# The Purple Platypus Diaries



## purple.platypus (Dec 10, 2012)

So, my finances currently suck nuclear weasel penises.

It's been a topsy turvy... well, life and as a result I've uprooted careers a couple of times, gone back to school for a Master's and a stab at a Ph.D program that I unfortunately ended up washing out of, and to make a long story short I'm only now really picking up the pieces.

Current income is around $43k/year but with the potential to improve that in fairly short order. Some of the other usual stuff people put in these threads (all dollar figures are approximate [exception: for the BMO debt they're exact] but in every case they're within 2% or so of the real numbers; it's sheer coincidence that they're all so nice and round):

LIABILITIES
Student debts

20,000 to NSLSC @ 5.5%
2000 to CIBC @ 5.5%
4000 to RBC @ 7%
250 to the Manitoba government @ 4%
Credit cards

C1 (active): 750 @ 19.something%
BMO (written off shortly after returning to grad school): 5750 @ 0%, they say they'd settle it for $4000, I suspect even that number could be negotiated down

ASSETS
(a tumbleweed rolls past)
Well, okay, there are some, but not a lot. There is no question my net worth is five figures into the negatives. I hold slightly more than $1000 between a HISA with Outlook Financial (2%) and some RBC mutual funds I mostly ignore (seem to be moving up at somewhere between 4 and 5%, roughly), and there's another $1200 I didn't know about until a few weeks ago in the superannuation plan from an old job. Just today I requested to pull the latter funds out in cash. I'll pay taxes on that, but I anticipate my overall income tax for this year being very low (one of the few good things about having spent part of the year unemployed) so that doesn't bother me, I'll probably get it back in a few months anyway. The plan is to use just over half of this money to pay the credit card down to nothing and split the rest between the HISA and short term funds to help with my Christmas shopping, using anything left over for debt reduction.

About half of every paycheque goes to debt reduction. The plan was for at least some of the rest to usually go to the HISA; for reasons I somewhat go into below, I may be reversing those priorities. This coming pay period, my plan is to get the provincial debt out of my life entirely and pay the minimums on everything else, pouring anything that's left from that paycheque's debt reduction budget into the RBC debt as it has the highest interest rate. I'm currently staying with family so my ongoing expenses are pretty low, allowing me to do this in relative comfort. However, that's a situation that, while relatively good for my financial life, is wearing on me personally and I would like to move out on my own ASAP.

In the last week it has occurred to me that, once I pay down my active CC to nothing, the interest rates on my remaining debts are very low (and tax-deductible into the bargain), low enough that investing makes more sense than being as aggressive as I have been lately in paying them down. I still want to pay more than the minimums (I typically pay, at an absolute minimum, the monthly minimum on most of my debts each _pay period_ (two weeks), to cut down on the overall interest I'll be paying over the long haul). Right now I budget around $500 per pay ($1000 most months, $1500 in months with the right combination of Fridays) to the student loans alone, but I could meet my minimums for about a third of that, especially with the added flexibility I buy by getting rid of the provincial loan.

So to make a long story short, I have a whack of financial goals, some of which compete, and I'm having trouble deciding which to prioritize:

- Save money up, for at least three purposes:

Have a decent emergency stash, against (among other things) the possibility of another period of unemployment
To pay off the BMO debt, a festering boil on my butt at least credit-rating wise
To pay first and last month's rent, moving expenses, some furnishings, etc etc for a move out on my own; I anticipate needing $3500-$4000 for this alone.
 Once some or all of the above is accomplished, the next major thing to save for would be a reliable used car.
 - Get rid of debt, and particularly debt interest
- Start investing, a trickle at first, but more and more as income increases and/or debts disappear from my life
- Improve my credit rating. (Until recently I've been _way_ overemphasizing this one, but it dawned on me this week that I'm trying to live within my means once the CC is paid off and that means I'm actively trying to _prevent_ this from mattering to me. A mortgage is a few years off barring some huge windfall; even the aforementioned used car is something I'd prefer to pay for outright if possible.)

Anyway, every month things look a little better but I still feel like I've got quite a hill in front of me...

So, thanks for reading if you've gotten this far! Any advice anyone has is welcome, whether on how to prioritize among the goals immediately above, how best to execute particular goals within that group (particularly the trickle of investment!), or on any other observations you have to make about anything I've said. I'm just learning finance and the whole reason I'm here is to hopefully benefit from, and later become part of, the collective wisdom found here.


