Four phases to financial freedom

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If I asked 10 people about their definition of “financial freedom”, I would most likely receive 10 different answers.

Financial experts and PF bloggers have identified 4 financial stages that most of us will be in at some point. Most of us will eventually be in stage 3, financial independence, but very few of us will actually land in phase 4, financial freedom.

  • Phase 1, Financial dependence: we all start there. We are first dependent on our parents. Then, we are dependent on our paychecks. Money -or lack thereof- is not really a concern. We may be racking-up debt, not saving anything or both. During that period, we tend to make financial mistakes after financial mistakes after financial mistakes. We are usually jostled out of this phase by a single event, for example a job loss. In my case, it was becoming a homeowner.
  • Phase 2, Financial stability: at this stage, we take our money more seriously. We are focused on paying debt-off, on ensuring our bills are paid in full and on time and on having some sort of financial buffer, a.k.a. emergency fund. We may also start saving for retirement and learn about investing and personal finances.
  • Phase 3, Financial independence: In this phase, we are consumer debt-free. We may still have other debts such as a mortgage. Some will actually be completely debt-free. We also have a significant buffer and are well on track in our retirement savings. In this phase, we start realizing we have more options for our lives. For example, we may be able to change jobs or take extra time-off without any hardship on finances.
  • Phase 4, Financial freedom: This is the ultimate Graal. In this phase, we are free to live the life we want to live. Money is truly not a concern.

A lot of people confuse financial independence with financial freedom. They are not the same. The truth is that achieving financial freedom can be hard and take a long time.

I personally am in phase 2, financial stability, but teetering on phase 3. What about you? What financial phase are you in?

Buying a pre-sale property

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Both the real-estate and construction sectors are hot commodities in Metro Vancouver. New developments are spurting everywhere and everyday. Clever marketing makes it sound and look very attractive to buy a piece of property without actually seeing the finished product. But is it really the case? Let’s explore!

A pre-sale or an off-plan is an agreement between a buyer and a developer, where a developer agrees to supply a property by a certain date in the future. The buyer agrees to pay an initial deposit and then, once the property is built, complete the purchase. Deposits are usually paid in installments over a number of months or years. This is what helps the developer with obtaining further financing.

The major advantage of a pre-sale is that the property will be brand-new and in most cases customized to the buyer’s tastes. The property will also have warranty protection, usually 2-5-10 years . If something goes wrong during that period, it can be fixed at no costs to owners. An important advantage is also the building of equity. As house prices rise so does the contract on the property.

Pre-sales are hugely popular with investors. Pricing is usually a bit lower and they can usually see a profit before the property is built, and because it is brand new, they can rent it for a higher price. There is also a 7-day rescission period, in which the buyer can decide to opt-out.

Now, on to the disadvantages, as yes, there are a few.

  • GST is mandatory, 5% on top of the purchase price, which could mean thousands of dollars more
  • You may not qualify for a mortgage on a pre-sale. A lot of lenders are reluctant to pay for something that does not exist. A lender may also agree to fund only what the property is worth when built. It could be less than your purchase price.
  • Since the property will take a few years to be built, a lot can happen during that time: changes in your circumstances, in the real-estate market, in mortgage rules….you have to be aware of this before committing.
  • There could be delays in construction or in delivery date and you will be required to pay occupancy fees, even when you don’t live in the property. Nothing you can do about that!
  • Once you have signed, you can’t back-out of the purchase. Reassigning the contract could be difficult.
  • You most likely won’t be able to sale your property before the developer has sold all the units/lots.
  • The end-result could be different from what you asked.

As with everything, you need to do your own due diligence and research before buying a pre-sale and assess your risk tolerance. Be sure you have a lawyer or a realtor review the documents from the developer. The majority of developers will try to discourage you from having a lawyer or a realtor assist you. Don’t get fooled by this.

Fun and cheap Valentine’s Day ideas

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I have always been bemused by the sheer amount of money a lot of couples spend for Valentine’s Day to “show” their love for one another. I also find the fact children “have to” give cards or gifts to their classmates downright ridiculous. I probably sound lecturing here, but Valentine’s Day is only one day of the year, just like Christmas, Easter or your birthday.

