# Moving in the right direction, I think



## YYC

Hey everyone,

Just discovered this forum over the last couple days. Really like the content I'm finding here. My wife and I have been trying to turn ourselves around to get our financial situation moving in the right direction. I make a good income, but until recently much of the excess was getting eaten up by a money-losing side business. We divested ourselves of this in August and are working to get back on track. Would love to get some feedback from the group here. Details I suppose you'll want to know:

Me: 37
Wife: 29
3 kids under 6, planning to have 1 more

I work in the technology industry as a contractor, earning $90/hr. My wife still has a small part time business earning ~$1000/month. As a general rule, I try to work enough hours to keep my income above $15,000 per month (I have several clients and reasonable flexibility as to how much/when I work). I also try to keep a reasonable schedule so as to see my kids as much as possible. I don't want to be one of those dads who hardly sees his own kids as they grow up. Anyway, all our income is earned through a corporation in which my wife and I are both 50% shareholders. We typically pay ourselves $2k each in salary per month, topping up to a total of approximately $7.5k with dividends, or using our PHSP, etc.

The corp has a few debts it's clearing up to the tune of $2.5k per month ($2k of it will be paid off by August 2013), so, of the ~$16k we earn each month, around $11.5k is available to us (I assume $2k per month for taxes in the corp). Our net worth sits as follows:

*Assets:*
House - $325,000
Truck - $40,000
Car - $15,000
RRSP - $13,000
Cash - $5,000
*Total: $398,000*

*Liabilities:*
Mortgage - $205,000 (3.69%)
Manulife One LOC - $93,000 (3.5%)
Credit Cards - $13,000 (10%)
ATB LOC - $11,500 (9.9%)
Truck Loan - $48,000 (7.2%)
Car Loan - $17,000 (0%)
*Total: $387,500*

So, yeah, obviously both cars are worth less than we owe on them, the ridiculousness of buying new with no down payment, a mistake we won't be making again. The truck is at a stupid interest rate too, the car at least is 0%. Current personal monthly budget looks roughly like this:

Income:
Salary & Dividends - $7,500
Govt Income - $553
Total: $8,053

Expenses:
Mortgage - $470 biweekly
Water - $125
Manulife Interest - $290
Truck Payment - $885
Car Payment - $393
Cable, Internet, Phone - $120
Gas & Electricity - $300
Credit Card paydown - $800
ATB LOC Payment - $100
Meals out - $300
RRSP Contribution - $100
Fun Money - $200 ($100 each)
Insurance - $232
Groceries - $600
Fuel - $400
Property Taxes - $322
House Cleaner - $400
Child Care - $600 (part time for 3 kids)
Charity - $130
Dog Food - $100
Music Lessons - $200
Misc Monthly needs - $500 (currently towards Christmas presents, but this kind of floats each month as necessary)
Total: $8,037

Alright, so obviously we have made a bunch of dumb mistakes with credit. Flame away, if that's your deal. I'm hoping some of the crowd here can offer constructive advice and critique of 'the plan'.

*"The Plan"*

So, as you can see, the corp has approximately $3,500 each month in free cash flow. Currently that money is being directed to one of the credit cards (comprising the $13,000), in addition to the $800 in the 'personal' budget. That one will be paid off by the end of December. The tentative plan once the two credit cards are paid off (hopefully end of March, April at the latest) was to focus on paying down the truck each month as much as possible. We are currently underwater, as you can see, and given that we want to have a 4th kid, we need a vehicle which can seat 6. We also love to camp, and have a trailer which requires a 3/4 ton or larger to pull (we don't generally take 'vacations', as we do a lot of camping in the summer). Once the truck is in a place where we can sell it for more than we owe (I figure somewhere next fall), the plan would be to find ourselves a nice used Caravan in the $10k range, then buy a minivan and sell the truck. In the spring of 2014, we would search for a used 6 seater pickup truck to pull our trailer with in the $10k range.

So, credit cards paid off by end of April, truck in a positive value by the fall, then maybe the ATB LOC? I'm not sure. I know at some point (like, ASAP) we need to start saving some money for retirement, but I also know I need to pay off our debts before it makes sense to do so. My thought was that the truck is such a huge monthly payment that getting rid of it frees up significant cashflow to either accelerate other debt repayments, or start contributing to a TFSA. 

Ok, so don't think I've missed anything major, I'm certainly answer any clarifying questions people have (I find myself confused sometimes, trying to budget between the corp and our personal), but would definitely appreciate the thoughts of those here as to how best to approach our situation. Thanks, and I hope to be able to contribute to others here someday soon as well!


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## ddkay

Whoa, why so many kids? and a pet... slow down, your household income is < $100K? When does the 15K/month come into play? I think your grocery budget is too low, but maybe I live in an expensive city. Camping is a huge money pit. Spend less on recreation, people don't need to vacation every year or drive a new Audi every year. You can still have fun, just learn to do it with less money. Retirement?! I would seriously start saving for your kids education, at the very least you should be prepared to cover half


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## YYC

We are trying for that elusive boy. We both always wanted to have lots of kids, have drawn the line at 4.

As far as camping, as I said, we don't get in planes to take vacations, so that's pretty much our 'quality family vacation' time. We love the time spent bonding with the kids at campgrounds.

And yes, education savings for the kids is something on my mind too. Our household income is actually more like $190k, not under $100k. We are tryng to pay as much as we can directly to our personal debt (this will get classified as a dividend at tax time) from the corporation so that we don't have to pass the money through two accounts, however it's all still earned by us. We budget an amount that's enough to pay our bills and make a little headway on debt, then once the corp is done it's month, we put any excess above a monthly floor in the corporate bank account towards personal debt. However maybe that's the wrong approach. 

