3 ways to save on your car insurance

Car insurance is mandatory for anyone who wants to legally drive on our roads and highways. Because car insurance is compulsory, most of us would love to find the cheapest car insurance policy possible without sacrificing essential coverage. Fortunately, with so many insurance providers competing for our business, there are ways that we can locate and purchase affordable car insurance. Below are 3 key ways to save on your car insurance:

1. Online Comparison: Today, the internet has become a vital tool to locating cheap products and services. When it comes to locating cheap auto insurance, consumers now have access to online search tools located on insurance sites that allow them to compare a number of car insurance policies from various insurance providers. It is an easy and fast way to receive several cheap insurance quotes. Consumers can then review each quote and the policy coverage and pick the best policy that fits their budget and coverage needs. You can save hundreds of dollars using this free search tool.

2. Cost-Cutting Measures: There are a number of things you can due to lower your insurance costs. For instance, if you pay a higher a deductible, you will pay a lower monthly premium. Sometimes you can get a discount if you pay the premium for the full year instead of monthly. You can also lower your costs by getting rid of unnecessary coverage such as collision coverage if you have a low valued car. As well, combining you car insurance policy with another policy such as your homeowners insurance policy will result in a discount.

3. Take Advantage of Discount Offers: Insurance providers will offer a number of discounts to secure your business. You can save on your car insurance by taking advantage of as many discount incentives as possible. You can get discounts for such features as: adding anti-theft devices and safety features, maintaining low-mileage, driving a fuel efficient vehicle such as a Hybrid, completing a driver safety program, maintaining a clean driving record, maintaining a good credit history, and more. As well, there are also age discounts and discounts for maintaining a certain school grade-point average.

Although you need car insurance to be able to legally drive, you do not have to pay high premiums. It is easy to locate and purchase cheap car insurance when you know all of the key ways to reducing your insurance costs.

the moneygardener 2009 financial goals

In my recent post, 2009, a new financial year, I talked about how I believe it is important to have a vision for what the upcoming year will look like for us financially and to write it down. Well we might not all have a blog, but I do, so conveniently I can write my 2009 financial vision/goals right here.

Current Situation
We are quickly approaching 30 years of age and over the last 4 years we've carried out some important financial steps toward building a secure, prosperous future.

• Started retirement saving plans for the long term
• Purchased a home and added features to make it comfortable
• Started a non-registered dividend stock investment portfolio for the long term
• Grew our careers through experience and further education
• Eliminated several inefficiencies such as gas guzzling, old vehicles, and multiple bank accounts
• As of October of 2008, when the market really went to hell in a hand basket, we made the decision to borrow money tax efficiently to invest into our non-registered portfolio
• My wife went back to work full time in December of 2008 after a year of mat. leave

Financial Vision For 2009

1. First and foremost, in keeping with my stated goal #1, in 2009 we want to continue to save at least $1,000 average per month for our non-registered portfolio. Ideally I'd like to save much more than this, considering that last year we managed to save an average of $1,395/month. This will enable us to be well on our way toward our goal of the portfolio being worth $175,000 (net value after any debt) in February of 2014.

2. 2009 will see us spend a good amount of money on home-related items. We will also spend some serious money on a vacation.

3. We will start 2 TFSAs (Tax Free Savings Accounts) in 2009 and contribute the maximum amount to both.

4. Over the past 3 months I've been using borrowed money to invest in our non-registered portfolio and paying it off in large chunks with saved money. I am expecting that this buying activity is largely completed and I will slow purchases now and concentrate on using saved money to pay back the line of credit. I am happy with the fact that I have now bought a good chunk of my portfolio at much lower prices and higher yields. This obviously depends on the market, but unless we breach the S&P 500 lows of the last few months I don't think I'll get excited about the opportunity to invest as often.

5. Our dividend income within our non-registered portfolio has grown from $1,523 one year ago to it's current level of $3,524. Savings and borrowed funds over the last year have really juiced our dividend growth. Over the next year I expect that this rate of growth will slow down dramatically as we rely on companies raising dividends for growth instead of mainly new funds coming in.