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## purple.platypus (Dec 10, 2012)

Well, so far no-one's commented. Does that mean I'm more or less on the right track, or just not that interesting?

In the last 12 hours or so a little over $2300 has flowed into my account between a paycheque and the aforementioned cheque from cashing in my old superannuation, and almost $1400 has flowed right back out again on debt reduction,or is scheduled to. My current credit card and provincial loan are now completely paid off, or at least will be in a couple of business days when those payments show up on their end, and I also bit a big bite, almost 10%, out of the RBC loan. (Another bit of good news is that the interest rate on the latter went down half a point since I last checked, so it's now 6.5%, not the 7% mentioned above). We'll see how things look after a bit of Christmas shopping - a little money will no doubt go into the HISA toward moveout and/or paying off the BMO loan. My goal for the moment is to spend most of my money in ways that contribute directly to getting my net worth to zero or better as quickly as possible, preferably while also being on track to move into my own place soon.

(The credit card only got run up in the first place due to a period of unemployment. At times of gainful employment, it gets used as a convenience only and paid off every month if not every pay period.)

With my high-interest credit card debt out of the picture, as I mentioned above, it makes sense to begin some flavour of index-type investing (typical rates of return now exceed the interest rates on any of my debts, especially given that my remaining debt interest is tax-deductible). That half point disappearing from my RBC credit line only further reinforces this. I guess the number one thing I'm looking for now is advice on where to start doing that.

In case it matters for things like choice of discount broker (if that's even the route I should be going), I am going to be doing my day to day banking with ING Direct going forward, but I still have financial ties to RBC and Outlook Financial as well. I do _not _wish to deal with BMO or CIBC if it can be avoided, and have neutral to slightly positive feelings about TD and Scotia but no current financial ties to either (never did in the case of Scotia). I'm technically still a member of one of the brick and mortar Manitoba credit unions as well though I no longer have active accounts there.

Given how small my investment life is likely to start (maybe $100 a pay period for now) I was thinking Credential would be an economical choice, and that my focus should be on a fairly passive strategy focussed on ETFs for now, though I really don't know that much about them, with the possibility of getting into a broader range of investments as I learn more about what the hell I'm doing. I have zero interest in day trading or anything anywhere near that active, but am willing to spend a moderate amount of time looking after my investments if necessary. So far, I have yet to panic when the value of a mutual fund dropped so I beleive I can be pretty disciplined about this.

Suggestions? Mistakes to avoid? Mistakes I'm already making? Other comments?


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## Spudd (Oct 11, 2011)

I disagree that typical rates of return on indexing will exceed the interest rates on any of your debts. Especially the 7% one. I would pay down at least that 7% one before starting to invest. 

Also, why save up for a used car? If you currently don't have/need a car, let me tell you, a car is a huge money pit. Buying the car, insurance, gas, maintenance. Unless you REALLY need a car it makes great financial sense to avoid buying one. 

Finally, I wouldn't go for a discount broker until you have 50k in investable assets. Until then, the cheapest route to invest is TD e-series index funds. I know you don't currently bank with TD but you can open an investment account with them and link it to your bank account to move money back and forth. These are no-load mutual funds (meaning no cost to buy or sell) and they have very low management fees. ETF's will end up costing you more because they cost money to buy and sell, and if you don't have a lot of money, the percentage will be large. But as I said above, I would not recommend investing until you have at least paid down your high interest debt. You more than likely won't get back 7% annually on index funds and they come with the possibility of losing money as well.


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## purple.platypus (Dec 10, 2012)

I know past performance won't always indicate future performance, but it's what we have to go on, especially in mutual funds, and the various index and/or dividend funds I'd be most interested in are showing annualized returns in the 8-11% range. Naturally you can't count on that in any given year, of course, but those are the one-year, three-year and since-inception numbers I'm seeing much of the time and it makes sense to me to invest as though there were a good chance of seeing at least the low end of that range.

But then, I am the first to admit I am _very _new at this; what am I likely to be overlooking?

I looked at the TD funds and their historical returns are a little lower, even if we ignore the 5-year returns which, at the moment, overemphasize the disaster that was 2008. What makes you recommend the TD ones? Just the low MERs?

