Give Me Back My Five Bucks

Monday 19th
$4.42 Starbucks
$15.44 Drink Lounge

Tuesday 20th
+ $301.38 freelance/side income
$48.38 gas

Wednesday 21st
No Spend Day!

Thursday 22nd
No Spend Day!

Friday 23rd
+ $1,100 freelance/side income
$7.39 Starbucks
$32 Locus Restaurant
$6 parking
$40 Bard on the Beach

Saturday 24th
$9.25 parking

Sunday 25th
$4.42 Starbucks
$22.40 Body Shop
$20.81 gas

WEEKLY EXPENSES: - $210.51
WEEKLY SIDE INCOME *: + $1,401.38

TOTAL: + $1,193.87

My freelancing income for the month continues to be steady, and this month is a significant one for me because of two reasons:

1. For the first time ever, my monthly freelancing income will likely surpass the income that I make from my full-time job.
2. I have made $3,858.31 so far this month, meaning I have shattered my September goal of making $3,000 through freelancing – and there are still a few days left.

As for my spending this week, I really felt like I spent a lot, but when I added it all up, it actually didn’t come out to much at all. Granted, I didn’t see my boyfriend very much during the week, but a friend was staying with me from Thursday-Sunday. We went to a Shakespeare play, dinner, Starbucks, shopping … the usual. I stayed strong and stuck to my shopping ban – even though I seriously tempted myself in Banana Republic by trying on like 10 things.

* This is all income I bring in that is above and beyond my full-time job. Money is primarily made through my two blogs and my graphic design business.

I came across an old post from Kiplinger that I had bookmarked: 10 Financial Commandments for your 20′s. And as I close in on another birthday, I decided to take a look at the list to see what I have accomplished so far, and what I still need to do.

Here is my review of  the first 5 commandments:

1. Plan ahead. To get where you want to go in life, you need goals and a plan to reach them. Having neither is like driving a car without a steering wheel — with your eyes closed. Start by asking yourself what you want in your future. Think about the short term (five years or less), medium term (five to ten years) and long term (20-plus years).

While I would consider myself to be a pretty good planner, I wouldn’t necessarily say that I know what I want in the future. It’s kind of scary to think about, isn’t it? But I’ll give it a shot.

In the next 5 years, I’d like to continue to aggressively pay down my mortgage, go traveling for an extended period of time, and try my hand at becoming a full-time freelancer. In the next 5-10 years, I’d hopefully like to be married with children, living in a different city, and holding down a somewhat successful career. In 20+ years? Well I hope to continue building my wealth so that I can continue on my path towards financial independence, and retire early. In 20 years, I’ll be 48. And when I’m 48, I’d like to seriously consider retirement. It might not be possible that early, because 20 years is not that far off. But definitely my #1 goal is to retire before 55.

2. Live within your means. Can’t afford something? Don’t buy it. Sounds simple, but too many people have a heck of a time following this one and get in over their heads in debt. Learn to keep spending in check while you’re young and you’ll save thousands of dollars over the years — and save yourself a lot of stress, too.

I’m thankful that I learned to live within my means while I was in my mid-20′s. I’ve struggled in the past few years with trying to strike a balance between spending and saving, and I think that I’ve finally figured myself out. It’s a good feeling to finally understand what I value in life, and to have the knowledge that no amount of handbags or jeans or fancy restaurant meals will get me to where I want to be, and what I want to achieve.

3. Make saving a habit. You work hard for your money, so when your paycheck arrives, why not make yourself the first person you pay? Arrange with your bank to automatically divert part of your paycheck every month into a savings account. That way, you won’t have to remember to transfer the money manually, and you won’t even miss it when it’s gone. Out of sight, out of mind.

Every bi-weekly pay day, my bank automatically transfers the following away into various savings accounts:

• $375 RRSP & TFSA ($9,750/year)
• $50 non-registered investment ($1,300/year)
• $100 Emergency Fund ($2,600/year)
• $400 Savings – general, travel, house, car ($10,400/year)

Because my automated savings are only based off of guaranteed income (and I can usually scrounge up some freelance work every week), I usually save more than that. But at the very least, that is how much I’m putting away. I fully agree with the advice that every 20-something should learn how to pay yourself first. If your money is automatically being transferred out of your account every pay day, then you won’t even have a chance to spend it. It might be hard at first, but as Preet Banerjee said, we are really great at adapting.

