Sunday morning musings

Good morning everyone – hope you are all safe, healthy, and free of COVID-19 related anxiety.

I know, I know….

It is hard not to feel anxiety about the situation; about ourselves, our and other loved ones’ well-being, and the current and future financial outlook.

….

Like any of you, I am getting more and more aware of the global and national situation, issues, and future predictions on a daily basis. The fact that I have been stocking up essential items and food in the last 3 weeks or so states this very well. I sometimes think quite drastically and assume that we will be only dependent on the food that we can grow in our yard and homes. Funny I know, but I cannot help but think about this. We will not have that panic-situation, will we?

I am quite aware of the importance of the cash right now and keeping my job. Goodness…

I wished somebody deferred the mortgage payments for 6 months or so – without interest – so that we all could save some cash and feel more secure…

I do not know what to do with my RRSP and TFSA contributions, either. I keep going as before. Since the market is down, it seems like the perfect time to invest. Yet, I cannot think about yet another blow to the market and the value of the investments getting even smaller. Since I used a portion of my RRSP to pay my down payment, I must continue with my RRSP contributions, but what about TFSA? Shall I rather stop my contributions and keep the cash in my chequing account?

I took so many things granted…Like many of us I guess.

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It is a beautiful, shinny, and peaceful morning out there. Perfect time to walk without even thinking about where to go.

I checked on a couple of people who I worked with in the past. I hope they are doing well. It will be awesome to hear from them. It also feels great to reach out to people I care about.

These being said, it is sad that I am away from my family and who knows when I will be able to visit them. I had purchased a ticket for this summer, which I am sure will have to be canceled. Next year? Will this be over next year? if so, how expensive will be the tickets? Will I be able to make it home then? I must confessed that this year I did not want to go visit my family – I have posts about it. I never thought that it would become a necessity like this. Life is so strange.

Over and over, I come to realize that while my mind is busy getting stuck at little pains of the past, it misses the chance of living what is important.

Here is to a painless past and vivid present:

planning retirement

I want to quit this job, but logically retiring from this job is the best.

I am looking at another 11 years, I have decided this evening. I can retire in 8 years but the pension is not good enough and the mortgage will be just paid. I need cash in addition to these.

So, my plan is to pay off the mortgage in the next 7 years and then save the mortgage payments I now make as cash. I will in the mean time continue to do my investments (RRSP, TFSA). These should give me some peace of mind. I hope I will not have a significant life event that requires a lot of cash. This plan is dependent on such an assumption.

I currently pay around 15K/year to mortgage. This year I started to make extra payments, totaling around 5K a year. I will make an effort to increase this a little bit more. No more fooling around with stress and making extra expenses, like I have done in the last 3-4 weeks. It is time that I return back to my wonderful budget I started in the new year.

I will make my life work here. I will make my work work here. There is so much I can do and perform. Maybe not what I want to do, but I will focus on what I can do. One year at a time. In two year comes a major promotion that I want to get. That means the next two years I am appliying for projects and forming better collaborations. My aim should be to prepare 4 projects/year.

I decided to become lean in terms of my work schedule and I will be removing myself from one of the committees I am a member of. I also will focus on work during the day and will not think about other stuff. Work is important and I am getting tired. My energy and efforts and time should be better protected.

I will also relax and trust more. Myself, universe, that something great will come. I hope I am not mistaken about this.

My pension 11 years later will not be huge, but just enough. That is good enough for me. I can always start a side kick and get occasional extra income.

I can handle 11 years. It is a definite time period. It has been 9 years that I have moved here. Time flies, but hopefully not so fast till then; I would like to enjoy my life, find my life’s purpose, and feel better about myself and life until then.

The moral of the story is that money is important. It does not matter how young or senior you are, you will need it. Keep it as much as you can while you have it.

 

 

Aims and plans: 1) getting a leaner budget and b) paying mortgage early

With this post, I start to dissect the aims I have posted yesterday and focus on my plans/thoughts/ability to achieve them.

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The first item on the list is:

1. getting a much leaner budget and getting rid of the extra expenses for good

Ok. Now, since June 2015 I have had a great budget that worked wonders for me. Since the new year it has been a lot better, only that since June this year I lost track a little bit and started to over-spend. I am still keeping frugal, taking advantage of sales, implementing a nice no-waste food policy, continuing my shopping ban on books, shoes, and clothes, taking the bus rather than the cab almost every day, and am very keen about designing my meals around the on-sale food every week, yet these extra expenses are draining me.

So what is causing me to spend more?

Stress. It is causing me to consume stress relieving but nevertheless unhealthy stuff. It is crazy how much money (around 70-80 bucks per week) I spend on these junk! I had completely erased them from my life at the new year when I had achieved a great/the leanest budget ever. My savings were up and I had a positive chequeing account for the first time in the last two years or so. It was so satisfying, so exciting to be feeling so. I felt abundant, enriched, and proud.

Now, I want to feel this way again!

