The Importance Of Emergency Funds

No matter how much you plan out your finances, life always throws curve balls. Engines die, hot water tanks burst and faulty parking garage doors smash your windshield *sigh*. That's why it's very important to set aside funds every month into an emergency fund. It could be $50 a month for a single person and increase from there depending on the size of your family and depending on your luck. Some people just don't get a break.

How My Emergency Fund Works

My wife and I put $100 away a month into a simple savings account to keep an emergency bubble just in case. Some people get a case of "the spends" when they see money stockpiled in their savings account. I on the other hand have a problem seeing a large sum of money not paying down my Mortgage or any debt we have. I remember the second year of TFSA when I took our $10,000 bubble and transferred it into a tax free trading account and purchased 200 shares of Enbridge. My wife was very concerned and to be honest I was a little worried as well, but a year and a half later my TFSA contribution is worth over $13,000 and pays me a 99% guaranteed $400 a year in tax free money. As my contribution room grows so will my dividends and with that, my peace of mind.

I try and save three months of expenses in an emergency savings account in case of job loss or sickness. When I start going over that limit I started putting that $100 a month towards other things like TFSA, the house maintenance account, or special purchases. I've been told many times by my wife that a samurai sword does not qualify as a special purchase, but I beg to differ.
 

Need A Good Night's Sleep?

One thing I've learned since leaving the nest is that it's a great feeling to pay all your bills and have a positive bank statement. My wife slowly learned this since leaving University and now she aims to keep her balance above $500 each month. Now I know not everyone has that luxury, but with the right attitude anyone can save at least a little amount of money every month. If you can't then you are not living within your means. Back in the early 1900's people made enough money to put food on the table, clothes on their backs, put a roof over their heads and were still able to save a little bit of their money. Nowadays people have to buy big houses, wear designer labels and eat out at expensive restaurants and they have to carry a balance on their credit cards to do it . Am I the only one who sees this as a problem?

Whether you make a lot or a little, an emergency fund can turn an "oh no!" into an "oh well". If you have a hard time saving money, you just haven't had a big enough financial scare. Kick yourself in the pants and start saving small amounts of money for an emergency fund today. Your future self will thank you.

Do you have an Emergency Fund?

Making The Most Of The Grocery Bill

I remember the first few days after returning from our Honeymoon. We didn't have much food so my wife decided to go grocery shopping. She went to the most expensive store in the city and bought everything at full price. When she came home and I saw the receipt I almost died! See, she was used to shopping with a credit card from BOMAD, (Bank of Mom and Dad). She didn't pay attention to prices, she just bought what she wanted and gave the cashier the piece of plastic and everything was fine. Well she saw the light after her money buys the groceries now and she leaves me in charge of finding the best prices with Friday's flyers.

"FRANKS and BEANS!"

Now before you click the X to close this window, I'm not going to preach to everyone that you can live off $15 a week for groceries by eating rice and twigs. I like food; I just don't like paying full price. I spend thirty minutes every Friday night looking at flyers to every grocery store within five to ten minutes of where I live. I make a list of everything I'll need for the week by searching what's on sale and pray the princess will like it. Cheese whiz, Eggo Waffles, and canned chili are just a few of many things that are frowned upon.

I tend to steer clear of processed food, sadly. No more delicious TV dinners, bologna sandwiches or Kraft dinner for this cowboy. Yes, processed food is sometimes cheaper, but it's also proven that it lowers your life expectancy which will severely hinder early retirement. I stick with basic, healthy ingredients which are cheaper and better for you. I look for low prices on fruits and vegetables in the flyers that appeal to both my wife and I and incorporate them into meal plans. Whenever possible I buy in bulk to save even more money.

Bulk, Bulk Baby...

 

Even though there are only two of us, I still buy our groceries in bulk as much as possible. Why not buy 40 granola bars at a time? Who couldn't use 8 liters of grape juice? I bought a nice freezer to store any extra perishables so they don't go to waste. Why not pay $14 for 5.5lbs of lean grown beef when you pay around $4 per pound when it's individually packaged. I just separate it into 1 lb servings with freezer bags and let it defrost the night before in the fridge. 

 

The best thing to do is stock up on non-perishables when they are insanely priced. Toilet paper will never go bad and everyone uses it so why not buy it when it's a good price? The same thing goes for toiletries and personal hygiene, buy it low and keep your friends at the same time! I tend to buy my non-perishables at the cheaper places like Wal-mart and Superstore, and buy the perishables at Sobey's or Safeway. The quality is a little higher and the cost is relatively low in comparison to the Superstore fruit that rots before you get it home.

