Adina’s New Year’s Resolutions

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“New Year’s Resolutions” is a post by Adina J, in which she outlines her financial goals for 2013.

New Year's resolutions

I don’t believe in making New Year’s resolutions. If there is something I know I need to accomplish, I just start working on it rather than waiting for that magical “tomorrow” that never comes. And if it’s something I should probably do but really don’t want to, I try to be honest with myself and not even pretend that it’s going to get done. As a result, I don’t really get the point of New Year’s resolutions, or why some arbitrary date in the calendar serves as any kind of motivation for people.

“But Adina,” you will say, “this post is titled ‘New Year Resolutions – aren’t you being a hypocrite?” Well, technically, yes. I needed a catchy title. But, at the same time, no. These are the (financial) goals I need to accomplish in 2013, and at least two of them are tied, in one way or another, to the calendar.

Negotiate a Raise

My annual performance review and salary negotiation takes place at the beginning of the year, usually in January or February. For obvious reasons, I won’t get into a lot of detail about it, but I will say that I am planning to be a lot more bold about my “ask” than in past years. Naturally, I will be going in prepared. Sure, being confident enough to ask for what you want is a big part of a successful negotiation. But it’s equally (if not more) important to come prepared to justify why your employer should give you what you want. You could be the most talented, dedicated, productive employee in the history of the company, but if your proposal doesn’t make financial sense to your employer, you’re not likely to make any headway. And it goes without saying that you must come to the negotiating table with a good bargaining position. If last year you were not a particularly talented, dedicated, or productive employee, it may be too late for that part now; in that case, be prepared to justify your proposal even more.

It would be poor poker form to tip my hand as to the nitty gritty of my negotiation, but I promise to reflect on my strategy later. Stay tuned!

Open a Spousal RRSP

Based on current numbers, I earn about 60% more than my husband does. In absolute dollar terms, this is not an insignificant amount. In the last 6 months, we have been contributing an equal amount to our respective RRSPs ($1,000/month each), and plan to continue doing so in the future. Last year, this also made sense because my husband had some secondary income to off-set come tax time. But, going-forward, we would benefit much more if I were able to claim more of the tax deductions associated with our RRSP contributions. Enter the spousal RRSP.

I have only heard this retirement vehicle discussed in the context of single-income families, but as far as I can tell, there is no reason why we couldn’t also use it to our advantage. I have a fair bit of contribution room left over every year, because I’ve never been able to max out my RRSP in addition to all of our other savings goals (TFSAs, mortgage, short- and medium–term savings). It’s time to put that contribution room to some use. I will likely have to wait until I get my tax return documents in early spring, so I can figure out exactly how much contribution room I have, and how to best split up our monthly RRSP contributions. I will let you know if I run into any snags.

Increase Our Net Worth

This is a perennial goal, but I am adding it to the “official” list for the sake of accountability come next December. Given my income goal (see above), I was tempted to be bold in this category and aim for something like 30%. Then I crunched the numbers and realized just how much a 30% increase would mean in dollar terms, and reconsidered. As in all things, I operate on the “under-promise and over-deliver” basis when it comes to my financial affairs. So my official goal is 20% – an improvement over last year, but still realistic.

Cancel My High-Fee VISA

This goal is just a bit of house-keeping from last year. I finally saw the light, and got a MNBA Smartcash MasterCard — right before they dropped the cashback rate and thresholds brutally. And I got it too early to enjoy the $100 gift certificate deal from RateSupermarket. Sigh. On the plus side, I can now part ways with my $120/year Avion VISA, on which the points accumulate at a glacial pace. (To be fair, I’m still not in the habit of putting a ton of my purchases on credit cards unless I’m buying something online.) After getting the MasterCard, I stopped using the VISA and switched all my automatic bill payments. I’ve waited a while, first so that the balance would clear and then to make sure that all bill payments had been properly switched. I didn’t want any surprises later. After that, I called VISA to redeem all my points, and got $400 in gift cards — an awful “return” for about 3 years’ worth of purchases (somewhere in the region of $30K in total), especially after factoring in that massive annual fee. Once I had the gift cards in hand, I was ready to finally cancel the card … and promptly got caught up in the Christmas whirlwind. Between all the family get-togethers, blogger meet-ups (YOLO!), and a ferocious cold, this dropped off the list of priorities. Well, now it’s first on my to-do list for this week.

