Shopping Ban 2011

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I’ve been toying around with the idea of a shopping ban for the last year, and I’m ready to take the plunge.

I’ve been diligently tracking my “shopping” purchases, such as clothes and toiletries for the past year, and here is what I’ve come up with.

Spending Analysis 2010

Toiletries: $290

This includes make-up, moisturizer, cleanser and shampoo.  I just stocked up in shampoo and think I may have enough for the next year.

Clothing: $1313.73 $1102.89

I thought that I was doing pretty well with clothing this year, but I have spent on average $100 a month.  Big purchase this year include my lovely trench jacket from Rudsak ($200), my winter coat from Banana Republic  ($210), my red pleather purse from Nine West ($70), a pair of Clark’s sandals and Rudsak heels ($160).

Update: I’ve returned my winter coat from Banana Republic because it wasn’t warm enough (I took it outside for a test walk).

Electronics: $191.84

I bought a new hard drive ($128) at the beginning of the year, and also bought a nifty laptop backpack ($64).  I love my new laptop bag and use it almost every weekend when I visit my parents or visit BF.  It’s the perfect size for a smaller person like me, and it protects my laptop in a way that’s as stylish as a back pack can be!

Misc: $263

I put things here when I don’t know where to put them, such as, buying a lock for the gym.  This includes the City Entertainment Book ($30) and the Minimalist E-Books Package ($30).

Shopping Ban 2011 Rules:

Toiletries: I will allow myself to make purchases where I am replenishing a current product I am using, but nothing new  for the next year. I estimate this will cost approximately $180 consisting of:  1 MAC face primer, 2 MAC blotting powders, 3 eye liner pencils, 1 eye brow pencil, 2 liquid eye liners, 2 bottles of SpectroJel, 2 bottles of Jojoba Oil, 6 packs of cotton pads, 1 toothpaste.

Clothing: I will be making some replenishing purchases for underwear and socks in the new year at Costco.   I will allow myself to buy 2 sets of thermal underwear (for commuting to work via bus).  There are 3 freebies I will allow myself.  A nice cross body bag.  A pair of casual runners.  A pair of flat knee high charcoal leather boots.   Each item must be less than $150 before tax.   Other than that, I’ve got everything I need so there is no need to shop*.

Electronics: I’m not a huge gadget fan, so I don’t have anything I need or want.  I’ve got a bar cell phone and my contract is up in July, 2011.  My phone will probably still work fine, though I’d like to negotiate a better plan.  I’m currently paying $40 a month right now for basic talk and text services – I would love to see that bill hit $20 to $30.

Note*: I give myself a little reward when I meet my budget each month because I like prizes :).  I give myself a certain amount to spend on anything I like.  Since this is a shopping ban, I’m going to make an exception that I can spend on thrifted items, only.  I haven’t ventured into many thrift stores, and now would be a great opportunity to start!

Have you ever done a shopping ban?  For how long?  What are some tips that you’d like to share, and how did/do you stay motivated?

Cheers,

$100,000 at 30

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I have a confession.  I am lazy.  Lazy with a capital L.

Before I started working full time, I never contributed towards a Registered Retirement Savings Plan (RRSP).  I had some catching up to do.

I started reading up on it in Personal Finance Blogs and books.  I went down to HR to talk to the manager, and asked him questions about how our group account worked.  Even though my company matching hadn’t kicked in yet, I wanted to be ready. I learned two very important things that day.

$100,000 in RRSP’s at 30

We were given a nifty sheet that had pre-calculated our required monthly contribution in order to result in different annual incomes during retirement.

The assumptions are that you will retire at 65, you live until you are 85.  Inflation is 2% annually, and your average return rate is 8%.  According to this model, if I have $100,000 in my RRSP by the time I am 30, I will not have to contribute another cent and just have to let it sit.  Then, when I retire at 65, I will have an annual income of $50,000.  Not bad, eh?