Their Loss Is Our Gain

Each week the grocery stores put items on sale below their cost called loss leaders. The idea is that you will stop by their store and purchase other items at the same time thus increasing the amount you normally wouldn't  have spent in the first place. If it's a great deal and we need it I will usually pick it up on my way home from work. I get it for cheap, and the store manager will weep.

Stick To A Budget

Now spending $100 on toilet paper is never a bad thing, but your next meal might consist of tooth picks and a can of tuna. The trick is to make a food budget that you can live with. With just the two of us we started with $100 a week for groceries. We found we could lower that to $75 and still eat well, allowing us put that $100 towards something else. Find what works for you and try your best to stick with it. If you go over budget don't panic, just spend less the following week to make up for it.

For the most part eating healthy can be cheaper. If you fork over extra cash for expensive organic food then you will need a large food budget. You best bet is to hit the farmers market in the summer or find independent growers to find organic food much cheaper than the grocery stores. You'd be amazed at the money you save if you head to the store with a well planned out list; and you don't have to become a coupon fiend either. Try it out and see for yourself.

Do you make a plan when it comes to groceries?

Sweat Equity

Since buying a new house this last winter, I never seem to be able to catch up on my savings. New furniture, appliances, cellular blinds, fence, landscaping; it just never ends! I even sold my amazing BBQ just to seal the deal when we sold our condo (I'm not going to lie, I really miss it). I know these expenses are part of a new home ownership, but there are ways of cutting down on the cost. I'm talking getting down and dirty with sweat equity.

Time Is Money

The wealthy call it being cheap, but I think sweat equity is a smart way to save money. It's a good feeling to work hard all day and to actually see the fruits of your labor, but there are some limitations. Depending on your skills in construction, motor skills and coordination you may just want to sit this one out and supply beer to your less inept friends or co-workers.

I myself work in construction so I am right at home when it comes to home maintenance and home improvement projects. My neighbors are computer programmers and were going to have a fence built by a contractor. I told them I would compromise and have the 6x6 posts installed by the contractor and would rather build the rest of the fence myself. They agreed and I saved myself a pile of money by doing the work myself. My other neighbor got a quote for his landscaping at tally of $4000 for dirt, final grade and sod. I bought the dirt for $700 which included the guy spreading it out with a bobcat. It took me an afternoon to level it out for final grade inspection which cost me $200 from a guy who did it part time. Then I bought the sod for $1000 and by the afternoon I was watering my new lawn.

Grand total: $1900- A far cry from what my neighbor paid and there's money in the bank for shrubs, bushes and a shed.

Start Small And Work Your Way Up

You don't have to work in construction to put sweat equity in your home. Start small with easy tasks and as your skills progress, take on more challenging jobs down the road. The last time I checked it wasn't rocket science to shovel dirt or mix concrete. The internet is an amazing source for do-it-yourself'ers. There's lots of step by step instructions out there and you can print them off for easy reference. Take some time and learn each tools name and its function. Get comfortable with power tools and learn to use them safely. 

Home depot has drop in classes on the weekends to teach basic home renovation projects. If you do hire a contractor, get your money's worth and ask them lots of questions to help you learn directly from the pros and increase your overall know how.

I think building a fence and getting the landscaping finished is enough work for this year seeing as we only had our rough grade approved in July. I left a large area for a vegetable garden to be ready for spring and I look forward to having fresh produce next year. So that just leaves a deck,  brick fire pit area and shed for next summer. Time to start saving so that the only thing I have to worry about is the mosquitoes!

What have you done to put some sweat equity into your home?

Creating A Retirement Plan

The first step to any successful retirement is... to have a plan! Yes, having a plan may seem obvious, but a majority of North Americans have no clue when they want to retire or how they plan to finance it. Some people even plan on winning the lottery to finance their retirement. All I can say to that is good luck! So what's my plan?

I started saving for my retirement from an early age. Ever since I can remember getting a pay cheque as a teenager, each month $100 was deducted from my account and was invested in mutual funds. I had no idea what mutual fund it was, but I trusted our family friend who signed me up for it and never thought twice about it. I didn't have a solid plan back, but at least I started saving for it. I work with a lot of people who are 20 - 27 years old and they have absolutely nothing saved for retirement and the more I talk to them about retirement savings, the more they ignore me. To each their own.

Now that I'm married and in my thirties, I have a more detailed plan of when I'd like to retire and how I'm going finance it. Right now, the age I'd like to retire at would be 50. Since my wife does not share my financial savvy, I've pushed my official retirement age back to a more realistic number of 55. That gives me 23 years to pay off my mortgage, possibly raise two children and save up enough money to be financially free. Now that I have an official time line, my goals that I must accomplish along the way can be carefully planned for and more easily executed with a rough plan.

