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Sam Spendalot - Payday

Previously Sam's accounts looked like this:
Main account: $676.88
Cash in pocket: $5
Credit Card debt: $1000

Today Sam got paid. To recap: Sam makes $58,000 a year and gets 26 bi-weekly pay cheques. His before-deduction pay is $2230. He pays about 485.25 in taxes, 103.76 in federal pension (CPP) and 41.72 in employment insurance (EI) leaving his net pay at $1600.04.

So Sam's main account how has $676.88 + $1600.04 = $2276.92 in it. Now this may seem like a little bit of a jackpot for Sam but Sam doesn't have a pay day between now and the first of the month so he will have to pay all his regular expenses out of that amount. His regular expenses amount to something like $1500 and I haven't added on a phone bill or internet access or heating/electricity charges or his cable bill or anything like that yet.

Sam also almost ran out of cash in his pocket yesterday. He spent his regular $3 on his morning coffee and muffin so now he only has $2 in his pocket. Since Sam got paid today he thought it would make sense to visit the ABM again. Once again, Sam used an ABM that isn't his bank's ABM so he pays a $1.50 charge to the other bank for doing that (and adds a charge at his bank for doing it as well, but that's won't come out until the end of the month). Sam took out $60 which cost him $61.50.

So now Sam's accounts look like this:
Main account: $2215.42 (676.88 + 1600.04 - 61.50)
Cash in pocket: $62 (5 - 3 + 60)
Credit Card debt: $1000


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category: Personal Finance posted on Thursday February 23, 2006 at 08:39:11 by: 0xCC

Sam Spendalot - Update

When we last left Sam his accounts looked like this:
Main account: $715.38
Cash in pocket: $21
Credit Card debt: $1000

Today he had to put gas in his car. Gas prices have gone up in the last week or so, up to 85.5 cents/litre this morning from the 77 or so cents/litre about a week or so ago.

Sam's car takes about 45 litres to fill so it cost Sam $38.50 to fill up. Sam is trying to eliminate his credit card debt so he isn't using his credit card for any purchases until the balance is paid off. Maybe I should write a full post on explaining why that strategy makes sense. Anyway, since Sam isn't using his credit card until the balance is paid off he used hit bank card to buy the gas. So $715.38-38.50 = 676.88.

Since the last update Sam has bought 3 coffee/muffin combos at $3 each, taking $9 from the cash in his pocket. He also bought lunch yesterday for $7. So since Sunday he has $16 less in his pocket, leaving him with $5. Sam gets paid tomorrow so I will be updating again in the next couple of days, the first of the month is also fast approaching and he will have a bunch of regular expenses coming out of his account then.

Sam's accounts now look like this:
Main account: $676.88
Cash in pocket: $5
Credit Card debt: $1000

Just finding out about Sam Spendalot? Use these links to navigate through the series:
Start of series.
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category: Personal Finance posted on Wednesday February 22, 2006 at 08:45:38 by: 0xCC

Sam Spendalot - Update

When we last left Sam his accounts looked as follows:
Main account: $1790.04
Cash in pocket: $60
Credit Card debt: $2000.

This past week Sam went to the coffee shop every workday morning (So that was Friday last week and Monday-Friday this week) and spent $3.00 on a coffee and muffin. That totaled $18 so his cash in pocket is down to $42 just from this morning habit. Sam also only brought lunch to work 3 times in the last 6 workdays, buying lunch at an average of $7 the other 3 days. This brings the cash in his pocket down to $21.

Last week Sam bought groceries for costing a total of $60. I want to try to give a breakdown of actual stuff bought (based on our actual spending) but I don't really have that this week. The $60 is an estimate for what one person would have spent based on what we spent last week. I estimate that Sam bought some stuff for breakfast (oatmeal, milk, orange juice, yogurt) some stuff for the lunches he did bring (apples, bread, cheese, pickles, baby carrots, pudding cups, sweet peppers) and some stuff for a couple of different dinners; chili and some pasta (canned tomatoes, baked beans, kidney beans, an onion, sweet peppers, pasta, pasta sauce) and some other snacks (cookies, some juice and maybe a couple of other things). So that $60 brought Sam's main account down to $1730.04.

Sam also had some minor car trouble this week. One of his headlights went out so he had to buy a replacement bulb and he installed it himself. The bulb cost 12.75 + taxes for a total of $14.66. This brought Sam's main account down to $1715.38.

Finally Sam realized he was making a fairly big mistake with respect to his credit card debt. He has $2000 in credit card debt which is charging interest of 18.95%. He has over $1700 sitting in his no-fee bank account where he is getting paid interest of less than 0.5%. Sam does need some cash in his main account to deal with things like his cash withdrawals and groceries and other stuff like that but he doesn't need all of that $1715. So Sam decided that he could afford to take $1000 of that $1715 and put it towards his credit card debt. Sam will have a bunch of expenses coming out of his account on the first of the month (car insurance, mortgage payment, car loan, condo fee, credit card payment, etc...) but he has another pay day coming before the end of the month so that stuff will be covered by that paycheque. So this will bring Sam's main account down to $715.38.

