My Plan to Slay the 60K Heloc Monster in 2014

I have given it a lot of thought, and I have decided to dedicate this year to getting rid of the Heloc. I know I will feel so much better if I can get it off my back. Plus, I have a rather good income coming in right now from my side gig, but that is not something I can count on forever, so I feel it is better to pay off the heloc while I still have that money coming in.

Here is the plan:

• $2000/month from my chequing account (some of this money would normally be going to Savings)
• $800/month from my regular side gig job
• Half of my Emergency Fund  $6000
• $20,000 from the life insurance money
• $1500 from my side gig job that I just do once a year
• The rest will come from my tax refund, but I don’t know yet how much that will be

In case anyone is wondering, my side gig is bookkeeping from home. I am a bookkeeper in my daytime job also, so the last thing I want to do at night/on weekends is more books, but the few small jobs I have pay well, and I have been doing them for a long time.

So that is the plan, wish me luck.

Net Worth Update January 1, 2014

Assets:

• Cash & Investments   $90,684
• House   $250,000

Liabilities:

• Heloc   $61,868

Net Worth  $278,816

Slay the 60K Heloc Monster or …

I have roughly 60K left on the damn heloc monster. I have been running numbers, and trying to decide what to do. If I get a chunk of money from the life insurance, put half my emergency fund on it, and don’t put anything into my RRSP or TFSA for a year, I could conceivably pay it off in 2014. But, I have been using a two pronged approach up until now. I have been paying down the heloc, but also contributing to my retirement savings. I’m not sure if I feel comfortable with not saving anything for a year. I have always believed in the power of compounding, and to lose a whole year of compounding is huge.

On the other hand, it would be really sweet to start off 2015 with a clean slate.

What to do?

Thoughts for the week

The $2700 November Challenge

At the beginning of November I set myself a challenge to save $2700 in the month, which is the amount I would need to save every month in order to semi-retire at 60. I did actually manage to save my goal of $2700  – kinda, sorta. I already had some money sitting in my side gig account so I transferred that to savings, otherwise I would not have been able to do it. I have come to the conclusion that while I am paying $1000/month on the heloc it is going to be impossible to save an additional $2700 that I would need to retire at 60. So I am just going to keep plugging away, being frugal where I can and saving what I can. I think a good goal is $1700 average savings/month. My side gig income is not always the same every month, so I have to average it out.

It was a good exercise though, and I think I got into some better habits like taking my lunch more often. I usually don’t feel like packing my lunch in the morning, but if I pack it the night before I can just grab it and go.

Christmas Plans

My kids and I are taking a trip to California this year at Christmas instead of exchanging gifts. I think these experiences are worth more than presents. I will still get them something small so they have something to open on Christmas Day. The reason we are going is that my Dad is down there for the winter and he is going to spread my Mom’s ashes, so we want to be there for that. Plus I don’t want my Dad to be alone for Christmas. He is 80 and you just never know when something might happen.

The trip is actually going to cost more than I would normally spend on Christmas gifts, but I will use my vacation savings and it will be fine. I rented a 4 bedroom house in Temecula, CA near the vineyards. That way we will each have our own bedroom and room to spread out. We can also make some meals there, which will save on restaurant costs.

I’m looking forward to getting out of the snow and cold for a week. Not looking forward to the drive, though. I hope the roads are good.

Speaking of Snow and Cold

“Oh the weather outside is frightful!” We had a blizzard last Monday that left so much snow that we had a snow day on Tuesday (which never happens). Nice to stay home on a work day, but not so nice to lose a day’s pay.

All this snow and cold has made me dream of retiring somewhere warm. Many retirees here are snowbirds and spend their winters in Arizona. I have been thinking that might be something I would enjoy. I could get a park model trailer, that way I could just drive down without having to pull an RV. The park model trailers are hooked up to electricity, sewer, water, even cable, so you have everything you need.

Something to dream about on a cold day anyway. Lots of debt repayment and saving to do before that day ever arrives.