What I won't Aspire To Do:

Grow Net Worth By X% - This is a pointless exercise for me because I rely heavily on the stock market for net worth gains. The market is out of my control.

Accelerate Mortgage Payments - This just ain't how the moneygardener rolls. I've chosen sides already. Having a low interest mortgage and an interest in the long term prospects of investing I've set my mortgage payments on cruise control, and I like it that way.

Follow The Crowd - I'll march to my own drummer again in 2009 like I've always done. I don't care what the majority of people are doing and why. I'm sticking to our long term plan.

What does your financial 2009 look like?

how did I save so much money?

I received an email from a reader recently in response to the post directly below this one, where I described that in 2008 we saved an average of $1,395 per month for our non-registered portfolio while my wife was on maternity leave. The gist of the reader's question was:

How on earth are you able to save so much money?

Well, simply put this blog's advertising revenue is approximately $1,395 per month.... :)

I wish the above were true. In reality my wife and I both pull in modest salaries. The best answer to how we are able to save so much money each month is a detailed description of several of our characteristics and habits which I feel allow us to do so. A simpler, more refined answer is we know how to get rich. It is really as simple as that. Read my "how to get rich, explained" post and that is basically the reason why we are able to save a significant portion of our income. Specifically:

• The conventional wisdom says that your mortgage and property tax should account for no more than 28% of your gross income. Ours accounts for 14%.
• The conventional wisdom says that as we age and earn more money we should buy larger houses and new cars. We don't subscribe to these theories whatsoever.
• The conventional wisdom and human nature tells us to spend money on what we need and what we want before considering what is left as savings. We turn this idea around and make saving the first action.
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how to get rich, explained

If we could boil achieving financial freedom and independence down to one habit, what would that habit be?

LIVE BELOW YOUR MEANS
Seems simple enough doesn't it? This basically means, ensure that your lifestyle costs much less than your true financial wherewithal. Do this for many years and you'll find yourself in a very good position financially.

We often hear the phrase 'Live Below Your Means' espoused by several personal finance pundits but what does this really mean?

Here are some of the most important specifics that I feel define what it is to LIVE BELOW YOUR MEANS:

• Do Not Purchase a Home for Nearly the Amount that your Lender Pre-approves You For. Lenders obviously want you to borrow as much money as you can theoretically handle based on your income. This figure is usually ridiculous when you consider the fact that you do need money for other items aside from your mortgage, property tax and other related home expenses. Write up a monthly budget and actually examine where your money will go in reality before purchasing a new home. You'll find that your lender would like you to lead a house-poor lifestyle of stress and worry.
• Save First, Then Spend. "I would save money but there is nothing left at the end of the month". This is a common excuse. Until you adopt the habit to put money aside as savings before you even think about paying bills or buying things, you'll feel like a hamster on a financial treadmill. Automate this by setting up an automatic money transfer to a separate account and it's fool proof. Save at least 15-20% of your gross income and you'll be well on your way.
• Forget About The Jones'. You might as well face it, your friends and relatives your age will live above their means and you will look poor when compared to them. Until you resign to this fact, you will be extremely tempted to veer off course, following the herd by making irresponsible financial decisions that lead into debt and stress. Let others become house-poor, live paycheque to paycheque, drive overpriced SUVs they can't afford, and take vacations on credit while you manage your finances responsibly by sticking to your plan. Remember, the Canadian banks own the Jones', while you can own the Canadian banks if you choose.

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getting more for less$

A recent report shows that Canadians are paying more out of pocket money for less stuff. Retail sales rose 0.5% in June but actual retail sales volumes decreased by 0.4% from May. Basically the 0.5% rise in retail sales came from higher prices at the gasoline pumps, to the tune of a 4.2% increase in sales of petrol. The Canadian consumer spent more in dollar terms during June, but bought less with their money in terms of the volume of goods and services. I am sure that the increase in food prices is not helping.