And yes, regarding the cars, they were definitely a mistake, especially the truck. Anyway, trying not to dwell on that, just make the best decisions moving forward to get ourselves into a good position. I feel like we should be able to make headway pretty quickly given my income, but given my disposition towards buying things I can't afford, I thought I could benefit from speaking to the group here. Thanks for the reply.


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## Argonaut

The good news is you make a lot of money. The bad news is that you have zero liquid assets at 37 years old, and way too much debt. I realize life happens, and a wife and kids and all that. But there's work to be done.

1. Pay off all debt.
2. Build up your liquid assets to $1 million.

This will take years, but that's all part of the game. Go for it!


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## YYC

Argonaut said:


> The good news is you make a lot of money. The bad news is that you have zero liquid assets at 37 years old, and way too much debt. I realize life happens, and a wife and kids and all that. But there's work to be done.
> 
> 1. Pay off all debt.
> 2. Build up your liquid assets to $1 million.
> 
> This will take years, but that's all part of the game. Go for it!


Sounds good! We really are trying to make better decisions (we ARE making better decisions), and are trying to approach this problem we've created for ourselves in a logical fashion. So, credit cards, then truck, then line of credit. I figure by paying off the 2 credit cards and getting rid of the truck payment, we'll free up close to $1700 a month. This can be used to accelerate debt even faster, but also gives flexibility to live on less if I ever need to take a pay cut or something.


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## Four Pillars

You are definitely on the right track. Your income is pretty high and you have identified some immediate debts to pay down and will hopefully keep on paying down the other debts over time.

Your debt payments, not including the mortgage are $2500/month which is pretty good. 

Don't worry about the car loans - cars cost money whether you pay for them in advance or later on and that's just the way it is. Get the loans paid off and drive the cars.

You've obviously had some serious spending problems in the past and I think that the main thing going forward is to avoid more of the same.


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## YYC

Four Pillars said:


> Don't worry about the car loans - cars cost money whether you pay for them in advance or later on and that's just the way it is. Get the loans paid off and drive the cars.QUOTE]
> 
> For my car (I commute with it), absolutely that's the plan. With the truck, however, we'll need to get rid of it when we have a 4th. We need something that can seat 6. We're thinking it would make more sense to get pay down the loan on the truck, then sell it and get a used minivan for cash, and a used truck for cash (which would get used just for camping and taking things to the dump, helping friends move, carrying things just because I can, etc). The other option we've considered is trading the truck in on a Suburban, but we'd need a 3/4 ton Suburban, and those are generally nearly impossible to find used, which means ordering new from the factory, which means the payment doesn't go away, in fact it likely goes up.


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## rd_aaron

Is it possible to "re-consolidate" your debts in your Manulife One LOC? Having your truck loan go down to 3.5% would certainly save some interest (nearly $150/month). I'm not exactly sure how Manulife works though.

Otherwise, I second Argonaut. Keep paying down debt and start building some liquid assets. Open up a TFSA for you and your wife. You'll have $50,000 in contribution room between the two of you as of January 1st. Also open up an RESP for your kids. Even a modest monthly contribution will be pretty beneficial by the time they are 18.


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## the-royal-mail

YYC, please note it is not necessary to quote everything you respond to. This is a threaded view, we've already read the comments you are quoting.

Anyway, your plan seems like you have a lot going on. You have a lot of assets but you also have a lot of liabilities. Many of your costs are justifiable expenses and I think it's clear you need two cars and many of the other expenses. Kids are expensive. Other than paying the debts first, minimizing use of credit and building up some emergency savings (all of this will take several years, no instant gratification) I am not sure what else you can do. Your main problem seems to be the LOC and CC debt. Why were these caused? Are you still spending the same way? Find out what caused that debt and stop doing that. It has left you in a financially unsafe position.


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## Four Pillars

YYC said:


> Four Pillars said:
> 
> 
> 
> Don't worry about the car loans - cars cost money whether you pay for them in advance or later on and that's just the way it is. Get the loans paid off and drive the cars.QUOTE]
> 
> For my car (I commute with it), absolutely that's the plan. With the truck, however, we'll need to get rid of it when we have a 4th. We need something that can seat 6. We're thinking it would make more sense to get pay down the loan on the truck, then sell it and get a used minivan for cash, and a used truck for cash (which would get used just for camping and taking things to the dump, helping friends move, carrying things just because I can, etc). The other option we've considered is trading the truck in on a Suburban, but we'd need a 3/4 ton Suburban, and those are generally nearly impossible to find used, which means ordering new from the factory, which means the payment doesn't go away, in fact it likely goes up.
> 
> 
> 
> My suggestion is to figure out your financial goals ie where do you want to be financially in 5,10 years?
> 
> As I mentioned, your non-mortgage monthly debt payments are $2,500 per month which I think is pretty good for your income. However, you have $182,500 of unsecured debt. Is the Manulife debt part of your mortgage? If so, then you only have $90k in unsecured debt.
> 
> Figure out how long it will take you to get to various debt levels and see if that makes sense for you. For example would you be happy with becoming debt free in 10 years? 5 years? Some other number? You have to sacrifice in order to shorten the debt repayment so that will be part of your decision.
> 
> You also aren't saving much for retirement. If you want to pay off your debts first, that is fine, but if that takes a long time - you will be getting a very late start on retirement savings.
> 
> I'm not clear on the car situation - in the end will you have three vehicles? A car, a minivan and a truck? That extra vehicle will cost a lot of money even if you buy it used. Or will you be selling the car?
> 
> Also - how much is your trailer worth? I don't see it on your asset list.
Click to expand...