 

December 1 Net Worth Update

Assets

• Cash & Investments  $90,422
• House $250,000

Liabilities

• HELOC  $62,229

Net Worth $278,193

Somehow my Net Worth has increased by $5108 this month. Not sure how that happened, but I am really happy about it. It was a bigger paycheque month due to more working days in the month, and I also got an extra $400 from my side gig. Also, the markets are still climbing. I hope I have the fortitude to hold on when they inevitably start to tank.

Emergency Fund – How much is enough?

I am a big believer in emergency funds. When my husband was in the hospital I was off work for four weeks. I had a bit of vacation time built up at work, but I knew I had my emergency fund to back me up if I ran short of money. When my car conked out on the highway out of town, I put the towing bill on my credit card, but I knew I had money in my emergency fund to cover it, if I needed it.

Most experts recommend 3-6 months in your emergency fund. I have $12,000 in my emergency fund which would cover 6 months of bare bones living. I have been keeping this in my Tax Free Savings Account (TFSA) in a high interest savings account at Canadian Western Bank. A couple of months ago I pulled that money out to make a short term loan to a friend. He only had the money for a few days and gave me $100 interest, so it was worth it, but now I can’t put it back in my TFSA until January.

As luck would have it, PC Financial, where I have an account for my small side business, has a 2.25% interest  promotion on right now until the end of January, so I put the money in there so I am not losing anything on the interest side.

But since the money is out of the TFSA account it got me thinking, “Do I really need $12,000 in cash in my emergency fund?” Maybe $5000 – $ 6000 would be enough. If I lost my job I would only have to cover a couple of weeks until EI kicked in. Plus, I could always draw money out of my Streetwise funds. The risk with that plan would be if I had to draw money out while the market was down I could be losing a butt-load of money. I also have a cashable GIC worth a little over $4000 at Ally (now Royal) that I could cash, with a penalty, if I absolutely had to.

So, I am leaning towards keeping $6000 in cash, and putting $6000 in my ING Streetwise TFSA in January or February. Or, another option would be to put the $6000 on the heloc. That would make a nice big dent in it, and give me a guaranteed 3% return. The problem is that even though I have to pay off the heloc, I don’t have access to additional funds on it. In other words, I can’t get any money on the heloc. (They shut it down when my husband died.) So, let’s say I had some major catastrophe and needed $10,000, I wouldn’t be able to use my heloc.

We’ll see. I still have a couple of months to mull it over. I don’t like to make quick decisions with my money if I don’t have to. One thing is for certain, shit happens, it’s just a matter of time. Best to be prepared.

If I had a Million Dollars …

I’d buy you a green dress

But not a real green dress

That’s cruel

OK, inside joke.

But what would you do if you won a million dollars in the lottery tomorrow? What about 10 million?

If I won one million I would:

• Pay off all my late husband’s taxes so I wouldn’t have to put his estate in bankruptcy. Probably $200,000 would do it.
• Quit my job.
• Give my kids $10,000 each. Enough so they have the start of a retirement nest egg, but not enough so they don’t have to work and make their own way in the world.
• Pay off my heloc, currently at about $62,000
• That would leave me with about $718,000 which I would invest in index funds, roughly following the Couch potato strategy. If you add in the money I currently have, following the 4% SWR, that should give me about $32,000 per year to live on.
• Then I would pursue photography. Maybe take some courses. Hopefully make a little bit of income eventually. I would do family portraits and weddings for cheap for people that can’t afford expensive photographers because I think memories are important for everyone.

If I won 10 million:

•  Do pretty much all of the above, except I would probably give the kids a little more. Maybe $50,000 each.
• Give my Dad and my brothers and sisters some money, maybe $10,000 each.
• Give about $100,000 per year to charity.
• Travel. I would like to spend some extended time living in Europe. Not just visiting, but living there; maybe for a year.
• Take all my extended family on a cruise. Whoever wanted to come would be invited.
• Go on a nice vacation to Hawaii for a month every winter. Rent a little house on the ocean.
• Obviously I wouldn’t have to live on $32,000 a year any more, but I would still live frugally. Maybe up my spending to $50,000, plus the vacations.

This is all just daydreaming because I don’t even buy lottery tickets. I figure every time I don’t buy a ticket I have already won.