So after this update Sam's accounts look like this:
Main account: $715.38
Cash in pocket: $21
Credit Card debt: $1000

Just finding out about Sam Spendalot? Use these links to navigate through the series:
Start of series.
Previous update.
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category: Personal Finance posted on Sunday February 19, 2006 at 10:24:42 by: 0xCC

Where are you wasting money?

Are you wasting money on things that aren't really important to you? In a recent episode of a show called "Til Debt Do Us Part" the husband of the couple profiled was spending $90/week on coffee and cigarettes. He didn't understand how much he was spending on those things until it was actually tracked. Once he understood that and saw how much that was contributing to his family's $900/month shortfall he quit smoking and buying coffee.

David Bach, author of "The Automatic Millionaire" calls this "The Latte Factor". How much is that coffee/latte/lunch at the cafeteria costing you per week? How about per month? Per year? Let's look at a latte. Maybe a latte costs you $3. That's $15/week (assuming you buy it 5 days a week) or about $60/month or about $750/year (assuming you do it for 50 weeks in the year). Is that something you could cut in half? If we take that $15/week and see if we can reduce that to $7.50/week. Let's say that a regular coffee costs $1.50. Would you be able to save that latte for only 1 day in the week (say Monday or Friday) and buy regular coffee on the other days? Would you also be able to drop one day/week of buying coffee at all? If you could make those two changes then you would spend 3*1.50 = 4.50 on regular coffee and 1*3=$3.00 on lattes for a total of $7.50. The hard part of that might be giving up coffee for 1 day a week. Well, maybe you could use that $4.50/week to make coffee at home for 4 days a week (it would cost considerably less than that I think). In this simple example you could have reduced your spending by $350/year. Now that may not seem like much but if you consider that in order to generate that much cash from your investments you would have to invest about $10,000 in a nice, stable dividend paying stock like a bank (with a 3.5% dividend yield), before paying any taxes.

One of the areas that I found I was wasting money on when I first started tracking my expenses was basic cash withdrawals. I go to the bank machine, take out usually $40 and then that cash just seems to evaporate. I know where it goes (although I don't like to admit it). It goes to the occasional muffin from the cafeteria at work. It (mostly) goes to going out for lunch at work with friends. It also goes to some more necessary things, car washes in the winter (the self-serve car washes I go to only accept change), donuts for m's homeroom, things like that aren't necessarily bad but they do use up cash. So once I started tracking expenses I started to recognize that this cash was leaving our accounts much too quickly. I started watching our cash withdrawals a little more closely and become a little more aware of where that money was going. Over a few years I was able to reduce the yearly total for these cash withdrawals. In 2002 m and I combined took out a total of just under $2000 via ABM withdrawals. In 2005 we took out just under $1150 via ABM withdrawals.

In a previous post I talked about tracking expenses and not necessarily having a budget. Tracking expenses will allow you to see where you are wasting money (even though you might not like to admit it). Wasting money will have different definitions for different people. Spending that runs counter to your goals is wasteful spending. If your goals include early retirement and you are spending $15/week on coffee while not fully funding your retirement account, that is wasteful spending. If you are fully funding your retirement account and spending $15/week on coffee and that is something that makes your day a little bit brighter, then maybe you don't consider that wasteful spending. However, if you aren't aware of how much you are spending on your morning coffee on a weekly and/or monthly basis or you don't know if your longer term financial goals are being fully funded then you don't know if you are wasting money. Once you start tracking your expenses you can look for ways to optimize your spending. For an easy way to get started download this spreadsheet.
category: Personal Finance posted on Saturday February 18, 2006 at 14:03:02 by: 0xCC

Textpattern installed

So I have been a little bit pre-occupied the last few days. On Sunday I attempted to install Textpattern on my other site. I did a pretty good job of messing it up and I ended up putting one file in the wrong spot. This caused a bunch of errors that had me digging through the Textpattern PHP code to try to figure out why Textpattern was broken on my host. Of course it ended up being my fault which I figured out yesterday. If Textpattern didn't have path names at the top of their files I would probably still be looking for the problem. There are a few index.php files in the Textpattern code base and I had one of those in the wrong directory. This caused me to not be able to get into the admin section of the site.

So that is all solved now and I can do a little bit of work on that site. Textpattern looks like a very flexible content management system but I think it is going to take me a little while to wrap my head around it. So I will be playing with that over the next couple of weeks.

Add to that the fact that I have finally started to get some traction on a web app that I am developing using Rails and my time starts to get pretty tight. So over the next couple of weeks there are a few things I would like to get done. I want to get a little further on my web app, I want to get my other site back up to the point I had it at before I installed Textpattern (which wasn't very impressive but it was something), m and I really need to start taking training more seriously so we need to get that going and finally I need to keep up my commitment to post at least once a week here.

So that's all for now, I hope to have a Sam Spendalot update a little later today.
category: General posted on Thursday February 16, 2006 at 09:35:38 by: 0xCC

Sam Spendalot - Payday

Today is pay day for Sam Spendalot. In my 'Introducing Sam Spendalot' post last week I outlined Sam's pay cheque. To recap: Sam makes $58,000 a year and gets 26 bi-weekly pay cheques. His before-deduction pay is $2230. He pays about 485.25 in taxes, 103.76 in federal pension (CPP) and 41.72 in employment insurance (EI) leaving his net pay at $1600.04.