Relatedly - are the returns shown in a typical simplified prospectus before or after accounting for the "friction" the MERs create? I've been assuming after - if it's before, then I _do_ have to rethink things. For example, I'm very attracted to Ethical Funds philosophically, and in at least some cases their prospectuses show annualized returns upwards of 8% even taking 2008 into account, but I've been assuming that's what you end up with _after_ accounting for their relatively high MERs. If your MER is chewing into those numbers then they don't look so hot.


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## Spudd (Oct 11, 2011)

They do include the effect of the MER in the returns. What index funds are you looking at that have done better than the e-series? The e-series tend to do very well against their peers due to the low MER. ETFs would do better, but they have the transaction costs you have to deal with.


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## purple.platypus (Dec 10, 2012)

I'm torn between index, dividend or a mix of both as the core of my initial strategy. I think the funds I was looking at were mostly dividend ones (which always seemed like a no-brainer to me before I heard about index funds). I'll look around some more when I'm less tired and get back to you on the specifics - that's information I should really compile for myself anyway. I did give one example of the Canadian dividend fund offered by Ethical Funds, but that is of course not an index fund.

If ETF transactions are priced as stock trades rather than mutual funds transactions, then you're right, that does indeed make them unattractive at the small amounts I'd be investing initially. I don't, however, see why that's a reason to avoid discount brokers entirely, or at least Credential. Mutual fund transactions are free there, and at least I would get a chance to learn their system slowly as I work my finances up to the point where


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## Spudd (Oct 11, 2011)

Just make sure there's no fee just to have the account. A lot of discount brokers charge a yearly account fee when you have less than a certain threshold. 

Also, yes ETFs charge the same as stocks to buy/sell.


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## Young&Ambitious (Aug 11, 2010)

The Credential mutual funds are, based on my experience, with IA Clarington and they have poor MER's. I started off in those while I didn't know anything about investing and I have since done much better going solo. If you want to go the managed funds route, the e-series is the way to go. If you're not convinced, think of the e-series as a parking spot for your money while you learn and maybe allocate a portion of your future investing contributions to a more active do-it-yourself strategy. Note, the mutual funds are typically not great parking spots as it's hard to get your money out, they often charge fees to do so, so if you choose this path, be aware of the fee structure.


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## purple.platypus (Dec 10, 2012)

> The Credential mutual funds are, based on my experience, with IA Clarington


Credential offers many, many different lines of mutual funds, or so claim several different credit union Web sites (one spot on their own site mentions "thousands").

On an unrelated note, going back to something Spudd said the other day:


> Also, why save up for a used car? If you currently don't have/need a car, let me tell you, a car is a huge money pit. Buying the car, insurance, gas, maintenance. Unless you REALLY need a car it makes great financial sense to avoid buying one.


Currently, I have the occasional use of one and I don't know how I'd manage things like grocery shopping without it; there are also several friends who would be a lot harder to see without this ability. I go to work by bus as I've got a route that goes literally from the door of the house I'm staying at to the building I work in, and parking downtown where I work is stupidly costly, so even if I had the use of a car consistently enough to drive every day I probably wouldn't. This would continue even if I were on my own and had a car, in fact the places I'd most like to move to are within walking distance of work. So, the car would be only occasionally used (= a lot less expenses) but pretty essential for the things it does get used for.

As for the expense, that's why you go used and Japanese. Let someone else soak most of the depreciation! In addition, I'm reading the first chapter of _Millionaire Teacher_ and was pleasantly surprised by his remarks on sometimes being able to sell just the sorts of cars I'd be looking for (I'm quite fond of my mother's Matrix) for _more _than he paid for them, though he does ignore most of the expenses one runs through in between. I'm assuming that's the best-case scenario rather than something that can be relied upon, but even so it goes to show that a car doesn't need to depreciate much.


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## Spudd (Oct 11, 2011)

We grocery shop by bike (either panniers on rack or trailer depending on the size of the grocery run). We live near a Zipcar lot so for the odd occasion when we really need a car, we get a Zipcar. We rent a car for the weekend when we need to go out of town for the weekend. We now spend <$200 a month on transportation (includes bike maintenance, Zipcars, rental cars, gas) when we used to spend $250/mo on the insurance alone.


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## purple.platypus (Dec 10, 2012)

There are Winnipegers who ride their bikes year 'round, including in -20 and worse weather, but I personally think they are all certifiably insane. In any case I don't see how I would do that while carrying anything resembling a reasonably-sized cart of groceries, especially given that I do a great deal of my grocery shopping at Costco to save $$ over the long term by buying in bulk.


