They say it’s better late than never, but thinking over the things I’ve done (or not done) in my adult life, there are some lessons I wished I had learned sooner.
I wish I had prepared more for retirement. When I was younger I felt I needed the money more for “today” so I missed out on contributing to my company pension plan and maxing out my employee savings plan and RRSP.
I wish I hadn’t racked up credit card debt to the tune of about $30,000 with multiple cards. It took a long time to pay them off and interest rates were high. Now, if I don’t have the cash, I don’t buy. I have only one credit card and it is paid in full each month.
I wish I hadn’t done business with a friend. I chose a realtor friend to sell my house and I felt he didn’t do all he could to advertise or have showings. He had reduced his commission for me, and it’s hard to tell a friend you don’t like his service. As a result, when my house finally sold I had only a month to purchase a new house and had to “settle” for not my best choice.
I wish I had taken more risks – both personal and financial. As a single wage earner I was always worried that I’d end up with no back up savings for emergency situations. I missed out on a lot of family memories by not spending on fun things we could have done. I also missed out on greater financial growth by keeping my money “safe”.
I wish I wouldn’t have let financial “experts” talk me into purchasing certain products that were not right for me. I lost money by thinking they knew better and not trusting my gut feelings and my own instincts.
I wish I had finished my university education. I feel that I missed out on a lot of career opportunities by not having a degree, even though I was well qualified with my work experience.
We all say that if we could go back in time, we would do some things differently. Are there any things you regret or wish you had learned earlier?
Last week I wrote about the process of upgrading our house. There were 3 factors that we needed to determine:
- How much can we afford to spend on our new house?
- How much will our down payment be?
- When do we put our house up for sale?
Of course, when it comes down to how much we can afford to spend on a house, the bank has a different opinion than I do. I take what the bank calculates with a grain of salt, as I don’t feel that anyone should extend themselves to the very limits of what they’ve been approved for. That being said, the old adage about only spending 2-3 times gross salary on your house doesn’t seem to make much sense in today’s environment either.
The house we are looking to build will probably end up costing us more than I would have liked to spend, however I am happy to say that the final amount shouldn’t come close to what the bank has approved us for. I say “shouldn’t”, because any time you are building a house with some estimated costs involved in your allowances and upgrades, I believe it’s prudent to factor in a contingency fund of at least 10 percent.
Our challenge lies with the down payment. I would like to use all of the equity in our existing house to pay for the down payment on the new house. However we need to declare our down payment to the builder and the bank in advance to starting construction. If we want to continue to live in our current house while we build the new house, we will need to open a home equity line of credit (HELOC). The bank will only lend us 80 percent of the market value of the house, minus the existing mortgage on the house. So, for example if our house was assessed at $250,000 and our mortgage was sitting at $150,000 the bank will only lend us $50,000 in a HELOC.
The house we are building will cost upwards of $400,000 which means we will require $80,000 to satisfy the 20 percent down payment and avoid CMHC fees. Even if we have an additional $30,000 to put onto our mortgage after the sale of our house, we would still have to pay the CMHC fees if our initial down payment is only $50,000 (or 12.5 percent). So what should we do?
There are still many factors to consider, for example when do we absolutely need to be in the new house? My wife and I have talked about this and we would love to be in the new house by this time next year (November 2011). Since it takes five months to build the house we would need to start building by the end of May next year. That also seems like a good time to put our current house up for sale, and gives me about six months to save up a bit more cash.
With so much to think about, doesn’t it seem like the easiest decision would be to just stay put? While that may be true, we feel that this is a great opportunity to build the house of our dreams and are very excited to get started.
Canada Savings Bonds (CSBs) are now on sale and I wonder if they are still as popular now as an investment option as they were in times past.
Although they’re called “bonds”, CSBs are actually savings certificates that are more like term deposits or GICs. They are issued by the federal government in the fall and pay a fixed rate of interest that is periodically reset based on market conditions. Canada Savings Bonds currently have a 10-year maturity and are also RSP eligible.
Canada Savings Bonds: Still A Good Investment?
The main change since I sold Canada Savings Bonds as a banker is in the interest rate. Past CSBs had a fixed rate of interest for the entire term, usually seven years. I owned one series that paid 19.5% compounded annually. (Of course, inflation was probably about 22% so I actually lost buying power, but that’s another story.)
Since they were easy to buy, fully guaranteed by the government and cashable at any time, they made an attractive alternative to bank issued term deposits and GICs and were regularly rolled over into new issues on maturity. My father purchased a house entirely from CSB proceeds. I sold many $100 bonds to grandparents who gave them to their grandchildren each Christmas instead of toys.
The regular CSB on sale right now pays an interest rate of .65% for one year. Compare this to an ING high interest savings account currently paying 1.5%. The first year interest rate on the Premium CSB is 1.1%. These bonds are only cashable on the anniversary of the issue date (plus the 30 days after) so they are more like a GIC. One year GIC rates range from .75% to 1.5% so they are better than some, less than others, depending on where you do your banking.
The benefits I see for purchasing Canada Savings Bonds are:
- After the first 3 months the regular bonds are redeemable at any time with full, accrued interest to the previous month end.
- Interest rates can increase during the term but rarely will they be reduced (based on changes to the Bank of Canada rate).
- They can be purchased through payroll deductions through your employer as a forced savings.
However, with all the other options currently available to the investor, I haven’t considered Canada Savings Bonds to be a desirable investment for myself for quite some time.
Are they, or will they become part of your investment portfolio? And what are your reasons?