# My Financially Responsible Journal



## eulogy

:frown: due to privacy concerns, I've deleted my posts in this thread. Any questions regarding the convo's that you're interested in (such as conclusions) just PM me.


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## Young&Ambitious

TFSA room (assumming no withdrawals) is $15,000 - as of Jan 1/12 it will be $20,000. Are you sure you are so close to the max limit?

Why so many chequings with little interest? I'd recommend putting that to use somehow and perhaps in a registered account depending on your intent..

Goodluck


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## the-royal-mail

I would say that's pretty darn good!

Predictably, I might recommend a tiered savings plan. You might already have most of the cash on hand, it's just a new way to think of your finances. Check it out in my sig file.


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## marina628

I would not close your credit card , the oldest cards are the strongest for your fico.We have some very old cards we do not use but once a month my husband uses them fro 20 in gas just to keep some activity on them.


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## plen

marina628 said:


> I would not close your credit card , the oldest cards are the strongest for your fico.We have some very old cards we do not use but once a month my husband uses them fro 20 in gas just to keep some activity on them.


This is very good advice, especially since it's not a card with an annual fee. I have a couple old cards that I only make small monthly charitable donations with. Combine that with an automatic bill payment setup by TD Easyweb and it works great.


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## the-royal-mail

That's what your tier 2 emergency money is for.


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## arrow1963

Your calculations are rather optimistic (perhaps 'wrong' if they're not what you intended).

Did you mean to assume a 7% real return, or nominal return? I assumed that would refer to a nominal return, but you're discussing your future retirement expenses in real dollars. Drop that down to 4% and see how your required savings rate changes.


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## the-royal-mail

Only cracker jack investors these days are getting better returns than the official inflation number of about 3%. To plan on 7% returns at your stage is simply not realistic. 0% inflation?

I've been losing principal. This is much more typical than 7% returns which are just not realistic.


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## londoncalling

I am guessing returns for the next 35 years will be less than the last 35 years... Look at Japan for example... I hope I am wrong but I see tons of volatility with little growth especially in the near term.. I am not saying NA is going to follow the route of the Japanese economy but it is a possibility especially if you follow demographics and looking at the last few years of market action... I hope I am wrong... 

I think you need to incorporate an inflation rate and decrease your rate of return. Both these adjustments will not only make your targets more realistic but will also provide a safety factor in case you do not meet your desired rate of return... worst case scenario you overestimate inflation and underestimate return...resulting in more money at the end of the game..

Cheers


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## steve41

Currently, any rates I have observed my users incorporate (my users are financial planner-types) are in the 3-4-5% range. Nominal. 7% is over the top IMHO.


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## marina628

I think you are better to plan at a 4% rate and if you end up with more money it is a bonus.Don't budget for needing 7% for your numbers to work or you will be in trouble.


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## andrewf

I agree with basing your plan on max 5%, and then adjusting your plan in the future if you achieve better returns than that. Your plan should be somewhat conservative. and a long run average return of 5% (3% real) is not out of the real of possibility).


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## the-royal-mail

3% after inflation?

"Inflation" is 3% right now.

So you would need to make real returns of 6% to achieve that.

Other than cracker jack investors, I do not know anyone making 6%.

I've lost 8% this year alone. If I average things out over the past 11 years I'm gaining about 1% per year.

So not sure how you plan to make the returns you insist on unless you're willing to spend the hours on the computer, take extreme risk and do the WORK needed to become a cracker jack investor.


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## andrewf

the-royal-mail said:


> 3% after inflation?
> 
> "Inflation" is 3% right now.
> 
> So you would need to make real returns of 6% to achieve that.
> 
> Other than cracker jack investors, I do not know anyone making 6%.
> 
> I've lost 8% this year alone. If I average things out over the past 11 years I'm gaining about 1% per year.
> 
> So not sure how you plan to make the returns you insist on unless you're willing to spend the hours on the computer, take extreme risk and do the WORK needed to become a cracker jack investor.


The Bank of Canada has a mandate to keep inflation (core CPI) between 1 and 3%, targeting 2%. It has been rock solid in executing that mandate for 20 years now. You can quibble with CPI (some people think it's an evil government conspiracy), but I don't find that very compelling.

TRM, I can build a very reasonable (50/50 FI and risk asset) globally diversified portfolio that returned over 6% over the last ten years. I don't think it is impossible.