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## YYC

Hi, sorry, the trailer is worth ~$20k, forgot to include that on the assets.

Yes, the one thought would be that we would have 3 vehicles, 1 which doesn't get driven very much. It seemed that would still be cheaper than having a single, very expensive, Suburban which could do it all. I'm really not sure what the best option is here. We definitely want to keep camping once we have a 4th kid, so it will need to be addressed at some point.

To answer the other question, Manulife is secured 2nd position behind the mortgage on our house.

At the moment there's no room on the Manulife to 'reconsolidate'. 

Finally, yes, we have had a tendency in the past to 'just buy things', while reassuring ourselves that we make lots of money so we'll be able to pay it off. We're working hard at changing these habits, and me posting here is also part of trying to get a clearer picture of our situation. As well, we had a side business which was losing more money than we realized, it sort of snuck up on us. We've shut down that money pit, which has helped.


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## Four Pillars

YYC said:


> Yes, the one thought would be that we would have 3 vehicles, 1 which doesn't get driven very much. It seemed that would still be cheaper than having a single, very expensive, Suburban which could do it all. I'm really not sure what the best option is here. We definitely want to keep camping once we have a 4th kid, so it will need to be addressed at some point.


I don't know either. I know that between insurance and maintenance - an extra vehicle isn't cheap even if it isn't being used much. On the other hand if the truck + minivan aren't that expensive to buy, then that might be your best option.

Is commuting in the truck for you an option or does that use too much gas?


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## Young&Ambitious

I am just being curious and nosy here, what was the side business?


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## the-royal-mail

YYC, thanks for the additional info. I agree that coming here was a great start.

How about setting some short term goals for yourself? ie. "Pay off $x and incur no new debt by date y" type of thing? It doesn't have to be the whole shot but when in debt repayment I found it helpful to set up a simple excel tracking sheet that helped me track my progress and remaining balances etc. Set up a repayment schedule in this sheet and go to it.

Above all, don't get discouraged. This will take a long time and you will have to make some tough decisions along the way. Since you said you have kids perhaps also start teaching them how to manage money etc.

Feel free to use this thread to keep yourself on track if you think that will help.


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## ehrof

It seems that you may have some flexibility to work more hours to increase your income. From this I derive that you've well valued. Any chance you can up your hourly rate, even for one of you clients? This will give you more income but not impact your family time (which seems to be important to you - bravo!).


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## YYC

To answer a couple more questions:

- Wayyyyy too expensive to drive the truck every day. I commute approx 80km each way, with my new Chevy Cruze that equates to around $60/week in gas. With the truck it would be around $160-$180, not to mention the additional hassle of parking it in city parking spaces (not fun with a 3/4 ton). 

- Increasing my hourly rate is not an option at this time. I just recently got a $10/hr bump from my 'pimp'. I risk pricing myself out of work if I try to go much higher.

- Without getting into too much detail, the side business was a publishing business, distributing a free publication and selling advertising. Delivery and printing costs were eating us up and we didn't have enough advertising revenue so we closed down a number of our territories. We still do it in a few select areas which are strong (this is my wife's ~$1000/month).


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## Feruk

Two thoughts/ideas:
1) Why do you care if the truck is in a cash positive position before you sell it? If you sold it today at a negative, would you be down more than selling next year at a positive but having a year of payments between now and then stacked on top?
2) Does your wife's job actually bring in any money after avoidable expenses? You said she's making $1000/month, BUT you pay $600/month in child care not to mention other expenses likely associated with her part time work (fuel ect, who knows). Would you guys come out on top monthly if she didn't work and looked after the kids for a couple years instead? Not trying to be rude, but it's a little confusing that you both want a big family, and yet she'd rather work a job that pays nothing than look after that family.


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## YYC

We probably would be better off without the job/business that barely covers child care from a strictly financial viewpoint. That said, there are some other family issues involved, including my wife's sister with Down Syndrome who this business provides a job for, among other things. It still might happen that we get rid of it completely, but it's an issue that requires more time to decide on. 

As far as the truck, we don't really have any cash savings right now, so selling it for a loss at the moment isn't really an option unless we take on new debt somewhere else to finance it. I've been trying to avoid that, but maybe my thinking is wrong there.


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## MoneyGal

YYC said:


> We probably would be better off without the job/business that barely covers child care from a strictly financial viewpoint. That said, there are some other family issues involved, including my wife's sister with Down Syndrome who this business provides a job for, among other things. It still might happen that we get rid of it completely, but it's an issue that requires more time to decide on.
> 
> As far as the truck, *we don't really have any cash savings right now, so selling it for a loss at the moment isn't really an option unless we take on new debt somewhere else to finance it*. I've been trying to avoid that, but maybe my thinking is wrong there.


But it's just debt, and you have lots of that already. You don't need to think about this debt separately from your other debt. If you sold the truck, you'd be able to retire a big chunk of the truck-related debt, and if you replace the truck (why does an IT contractor need a 3/4 ton truck?) with something cheaper to operate, you will save every single day that you drive the replacement vehicle. I take it you are leaving the truck for your wife to drive every day, or does it go undriven? Do you really need two vehicles?


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## MoneyGal

OK, I went back and read your first post in more detail. 

