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Thread: From a hard lesson to financial prudence

  1. #21
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    ^ +1. The OP appears to have a spending problem and by his own admission, a discipline problem because he operates numerous accounts to keep his hands off the cash. He should work on that issue and until he does, he probably needs to maintain multiple accounts (as per his own admission). I wouldn't be so quick to consolidate as suggested by many posters, given that situation. He may need a money coach to help him (maybe both) develop new habits over the course of 1-2 years. Some austerity now is the treatment necessary to develop those habits, but not so severe that he will fall off the wagon. Only the OP knows himself, so I don't think strangers on a forum can be any more helpful.

    Last edited by AltaRed; 2017-04-17 at 12:45 PM. Reason: Better wording

  2. #22
    Senior Member m3s's Avatar
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    Yea never change money in an airport.. The xe app has a neat feature to calculate the fx fee % and the airports are extortionate. My typical modus operandi when arriving to an exotic airport is to walk up to the departures level and nab a cab as they drop someone off in order to avoid the touts in the arrivals area, the cabby will also love you for saving them from a long lineup as well.. and just ask them to stop at an ATM on the way.. my immediate next stop will be to get a local sim so I can hail an Uber or equivalent next time and pay with Visa. I prefer to pay some ATM fees than to walk around with $$$ in my underwear.
    amat victoria curam

  3. #23
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    I'll quote Just a Guy, but try to answer some of the other things brought up:

    - I didn't know I could open more than one savings account at Tangerine. I like the idea of having everything centralized, so I'll look into moving everything over. I'm not sure if I need to maintain an account at Scotia to keep my Visa..?

    - Foreign currency exchange isn't even on my radar. I've left the country once in the last 10 years, and have no plans to leave in the forseeable future though I do want to travel some day. Trips like that are planned long in advance for me, so the quick access tocurrency exchange isn't something I need.

    - The only bank draft I've ever used was when I paid off my last vehicle. So that's also not something I need regularly.

    - Interest on the line of credit is prime + 4%.

    Quote Originally Posted by Just a Guy View Post
    Umm, is it just me or do these numbers just not add up.

    You claim you "only" made 60k last year, I gather that is significantly less than you normally made in previous years. Your girlfriend makes about 2500/month.

    Your monthly expenses are about $700 on your visa for living expenses, a car payment, and, I gather, rent (half of which is yours).

    10% of your paycheque goes into chequing, yet you've only managed to save about $1100 after several months.

    If you lived on just your salary, you think you should be able to invest $2500/month but, by sharing expenses as you currently do, you're no where near saving your "half" of that.

    You seem to worry about the "fun" money and the "vacation" money enough to allocate for them, but you've got next to nothing allocated for "emergency" and not even a savings allocation for "future known maintenance".

    Now, considering the "average salary" in Canada is less than either of you make, and those families often have mortgages, kids, and other big expenses that come with getting older, I'd say you're missing the real problem here...

    From what I see, first you've got a spending problem. With the few expenses you listed, the numbers don't add up. Where dis all your money going?

    Second, you have a priority issue.your allocations seem to be all about the "here and now" (fun money, vacation money) and nothing really about the the future (retire at 55, getting married, buying house) things. Heck, instead of worrying about loss of job, chance of injury, unplanned pregnancy, you're worried about truck parts.

    Sure you may hate your job and need to "let loose" or "get away" to make it tolerable but you're an adult now...it may be time to start thinking ahead, biting the bullet and doing what is required so that you have some options in the future. Financial freedom comes at a cost, hen you have options to make changes.

    So far, you seem to be spending everything you've made and wanting to have extra on top, it's not going to happen. Most people who make money also make sacrifices. In the early days I didn't take vacations, I didn't go out a lot, I invested the money instead. Better yet, I invested in illiquid assets like my own company and real estate so I wasn't able to easily spend my gains either. in the end, I've got options that, on your current path, you'll never have.

    I think you need to find out where the money is going, then make some changes to where you're going to put it in the future. A few years of "pain" at your age can make a big difference in the long term...

    Just my two cents.
    3 of the last 5 years were spent paying off debt accrued by poor spending, lay offs, unemployment and trade school. The last 2 years were spent paying off a stupid decision I made when it came to buying a truck.

    2015 was a great year and I paid off all debt outside of my truck, roughly $14,000.

    In July 2016, I had $12,000 in savings and owed $34,000 on a truck I foolishly bought in 2014, and it was in the shop more than it was on the road. It had less than 70,000kms on it and was becoming more and more unreliable. I also realized how stupid I was for getting myself deep in debt for a vehicle. I drained the savings and paid down the truck, then sold it. That tapped me right out, and it was good to be debt free but I needed reliable transportation so I bought my current 12 year old truck with my line of credit.