Now, I know that I should be increasing my RRSP/TFSA savings, and once my Emergency Fund hits the $10,000 mark (hopefully by the end of next year), I will funnel the extra money towards my Retirement Portfolio. And based on my income going forward, interest rates, and my general comfort level, I want to keep adding more into my RRSP/TFSA accounts.

4. Pay off your credit cards. If you have a credit-card balance, now’s the time to rid yourself of that albatross around your neck. Set a goal to pay off all credit-card debt before you turn 30 and have other financial responsibilities to tend to.

I think this is a terrific goal to be free of credit card debt before you turn 30! I consider myself to be extremely lucky not to carry a credit card balance right now, even though I did so for years and years. I think once you get in the habit of having credit card debt and not paying off the balances each month, you can get really comfortable with your debt. And that’s not a good thing at all. Debt felt normal to me for many, many years. And now that I’m debt-free (aside from my mortgage), I feel a lot less anxious and stressed out.

5. Start investing. The sooner you start investing for retirement, the less painful it will be and the more money you’ll accumulate.

This is a category that I really need to work on. As of right now, my Retirement Portfolio consists of indexed e-series mutual funds. That’s it. Nothing more than that. A huge goal of mine before I turn 30 is to figure out this whole “investing” thing. Or at least start to learn. There’s so much information out there, and truthfully, I feel a little lost. But now that I have my savings and spending under control, this is definitely the next step for me.

How are you doing with the first 5 commandments?

Next —> Read Part 2 of the 10 Financial Commandments for your 20′s

NOTE: This is a guest post by my good friend, the wonderful and sassy Money Rabbit. :) She is a young 20-something professional living in Toronto. You can also find her on Twitter @TheMoneyRabbit.

The Merriam Webster Dictionary defines an Enabler as:

“One that enables another to achieve an end; especially : one who enables another to persist in self-destructive behavior (as substance abuse) by providing excuses or by making it possible to avoid the consequences of such behavior.”

Relationships, both friendly and intimate, form crucial foundations of happiness and success. Your friends are there to support you in your most dire hour, provide a shoulder to lean on, or make you laugh until you cry.

Unfortunately, friendships can also come at a greater cost, in that they often will sabotage your efforts to improve your personal finances by enabling your worst spending demons.

As a twenty-something living on my own in glitzy Toronto (currently duking it out with Vancouver as the country’s most expensive city to live in), it is all too easy to use outings with friends as an excuse to enable my bad spending behaviour. For example, this summer I went to a birthday dinner at a shmancy restaurant with a bunch of new friends, mostly investment bankers and DINKs (that’s Dual Income No Kids, folks). More specifically, it was my boyfriend’s birthday dinner, and I wanted to be there and share the experience with him. But as soon as I heard the name of the restaurant, I knew that it completely out of my league. I still decided to go. For four hours, I wined and dined amidst crisp white linens and (several) bottles of imported wine. It was easily one of the best dinners I’ve ever had in my whole life, simply divine.

The tab came to $165. Each.

Since it was my boyfriend’s birthday, his best friend (another banker) covered his dinner, while the rest of us went Dutch. I knew prior to accepting that it was beyond my means. I knew that I’d have to dip into my savings account to cover it. But I wanted to belong, and feel like a full-fledged member of the group, even though they all make at least 3 times more than I do (fact.) So that night, though I handed over my Visa card with a careless flick of the wrist, inside I was panicking. “Oh God, oh God, oh God…”

My example may be a little extreme, but the point that I want to illustrate is that peer pressure is still alive and well, whether intentional or not. How often have we spent beyond our means because we don’t want to be left out? During university, dining out and coffee dates formed a gaping wound in my personal finances that oozed steadily, while I blissfully ignored it. As I’ve grown older, the temptations have changed, but some remain omnipresent (coffee dates and buying lunch at work are the worst for me).

Still, it’s an all too common occurrence that a friend or loved one will invite me on a daytrip or dinner, and I will give my regrets with honesty: I can’t afford it. Usually, it’s end of discussion. I was invited to go to Canada’s Wonderland this weekend, but I had to turn it down since it would blow my budget. No questions were asked. Another time, a friend tried to pressure me into buying a Groupon with her for a martini-manicure, and when I declined based on lack of funds, she protested repeatedly “What?! It’s only $18!!!” If only she knew how frustrated I was to hear her response; I felt judged and inadequate for not indulging myself. But I stuck to my guns. No martinis and manicures for me.

