sacha chua living an awesome life

To encourage people to save, the Canadian government created a tax-free savings account. You put after-tax dollars into it, and the interest is tax-free. The contribution limit for this year is $5,000.

PCFinancial and ING Direct are two Canadian banks with great interest rates. Currently, ING Direct (0.27%) is better than PCFinancial’s Interest Plus (1% on 0-$1000, 2.75% on $1000 and up) for amounts less than $53,000, and you probably wouldn’t want to keep that much money in a savings account anyway. PCFinancial does have an anniversary bonus and it’s easier to transfer money back and forth between accounts, and sometimes PCFinancial’s rate is a little bit higher than ING. ING Direct’s GICs seem to be a better deal, though, and they come with more options.

If you do set up an ING Direct account (and deposit at least $100 into it), you can use my referral code (Orange Key: 29083948S1) for a $13 bonus. I’ll get a $13 bonus, too, so everyone’s happy. =)

I’m setting up some transfers. Looking forward to taking advantage of that tax-free deal! Maybe another set of laddered GICs…

Another milestone! Today, I consulted a financial planner for the first time. I’d been meaning to find a financial planner who could review my setup and suggest other best practices, and I learned a lot from the session.

When I told the financial planner how I’d maxed out my registered retirement savings plan. She was impressed and suggested looking into corporate class funds. They’re taxed a little differently than regular mutual funds, and can be more tax-efficient than regular funds when outside an RRSP. I took the literature and promised to read up on it. Based on this Globe and Mail article about corporate class funds, it seems that corporate class funds are good for active investors who like switching in and out of funds, and not so good for buy-and-hold investors who favor index funds because of tax efficiency and low management expense ratios. (TD Canada Trust e-Series has the lowest-MER index funds I’ve seen so far, as the exchange-traded index funds that are increasingly popular in the US are somewhat bulkier over here.)

It was good to get some advice on uncommon concerns, such as international personal finance. How would I need to prepare for the scenario of moving back to the Philippines? I knew that my RRSP investments could be left in Canada, but I didn’t know how to handle my non-registered investments and other accounts in a tax- and duty-efficient manner. It turns out that I can leave money here, but I may not be able to give further instructions from overseas, and withdrawing everything could result in losses or high taxes. One way to handle this situation might be to convert all my accounts into long-term investments, then leave very good instructions. I’m currently planning to stay in Canada for a while, but it’s nice to know what I need to do in order to prepare for other options.

I answered her questions about my existing assets and expenses, and I asked her to help me prepare several retirement scenarios: the traditional retire-at-65 kind of plan, the ambitious be-flexible-at-40 plan, and the calculations for time in between. I wanted to figure out what a basic plan is, then inch that retirement date earlier and earlier. I gave her the numbers she asked for, and she’ll share some plans with me the next time we meet.

Writing about this gave me an epiphany. What I want to develop is not a retirement plan, but a medium-term opportunity plan. I don’t need to know how many dollars I’ll need in order to never work again. I’m not in the habit of postponing life until then, and I certainly hope I can continue doing meaningful work forever. What I want to know is this:

How can I position myself so that I can create and take advantage of opportunities while dealing with the risks?

(This post is not financial advice. Good luck!)

I attended a personal finance seminar by Ellen Roseman, a Toronto Star columnist and University of Toronto alumna. I’ll write about it in more detail as I reflect more on personal finance, but here are a few new nuggets I picked up:

• No RRSPs until I get my paperwork sorted out! Boo. Not fun knowing better practices and not being able to use them.
• It might be a good idea to invest money into an RRSP while I’m young, then take a holiday—leaving the money there to take advantage of tax-deferred growth—and do something else with the money I’m already used to setting aside. For example, I could save up for a house.
• You can carry forward the tax deduction you get when you invest in an RRSP, so you can invest now in order to take advantage of the tax-deferred growth and claim the deduction when it makes more sense tax-wise. Must figure out when that makes sense.
• Four magic words: “Can I do better?” Ask for discounts!
• Two good books: The Wealthy Barber, The Richest Man in Babylon.
• Tour of Canadian personal finance blogs. Check ellenroseman.com for the link.
• I should check out the TD monthly income fund or dividend funds to find a growth-oriented investment vehicle. Morningstar.ca has good reviews.
• Might be more comfortable with a financial advisor within 10 years of my age.
• E-mail car dealers to get good quotes without having to shop around so much.

Interesting tips came from the other attendees:

• Skype now has a yearly plan. That’ll be worth signing up for.
• Insurance brokers can be handy.

Worth the time.

Random Emacs symbol: bbdb-add-or-remove-mail-alias – Command: Add NEWALIAS in all RECORDS or remove it if DELETE it t.

No one in Web 2.0 can spell. But Wesabe looks interesting. It’s a Web 2.0 budget tracking thing with tips. It rocks. Tagging is an interesting idea.

I should also put getrichslowly on my more-frequently-read blog list…

On Technorati: web2.0, finance

Random Emacs symbol: calendar-set-mode-line – Function: Set mode line to STR, centered, surrounded by dashes.

I’m back on the wagon of tracking every expense. There’s a certain
satisfaction in knowing that every cent is accounted for. This time,
I’m using John Wiegley‘s excellent
Ledger command-line accounting
tool. It works with plain text, of course.

