Can money buy happiness?

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Back in 2010, the University of Princeton published a study on how people making $ 75 000 per year were reportedly happier than those earning less than this amount.  A lot of media outlets and people immediately jumped to the conclusion that money buys happiness.

Well, I kind of disagree with this statement…no point in writing a post otherwise!

you can’t buy happiness at the supermarket

Happiness is not a tangible product. It is not something you can see or touch. There are lots of variables when it comes to happiness.

If you ask 10 people what their definition of happiness is, I bet you will receive 10 different answers.

Before haters jump all over me, let me tell you about my personal story a little bit.

I actually grew-up poor. My parents were considered as low-income class. They didn’t have any money besides to pay for their bills, and even that was difficult at times. My parents were also terrible with managing the little they had.

They had no long-term vision or planning skills. Saving was a foreign concept to them. Growing-up I certainly did not wear designer clothes or vacationed in exotic, far-away places, unlike some of my friends and classmates.

YES, the lack of money can be a source of stress…

So yes, the lack of money was stressful and bothersome in my family. But it is actually not what made me unhappy at times. For the most part, I would say I was happy growing-up. What actually made me unhappy had absolutely nothing to do with money.  I will stop there with my childhood memories. There are many things I do not wish to share online.

…but having money does not automatically equate happiness either

Fast forward a few decades later, I reached that $75K mark. I didn’t necessarily feel happier to a greater extent, although it sure was nice to be able to save for retirement, pay for my bills and vacation in exotic, far-away places.

Except that, for me to be fully happy, I needed something else. Something that has nothing to do with money, and that money actually cannot buy.

Recently, I decided to switch to part-time work. Working full-time was simply no longer sustainable for me. Doing so means a huge pay-cut and possible depletion of my savings. Guess what? I am happier now than when I was earning a full income.

attempting to define happiness

As mentioned above, everyone’s definition of happiness is different. I personally like the definition offered by Happiness International:

Happiness is when your life fulfills your needs“.

Money is not the only need we have; not all our needs require money either.

FINAL WORD

It is probably more accurate to say that money can contribute to happiness to a certain extent. The Princeton study that started this post also revealed that people earning more than $75 000 per year did not report increased levels of happiness…..

That time I decided to work part-time

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As I previously wrote, a few things have changed in my life recently.

I became consumer-debt free, decided to obtain an MBA and recently switched to part-time work.

BUT, WHY DID YOU DO THAT?!

You might ask. Well, studying for an MBA is not the same as studying for a certificate or a diploma. A lot more reading and researching is involved, and it is definitely more challenging.

But it is not the only reason.

i desperately needed better work-life balance 

Working full-time was sucking all my time and energy. For the last 2 years, I would leave my home at 7.00 am and would never be back before 5.00 pm, from Monday to Friday. I was constantly tired and had not much energy for anything else during the week.

I was only living for the week-ends and vacation. A lot of personal matters were put on the back burner and my health also suffered. This is simply no way to live. I started resenting my job.

Other issues within my workplace made me resent my job even more. I reached my breaking point in February.

I FINANCIALLY PLANNED FOR THE TRANSITION

Although I was at my breaking point, I decided not to hastily quit my job. Been there, done that!

While I was paying off my consumer-debt, I also saved money. It was equally important for me to also have some serious savings. My full-time income allowed me to do so.

It definitely took me more time to get rid of my debt, but I also built a nice cash cushion that could allow me to remain without any income whatsoever for several months.

If I made any type of income, I would be able to work part-time for about 18 months with said cash cushion.

If I had kept working full-time, said cash cushion would have paid for my MBA. But I switched to part-time, so it is a moot point.

i waited for the last car payment to go through

I wanted to become consumer-debt free with my income rather than dipping into my savings.

i refinanced my mortgage

Since I had decided I would work part-time, I had to figure-out the tuition payment. I did not qualify for student loans, but I actually didn’t want to take any. I also did not want to do a line of credit or another personal loan.

So, I refinanced my mortgage and slightly leveraged against the equity of my condo.

By doing so, I only have one monthly payment to take care of. A portion of said payment is also going right back to the equity in my condo.

Most importantly, I can afford to pay for my MBA and to work part-time for the next 2.5 years.

final word

I have been working part-time for a month now and am already reaping the benefits. I have more energy and feel  more positive. My health is improving as well.

