January Money Checklist

 Happy New Year!

Sorry it's been a long second - the logistics of moving to a new home, social distancing and homeschooling kids took a lot of my mental bandwidth and left me too overwhelmed to blog. I'm back to share my January Money Checklist. It's a list of tasks that I complete at the beginning of the year to help me plan for the next 12 months and recap the previous 12.

1. Make annual spending plan. Start with expected annual income and slot in expected annual expenses. Some big  ticket expenses that I set a yearly amount aside for are travel, vacation, gifts and kids extracurricular activities. 
2. Make annual saving/investment plan. Once step 1 is completed, it's easy to know how much money you'll have leftover for this step. For me, my annual saving and investing plan order of priority is
• Fund retirement account (RRSP)
• Fund kids education savings plan
• Fund tax free investment account
3. Check insurance quotes for home and auto to confirm that I'm still getting different rates
4. Make list of all the receipts and documents I need to have in preparation for tax season.
5. Set passive income target. Not sure why this is number 5 but I also set a mental target for extra cash I want to see coming in from deals, discounts, interest, dividends, bonuses (when I had a job), tax refund and side hustle. 
6. Decide on my spending mantra for the year. This is a personal little habit I have. My mantra is usually based on just looking around at the world around me and deciding how I should respond with my financial resources. Last year, my mantra was "Hoard cash and stay close to home". This year, it's "Stewardship"

Dear reader, have you started working on your January Money Checklist? Begin with the end in mind!

Happy New Year

xoxo

10 Steps to Choosing a New Home

 8 years ago when we bought our townhome, I can say without any bashfulness that we were totally clueless about what went into buying and owning a home in Canada. We looked at over 30 homes in 3 neighbourhoods, had a very tense offer go bad last minute and faced with nowhere to live, decided to rent with the only landlord that would sign a lease on the last Friday of the month without a background check and let us move in the next week. We ended up liking the neighbourhood so much that 6 months later when our lease expired, we decided to buy a townhome that had come up for sale in the complex. Eight years and one additional kid later, we were ready to move on to the "grownup" home. Earlier this month, we closed out on that home and now I can share the steps that got us here.

1. City/Area: First step was to determine which part of the city we wanted to live in. Calgary is divided into quadrants and each quadrant has it's own quirks and personalities. We started out living in the South-West quadrant and decided we wanted to remain here. 
2. Neighbouhood: Next up was to narrow down on which neighbourhood in Calgary Southwest would work best for us as a family. Here's where school choice, proximity to office, road network access, parks and recreational facility access played a role. Since I wanted a home that we could live in for the next 20 years, I had to consider high school choices and locations even though my kids are still in elementary school. 
3. Living Space Size: Depending on which opinion you read, the square footage requirement for a family home can vary from 100 - 700 sq.ft per person. Our current home is 2100 sq.ft of living space and just a tad too small. I settled on needing 500 sq.ft per person which equated to at least 2500 sq.ft of living space for our family of 5. The home we eventually bought is ~2700 sq.ft so bang on. 
• Living space = Above grade area + finished basement space. 
4. Building Type and Style: There are several options available for building type and style but not all options are available in all neighbourhoods. Building type to consider - with their accompanying pros and cons - include detached, semi-detached, attached, duplex, triplex, multi-family, high-rise, low-rise, mobile home etc. It's good to be fairly flexible with this because the next few steps can affect your available choices. We wanted a single family detached home. 
5. Downpayment available: Here we took stock of how much downpayment we could afford for a home. This is any combination of money that's available to be locked down into this home purchase. Downpayment can come from equity in current home, savings, liquidation of other assets and cash gifts from friends and family. 
6. Loan amount accessible: This is the step where we find out how much the banks were willing to loan us as mortgage. You can either consult the in-house mortgage specialist in your everyday bank or reach out to a mortgage broker. Either way, the loan amount number is a critical one to have on hand along with what the interest rate and estimated monthly payments will be. 
7. How much home can we buy? The very simple calculation for this is below:
• Downpayment + Home loan amount = how much home we can buy
8. How much home can we afford? Ah ha! This is different from step 7. Just because you can buy it doesn't mean you can afford it! How much home you can afford is simply another way of saying how much of your monthly/annual expenses can be spent on housing. One prolific rule of thumb in personal finance circles is to spend 30% of your income on housing. I'm not a fan of generic rules of thumb. I prefer to work with actual numbers using the calculation below. Mandatory expenses is things like insurance, utilities and loan repayments. Chosen optional expenses are things like private school tuition for kids, travel, entertainment etc. Basically the things you'd like to have so as not to be house poor. 
• Income - Mandatory expenses - chosen optional expenses - savings = Housing expenses
• Housing expenses = Mortgage + property tax + home insurance + maintenance + HOA fees
9. Bring it all together: This is where you work backwards from step 8 to step 1 to determine what works BEST for your family right now. In other words, use your desire housing expenses to determine how much mortgage you can afford (this could be different from what the bank tells you). Then knowing how much mortgage you can afford, add that to your available downpayment amount to know how the maximum amount you can spend on buying your new home. Does that amount buy you the house style you want in the right size and the desired neighbourhood? If yes, congratulations and proceed to step 10. If no, decide which of the items in steps 1-5 you'll need to change on to get the home you want and which ones you're inflexible with. 
10. Armed with all this knowledge of exactly what you want and can afford, go ahead and call a realtor and let them know the specs for your new home search.