Root cause: stress (or lack of will power – you tell me). This is one issue that I must tackle soon and quite effectively.

Consequences: unhealthy life style, harm to my body, and reduced self-respect. I also lack the excitement and other positive feelings associated with not doing these expenses. Plus, my savings have been down lately, which is rightfully annoying me.

Action item: Stop it!!!! Simple and effective (we will see how this goes, right?). I did it once and I would like to think that I can do it again. Please, please, wish me luck with this!

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The second item on the list is:

2. making an extra payment to mortgage till new year and increasing my payment after that sometime. My very ambitious plan is to drop it to 100K in 3 years. Likely not gonna happen but whatever I can do is good

My current principal/mortgage debt is 175K… This is a lot of debt, which bothers me. The interesting thing is that in 3 years (sept 2019) with my current payment plan, it is supposed to fall to $132,200. When I think about it, it is awesome that I can drop it to such a much less amount.

But I feel like I can do better.

I have been saving some cash since last Spring, which I had planned to contribute towards my principal. Initially I had planned it to be around 5K, but with the recent extra expenses, it will be around 4k. I plan to make this payment around new year; better before the new year to celebrate 🙂

An extra 4K would make my mortgage drop to $128,200 till Sept 2019. I have always felt like if it is less than $120,000, then I would have a greater motivation to pay faster. Now, I think the best way for me is to actually aim higher and make it drop to $100,000 till then. The question is how am I going to do that?

I am currently contributing to my RRSP (maximum allowed), paying HBP (home buying plan in Canada – basically I borrowed money from my RRSP as down-payment, which I am supposed to pay back in 17 years. I pay almost double the amount I am supposed to pay each year so that I can pay it off early), a small personal retirement plan with an annual payment, and my TFSA.

Since I had taken money out of my TFSA when I purchased my home, my TFSA is not maximized yet. It looks like with my current contribution levels, I will need around 3 years to maximize it. While that would be awesome, I am more inclined to keep it below the allowed maximum level, and rather channelize the TFSA payments to mortgage. My current plan is to contribute another 9K to TFSA (which would take around 13 months or so) and then stop contributing to it for two years (till the end of my mortgage term).

So, 2 years of not contributing to TFSA would mean an extra $15,600 to go towards my mortgage. Together with the one-time lump sum payment I plan to make this december, that would mean at the end of the term my mortgage debt drops to $112,600.

I am not at $100,000 yet but it is possible that I can come up with an extra $12,600 sometime, somehow to make it finally become $100,000….

Action items: Make 4K one time lump sum payment to mortgage in late December 2016. Continue with contributing to TFSA for another year or so, and then stop it to use the money to increase the mortgage payments. Whenever an extra amount of money is saved, use it to pay the mortgage. This last one can be possible if I had got back to my lean budget – one more motivation to start it tomorrow! 🙂

 

 

the best way to reduce the mortgage principal?

I recently renewed my mortgage and as an avid listener of others, I thought the best thing for me to do would be to make prepayments or increase my payment.

I made calculations after I have got confused about the entire stuff; I used the online calculator of my bank and verified my results with my bank rep.

Here is what I found: within the term, making prepayments or increasing the payments certainly decrease the principal. However, this decrease is NOT substantially bigger than making the extra payment at the time of renewal next time; for example, a one-time $5,000 prepayment during the term only reduces the principal by $5,524. The extra $524 is what I get as a “benefit” within 4-years (the term). This is not good enough for me to get anxious and make an effort during the term to decrease my principal.

After seeing this, I decided to invest the money during the next 4 years (and hopefully not lose it at the market) and make a payment towards my principal while renewing the mortgage (you can pay off the entire mortgage at the end of the term if you want). At least I will have a chance to grow the money in between (and hopefully that will be higher than $524).

This gives me some sense of peace as I am now okay with going with the new mortgage without thinking too much about it. Another nice thing is that I was planning to cash in my emergency fund to make a prepayment; I do not have to do that right now and I am very happy with this.

Considering that 4 years later, the purchase power of the CDN dollar can drop a little bit and I can get other salary increases, I believe I can come up much easily with the same amount of lump-sum I was planning to pay nowadays  four years later at the time of renewal.

conscious spending update

For a while now I have been trying to save money so that I can continue to invest for my retirement and also save funds for my house repairs.

A couple of weeks ago I became serious about it. I have a large payment (an annual contribution for a retirement account) coming up at the end of next month and my chequing account has been on the border of being empty since last December. This week I started to see some improvement. I will not have enough funds in my chequing account to pay for the payment next month (use of line of credit is inevitable), but the situation looks a lot better now. I have hope that in two months I will have my chequing account back to positive. That gives me not only hope but also a great motivation to keep going 🙂

No large-scale shopping, no books, no gifts, no eating out, no cab (bus is my new hero nowadays :), and continuing the usual frugality for another two months. Two more months and I can do this.

great news! 🙂

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