How I am handling my finances and coping during Covid-19

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I have received a flurry of e-mails from readers asking me how I am handling my finances and my life in general during these uncertain times. Thanks for reaching out. I will gladly oblige.

First, expressing gratitude

As some of you know, I am based in Vancouver, Canada. Here, there is no “confinement” like in other parts of the country or in other countries. However, many shops, businesses and places of entertainment are closed until further notice. Same for schools and universities.

People are asked to stay home as much as possible…which is exactly what I have been doing since mid March. I was supposed to travel to France, my home country but cancelled my flights as the country went in total lock-down. My plane ticket is refundable, but I am unsure as to when said refund will be processed. It could be a while…

I realize how privileged I am to be able to stay home. I am not a frontline worker and I have the luxury of setting my own hours and workload. Said workload has definitely decreased, but I am fine financially….at least for the time being.

I am equally privileged to live in Canada, where the healthcare system is more than adequate and where all levels of government are working together to provide assistance and see us through this crisis.

I have never taken my Western-world background for granted. It has given me incredible privilege and opportunities from the day I was born. It is continuing to do so now.

How I am managing my finances

Let’s get to the nitty-gritty:

  • My income is down. Honesty is important.
  • I am still paying my bills in full and on time, at least for now. Yes, I realize how fortunate I am to be able to do so. Most of the amounts on my usual bills have remained the same, mainly my fixed expenses such as my mortgage, strata fees, car insurance and internet. Other bills are not due before Summer such as my home insurance, prepaid cell phone and property taxes.
  • I have postponed any non-urgent spending, such as servicing my car and minor maintenance items in my condo.
  • I have not touched my investment portfolio. It went down in value, but I am sticking to my plan. My portfolio is for retirement purposes, so I don’t need the money at this stage.
  • I am not contributing to my RRSP or TFSA for now. It is unfortunate, but as my income is down, it’s not a priority at this stage.
  • My overall spending is actually down. That’s a good thing given my income is also down! As a lot of shops, restaurants and other entertainment places are closed, I haven’t spend anything on them. I have also made a conscious choice of avoiding supermarkets and other essential shops as much as possible. I also chose to limit the amount of deliveries to my home.

How I am coping personally

I have made good use of my unexpected free time. My condo is de-cluttered and more functional than ever. I have rediscovered the joy of cooking and baking. I have also binge-watched on Netflix, Amazon and YouTube. I have been reading a lot too.

I have been in touch with friends and family via Facebook and WhatsApp.

I am not watching the News too much though. I find it anxiety-producing.

Once again, I realize how fortunate and privileged I am.

Final word

I am aware there’s much more important things going on in the world today than how a personal finance blogger is managing her finances. I know there is more important than me, period.

I guess I just want to reach out to anyone who is in the same situation and feeling unsettled or alone. You’re not alone. Your feelings are normal.

We will get through this.

Stay safe!

Coronavirus and your expenses (with a BC twist)

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Pandemic or no pandemic, we all have bills to pay….unfortunately. If, like many people, you are already feeling the pinch financially, let me give you some advice on which bills to pay first and any assistance that might be available to you.

Since I live in British Columbia, I will provide information about the provincial government economical response to Covid-19.

Also, some of the advice I’m about to give is controversial, and may completely go against conventional wisdom. You’ve been warned!

It’s all about prioritizing your payments

When you lost your job or your working hours have been reduced, you can’t keep living the same way than when you were fully employed.

I know it sounds obvious, but many people still live and spend as if nothing had happened. You can’t routinely spend $150 per week on take-out or clothes when you have no, or little income.

# 1. Cut unnecessary payments

It’s pointless to contribute to your RRSP, TFSA or RESP if you can’t pay your rent or your mortgage. Same goes with charity contributions. You need to help yourself first before helping others.

#2. Paying your credit card balances

Like many people, you probably have several credit cards; and like many people you may be carrying a balance on a few if not all of them.

If you happen to have a Line of Credit -LOC-, transfer your credit cards’ balance there. The interest rate on LOCs is lower than the one on credit cards. Most LOCs are also interest-payment only.

Afterwards, only use 1 credit card for your purchases. It will limit the number of monthly payments.

If you don’t have a LOC, check if one your credit cards offer a 0% interest transfer or a low interest one. Many credit cards give their customers the possibility to transfer balances from other credit cards with 0% interest for 3 or sometimes 6 months.

Afterwards, only use 1 credit card for your purchases. If you can keep using the one you transferred balances on, it’s even better. You’ll only have one payment to make.

If you are in a dire situation, only make the minimum payment. It will keep your accounts current, while buying you some time.

# 3. Paying rent

Unfortunately, renters are the forgotten of the Federal Government financial package.

If you live in BC, a moratorium has been implemented on both evictions and rent increases. In addition, renters can claim up to $ 500/month. That amount will be paid directly to landlords.

Your rent is definitely the one payment you really need to make. If need be, you may take money from a LOC or a credit card to do so. You need a roof over your head!

# 4. Paying the mortgage

If you are an owner, you have a few more options. Many lenders offer options to skip payment or take a “mortgage vacation”. Contact your lender directly. Note these options are not free. Interests will still accrue.

This is also a payment I suggest you try to make as much as possible.

Should you be unable to make payments, it will take months before your lender takes action. Foreclosure proceedings take well over a year.

# 5. Paying for daycare

In BC, the provincial government is picking-up the tab for licensed day cares and private, family ones. It means you don’t have to make payments and your child retains her spot.

I don’t know about other provinces. If there is no disposition, negotiate with your provider. Ask for reduced fees since you’re not using the service.

# 6. Paying other bills

Hydro: BC Hydro is no longer disconnecting service for non-payment. In addition the corporation has a crisis fund to assist customers who can’t pay their bills. Other provinces probably have dispositions as well. I wouldn’t worry too much about that particular bill.

Car lease/loan: I’m afraid you may not have many options here if you can’t pay. Call your lender or dealership. If it’s a possibility and as a last resort, you may need to part with your car. Either sell it, or if have a lease, obtain a buy-out. In BC, repossession is not automatic and usually takes months.

Cell phone/cable/internet: It will also take a few months before your provider disconnects services and/or send your account to collections. Telus is no longer disconnecting at the moment. Many providers also offer payment plans. Don’t worry too much about this bill.

Student loans: the federal government has suspended both payments and interests for the next 6 months. The BC government has done the same.

Strata/ HOA fees: it will also take months for your strata to go after you on these.

# 7. What about income taxes?

If you’re entitled to a refund, file now.

If you owe money, defer until June 1st and pay by August 31st. CRA is no longer charging interests for late payment.

Conclusion

Don’t get me wrong. I am not suggesting you default on all your payments, or that you let your home be foreclosed. What I am suggesting however, is that you buy time if you are in a dire situation.

Don’t beat yourself up if you have to use credit to pay for your bills, or if you have to miss some payments in order to keep a roof over your head and food on the table….

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….