Risky business

I woke up to another surprise from eTrade this morning. In addition to the 128 shares of restricted stock options they've been teasing me with for the past few weeks, I also now have 383 shares of regular stock options vested. Both batches vested this morning.

Regular stock options are issued with a strike price. The strike price is somewhat tethered to the price the shares were trading at the day you joined the company. In my observation, they operate on the principle that your contribution to the company over time can help increase its value. Vesting schedules are laid out in a job offer to encourage retention.

Once options have vested, you can sell them at nearly any time (before you leave the company) and profit on the difference. It's taxed as a capital gain. If they do not increase in value, you simply do not exercise them and walk away from them without realizing a loss. There is also a small fee associated with exercising them.

In 1997, I was issued a significant number of regular stock options in a relatively obscure tech company. They vested three years later, nearing the height of the Nasdaq and dot-com madness. My strategy was simply this one: it's essentially free money, exercise as they vest, sell immediately. I realized a capital gain of approximately $250 000.

My former colleagues who held a similar number of options to their peak made $1 000 000. My former colleagues who held past the peak made $0. It's a best guess, gut feel, risk threshold, comfort level kind of decision you usually don't get to make twice.

This time I have vested shares in Intel, and right now they are trading pretty close to the strike price. I'll let them sit for now. I'm not ready to sell the restricted stock options either.

I looked up the strike price: $20.30

Is it just me?

I have absolutely no idea how much in total is owing on two of my main assets:
my house and my car. I've not seen a recent annual statement for the mortgage, nor am I set up to monitor its progress online. I've just confirmed the service is available.

While there is equity in this house, the amount is not clear. I paid my last house off in its entirety, over a 10-year period. That turned out to be a costly decision, and I do not aspire to do such a thing again in my lifetime. This one is financed over a 35-year period at a rate of 4.9%, and the $845 monthly payments are mostly interest-only. To date they have been lower than rental payments would be, and the house has significantly appreciated in value.

The car loan scares me a little. In addition to the outstanding loan amount of approx. $10K, I recall it was financed in a accordance with a lease-style arrangement to keep the monthly payments low with a shocking interest rate of .8% (less than 1%, really not a typo). The final monthly payment for the vehicle is followed by a lump sum; I don't how the amount is determined. Will it exceed the car's book value? It still runs well, and for that I am grateful. I've kept the mileage low, installed a trailer hitch for our bike rack, and invested in a second set of (winter) tires on rims for it. The current value is hovering close enough to $10K.

I know precisely how much is left on the adoption loan ($7250), and the rate at which I have been clearing it. National Bank sends me an annual statement. The interest rate is much lower than I thought it was, hovering variably between 3% and 3.75% in 2010.

Light bulb moment:
Realizing why the credit line torments me. Mortgage excluded, it may be my primary debt. There is something wrong with this picture. It's supposed to be for unforeseen expenses.

One trap today

Family dinner.

Today is Friday. It's the day my eldest child returns to our household after a week with her father. She splits her time between two homes. She does not like change. In her absence, my youngest child asserts the role of Only Child. It's one they both reluctantly give up.

I collect them from two different locations before Friday dinner, and more often than not, they bicker all the way home. In the evening, it can escalate to whacking, biting, and sometimes includes spitting. It's a scene playing out across town; I have no doubt.

My best strategy to pre-empt it is a sit-down family dinner. Sometimes we go out. The temptation can be very strong, but it adds up quickly. I'm planning something different tonight. Although we're generally a meatless household, I will bake another small black forest ham. It's the same kind we had for Christmas, and they know it's a treat.

I enlisted their help in the meal prep, and it worked. No whacking. No biting. No kidding.

Traps for today

Here we go:

• Buying surplus donuts for this morning's office warming social. One dozen will be enough for seven people, plus I picked up a half-price vegetable tray at Metro last night. It has not expired yet, they look fresh to me, and I saved $5.
• Hospital pay parking lot. I will choose sensible footwear to reduce temptation.
• Networking dinner, which may involve multiple courses, wine, and simple-math bill splitting. I will indulge a little, enjoy the company of my colleagues, and lead by example on pushing back the dessert menu, firmly and swiftly.
• Overpaying the babysitter, which of course I will do!

In the plus column is the stop downtown I'll likely make on the way home from dinner.

Much ado about nearly nothing

Tax Free Savings Accounts (TFSAs) appeared on the Canadian financial landscape in January 2009. There was a bit of fuss on my Facebook feed on this theme in late December 2009. The consensus was that if you did not open an account somewhere and make a first contribution in 2009, then you would lose the option of carrying forward any unused portion of the $5000 contribution limit to 2010. One year later, it still sounds like urban folklore to me but then again, it might be true.

My account is set up through ING direct, and they mail me paper statements quarterly. It pays interest at a rate of 2%. I have a small monthly amount deducted directly from my chequing account at RBC. My TFSA closing balance one year later is $322.06. I should eventually check out the facts, and I probably will. I do not yet need to know.

Interest paid this quarter? $1.03

Update, January 23:
Just opened a great letter from ING Direct in which they clearly lay out basic facts:

• Deposit up to $5000 a year and carry forward any unused portion. With TFSAs now in their third year, that's a total deposit limit of $15 000.
• You can withdraw money from the TFSA at any time without paying tax, but you must wait until the next calendar year to redeposit that amount.
• Any money you withdraw can be deposited again the following year, in addition to the annual $5000 limit.

Money for nothing (and trips for free)

In recent years I have accumulated approximately 170 000 Aeroplan miles, through a combination of adoption-related travel, work-related travel, and a Visa points program. I was completely off the points card for a few years, but when you know you have to travel, there are definite advantages (such as travel insurance) to the card. The card has an annual fee.

I routinely retreat to these points in fantasy. My current thinking is that they will get me, my kids, and my father up to the Yukon for a week in 2011. It will take some advance planning to book that trip, the kind that is not necessarily compatible with the custody arrangement for my eldest. I digress. That's not a financial problem, and has no place on this blog.

All of my grocery shopping expenses route through Visa. I am a careful shopper, and my thinking is that we might as well get points for things we need to buy.

Costco will sell me groceries, but won't take my Visa. For reasons I still don't understand, I renewed my club membership twice last year. I don't shop there any more; I don't trust their memory. I learned from my experience of a first phantom renewal to demand a receipt upon the second renewal in April. While I can use it to challenge their claim that it is again expiring, I've decided not to renew. I might if the membership had tangible benefits to me. I question how much the renewed membership actually saved me. The answer is none.

Update, January 19:
169,639 points

List of banned expenses for the rest of January

It's an experimental post. Writing it down helps. The aim is reducing my next Visa bill.

For the next two weeks, I will not spend money on any of the following goods or services:

• electronics, including anything sold through the iTunes store
• services related to hair and foot care
• sporting goods and events
• clothing and shoes
• out-of-town travel/vacation (no advance bookings for hotels or camp sites)
• parking

Seemingly random, this list is compiled from a detailed analysis of how I actually spent money in 2010. Temporary cutbacks in these specific areas can make a difference.

Update: January 18. (One day later.)
I just registered for a 10K run in May at a cost of $50. On the plus side, my new glasses were $85 cheaper than I expected them to be. I'll be good tomorrow. Maybe.

Update: January 28.
Visa statement date is today, with a balance of 2054.87 owing. This is progress.