$10,000

Some of you know that the company I used to work for has an employee ownership model.  As part of that, I own shares worth $10,284.30 USD.  If the USD/CAD conversation rates stay about where they are now, the refund should wind up being closer to $13,500 CAD. I should note that it is not an option to maintain my shares if I'm not an employee.

As per my shareholder agreement, the company has up to six months from my departure to sell and issue a refund to me.  I've confirmed that I will receive the money in USD in a cheque.  So, sometime between now and the middle of February we'll get a cheque and need to have a plan for the money.

I've always considered the money invested in shares part of my retirement plan, but now that the funds are being paid back, I'm feeling a bit torn.  Jordan and I chatted about it over the weekend some and he's also a bit conflicted.

Here's the options that we're thinking on:

• Keep the money fluid in my TSFA 
• Pay off the Kia 
• Pay off half off the LOC debt
• Move the money to RRSP

Keeping the money fluid does have it's advantages.  Certainly it would fully fund our emergency fund and then some.  We don't know what type of job I'll find next year, so it might be good to have this as cash to remain flexible.  This also opens us up to spending the money even if we don't really need to.

Paying off the Kia is a super attractive option.  The interest rate is 0%, and as of today we owe just over $15,000 on it - so it would be so so close to being paid off with the share money.  We pay a little more than $250/month on the car and not having that payment would give us a different type of month-to-month flexibility.  That money could be redirected to paying off the LOC - going from $500/month to $750/month, or directed to savings that we've had to pull back on because of going on EI. Putting the money towards this debt has the advantage that it can't be 're-spent' unlike the LOC.

Paying a big chunk on the LOC would make tackling the rest of it feel actually achievable.  Since using it to build the garage and fence on our Alberta house, the balance has gone up and down from $19K to about $25K. Currently it's sitting at $23,500 - so the share money would get this down to a manageable $10,000.  The interest rate on the LOC is 5.73%, so from a financing charge perspective it makes more sense to lower this debt than the Kia as well.  The minimum payment would reduce by about half which would give us equal month-to-month flexibility that paying off the Kia would give us (reducing the required paying by about $250).

Last option would be to just move the money into RRSPs.  This wouldn't impact our cash flexibility in anyway, but would lock in the money to long term savings which was the original intent of it.

So, what do you think?  Keep the money as cash, pay off debt, or move the money to long term retirement savings.  We could really use your thoughts on this one.

Investing - Asset Allocation

After writing about my pension asset mix a month or so ago, I felt like I hadn't really finished the exercise so I went to the front page of the internet and found a sub-reddit for personalfinancecanada and there I asked about pensions and asset allocation - and what I got, was a big lesson that I wanted to share with you.

First, if you haven't seen it before - I would really encourage you to check out the Canadian Couch Potato Blog.  It's written by Dan, and Dan's got a lot of credibility on the topic of investing in Canada.

no, this is not a sponsored post, I'm just excited about it.

On his site, and through some help on reddit - I learned a bit about index funds and some recommended approaches for setting an investment mix.   One of the approaches, which appealed to me had a balance of bond and index funds - for the medium risk appetite.

I totally see now, why those that commented on my last post about the topic thought my investments didn't have enough equity built into the mix.  Someone on reddit suggested I

1. Determine your preferred asset allocation (ie, above graph)
2. In a spreadsheet, pool all of the values of your various accounts and parcel the total out into buckets representing the percentages from #1 to the various asset classes.
3. Distribute the individual asset class values across the accounts based on tax efficiency. You match asset classes and accounts. A spreadsheet is really helpful for this.

So, I did just that...and here's what my current state of affairs looks like including all investments.

Then, I played.

I played and looked at my investments until I came up with the following 'future' state...which is what I'm thinking of doing.  Basically, it involves:

• Changing my TSFA DISA to the Tangerine Balanced Income Fund
• Adding the balance of my RRSP DISA to my RRSP Tangerine/Streetwise Equity Growth
• Adjusting the asset mix of my pension (tossing Trimark has it had high MER without higher growth)

I wanted to put this back out to you before I actually made the changes.  What do you think?  Am i missing something?  Do you think the advise to go with the Canadian Couch Potato Asset Allocation (40-20-20-20) is a good one, or do I still have too much in bonds?

Recent Decision Making

The last little while, my posts have been a bit all over the place as we've had some conflicting priorities.  I've talked about buying an investment property, or investing in RRSPs or even investing with shares at work.  I've talked about paying off the escape and looked at increasing our mortgage payment.

There are just so many options.

Yesterday I wrote about our decision on a vehicle - basically, we've committed to continuing to do research and not rushing it.