You might benefit from thinking differently about your current truck loan. There's no real benefit to you in "waiting until you can sell it for more than you owe on it." Why? Because servicing the debt is costing you a lot, as a result of the high interest rate on that specific loan. In fact, the reason that it is going to take you a long time to reach that break-even point is the high interest rate. You would be further ahead to sell the truck now because it retires more of the truck loan debt now, and frees you from that high interest rate - and put your plan of buying a cheap used Caravan into effect now.

Don't believe me? Model the TOTAL costs of keeping the truck for (let's say) two more years versus replacing the truck now. Include interest costs, depreciation, maintenance costs, and insurance. Unless you buy a very crappy used car and need to budget a lot for repairs (and/or you buy an "expensive" used car at a high interest rate), you will come ahead by replacing it now compared with keeping it and replacing it "later." The cost of money is just too high in your current scenario.


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## YYC

Yes, the truck is at home for my wife to drive. We definitely need two vehicles, but she doesn't need a truck for most of her day to day driving. We have a 3/4 ton truck because of the trailer, so we would want to get a tow vehicle before the next camping season, however something used would definitely suffice.

This is an interesting thought. So, let's say we're ~$10,000 underwater on the truck right now (could be slightly less, hard to say). If I get $10,000 of new debt, plus $10,000-ish to buy a replacement vehicle, that's $20,000 of new debt, but savings of $900 a month on the truck payment. Maintenance on the new vehicle might be slightly higher, but fuel/insurance costs will be lower, so maybe we call that a wash. Now's where I get confused, how do I calculate which way I come out further ahead? The new debt would likely be at a higher interest rate than the 7% the truck loan is currently at, but the minimum payment will be much lower. Can anyone help me with figuring this out?


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## MoneyGal

It isn't $10K of new debt. That's $10K you currently owe. You just would no longer have the asset against which it is owed. 

Why would you assume the new debt would be at a higher rate than 7%? 

How you calculate which way you come out further ahead: 

Take a one-year period for the sake of argument. 

Put in all your expected costs for the truck over that one year - payments, maintenance, useage costs, depreciation, insurance. 

Put in all your expected costs for a used vehicle over the same period. (You are going to have to do some guesstimating in both scenarios.)

Compare the two figures. :encouragement:


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## YYC

Well, I don't have any room on any of my line's of credit, so I would have to go get approval for more, or use a credit card, which is at around 10%, or find some other way to access ~$20k. Maybe it would be less than 7%, but I don't see it as a safe assumption.

I'll start working on it and post the numbers here for validation. Thanks.


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## the-royal-mail

How many times a year do you really NEED such a large vehicle? Could you not just rent a truck when you need a truck, and then you can downsize to a much smaller/cheaper car in the interim?

Yes, I know it would not be as convenient (you would need to book in advance to get right vehicle etc) but as I see it you have a huge financial project before you and the way I see it you need to make significant changes if you want to get this under control.

Other alternatives include renting motorhome or cottage, seems to me that would be cheaper than owning and could save you some cash at the moment.


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## MoneyGal

Either I'm missing something, or you are missing something, in this discussion. 

If you sell the truck, you can make a huge balloon payment against the truck loan. Then, keeping the loan at the same term, your payments on that loan will go way down, as will your gas costs (and potentially insurance costs). (Because you are now servicing $10K of debt at 7.2% versus $48K of debt at 7.2% -- giving you a montly payment of about $250 versus $900 -- that's a savings of $650/month.) 

If you suspended payments on the credit cards, making only the minimum payments, wouldn't you have $10K saved in just over 3 months - meaning you could buy a $10K car in cash?


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## YYC

You can't just sell the truck but keep the loan, as I understand it. The truck loan is registered to the truck, so any buyer would need to see proof that the loan was being paid off and removed from the truck before the transaction could complete (otherwise they risk having a vehicle they paid cash for with a lien on it). So, it becomes a little bit complicated, in that I probably need to trade in my truck and buy a used vehicle from a dealership, who is willing to arrange financing for the difference between the value of the truck and the current loan, in addition to the cost of whatever vehicle we buy. There's a decent chance someone would be willing to do this on a new vehicle, seems less likely they'd be willing to on a used vehicle. I'll do a bit more research and see what the options are.

TRM, I've actually looked into that before, but you are not allowed to tow with rental trucks, strict prohibition.


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## MoneyGal

OK, I am missing something. I did buy a new car, once. With, uh, cash. :encouragement:

Would it be worth going back to Manu One to consolidate everything?


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## MoneyGal

Or increasing your mortgage - is that an option? You may not have any room to move, though.


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## YYC

Manulife could be an option, depends on the value of my house at the moment and where an appraisal comes in. I need to roll this around in my brain for a bit. Will post back more later. Thanks!


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## MoneyGal

Would it help if you worked out, just as a "rolling around in your brain" thing, a spreadsheet which showed the debt payments you are making each month and how much of your monthly payments are interest?

I kind of feel like I'm not sure what your goals are. Maybe it is just "reduce debt" and that's what you've laid out so far. 

The input I've been providing has been suggesting that you might reduce spending as well. Or "reduce total interest expenses." 

The plan you've laid out is not bad. I am just interested in exploring whether there are other options to consider, too.


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## YYC

Yeah, a spreadsheet is definitely in order.

I think the goal so far has been "reduce debt" and "stop buying things on credit". It gets a bit bewildering and confusing when I try to think too much beyond that. I sort of figured that once I pay off the debt it will get clearer what a logical next step would be. Sort of like focusing on the first step in front of me instead of focusing on the one after that. But maybe it is time to get a bit more specific with things.