    I had been paying about $600 per month on the LOC and trying to save in my TFSA. However, based on reading here and one of my first threads on this board I made the decision to put all savings on hold until the LOC is paid off. i also had to put about $2000 into the truck in maintenance items the previous owner neglected to do. For the last couple months, I've been putting 90% of all money money left over after the bills are paid onto the LOC (the paycheck I got on Friday allowed me to put $1000 on it, once some bills come out, I'll probably put another $600+ down).

    That's why it seems like I'm spending everything. In reality, the money is all going to debt repayment so I can have that LOC paid off ASAP.My monthly expenses, not including paying the LOC off are right around $1600 per month. I average $3800 or so net per month, give or take a few hundred.

    Once the LOC is paid off, I intend to aggressively save up emergency expenses since the industry I work is very up and down so there's no certainty or stability. It's something I should have been doing from the day I moved to AB, but that's in the past.

    Priorities right now are pay off LOC. The fun and vacation allocations amount to about $300 per month, combined. Once the LOC is gone, the savings will be built up quickly. I haven't spent more than $100 on myself since spring last year, since to spend the fun money I do have makes me feel guilty and I can't bring myself to do it. Vacations...well, we just spent 4 days in Edmonton. That's the first vacation we've taken in the 3 years we've been together and the first I've had in 5 years. We used less than half the money we'd been putting into our joint account.

    The reason I'm looking at "truck parts" is it's normal maintenance: my tires are cracked, leaking and the treads are about 80% done. The timing belt and water pump is required service if you want avoid potentially blowing the engine. The shocks can be delayed a bit, but do need to be done. At 140,000kms and 12 years old, they're starting to get soft.

    So, in a nutshell I'm living on 50% or less of my take home pay, putting roughly 40% against my debt, and keeping 10% for myself (which I can't bring myself to spend anyways...) all the while trying to respond to the curveballs life keeps throwing at me.




    I'll be getting $2300 back from my tax return. I had planned to buy tires and do the timing belt and water pump on the truck with the money. Now I'm second guessing my plan. It seems as though I should either put that money onto the LOC or into emergency savings and run the risk of driving with worn out tires or just use my winter tires all summer and push back the timing belt job, rolling the dice on whether it'll go before I get it done or not...
    Last edited by OutofBounds; 2017-04-17 at 09:00 PM.

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  5. #24
    Senior Member kcowan's Avatar
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    Quote Originally Posted by AltaRed View Post
    I almost always get my foreign cash from an ATM so on that point I agree with the above, but not everyone is willing to enter a foreign country without some foreign cash and the money changers (extortionists) at most money exchange storefronts (and especially in airports) are a ripoff.
    While the airports are a rip-off for FX, The Toronto Star disagrees that the 2.5% vig at foreign ATMs is the cheapest. They specifically recommend Kantor, Knightbridge and the Canadian Snowbird Association.
    FX Rates
    More ways to get low FX rates
    Of course, the fact that banks bury 2.5% in their rate in certainly misleading to most consumers. But numerous people have done the math to prove that paying Chase 1% on cash advances on their noFX CC is cheaper than using foreign ATMs by doing side-by-side transactions with their debit cards.

  6. #25
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    I've never had that kind of vig charged at foreign ATMs so the practice must vary depending on institution (I use Scotia ATMs for CAD or Wells Fargo ATMs for USD). And I only have to change the amount of cash I really need.

  7. #26
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    Okay, now it sounds like you're debt paranoid. You're willing to risk your life to get out of debt, that's not healthy either.

    Debt is a tool, used wisely it can make great things, used poorly and you can kill yourself.

    What will you do when you buy a house? Are you going to be sleepless and paranoid until it's paid off? Learn the difference between good debt, required debt, and bad debt.

  8. #27
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    Quote Originally Posted by Just a Guy View Post
    Okay, now it sounds like you're debt paranoid. You're willing to risk your life to get out of debt, that's not healthy either.

    Debt is a tool, used wisely it can make great things, used poorly and you can kill yourself.

    What will you do when you buy a house? Are you going to be sleepless and paranoid until it's paid off? Learn the difference between good debt, required debt, and bad debt.
    You're absolutely right that I'm a little paranoid of debt. I've been taught all my life that debt other than a mortgage is bad debt, especially debt on a vehicle which mine is. I'm not willing to risk my life to pay it off, but I do need to work on convincing myself that paying for the required maintenance shouldn't be postponed in order to pay off the debt sooner. That extra month or so of interest really isn't worth the potential for major repair bills down the road.