I know, I know.  This is just an estimate and I shouldn’t start popping the champagne bottle just yet.  But what I realized was the power of compounding interest.  Since I am young, I have time on my side.  I had exactly 5 years until I turned 30, and based on my expenses and income, putting $100,000 towards my RRSP would certainly be do-able*.

I was really excited – instead of working really hard, I could make my money work for me!

Immediate Tax Benefits

When I contribute to my RRSP through my company, the amount towards my RRSP is not taxed.  This is great because when I direct $200 from each paycheck to my RRSP through my company plan, my paycheck decreases by less than $200 since I am taxed on my income less the amount I contributed towards my RRSP.

Prior to contributing to my company plan (before the RRSP matching started), I contributed to a self directed RRSP with ING Direct.  I contributed to the RRSP with my after tax dollars, and got a tax refund at the end of the year.  And even though it’s nice to get a big fat check in the mail, it’s not so nice to be giving the government an interest free loan and not making my money work for me the past year!

Why Laziness?

With my current situation, it’s a lot easier to save more towards my future (i.e., retirement) now than it will be later on in my life.  Right now, I have no mortgage, no car payments, no dependents, and no debt.   By prioritizing my spending, I can put more towards my future now, so that my future self can have more freedom.  I am also assuming that my future self may have more obligations, such as, mortgage, caring for my parents, kids, etc.

What if I Need the Money?

In Canada, you can take money out of your RRSP before you retirement at 65 without being penalized for two reasons:

1) Life Long Learning Plan – You can take out the money up to $10,000 per calender year to put towards tuition.  You will not be taxed on this income, and you have up to 10 years to repay your RRSP.

2) First Time Home Buyers Plan – You can withdraw up to $20,000 from you RRSP to put towards buying or building your first house.  You will not be taxed on this income, and you have up to 15 years to repay your RRSP, with a minimum payment of 1/15 each year.

I will most likely not take out my RRSP for either of these two options.  I would rather let my RRSP sit and compound, and I would rather save separately for the education or house down payment.   It is prudent to note that when you are paying back the RRSP, you are paying it back with after tax dollars (i.e., no tax benefits).

Note*:  Putting away $20,000 a year towards RRSP is no easy feat.  And also, I wouldn’t want to lock in more than my maximum RRSP contribution since that money does not lower my taxable income.  For me, the $20,000 goal would be a combination of RRSP, TFSA (Tax Free Savings Account) and investing outside of these two vehicles.  That doesn’t include emergency fund or other savings.  Even if I can’t make $20,000 a year, that’s OK.  It’s a goal, and knowing the number is better than not knowing.

What are some tips that you’ve learned over the years?  Are you lazy like me when it comes to saving and money? 🙂

Cheers,

Public Transit Thoughts

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One of the most interesting courses I took in my undergraduate career was Urban Transportation Systems.  This course studied how public transportation evolved in a city, and different components and tools in each type of transportation system.  Even though this course was mainly a technical elective, I found the psychology behind the course equally as compelling, if not more so.

As you may realized from my previous post on the cost of car ownership, I am biased towards using public transportation in urban areas.  The following are some interesting points that I encounter in my everyday life.

Over-Estimating Travel Time:

One of our first exercises was to take the local pubic transportation in our city from point A to point B.  There was no time interval; however, we needed to have at least one connection in our trip.  Before we took the trip, we were to estimate how long out trip length would be, and compare it to our actual travel time.

People who did not regularly take public transportation over-estimated their travel time by 2 or 3 times as long!  You can see how this becomes a bad cycle.  People who don’t regularly take transit think it will take too long to get to their destination, so they don’t use it.

For my example, I took the bus from my university dorm room to get to uptown for groceries.  I checked the bus times, and waited for my first bus.  When I got to my transfer point, there second bus was waiting there, and I had no wait time for the second bus.  I was at the grocery store in 15 minutes and I had guessed it would take me 35 – 45 minutes.

