electricland

Finances are on my mind of late, thanks to the global economic meltdown, which is having its effects on my workplace and on some of you as well. (Much sympathy.) I'm fortunate: my job, thank goodness, is safe for now, and is nice and stable at that. I don't think I'm temperamentally suited to be a freelancer -- I like knowing where my next paycheque is coming from and how much is going to be in it.

It always strikes me -- not in a good way -- that although I make more than twice what I did in my first "real" job 10 years ago, and am living in a lower-tax jurisdiction, I seem to be perpetually at the edge of my bank account. There's a good reason for this, of course: my apartment in Montreal was cheap cheap cheap, whereas my house takes roughly half of what I make after tax. When we started off this grand adventure, Jen and I set up a joint bank account, which we use for mortgage payments, tax, utilities, renovation expenses, and all the other exciting expenses that you come in for once you own a house. We each have a set amount we pay into it every paycheque, and Jen administers the funds (giving me a free ride). There's a complicated spreadsheet that she uses to keep track of it all. Anyway, my share is almost exactly half my paycheque. With that and the other regular payments I make (see below), I often wind up with... not a whole lot of money, actually, even on payday. (I should really stop ripping open my pay stub every other Friday and getting all excited. The number on it is totally illusory.)

There's also a bad reason: it's shocking how much I manage to spend on frivolities. After my trip to Italy last year I stopped updating Quicken. (Out of fear, I think, although actually as overseas trips go I don't think I've ever had a cheaper one. Or maybe I just don't like entering foreign currency transactions.) In January, as part of Operation Make My Life Better, I ploughed through the giant stack of receipts and statements and managed to catch up. This gave me an excellent opportunity to look at 6 months' worth of expenses in one go, and something I noticed was how few items seemed like a good idea months after the fact. There were a very few items of which I was able to say definitively, "Yes, I'm glad I bought that. Spending $X on it was totally worth it." There were quite a few necessities -- groceries, obviously, and vet bills. And then there was the alarming list of expenses of which I had to ask "What was I THINKING?"

I was also shocked by how often I'd paid off my credit card with my line of credit, which has been steadily inflating all year. I'd thought it was maybe once or twice; in fact, it was every other month. (Now I know WHY it's been inflating.)

As I mentioned yesterday, I really need to keep track of what I'm doing or things get completely out of hand. And I hate the feeling of being financially out of control, always have. (Unfortunate about that reluctance to look at my finances, then... I know, I know. I'm better now.)

There is good news. I'm enrolled in a defined-benefit pension plan at work, which is a chunk out of my paycheque but also means that my unused RRSP contribution room isn't accumulating quite as fast as it would otherwise... and defined-benefit pension plans are thin on the ground these days. I've been saving steadily into an RRSP since that first real job (I'm now paying back what I took out for the First-Time Home-Buyer's Plan), and that's an automatic payment from every paycheque. I also have an automatic payment into an ING account on every paycheque, so I do have a bit of an emergency fund. And my line of credit isn't yet out of control.

Still, it was time to take things in hand. What I'm doing:

Continuing with savings and RRSP payments. Savings are going into a tax-free savings account.
Paying a set amount to my line of credit each paycheque. Once it's paid off, I'll divert most of the money to savings.
Keeping track of expenses and updating Quicken every 2 weeks.
Trying to stick to a budget, and really considering every purchase carefully before making it. (So-so results so far, but at least I'm more aware of what I'm spending and what I should be spending.)
Writing down major purchases I want to make (which in the past would have gone straight onto the credit card), together with approximate cost, why I need it, and how I plan to pay for it.
Taking out only $20 in cash per week.
Nothing on the credit card unless it's going to be reimbursed (e.g. dental work) or I have no choice (Internet and mail orders) or it's a known quantity every month (gym membership).
Pretty much everything paid by debit. (Downside: I had way more transactions last month than my account allows. I'm going to have to pay slightly more for an account with unlimited transactions. I've also had some overdraft fees thanks to inept juggling of funds. Hopefully these hiccups are now behind me.)
Tax refund goes to debt repayment.
No more dipping into the line of credit except to cover short-term cash-flow hiccups.
Tracking my progress on a graph, so I can see I'm actually getting somewhere.
Finally, a slight stroke of luck: our mortgage came up for renewal, so we got a variable-rate closed mortgage at a lower rate (at least for now) than we were paying before. Our payments are going to drop a little, and if interest rates get too high, we'll lock back in to a fixed-rate mortgage. So that will help.

Inspirations: I've been watching a lot of Maxed Out, which is inspiring in that horrified "well, at least I'm doing better than that!" kind of way. (The website has budgeting tools.) I also found Going Broke, which I believe

fairoriana recommended, really fascinating and illuminating, and am trying to put some of its conclusions (build in a waiting period; keep your long-term goals in mind; treat windfalls as real money that you earned) into effect.

So yeah. That's how the Great Financial Crisis helped kick-start me into doing a bunch of stuff I should have been doing anyway. How about you?