I’ve just figured out how to do my fancy earmarked accounting thing.
I’ve partially sorted out my cashflow, but I’m not sure how much I’m
supposed to receive over the next few months or what’ll happen when I
start working. For peace of mind, I’ve earmarked enough money to cover
tuition, rent, and food.

I want the earmarked money to be tracked separately from my real
savings so that I know how much money I can actually touch, but I want
to leave it in my regular high-interest savings account so that I can
earn interest on the whole amount. So I need two reports: one showing
what I can consider free and clear, and another that reconciles with
the account summary from the bank (includes earmarked accounts).

Here’s the transaction setting up earmarked rent:

10.28 Earmarked for rent
   [Savings:Earmarked:Rent]      $4365
   [Assets:Savings:PCFinancial]

and every so often, I’ll post transactions that look like this:

11.02 * PCFinancial ; Transfer for rent payment
   Assets:Savings:PCFinancial     $-485
   Assets:Checking:PCFinancial    $485
   [Assets:Savings:PCFinancial]   $485
   [Assets:Checking:PCFinancial]  $-485
   ; Automatically transfer rent money from Savings to Checking ($485)
   ; This is still part of my earmarked savings until it goes out of Checking
   ; So ledger -s -c bal shouldn't show it as part of my real checking account
   ; or my savings account, but as part of Savings:Earmarked
   ; but ledger -R -s -c bal should show an increase in checking and a decrease in savings
11.05 ! University of Toronto
   Assets:Checking:PCFinancial    $-485
   Expenses:Rent                  $485
   [Savings:Earmarked:Rent]      $-485
   [Assets:Checking:PCFinancial]  $485
   ; Now decrement my earmarked savings
   ; And make sure that Checking reflects actual balance
   ; And that savings is unchanged from before with virtual transactions

The ! signifies a pending transaction that has not yet been cleared,
while * signifies a cleared transaction. ledger can do
partially-cleared transactions too. This is pretty nifty.

Makes me want to have more to track…

On Technorati: ledger, finance

Random Emacs symbol: shell-script-mode – Command: Major mode for editing shell scripts.

Finally sorted out a Canada-based credit card. Yay! I no longer have
to course credit card purchases through the Philippines, getting
dinged on the exchange rate. Too bad I didn’t get it in time to pay
for my flight.

The credit card representative handling my activation call was really
hard-selling me on credit balance insurance. I wasn’t too sure I
needed it because I plan to pay the balance off in full each month,
which is the proper way to use credit cards anyway. He was really
pushing me to go for the 30-day review, but I was, like, ehh…
Something about hard sells raises my hackles, and I was rather
suspicious of the fact that I couldn’t go without and just opt in
afterwards.

So I Googled for “do I need balance protection insurance” and found the Government of Canada’s helpful factsheet on credit balance insurance, which led me to the totally awesome list of consumer publications from the Financial Consumer Agency of Canada.

Hey, governments can rock after all. =)

On Technorati: money, finance, canada, credit

Von Totanes and I are at the TD Canada Trust
at Bay and Bloor to set up accounts. I’ve decided to finally go for
the secured credit card so that I can establish a credit history,
which will be handy later on.

I’m going for the CAD 1000 limit credit card because I find myself
occasionally needing to book a flight. It’s still not going to be
enough to book a flight home, but that’s okay: we need to start
somewhere. Two options:

1. Open a checking account and maintain a minimum daily balance of CAD 1500 in order to avoid monthly fees of CAD 3.45.
2. Secure the deposit with CAD 1000 in a 1-year GIC with 3.75% interest, freeing up CAD 500 to put into, say, my 4% savings account. Open the checking account and pay monthly fees of CAD 3.45, but avoid keeping a minimum balance. EARN: 57.50 SPEND: 41.40 NET: +16.10

Approach 2 earns me CAD 16 extra per year, compared to the opportunity
cost of tying up CAD 1500 in a non-interest-bearing account. For the
purposes of simplifying my life, however, I don’t mind giving that up
for now. If I were here for longer, I might’ve secured it with a
longer-term GIC, maybe even get up to 4%.

To simplify matters, I’ll probably also do most of my banking at TD.
The savings account offers 3% interest with a minimum balance of CAD
5000.

The savings account has a maximum of two transactions per month, so I
can’t do the kind of financial juggling I’m doing with PCFinancial,
but I guess it’ll work out better in the long run. The account’s
actually a better deal than my previous PCFinancial savings account,
but I’m on the 4% savings account at PCFinancial now, so I’ll need to
think about that for a bit.

I think I’ll start off by just using the checking account at TD for a
while, using it to autopay my credit card and transferring more money
into it once in a while. It’s handy because it’s another way I can get
cash; their daily withdrawal limit is higher. I’m going to need to be
more careful managing my accounts and making sure I’m keeping track of
everything.

I’ll close my Scotiabank USD account, at least. I’ll keep the
PCFinancial savings account for the extra 1% (which is still quite an
amount), move most of my current account to TD, and keep a checking
account at PCFinancial for bill payments, checking, and the occasional
debit transaction. I can use the TD account to pay rent every month in
order to make sure the account is active, and I’ll use scheduled
transfers to make sure the money is there each month. I’ll also top it
up right after I charge something, treating it as a charge card.