Now I will assume that Sam had $250 in the bank before his pay was deposited. So now that total should be $1850.04.

Thanks to Humble Investor over at A Frugal Focus and his analysis of bank accounts I will use a PC Financial account as Sam's main account (even though I am personally not impressed with CIBC).

Ok, time to set up a couple of bad financial habits for Sam. First, let's say that Sam doesn't pay attention to the bank machine that he uses to withdraw cash. Let's also say that Sam spends $3/day on his morning coffee and muffin on his way into work. Let's also say that 3 days a week Sam buys lunch at work.

So today Sam withdrew $60 from his bank account because he ran out of cash. He didn't use a CIBC/PC Financial bank machine so he paid a $1.50 charge for doing that.

Sam's final numbers are then:
Main account: $1790.04
Cash in Sam's pocket: $60

Anyone have any other bad habits I could introduce for Sam?

Edit: thanks to Humble Investor the net pay numbers have been adjusted (see comments)

Just finding out about Sam Spendalot? Follow this link to go to the beginning of the series. Follow this link to go to the next entry in the series.
category: Personal Finance posted on Thursday February 09, 2006 at 21:09:57 by: 0xCC

Introducing Sam Spendalot

Looking at my previous post about tracking expenses I started to realize that maybe that post didn't really connect with people in the way I hope it could. So I thought about creating a fictional, average middle-class person and trying to imagine how their finances would be and how they could be cleaned up. In this post I will set up some basic assumptions and I will see where everything flows from those assumptions.

Sam is 28 years old.

Sam has a university degree and has been out of school for 3 years.

He has managed to save up for a down payment on a condo and has a $150,000 mortgage that he has locked into a 5-year rate today. From doing a little bit of looking at condos in Toronto in the $175,000 to $200,000 range the maintenance fees seem to be in the $150-$300/month range. I will estimate that Sam's condo fees are $240 and rise with inflation. Sam's mortgage payments are calculated using 150,000 at 4.99% and a 25-year amortization is $871.55/month (ING direct rate).

He bought a 2001 Ford Focus 2 years ago for $15,000. He had a $500 down payment for the car and the rest he financed using a deal he got through the dealership he bought at. He got a 5 year loan at 5% for the $14,500 borrowed for the car. He has 36 months left on the loan (he bought in January 2004) and his monthly payments are: $280.33. Insurance cost: $1362/year $122.58/month with PST included. He expects the car to last him another 5 years at least, hopefully 6 when he will trade-in/sell it for probably less than $500.

He has $2000 on a credit card. I will need to find a specific credit card and look at their current interest rates to figure out how much of a problem this will be for Sam on a monthly basis.

He is a professional (teacher, engineer, accounting clerk, etc...) making about $58,000 a year. I will assume that his income will beat inflation on average by 0.75% and that raises come in roughly September every year.

He gets paid bi-weekly, 26 times a year. His payday is next Thursday. He doesn't have a pension at work. He also doesn't pay any union dues/professional fees through his paycheque. His employer doesn't offer any RRSP or employee stock purchase plans so he is totally on his own for retirement savings.

He currently has no investment/retirement savings.

He isn't married and he doesn't have any kids.

Setting up Sam's pay cheques on a bi-weekly basis. As mentioned Sam's yearly salary is $58,000. Sam's gross pay should be about 2230 on a bi-weekly basis. After taxes that should be 1744.75, for a total of 45363.50 take-home for the year. CPP is 4.95% with a max of $1910.70 for the year. EI is 1.87% for a max of 729.30.

So 4.95% of 2230 is 110.38, but that doesn't appear to be right for CPP which should come in at 103.76. 1.87% of 2230 is 41.70, which also isn't quite right and should come in at 41.72 for EI. Total net would be 1744.75-103.76-41.72 = $1600.04.

Now I want to set up some bad financial habits for Sam. The first one is already in this post, the $2000 credit card debt. I think something like buying lunch at work everyday is an example of the kind of bad financial habit that I'm looking for. If anyone has any suggestions, please leave a comment.

So what do I want for Sam? I would like Sam to meet a few financial challenges. I think Sam should get rid of his credit card debt ASAP. I think that Sam should be trying to set something up so that his next car can be bought with cash. The final, big financial challenge for Sam is to see if over the course of 15 years he could have his mortgage paid off, and amass a non-registered investment portfolio that generates enough income to meet his living expenses. I want to go through this in real-time. I hope to show on a weekly or at least monthly basis what Sam's financial status is.

So in order to get this started as realistically as possible I need your help. If any of the assumptions I have listed above are way off (maybe some one that actually earns around $58,000/year can tell me if the net pay looks about right) please leave a comment. Also, if anyone has some good examples of some bad financial habits that I can use and then try to fix please leave a comment.

Next item in the Sam Spendalot series.
category: Personal Finance posted on Friday February 03, 2006 at 16:06:13 by: 0xCC