Where does that leave the average consumer? Well spending more for less is never a good scenario, but I like to think that we are beating this trend by buying smartly in bulk. By doing this, we are actually getting more for less. We buy the following items at Costco Wholesale for prices per unit that are far below what you would pay at any traditional grocery store.
Bread, toilet paper, Ziploc bags, baby wipes, diapers, fresh and frozen vegetables, fruit, salmon, tuna, lunch meat, paper towel, granola bars, juice, toothpaste, cottage cheese, shampoo, conditioner, deodorant, cheese, garbage bags, ketchup, sausages, and chicken among other items

I would estimate that we probably save thousands of dollars per year doing this. Obviously you must be careful not to buy goods that you don't really want or need, and careful to not buy something in bulk that perishes to quickly. If we could only do this for gasoline...we'd be set. We have an area in our home ('the stock room') where we store these items so that we can take advantage of sales and not take space from the kitchen and bathrooms. The prices on these items may rise, but we are still gaining the benefit of cost savings through buying in bulk.

Another added benefit of doing this the elimination of hassle. I hate having to think about whether or not we need bread, toilet paper, or paper towel every time we're at a grocery store, as we constantly buy the same items over and over. By buying in bulk we're always covered, and we only buy and stock the best stuff, as Costco never carries inferior products. We've actually eliminated the need to make a large weekly trip to a traditional grocery store.

'Do we need baby wipes?' , 'Let me check our inventory'.

mid year portfolio review

Those of you that have been following this blog for any time know that I write quite frequently about my non-registered portfolio. Part of the reason I started this blog in April of 2007, was to document my progress on this portfolio over the long term. This is a portfolio that I excitedly started on June 1, 2006 as I began my foray into investing in individual stocks.

The history of the money in this portfolio actually dates back to March of 2003, which was the same month that the most recent Iraq war began. The S&P 500 index is actually up about 50% since then, which represents a compound annual growth rate of 8.6%. At that time I socked away the first $500 to start what was then a mutual fund portfolio. I had earned the money working at my first full time job, right out of university. I likely had several other avenues where the money might have been better spent (paying off student debt, saving for a house, or replacing some 'student' furniture), but I wanted to get into the market in some way for the future so I opened the account. As I've mentioned before it's too bad I waited until I graduated from university to put some money away and begin to learn about investing. Five years later, this portfolio has morphed into a group of investments that my wife and I add to very regularly and value dearly for our future financial success.

Today marks the end of the first half of 2008, a good time to update our portfolio. I really can't believe it has been over 2 years since I started the portfolio as it is in its current form. Seems like yesterday, and in the grand scheme of time that should be invested in stocks it is really insignificant. This portfolio and most of the stock within it will be held for at least 15 years or more. Now to the Review...

2008 Returns To Date

The headline number here is -15.3%. That's right our portfolio is down a whopping 15.3% since the start of 2008. This compares poorly with the -12.8% return of the S&P 500 index, as well as the -8.6% return of the XDV (an ETF that tracks Canadian dividend paying stocks). Brutal numbers here...

Dividends and Yield

Our portfolio is now yielding a whopping 4.8%. This essentially means that we are being paid an amount equal to 4.8% of our capital annually. We're currently being paid $1,993.03 in dividends and distributions per year. Alternatively $5.46 per day is a fun way that I like to represent this. This is about 125% more than we were being paid last year at this point. I like to refer back to dividends and yield instead of paper portfolio value, when the market gets tough, as it has been lately. My favourite graph, our income from investments graph keeps on moving up despite the current markets.

Asset Allocation

Click on the pie chart below for current details.

Looking ahead I'm going to keep trudging along through this difficult market. Hopefully I will have some money available later on in the year to take advantage of the plethora of cheap stocks out there. The fact that the markets have been so ugly is actually a positive as I expect to invest a lot of money in 2009, and I'll be able to buy more dividends for every dollar I invest if the market declines persist. Very shortly our income from investments will reach $2,000 per year, which will be a nice milestone. For more on my mentality with this portfolio, check out my investment philosophy.

shrink yourself or grow your net worth

I'd be willing to bet that at some time in most people's lives they have set out to accomplish one or both of the following:
Lose Weight, Eat Better, & Get Healthier (Shrink Yourself)
Save More Money & Invest It For The Future (Grow Your Net Worth)

These two popular 'worthy' pursuits of self improvement don't actually have a lot in common. OK, they both require discipline, but the similarities end there.