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## GOB

the-royal-mail said:


> 3% after inflation?
> 
> "Inflation" is 3% right now.
> 
> So you would need to make real returns of 6% to achieve that.
> 
> Other than cracker jack investors, I do not know anyone making 6%.
> 
> I've lost 8% this year alone. If I average things out over the past 11 years I'm gaining about 1% per year.
> 
> So not sure how you plan to make the returns you insist on unless you're willing to spend the hours on the computer, take extreme risk and do the WORK needed to become a cracker jack investor.


It looks to me like you're cherry picking numbers to paint the worst possible picture. An 11 year period which includes one of the worst market crashes in history isn't an accurate portrayal of a 35 year investment period. Choose any 35 year term starting from any year and you'll see in most cases growth has been quite reasonable. 

Now is the time to load up on cheap multinationals that pay growing dividends, combined with a few attractive growth stocks. Nothing is for certain, but if these companies keep paying out as they have through many a tough time, 6-10% nominal returns are definitely not a pipe dream.


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## mind_business

Well done eulogy! Improving your net worth that much in one year is impressive. However I see a significant area of concern in your net worth statement. You have to start focusing on getting your PC Financial Mastercard under control. The interest charges are going to kill you over time


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## mind_business

Yeah, it's interesting how many people, including myself, get to a point in life where they look around and see what everyone else is doing, and figure they should as well. It takes courage to buck the trends, and smarts to know when the time is right for you. Keep up the good work!


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## londoncalling

It's easy to get caught up in what it appears that others are doing. The reality is that we don't really know what their situation is. It is much smarter to assess your own situation and act accordingly. Eulogy, I am glad that you think you have made the right choice in holding off on your home purchase. If by now you are glad you made the right choice, it probably is the right choice for you.

For me personally, I am unsure if I bought too late or too early. The reasons I bought was because rent in my city had begun to skyrocket and has continued to do so. I had considered buying a couple years prior and maybe that was the right time to get into the market or perhaps it was not. The reality is it doesn't matter because I didn't do it. The decision to buy a home was a quick one. We became annoyed with rent increases every 3 months and seeing property values rise on a month to month basis. We were fortunate as we caught a dip in the market and my wife had received a nice chunk of money as a payout from a previous job. The one regret I may have is that we didn't have 20% for a down payment, (I think we put about 15% down, so I was stuck with the CMHC premium which was a huge expense. In hind sight we should have cashed in some investments to bump it to 20 but didn't think it through at the time. However, we bought well below what we were approved for (we spent 66% of what we were approved for. As a result our mortgage, taxes and utilities are the same as what we were paying for rent. Rents have gone up but our mortgage has not. Also the value of this home has appreciated quite a lot from home improvements and the current real estate market. This is not a big deal for us as we intend to stay here for the long haul. We have chosen to increase our mortgage payment as well to pay this off early and if we ever need to scale back we have the option.

The above is by no means an endorsement for others to go out and buy a property. It is just me spouting off about a choice we made. Is our house amazing? No. As mentioned above it is in a constant state of renovation. But neither my wife and I regret making this purchase as it is our home and we can easily afford it. It is a nice cozy 1200 SF bungalow which is more than enough for the 3 of us. Our neighbourhood is one where the owners are house proud. It is in a safe and established neighbourhood that has seen slow steady increases to property values for the last 50 years. For those reasons alone we know we made the right choice. Congrats to those who are satisfied with what they have achieved this past year and all the best in achieving your financial goals.

Cheers!


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## mind_business

What are you targetting for grocery expenses? How much do you spend on dining out?


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## steve41

Cccrrrreeeeppppyyyy!


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## Jon_Snow

Okay Steve, we get that you don't like these threads, and that they are CREEPY. You don't have to read them. Maybe its like a car wreck at the side of the road - you are compelled to look. Let it go man... Or else I'll post my own diary.... You will love it.


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## balexis

eulogy said:


> Alright, my net worth numbers.
> 
> I'm just curious whether I should take my RRSP deductions or wait for a higher bracket. Being in Alberta, I'm currently at 32%. The next tax bracket jump is about $85k, which is 36% and the top bracket at $132k being 39%. It may be a long old time before I reach the top bracket (if I reach it).


My 2 cents on this: I am not a pro but I have been investigating this for myself lately. First, you correctly nailed the opportunity cost of delaying the deduction, which not everyone seems to take into account.

It comes down to a somewhat simple math:
*rrsp_bonus* = (income tax saved if contributing in the future at higher tax rate - income tax saved if contributing this year) 
(in your case, at MOST 400$ if your income becomes at least 85k + 10k)
*yearly_opportunity_cost* = yearly income generated by income tax saved if contributing this year

Next, set the investment return to determine yearly_opportunity_cost.

