Sustainable Personal Finance

Mrs. Sustainable PF agreed to marry me about two and a half years ago and we wed just over a year ago. We determined that we needed to prioritize some important things in our lives which included choosing and buying a home together as the house we were living in was one I purchased shortly before meeting Mrs. Sustainable PF. We fixed up our house and sold it while also finding and purchasing the house of our dreams. We also wanted to buy a new car, a Subaru Outback, which we purchased in the Summer of 2010. Both of these activities took extraordinary research on my part. I tend to be a bit obsessive compulsive about what I sink my teeth into. In the late spring with our house being ready for market and our Outback purchase all lined up I turned my attention to our finance. In retrospect I should have done this first as it is the most important of our 2010 goals.

I mentioned being a bit compulsive so I hope the reader can understand how much I research things when I become interested in them. I started my research by re-reading a copy of The Wealthy Barber by David Chilton that my Mother gave to me decades ago. I downed entire book one warm July day at Mrs. Sustainable PF’s parents house. I quickly realized I should have picked this book back up 10 years ago prior to entering the work force. Ten years of compounding interest, lost! I agree with all of Chilton’s suggestions regarding personal finance. Save 10% off the top, utilize government savings programs such as RRSPs and Tax Free Savings Accounts, ensure you are insured, contribute to your pension if you are lucky enough to have an employer who provides one (we do), participate in home ownership and get wills for both of us.

I needed to learn more. We are both gainfully employed in the public sector and we had come to realize we were not employing Chilton’s basic financial principles and that it was in our best interest change our financial habits. I had mindlessly contributed to Mutual Funds for years and was in the process of re-purchasing our RRSPs that I had used to assist in the down payment for our first house under the First Time Home Buyers Plan. So, I took to the Internet to learn more.

I now subscribe to 65 RSS feeds pertaining to personal finance, investing and socially responsible finance. I did mention I get a bit obsessive compulsive, right? I started reading the Personal Finance sub-forum at redflagdeals.com but at the time I found there was far too much information and a lot of it contradictory. So I decided to look for other sites that were the opinions and experiences of individuals and/or collaborators. One of the first blogs I stumbled across was Frugal Trader’s Million Dollar Journey (MDG). Fantastic site as many who read this post likely already know. I then discovered the world of Exchange Traded Funds (ETF) and quickly surmised that my Mutual Fund days were at an end. Who wants to pay a ridiculously high Management Expense Ratio (MER) when products are available that a Do It Yourselfer can purchase? I found The Couch Potato investing strategy at MoneySense.ca and The Canadian Couch Potato and read through all of the articles posted by the writers for these sites. I was sold, mostly.

We decided that the couch potato strategy was one we wanted to use. We would diversify the ETFs we intended to purchase between US Market, International Equity, Bonds and perhaps Real Estate Investment Trusts. You’ll notice I did not mention Canadian Equities for our portfolio. Why no Canadian equity here? Two words: Smith Manoeuvre (SM). I discovered this strategy on MDG and really liked the idea of turning our non-tax deductible loan into a tax deductible loan while building a hefty portfolio. Mrs. Sustainable PF saw the advantages of the SM as well so we decided we would leverage our Home Equity Line Of Credit (HELOC) to invest in dividend paying blue chip Canadian equities.

We decided we should pay off my student loans and a low interest personal loan sooner than later and this will be a priority for 2011 and 2012. Guaranteed returns by paying off debt plus more money available in our budget once these loans are gone.

We have applied for term life insurance although we are awaiting confirmation of coverage. Our next step is to write our wills. We will save 10% of our take home income and work toward maxing out our RRSP and TFSA account. We will continue to increase our bi-weekly mortgage payments by 20% each year. Once these items are in hand we will feel very comfortable in our journey to financial freedom!