 

That time I refinanced my mortgage

 

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Note: this is not a sponsored post, but if you need a mortgage broker, I recommend Alex McFadyen and his team at the Mortgage Pug

I recently refinanced my mortgage. Refinancing basically means paying-off a mortgage with a new one. There are several reasons why one might want to do so, including myself.

getting a lower interest-rate

Despite being in a rising rate environment, it is still possible to obtain a low rate, primarily on variable-interest mortgages. At the time of writing this post, rates for a 5-year variable mortgage were as low as 2.20%.

Obtaining a lower rate will save you thousands of dollars in the course of your mortgage. Do not let the mortgage penalty deter you. Do the math before deciding.

getting better terms

Mortgages can be complex products. The good news about this is that you can find a mortgage that will fit your personal needs.

My previous mortgage was not doing anything for me in terms of prepayment privileges.  I could only make one extra payment, once a year! Although I am in no hurry to burn my mortgage, I wanted more flexibility in terms of prepayment.

leveraging, a.k.a. borrowing against equity

The PF police will most likely be all over this, but leveraging is not necessarily a bad financial move, if done correctly and with caution. In my own situation, I called this”utilizing my assets to the best of their abilities”.

To borrow against equity, first you need at least 20% of equity in the property. An appraisal will be done to confirm the amount of equity. This is when things can get out of control, as a lot of people tend to borrow the maximum amount they are eligible for. This in turn results in a maxed-out HELOC or unmanageable mortgage payments.

Just like stocks in the stock-market, home-appreciation fluctuates. Sometimes, it will go up; and sometimes it will go down.

To minimize risk, I borrowed less than the amount I qualified for. The amount borrowed is also way less than what properties in my area currently sell for. I did not let the appraisal dazzle me.

I opted-out for a cash-out refinance instead of an HELOC. Why would I want to leverage, you may ask. I decided to obtain an MBA and will be using the money to pay for my tuition fees, as well as a top-up to my existing savings in order to work part-time for the next 2 years.

I will elaborate more on this in a couple of upcoming posts.

FINAL WORD

In order to determine whether refinancing your mortgage is the right option for you, you need to do the math and figure-out why you want to refinance. There are costs associated with doing this. As indicated above, you will need an appraisal and you will have to pay for a penalty. You will also need a lawyer or a notary.

Financial milestone: consumer-debt free!

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June 23rd, 2018 marked the day I officially became consumer-debt free.

I am not completely debt-free though. The only debt I have left is my mortgage. I am not too concerned about this one.

Being consumer-debt free feels pretty good so far, but it was not the big celebration I thought either.

I HAD BEEN UP AND DOWN THE DEBT ROLLER-COASTER

I started repaying my debt in late 2010. Back then, it was just a little over 20K, 12K being student loans. The rest was credit cards and line of credit debt.

At the same time, I was also building my emergency fund and modestly saving for retirement. I felt it was important to do so, given where I was in my life at the time.

Personal finances are just that…personal.

THEN CAME THE FIRST CONDO AND THE CAR

Fast forward to 2013, my debt level was steadily decreasing and my savings steadily increasing. My income was also good.

After careful considerations and calculations, I decided to become a homeowner.

The down-payment and closing costs put a serious dent in my savings, and because I moved to suburbia-where public transit was more limited- I bought a car, adding 16K to my overall debt.

But, I was able to handle all my obligations….thanks to my income and low interest rates.

THEN CAME THE SPECIAL ASSESSMENT

For those new to the blog, the first condo I bought was in a problematic building. Said building needed a lot of repairs and the corporation didn’t have any money to do them.

So, I found myself on the hook for another 6K of debt. I didn’t have enough savings back then. This happened 8 months after I bought the condo.

It was my lowest financial point. I felt like I would never get out of debt, never save enough money and would never able to do the things I wanted and live the life I had envisioned.

THE BEGINNING OF THE END

In 2016, I decided to sell my first condo. Although some major repairs had been completed, the building still had issues and I didn’t see myself constantly paying for levies.

Thanks to an over-heated market, I sold at over-asking.

The proceeds of the sale allowed me to buy my second condo and pay-off my “consolidated consolidation-loan”. I felt more elated paying this sucker off, than paying my car off.

I realize it is probably due to my suffering from debt fatigue, after 7.5 years of continous consumer-debt repayment. It is also perhaps because I don’t have anything to show for that consolidation loan, except my Diploma.

LOOKING BACK AND FORWARD

With more perspective and a better grasp of personal finances, I certainly could have proceeded differently. That being written, it is a little too late to think about how things could have been. The past has come and gone.

I actually don’t regret what happened to me financially-speaking. I really learned and grew during these challenges.

I know I won’t make the same mistakes again with my money. I may make other ones, however.

