Life update and musings

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I am aware I haven’t blogged that much lately. Actually, I haven’t blogged much at all this year, with a total of 18 posts, including this one. I guess 2018 was a little bit complicated and full of changes for me. The first half was actually not that great.

CAR ACCIDENT AND INNER QUESTIONING 

In October 2017, I was involved in a minor car accident that resulted in whiplash and soft tissue injuries. Said injuries lingered for over 6 months. This period was difficult, both physically and mentally.

On top of this, I started resenting my full-time job like never before. The only silver lining with this accident is that it really put my current life into perspective. I realized I had been putting off a lot of items, and that it was no longer sustainable.

FIRST WAVE OF CHANGES

I also realized I wanted more out of my life. “More” however is still proving elusive to define. I am working on it. Career-wise, I narrowed a path down to 2 options that I am really interested in. To do so, I decided to obtain an MBA.

Subsequent to this, working full-time was no longer doable or sustainable. Initially, I had given my resignation. After further discussions with my boss, I decided to stay on a part-time basis.

To cope financially, I refinanced my mortgage and leveraged against my condo. I had personal savings as well, but leveraging gave me more options. I don’t regret doing it.

Since then, I have seen drastic improvements in my life, particularly health-wise. I am feeling much better. I am finally taking better care of myself and addressing issues.

There are still a few key aspects of my life that are not satisfying and that I need to spend time on. But, I don’t want to make any rash -or rush!- decisions.

More changes are coming to my life and 2019 has the potential to be a powerful year for me. I can’t wait!

THE FUTURE OF THE MONEY SAVVY BLOG

This leaves me with the future of this blog. To be honest, I am undecided at this stage. One of the things I want to do is definitely being more offline. Maintaining an online presence is exhausting, as well as time-consuming.

I don’t know when the next blog post will be. I simply have more important priorities to take care of at the moment.  I am totally fine with that. Thank you for reading my posts and visiting my blog over the years.

Why I don’t really blog about my own finances

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A lot of fellow PF bloggers share their most intimate financial details online. How much debt they have, their net worth, their spending, their income….you name it, it is out there.

While I did share my debt amount, and how I repaid for it, I chose not to share many details on my finances , and here is why.

privacy concerns

Once you share something online, regardless of what it is, there is no way to get it back. No matter how hard you try, it will stay online.

I am of the opinion people don’t need to know everything about my finances, whether they are complete strangers , friends or acquaintances.

unhealthy comparisons

Society in general, and the PF community in particular, is using net worth as a measure of self worth. The 2 are actually not related.

If you are not killing your monster debt in less than 2 years, something is inherently wrong with you! Or if you haven’t saved a million by the time you are 25 , you are bad with money. If you are bad with money, you are probably bad with other things as well.

Does the above sound familiar? I bet reading about it wasn’t really helpful. It may even have made you feel bad.

Our own story is unique. We all have different lives. Knowing so-and-so paid x amount of debt or saved x amount of money won’ really do anything for us, at an individual level.

not a financial planner or advisor

A lot of PF bloggers have lists and spreadsheets of all their investments on their blog. Some of them even talk about their “top stocks” or favorite ETFs. I previously mentioned the majority of PF bloggers have no formal qualifications or certifications in Financial Planning.

I won’t be one of these bloggers anytime soon. I believe there is a level of personal responsibility when advertising or promoting financial products to complete strangers you don’t know anything about.

Final word

My blog is to share my passion for personal finances, but not necessarily to share everything about my own personal finances or my life.

I consider my blog to be a peephole into my life, but definitely not the complete picture. There is so much more to me than the contents of my blog….but I choose to keep it offline.

Time-weighted vs. Money-weighted rate of return

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With the implementation of CRM2, Canadian banks, investments brokers, mutual funds dealers and other financial entities must disclose the method used to calculate the rate of return of a portfolio or investments like an ETF or a mutual fund.