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## andrewf (Mar 1, 2010)

Repaying debt is risk-free returns after tax of 5.5-7%. That's pretty good.

Repaying your debt also improved your balance sheet/credit rating in the event you want to buy a home.


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## Barwelle (Feb 23, 2011)

I went to college in Edmonton through two winters by bike... 15 min ride on good days, up to 25 mins on the coldest days. Something I'm proud of (and I think it makes me certifiably Canadian, rather than certifiably insane!)

I like Spudd's recommendation of getting a trailer for your bike for groceries. And his Zipcar suggestion is pretty neat too for seeing your friends. Some would argue against it because it's not as convenient... but then, it's also convenient to not have to worry about oil changes, repairs, new tires, parking, etc.


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## purple.platypus (Dec 10, 2012)

Zipcar is only available in two cities in Canada - Toronto and Vancouver. So that's not an option regardless.


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## Barwelle (Feb 23, 2011)

Good point. Google winnipeg car sharing. This is what I found: http://pegcitycarcoop.ca/ 

edit: Looks like they only have four cars, downtown. If they're close to you, that's cool. If not, something to keep an eye on still, as I am sure they are expanding as much as they can.


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## purple.platypus (Dec 10, 2012)

Revised numbers from the first post


LIABILITIES
Student debts

 < 20,000 to NSLSC @ 5.5%
 < 2000 to CIBC @ 5.5%
 < 3750 to RBC @ 6.5%
 *Zero* to the Manitoba government @ 4%
 Note that interest payments are tax-deductible on at least some of these (the huge NSLSC one for sure)
Credit cards

C1 (active): *Zero* @ 19.8%
BMO (written off shortly after returning to grad school): 5750 @ 0%, they say they'd settle it for $4000, I suspect even that number could be negotiated down

One of the next financial things I should probably do is see if Capital One will give me some sort of better deal on a credit card. This one's got a relatively large annual fee, even if they won't give me a card with points or anything like that I'd like to at least ditch that fee before it next comes up (mid-February). Incidentally, my ING Direct card just arrived; will switch my day-to-day banking to there ASAP while still maintaining my relationships with RBC and Assiniboine Credit Union/Outlook Financial.


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## MoneyGal (Apr 24, 2009)

This may sound like a quibble, but it really isn't: the interest on your student loans is not *deductible,* instead, it gives rise to a _tax credit_. The amount of the credit = [interest paid] * [rate of lowest federal tax bracket, currently 15%]. 

This still reduces the effective interest rate paid, but not by as much as you think (or your language implies).


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## brad (May 22, 2009)

purple.platypus said:


> Zipcar is only available in two cities in Canada - Toronto and Vancouver. So that's not an option regardless.


As Barwelle pointed out, Zipcar are not the only game in town. Here in Montréal, we have Communauto, which recently expanded its operations to Paris.


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## purple.platypus (Dec 10, 2012)

MoneyGal said:


> This may sound like a quibble, but it really isn't: the interest on your student loans is not *deductible,* instead, it gives rise to a _tax credit_. The amount of the credit = [interest paid] * [rate of lowest federal tax bracket, currently 15%].
> 
> This still reduces the effective interest rate paid, but not by as much as you think (or your language implies).


Sorry about the incorrect terminology, but I did have the correct concept in mind. I'm fairly new to having anything more exciting going on with my taxes than some credits for tuition and the like (I have a whack of other credits from the last few years but it hasn't seemed worth it to use them as I was already getting relatively large refunds without them - hopefully I make enough in 2013 for it to be worth finally burning them in that tax season).

I've been using the phrase "tax deductible" to refer to what you describe for years, including in front of professional accountants, and no-one has ever bothered to correct it before; whenever it's been relevant, people have seemed to understand what I meant. What would be an example of something that is genuinely tax-deductible in what you would regard as the correct sense, and how would it differ from the above?


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## MoneyGal (Apr 24, 2009)

1. Examples: Interest paid on funds borrowed to invest (as long as the investment is in a non-registered account), RRSP contributions. 

