Focus on February

Even with the second bonus from work now sitting safely in my chequing account, the Excel spreadsheet I use to plan and track expenses running through this account just gobbled it up. All of it will disappear in February, with none leftover for the line of credit.

Of this I am nearly certain, the in-house supply of wine and coffee can be rationed to last the month. I share both freely with the daycare provider. I have tamed this expense considerably since I started buying both items in larger quantities a few months ago, with fewer impulse trips to both stores and much less wine consumed when I go out.

SAQ Depot in Hull further discounts wine by 15% with every twelve bottles purchased. Bridgehead gives me a free pound of coffee based on the number of stamps I accrue on their customer loyalty card.

The following self-imposed restrictions from January must carry over:

• 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

In the foot care camp, I've recently acquired a bottle of fairly glamourous nail polish for $2 (marked down from $12) and a foot file for $3. Paying closer attention to my feet takes time I often don't have, but I will try and find a few minutes every day. The vaseline and socks trick at night works wonders too. A proper pedicure can wait until spring, hopefully.

Cosmo magazine says that big bangs are back big. I've boldly trimmed them up again.

Keeping away from the iTunes store is harder. I might pick up a fixed-amount iTunes gift card for myself to budget and restrict my purchases that way.

Thankfully, February will be a short month. It always is.

Taming the tiger

This post is a credit card update. I pay the card off monthly, so there is never an interest payment to Visa. The amounts shown per month are the actual amounts I charged to the card per month, and do not reflect any back-debt or accrued interest due because there is none. To pay it off in full every month, I have sometimes borrowed from my line of credit.

I started this blog in November. It helps!

The amounts paid are associated with a payment date 15 days following the statement. For example, the February amount is the amount I will pay on Feb. 15 to clear the Jan. 27 statement.

Dumb and dumber

Inspired by the flurry of annual statements I'd received recently, I called FirstLine to request an annual mortgage statement. It's on its way to me now, by regular mail. The customer service agent who helped me with my request noticed that my five-year fixed-rate mortgage is up for renewal this year. She pointed out that the interest rate was a little higher than current rates, and asked if I would like to speak to someone about switching it.

In her opinion, I would certainly stand to save money. I asked about the penalty, and I mentioned that my last mortgage had a three-month interest penalty associated with such a change-up. She did not answer the question.

Instead she patched me through to someone who could answer it for me, and set things up. I spoke with him for about two minutes. When I asked him about the penalty, he paused before saying... thirty three ... thirty three ... ... eighty five. That's four months interest!

I ran the numbers on how much the interest drop might actually save me. It would lower the monthly payments by approximately $50 per month, over a new five-year term. I fail to see how increasing the debt by $3333.85 would save me any money. That's because it would not, unless something truly horrifying happens with interest rates in the next 11 months.

Approximately $50 per month X 12 months per year X 5 years = Approximately $3000.

Unless I've overlooked something, I just don't get it. There are a lot of mortgage choices out there. It seems to me that if I choose to continue doing business with FirstLine for an additional five years, there should be some sort of return consideration, like waiving the fee, not penalizing the customer. I wonder if they have a customer retention department.

One thing that strikes me as particularly weird here: they approached me about breaking our contract, not vice versa. I did not approach them. Who really stands to benefit?

Most closed fixed-rate mortgages have a prepayment penalty that is the higher of three-months interest or the interest rate differential (IRD).

December 31, 2010 closing balance: 
$160 960.17

Maturity date:
January 1, 2012

I did not see that coming

I experienced my first eTrade this morning. While I was sleeping, they sold 56 of my restricted Intel shares, leaving me with 78. When I called for an explanation, I was told that it's an automatic transaction scheduled on my behalf to cover taxes.

I was surprised to learn that they were being collected on behalf of my employer. That's not the right amount for a capital gains tax, and I don't think I've realized the capital gain yet.

Will I be taxed again when I sell them?

When I did the math on the potential capital gain for the grant, it came in around 25 shares... leaving me to wonder, how is it really taxed, and how much of this money will actually be mine to keep?

Further research reveals that it's called withholding. It's required by the Canadian Income Tax Act. The 2010 federal budget changed employer withholding requirements on stock option benefits to shift the tax collection risk to the employer, effective January 1, 2011.

Update, January 31:
"This order was initiated by your employer based on your restricted stock tax payment election. You can review your elections any time by logging into etrade.com. At the top of the page, just below the main tabs, click Plan Elections."

RRSP roundup

Just getting caught up on my mail.

The residual funds from my aforementioned dot-com glory days are managed by Assante. The new statement indicates a total portfolio value of $60 472.17 as of December 31, 2010.

There's a statement here from Sun Life Financial as well. I've been setting this money aside since my return to full-time employment in October 2009. The RRSP itself is currently valued at $17 913.41, funded by employee contributions. The unvested DPSP sits at $3 041.01, and is funded by employer contributions. The DPSP vesting date is November 17, 2011; it's not mine yet.

These are before-tax dollars.

In between sits a seven-year self-employment gap in which I made no contributions at all.

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.