Just Bought a Car

We decided a while ago that we needed a new car. Or rather, I decided that I wanted one, because my wife needs the car all the time for work and although I bike to work sometimes, I definitely won’t be biking all winter long (yes I know, Vancouver isn’t THAT cold) and I’d like to be able to go get groceries or drive to visit my parents or do any variety of things even if my wife is out using her car. I’ve been taking the bus for about 4 years now and although I enjoy it because of the amount of reading it allows me to do, I want to get home a bit quicker sometimes without cutting into my work day.

For the past few weeks we have been looking at the 2009 Matrix as well as a few similar cars such as the 2008 Yaris Hatchback and Mazda 3. All of these cost around $20,000 including everything. It was such a big purchase that we couldn’t decide on what to get but I think we were leaning towards the Matrix. I decided to check out the Buy & Sell one day and I scanned for old Tercels, Echos, and Corollas. I eventually found a 1997 Tercel Sedan for $2700. It’s better on gas than my wife’s little car from 1997 and also better than the 2009 Matrix. I checked it out after a test drive I gave the guy $100 as a deposit and shook on it. The only downside is that it has 230,000 km on it but I really don’t see that as a problem. It has had a single owner, no accidents, and he has maintained it well. This car will last at least another 10 years. I’ve never bought a new car before (my previous vehicle’s were at 1985 Tercel and a 1986 Tercel) but I really wanted to this time. I’m so glad we didn’t $20,000 on a new car when there are so many perfectly good old cars out there.

Air Miles Blows

I have blogged about Air Miles a few times. I am seriously thinking about getting rid of Air Miles once we use up our remaining miles. We tried to use up half of them for some upcoming flights but once again, they did not have flights that worked for our schedule. We even called over 3 months ahead of time. This is the third or fourth time this has happened. This just makes me detest “Rewards Programs” even more. Some of the other tricks they do include making the flights worth more per mile than the non-travel items (such as gift cards and other merchandise). This makes it psychologically difficult to go after the non-travel items since they are valued at half the cost per mile compared to flights (sometimes worse). Seriously, on my last statement from Air Miles I got like 100 miles. Their statements are sent quarterly and 100 miles is worth like $10-20 depending on what valuation you use. So that’s like less than $10 a month. Are you f$cking kidding me? The only way to get serious miles is to rack up seriously huge credit card statements or shop like crazy at Air Miles retailers, which we are never going to do. So they pay me less than $10 a month so I can go through this hassle of calling Air Miles every time I want to fly to see if they have any flights I want (which they never do), carry an extra card in my wallet, receive an extra statement, and waste my time writing a blog article about it. No thanks.

My Investment Advice for Young Adults

Rather than just bash Rob Carrick’s advice for young people, I’ll offer up my own advice:

  • Start investing as early as you can. The earlier the better.
  • As soon as you have some money, invest some of it. If you have a paper-route or a part-time job, invest 10-20% of it for the long term. Get in the habit. Invest monthly. You won’t miss that money.
  • If you are babysitting for cash, tutoring for cash, earning tips, basically if you earning ANY employment income, file a tax return and declare all your income to build up RRSP contribution room.
  • If you have RRSP contribution room, start an RRSP and contribute to it. Find a company that will not charge you any annual RRSP fee. I recommend something like TD’s Mutual Fund Account. Set up an automatic monthly contribution if you have steady income. Max out your available contribution room every year.
  • Set up one or more ING Direct Savings accounts or one ore more savings accounts at your bank. If there is anything big that you want to save up for, use that to save up for it.
  • Don’t get a credit card unless you have to. Keep your credit card limit low. Pay off your balance every month. Don’t be dazzled by rewards plans.
  • When you get a large chunk of money from a birthday, a scholarship/bursary, a tax refund, don’t put it in your chequing account or convert it to cash. Deposit it into a savings account. Sit on it for a bit. Don’t make an impulsive purchase.

Think any of my advice is bad? Think I am missing something? Let me know.

Resist the New TV Cravings

Earlier this year we almost spent over $1000 on a new TV. I am so glad that we resisted, as 2 weeks ago, we stopped watching so much TV. We started setting a limit of 1 hour at most per day combined for the two of us because we noticed we were watching way too much TV and not getting enough other things done each day. Now we barely watch TV at all, and don’t always use up the 1 hour per day allotment. The pressure to buy a big TV is huge. It seems that so many people are buying bigger and bigger TVs these days (size apparently does matter). One of the reasons that we had the temptation to buy it was because we had bunch of money sitting in an ING account. We have since starting paying down the principal of our student loans, instead of just the interest so we no longer have gobs of cash sitting in our ING accounts. We could not afford to pay down the principal of the loan before, but after a couple raises some adjustments to our monthly cash flow, we are able to pay even on the principal that we owe in interest. This is helping to keep our cravings for new expensive things at bay, and helping us slowly reduce the amount of interested owed monthly.

Regrets of the Retired: Didn’t Save Enough!

According to a survey done last year, “98% of retirees surveyed by Oppenheimer regret how they spent their money before retiring” according to this article, “Regrets of the retired — didn’t save enough!’.”

Of course, Oppenheimer is using these numbers to boost their own business (they are another company with baby boomers on the brain), but I think think the first statistic about regretful retirees it is something that everyone should consider, regardless of your current income. The lifestyle you enjoy when you are in your 50s and still working may take a drastic turn in your 60s when you decide to retire and have only your retirement savings, existing non-retirement assets, and social security to depend on.