• Saving Money and Investing it is Passive

Spending less money takes less effort than spending more money. It might be a lot of work to figure out different ways to trim your budget, but buying a house well below your bank pre-approval amount, and avoiding large frivolous purchases is easy. One of the keys of investing for the long term is sitting on your hands. Tinkering with a portfolio and trading in and out of different stocks and different instruments will often take a large percentage out of your return. Spend less than you earn, invest the difference, and ignore it for several years...no sweat.

• Working Out Regularly and Choosing Healthier Foods is as Active As It Gets

Getting active and/or getting to the gym regularly takes a great deal of effort. Sticking to a workout regimen is very difficult. Changing your diet in order to take in less calories and more healthy foods takes some thought, adjustment, and effort. Lot's of sweat and activity here...

If you are reading this blog you might find the former much easier than the latter, as I do, but is it really easier to most? How do personality types and values affect one's successes in these areas?

diaper mayhem II - an act of treason

There has been something bothering me for a few days now... I have an apology to make.

Back on my popular diaper mayhem post in January of this year. I blogged about how I was a slave to the Pampers brand, after a full 13 days as a parent. I should have known not to turn my back on one of my long time allies in our quest to financial freedom; Costco Wholesale, this is my official apology:

I am sorry I doubted your Kirkland Signature brand diapers. I was a green parent and the last thing I needed on top of the stress of new parenthood was 200 potentially leaking diapers. Now that we have had the time to get into the groove of parenthood, we finally took the plunge. That's right, once again Costco came through for me, as my son is now comfortably wearing and 'using' Kirkland Signature diapers. I suspect Kimberly Clark makes these puppies, so in essence they are Huggies, but they seem to work fine now. I should have never doubted the good people of Costco, who incidentally now sell Crocs for $24.99 a pair.

Here is the breakdown on the diapers:
$44.99 for 200 diapers size 3 = $0.225/diaper...likely about $1.80/day

I will update the comparison of Costco's Kirkland Signature to other brands and stores in a later post. I am confident Costco is proving, once again, to be the best value proposition on the retail diaper scene.

reader q&a; on net worth gains

A reader, yohann (from France) asked a question in response to my latest net worth post from March of 2008:

could you please provide more info about how you did it ? I saw that you had some 6 000$ increase per month when going from 83k to 95k, was it only salary?

On the particular update that johann was referring to, our net worth did increase by about $12,000 in 2 months. In valuing our home within our net worth I try to keep an eye out for the selling price and time on the market of very similar houses in our area. Our neighbourhood is actually made up of bit of a monoculture of homes, which likely makes this valuation more accurate. I use comparable homes and I attempt to be very conservative when valuing our home. In this particular update I increased the value of our home by $6,000. Therefore this made up half of the increase yohann was asking about. Real estate in my area had two very good years in 2006 and 2007, however I expect my home value to remain fairly flat over the next few years.

During this same period we were able to save about $6,000 for our non-registered portfolio. It looks as though the market return during that period was likely modest to negative so that did not help out whatsoever. Our normal savings for our other registered accounts, as well as our traditional slow and steady debt reduction also contributed. It's interesting to look at the period in question when compared to our latest update (March of 2008) which yielded a paltry $1,193 increase in net worth.

Generally, going forward our net worth gains month by month (reported bi-monthly) should be attributed to a few factors:

• We Spend Much Less Than We Earn (probably half, including bonuses, etc.)
• We Save & Invest the Balance
• Our Investments Should Grow in Value Over Time
• Our Investments Pay Us Income (dividends & distributions), Which in Turn get Re-invested

On another note this is the first post on the moneygardener which I have actually written outdoors! There is nothing like those first few beautiful Spring days!

the smart R.E.S.P.

The Canadian government's Registered Education Savings Plan (R.E.S.P.) program is a great way for parents to save for a child's education. When used intelligently, the plan can really allow parents to give their child significant funds for their education while outlaying very little of their own money.