2. The entire amount borrowed / contributed is deductible directly from any tax owing, versus [amount paid * 15% = total amount by which taxes are reduced]


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## Pennypincher (Dec 3, 2012)

A tax deduction is basically any amount you put on line 200+ of your T1. Ie:

RRSP contributions
Pension Contributions
Daycare costs
Union Dues/Professional Dues.
Employment expenses
Business expenses

It reduces your gross income into a net income. :chuncky:


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## Daenerys Targaryen (May 11, 2012)

Thank you for sharing your story Purple Platypus. 
I can relate to your situation. I went back to school for a Masters which took longer/cost more than I thought it would and which honestly I regret doing. It created a lot of debt for myself and resulted in me living with my family for longer than me or my family was planning...let's stay I overstayed my welcome with my parents a bit.
Luckily I have been employed full-time for the past 3 1/2 years...although my job isnt releated to what I studied in school the income allowed me to buy a car (I would love to not have this expense but based on where I live/work it really is needed) and to save up first/last month's rent and furnishings etc for my own apartment which I moved into 1 year and a half ago. I still have some school debt which I am desperately trying to pay off as soon as possible. I have some small investments which I would love to supplement, but I can't afford to right now. All in good time, I don't know how old you are, but I am 27, sure I would have loved to be in a postive-net worth situation by this point in my life, but I can't undo past decisions.
You sound like you are making good progress so keeping working at your debt and enjoying watching the numbers go down. 
Good luck


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## purple.platypus (Dec 10, 2012)

Pennypincher said:


> A tax deduction is basically any amount you put on line 200+ of your T1. Ie:
> 
> RRSP contributions
> Pension Contributions
> ...


I guess that's different (in its net result, I mean) from what I described if you are not in the lowest tax bracket. However, that's something I've unfortunately only been able to say once or twice. Hopefully the future is kinder to me than the past has been in this respect.


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## MoneyGal (Apr 24, 2009)

I think you may be confused about the differences between a tax credit and a tax deduction. There is NO relationship between your personal marginal tax rate (or "tax bracket") and the rate or percentage at which a federal tax credit is calculated. The fact that you (may) be in the same tax bracket as the rate used to calculate the value of a tax credit is just a coincidence. 

More elaborate numerical example (than I provided before):

It is the end of 2012 and you are starting to estimate your income tax position. 

During the year, you have paid $100 in qualifying student loan interest ("qualifying" = eligible for the student loan interest tax credit), and you made a $100 RRSP contribution. 

How much do these two $100 sums -- both the same, nominal, out-of-pocket cost for you -- affect the amount of tax you may owe? 

The _student loan interest_ gives you a *tax credit*. It is calculated this way: $100 x 15% = $15. This outlay of $100 on your part will reduce your taxes by $15. 

The _RRSP contribution_ gives you a *tax deduction*. It is calculated this way: $100 x 100% = $100. This outlay of $100 on your part will reduce your taxes by $100. 

So, all things being equal, you will prefer expenses that give rise to tax deductions, not tax credits. This is basic "tax math" and something that it pays (quite literally) to know and use to your advantage.


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## purple.platypus (Dec 10, 2012)

Thanks for educating me on this subject. This will be the first tax year I really need to know this stuff well so I'm going to have to get up to speed on it relatively soon anyway, and this primer should be a helpful step in that direction. I had assumed most "deductions" were simply subtracted from your effective income as distinct from the actual taxes you pay; obviously there's a very big difference between the two!

Having said that, on to the main reason I'm writing a new post today, which is only tangentially related to taxes...

Purple's New Year's Financial Resolutions

This is, of course, the time of year for setting goals and making, well, resolutions. By the end of this year, I want to do the following, some of which I may need advice from here on:

Save up enough to move back out on my own, and do so.
Have the RBC and CIBC loans paid off, and make a dent of at least 15% of its current value in the NSLSC one.
Establish an investment account, to which I am making modest contributions a minimum of once per month, most likely in the TD e-Series.
At some point _after_ accomplishing the first bullet point above, but before the end of the year, have at least $3500 in combined investments and savings.
If possible given my current credit rating, switch to a credit card with no annual fee and, ideally, at least one of cash back, air miles or a points program (in order of preference).
I presently have about $600 in RBC mutual funds (select conservative); I don't see the point of holding onto them in their present form, do any of you? My plan is to yank them and stick them in the e-series instead, if there aren't any insane penalties for doing so. If there are penalties that make this not worth doing, perhaps I could shift them into RBC index-based mutual funds instead; their MERs are higher than the e-series but still substantially less than I'm paying now. If it makes a difference, that money is in an RRSP whereas I'm not sure whether it's more beneficial to go RRSP, TFSA or unregistered with this proposed new account.