November 1 Net Worth Update

Assets:

• Cash and Investments  $87,912
• House $250,000

Liabilities:

• Heloc  $63,927
• Credit Cards  $900

Net Worth  $273,085

I forgot to do an update on October 1, but since September 1 my Net Worth has increased $5650. Partially due to savings and paying down debt, and partially due to an upswing in the markets. I am pretty happy with that.

I also have $300 in A/R for a bookkeeping job I did that I haven’t been paid for, but I didn’t include that. Hopefully they will pay this month so I can include it in my December 1 Net Worth update.

Retirement soul searching

A while back I contacted a gentleman who used to work for the government in the CPP department. He offers his services, for a small fee, to calculate what your CPP will be at different ages. I asked him to calculate what I would get at age 60 and 65. My CPP situation is a bit complicated because I am also receiving a CPP Survivor’s benefit and the formula CRA uses to calculate that puppy is way complex.

Anyway, he told me that if I started getting CPP benefits at age 60 I would get a combined benefit of $828.48 until age 65, at which time it would drop to $740.05. If I wait until 65 to start getting CPP, my combined benefit would be the maximum, which is currently $1012.50. CPP is indexed for inflation, so these figures are all in 2013 dollars.

He calculated that if I die before age 79 I would be better off taking it early, but I die after age 79 I would be better off taking it age 65.

So, based on these figures I sat down yesterday and did some spreadsheets with different scenarios. I am using $30,000 per year as what I need to live a fairly normal life, close to what I live now. So, that is $2500/month. My target retirement nest egg is $350,000.

If I were to retire at 60, I would have to work part time until Old Age Security (OAS) kicked in at age 66. Here is what that scenario looked like.

	Age	Part time work/month	CPP Combined benefit	OAS	Draw down from investments	Total
1	60	1000	828.48		671.52	2500
2	61	1000	828.48		671.52	2500
3	62	1000	828.48		671.52	2500
4	63	1000	828.48		671.52	2500
5	64	1000	828.48		671.52	2500
6	65	1000	740.05		759.95	2500
7	66		740.05	546	1213.95	2500
8	67		740.05	546	1213.95	2500
9	68		740.05	546	1213.95	2500
10	69		740.05	546	1213.95	2500
11	70		740.05	546	1213.95	2500
12	71		740.05	546	1213.95	2500
13	72		740.05	546	1213.95	2500
14	73		740.05	546	1213.95	2500
15	74		740.05	546	1213.95	2500
16	75		740.05	546	1213.95	2500
17	76		740.05	546	1213.95	2500
18	77		740.05	546	1213.95	2500
19	78		740.05	546	1213.95	2500
20	79		740.05	546	1213.95	2500
21	80		740.05	546	1213.95	2500
22	81		740.05	546	1213.95	2500
23	82		740.05	546	1213.95	2500
24	83		740.05	546	1213.95	2500
25	84		740.05	546	1213.95	2500
26	85		740.05	546	1213.95	2500
27	86		740.05	546	1213.95	2500
28	87		740.05	546	1213.95	2500
29	88		740.05	546	1213.95	2500
30	89		740.05	546	1213.95	2500
31	90		740.05	546	1213.95	2500

Then I looked at what it would look like if I worked until age 65. Note that the previous scenario took me to age 90, and this one goes to age 95. Not sure why I did that. I guess because I based them both on 30 years.