What do I mean by this? There are several ways to use the plan intelligently, but by 'used intelligently' I am referring to 2 practices in particular:

Invest fully, EARLY
Utilize the Universal Child Care Benefit (UCCB) and the Canadian Tax Benefit (if applicable)

By following these 2 simple tips, funding your desired portion of your child's education will be a breeze....much easier than first year chemistry anyway... Here's an example. Let's take two sets of parents, we'll call them the 'Smiths' and the 'Einsteins'.

On April 15, 2008 the Smiths gave birth to a bouncing baby boy named Darryl. But there were planes to catch and bills to pay, so the Smiths put off starting a nest egg for Darryl's education until 2020 when he was 12 years old. At that time they began putting in the maximum amount per year ($2,500) in order to still receive the 20% CESG grant ($500) that the government provides. The Smiths also did not use the $100 / month, that the government of Canada dolls out until the child is age 6 in the form of the UCCB, they hardly even noticed it....

Amount of their own money invested by the Smiths = $15,000
Amount Available for Darryl's Education in 2026 = $23,416
---------
On the same day the Einsteins gave birth to a baby girl named Cheryl. Knowing the power of compounding, the theory of relativity, as well as the benefits of living below your means, the Einsteins began investing the $2,500 annually in the first year of Cheryl's life. Not only did they take this wise route but they also took the UCCB amount of $100 per month and used this as part of their $2,500 per year. The Einsteins had the Government of Canada giving them money upon money by having them match the UCCB to the tune of 20%. When Cheryl turned 6 Albert and his wife abruptly stopped all contributions.

Amount of their own money invested by the Einsteins = $7,800
Amount Available for Cheryl's Education in 2026 = $58,965

Both families invested for 6 years, but because the Einsteins invested early and utilized the monthly UCCB they were able to provide over $58,000 vs. the Smith's $23,416. The Einsteins pulled this off using half the funds that the Smiths used.

*rate of return used was 8%, assumed deposits made a beginning of each year.

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vancity calculators

I wanted to point out a great personal finance resource that I've discovered online. Vancouver City Credit Union has some wonderful graphic personal finance calculators in their my money section under the 'tools and calculators' / 'online calculators' tab. The calculator I have linked above is called 'Savings Calculator';

Consistent investments over a number or years can be an effective strategy to accumulate wealth. Even small additions to your savings add up over time. This calculator demonstrates how to put this savings strategy to work for you!

There are actually several calculators on the Vancity site including mortgage, loan, net worth, and debt calculators. Obviously there are several of these type of finance calculators scattered all over the internet, however I've found a few of these to be a step above. Don't have time to check them out right now? Not to worry, I am going to include a link to these Vancity calculators under my 'useful links' section on the right panel of the moneygardener.

a very simple move

Back in August of last year in my 'how i manage day to day' post I explained the habits that I employ which I feel allow us to save about 40% of our net income. I wanted to expand on #4 on this list which was 'MAKE SAVING YOUR FIRST PRIORITY'.

Actually making saving your first priority for your money is not an easy task. Life is filled with ways to spend money and often these seem more attractive than saving and investing for the long term. Changing your mentality to see the long term benefits of saving and investing is a state of mind, and is not accomplished overnight by most. The benefits of saving and investing a large portion of your income are numerous. It is important to remember that having the wherewithal in the future to purchase material possessions is only a part of the benefit. Another part, which some might consider the key part, is financial security and freedom. By financial security and freedom, I am referring to that mental state of mind where money no longer becomes a constant stress and worry in your life. I think many people overestimate the amount of capital that it would take for them to achieve this financially free state of mind. If you have the choice right now at this moment whether or not you want to stress about money for the rest of your life, why choose stress?

Literally making saving your first priority is an extremely easy task. Blogger squawkfox points this simple fact out best in the post 'I have zero debt. Am I weird?'. When I read #7 of squawfox's list, 'MOVE THE MOOLAH' I realized how important this is. squawkfox and I share this habit as one of they key's to our saving strategy. It is so simple it's almost silly, but I hold 'MOVE THE MOOLAH' as absolutely essential to saving 40% of our take home pay. It is as easy for me as the following robotic procedure I go through once every two weeks or so:

My 'MOVE THE MOOLAH' Procedure

1. Get Paid (X). This is where the money comes from.
2. Sum up your expected expenses for the next 2 weeks (Y). If you need help look back at your spending from a previous 2 week period.
3. Insert Buffer. To allow for the unexpected, include a small amount of money (Z) in your expected expenses.
4. Perform this calculation $X - $Y - $Z = $S (Savings)
5. Simply transfer $S into some type of savings or investing account. Usually this involves typing in dollar values, and clicking a few times.