 

 

Alternatives to big cable companies in BC

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Please note this is not a sponsored post.

Not so long ago, in the Lower Mainland – and I am sure it applies to the rest of BC as well-, people basically had 2 options when it came to cable, Internet and home phone services: Shaw and Telus. If we were very lucky, we could add Bell to that rooster.

I once lived in a building that was only serviced by Shaw. For many years, I alternated between the 2 above-mentioned providers and my bill kept increasing, despite skimming services to a bare minimum.

The good news is that there are now alternative providers, particularly in the Lower Mainland. These companies will save you moolah.

VMEDIA

VMedia has definitely become a serious player in the telecommunication landscape. The company has grown tremendously over the last 2 years, and now services most of Canada. All their services are delivered via Internet -including home phone-. No contract and unlimited Internet data.

There are a few start-up costs (modem, adapter & TV box), but it is worth the future savings. I recently switched to VMedia and divided my bill by 2. I will write a review in a separate post.

UNISERVE

This company also provides all services at a much lower cost than Telus or Shaw. No contract and unlimited Internet data as well. You will need an Apple TV box.

NOVUS

This company also offers TV, Internet and home phone but their geographical scope is not very extended.

They primarily service Downtown Vancouver and a few select buildings in the Lower Mainland.

COAST CABLE

Another company offering “the triple”. However, they are pricier than VMedia, Novus and Uniserve even with a 2-year agreement. If you don’t sign a contract, your bill won’t be much lower than with Telus or Shaw.

If you are not interested in having “the triple”, or watch TV with a Roku or other streaming box, check these companies:

LIGHTSPEED

This company offers Internet and Home phone services. Their home phone price is unbeatable.

ALTIMA TELECOM

Same as above. Their home phone price is pretty cheap too.

TEK SAVVY

Same as above but their home phone price is higher.

FINAL WORD

Home phones are more and more becoming a thing of the past. With the advent of streaming boxes and VOIP systems, the glory days of cable TV are over.

There are no valid reasons for us, customers, to keep paying an exorbitant price for these 2 services.

It doesn’t seem like any of the big cable companies has taken this into consideration. It may very well be their downfall.

That being said, Canada still remains one of the most expansive countries for telecommunication services….

When Financial literacy is not enough

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A lot is being written about Financial literacy. In its basic definition, Financial literacy is is the possession of the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources.

There has been a lot of lamentations over the fact Financial literacy is not taught at schools. Although things are starting to change on that front, and I totally agree with the importance of this subject, I believe Financial literacy alone is not enough.

Let me elaborate a bit.

YOU NEED SOME MONEY TO APPLY FINANCIAL LITERACY CONCEPTS

Yep, that’s brutal and cynical but it is the (hard) truth.

You initially don’t need money to learn about Financial literacy, but you do in order to implement what you learned. For example, debt repayment and investing are 2 pillars of Financial literacy.

If you don’t have any -or enough-money to pay off your debt or to start investing, you won’t go very far with your personal Financial plan. The money conundrum needs to be sorted out first.

YOU NEED TO ADDRESS YOUR PERSONAL BELIEFS ABOUT MONEY

So you think your Financial decisions all come from a rational, logical, cold place? Think again!

A lot of our decisions come from deeply-ingrained beliefs we all have about money….as well as other aspects of our lives and ourselves. Some beliefs can be very limiting and hold us back.

Behavioral Finance is a relatively new subject field that studies the psychology behind financial decision-making. We all can learn a lot from this. Some common beliefs around money can trigger overconfidence, avoidance or inertia.

If you want different results with your money, look at the belief system behind what you are doing and how you are feeling. This can work in other aspects of your life, by the way.

The first step is to identify the belief and accept it. Then you can figure-out how to change it, if it is a possibility.

CONSISTENCY IS KEY

In order to be successful, you need to consistently apply the Financial literacy principles you learned as well as addressing your beliefs in an equally consistent manner.

This is where most people fall off the wagon. It can take time to change deeply-ingrained beliefs. Relapses are to be expected. If money is lacking, you may think it is pointless to apply these principles. Please, don’t do this!

Consistency and perseverance is what will yield results.

final word

I look at Financial literacy as being one leg of the “Financial chair”. If you are missing the 3 other ones -money, beliefs and consistency-, the chair will be, at best, shaky.

Financial literacy is a good start. But it simply is not enough.

 

10 Financial killers

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In my previous post, I shared how F.I.R.E. has an element of privilege to it. I also indicated that for most people, F.I.R.E. will remain a pipe dream.