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## purple.platypus (Dec 10, 2012)

So, in nearly a month since I last posted to this thread, here's the progress I've made.

Perhaps most important in the long run, I've opened a TD e-series account. That was not an easy or instantaneous decision - starting some form of investment account was, but that it should take that form in particular was not - and more details can be found in this thread. *I would particularly draw attention to this post for anyone else thinking of opening an e-series account at this time!*

I'll start that off with $200 each of the Canadian bond, Canadian equity and international equity e-series funds (more or less the funds from getting rid of my RBC RRSP), plus preauthorized payments every payday (bi-weekly or 26 times a year). For now these are just $25 into each fund (so $75 every two weeks in total, or $150 most months with the occasional spike to $225) but my hope is to ramp up to several times that figure over the next two or three years as my other goals, such as debt reduction, are achieved.

I'd also like, in the next few months, to move into a slightly more aggressive mix of 30% each of these three funds (vs 33.333...% now) and 10% in one of their dividend funds, even though that won't have the low MERs of the e-series funds.They seem to get decent returns despite their higher MERs but that's the less important of two reasons for going that way. My medium-term plan is to put that 10% (maybe more) of my investment money into solid dividend-paying stocks - for now, I'll gather money in that fund with the intention of periodically selling out of that and using the proceeds to buy shares. At the small amounts I'm starting with now, though, that is a ways off. Any feedback on this idea (or any other idea I express for that matter) is welcome.

Incidentally, I'm also signed up for the civil service's superannuation plan, which kicked in for me starting with this most recent pay period. This "forces" me (twist my arm!) to invest 7% of my pre-tax income (which the government matches dollar for dollar) in what seems to be a pretty well-managed retirement fund. So there's two levels of investing going on here. I plan on mostly ignoring that one for the foreseeable future and just letting it do its thing in peace. So yeah, a shout-out to the Manitoba government for the 7% raise .

I've also paid the RBC loan down to less than $2500 along with paying token amounts on the other two remaining active debts (by "active" I mean charging interest and requiring a minimum monthly payment). I project having that completely paid off and out of my life by May 31 at the latest, and the CIBC one not a terribly long time after that.

Another positive step taken this month - and this constitutes fulfilling one of the above resolutions, already - is replacing my old credit card with its annual fee and total lack of a rewards program with a new one (still from Capital One) that has no annual fee and effectively 1.25% cash back. So I'll move most day to day purchases to that card, pay it off every pay period whenever possible and in any case zero it a minimum of once a month, and use the cash back... well, I haven't got _any _specific ideas as to what for, and it'll be a while before it amounts to anything of significance anyway, so I imagine I won't touch it for a while. But in any case I'd rather have it than not have it.

So, progress toward a positive net worth and healthy financial life continues apace, indeed it's been an above-average month for that.


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## purple.platypus (Dec 10, 2012)

Okay, I just did my taxes. I'm getting a refund of $2825, one of the few positives about having spent a lot of last year unemployed (and not even EI-eligible having been out of the Canadian labour force for too long for their tastes - I'd just come back from five years in Texas). This will be enough to take the RBC loan right out of the picture, as I have in the meantime paid that down to about $2150. The remainder will help me meet my savings goals that much faster. Note that at that point I will owe no debts charging interest greater than 5.5%.

There's actually a little more coming because EFILE wouldn't accept my forms without me lying and putting a zero in for my past years' unused RRSP contributions - not only didn't I use them but I didn't _tell_ them I wasn't using them, so that plus a small forgotten tax credit (as you can kind of tell, I had a LOT of them) will mean a little more coming after adjustments. So another month or two after my "main" refund arrives there will be another, smaller boost.

By the way, this does not seem to be true, or at least needs further explanation:



MoneyGal said:


> The _RRSP contribution_ gives you a *tax deduction*. It is calculated this way: $100 x 100% = $100. This outlay of $100 on your part will reduce your taxes by $100.


Looking at both the forms and the numbers that come out of them, the RRSP contribution is actually deducted from my _income_, not my total taxes owed, and therefore only reduces my taxes by whatever my marginal tax rate happens to be, NOT by 100% of my outlay. (If you don't believe me check page 3 of your Schedule 1.) _Which is what I said_, or at least took myself to be saying, above, and got pounced on and "corrected" by multiple people for saying. In my case the actual reduction in my taxes owed is around a third of what I paid, not the entire amount. Which is still good, but not the near-miracle people were making it sound like!