The best way to save money on Valentine’s Day is to skip it altogether, and treat it like a regular day. Easier said than done, I know. Let’s see how we can all save some money here.

  • Homemade meal: skip the crowded  and expansive restaurants and cook at home.
  • Homemade card or love letter: you don’t need a fancy card, you can create your own or better, write a letter instead. If you absolutely want to buy a card, get one from the dollar store.
  • Homemade cookies: bake goods instead of buying them.
  • Watch a movie at home
  • Play board games
  • Have a scavenger hunt: hide candies or love notes all over your house and have your partner find them
  • Turn-off all your electronics and spend quality-time together: the world is not going to stop because you can’t answer your cell or tweet about your evening. It is actually a great way to show your partner you care.

It is important both partners manage their expectations of this day. The best way to do do is to talk about said expectations. Also, don’t expect your partner or your relationship to be different just because it is Valentine’s Day.


When and how to financially cut off your adult children

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As I previously wrote, times have changed. Gone are the days of working in the same company for your entire career as well as receiving a generous pension plan upon retiring. With tuition fees on the rise and employment prospects rather scarce, a growing number of parents found themselves helping their adult children well past their university years.

I will probably sound harsh here but doing so is a disservice both to the adult children and the parents. Let me tell you why:

  • Parents, your children are not going to pay for your retirement. You can’t borrow for this!
  • Parents, if you can’t pay your own bills in order to pay your child’s, you have a problem!
  • Parents, if you are cashing your retirement savings or your home-equity to help your children, you have a problem!

Constantly helping your adult children actually teach them to be helpless and unmotivated. Think about it for a minute or two. If your adult children know you will catch them when they fall, what are they learning? Probably nothing. Do they have any incentive to proceed differently? Probably not.

There is no question in my mind that adult children need to be responsible for their lives, in every way:

  • Adult children, if you need to get 1, 2 or 3 jobs to make ends meet, so be it! Stop relying on the bank of Mum & Dad for your basics.
  • Adult children, if you need to postpone vacation, wedding or home-buying until you can actually afford it, so be it!
  • Adult children, if you are never able to go on vacation, pay for a grand wedding or buy a house, so be it!

What is the best way, as a parent to help their adult children, you might ask.

  • Teach your child about money management. It is never too late to learn! You may find out you need a refresher too, as a parent.
  • Set boundaries and stick to them. Saying no to a child is the hardest thing to do for a parent, but is both liberating and powerful. But by doing so, you are fostering their independence and creative-thinking. If you gave them a move-out or cut-off date, follow through.

My own parents only helped me once, financially, as an adult. It was back in 2009, in the midst of the economic downturn. I was unemployed and had exhausted the little savings I had.  It is the only time they bailed me out…and that’s the way it should be.

I had previously asked for financial assistance for other items, and my parents always declined. I found it hard, but looking back I know it was in my best interest. I made my own mistakes but I also learned valuable lessons, such as the value of a dollar and the value of planning. It also rid me of any sense of entitlement I may have harbored.

Suburban life ain’t cheaper

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Extraordinary real-estate costs in cities like Vancouver and Toronto are pushing people further and further away from said cities.

A single detached house in Vancouver costs close to 1.5 millions. A townhouse costs  about 500K and a condo 350K. No wonder people rush to the suburbs in hopes of snapping-up properties at a somewhat lower price.

The problem with this approach is two-fold: first, it drives prices up in the suburbs as well. Bidding wars and no-subject offers have become the norm there too. Second, it will cost you more if you have to buy a car or two.

A recent study compared the costs of housing in Langley with the costs of commuting Downtown Vancouver for 25 years. There are very few properties assessed at over a million  in Langley. However, the transportation costs would be close to 565K over the course of a quarter century. Staggering! On the other hand, someone living in Vancouver would spend “only” 298K in transportation costs, over the same period of time.

The choice of Langley is not random. Public transit is fairly limited in this city, making a car a necessity. Technically, one could go Downtown Vancouver from Langley with bus/skytrain but it would take them close to 2 hours. There are also fewer job opportunities.