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## Four Pillars

YYC said:


> Yeah, a spreadsheet is definitely in order.
> 
> I think the goal so far has been "reduce debt" and "stop buying things on credit". It gets a bit bewildering and confusing when I try to think too much beyond that. I sort of figured that once I pay off the debt it will get clearer what a logical next step would be. Sort of like focusing on the first step in front of me instead of focusing on the one after that. But maybe it is time to get a bit more specific with things.


Nothing wrong with keeping it simple - you have a good plan in place. The reality is that you are constrained from doing much else other than pay off debt so just work on that.


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## YYC

So I stopped by a Dodge dealership yesterday on the way home. They are more than happy to roll negative equity into a new car payment (not used). I got some pricing and finance rates and spent the evening thinking and discussing with my wife. We decided in the end to stick with the original plan for the following reasons:
- Immediate equity loss on buying a new van would probably knock us closer to $15,000+ in negative equity the day we drive off the lot
- We always rush into things. Flipping the truck into a van feels like a shortcut and rushing into something again. We need to prove to ourselves that we can stick with a plan for more than a month at a time without getting distracted.
- Pressure to save enough in the next 5-7ish months to replace the tow vehicle in addition to debt repayment plans creates some additional stress
- Mainly, it just didn't feel like a good decision

I appreciate all the input here. Will post back soon with any updates.


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## MoneyGal

I'm glad. I think Four Pillars' perspective on this is better than mine was. I got distracted by "why such a big truck?" and I started thinking about what I personally would do. I think FP often has a better "real-world" sense of what people need to do. 

BTW a dealer will always be happy to roll "negative equity" into a new car payment. Guess why? 

I do think the process you went through yesterday is probably useful though. You and your spouse will feel good if you are on the same page and working towards the same plan, and considering and rejecting options is a big part of making workable plans.


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## jack cash

*Missed question*

Quick question... you mentioned you couldn't raise your hourly rate, but can you work more hours? I know you want the work/life balance, but if you worked an extra 5 hours a week @ $91 that is another $1820 before taxes/monthly. Which gives you more cash in the pot for that debt pile you've built.

Also, Uhaul rents trucks for hauling(hitch and wired) and although they're ugly it is cheaper than owning a vehicle you're only using during camping season.

I think it is great that you're talking about it and taking action. 

Cheers.


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## Guigz

I second Jack Cash:

Have you thought about just renting a truck when you actually need it (trailer hauling) instead of paying for the convenience all the time? Your camping trips, while very inexpensive on the surface, are likely costing you more than a stay at a 5 stars resort if you were to include the depreciation, and financing cost of your truck.

What struck me about the initial budget in the op is that expenses nearly = incomes. This is usually not a good sign. I think it is great that you are planning to pay your debts and free up some cash flow, just make sure that when the cashflow is there, that you don't just put it all back in expenses.

Suggestion: Add an investment line item in your budget and treat it like a fixed expense.


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## YYC

Guigz said:


> What struck me about the initial budget in the op is that expenses nearly = incomes. This is usually not a good sign. I think it is great that you are planning to pay your debts and free up some cash flow, just make sure that when the cashflow is there, that you don't just put it all back in expenses. Suggestion: Add an investment line item in your budget and treat it like a fixed expense.


I like this idea a lot. Thanks. Regarding the income=expenses, we sort of budget it that way, if you look at the income I make, we pay ourselves enough to cover expenses plus some limited debt repayment (the $800/mo). However, I actually earn a fair bit more than that, but we leave money in the corporation each month until it has paid its bills etc, then pay the excess above a minimum balance towards personal debt at the end of the month. At least this is the plan. As I said, we've just recently gotten rid of part of the business which was sucking a fair bit of money out of the corp each month. It takes a bit of time to recover from that. However, October was my best month ever, from a total earnings standpoint (over $18,000, so yes I do work more hours sometimes when they are available and depending on family commitments, etc, but the initial budget was more to show an average), so we should be able to make a big dent in the debt with October invoice, which gets paid here in 10 days.


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## YYC

As of December 3, 2012.

*Assets:*
House - $325,000
Truck - $39,600
Car - $14,800
RRSP - $13,000
Trailer - $15,000 (forgot this in initial post)
Cash - $5,000
*Total: $412,400*

*Liabilities:*
Mortgage - $204,500
Manulife One LOC - $93,000 
Credit Cards - $11,200 
ATB LOC - $11,500 
Truck Loan - $47,400
Car Loan - $16,600 
*Total: $384,200*

*Net Worth: $28,200 *

Just an update, probably won't do this every month, but maybe quarterly going forward. Anyway, continuing to move in a positive direction. Couple of notes, depreciating the truck by $400 per month, just a guess but should be close enough. The loan principal is paid down ~$600 in principal per month. Depreciating car at $200 per month, principal paid down $400 per month. Trailer is estimated well under market prices at $15,000 so I won't bother depreciating that for now.


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## YYC

Ok, so I was thinking quarterly, but I figured I'd make a post to start the new year so I can post a few goals for the year along with an update.

Assets:
House - $325,000
Truck - $39,200
Car - $14,600
RRSP - $13,600
Trailer - $15,000
Cash - $5,000
*Total: $412,400*

Liabilities:
Mortgage - $204,000
Manulife One LOC - $93,000 
Credit Cards - $8,000 (paid one off! only one left!) 
ATB LOC - $11,500 
Truck Loan - $47,250 (squaring this up based on loan calculator)
Car Loan - $16,400 (squaring this up to match home spreadsheet)
*Total: $380,150*



Net Worth: $32,250 

Continued progress moving in the right direction this month. Feeling really good. We should have the last credit card paid off by the end of March, then we'll begin paying down the truck, along with accelerating the mortgage and starting to pay off the ATB line of credit. Considering doing a blend and extend type thing with the mortgage this year, if TD Canada Trust will do it for us without penalty. Our mortgage comes up in August of 2014, and I'm concerned rates might be significantly higher by then.

