credit score review.  I got a very nice gentlemen on the phone:

Credit card Guy “It looks like we reviewed your credit score and what you have with other lenders and it was decided to lower your credit limit”

I rebut with  “I have never been late on ANY bills and have always paid off this credit card in full without ever carrying over a balance”

Credit card guy follows up with “Well they may have also decided that you don’t normally use that much credit so there is no reason to have that much credit”.

I decided to end the conversation with the following “Well I don’t really understand. My credit score was lower when you gave me this limit. My score as gone up since then and now you want to lower my limit. I would like you to note that I’m dissatisfied with this and in future reviews if you decided to raise my limit, don’t”.

What’s The Problem

The interesting part is I never really wanted that much credit when I first applied for the card. I was only going to keep it at $7500 while we did our renovations which were completed 8 months ago. I think I’m annoyed and a little worried that my credit is being called into question. I’ve never ever had problems getting credit or being refused credit. I see this has a sign that things might be getting tougher for me in the future. If lenders begin tightening up on their lending practices I might not have access to funds when I need them or at the very least won’t be getting the best interest rate. Its apparent that repairing my credit score should be higher on my list of priorities.

Have you recently had your credit cut?

-mfd-

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