Case in point with my own story: before buying my first condo in Surrey, I rented in North Vancouver and New Westminster. I worked mainly Downtown Vancouver and have been calling New West my workplace for close to 5 years. I never rented Downtown Vancouver, as I simply couldn’t afford it and didn’t want to. Rents are a waste of money in this part of the city!

With some previous salaries I made, I simply couldn’t afford a car, but I also didn’t need one. When I was in North Van and worked Downtown, I would simply take the Seabus. It took me 15 minutes to get to work. The best was when I moved to New West and also found a job there. I would walk to work.

If I needed a car, I was member of a couple of car-share organizations. It was way cheaper than owning one. I would also claim the monthly bus pass as a tax credit. Financially, it looked like an idyllic situation, when it was not necessarily the case.

The black point is that I was renting when it no longer made sense for me to do so, both financially and personally. I am not getting into the rent debate here!

Back to my own story, I didn’t qualify for anything in Vancouver or closer suburbs, so I turned to further suburbs, namely Surrey and Langley. With public transit more limited, I had to buy a car, which added $ 800 to my monthly budget. Buying was cheaper than renting, but when I factored in that extra $ 800, I wasn’t so ahead anymore!

The yearly cost of a compact car in Canada is just under $ 10 000. If you have a bigger car or a truck, that amount will be higher. If you have 2 cars, it will be double.

Living in the suburbs used to be a no-brainer. It is definitely no longer the case. Nowadays, suburban vs. urban living is a trade-off between housing and transportation costs. Before deciding to move to the suburbs, whether as a renter or owner, take a look at your transportation costs and commute time.

As for me, I do not regret buying in the suburbs and getting a car, despite the extra expense. My car will be paid off next year and I anticipate my transportation costs to actually be lower for a few years after.

Most importantly, I enjoy my suburban life.

BC home equity partnership, friend of foe?

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Last month, the BC liberal government announced a initiative to “help” first-time home-buyers enter the increasingly expensive real-estate market. The province consistently sees the highest prices when it comes to housing.

You can find all the details about this program here.

Of course, the announcement sent quite a shock wave across the personal finance and banking communities, as basically the program is a loan up to $ 37 500.00 to help with the down-payment requirements. The loan is registered as a second mortgage on the property.

The first five years are both payment and interest-free, but if you sell you will have to pay the full amount back at the time of conveyance. After the five year period, you will have to make payments both on your mortgage and this loan. This is the element that can set people up for a financial disaster, depending on their circumstances. A lot can happen in 5 years, including a raise in interest rates.

Living in British-Columbia is very expensive, not just housing-wise. British-Columbians pay the highest amounts on car insurance, gas and daycare fees. Groceries aren’t cheap either. Unfortunately, salaries don’t always match these high living costs.

Genworth, one of the mortgage-default insurers in Canada, announced this loan would be treated as a non-traditional, borrowed down-payment -which it is- and included into the debt service calculations, effectively lowering the mortgage amount one would qualify for. On top of this, the mortgage default insurance rate will be higher. No doubt CHMC will follow suit as well as a lot of lenders.

So long for improving accessibility and affordability, particularly in Metro Vancouver!

The only tiny advantage I see in this program is that it technically allows homeowners to have a higher equity in their property, as it boosts their initial down-payment. But the equity will never be higher than 19.90%, thus mortgage-default insurance will still be required.

As most people in the PF blogosphere, I don’t think this program is a good idea. Luckily, it is limited to first-time home buyers and also in time.

If you need to borrow money to fund the minimum down-payment requirement and closing costs, you can’t afford to buy a property, period. It also applies to the bank of Mom and Dad.

2017 plans

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Hello Blog and Readers, I am back!

It has been a month since I last wrote, but boy I needed a break. My holidays were quiet and relaxing. I spent $ 227 for Christmas, including food, booze and gifts. I will definitely have a Merry January!

As customary, here is what I want to accomplish this year. I found out that writing plans for the whole world to see kept me accountable.