There are very real obstacles to becoming financially independent and potentially retiring early. Here they are, in my personal order of importance:

FINANCIAL KILLERS # 1 & 2: STAGNANT WAGES AND INFLATION

5 years ago, Statistics Canada published a very interesting study on the evolution of wages in Canada between 1981 and 2011. The study shows, among other things, that hourly wages barely bulged during that period. A full-time worker would earn about $ 21 in 1981 and just under $ 24 in 2011. Not even 15% more.

There were also gaps depending on gender, age and education.

In the meantime, inflation during the same period rose by 149.16%. 

FINANCIAL KILLERS # 3 & 4: DISAPPEARANCE OF JOB SECURITY AND PENSION PLANS

Job hopping is the new normal these days. Most people will have an average of 15 to 20 jobs and 2 to 3 different careers. Sadly said so, most employees are seen as disposables. Job security is a thing of the past, just like companies’ pension plans.

Only 37% of Canadian employees have a pension plan today, primarily in the public sector. It used to be over 50% in the seventies. A company pension plan used to be an important pillar of retirement, making-up for paltry CPP amounts and lack of personal savings. Nowadays, workers need to save more for their retirement. It can be an arduous task when looking at Financial killers # 1 & 2.

FINANCIAL KILLER # 5: POST-SECONDARY EDUCATION COSTS

Canadian students graduate with an average of $ 27 000 in student-loan debt. Depending on the degree and university, this amount can be much higher. Starting adult life and career with such burden is crippling, even more so when looking at the previous 4 financial killers.

FINANCIAL KILLER # 6: UNHEALTHY OBSESSION WITH HOME-OWNERSHIP

Yes, I am aware I am a home owner, thank you very much. That being said, I did not think about buying until I was in my mid-thirties, and after doing thorough calculations. Nothing says you have to buy a property right after graduation or after getting married!

In order to buy, you need to save for both a minimum down-payment and the closing costs. You also need to stay put for at least 5 years, if you want to gain equity and recover from the closing costs you paid.

FINANCIAL KILLER # 7: CAR AND COMMUTING COSTS

A subcompact car will cost on average $ 10 000 per year. This includes car payment, insurance, gas, maintenance and tolls. Since more people have to move to suburbia to find affordable housing and easily need 2 cars per household, these costs can only go higher.

FINANCIAL KILLER # 8: STAGGERING DAYCARE COSTS

If you chose to have children, it is very likely you will have to go back to work, despite the Federal government paid maternity leave and the Canada Child Benefit program.

This is not always a question of personal choice. It is merely based on at least the 5 first Financial killers.

A spot for an infant in a licensed daycare in Vancouver costs close to $ 1 300/month. For a toddler, you are looking at just over $ 1 000.  Prices in other big Canadian cities are similar, with the exception of Montreal. The Quebec government has its own childcare program and costs are way lower.

FINANCIAL KILLER # 9: CONSUMER-DEBT, AVOCADO TOASTS AND LATTES

A lot of people are still trying to keep-up with the Joneses, by constantly upgrading to bigger and shinier things.

That being said, a lot of people are also using credit cards to make ends meet, due to the above financial killers.

FINANCIAL KILLER # 10: LACK OF FINANCIAL LITERACY

Unfortunately, we are not taught at school that we need to save for retirement or for emergencies. We are also not taught how to best do these things. We are not taught how interests on credit cards or loans is calculated. We are not taught about management fees.

This doesn’t help, but it is not what sends someone to a trustee in bankruptcy, contrary to popular belief.

 

 

F.I.R.E. explained and debunked

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F.I.R.E. is a very popular acronym is the Personal Finance blogosphere. It stands for Financially Independent Retire Early. Over the years, this concept has become more and more appealing, and no wonder. With major changes in the workplace, such as stagnant wages, the disappearence of pension plans and a higher unemployment rate, a growing number of people aspires to quit the grind….myself included.

F.I.R.E. IS NOT A GET-RICH-QUICKLY SCHEME

Unfortunately, it will take some time before anyone is in a position of pulling the plug on their dreaded job, as a sufficient amount of money needs to be saved first.

Said amount will require thorough calculations first. Conventional wisdom says it should be 1 million or 25 times your yearly expenses. I say conventional wisdom needs to be challenged! I will save this for another post.

In order to save for the magic number, you need to make money, there is simply no way around this!

F.I.R.E. HAS AN ELEMENT OF PRIVILEGE IN IT

When you take a look at F.I.R.E. bloggers, most of them were making a decent income – well into the 6 figures, combined or not- before becoming financially independent (F.I.) . Some of them don’t have children or had them long after being F.I. Others chose not to buy properties or graduated with no student debt or had no debt at all.