Anyway, however that may be, things continue to get better each month with an additional two-and-a-half or so months' worth of progress coming soon from Revenue Canada. Getting rid of that RBC loan and its payments will free up enough cashflow to make other savings and investment goals that much easier to meet as well, so it's good news now and good news going forward.


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## MoneyGal (Apr 24, 2009)

The deduction is calculated at 100% of the contribution. It does not reduce your taxes by $100. The first part of my assertion was right and the second was wrong; I must have been operating on too little coffee (or too much) when I wrote that and I apologize.


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## purple.platypus (Dec 10, 2012)

So the difference between a deduction and a credit, as you and others were using the terms above, is mainly between being _deducted from your income_ and thereby reducing your taxes owed at your actual marginal rate, versus reducing your taxes at some fixed rate (which depends on the credit, but is going to be lower than the marginal rate in the "typical", expected case)?

That's still an important difference, don't get me wrong. And you were correct that I was being sloppy about the distinction earlier. But it's a difference I already had a pretty decent grasp of even if I was using incorrect terminology in my attempts to describe it.


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## MoneyGal (Apr 24, 2009)

Yes to your first paragraph. Sounds like I didn't help clear up the confusion, which there may not have been much (any?) of anyways.


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## purple.platypus (Dec 10, 2012)

Okay, I think I've got it. For my own part I'll try to keep the terms clearer in the future, should the subject come up again.


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## purple.platypus (Dec 10, 2012)

So, I seem to have fallen into updating this thread about once a month (plus responding to any other comments those updates lead to), and it's about time for the March one.

I covered this month's most exciting news - the tax refund - in the previous update. Basically I spent the bulk of it zeroing out my student LOC from RBC, as planned, and the rest was almost exactly enough to zero out my credit card so I did that too. This freed up the large chunk of my regular paycheque that usually gets used paying off the CC (I try to pay it down to zero every paycheque, or failing that, pay enough to not get charged interest - haven't had an interest charge on this CC yet!). So that extra money mostly went to savings.

Since then I've shifted my priorities around a bit. The same portion of my take-home pay (just over 55%) is going to combined debt reduction, savings and investment as before.[1] However, within that portion, which I call my "responsible spending budget", my priorities have shifted a little away from debt reduction and toward savings. (Before - about 77% debt repayment, about 12% each savings and investment. Now - about 61% debt repayment, about 23% savings, about 15% investment, with some flexibility built in to shift the first two numbers around a bit. Percentages don't add up to 100% due to rounding.) In addition, any extra money I find myself with is pretty much going straight to savings rather than being split somewhat arbitrarily among these three goals. There are a few reasons for this:

Increasing desire to move out on my own, which is going to require some money stashed away
It gives me more of a sense of security in case of job loss, etc to have that money handy than merely to have debt paid off
Interest on my remaining debts is relatively low, so the argument that paying them off ASAP saves me money in the long run, while still true, doesn't look that impressive anymore when you actually crunch the numbers.
At any rate, the new budget should still let me have all my debts paid off by the end of 2015 and possibly sooner, I think, though I haven't done any detailed calculations on this since before Christmas.

The latest debt numbers (rounded off, but all are within about $3 of the real numbers):
NSLSC (Federal student loan): $19300 @ 5.5%
CIBC: $1480 @ 5.5%
BMO (canceled credit card, R9): $5750 @ 0%, might be willing to give paid in full letter for less as long as I pay it all at once.

The provincial and RBC loans mentioned in the OP have been completely paid off. I have a credit card as well but as noted above, I keep it paid off (using most of the other 45% of my paycheque to do so, since I use it for almost everything it's possible to use it for to maximize my cash back) so I don't view it as part of the debt reduction budget.

For the immediate future the plan is to focus over half my debt reduction spending on the CIBC loan (and the main reason that proportion isn't even higher is that the minimum payment on the federal loan is fairly high). This will eliminate that debt in under three months at the current pace. A small trickle, to get quite a bit larger once the CIBC loan is paid off, is going into a second savings account with the intention of paying the BMO debt off eventually.