I really only started doing this habitually about 2 years ago, but it has really paid off. It seems that when I jettison the money off to an investing account quickly, it feels like I never had it. All of this extra money is not sitting in my chequing account making me feel rich so that I can subconsciously buy more stuff. Instead it is actually making me rich by compounding untouched for years.

To quote squawkfox: This is really simple. Every time I get paid, I move a portion of my moolah to a savings or investment account. I move my moolah every pay, without fail. Some people call this “automatic savings”. I just call it common sense. I figure, why I am working so many hours if I have nothing to show for it at the end of the week! Moving my moolah every pay is the significant reason why I am finally sound.

I have to credit squawkfox, which happens to be a great blog, for the phrase 'MOVE THE MOOLAH' which is so simple yet so crucial to my financial strategy.

the seeds of an education

This week I started a Registered Education Savings Plan for my 6 week old son.

For some great information on RESPs, you should visit Canadian Capitalist or Quest for Four Pillars. These two authors provide some of the best, most thorough information on Canadian RESPs available on the Internet today. All the great information contained on these two blogs really helped me with my RESP choices and with the process itself. 

How The Process Worked For Me
I filled out a TD Mutual Funds RESP application that I obtained online and mailed it in to their Markham office. Within the application I included a form that needs to be filled out in order to immediately covert the account to an e-series account. 'E-series' simply refers to a group of index funds that can be purchased online. The low management needs of these funds, combined with the efficiencies of using the Internet allow these funds to carry some very low MERs (Management Expense Ratios). MERs are the hidden fees that an investor pays for the administration of a mutual fund, ETF, or index fund. Also included in our application was our application to receive the CESG grant, which allows the government to match 20% of our contributions.

The account was set up very quickly, and TD notified me by email. The email prompted me to call TD Investment Services where I was advised that I needed an access card to get onto their online EasyWeb system. EasyWeb allows the investor to manage the entire RESP account online. I went into a TD Canada Trust branch and obtained the access card. Now that I have the card I am able to access EasyWeb, where I have switched out of the TD Canadian Money Market fund where I deposited my cash initially. I put the cash in the money market fund just to allow the funds to be held for a brief time before I decided where to transfer it for long term growth.

Why I Chose TD E-Series Funds
The merits of index investing as a way to replicate market returns for minimal cost are widely known. What I like about index funds aside from the low MERs is the fact that they are great to use for taking a no-hassle approach to investing. For this RESP account my priorities were minimal management on my part, low fees, and long term growth. I believe the following allocation, which I have chosen satisfies this:

TD Canadian Index E-Series -----MER=0.31%------30% allocation
TD U.S. Index E-Series-----------MER=0.33%------35% allocation
TD International Index E-Series--MER=0.48%------35% allocation

I plan to re-balance this infrequently if the asset allocation gets too far out of line. Obviously as we get closer to our son's first day of post secondary education the money will need to be managed more for stability of capital rather than for growth, and I'll adjust accordingly. That is a long time off right now as currently we are trying to get him to keep a soother in his mouth.

tfsa bonanza

I'm sure the majority of my readers have learned about the new financial instrument that the Canadian federal government has announced in their budget; the TFSA (or 'Thank the Feds' Savings Account), aka Tax Free Savings Account. For those of you who would like to know more about these new accounts that will be available starting in 2009, I'm going to refer you to the clever minds that I read on topics like this:

Mike From Four Pillars, The Benefits of Tax Free Savings Accounts
Canadian Capitalist, Tax Free Savings Accounts
Financial Jungle, Tax Free Savings Account
Million Dollar Journey, Federal Budget 2008 Tax Free Savings Accounts (comments)

If you read these 4 posts, they'll provide a pretty good primer on the TFSA. For those of you who are either really bored, or really excited about the TFSA, you could also read the comments attached to each post, which tend to spark ideas and ideas for further discussion.