Goal No. 1- Pay off the mortgage

My wife and I just bought a house last December. We both have good jobs so we moved from our condo to a nice two story in a very nice and quiet neighborhood in Edmonton. We basically doubled our mortgage and now have a balance of roughly $300,000. For now, I put $1000 in an account each month that is strictly for emergencies only (Not the BOGO at the shoe store like my wife suggests). Every 6 months I transfer the funds from the emergency account and make a payment on the principle of our mortgage. How do I keep from spending that money on a motor sports or tropical vacations? Simple! I think about the interest that a $300,000 mortgage generates at these low interest rates and then I imagine when they climb above 8% and my mortgage payment doubles. For me that's all it takes. By making these extra payments and piling on any extra money that may surface, I plan to have the mortgage paid off in 13 years. Am I crazy; yes. Can it be done; yes.

Goal No. 2- Raise Two Children

Even though we don't have kids yet, my wife and I plan on raising two children. Why only two kids? One parent per child seems like an excellent ratio for family fun and supervision purposes. Yes kids take a lot of money to raise, but I'm pretty sure they don't cost as much as everyone says. My kids are not going to wear major labels until they pay for them with their own money. I've already devised a plan to pay for post secondary education while saving for my own retirement using a Tax Free Trading Account. Every year I purchase $5000 worth of dividend stock. Each year I re-invest the dividends to purchase even more shares. In 20 years I will have invested over 100,000 in my TFSA and depending on dividend growth, my return on my investment should easily be above 10%. If $14,000 tax free a year isn't enough to help my child out for secondary education, then they are going to take up a trade. When the kids are done secondary education, then the dividends are reinvested until I retire a few years later.

Goal No. 3- Saving For Retirement

When it comes to saving for retirement, I basically save 15% of my yearly earnings. Through my work they have an RRSP matching program that will match up to $1.50 an hour. They also have a share purchasing program as well so I can invest up to 5% of my yearly earnings in my company's stock and they will match what I contribute. We also contribute $10,000 a year to our TFSA and grow our nest egg tax free.

I used to invest my money in mutual funds just like everyone else, but I found a better vehicle that is a proven strategy to make my nest egg grow and keep growing even during retirement. I invest my RRSP and TFSA money in Canadian dividend paying companies which regularly increase their dividends. My total dividend income for 2010 was $2696.00 and my yield for dividends was a guaranteed 4.78%. My total dividend income has now increased with dividend increases and additional purchased shares. My 2011 dividend income is now $3432.00 and my yield is 5.04%. Not bad for just starting out. I could only imagine how big my nest egg would be if I started this strategy from the beginning.

Now of course no matter how much you plan for it, Life Happens! Things always change and my strategy can be stalled or re-directed, but at least it's here for a rough guide and example for others. 

Do you have a plan for your retirement?

The Loonie Bin- Mobile Addition

<p>Greetings from Cape Breton, Nova Scotia! I've been on holidays for the past week and it's been really nice to escape the hectic life of the big city. I downloaded a blogger mobile app to create this post and I'm not sure how it's going to turn out so please bear with me.</p>
<p>In my journey to financial freedom there's one important lesson I have learned which is often overlooked and that is; life is short! </p>
<p>I've met a lot of people who always have to work and never take vacations. They slave away and are obsessed with the all mighty dollar, squirreling away any money they can so they can retire early. What these people don't realize is that by the time they retire, their mind and body is so worn out that they can't enjoy retirement. What's worse, you could work yourself into an early grave and your nest egg of savings will be given to someone else! Like anything in life, you need to find a balance.

My wife and I both work full time and after a long week of work and house upkeep, we throughly enjoy a weekend of relaxing. Whether it's spending a few hours out in the garden, going for a long walk or watching a movie, we try and make the most of it without spending a lot of money. The money we save by living this way we put towards a trip every year. Sure we could save that money each year and retire that much sooner, but I would rather live life while I can and save more efficiently for retirement.

Everyone seems to work hard for there money, but why not have your money work hard for you! Ever since I started investing on my own my nest egg has done very well in comparison to investing in mutual funds and contrary to popular belief, it's just as easy as online banking.
Even now, with the stock markets heading into the toilet, I sleep like a baby because I know that I'll still be making over 5% this year. Better yet I'll be making 6% next year and 7% the next thanks to investing in dividend paying stocks.

The next time you find yourself stuck in a rut, take a break from the rat race and learn to enjoy the little things in life. Take a walk and stop and smell the roses once in a while. Eat your lunch outside if possible and watch the birds or squirrels. Enjoying nature is free for everyone and is a great stress reliever.

So the next time you feel like money is ruling your life, take a step back and remember to find a balance.Life is short, so don't let it pass you by.