We have also decided to buy more shares at my work which is an investment in both my career and our retirement.  We have also moved our RRSPs with ING from a RISA that was getting 1.35% to a Streetwise Mutual Fund Portfolio.  Specifically, the Equity Growth.  It's high risk/high return - but it's a relative low sum of money (under $6K combined), and we have 35 years of investment time.  The portfolio is trending very strong at 8.73% YTD.  While we will continue to contribute $50/week (each) to our RISAs, Jordan is now also contributing an additional $25/week to his Streetwise! So pumped!

We haven't written off the idea of an investment property, but we have put it on hold for at least a year or two.  We want to focus on our family and a few other things before we go down that path.

Updated: The Big Backyard Project

The first deposit has been paid ($750 for the fence, and the work has begun!  Jordan and I are both working  so we can't see the work being done, but our lovely neighbor is taking photo's for us and sharing them.

Are we really going to buy a condo?

A few weeks back, I told you that Jordan and I were discussing an investment property, specifically buying a Condo.

We have narrowed it down to which development we are interested in based on quality, marketability, rental income and re-sale value – while I would like to spend $160-$170, it looks like the best value is around the $190K mark. There are a couple of things we would have to look at including how we are paying for our backyard, as well as how we would be coming up with the cash for a down payment.  The specific unit we are interested in is $194,900, so after GST and down payment the mortgage would be $158,726 for a two bed, 1 bath 876 sq foot condo that has a separate entrance from the outside (no hallways) on the main floor.

Here's why we like this one:

The washer/dryer is accessible by both rooms and it's behind the pantry rather then right next to the cooking surface.

• It has a separate eating nook, rather then just the counter top eating space - nice for families.
• The living space is open to the kitchen - which creates a bigger feeling for the space.
• Storage space within the unit (just off the eating nook).

So, that's the space - without further ado - here is one scenario for our the cash flow would work, keeping in mind that the money for a down payment would need to be in our bank account for at least 90 days prior to fiance approval.

We would pay for our backyard using our line of credit, rather then the cash we are projecting to save this year.  The cash we are saving, would be re-directed to saving for a down payment.  We would begin paying a carrying cost/interest of approx $103/month.

Half of the down payment/closing costs would come from current cash savings as well as savings from May-October bringing us to just over $23K in cash savings.  We would need to withdraw an additional $17K from the LOC to get a total of $39,681.   If we made the withdraw in July and stashed it in our TSFAs we would gain 1.4% in interest (offsetting the interest we would pay on the LOC which is 5.5%, reducing carrying costs slightly - $58/month).

Our total interest costs would now be approximately $160/month including what we pulled for the back yard.

Assuming we would purchase the property in October and get possession and have it rented prior to January/February - we factor in three months of carrying the Condo. The carrying costs would be about $1,125 (shown below).



A note here.  Jordan asked me if we could still carry the condo if I was on maternity leave - we could, but only for the first five months without going into debt.  The first 15 weeks of my eventual maternity leave  (no, I'm not preggo yet) will include a top up (paid by my employer) to 70% of my salary.  There would be some carry over from the top up month to month, which is why would could stretch it to five months, rather then 3.

Once the purchase is complete, we could begin to pay down the LOC as aggressively as possible.   We would have cash flow from November-December of just over $1,700 which would reduce the debt to $38,336 by the end of this year.

Projecting forward, assuming no raises (which their will be) and a maternity leave (which I hope there will be) - as well as rental income of $276-$376/month - the debt would be paid for by the end of 2016.  It would cost us approximately $5,000 in interest cost over less than 4 years.

Is it worth it? 

TLDR: Is it worth $5,000 to both significantly increase the value of our home ($27,181 in equity) and acquire an investment property that would net $3300-$4500 in revenue a year (yes I've accounted for property taxes and the like, but not income taxes).

I am now an owner!

One of the unique and awesome things about the company I work for is that it is 100% employee owned, in an industry where that is pretty rare (from my understanding of it). All salaried employees can join the share purchase program and put however much away each pay day towards their purchase. You can purchase shares twice a year (end of June and end of December). I’m sure some of you saw the budget line and tracking bar I had, working towards my first share purchase.

This past December the minimum purchase was 20 shares (and then you can buy in increments of 5), thanks to a stellar interest rate when they set the prices, I was able to buy 25 shares!

I feel pretty excellent about that!

It’s confidential information, so I can’t share exactly the structure/dividends pay – but it’s pretty good.

The shares are more than a financial investment, it’s an investment in my career. For me to be able to reach lofty heights in this company – I need to reach a certain….status….we’ll call it. The minimum number of shares for this status, is around 1,700…. So I certainly have a way to go – and owning the shares isn’t the only thing I need to do to reach this status, but it is one of the core requirements. I figure if I buy them up now, it’s less I have to buy in a lump sum fashion 10 or 15 years down the road. It also helps my management team see that I have an ownership mentality, and plan on making something of myself here.