  9. #28
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    Simple solution to that is to calculate the actual interest you pay in a month and see if your life is worth more than that.

    You'll notice that I said there were three kinds of debt...

    Good debt - the kind that makes you money, most people don't have much of this but examples would be a rental property, business debt (within reason), and leveraged investing.

    Required debt - fairly common, this kind of debt allows you to buy things you can't always afford right away but you still "need". Examples of this would be a house mortgage, a car loan (assuming you get a reliable car and not a Lamborghini) and unexpected emergencies which may come up. Many people tend to abuse the amount of this kind of debt by buying too big or fancy then trying to justify it.

    Bad debt - money for the "wants" in life like a skidoo, boat, ATV, fancy furniture, toys, drinks, vacations, etc. Things you can do without but may not want to.

    If you need a vehicle to make money, ie your job, then that isn't bad debt. Buying a top of the line lemon is bad debt. Buying a reliable vehicle and keeping it maintained is a required debt. Your life, and potentially mine is on the line here.taking an extra month or two to pay it off, as long as you pay it off, isn't worth dying or killing someone else for.
    I'm not JustAGuy (without spaces), or Donald, or <insert name here>.

  10. #29
    Senior Member kcowan's Avatar
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    Quote Originally Posted by AltaRed View Post
    I've never had that kind of vig charged at foreign ATMs so the practice must vary depending on institution (I use Scotia ATMs for CAD or Wells Fargo ATMs for USD). And I only have to change the amount of cash I really need.
    As I stated:
    Of course, the fact that banks bury 2.5% in their rate in certainly misleading to most consumers.
    As I said, we have done side-by-side transactions on noFX CCs and Debit and the difference in FX rate is exactly 2.5%. Just trying to save you some money AR!

    When you spend 6 months in a foreign land, those FX charges add up!

  11. #30
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    All right, it's been about a month. Update time.

    I've taken some of the suggestions from this thread and begun slowly implementing them. The main one is I'm in the process of moving everything under pretty much one umbrella as it were by having Tangerine take over most of my accounts. I've got a chequing account and savings accounts set up there for individual designations.

    I still need to talk to Scotiabank about how closing my accounts will affect my LOC, Visa and RRSPs. I simply haven't had time this month to deal with it.

    I've also backed off on being so hard core on paying off the debt. It's tough for me, but I realize I still need to put money into emergency savings to minimize racking up debt again if something happens. I'll be putting $500 per month into that until I have at least $6000 saved up which is roughly 3 months expenses for me. Then I'll continue to put a couple hundred a month into it to keep building that buffer. I also want to keep up with the discipline of saving for my retirement as leaving the work force is very important to me. I've set up auto-savings into my TFSA of $300 per month so at least something is going there.

    Finally, I'll be budgeting for future vehicle maintenance and repairs (my truck has less than 150,000kms on it but is 12 years old). I have yet to decide on an amount to put into this monthly. I did however use my income tax return to get the tires done on my truck.

    Current debt:

    Line of Credit: $7800
    Visa Card: $0 (paid off last month's expenses today)

    Total debt: $7800

    Assets:

    Bank 1:

    Main chequing account: $1700
    Savings account: $0.04
    Money master savings: $10.06
    RRSP: $202.40
    TFSA- cash: $47.92

    Bank 2:

    Chequing: $10
    Emergency savings: $500
    TFSA - Tangerine Equity Funds Portfolio: $1570 (next $150 deposit to be on the 17th)

    Bank 3:
    Chequing - fun money: $1280
    Savings - vacation fund, joint with girlfriend: $570 (We took a trip to Edmonton last month)
    Random cash on hand: $300

    Total assets: $6189


    Net worth: -$1613


    Current state of my education: I've had alot on my plate this month, and my head's been filled with distractions. I had to take a bit of a break from the heavy reading so I only read a chapter or two of The Intelligent Investor

    - Working through the "8 With Weight" reading list posted on this forum
    - Reading CanadianMoneyForum, MyOwnAdvisor, and Finiki
    - Following Money School on Youtube

    Books purchased and read:
    The Lazy Investor - 100%
    The Wealthy Barber - 100%
    The Wealthy Barber Returns - 100%
    The Value of simple - 20%
    The Intelligent Investor - 5%



    I feel that it was pretty good progress this month overall. The middle of the month always looks strong, as most of my bills come out on the first paycheck. The money in my chequing account will go to pay day to day expenses until next payday when everything left over will be put down on the line of credit. Based on past months, I should be able to put $1000 down then.


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