One of the things I discovered about taking transit in my University City was that buses would often wait for each other at main intersections.  Since routes would only run every 30 – 45 minutes, off peak, simply working out the schedules of major routes so that they only need to wait a little bit for each other goes a long way in optimizing the transit system and making it more enjoyable for those of us who used it. 🙂

Plan Ahead

Some cities even have a system where you can call or text a certain stop number to find when the next bus will arrive.  Some cities also have estimated wait times posted via an information board at certain stops.  I think every major city has a transportation website where you can find bus/train schedules.  Some websites even allows you to type in your location and destination, and proposes various routes to you.

Schedules are very useful if you’re not in the downtown core.  It takes a bit of planning, but it’s worth it.  Always buffer in some extra time just in case your bus/train gets there a little early.

If you a regular user of public transit, I’d love to hear your thoughts.  And for those of us who don’t use public transit, try this exercise and share your results.

Cheers,

Dressing for the Holiday Season

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It’s getting close to that time of the year again, where we need to glam it up for holiday parties and work functions.    The Holiday Ball where I work is tres fancy.  I also own a total of 2 fancy dresses in my closet.  My green Chinese dress (ki pao), and a black strapless dress.

Some of  my colleagues were excited to be getting a whole new outfit for the Ball.  They said there weren’t that many occasions where we can go out and get a new dress with new shoes and hand bag.  I don’t share her views.

Here are my suggestions on how to best find an outfit for the Holiday Season – while looking great and not breaking the bank.

Low Cost per Wear:

Since wearing a fancy dress/outfit is limited to a holiday party or maybe a wedding, the cost per wear for a fancy dress is very high (> $25).  I want the dress to be conservative to wear to most work/wedding functions, and versatile so it may be dressed up or down with accessories.  I am also learning that I usually get what I pay for, and sometimes it’s worth it to pay a little more for better quality items.  The upset amount I would spend is $150, ideally under $100.

Borrow or Swap Dresses:

Luckily, I have 2 sisters and a few girlfriends who are a similar size to me.  We’ve swapped dresses for graduations, weddings, parties, etc.  It’s great, because we get a completely new look without spending any money.  One thing to keep in mind is to be very careful to not damage the dress.  Spilling red wine on a borrowed dress, may ruin the dress, and the chances of you borrowing anything further.

Be Creative:

Try giving a twist to the outfit by dressing it up or down with accessories.  A shawl or a statement necklace can completely change the look of an outfit.  I’ve also paired a top tucked into a skirt for the look of a block dress – this can have endless options, and also be changed up with accessories.  Check out vintage stores, and pair vintage items with modern items for classic twist.

Q: Is it Taboo to Wear the Same Dress?

This is something that I’m debating.  I’ve been told by several girlfriends that it is completely taboo to wear the same dress to a function where the people there have seen you in that dress before.  For instance, I wore my black strapless dress to a wedding this summer for a co-worker (only about 5 people from my firm were there).  I thought this would be a great dress for the Holiday Ball paired with a nice (and different) shawl.  Thoughts?

What are some of your holiday dress tips?  Would you feel uncomfortable wearing the same dress to an event where your colleagues have already seen the outfit?

Cheers,

Car Costs

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I have been debating for the last little while the cost of owning a car, and whether I want to be a car owner or not.  I’ve thought about the reasons why I want the car, and also the costs of owning and driving a car.

Reason why I want a car:

It would be convenient to get to places.  I can use it to get to work, I play volleyball once a week, and I also use it drive home to visit my folks.  I would also be able to carry groceries home easier and not be cold waiting for the bus, or having to follow bus schedules (which don’t run very often on weekends).  I also use my car for work, and drive to meet clients.

Reasons why I don’t need a car:

I live within 5 minutes of walking to two different bus routes – one of them takes me very close to work.  It’s about a 25 -30 minute bus ride and about 15 minutes of walking, so it’s certainly do-able.  Volleyball games are also usually close to the subway.  It would take planning but is not impossible.  There is public transportation that I can take to visit my parents.  It takes almost 2 hours one way, but I don’t really mind being on the bus that much.  I can listen to music and sleep.  For work, I can try to use car sharing programs such as ZipCar or AutoShare since they do have locations close to my office.  Will have to get my manager’s approval for this one.