As of late, certain friends have been pretty good as anti-enablers. Many in my circle vastly prefer potlucks and home-hosted gatherings as opposed to meeting out for dinner, which generates a stronger sense of community anyways. We did an awesome trip this spring where we biked from Toronto to Niagara Falls in a day (14 hours) and split the hotel, $30/night. All in, that trip cost under $200 for three days and two nights, and we also were able to chaulk it up as an incredible life experience. These kinds of opportunities to do inexpensive and memorable day trips are everywhere; have bike, will travel. Another option for an outing is a cozy autumn picnic in the park with a thermos of hot chocolate and a good book; it will definitely make it onto your list of favourite fall memories.

So I’ll be continuing to turn down friendly dinner dates and day trips of a certain ilk. The relationships in my life may sustain me on a social level, but what really ensures that I sleep at night is my knowledge that I am living within my means. I may not lead an expensive life, but I actively strive to make sure that it’s exciting, satisfying, and fun … as it should be!

I have been really inspired lately by the personal finance world. After reading other blogs, I’ve been inspired to take more photos for GMBMFB, and after seeing everyone hop on the vlogging bandwagon, I’ve also been inspired to start attempt to try my own vlog. I’ve been unsuccessful so far, but it’s all a work-in-progress. :) New article ideas keep coming to me, and I remain happy and positive, despite a packed schedule.

Anyway, here are two personal finance events that I’m really excited about:

Financial Blogger Conference
It seems like it just a few weeks ago that the Financial Blogger Conference was announced. Now, we are just one week away, and I am really excited to meet everyone for the very first time. Long-time PF pals Money Smarts Blog, Finance Fox, Blonde and Balanced, Punch Debt in the Face, and Budgets are Sexy will be there, along with a bunch of new bloggers who seem super keen and energetic – as well as my Toronto Star/Moneyville editor, Adam Mayers. Check out the hashtag #FINCON11 on Twitter to join in on the conversation. Can’t wait!

Canadian Personal Finance Conference
Just a few days ago, Preet Banerjee and I announced the 1st (technically, the 2nd) Canadian Personal Finance Conference – which will be held in Toronto on September 21-23, 2012. I am thrilled to be co-organizing this event with Preet, and I can’t wait to help shape it into something amazing (and it will definitely be amazing). Register for the newsletter at www.cpfc12.com and check out the hashtag #CPFC12 on Twitter for more information!

Now I want to ask you two questions:

1. Is there something in particular you want me to write about?
2. Is there anything you want to see more or less of out of this blog?

As always,  I’m open to all suggestions, so please let me know. :)

One of my August goals was to increase my accelerated bi-weekly mortgage payments to the 20% prepayment maximum. Well, I never got around to it, but earlier this week I was reminded of it by @RateSupermarket who tweeted about 3 easy ways to save $65,541 on your mortgage.

So I finally stopped being lazy, and called to speak to someone at Vancity.

My minimum mortgage payments are $1,098/month ($13,176/year).

When I signed my mortgage paperwork back in May, I agreed to a 10% increase to $600/accelerated bi-weekly ($15,600/year).

Now, my mortgage payments will be approximately $660/accelerated bi-weekly ($17,160/year).

You can see from the chart below what a difference the 20% prepayment can make to my mortgage amortization (30 year amortization, current 5-year fixed term at 3.74%). Granted, after this current 5-year term is up, when I go to refinance, who knows what kind of interest rate I’ll end up getting.

The dark blue represents accelerated bi-weekly payments without any additional prepayment option. You can tell that already cuts my mortgage down by 4 years. And then when you add in the accelerated bi-weekly payments with the 20% prepayment (orange), you can see that it knocks my mortgage down even further, to 19 years.

This new payment amount of $660/bi-weekly ($17,160/year) represents approximately 21% of my gross annual income, and it’s an amount that I’m comfortable with for the time being. I also hope to keep saving money into my House Fund, so that by the time next spring rolls around, I will have enough saved up not only for my property taxes, but to also put down a lump sum towards the mortgage principle when my anniversary date comes.

If anything should happen, and I can no longer afford $660/bi-weekly, I can always drop my payments down to the original amount. As long as I’m satisfying my obligation of $1,098/month, and not going above 20%, then the bank is fine with whatever I choose to do.

**NOTE: For those who are new to my blog, please know that along with my FT job, I also am a freelance write & blogger. I choose to work about 65 hours/week (see my freelancing schedule) in order to be able to afford to save, pay down my mortgage, and travel often. I worked hard to get out of debt, and I’m working just as hard now to reach all of my personal finance goals. If you check out my freelancing schedule, or stick around to read more of my blog, you can see that even though I’m busy, I make sure to have a good balance in my life. :)