My financial goals for 2013 are:
- $50,000 growth in net worth.
- No new consumer debt acquired
- Open TFSA for my wife and myself, begin contributing by the end of the year
- Open RESP for all our kids, begin contributing by the end of the year


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## MoneyGal

Great news! Great update. Great start to the new year!!!


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## Pennypincher

Great job on paying off a credit card. Sounds like you are moving in the right direction. I look forward to seeing your goals met


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## YYC

Hello folks. Been busy working hard and trying to enjoy life with the family. In the meantime we've made some progress. We traded in our truck on a used Yukon 3/4 ton which is equally bad on gas and has a monthly payment of about the same amount. It also gives us passenger flexibility. We anticipate keeping this vehicle for a long time as it meets our family needs very well. It turned out our truck was worth a fair bit less than we thought on trade in (ie: not $39,200 as estimated in the January 1st update), I guess I shouldn't be surprised by that. In any case, you'll see in the numbers below that it appears the net worth has stagnated, but in reality we've paid off a bunch of debt, as well as making a few other positive changes.

Assets: 
Cash	$5,000.00 
House $325,000.00 
RRSP $13,382.00 
Yukon $33,000.00 
Car $13,400.00 
Trailer $15,000.00 
TFSA $25.00 (just opened)
RESP $0 (just opened, deposits starting in July)
Total: $404,807

Liabilities:
Credit Card 1 $0 
Credit Card 2 $0 
ATB LOC $11,600.00 
Mortgage $201,266.00 
Manulife One $92,750.00 
Yukon Loan $50,480.00 
Car Loan $14,000.00 
Total: 370,096

Net Worth: $34,711

Also, you'll see I've opened a TFSA for myself, as well as a family RESP plan for the kids. Have stuck to our goal of no new consumer debt and have not made any significant purchases on credit. My IT income continues to be stable in the $15k+ range per month. Other business income is holding steady, slightly improving perhaps, but it's not a drag on the finances anymore. We did a blend & extend with our bank for 10 years and are aiming to have the mortgage paid off in ~8.5 years. Also consolidated everyday banking back to our PC account and are no longer using the Manulife one product for day to day (it was just impossible to make any headway on it, couldn't get any traction when using it). We have just started making a $500 a month payment to this and otherwise it sits idle. Next goal is the ATB LOC, which I have budgeted to make a $4,000 payment on in July. Once that is paid off in a few months, I think I may tackle the Yukon loan, though would welcome input on that, maybe I should go after the Manulife One balance next. I'm not sure if we'll hit the goal of a $50k net worth improvement in 2013, but all in all I am feeling very positive about the direction everything is moving.


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## rd_aaron

Paying off ATB LOC first is smart since it's the highest interest rate. Pay off the Yukon loan next as I am assuming its interest rate is much higher than the Manulife One interest rate. In fact, if it was possible, I'd add the Yukon loan onto the Manulife One account, and then set up an automatic payment plan so you never see the money that is used for paying down the debt.


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## YYC

rd_aaron said:


> Paying off ATB LOC first is smart since it's the highest interest rate. Pay off the Yukon loan next as I am assuming its interest rate is much higher than the Manulife One interest rate. In fact, if it was possible, I'd add the Yukon loan onto the Manulife One account, and then set up an automatic payment plan so you never see the money that is used for paying down the debt.


Yes, in terms of interest rates, it goes roughly:

ATB LOC: 7%
Yukon Loan: 6.4%
Mortgage: 4.2%
Manulife One: 3.5%
Car Loan: 0%

We can't add the Yukon onto the Manulife at this time, as there is no real room on that (it was hovering near the limit when we were using for day to day expenses, hence the reason we have stopped using it). We could pay down the Manulife then add the truck, but I think at that point it's simpler just to pay down the truck directly.


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## YYC

Brief update. Continued progress. Opened self directed TFSA for myself, and family RESP for my kids, over half way paid down on the Line of Credit, no new consumer debt acquired. Once LOC is paid off, will focus on the Yukon loan, as it has the highest interest rate, and is also the biggest monthly amount, at $900/mo. Also, locked in mortgage at 4.19% for 10 years, just before the rates went up. Big goal is to have this paid off before the 10 years is up. I have been playing around with an amortization calculator and figure I should be able to do it within 8 or 9 years.

*Assets:* 
Cash	$5,000.00 
House $325,000.00 
RRSP $13,740.00 
Yukon $32,000.00 
Car $12,500.00 
Trailer $15,000.00 
TFSA $225.00 
RESP $350 
Total: $404,215

*Liabilities:*
Credit Card 1 $0 
Credit Card 2 $0 
ATB LOC $5,860.00 
Mortgage $198,742.00 
Manulife One $92,500.00 
Yukon Loan $48,859.00 
Car Loan $16,534.00 (I was estimating before, found the initial paperwork and this is a corrected balance)
Total: $362,495

*Net Worth: $41,720*


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## My Own Advisor

Sounds like you're making progress YYC, always a good thing.

Continue paying down the highest interest debt. Painful now, but long term, you'll be glad you did. Keep up the progress.