In order to ensure that I do not have the same regrets when I retire, I have made retirement our #1 savings goal. Eventually we may get to the point where we have enough saved up such that we will have more than enough money at 65 without making any more contributions (and assuming a conservative return on investment). Until that day arrives though, saving for retirement is our #1 savings goal. My wife is not that happy about it. We could have more cash to spend on our “wants” every month if we contributed less towards retirement, but ever since I saw those typical examples of compound interest (and learned the compound interest formula in school) I have been hell-bent on the belief that people should start saving up for retirement as early as possible. This maximizes the compounding effect and takes cash out of your hands so you will not waste it. One of the comments on the blog post above had something to this effect:

I suspect that these retirees regretted spending money on things they didn’t need. At work I constantly hear my colleagues breathlessly talking about the flat screen TVs they have, plasma vs. LCD, etc. The big ones cost thousands, and even smaller models can cost between $600 and $900. I am pretty happy with the 25″ tube-based TV I bought last year — it cost $190 and does the job just fine!

We also have a 29″ tube-based (CRT) TV. We actually got it free as a hand-me-down. With so many people upgrading to the latest technology these are easy to find! I am no longer concerned about keeping up with the Joneses. An investment in retirement savings will grow. And investment in a new TV will depreciate. Either you invest a little bit in your retirement now (and let it grow) or invest a lot in your retirement later. I am pretty confident that by choosing retirement over TVs now means that others will be trying to keep up with US later.

Spending Less Money on Food

Spending less money on food is something I probably should have listed as one of my 2006 goals. I don’t even need to look at my Gnucash (accounting software) reports to know that I spend too much on food.

The first problem is that I eat out for lunch every day at work. Being able to eat out for lunch is sometimes important as it gives me an opportunity to talk to work colleagues about work-related or non-work-related things and gives us a chance to socialize. Sometimes it is necessary (for business meetings with external people, for example). But it is never necessary to eat out for lunch every day of the week. Recently (in November 2005) I started limiting the amount of money available in our chequing account every week (one of my goals for 2006). This has forced me to eat out less often. I started out slowly, and now I bring my lunch to work at least 3 times per week.

The second problem is that we spend too much on groceries. The nearby Safeway has just about everything you would need but the prices are really expensive, especially for produce, something which I didn’t until recently. A few months ago, I discovered the Dan-D Market, also nearby. I began going there for a few unique international products (rice noodles, pot stickers, pad thai ingredients, oriental sauces, etc…) which are either absent from Safeway or just too expensive. Then I started going there to buy produce which I realized was always at least 2-3 times cheaper than Safeway! I then discovered they have lots of canned foods are great prices, an excellent bulk section with every kind of grain you can imagine, and great breads (from a local bakery) as well. They also have a small deli where I have bought cheese and cold cuts on occasion, but I had never actually compared the prices between Dan-D and Safeway until yesterday when I did a comparison. The peppered salami was $1.49/100g at Dan-D and $2.49/100g at Safeway (on sale for $2.29/100g). A block of Parmesan cheese at Dan-D was $16/kg, vs. $30-$40/kg at Safeway (for grated and block). It’s amazing how much I save at Dan-D. I now do my shopping there exclusively and only go to Safeway for things that Dan-D doesn’t have (which is rare).

Another small problem is that we tend to go out for dinner a bit too frequently. But again, the fact that we have limited the amount of available cash in our chequing account every week and stopped using our credit cards has helped in this area as well.

I recently found some other suggestions for spending less on groceries:

Financial Service Charges Calculator

I just found this, Financial Service Charges Calculator, provided by the Government of Canada! It’s provided by the Office of Consumer Affairs. It looks like PC Financial is the cheapest by far for my needs. Using a grossly exaggerated estimate of my monthly financial transactions (I exaggerated it a lot because I expect to use Interac more now that I don’t use credit cards), I got the following results:

PC Financial – $1.50
BMO – $25
CIBC – $14.45
HSBC – $25
Scotiabank – $29
TD Canada Trust – $14.45

This assumed only 1 withdrawal from another bank’s INTERAC bank machine. This assumption may be incorrect for some of these banks which don’t have as many ABM’s available to use. Most of the plans above are unlimited plans. PC Financial is clearly the cheapest. I’ve also neglected the fact that cheques from PC Financial are free, and also, CIBC and PC Financial appear to have one of the largest ABM network’s in Canada according to this article (BMO is not listed) which means that I will need to use the other banks’ machine’s less often. I just did a search for CIBC/PC Financial ABMs in Vancouver and it sure turned up a lot.

Screwed on Bank Charges

We just got our first bank statement since attempting to stop using our credit cards completely. My plan to reduce our total spending by not using a credit card may have back-fired slightly, as there was a whopping $17 in extra charges charged to our bank account, in addition to the $11 we are already charged for our monthly plan “Everyday Banking Plan.” We were pushed over our transaction limit because we are such heavy Interac/Debit users, and we have many automatic deposits and withdrawals coming in and out of our account every month. To combat the problem, we will carry around more hard cash in our wallets in December and I hope this will help us stay under the transaction limit.

I am seriously considering using our BMO bank account for all our bill payments and direct-deposits, and using a separate ING Direct account (they allow you to create 4) for Interac charges, since as far as I know there is no limit to the number of Interac transactions you can make with ING Direct accounts, just as there is no limits or charges associated with transferring money from an ING Direct account and a big-bank account (except charges incurred from the big-bank). It will be nice when ING Direct one day provides bill payment and direct deposit service.