After having a few days to digest the TFSA, I do feel that it is a huge positive for financially aware Canadians. The trouble is that many Canadians are not very financially aware, and in that respect the TFSA will turn out to be yet another instrument that is beneficial, but underutilized (a la RRSP).

Will We TFSA?
For our situation and goals, starting in 2009 I will maximize my wife's and my TFSA room ($10,000) every year going forward. Considering our current investing strategy and activity in a non-registered account, by not utilizing the TFSA to it's maximum I would be essentially choosing to pay tax our investment gains on that $10,000 portion. Looking at it this way, I really have no choice but to utilize the TFSA to its fullest. As previously mentioned we do both contribute quite a bit to RRSPs, however we emphasize non registered investing for reasons mainly for the purpose of flexibility and availability of capital. The fact that we'll be using the TFSA will affect goal #4, I will have to sum up the total value of 3 accounts now to track progress toward goal #4.

free money? no thanks

I think I've mentioned before that I participate in my company's defined contribution pension plan. The way the plan works is outlined below:

My Company

• 2% of my salary regardless of my contribution
• 4% of my salary matched to my contribution

What this means is that even if I didn't contribute anything to my Registered Retirement Savings Plan (RRSP) my company would kick in 2% of my salary. My company will also match the contributions that I do make up to 4% of my salary.

For example if I decide to contribute 5% of my salary into my RRSP out of my own pocket, my company will then contribute 2% (automatically), and 4% to match me. Therefore I'll end up with a contribution of 11% of my salary. Since my company is kicking in 6% out of this 11%, I am essentially starting out of the gate with an investment return of a whopping 120%

A recent survey by Sun Life Financial found that 1 in 5 people who have access to this type of program don't participate. About 40% of employed Canadians have access to this type of program, but only 80% participate. What that means essentially is that 1 in 5 people are saying 'no' to free money. Reasons for this varied from no desire to, to no money to spare, but the weirdest reason was the following "they preferred to invest on their own". I would be interested to know what these folks were investing in on their own that was worth passing up a guaranteed return of 25% to 150%, before the money is even invested.

household savings rate feb '07 update

The last time I updated our household savings rate (HSR), (which is the amount of money we save for investments, as a percentage of our after tax income), was on September 30, 2007. By 'investments' I am specifically referring to my non-registered portfolio, my RRSP, my wife's RRSP, and now my son's RESP. Back then we were saving about 36% of our net income. At that time my wife and I were both working away at full time jobs. When our entire mortgage payments were thrown into the 'saving' category our HSR was 51% of net income.

Fast forward to the present day where my wife is taking a government allowance each month, maternity leave, and I am still working full time.

Here are the figures for the last 2 months:

January, 2008 --- HSR = 38%, HSR including mortgage = 58%
February, 2008 --- HSR = 44%, HSR including mortgage = 63%

Also, Goal #1 has been met for both months, as we've now saved $1,388 for our non-registered portfolio for the month of February.

I am extremely pleased with these savings rates. The improvement over late last year might have to do with a general mental attitude to spend less since we are earning less. Another explanation could be the actual reductions in our day to day living costs that come along with caring for a baby.

baby savings

The birth of a child is a wonderful thing, but it can also be a wonderful thing for your finances. Keeping in mind that a dollar saved is worth much more than a dollar earned, here are a few of the unexpected lifestyle-related cost savings that we've realized since our son was born over a month ago.

• We're no longer supporting OPEC. Months before my son was born our typical monthly gasoline bill was approximately $250 - $300. Our last two bills were $140, and $40 respectively. We actually went through one full tank of gas in one month.
• Dinner and a movie? How about take out and Rogers On Demand.
• Where should we go on vacation this year? The closest I'll actually get is the Sandals commercials, which I do enjoy....

Funny, these three initial items all have to do with the fact that 'We don't go anywhere'.... I didn't really fully realize this when drafting up the maternity leave budget spreadsheet; go figure.