  • Save $ 500/month in my RRSP: The calculator from the federal government estimated this is the amount I need to save if I want to retire comfortably. So, here I am!
  • Completely pay-off one of my 2 consumer debts: I currently have a car loan and a consolidation loan. I want to get rid of one of these, which one is to be determined. I want 2018 to be the year of becoming consumer debt-free.


  • Keep moving towards new career: I finally figured out what I want to do and I am moving towards this goal. Sorry, I am not saying more.


  • Keep taking good care of myself: exercising, eating right, getting enough sleep, not putting off medical appointments etc…This is something I will always need to pay attention to.
  • Date more: as previously mentioned, I am single and no longer want to be.

Update on 2016 plans

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I can’t believe it is already December and 2016 is almost over. I am actually glad this year is coming to an end, as it was insane as far I am concerned. Life always has a way of unfolding when you least expect it and despite the best laid plans. As John Lennon perfectly summed it up: “life is what happens to you when you are busy making other plans.”

Some of you readers know that back in April I decided to sell my condo, which I hadn’t initially planned to do just yet. Unfortunately, the building I used to live in could have pretty much been considered a “leaky condo building“. It necessitated tons of repairs and there was no money to do them, meaning that, as a homeowner, I would have been on the hook for close to 29K of special levies….No way that was going to happen. So, I put it for sale in June and sold at over-asking in less than a week thanks to red hot Vancouver real-estate market.

I was able to buy another condo in another city. Luckily, I didn’t get involved into a bidding war and was able to have a home inspection done, a scarcity in the Lower Mainland. That being said, I had to increase my initial budget by $ 10 000. To all the naysayers, including in the PF community, yes, I did the math before buying, and yes I can afford to live in my condo and save money and pay for my bills and live a little bit!

I actually contemplated going back to renting, but after further calculations and personal considerations, it did not make sense for me.

Work was also crazy-busy. The company I work in has been steadily growing over the last 2 years. Although it is a good thing, as I am not concerned about losing my job, I barely have time to catch my breath. It is definitely not how I want to live. I have been thinking about my career for a couple of years now and it is definitely time for a new direction.

Without further ado, let’s see where I am at with the plans I made earlier on this year:


  • Save $ 5 000: exceeded. Got a nice boost from the sale of my condo.
  • Keep paying down my debt and not incur any new one: I did not incur any consumer debt, but I did get a new mortgage…so technically not done.
  • Increase debt repayment by $ 100 per month: done. Put $ 1 200 to my consolidation loan, and it is now under 10K! 2018 will be the year of becoming consumer debt-free.
  • Learn more about stock and dividend investing: done and still in progress. It was not rocket-science! As usual, I let fear get the best of me instead of educating myself. I liquidated all the mutual fund losers I had had for a few years and started building my stock portfolio instead. My accounts are finally back in the black in terms of return.


  • Explore career options: I have been in administration and accounting for 15 years. This is no longer “talking” to me. Time to figure out my next move: in progress. I have explored other career options, mostly in the corporate world, but nothing really appealed to me. I also thought about obtaining an MBA which would have been a huge, costly mistake, as I simply don’t need/want one. There was one particular option I kept dismissing but it kept coming back and gnawing at me. I decided to listen and take a closer look. It actually makes perfect sense to me…and this is what I intend pursuing. I am not sharing more at this stage, sorry! Nothing is done yet, and my employer or coworkers might be reading my blog.

Personal life

  • Take better care of myself, i.e. getting enough sleep, exercising regularly etc…sometimes it is challenging for me to do these seemingly simple things: in progress. I definitely made efforts, but I need to constantly pay attention, otherwise I will right back into bad habits. My job is making things difficult, giving me further reasons to get things moving on the career front.
  • Date more! Pass. This year was simply too busy and I just didn’t have and didn’t make the time. This will be next year’s priority. I am single and don’t want to be. Time to change that!

I have also decided it will be my last post for 2016. I chose to say “yes” to other things instead, namely resting and taking time for myself. On top of all the above, I also traveled to France and had family over in my new dwellings. No wonder I feel close to burn-out!

This blog is a labor of love at the moment, i.e. it is not generating any money. I have already started brainstorming on my 2017 plans, and one of them is deciding what to do with this blog.