Then, you will be able to see how long you can wait until total_opportunity_cost becomes greater than rrsp_bonus.

Finally, by not taking the deduction now, you have a certain amount of risk related to the future tax rate: your situation may change and the higher tax rate may never materialize, leaving you high and dry with a net opportunity cost that you will never be able to recuperate.

One way to pad oneself against such scenario is to invest the money in a TFSA and contribute in-kind to RRSP when/if the higher tax rate actually materializes. That way you grow tax free while avoiding an increase in your RRSP tax liability. Of course this assumes enough TFSA room, which is not a given.

Hope I was clear enough


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## Barwelle

eulogy said:


> Note to self, use VISA card before it goes inactive.


You could set up an automatic bill payment (phone bill or something) to charge to your Visa. Unless you don't like to, I know some people prefer to see the bill before it is paid.



eulogy said:


> Been doing some research into ETFs that I could end up getting in the future. I've been actually pretty disappointed with the search actually. Especially with international holdings. I don't see any significant savings in MER compared to the e-series international, unless I'm buying a US dollar ETF. Also not too impressed with Canadian equity ETFs either. US equities (since I have $US dollars) is pretty nice though.


Vanguard's MSCI Canada ETF, VCE, is at 0.09% MER if you're willing to try something relatively new and low volume. So far it correlates pretty well with XIC. I've read that some people don't like VCE because it has low volume, but I don't see how that makes a huge difference for an index fund, unless they think that it means the fund may be folded if they don't get enough business.

Vanguard's hedged International ETF charges 0.37% vs TD's 0.53%, and they track the same index. EDIT: Looks like you've got the unhedged version, so scratch that.

I don't work for Vanguard! Just letting you know what I've found in my research. I'm going with TD for weekly investments, then going to sell them and buy the equivalent ETFs every year or two.


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## Barwelle

Re: VCE spread, right now it is at $0.01 between ask and bid. Earlier, it was around $0.14, which is about 0.5%. So yea, it is a concern.

Re: Following the S&P/TSX index, I agree that you're being overly sensitive about it. The only difference I can find between the Capped Composite and the Composite index is that the Capped Composite caps the weighting of any one holding at 10%. 1) How often will you see one company make up 10% of the TSX? As of October 31/11, the biggest holding was RY at 4.79%. 2) Depending on what your strategy is, isn't that a bad thing anyway? One of the pros often used to promote index investing is diversification, but if one holding constitutes more than 10%, that one company makes up a big chunk of your portfolio. (Well, not big chunk, but it would be over-represented compared to all the other companies.)

Re: XIU vs XIC... Which ever one you pick, I don't think there will be that much of a difference between them performance wise, and there hasn't been in the past. It's basically more diversification for a higher fee, versus less diversification (and a focus on large caps) for a lower fee.

Re: international hedging vs not hedging. I've also been looking around for an unhedged international ETF. Like you say, it seems the only option is to go through a US$ ETF. I have the hedged TD Int'l e-series fund, but I am still undecided whether or not I should hedge once I build up enough to transfer into ETFs. What was your reasoning for settling on unhedged?


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## Four Pillars

Barwelle said:


> How often will you see one company make up 10% of the TSX?


Back in the day, Nortel represented as much as 37% of the TSX 300, so it can definitely happen. 

Having a capped index would have reduced the Nortel effect, but how much fun would have it been back in the late 90's watching the uncapped index blow away your capped index?


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## Barwelle

Four Pillars said:


> Back in the day, Nortel represented as much as 37% of the TSX 300, so it can definitely happen.
> 
> Having a capped index would have reduced the Nortel effect, but how much fun would have it been back in the late 90's watching the uncapped index blow away your capped index?


True, it can happen. But is it a good thing, or a bad thing? I can make the opposite argument as you. Those investors with a capped index (or who rebalanced to keep their Nortel weighting in check) would have been rewarded when their portfolios didn't crash as hard in the dot-com bust / Nortel bust as those who were heavily weighted in Nortel.



eulogy said:


> Maybe I'll go with VCE and maybe I'll can get it cheap at sometime. I honestly haven't traded stocks/ETFs before as I'm still pretty new to all this. I assume if I was in Waterhouse and wanted to buy VCE and it was a penny off of the market price that if I bought it would most likely be fulfilled at that price?


