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 Post subject: Jake's Financial Diary
PostPosted: Wed Apr 21, 2010 2:05 am 

Joined: Tue Apr 20, 2010 10:44 pm
Posts: 5
Long read, but all relevant to my financial pace from here.

A couple of years ago, I did a specialty program at a college that was supposed to help me travel and make money at the same time. Unfortunately, after all was said and done, the money making didn't happen very much. I did get a lot of traveling in, but by the time I got back to Canada, I was $22k in debt. $20k on a loc, $2k on a credit card.

Things got worse when the recession was just starting to hit and I couldn't get a job. I was doing random jobs to make whatever little money I could. After several months of searching, I found a dream job. It was doing work I love, paid $22 an hour despite my lack of relevant education, and I got loooads of overtime. I have been working there for roughly 14 months now.

During that time, I started going back to school. I always planned to go to university. I realized to pay for it I needed to take out student loans at the time. I was still paying down my loc while going to school and the student loans are interest free at the moment. So, over the last 14 months, I have paid down $12k of debt on my loc and credit card even while being in school for the last 8 months. I realize there is still room to go, but I feel pretty good about that. On an even brighter note, I made a very, very good decision last spring.

The housing market tanked for a while. It wasn't as bad in Canada as it was in the US apparently, but still, prices dropped. As did interest rates. I always watched real estate listing for some reason, and an opportunity came up for me to buy a cheap condo in the city where I live. I did with a partner, and we rented it out for $150 more a month than all the costs came out to. Now I know many people say one should not go into debt for any reason at all when paying it off, but it turns out this was, as I said earlier, a very good decision. The housing market rebounded, and I just sold the condo for quite a bit more than I bought it for. When all is said and done, I will be making between 20-22k out of the deal.

So, I have $10k on my loc, $5.5k in student loans and $20-22k coming in, plus summer coming during which time I can save up more. I also just received a 2k scholarship for the next school year.

What I plan to do is immediately pay off the line of credit and be done with the thing, may it rot in hell. After that though, suggestions are welcome. I plan to put $5.5k away for the coming school year, perhaps in a GIC that I can access when my tuition fees are due. One need/want (both) is that as I am moving off campus, I need some form of transportation. I would like to buy a used motorcycle as they are much cheaper to run and don't depreciate significantly. I have sort of set my mind on that.

The one thing I would really appreciate a suggestion on is what I should do with the remaining money. On the one hand, I could pay down my existing student loan and be totally debt free. However, I do not NEED to pay anything for at least 3 more years, and there is not interest until then. My other option is to put the extra money away for my third year in some sort of low risk investment account and let it grow for the next year and a half. Best case scenario, I get lots of work this summer and can do both.

So that is my saga, if you made it through the whole thing, kudos! If you have comments, feedback or suggestions, I would love to hear them.

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 Post subject: Re: Jake's Financial Diary
PostPosted: Wed Apr 21, 2010 4:06 am 

Joined: Tue Jan 26, 2010 10:08 am
Posts: 113
Do you have an emergency fund? I would put my money there...if summer work goes great you can set aside extra money for another school year, and if not, you'll have a cushion to fall back on.

If you send $10k to your LOC that still leaves you with $10k. In this economy, I would aim for at least 3 months' of living expenses in the bank, so if that uses up the entire $10k, fine. If not, consider upping that to 6 months' expenses (depending on your comfort level with risk).

Since your student loans won't earn interest for 3 years there's no real reason to pay them off before then (though if you can, I'd recommend saving up that $5.5k - or whatever it is when you're done - in the next 3 years so that you can wipe them out before they ever earn interest).

I wouldn't worry too much about earning money on that extra $10k (unless you already have an emergency fund setup and can be a bit freer with this money). Interest rates are pretty low so it's not like you'll be earning a ton of money wherever you put it.

Good luck, sounds like you've made some good decisions.

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 Post subject: Re: Jake's Financial Diary
PostPosted: Wed Apr 21, 2010 1:06 pm 

Joined: Sun Mar 16, 2008 6:53 pm
Posts: 77
I completely agree with peaceofmind's Emergency Fund suggestion. It sounds like what you need to do is just set up and prioritize your goals.

The dates and amounts may not be completely accurate, but it sounds like these are the things you're going to need to pay for:

1) (Summer 2010) Pay off LOC [$10,000]
2) (Summer 2010) Second year of School [$5,500]
3) (Summer 2010) Bike [$???]
4) (Summer 2010) Emergency Fund [$???]
5) (Fall 2011) Third year of School [$5,500]
6) (Fall 2012) Fourth year of School [$5,500]
7) (Fall 2013) Pay off Student Loan [$5,500]

Here's what I would do:
I don't know how much a bike costs, but I would think that you could knock out 1-3 easily with the money you're getting from the sale. Take the rest and start your emergency fund. Figure out how much you would need to survive for at least 3 months if you weren't bringing in any income. I'm sure you could easily knock that out over the summer. That leaves you with two years of school and a student loan to pay off, none of which are immediately due. At that point just start putting aside money each month and pay each of them in cash when the time comes.