I have a feeling there will be more to come on this....

february links and updates

• I wrote a guest post for The Dividend Guy. Check out What Makes A Stock Defensive? The Ultimate Defensive Stock. at The Dividend Guy.
• My non-registered portfolio is yielding a staggering 4.5%, and is actually down 8.1% year to date while the S&P 500 is down 8.8% in 2008.
• Great Scott! Financial Jungle interviews one of my dividend investing mentors.
• So far we've saved over $600 in February for our non-registered portfolio, which puts us over 60% of the way toward our monthly goal.
• I am also opening an Registered Education Savings Plan (RESP) account, with TD e-series funds for my son. The little fella is going to own some Index Funds before he can hold his head up...

diaper mayhem

Expenses that I always think of as key when trying to save money are those that are repeating. Those little repeating purchases that never end, like gasoline, dishwasher detergent, and even toilet paper, can really add up over time and not allow you to keep the money you want to save, invest, or spend on more worthwhile pursuits. They may at times seems trivial, but these small repeating expenses can pull you down like an anchor when you are trying to move ahead financially.

Becoming a parent, the first new repeatable expense that really kicks you in the a$$ (pardon the pun) is diapers.

Now keep in mind, I have been a parent for less than two weeks, so I am speaking from my very limited personal experience. Here is how I see the situation so far:

The Contenders:
Huggies - by Kimberly Clark (KMB)
Pampers - by Procter & Gamble (PG)
Teddy's - Loblaws Private Label (L)
Kirkland Signature - Costco Private Label (COST)
Parent's Choice - Wal-Mart Private Label (WMT)

Our Preference:
It did not take us long when we were filtering through the diapers we were given by friends before our son was born, to realize that Pampers are the best. I am not sure if they are just a better product, or if this is unique to a baby's shape, but we have found that Pampers not only fit better but work better. The Pampers advantage over Huggies is so pronounced that I am afraid I do not want Huggies no matter what the price.

I've heard negative reviews of each of the above brands of diapers with the exception of Pampers.

The Problems:
I fail to understand why Pampers size 1 diapers (which are made for babies 8lb - 14lb) are not available in bulk sizes. As far as I can tell the largest quantity these are available in is about 90. Considering we probably go through about 8 - 10 diapers per day, I would welcome a 256 pack.

I have heard from several sources that Kirkland Signature from Costco are actually Huggies private label which makes a lot of sense since Costco only sells Huggies, aside from these. My fair Costco, you have disappointed me for the first time...I forgive you..

The Numbers:
Kirkland Signature at Costco bulk pack - $0.15 / each --------- $1.50 per day
Pampers at Zehrs (Loblaws) on sale = $0.17 / each
Pampers at Zehrs (Loblaws) = $0.19 / each
Pampers at Wal-Mart - $0.27 / each ----------------------- $2.70 per day
Teddies at Zehrs (Loblaws) = Not Available
Parents Choice at Wal-Mart = Not Available

As you can see, diaper costs can really add up. I imagine that if I just blindly purchased my favourite diapers from any store, at any quantity, I could easily end up spending about $5.00 / day, or $1,825 annually on diapers.

The Conclusion:
I'll admit it - I am a slave to the Pampers brand, I want to know where I can buy these little puppies the cheapest per diaper. So far the winner is Zehrs, which is surprising. Any suggestions?

I welcome much participation in the comments section here by fellow diaper geeks...I know you're out there...

goal # 1 progress report

In a post back in November, 2007 I disclosed # 1 of our 4 goals for our non-registered portfolio.
Goal # 1 is : Save an average of $1,000 / month, to be added to this portfolio.

I thought I'd provide an update on our progress towards this goal since we are now a solid 2 months into my wife's year long maternity leave, which caused our employment income to decrease dramatically. Here are the results so far:
--------- December, 2007 savings = $1,351 -----------------
----------- January, 2008 savings = $1,518 -----------------

This is obviously a great result as these two months combined provide a buffer where we could save $130 for one month and still meet our goal. I am seeing some clouds on the horizon though, as we need to purchase a new set of tires for our car next month which will eat up a good chunk of potential savings. I will post soon with an updated Household Savings Rate (HSR), based on our new income and recent savings levels.