In the meantime, have a wonderful holiday season and thanks for your readership and support!!









It is not just the latte (factor)

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David Bach popularized the “latte factor” term. The concept emphasizes the long-term cost of small, everyday purchases such as coffee, cigarettes, magazines and so on. There are lots of debates in the PF community as to whether this concept is valid. I personally believe it is, to some extent.

The very first post I wrote was about the cost of eating-out. I had estimated that someone eating 3 meals out five days a week will spend over $ 8 000 per year on food. For simplicity, let’s say this amount never changes for a period of 25 years. The cost will be $ 200 000. I sure could find a lot of better uses for that amount of money!

For simplicity again, let’s say that half of it is invested, i.e. $ 100 000, for 25 years at a conservative 5% interest rate. At the end of the 25 years, it would turn into close to $ 194 000. I don’t know many people who can pass up $94 000. Do you?

No, the latte factor won’t make you a millionaire, but it can certainly help your financial goals. That being said, in order for this to work, you need to actually save and invest the money. If you spend it somewhere else, it will get you nowhere financially.

You also need to look at bigger expenses, namely house and car. Don’t buy too much of these, they can drain your accounts in no time and prevent you from replenishing them. It is also a good idea to review and compare insurance quotes or call your cable to company and ask for a discount. You will be surprised at how much money you could save by doing all the aforementioned.

To put together a successful financial plan, you need to look at the bigger picture and at other elements such as your income – does it exceeds your expenses?-.

Spending an occasional $ 4.00 on a fancy latte will not derail your retirement plans. Spending $ 8 000/year on take-out or taking on a too large mortgage might.


Financial things to do (and not to do) in your 30’s


The 30’s are definitely an interesting decade. Chances are they are a mixed bag for most people in them, including myself: wedding, kids, house, career…etc. This decade is probably the most taxing on hard-earned dollars.

The good news is that your 30’s are also your top-earning decade. Without further ado, here is what you should – and shouldn’t- be doing in your 30’s:

  • become established in your career. You probably have a few years of experience under your belt by now. Make the most of them to negotiate your salary and promotion or to find a better job. If you are considering a career change or want to become self-employed, you will need to plan for this. Keep reading.
  • make use of work benefits: benefits are basically free-money, and even more so when they are employer-paid. If your employer offers extended health and/or disability insurance, please enroll. Same goes for a pension or a group RRSP plan.
  • track your expenses and income. There is no way you can budget and set goals if you don’t do this.
  • have a sufficient emergency fund. Whether you want to call it a back-up fund or an opportunity fund, it is all the same. It needs to be adequately funded. Chances are $ 1 000 are not going to cut it anymore, particularly if you have dependents. Most people aim for 3 to 6 months of living expenses. Aim for what is right for you, given your circumstances.
  • have adequate insurance coverage. Unless you are loaded with cash you need insurance. Check my previous entry on this subject.
  • plan and save for items: whether it is car repairs, your wedding or your annual vacation, these are neither emergency nor a surprise. If you are unable to save the money, then you may have to postpone or consider other options.
  • don’t keep-up with Joneses. You should be way past this.
  • you are really saving for your retirement. This should be the top-priority, before your kids’ education, if you have them. Ultimately, your children won’t pay for your retirement.
  • you are investing in the stock market. You still have a few decades before retiring. The stock market has always provided the highest returns. Educate yourself and invest your money. Do not let it sit in your savings account earning 0.5% interest.
  • you have your debt under control. It is unlikely you will be able to completely avoid debt in your 30’s. Your student loans should be on their way out, if not paid off. You are not racking-up credit card debt to buy stuff or to pay for living expenses. When borrowing, it should be to buy an appreciating asset, when the cost of the loan does not impact other saving goals and will be paid off before retirement. Anything not under that category should be off-limit.
  • Don’t buy too much house. If you decide that home ownership is for you, do not become cash poor over it. Too many Canadians make their home their entire financial plan, including to retire. This is a mistake. You also need highly-liquid, easily disposable assets.
  • have your legal affairs in order. You need a will, even more so if you are married and/or with children. Ensure you designate a beneficiary for your life insurance and other registered accounts.