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 Post subject: Re: Jake's Financial Diary
PostPosted: Wed Apr 21, 2010 4:42 pm 

Joined: Tue Apr 20, 2010 10:44 pm
Posts: 5
Thanks for the thoughts guys!

For straight up necessities, I need $738 a month. So I guess a good size emergency fund would look like $2200-2500 for me. To be honest, I have been more concerned about have a sum of money ready for school than any emergency fun as that sort of seems like putting money aside for the theoretical at the expense of the inevitable.

As for the bike, I want a reliable dual sport that I can insure for cheap, so a DRZ 400sm looks like what I'll be getting (for those who speak motorcycle). Used ones that have been taken care of range from 5-7k, so I'm looking to spend around 5 grand.

I like your list of priorities very much though! Yes, money from the apartment sale should cover the first three, especially with the scholarship I have coming in. I'll have to wait a week or two to see exactly how much I get out of it.

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 Post subject: Re: Jake's Financial Diary
PostPosted: Sun Apr 25, 2010 6:38 pm 

Joined: Thu Apr 02, 2009 7:22 pm
Posts: 14
A word of caution on the motorcycle. I've ridden for the past 6 years. Two different bikes - a Honda Shadow 750 and now a Suzuki V-Strom 650. Make sure you run the numbers and fully understand all the expenses before deciding that a bike is cheaper than a car. Your estimate for initial cost sounds about right. Do you have gear? A basic set of riding gear will easily cost $500 - gloves, helmet, jacket, pants. A GOOD set of gear can cost 4 times that. Have you checked insurance rates? I don't know how Canada compares to the US, but my insurance on the bike is not much cheaper than my insurance on my car. Have you looked into maintenance costs? Again, I don't know how Canada compares, but in the US a basic service - oil change, chain lube, etc - will set you back ~$120. Bikes go through tires a lot faster than cars - 10,000 miles on a bike tire is awesome. Tires cost ~$120 a piece. The more involved service intervals easily cost $300+. You are in Canada - if a bike is your only transportation, what are you going to do in bad weather? I live somewhere I can ride year round and I have and use backup transportation. Do you have any dependents? If so, make sure your life insurance is paid and you have wills, advance health care directives, etc. I don't mean to be a wet blanket. I love riding and encourage anyone who is interested to try it. But know what you are getting into - bikes aren't necessarily cheaper when you take all the expenses into account.

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 Post subject: Re: Jake's Financial Diary
PostPosted: Wed Apr 28, 2010 2:06 am 

Joined: Tue Apr 20, 2010 10:44 pm
Posts: 5
Thanks for your points! I did ride a bike for a couple of years in high school and it was a great money saving experience compared to driving a car for me, which is why I am getting back into it.

I do have a set of gear already (helmet, Jacket, gloves and pants). I went into a insurance branch to get a quote. For the year it will be about $500 as the displacement is so small. When I had a car back in high school, it was about $120 a month. Much of the maintenance I can do myself, but I expect some costs there. And I am familiar with the tire situation. As for the weather, in Vancouver, almost all precipitation takes the form of rain, which just requires proper clothing. If the weather is really intolerable though, I can use my University bus pass to get around for free. The reason I don't want to do this all the time is that I am losing a lot of time on buses currently, as well as traveling to some places the buses don't go. I don't have any dependents or reason for life insurance, so that isn't really a concern.

On a money update note, my bank account just got updated from -10k to +32.6k!! I don't get to keep all of that as half the money goes to my partner in the real estate investment, but my god that feels good to see! Tomorrow morning first thing I am doing is going to the bank to close my line of credit.

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 Post subject: Re: Jake's Financial Diary
PostPosted: Sat Oct 02, 2010 7:58 pm 

Joined: Tue Apr 20, 2010 10:44 pm
Posts: 5
So I think this summer was an economic success. In hindsight, I could have tightened up my spending a bit more, but I don't have any big regrets or 'd'oh' moments.

So after working this summer, I managed to get my savings up to 9k. I did take a 3 week break from working in August, but that was due to me being offered a free trip overseas which I ended up only spending $300 on, so i figure the loss of income was a fair trade.

After school for the first semester and rent, I am now sitting at 5k, but I am thinking about selling my motorcycle to try and hit that 10k mark.

I am now working two shifts a week and that feels pretty rough considering my course load, but the stress I have felt before over having a negative cash flow is worse than stress from a busy schedule.

My first paycheck with my school time hours reflected on it should be coming this week, so i'll be working on a rough budget at that point. I haven't really done well with budgets before (not that I can't stay within them, I just don't end up consulting them at all), but with things as tight, it might be good to give it another go.

I'll post when I get into that and would love feedback from others who have experience in that regard.

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