This is a very serious discussion of debt today. I don’t care for cute cat pictures but this cat drowning in quick sand sums up how I am feeling about my debt situation today.
My net worth is approximately $190,000. That breaks down as follows : house $200,000
cash and investments $ 9,500
HELOC debt $ 20,000
House plus cash and investments minus debt equal a net worth of about $190,000. That may seem like a lot but I read a lot about personal finance and I am very, very, very much behind all the other 40 something savers and investors. I am also very, very much behind most of the 30 something savers and investors.
I rounded all the numbers because the dollars and cents are just not important to the totals. I am not worried about pennies I am worried about the thousands and thousands of dollars that my net worth is lagging behind.
The reason why? The gosh darn @%^**&^%$$ debt.
I am still looking at 2 years to eliminate my debt and I have a bad case of debt fatigue today. There must be a way to generate more income or cut more expenses or reduce the amount of interest owing on the debt.
No real answers to any of the big problems today. Just more questions.
P2P update
It does not appear that peer to peer lending (p2p) is available in Canada. Lots of states restrict it too. Too bad for me. I will have to find something else with a high potential for return to invest in. What else offers a high rate of return? Internet start ups? I don’t invest in things I don’t understand like internet start ups. What else is left for people who would like to see big reward for their money?
Loan sharking? That would be a form of p2p lending. I would have to hire a leg breaker and those guys don’t come cheap.
Booky? That is a form of gambling but the old saying is that the house doesn’t lose. I think that the house could lose and I could end up being visited by one of those leg breaker guys (see loan sharking).
Time machine inventor? Invent a time machine, go back to 1995 and buy Apple shares for $2.00 each then sell them in September 2012 for $667.00 each.
Where can everyday Joes and Janes see a good return on an investment that doesn’t involve criminal behaviour or bad science fiction?
If Cher could turn back time I wonder if she would make a different wardrobe choice?
https://www.youtube.com/watch?v=mEszTzdUMcY
No cats were harmed in the creation of the cat photo but I cannot guarantee that a variety of exotic and domestic animals weren’t permanently harmed, plucked or at least mentally scarred during the creation of the Cher video.
If I were you, I would pay down the debt on the HELOC before I started investing. The rates of return offered at the moment are pretty low. What is the interest rate on your HELOC? By paying off your HELOC you are effectively earning a return equal to the interest rate you would have paid.
I understand that it’s emotionally comforting to see savings grow (I really do!), but have you truly established that it makes fiscal sense for you to invest rather than pay down debt? Certainly you should have some emergency funds on hand, but I would consider “investing” in paying off your debt before investing elsewhere.
Once the debt is gone, have you considered something like the TD bank e-series index funds? Those will let you build a fairly simple diversified portfolio with low fee funds. Maybe take a look here for canadian information: http://canadiancouchpotato.com/model-portfolios/
Heloc interest rate is 3.75%. You are right that I should pay down the debt and that is my primary focus but I am doing some saving to the emergency fund and some investing. Maybe it isn’t the best idea but I am in a serious debt rut right now and seeing the balances grow makes me feel a little more positive plus it is fun. I also have to continue to contribute to my RRSP to minimize tax and maximize the tax return.
money=emotion. Guilty as charged.
While RRSP contributions make sense for a lot of people, they aren’t best for all people. You are only really “saving” taxes if you think you will be in a different (lower) tax bracket at retirement than you are now. And that’s not even addressing the fact that you are contributing money that you don’t really have. You are – in truth – borrowing from your HELOC to contribute to the RRSP, so any return you get on the RRSP you should decrease by 3.75% to cover the cost of servicing the loan to put the money there.
It’s hard to remove emotion when thinking about money. I know that I’m guilty of the same. However, I truly think that you should reexamine your priorities. I think it could be just as fun and motivating to see your debt shrink as it is to see your savings grow
I plan to put the tax return on the HELOC so hopefully that will help balance things out. There is still much more going against the debt than in to savings.
I make most of my decisions in life emotionally and that is not the best plan. I have not seen sunshine in two or three weeks and it tends to make you think too much about everything and whine a too much.
I think that putting some cash in the RRSP or the TFSA stock account gives me hope for the future and we all need extra hope in the middle of a dreary Canadian winter.
I can relate to debt fatigue. I haven’t been out of debt since I was 20, and that was 21 years ago. For years I numbed how I felt about my life, bad marriage, and horrible financial position in any way I could.
The last few years (since I got rid of bad marriage) I’ve been working on what I can. My income isn’t huge, and I currently have a negative net worth.
I track every penny I can, but have also come to understand I need to have some fun as well.
One thing I do, is that I will set smaller debt payment goals, and then treat myself to something (costing no more than 10% of the debt I just paid) to keep me motivated for the next goal.
My goal for 2013 is to bring my net worth up to $0.
Stop comparing your situation to what society says you should have. Everyone is different with different experiences. You might not have the full picture. I look at the PF bloggers who state what their net worth is, kudos to them for having their shit together at an early age. Talk to me after you go through 2 divorces and raise a child.
Do your best with what you have. You can do this. 2 years to be debt free including the house? That is a bright light at the end of the tunnel. do what is important to YOU, and never feel less than because you aren’t doing what everyone else thinks you should.
I am 48 and very late to saving for retirement. I think the whiney part of the blog was one of my regular pity parties where I wallow for a lttle while as everyone I know heads off on a winter get-a-way. It will blow over and I will remember to be grateful for all that I have – especially my health and the health of my children. I just wish it didn’t take so darn long and I really wanted to use a word other than darn in this sentence.
You are getting your own finances straightened out and so will I. Keep me posted on your net worth.
“That may seem like a lot but I read a lot about personal finance and I am very, very, very much behind all the other 40 something savers and investors. I am also very, very much behind most of the 30 something savers and investors.”
This is a thought I’ve often had, but its not smart to think this way. A lot of these blogger (MMM, BraveNewLife) are the cream of financial crop. Most people who struggle aren’t going to jump online and broadcast it to the world.
From what I see, I think you’re ahead of a lot of folks. My 40 year old boss makes US $150,000/year and you are in beter financial shape.
So, chin up and keep at it!
The pity party that I was having when I wrote that is over. I am back on the work hard, work smart and get ahead faster bandwagon today.
I’m behind too Jane!
Glad to see you’re feeling much more positive right now.
It is amazing what seeing some sunshine after 3 weeks without it will do for you.
Today we have a snow warning in effect and we are excpecting 15cm to 20cm but I am happy because I have today off. Going to find more yard sale stuff to sell at the yard sale.
“Where can everyday Joes and Janes see a good return on an investment that doesn’t involve criminal behaviour or bad science fiction?”
Hahaha – so true (yet sad). I wish I had the answer!
I will keep plugging away because I am not sure there is an answer.