If you can get VCE "cheap", then you'll be able to get XIU and XIC cheap at the same time. As for your question about pricing... it all depends on whether or not someone would be willing to sell to you at the price you've set your bid at. The price could go up, in which case you wouldn't get it filled, or it could go down, in which case it would be filled. There's no guarantee it will get filled. Of course, you don't have to set a bid, you can choose to buy at market price... so if the price jumps in the seconds it takes to enter your order, you'll end up paying more than you thought, but then the price could drop as well, so you'd pay less than you expected. Maybe one of the more experienced folks here could jump in and explain when you'd want to set a bid/ask price, and when you'd want to use market price?

The MER difference was really what got me thinking about VCE, because as you point out, there isn't a lot of difference between the TD e-series and XIC. But this discussion now has me wondering if XIC would be better, because it has more diversification (~250 vs VCE's ~100) and because of its cap on weighting. Ultimately though, there shouldn't be a big difference in the long run. All three funds are designed to track the Canadian market, just with slightly different methodologies. If you compare the short history of VCE with XIU and XIC on something like Google Finance, so far they all track very closely together. You just gotta pick whichever one makes you feel good, and go with it. Nothing to lose sleep over.

Re: US$ ETFs, you must have heard of Norbert's Gambit by now? That gives you an option to buy American ETFs and save money on the currency exchange, if you really want to save on MERs and are willing to take on currency risk to do it. Which you are doing anyways if you want to use unhedged ETFs. It is something you want to do with several thousands of dollars at a time, though, because you are adding on two commissions to make the trade.


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## Barwelle

You could also open up a trial account somewhere and play around with fake money. Learn to do by doing! I did at Investopedia a while ago. Questrade also has one, and I'm sure others do too (but not TDW afaik, which is with whom I think you want to have your trading account. But another member here, Koala, went to a TD seminar of some kind and they were given demos to play around with.) The thoughts and emotions aren't quite the same as when you are actually trading with your own money, but it gets you more familiar with using trading platforms.


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## Spudd

It'll get completed but you might pay a little bit more per share for the 63 than you did for the 100.


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## mind_business

Sorry to hear about your father's illness. Glad you're able to fly back to visit him.


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## YYC

I'm pretty sure that even after you cancel the card the records of your good payments are on there. I've pulled my credit from Equifax before and it shows loans I had over 15 years ago, including number of late payments 30, 60, 90 days, etc. It's a fine line between having credit to show a good history and having too much credit that lenders are worried about you maxxing it out.


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## Pennypincher

So many places don't even accept AMEX. I spend most of my credit card money at places like Loblaws. Where do you use your AMEX to get points?


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## Dibs

Hi eulogy, I'm sorry to hear about your loss. Stay in there and keep up the good work!


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## YYC

Hey, couple questions.

First off, how do you embedd the spreadsheets like that, it's pretty slick?

Second, I like your format, do you have a blank version of your spreadsheet you'd be willing to share?

Third, I notice you include the business account in your assets, does the business not have any liabilities? Personally, I prefer to keep my business net worth separate from my personal, I feel like it muddies the water too much to try and combine them. Anyway, sorry for your loss, hopefully you can get back into the swing of things soon.


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## My Own Advisor

Very sorry to hear of your loss.

Hang in there.

As for your financial plan, keep up the good work. You seem to have a great deal of focus - which is great. 

Of note, PCF offers 1.35% as well.
http://www.banking.pcfinancial.ca/a/rates/savingsPlusAccountRate.page

Take care...


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## mind_business

Great stuff Eulogy. The only thing I'm confused about is the 5 credit cards you own. It's clear from your balances that you rarely use them. You could probably get by with only 2 (one main, and one backup in case there's a problem with the first one). Hopefully you're not paying an annual fee for any of them.


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## mind_business

eulogy said:


> Just got back from my vacation to Vegas! ... I won't be posting a net worth for the month.


:eek2: How much did you lose in Vegas???


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## mind_business

Ouch ... if you had put that $50 in a 6% compounding account for 20 years, you actually lost $160.36


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## Barwelle

eulogy said:


> Markets have been going down nicely since I dumped a large sum of cash in it. Life I suppose.


Haha... for sure... for a few months I have been rooting for the markets to drop as I have some re-balancing money to invest in my retirement couch potato. Yesterday, after this slide, I found out that I might need to sell some of my other investments sometime this year, so I have done a complete reversal and am disappointed in the drop!

I see you were figuring out what your ETF portfolio would look like... in case you haven't heard, iShares released some new ones. See here: "New iShares ETFs Give Canadians the World" by Canadian Couch Potato

(Late) Condolences on your father's passing.