I am debating getting a secondary credit card in addition to my MasterCard, and throwing this out there for your suggestions: what are my best no-cost (or low-cost) options? (Editor Joe’s Note: while my #1 recommendation is the Scotia Momentum Visa Infinite, this card has a fee, and most of the great no-fee cards are MasterCards. I assume you want a Visa as a secondary card, in case a merchant doesn’t take MC, so I’m kind of at a loss for a recommendation.)

Shop for Clothes Only Second-Hand

While this is, technically, not a financial goal per se, it’s one that could have a measurable impact on my finances. Last year, most of my clothing purchases were second-hand, and the results were impressive: I spent around $2,000 less than the previous year. (To put things in perspective, I spent around $1,700 on clothing in 2012.) I was still able to replenish my wardrobe nicely, post-maternity leave, and not feel like a total bum around my well-heeled colleagues. In fact, the most compliments I received on a single garment were for a $17 dress I bought at Value Village.

New Year's resolutions
Entire outfit cost: $40

So, for 2013, I am going to go one step further, and shop exclusively second-hand. Well, with one exception: accessories (including underwear, pantyhose, etc.). Given that I tend to spend the most money on accessories (hello, handbags!), this may seem like a cop-out. As a compromise, I have decided to only make essential accessory purchases and to cap my spending in this category at $40 per item. If all goes according to plan, my “fun money” account should finally start to see some accumulation this year. Is it too early to start planning how to spend it? Just kidding.

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11 Comments… Share your views

  1. Good luck with your salary negotiations. Last year I reached the maximum salary threshold for my pay grade, meaning I’ll only receive cost of living adjustments (2% ish) going forward. My raise should have been 6%, and I let it slide last year, but I’m going to press the issue and request that I get bumped up to the next pay grade level.

    Regarding the credit card, it’s tough to make a recommendation without knowing how much you spend, and in which categories you spend the most (probably hand bags).

    Check out this site (http://canipayless.com/) which compares all the credit cards and gives you the best one (or two, or three) for your needs.

    I just got the Capital One Aspire Cash card, which will replace the Smart Cash card (it took a month to get the damn card). Next up is the Scotia Momentum Visa Infinite, which I’ll use as my primary card. My wife says I have too many credit cards.

  2. Thanks, Robb! LULZ on the handbag comment (and touche!). I have been making an effort to remember to put all groceries and gas purchases on my Smart Cash VISA (and already got a cheque, 2 months in!), and those represent the majority of our monthly purchases, bill payments aside.

    Is the Capital One card free, or is there an annual fee? I was looking into the Scotia VISA, but I think it has an annual fee as well so I nixed it. Right now, I’m pretty happy with the Smart Cash card, and my free “throw-away” VISA I use for online purchases, but I am always on the look out for better deals, if there are any to be had.

    • The Cap One Aspire Cash card is free, and you get $100 bonus on your first purchase. You basically get 1.5% cash back on all spending, so use Smart Cash for groceries and gas and then use Cap One for everything else to maximize your rewards.