Having all the information in the above really helped us with our new home search. Our criteria was so well-defined that we could tell when what we wanted exactly became available. We looked at 3 homes, made offers for 2 and bought 1. 

Home Closing Costs In Alberta

 It easy to think of the down payment as the only cash outlay involved in a home transaction. It's easy and it's also wrong. There are quite a few more costs that take a bite out of the cash pie. As I'm currently in the home buying process, I wanted to share some of the closing costs that can be expected. Some of this costs vary province-by-province or even across cities so even though these are my costs, your mileage may vary.

Buyer's Closing Costs in Alberta

Property tax: If seller has prepaid property taxes for they full year, you may have to refund them a portion equivalent to taxes for the rest of the year. 

Home Insurance: Your lawyers will want to see proof of home insurance before closing out the sale. If you've prepaid a full year's insurance for your old house, you could get a refund from the insurance company to offset this new insurance cost. 

Legal fee: The lawyer will charge a purchase fee as well as the regulatory fees for title search, title registration, registration of mortgage and registeration of transfer of land. Depending on the law firm, legal fees can be anything from $1000 to $3500. 

Contingency fee: The lawyer may request a contingency fee for unplanned costs that will be billed to you. If this ends up not being used, it will be refunded. 

Equity Crowdfunding 101

One of those weekends when I decided to troll the internet for money knowledge (because that's my idea of fun), I came across the concept of Equity Crowdfunding and was intrigued. Sounds like a good idea to add to the high-risk section of my portfolio. Some more digging and I learnt a few more facts that I'd like to share

NO CANADIANS PLEASE!

There are a few big, well-established names like EquityZen, SeedInvest and Crowdcube. Guess what they have in common? No Canadian residents can purchase investments on their website due to our regulatory requirements. Bummer! EquityZen does give access to shares of some of the big tech companies that are not yet publicly traded.

What is equity crowdfunding in Canada? Read here. It's geared toward Ontario but applicable Canada-wide.

List of portals: This archived version is a good starting point though some of the portals are already consigned to the internet graveyard. Here you can find a list of registered portals in Quebec

Time to pause this post for a quick disclaimer: This is not investment advice. Equity crowdfunding comes with a higher risk for investors and is best reserved for experienced and/or accredited investors. A lot of homework needs to be done before diving into this. 

Ok, disclaimer's in place.

What equity crowdfunding opportunities are available in Canada? I see two worth considering: vested and frontfundr.

A casual perusal of their current offerings tells me there's nothing I'd invest in right now.

What's my future strategy? There's a certain percentage of my portfolio (5% in total) that I keep for weird/higher risk investment ideas. This is where things like gold and cryptocurrencies are allocated funds from. I intend to watch the 2 Canadian websites closely and see if there's any company that'll serve as my first foray into the world of equity crowdfunding.

Do you have a portfolio allocation for high risk plays?

Condo Fees Breakdown

Buying a condominium townhouse was the best decision for our family as immigrant, first-time homeowners. I stress the "immigrant" part because home structures and maintenance look very different in Nigeria than they do in Canada. We didn't know the what stucco was, had never lived in a place where it snowed regularly, didn't even know what proper winter jackets were before we moved to Canada from Houston. Living in a condo where the external and structural maintenance was the responsibility of the condo board gave us a chance to learn about home ownership in Canada at our own pace.

It's been 8 years of living in our townhouse and we've learnt a lot! We're now fairly confident that we can manage a single family detached home and are currently house hunting. One of the reasons why we want to move is that while condo living is low-maintenance, that carefree living comes at a price. For us, that price is in monthly condo fees.

Our monthly condo fees are $702 and breakdown as follows:

It's easy to look at the above breakdown and figure out which expenses would be off the table if we were not living in a condo. If you're thinking of owning a condo, these are some of the costs you can expect to see in your condo fees.

PS: Owning a unit in a building with an elevator has a significant impact on costs
PPS: This cost breakdown does not consider special assessments which can come up. For transparency sake, I can share that we've had 2 special assessments in the last 8 years. 

Owning a condo may be carefree, but it comes at a price. It's the price we chose to pay but are ready to move away from.