There are 2 methods used: time-weighted and money-weighted. Both are valid and accepted. Let’s take a look at the 2 approaches.

there is only one big difference between the 2

The time-weighted method does not take into consideration any contribution or withdrawal (cash flows) made to a portfolio. It does not take into account any dividend or interest received either.

The money-weighted method, on the other hand, does take cash flows into consideration, including dividends and interests.

the time-weighted method works best for product comparison

In the time-weighted method, all periods’returns have the same weight, regardless of cash movements. For example, if the return for period 1 is 10%, and the return for period 2 is  -8%, the return would always be 1.2%.

This method works very well to compare products such as mutual funds or ETFs. The majority, if not all, of fund managers uses this method. it is also easier for them, as they have no control on cash flows.

the money-weighted return works best at individual level

The money weighted method, as indicated above, takes cash movements into consideration to calculate return.

It  finds the interest rate or rate of return that would have to have been paid for the investor to obtain the actual ending value, given the beginning value and the deposits and withdrawals that occurred during the period.

The result is way more precise for investors, and can help them understand why they might be loosing money.

The money-weighted return will most likely be a different than the time-weighted return.

conclusion

For most investors, regardless of how experienced they are, the money-weighted return is the best method. It gives a more clear picture of how their portfolio is actually performing .

 

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.

 

Financial rules I like to bend or break

There are many financial rules we hear over and over again, and that we blindly follow. But before following any rule, we need to see if it is actually adapted to our own situation. The key word in personal finances is personal.

  1. Live within your means. Sure, this rule makes sense at first, when you try to get a grip on your money. But once you have done that, you actually need to live below your means in order to save. If you spend all your paycheque, how will you achieve this?

 

  1. Cut expenses drastically. You can only go so far in terms of cuts. I am a proponent of earning more instead.

 

  1. Have 3 to 6 months of living expenses or a minimum of 10K in an emergency fund. Who decreed these numbers were an absolute must? I personally don’t like the concept of an “emergency fund”. I have this theory that, if you focus and obsess on “emergencies”, it is exactly what you are going to get. I prefer using the term “back-up fund” instead. It is just semantics though. I am not saying you shouldn’t save, but the amount you decide to put aside is entirely up to you. If you have a good cushion, it shouldn’t be sitting in a plain savings account earning 0.5%. Consider investing a portion of it in a low risk product.

 

  1. Buying (a house or a car) is the only way to go. Do the math before abiding by this rule. Review your personal situation as well.

 

  1. Always max out your RRSP contributions. In a perfect Canada, we would all contribute the full amount to our RRSPs each year. But it is pointless to set money aside for retirement if you can’t pay your bills, or if you don’t have a back-up fund. An RRSP might also not be the right investment tool for you.

 

What about you? What financial rules have you broken or bent?

The personal aspect of personal finances

I sometimes wonder if I will ever be able to “make it” in the ever-growing, online world of personal finances. I have read a lot of blogs from folks seemingly like me, who have knocked down massive amounts of debt in record times. I am nowhere close to what they have accomplished….and in fact, that’s perfectly fine!

First, other people are not like me…and I am not like them either. The key word in personal finances is “personal”. We all have our unique situation, circumstances and priorities. Mine are both to pay off my debt and re-build my emergency fund.

Some will argue I should get rid of all the debt first and start saving after. This may make sense, but not for me. Other will say I should ramp-up my debt repayment or my income, or both. This also makes sense…but not for my current situation. On taking a closer look at my expenses, one might say I spend too much on this and not enough on that. They may be right, but again, my spending makes sense -and more importantly works -for me.

My bottom-line is that my budget is balanced, my debt is in repayment and I am saving. I am exactly where I need to be, financially, plus I can afford to have some fun while doing all of this. I will definitely not knock down 25K of debt in 3 months, and it is actually not the point. Well, at least it is not my point.

I have noticed some personal finances ’bloggers tend to be very critical and judgmental of anyone who doesn’t do what they do, as if their way was the only one, true way. As far as I am concerned, your personal finances are not my personal finances….