Talk Personal Finance – February 2015
Welcome to the start of the shortest month of the year!
To be completely honest, I have been feeling that my progress towards my financial goals have become a little stagnant as of lately. Perhaps this is just a process that everyone will have to go through in their financial journey.
With that being said, I have done some research in leverage in the last couple of weeks and things are beginning to pick up. Here’s how:
Is the Market in Recovery?
January had been a slow start in terms of the stock market which is often the case. However, in the last couple of days, the Energy and Financial sector had made a slight recovery. My portfolio jumped up nearly 4%. 🙂
Is this a sign of recovery for the low oil prices? Perhaps, I can’t really tell. I guess we’ll all find out soon. Until then, I will continue to hold all my positions and start investing more in low MER index funds.
Leveraging the Home Equity Line of Credit
If you have already had a chance to check out my last month’s net worth update, you may have noticed that I still owe $18,185 in student loan. I am currently paying $300 monthly at an interest rate of 5.5%. This amounts to roughly $80 worth of interest per month.
In an effort to reduce my interest and to start saving more aggressively, I have convinced my parents to use their home equity line of credit to refinance my student loan. The interest rate on their HELOC is at 3.35% which is at a slightly lower rate than the 5.5%. Additionally, the minimum repayment is just the interest that accumulates each month.
With this leverage of my student loan, I am able to contribute an additional $247 to my TFSA and RRSP. This will ensure that I reach my aggressive saving goal on time. I have also promised my parents that I would set up my bank account to transfer $53 monthly to their LOC as that is the minimum required payment.
My plan is to have my TFSA maxed by the end of March and my RRSP by the end of August. From there, I will aggressively repay my student loans in my parent’s HELOC account. I am determined to have my student loan fully repaid by the end of the year.
The reason why I will aggressively pay off my student loans afterwards is because both my non-taxable accounts will be maxed. I will have no other methods of sheltering my money from taxes for the time being and paying off this loan would be the more logical course of action.
This endeavour will not only save me $270 by the end of the year in interest fees (which isn’t really that much) but it will also encourage me to get comfortable with leverage. Hopefully, everything works out as I have outlined. Plus, I will most likely use that money to treat my parents to a nice dinner for letting me use HELOC.
Dealing with Pressure from Work
Finally, it’s that time again where I dedicate a section of talk personal finance for ranting out my frustrations from work!
Last week was one of the worst I have had since I started this job. As someone who works for the city, both management and the public were not happy with my work for some apparent reason. In my line of employment, safety should be the priority over everything else.
I prefer to take my time and ensure that everyone is safe instead of rushing to meet schedule. However, management does not seem to really like that at all. They were up my case the entire work week and even though I try not to let that get to me, it just adds to my stress level. In any case, more reason to why I am so determined to pursue personal finance.
Interesting Reads
Here are some of the interesting posts that I have came across last month:
Hey, that’s my article! Thanks for the mention!
No problem Simple Cheap Mom! Budgeting is something that I will look into in my finances. 🙂
Bummer to hear that you’re having a tough time at work. It’ll get better. Things like this happen from time to time. Thanks for mention, cheers!
Yah, going through a rough patch isn’t exactly the best feeling! I guess i’ll have to prepare for this sort of thing as long as I am working for someone else.
I must admit I was skeptical at first when you have your parents take out a heloc for you. But in the end you’ll come through and pay it all off by the year end. Nice! Family support is wonderful. You get it down to the penny, it’s is great. A penny save is a penny richer to that million.
Since my student loan rate only 1.88%, I’ll continue to use that money to invest and pay minimum + $50/ month. When this start to annoy me, I’ll use my savings to clear it off.
January was bad, my account took a dip, I seized the opportunity to buy, will add $150 to my dividend income this year. I managed to buy BP, BMO, BAC. Oil will remain volatile, I’d want to see some more dips, as I will inject more capital into my freedom fund.
Thanks for including my article.
Hey Vivianne, doesn’t the “opportunity to buy” and your preference of wanting “to see some more dips” make January a great month?
Lets get it out there that discounts aren’t only good news in the shopping mall but are exciting in the markets as well =]
Wow! That is a very low student loan interest! There is definitely no rush in paying that off. February has been a great month so far! Recovering from the January low.
Very nice of your parents to let you interest rate arbitrage on their home equity. I would make it a high priority to clear that debt ASAP as if something happens in your life it shouldn’t affect their ability to live in their home.
Hi Evan, I haven’t gone through with it yet. I have done some quick calculations and all I will save is $2000 once my loan is repaid. Paying back the government will allow for a tax refund. Still weighing the pros and cons for now. Thanks for dropping by. 🙂
Hi Jeff
Appreciate the mention in your link 🙂
I am sorry to hear about your recent unhappy case with your work and as an employee myself I totally understand that. In fact I just got my appraisal and I think work is just work. We are pursuing what we believe in right here!!!
A good idea to lower down your interests by a couple of percentage points there and I am sure once you have clear that your savings are going to rocket.
Btw what do you mean your recent journey is feeling stagnant? Is that more from cashflow point of view?
Hi B, I just meant that I feel like I haven’t been doing much to improve my financial situation except going to work and collecting a paycheck. I’ll try to figure out how I can do more. 🙂
Hey Jeff!
Yes, I agree, I think the market is definitely recovering. The energy sector, which I have put most of my investments in, are slowly rising. The REITs took a hit this past week though, as O dropped from about 55 to 50. But I’m fine with that as long as they keep paying the divs!
As for your student loans, you seem like you’re doing a good job of repaying them. I just blogged about how I believe student loans are scams 🙁 Anyways, keep up the good work! Can’t wait to read your next net worth update.
D2R
Hi D2R, It’s nice to hear that your energy stocks are recovering. I think it is on a path of recovery now. Also, student loans are very annoying and it is hard to get rid of. I’ll be providing an update soon!
Hi, Jeff. Enjoyed your post. Good job on your finances. And I totally understand the frustrations of being an employee. I’ve decided that I should do something about the fact that I don’t like my job (don’t really like working for anybody), and am trying to buy businesses and invest in real estate as a means to eventually quit my job. Best of luck to you.
Hi Felix Money!
Life is definitely too short to not do something that you love. I look forward to reading about your business and real estate investments.
I agree. I’m so excited to start on this new path. And I am looking forward to reading about your progress as well!
All the best