  3. I love the Chase Amazon.ca Visa. No fee, 1% cash back credited every time you hit $2000 (so $20 off your card balance), and no forex fee, it just uses the straight Visa spot rate at the time. Almost every other card in Canada charges you the spot rate +2.5%, so with the 1% cash back, you save 3.5% on foreign purchases. If you vacation/work travel outside of Canada or shop online in US dollars, this is the #1 card in my opinion. And no fee. Oh and 2% cash back on wretched Amazon.ca purchases, which is sort of moot since Amazon.ca is the red-headed stepchild of the Amazon.com family…

    I’m up for another promotion next year (3rd promotion(!) in a year if I get it in May as I expect). I’ve been doing the job of CFO at my company but not being paid as much as the previous CFO (the position is vacant). I expect to be promoted to Vice President this year, which carries significant (taxable) benefits, but I will also be asking for a larger salary increase to bring me in line with the previous CFO’s salary (who was 25 years my senior, oh well). Any increase I will be putting 100% towards savings, no lifestyle inflation!

    • Solid plans, Adina. I definitely agree on the “underpromise, overdeliver” theory. And congrats Adam; you continue to make absolutely astonishing progress IRL.

    • That’s awesome, Adam! I am planning to do the same with any increase I get. As it is, I feel “squeezed” by our current savings rate – as in, there is little wiggle room for any monthly “extras” – so it would be nice to feel like I can continue to contribute as much (and hopefully more) to savings whilst still enjoying the occasional splurge.

  4. I would make sure you look into all of the ownership details regarding spousal RRSPs. I really can’t remember what it is at the moment, but the rights to them are a bit funny in the case of divorce (not saying that you will get divorced!), plus there are some different implications regarding withdrawals in short time periods after contributions. Basically, look into them well as they do operate a fair bit differently than regular RRSPs.

    • Good point on the divorce aspect, not that we plan on it. But in the interests of fairness, if the spousal RRSP is not subject to the usual rules of matrimonial property, versus a regular RRSP, that might be a consideration. I hadn’t really thought of that, so thank you for bringing it up.

      As for withdrawals, we don’t plan on making them any time soon, so it’s less of a concern.

    • OK, based on my 30 seconds of research, spousal RRSPs are treated the same as regular RRSPs in the event of divorce. Well, my source is the Globe and Mail, so take it for what it’s worth ;)

      “Investing in a spousal RRSP is a smart move for couples who want to split their income – and pay less combined tax – in retirement. If you break up before you get to that stage, however, the assets belong to the person whose name is on the plan, although the funds will be equally divided.

      Spousal RRSPs are especially useful when couples anticipate that they’ll generate unequal amounts of taxable income when they retire, for example from pensions, retirement savings or investments. They can also be used to build up both spouses’ RRSP accounts in equal proportion, where one person doesn’t work or earns less and therefore has less RRSP contribution room than the other.

      In a spousal RRSP, one spouse uses his or her own contribution room to pay into an RRSP account in the partner’s name. The person who makes the investment benefits from the tax deduction, while the partner in whose name the RRSP is registered owns the account.

      Upon divorce, spousal RRSPs are actually treated the same as the rest of the family’s assets. A couple’s RRSPs and RRIFs are evenly split and can be transferred tax free, so in most instances contributing to a spousal RRSP is no different from contributing to an RRSP in your own name.”

      • I haven’t investigated this enough to know for sure, but I’m under the impression that the spousal RRSP is a bit redundant now that you can split income 50/50 with your spouse in retirement.

        My wife stays home full time, so you’d think we would be the prime candidates for using a spousal RRSP. But since I can split my DBP and RRSP income with my wife (after 65), I don’t really see the advantages outside of some scheme to withdraw the funds three years after contributing.

        • You are probably right. It was premised more on the idea that we would each have an equally funded retirement pot in our own name – for the sake of marital fairness and good relations, LOL! – while recognizing that (a) one of us actually earns more; and (b) we don’t want to lose any potential tax deductions.

          Sorry, I hope that makes sense. To be honest, I may be over-estimating how important the whole “having your own name on the RRSP” business is to my husband. Perhaps, given the practical results in the event of retirement (or divorce), he won’t care as much and we’ll simply adjust our contributions so that I contribute more to mine to get the bigger tax deductions. Definitely worth another discussion.

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