	Age	CPP Combined benefit	OAS	Draw down from investments	Total
1	65	1012.5		1487.5	2500
2	66	1012.5	551	936.5	2500
3	67	1012.5	551	936.5	2500
4	68	1012.5	551	936.5	2500
5	69	1012.5	551	936.5	2500
6	70	1012.5	551	936.5	2500
7	71	1012.5	551	936.5	2500
8	72	1012.5	551	936.5	2500
9	73	1012.5	551	936.5	2500
10	74	1012.5	551	936.5	2500
11	75	1012.5	551	936.5	2500
12	76	1012.5	551	936.5	2500
13	77	1012.5	551	936.5	2500
14	78	1012.5	551	936.5	2500
15	79	1012.5	551	936.5	2500
16	80	1012.5	551	936.5	2500
17	81	1012.5	551	936.5	2500
18	82	1012.5	551	936.5	2500
19	83	1012.5	551	936.5	2500
20	84	1012.5	551	936.5	2500
21	85	1012.5	551	936.5	2500
22	86	1012.5	551	936.5	2500
23	87	1012.5	551	936.5	2500
24	88	1012.5	551	936.5	2500
25	89	1012.5	551	936.5	2500
26	90	1012.5	551	936.5	2500
27	91	1012.5	551	936.5	2500
28	92	1012.5	551	936.5	2500
29	93	1012.5	551	936.5	2500
30	94	1012.5	551	936.5	2500
31	95	1012.5	551	936.5	2500

Then I did some number crunching to see how much I would need to save between now and retirement to reach these goals. The results are a bit scary, and were based on some assumptions that may or may not come to pass such as downsizing my home to get some equity out and pay off about $50,000 of the heloc. Also being left with 30-40 K of the life insurance after paying out my late husband’s share of the house.

Anyway, to semi-retire at age 60 (I am currently 54) I would need to save about $2700/month between now and then. That is a big number, but not entirely out of the question. In addition to my wages I have a side hustle that brings in about $1000/month. I also get a CPP Survivor’s Benefit of $375/month. So, out of my net pay I need to save $1325. My net pay varies from month to month because I make an hourly wage, so it depends how many working days are in a month, but on average I probably bring home about $3200 per month. So $1325 is roughly 40% of my take home pay. Which is doable, especially if I don’t do stupid stuff like buy clothes that I don’t need or get take out food. I am also saving $200/month towards a future car purchase, $100 per month for vacations, and $150/month for insurance and other big expenses. But, I don’t calculate these into my retirement savings as these are short term savings and will be spent eventually.

So my challenge for November is to save $2700 to see if I can do it. This is on top of the $1000 I pay on the heloc every month. I am going to have to watch my spending very closely. No stupid purchases. Take my lunch every day. The car is full of gas, but I don’t know if I can make it a full month on one tank. I have never paid that much attention to it. Only buy groceries I need, no junk food.

I guess the thing is, now that I sit down and write this all out is that I wouldn’t mind working until 65 (or even 66) if I was working at a job I enjoyed. I like working, I just don’t like my current workplace. It’s values and ethics don’t match mine. I feel it is bringing me down. But the pay is pretty good, especially for my level of education (never finished university) and field of work (bookkeeping). I peruse the job ads every day and the wages being paid are all less than what I make. The only way I could make more would be to go back into accounting, which I didn’t enjoy. So, maybe the answer lays in finding a job that I enjoy more, even if it pays a little less. Or start my own bookkeeping business, but that is a scary thought.

If I didn’t have the damn heloc, and I didn’t have to pay out my husband’s share of the house my finances would be a lot easier. I guess we have to pay for past mistakes sooner or later.

 

Conflicting Emotions

I met with a bankruptcy trustee this week regarding my late husband’s estate. He hadn’t filed his taxes for several years and owes mega bucks to the CRA. On the one hand I am not responsible for paying his taxes, but on the other hand they can go after his share of the house. So, I will have to buy out his share of the house, which after everything is said and done could be around $60,000. That is actually less than what I originally thought it might cost me, so I guess that is good. But, I feel conflicted about declaring his estate bankrupt. He would have hated that. But, I have to do what I can to preserve my retirement funds for my future. Besides if he didn’t want to be bankrupt he should have paid his damn taxes. So many thoughts and emotions swirling inside of me. Guilt, anger, grief, relief. sadness, even a touch of happiness, which brings on more guilt for being happy.

I have to meet with the trustee again next week and give him some paperwork and pay a retainer of $7000. Now, I ask you, how do people that are bankrupt afford $7000? I am in an unusual situation because it is my late husband that is bankrupt, and I have his life insurance money squirrelled away. But, isn’t the point of bankruptcy that you have no money to pay your debts?

This is going to be a stressful process, but I have to do it to move on.