The above definitely gives a head-start to anyone choosing F.I.R.E. It doesn’t mean you can’t achieve F.I.R.E. if the above-mentioned doesn’t apply to you. However, it may be more challenging and take longer.

The harsh truth is that F.I.R.E. will remain a dream for a lot of people.

F.I.R.E. HAS AN ELEMENT OF FRUGALITY IN IT

In order to achieve F.I.R.E., you not only need to earn money, but also to cut down on expenses.

By doing so, you may realize you need less than you initially thought to live on.

Being frugal can be borderline with being cheap at times.

Frugality is not for everyone either. That being said, not being frugal does not prevent anyone from reaching F.I.R.E. either. It will just take longer.

F.I.R.E. IS MORE ABOUT FINANCIAL INDEPENDENCE THAN EARLY RETIREMENT

A lot of people achieving Financial Independence actually do not retire or stop working. They choose to pursue different career paths instead, the most popular being becoming a writer and/or a blogger.

This is where the problem lies, in my not-so humble opinion. A lot of people blogs about retiring early and never working again, when they are actually still earning income instead of drawing from their savings!

The core concept is that F.I.R.E. gives you the ability to choose when and where to work as well as what to work on. Money is no longer part of the equation. This is what I personally find really attractive.

FINAL WORDS

I would love to reach Financial Independence sooner than later. That being said, I don’t know if it is a possibility right now, and it is OK. I fully acknowledge my economic reality and the limitations of the F.I.R.E. concept.

I would also caution anyone not to take at face-value anything read on the Internet from people claiming to be F.I.R.E. We never have the “full picture” of their situations. We don’t have access to their bank accounts, investment portfolio or tax returns. We can never be sure where their income comes from.

 

 

The importance of the emergency fund

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I have heard a lot of names for the Emergency fund: Back-up fund, F-U fund, Opportunity fund, Rainy-Day fund…whatever you want to call it, it is just semantics.

The purpose of said funds is the same: to have some cash in hand when s**t happens. And yes, s**t will occasionally happen, no matter how much we pretend it won’t.

I have written about having an emergency fund before. My views on this matter haven’t changed. With this post, I want to go from theory – i.e. having an emergency fund- to practice -i.e. dealing with an emergency-.

ENTER MY DRIVING WOES

It all started in 2014. That year, I was involved in a minor collision for which I was found 100% responsible. I had to pay a deductible when getting my car fixed. At the time it was $300, no big deal for my wallet.

In British Columbia, it is possible for the at-fault driver to reimburse the insurer for the repair costs to both vehicles, provided there is no injury claim. Doing so also “protects” the insurance premiums of the at-fault driver from increasing.

In my case, the other driver claimed injuries so I could not do this and was assessed a premium surchage over a 3-year period. In any case, I wouldn’t have been able to repay , as I simply didn’t have the extra money back then.

DRIVING WOES-TAKE 2

Fast forward to 2017, I hadn’t had any at-fault accident since then, when I was involved in another minor fender-bender for which I was also found 100% responsible!

My deductible was $ 500 this time, again no big deal for my wallet. However, because of the 2014 accident, I was looking at a hefty premium surchage. The only way for me to avoid this was to pay for the repair costs on both vehicles, AND that the other driver did not claim injuries.

THE CASE FOR THE EMERGENCY FUND

I was extremely lucky that the other driver did not sustain injuries. I was also lucky the collision was minor. The total extra costs came at just over $ 2 800.00, which I was able to repay and this is what I actually did.

All in all, the total amount I forked up-front for my driving mishaps was $ 3 600.00. The upcoming surchage I was looking at was 3 times that amount!

I might be Captain Obvious here, but I am glad  my emergency fund was here to get me out of the hole I had dug for myself! If I hadn’t had one, it would have cost me an extra  $10 000, on top of the regular premiums. That would have been a big chunk of dough!

CONCLUSION

I have yet to hear anyone -including myself- wishing they didn’t have an emergency fund when s**t hit the fan.

Much has been written and said about the good, old emergency fund. There is no question pretty much anyone needs one, including those with a hefty saving rate and those financially independent. A portion of assets should be designated as emergency fund.

Whether one needs $ 10 000, 3 or 6 months of expenses and whether said monies should be held in a plain savings account are discussions for another post.

In the meantime, and in light of these car events, I may need to devote some money for driving lessons….and that is also a discussion for another post!