Background:

I plan to buy my car second hand.  I’m not completely sure which car I want.  I debating between a used Corolla (early to mid 2000’s) or a used minivan (also early to mid 2000’s).   I like the Corolla because I’m used to driving one and it’s super awesome on mileage and easy to drive.  I like the minivan because I can find it for a better price and can likely get cheaper insurance for it.  At the end of the day, I really don’t care what type of car I drive as long as it’s safe, reliable and easy to drive – I really don’t care about the cool factor in the car I drive.  The cost to purchase the vehicle will range between $5,000 to $10,000.  I will buy it with cash.

I am a young driver (I’m 26) and it will be my first time being the primary driver.  I also have not been insured for that long (under 2 years) and I been quoted for $3,800 (annually) for the Corolla and $3,200 for the Minivan.  Outrageous, I know.  That’s what you get for driving in Ontario. That was the first quote I received and I am sure that I can get a better price, but the sticker shock opened up my eyes to the REAL cost of driving.  Let’s say I can find a price for $2,500 to $3,000 – it’s still a lot of money.

The Math:

Since the main cost is the cost of the car itself, I also did the math assuming that I would be able to use the car for at least 5 years.  From this total cost, I calculated for the average annual cost in today’s dollars (note: inflation was not taken into consideration for this example).

If I didn’t have a car, I would use public transportation to get around the City.  I live on the outskirts of the City, though I do have access to public transportation – just not as frequent as the Downtown core.  I would also buy a monthly pass so that I won’t have to worry about constantly buying tickets – it works out to be almost the same, anyway.

With those calculations, I have an average annual savings of $4,308 or $21,540 over the next 5 years!  That’s a lot of money that can be put in my Retirement Savings, my Emergency Fund, a Trip or put into some Dividend Paying Stocks! I like looking at numbers and this number is a huge incentive for me to NOT buy a car.

I also read a really neat post from Hi That’s My Bike (HTMB) about how they were literally paying themselves by not owning a car.  Basically, HTMB takes the money that they’ve saved and divide that by the time they spend on the bus.  I think it’s a very innovative way of thinking, and will apply that here.

I roughly spend 30minutes on the bus each way.  Each month I would spend approximately 20 hours on the bus, and I would save $218 by taking the bus.  (I am not counting the time that I will be making long commutes to see my parents, this is just day-to-day getting to work time.)  That works out to about $10.90/hour.  The more I take the bus, obviously the smaller the hourly rate, but it’s a good ball park number.   Unfortunately (or fortunately), it’s nowhere near as high as HTMB’s $26/hour, but it’s something!  And that money saved could easily cover my groceries bills for at least a month, maybe even two :).

How much are your car costs?  What are you paying yourself an hour if you don’t own a car?  Is it feasible for you not to own a car?

Cheers,

Hello world!

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Welcome to my blog.

I am a twenty-something girl on my journey to financial freedom.  I tested the waters of personal finance not long after starting my first full-time job after college and have been hooked ever since.  I have been reading so many inspiring writers on their financial journey for the past two years, that I took the plunge and started my own blog to track my progress.  I’m hoping this blog will also serve as a motivator, and a place for me to speak my mind about money and my life.

I am also an aspiring minimalist, and hope to share some of my experiences in minimalism on this blog, as well.  To me, minimalism and personal finance go hand in hand.  I first contemplated “minimalism” when I tried to continue living like a student, even after my college days.   I saw it as a great way to save money, and through that experience, I realize that I don’t need much to keep me happy.  I want to live my life with a purpose, and spend with a purpose.  I also want everything I own to serve a purpose in my life.

Join me as I start this journey  towards my financial freedom!

Cheers,