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## tiffbou2

Congrats on improving your net worth this last year. I've been following your thread and glad to see you paying off those CCs and progressing.
I just wanted to pop on to say I understand why your wife is working partly to provide a job for her sister. I too have a sis with Down Syndrome and know first hand the serious lack of opportunities and funding for people with disabilities. I am curious what sort of job sister does? Right now my sister is in a community living day program which my parents pay for and which she is darn lucky to be in given the size of the waiting list. My sister is in her early 30s and still lives with my parents but they are now approaching 70 and are tired. There seems to be no other options anymore than to live with family.


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## Homerhomer

Good for you for creating a plan and sticking to it, great job.
One thing I would add which may make your net worth look not so rosy is including cars in it, yes they have resale value but at the end they are tools which will be worthless, not much different than furnitures and other assets we have to pay for to get by.


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## YYC

Hi Homer,

I agree that the vehicles are not exactly great assets, but since I am showing the loan balance as a liability, it only makes sense to include the estimated resale value of the vehicles too, doesn't it? I am depreciating them each month in my estimates, if that helps. Also, once I get the loan paid off for each vehicle, I intend on removing the vehicle from the net worth calculation entirely. Does that seem reasonable?


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## Homerhomer

YYC said:


> Hi Homer,
> 
> I agree that the vehicles are not exactly great assets, but since I am showing the loan balance as a liability, it only makes sense to include the estimated resale value of the vehicles too, doesn't it? I am depreciating them each month in my estimates, if that helps. Also, once I get the loan paid off for each vehicle, I intend on removing the vehicle from the net worth calculation entirely. Does that seem reasonable?


Yes, that's reasonable, for me both methods have merits (including cars and excluding cars from assets) ;-)


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## YYC

Any thoughts from the group on maybe paying off the car loan first? I figure I will have the line of credit from ATB killed by the end of November, so I need to decide what to work on next. I know the Yukon has a higher interest rate, but is also a much larger balance that will take longer to pay off. I could probably have the car paid off by April or so, which would free up $400 from my monthly cashflow, this is appealing. Anyone have thoughts either way?


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## Four Pillars

YYC said:


> Any thoughts from the group on maybe paying off the car loan first? I figure I will have the line of credit from ATB killed by the end of November, so I need to decide what to work on next. I know the Yukon has a higher interest rate, but is also a much larger balance that will take longer to pay off. I could probably have the car paid off by April or so, which would free up $400 from my monthly cashflow, this is appealing. Anyone have thoughts either way?


You'll pay more interest if you work on the lower interest loan first. If the gap isn't too much and you can pay off the smaller loan quickly, then it probably doesn't matter too much.

In your case, there is a big gap



YYC said:


> Truck Loan - $48,000 (7.2%)
> Car Loan - $17,000 (0%)


There is also a gap between your car loan and all your other debts since the car loan is 0%.

So it will cost you money to pay the car off first. Is it worth it?


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## YYC

Little brag post today, the Line of Credit is paid off! We got a small final disbursement from an inheritance, of around $1900. This allowed me to pay it off a month early. So this post is just a big WOOHOO! No more consumer debt! All we have left now are vehicles and housing. Feels good, there's still lots of work to do, but that makes over $30,000 in consumer debt retired in the last 12 months.


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## PrairieGal

Great job YYC!


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## mind_business

I just read through your entire diary YYC. Not sure why I didn't see it before. First of all ... well done improving your financial situation!!! 

I was just going to comment on two things that I would considering taking a second look at. 

1st - how often do you guys use the camper? Would it make sense to budget for cottage rentals in the summer instead of maintaining both the trailer and truck? If it's an important way of life for you guys, then I understand why keeping them is important.

2nd - when I started my diary on this site, my wife and I took a hard look at our budget. We reduced, or removed budget categories where we could. Dining was at the top of the list. We are down to about $50 per month, which is down considerably from where we were. Although I realize many people use dining out as a form of entertainment, we found that we could make special meals at home that were more satisfying than eating the sub-standard food that you typically get at restaurants. You could shave at least $200 from your $300 dining out budget ... which equates to a $200 per month raise 

To be honest, there seems to be quite a few budget lines missing from your original list. There may be more opportunities for savings. Keep in mind that most 'service' companies are willing to negotiate if you suggest you are considering switching the service to another company. Cable/Satellite TV, cell phones, land lines, banking fees, etc, etc.


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## YYC

Hey Mind_Business, thanks for your comments. Regarding the trailer, we really value the camping as part of our lifestyle. We don't take big family vacations on planes, generally speaking, so we get a lot of use out of our trailer in the summer months. We don't really plan on selling it for a long time to come.

Regarding the budget, things have changed a fair bit since my original post. Here's a more accurate current snapshot.

Income:
Salary & Dividends - $7,600
Govt Income - $397
Total: $7997

Expenses:
Mortgage - $1329 monthly
Water - $100
Manulife Payment (interest plus paydown principal) - $500
Truck Payment - $900
Car Payment - $393
Internet, Phone - $100 (cancelled cable)
Gas & Electricity - $300
RRSP Contribution - $100
TFSA Contribution - $200
RESP Contribution - $200
Fun Money - $200 ($100 each)
Insurance - $232
Groceries - $800
Fuel - $500
Property Taxes - $322
Child Care - $400 (part time for 3 kids)
Charity - $130
Dog Food - $100
Massage - $130
Kids activities - $500 
Misc Monthly - $500

Total: $7936

What other line items are you thinking I'm missing, by the way? We actually don't have a 'meals out budget' these days. We do still eat out once in awhile, but not nearly as much, and we fit it into the 'misc' category. Fuel is usually lower than budgeted, but groceries are sometimes higher. Anyway, just removing the credit card and line of credit paydowns opens up a bunch more wiggle room in the budget. As noted in the original post, there is quite a bit more income than this in the corporation, and that is what I've used to aggressively pay off our debt. The corp has a bit of debt it's been carrying, so I'm actually thinking I'll be focusing on that for the next few months. This will stagnate our personal debt paydown for the short term, but will free up a bunch of corp cash flow going forward which will allow us to increase our net worth even faster in the future. Thanks for your feedback.