For the next little while I see only steady progress and at most minor refinements to this plan as long as my income remains steady or increases. The biggest potential dark cloud is that my current job term ends in just under two months, so my biggest finance-related priority, obviously, is something I don't generally talk about here - getting a new one lined up.



[1] Note that this is calculated from what I take home after _all _deductions, and therefore doesn't include my contributions to my work's superannuation fund - pension plan, essentially - so this understates the amount of investment I'm actually doing.


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## purple.platypus (Dec 10, 2012)

Well, April has been another month of steady progress, but there is nothing major to report for this month's update. 

One debt reduction milestone has just been hit - my CIBC loan just dropped below $1000 (I figure it at somewhere around $984 right now, and that's based on somewhat pessimistic assumptions about the effect of interest on the total - I'll call to check on the real number sometime next month, as paying it off completely comes within sight). Two other milestones are close - at my present pace, my main NSLSC student loan will drop below $19000 after my next paycheque, and my overall debt load will drop below $25000 the paycheque after that. Two more pays beyond that and the CIBC one will be paid off - that takes me to early-to-mid June given that May is a three-paycheque month.

I don't discuss my employment situation here very often, but suffice to say it looks like I WILL be getting those paycheques, and toward the end, they might even be bigger than my current ones. I got two good pieces of employment-related news about 24 hours apart this week. First, I made the first cut for a better-paying and more secure job than my current one (a test that represents the next stage of the selection process arrives tomorrow). Second, if I don't get that, or perhaps even if I do given how long these things can take sometimes, it appears that my current term will be extended to roughly mid-July, as distinct from its original mid-May expiry. So this journal won't be turning into a discussion of how to meet at least some of your financial goals while on EI, at least not soon!

If I do get that job, it will temporarily reverse the priority I'm currently giving to debt reduction and savings, for reasons I've discussed before - but let's keep this post short, and worry about detailing that if and when it happens. In summary, it's been a month of steady progress, sticking to the plan from the previous entry, with some good news that might mean further improvements down the road.


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## purple.platypus (Dec 10, 2012)

*May update*
Grrr. Looks like I won't be getting that job I'd been hoping for despite making the initial cut.

When it looked like I might, I temporarily de-emphasized debt reduction in favour of saving for a couple of pay periods (the above 61/23/15 split became 42.5/42.5/15), but as of today's paycheque it's back to the usual plan.

Which has my debt vanishing at a pretty phenomenal pace, actually. In just under a year and a half - essentially since January 2012, with a trickle having started the month before that - I've paid off over $10,000 in debt despite having been unemployed for over a third of that period. My overall debt load, at least in terms of what I'd actually have to pay to pay it off, is now below $25,000 (in fact, it's below $24,000 and near to dropping below $23,000).

Another milestone recently hit is that I now owe CIBC less than $500, or rather, I will when today's payment hits. I project having that paid off entirely at the end of June. (That's just one pay period behind the schedule I had in mind in my March post.)

One other event relevant to my financial life took place in the last month, and that was emptying my secondary savings account at RBC and putting that money in a new savings account at ING instead. The final straw in this decision was an offer of a free $25 bonus from ING for starting such an account, but I'd been wondering for a while if there was any real point in keeping that money at RBC. With ING I get a better (less bad) interest rate and it's a lot more convenient with that already being where my main chequing account is. So I've essentially cut my ties to RBC entirely with that move, though I haven't officially closed those accounts yet.


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## purple.platypus (Dec 10, 2012)

*June Update*

Steady, solid if unexciting progress continues on the debt reduction front. As anticipated above, my CIBC loan was completely paid off late in the month, reducing my number of debts to two, BMO and the NSLSC.

However, I am rapidly approaching the end of my current work term - less than two weeks to go! Without anything specific lined up that means being out of work for a while... unless I can make my own.

Yep, I'm thinking real seriously about starting my own business. I've got a game idea that's really starting to come together, and I'm excited about it and hope others will be too. It's still a couple months, and maybe a few pieces of professional art and graphic design, short of the point where I could even do a credible Kickstarter campaign around it, but it's getting there. I have next Monday off and will be talking about the legalities as well as what support is available with the relevant government agencies. At my age and in my current position in life, I feel like I owe it to myself to at least give this a shot.

So yeah, this diary could take a hugely more interesting turn over the next few months. Or I could get the $90,000/yr job I applied for a few weeks ago and decide to hold off on this project for another year. But barring that, if it looks at all like I can make a go of this, I'm going to.


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