And congrats on the raise!


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## cmoney

Really like this idea. Awesome to keep great alignment with your integirty and your success journey. Very impressed


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## Pennypincher

Cool, what political party? 

I hope you got a big weight off your shoulders with the pirating. I don't necessarily think it's all that bad, but I see what you are also doing is getting your house and your posessions in order. Then you can get more organized and free of clutter and things weighing you down so you can focus on what you need to focus on.


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## andrewf

There's two sides to that coin. Yes, piracy is unfair to the creators of IP. On the other hand, IP owners have protection that is far too strong. Copyright used to expire after 20 years, after which time that IP become public domain. It was a balance between the interests of the community and the IP creators. Now copyright never expires because it keeps getting extended to protect private (corporate) interests. The same goes for the patent system, which has gone far too far and is strangling innovation.


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## Spudd

You might also like the Strava app for route tracking. The fun thing about it is that it compares you vs other people who have taken the same route.


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## Barwelle

Kudos to you for owning up to it instead of committing a hit-and-run. Or... swing-and-run...?

Sounds like a lot of money to repair damage from a door swinging into the neighbouring parked car though.


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## Plugging Along

Sorry to hear about the car. My brother was n the per side of being hit by a swinging door. Be really nice, and see if they will settle. It was about $14000 for my brother. He was going to settle for $500 but the person was a jerk.


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## My Own Advisor

Good call on the RRSP eulogy: VTI and VXUS. I put the same in my wife's RRSP, along with 30% XIU and a small portion of XBB.

Her RRSP is 95% indexed.

Fixed-income is making nothing, not holding very much. You can get paid more buy owning U.S. dividend stocks and get capital appreciation as well.


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## mind_business

eulogy said:


> My financial information fast has been going quite well for the few weeks on it. And what I meant about financial fast is the time I spent digesting stock information, watching my portfolio, etc.
> 
> It's been quite liberating. Each day at work I would typically open up Google finance and follow the markets. I had my stocks show up on my phone with Google Now. And I would open up my financial spreadsheet just to keep track of the daily movements of everything.
> 
> Well I stopped looking at my spreadsheet and opening up Google finance at work. Removed stocks from my Google Now on my phone. So really I see very little of what happens in the market and it's nice.


Yeah, watching your stocks that closely takes all the fun out of it. Unless you're a day trader, no point in checking too often.


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## mind_business

Nice work on the RRSP(s). I agree with you about the plastic. I only have 2 credit cards ... one personal one, and one corporate card for work. No need for any others.


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## peterk

Well that was actually a very interesting and inspirational read, eulogy!

A 200k increase in 2 years is mighty impressive. I had a hard time deciphering how some of your big gains were made though, and what your income and spending breakdowns are.

Perhaps your intention is to keep these things private, but I'd be interested in reading a rough breakdown of:

Income (did that change significanly when you started working for your friend?)
Spending
Business Earnings (are you doing any side work now or did that completely stop when you closed your business accounts and took the new, more stressful job?)
Inheritance
Housing situation? (Perhaps I missed it but I couldn't figure out if you own a house or rent or what)


I also enjoyed that you discussed human capital here, and fitting it into your work life balance. What I'm coming to realize is that "work life balance" is kind of a silly concept if the "life" part consists mostly of watching tv, screwing around on the internet (like too much CMF :biggrin, eating poorly, going on too expensive vacations and buying the same high-priced/low quality crap that everyone else buys.

Personally, I am interested in figuring out how to cut all this CRAP out of my life so I can replace it with worthwile activities on the "life" side of the balance. I had some vague 2013 goals of reading lots, getting jacked, taking my musical abilities from amateur to sub-pro levels, learning a language or two, improving my social and sex life, starting a side business, and learning new things in my career instead of just doing the bare minimum. Every one of these goals has either not progressed or gone backwards in 2013... but that's a discussion for my own Money Diary.

And I'd agree with getting rid of the credit cards. I've got the MBNA for groceries and gas and everything else, Amazon for Amazon purchases and trips to the US, and a high limit BMO card that I use only a couple times per year for large purchases. I'm thinking of upgrading the MNBA card and just scrapping the BMO one altogether.


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## Pennypincher

did you find a new job yet? Good for you for facing your boss and deciding not to stick with something you really dislike.


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## BoringInvestor

I know this thread is months old, but congrats on your clean bill of credit health! Huge accomplishment!


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## trvfsub2

Great work!


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