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## YYC

Well, it's been awhile since I updated this! We're still moving things in the right direction. Here's an updated snapshot of my net worth:

*Assets*
Cash: $5,000
House: $325,000
RRSP: $16,083
Yukon: $30,000 (depreciating at $300/mo)
Car: $10,400 (depreciating at $300/mo)
Trailer: $15,000
TFSA: $1,673
RESP: $3,112

*Total: $406,268*

*Liabilities*
Mortgage: $194,102
ATB LOC: $0
Credit Card 1: $0
Credit Card 2: $0
Manulife One: $90,651
Yukon Loan: $43,392
Car Loan: $3,385

*Total: $331,530*

*Net Worth: $74,738*

We're expecting our 4th child in June, and have divested ourselves of the dog. Life continues to hum along and the light at the end of the tunnel is becoming steadily brighter. Even though it's not the best decision based on math, the low balance on the car made it our first choice to pay off. It will be paid off soon, which frees up an additional $393 in our monthly budget that can be used for debt/savings/kids soccer fees/etc. The Yukon loan is probably next after that, although it will take more time. Still, if I really focus I can probably kill it within a year or so. Good times ahead!


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## PoolAndRapid

..


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## Calgary_Girl

And you "divested" yourself of the dog why exactly?


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## YYC

We found a new home for the dog where she would get more exercise and have other dogs to play with. With the 4th baby coming, we were worried about her stepping on the newborn accidentally, since she was a very excitable boxer and not the most aware of her size at the best of times.


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## My Own Advisor

Probably a smart move, re: dog. I've read about too many instances whereby the child has been attacked by dogs when, unfortunately, the parents didn't realize it could happen....

The good news YYC, assets up, liabilities down. Nicely done.

When you kill that mortgage and direct cash flow to increasing assets, you'll be laughing. Even with 4 kids


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## Marguerite Gilmore

Thanks for sharing this topic...
You are definitely on the right way.


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## Abbie Darcy

I think you are doing great.... Thanks for the post..


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## YYC

Time for an update I suppose. Slower progress since my last update, simply because I worked a lot less this summer in order to spend time with the kids & family, and we took a 3 week family vacation to Ontario, which (despite couch surfing with relatives) cost a nice chunk of change. Still, progress, and no backsliding. Car paid off! Next trip (2 months in UK in 2016) is our next big savings goal, so we've started working on that. Work should be super busy over the next few months, which will allow me to put lots of money away and/or on debt.

*Assets*
Cash: $5,000
House: $325,000 (this has actually gone up, but I'm going to leave it where it is)
RRSP: $16,912
Yukon: $28,500 (depreciating at $300/mo)
Car: $9,200 (depreciating at $200/mo)
Trailer: $14,600 (depreciating at $200/mo)
TFSA: $2,289
RESP: $4,948

*Total: $406,449*

*Liabilities*
Mortgage: $190,700
ATB LOC: $0
Credit Card 1: $0
Credit Card 2: $0
Manulife One: $89,500
Yukon Loan: $40,031
Car Loan: $0

*Total: $320,031*

*Net Worth: $86,418*


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## cashinstinct

Congrats on your progress in the last 2 years.

I read back the thread and you decreased liabilities significantly in 2 years, nice job. All these loans shown now at $0 is a good sign on your net worth report.

You are moving in the right direction indeed.

Yukon Loan is next step in your great journey. You could also consider small investments in RRSP/TFSA/RESP, but considering your interest rate of 6.4% on the Yukon, it's probably reasonable to focus on that loan.

I would consider to setup small monthly contributions (to start an habit) and increase these contributions by the amount paid on Yukon loan when you are done paying it.


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## YYC

Thanks. Yes, we contribute to the RESP ($400), TFSA ($200) and RRSP ($75) each month. The Yukon loan is next on my list, I'm hoping to have it paid off, and $30,000 saved for our trip to the UK by May of 2016. Should be do-able as long as I keep my hours at a good level.


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## TK.61

Am I understanding that correct; You have a GMC Yukon worth only $28,xxx with a loan on it worth $40,xxx?


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## YYC

TK.61 said:


> Am I understanding that correct; You have a GMC Yukon worth only $28,xxx with a loan on it worth $40,xxx?


The value is a guess, but close enough, yes.


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## cashinstinct

TK.61 said:


> Am I understanding that correct; You have a GMC Yukon worth only $28,xxx with a loan on it worth $40,xxx?


Read the thread for further explanations on this. It has some history.


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## TK.61

cashinstinct said:


> Read the thread for further explanations on this. It has some history.


My bad, I only read the latest page when I commented, but I ended up reading the thread after commenting. Looks like some good overall progress has been made.


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## YYC

TK.61 said:


> My bad, I only read the latest page when I commented, but I ended up reading the thread after commenting. Looks like some good overall progress has been made.


If it helps, I made an extra $600 payment on the Yukon loan yesterday, so now the balance is now under $40k.


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## cashinstinct

TK.61 said:


> My bad, I only read the latest page when I commented.


No problem, I did not want to reash, but I knew it was in the thread somewhere.


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