Tuesday, February 28, 2006

Book Review - The Investment Zoo by Stephen Jarislowsky

The fact that there are so few investment books written with a Canadian focus of the caliber of The Investment Zoo is in no small part a fair reflection of the fact that there are correspondingly few Canadian investor-authors that compare not only to Jarislowsky’s financial success but also his emphasis on corporate ethics, shareholder interest and responsible philanthropy. Sadly, I have found that there are, of late, few investment books that are, in themselves, investments, and I was quite pleased to count this book among the exceptions. Not only was his investment advice valuable, but the experience he conveyed through numerous real-life examples - entirely without ego – also made for a very enlightening read. With 50+ years working as an analyst, advisor and investor, there are few ‘insiders’ as ‘inside’ as the author in question, who paces the work in a very engaging style. Arguably, some of the earlier sections, covering his background and political views could have been trimmed, though again, these passages speak as much to the author’s outlook as do his financial successes.

As much as Jarislowsky’s charisma shines through the work, its value as a practical investment guide cannot be overstated. He advocates purchasing large (if not global) industry leading companies in stable, non-cyclical industries and prefers those that pay rising dividends, and provides numerous examples of such companies (as well as those he suggests one avoid) There were many passages I bookmarked as particularly noteworthy, and hope to revisit them often and with reflection. Here’s a sample:
The beauty of the high-quality, worldwide, non-cyclical approach is that it gives a good reward while being low-risk, simple, non-commission intensive, and exposed to few surprises…. It adapts well to a do-it-yourself approach because there is no need for constant, high-quality security analysis to support it.
Others have also commented on this book. If interested in more than one view, please have a look at:

Thomas Connelly’s Review
Canadian Capitalist’s Review

Saturday, February 25, 2006

Canada Post, My New (Old) Friend

I'm at a point quite reminiscent of childhood, where I'm rushing (if only mentally) to the mailbox everyday on the way home from work, eagerly turning the key, and peering inside the dark metal bin (we are using a super box) . After years of mail = bills or junk, and a shift to more electronic communication, once again I find myself much more interested in(snail) mail than I have been for some time.

Right now I'm waiting for:
  • One more year-end tax form;
  • A transfer form ("Assignment & Irrevocable Power of Attorney - Securities") for a single share of TransCanada Corp. (TSX:TRP) so I can start taking advantage of their Dividend Reinvestment Plan;
  • A certificate number for BCE after having mailing in my transfer form a couple weeks ago,
  • My PC Financial MasterCard;
  • My first set of PC Financial cheques; and,
  • My first copy of MoneySense magazine, having ordered a subscription by redeeming Air Miles.

More on Electricity and Gas

The Toronto Star reported that consumer gas rates are indeed, likely to fall this spring, according to Enbridge. While great news for the vast majority of consumers, those that signed fixed-price contracts under 'the sky is falling' pretences (um, myself included) will, at least for a while, have to pay more as the promise of higher rates and a mathematical savings remains elusive, at least for the first half of the calendar year.

On the other hand, electricity rates are likely to rise at about the same time. The Ontario Energy Board writes:
In the spring of 2006, and every six months after that, the prices you pay for your electricity may change based on an updated OEB forecast and any difference between the amount consumers paid for electricity and the amount paid to generators.
With locked in gas rates and a electricity increase nearly certain, I'm just glad the winter will be over when the double-whammy kicks in.

Wednesday, February 22, 2006

Buying Electricity

I was visited by a salesperson from Universal Power yesterday looking to have me sign a long-term (5-year) agreement for fixed price electricity. I'm not terribly impressed by the scare-tactic approach, widely used in selling electricity and natural gas (ok, so it worked on me when I bought my gas plan ...). I realize our electricity rates are artificially regulated in Ontario, but I'm really reluctant to jump into a contract. As Canadian Capitalist pointed out in a previous post, if natural gas rates, fall, for example, in April, my fixed price natural gas contract will put me above market. Ouch.

As a relatively new homeowner, the options for buying electricity aren't something I'm familiar with. I pulled the following from the Ontario Energy Board website:
While electricity will always be delivered to you by the utility, you have the option of buying the electricity you use in one of three ways.
  • One way is through the Regulated Price Plan, in which you are charged a regulated price per kWh by your utility for the electricity that you consume. The price is set by the OEB, the independent regulator of Ontario’s energy sector, and remains stable for a certain period of time. As of May 1, 2006, the price may change up to every six months since the price is estimated by the OEB based on a forecast and it may not reflect what has been paid to generators. The difference is incorporated into future Regulated Price Plan prices set by the OEB.

  • Another way is through an electricity retailer, in which you pay the price per kWh as agreed upon by you and the retailer in the contract you sign. The price you pay is usually guaranteed for a number of years.

  • A third way – only available for a limited number of consumers who have an interval meter – is through spot market pricing, in which you pay actual wholesale market prices for electricity. These prices are volatile, fluctuating up and down by hour, day and season.
Has anyone had any experience working with an electricity retailer? If so, please let me know your thoughts.

Tuesday, February 21, 2006

A Frugal Focus Saving Event - Bank Fees

As a logical conclusion to my review of banking options, I followed through on my assessment and opened a new President's Choice Financial account for my everyday banking. I do want to thank everyone that provided feedback on this - I'm glad it was pointed out, for example, that CIBC really doesn't service PC Financial for in-bank services. As suggested, I will keep my existing TD Canada Trust saving account for those requirements.

While I don't like to needlessly apply for additional credit (i.e. as its just one more account to manage and has an adverse effect on my credit score), I also requested a PC Financial Mastercard. As I calculated, the benefit of PC points (redeemable for groceries) really only becomes material if I start to substitute some of my current debit usage with credit purchases. As always, this naturally requires balances be paid off monthly (if not daily, when they are made).

Total Annual Savings: Up to $155.40 in bank fees (12 X $12.95) and $213 in grocery rebates for a total net savings of up to $368.40!

What this means: About two winter month's worth of natural gas, or an entire 'back to school' shopping trip for my kids.

Not bad, considering this was still a relatively small change, and I still enjoy a similar level of overall benefit.

Festival of Frugality #11

This week's festival is hosted by Retire at 30 .

I particularly liked the post by Jim from Blueprint for Financial Prospectity featuring an actual cost analysis of compact florescent bulbs vs. standard incandescants. Perhaps a minor point, but the value for me was the effort spent to move beyond the anecdotal and measure a real-life savings.

Monday, February 20, 2006

Paid Online Surveys?

Yes, a little dodgy, I know, and perhaps only a few rungs of credibility above the myriad of 'make money at home' schemes that fill pop-ups ads and clog my spam-filter on a proverbial basis.

That being said, after travelling through few a few links from a post on MyMoneyBlog, I came across InternetPaidSurveys.com, something of an aggregator for market surveyors of all colors. (There is even a list just for Canadians). From the list of companies offering surveys, I did sign-up with Ipsos I-Say, a division of the reputable and well-known Ipsos-Reid. Their focus clearly was on consumer-type research, and they offer respondents more of "opportunities to win cash" as opposed to just "cash". We'll see ...

Many of the others began asking a lot about my employer and any decision-making responsibility I enjoyed at work over various types of product or service acquisitions. Not only was I uncomfortable with this type of disclosure, but they fact they were just generating contact leads for third parties was painfully undisguised. These were an obvious pass.

If I have any success at all with Ipsos I-Say (my expectations are quite low) I will update this topic.

Sunday, February 19, 2006

The Haircut - Saving and The Male Psyche

I've often mused that there are really only two types of hairstyles for men over the age of 30; the highschool haircut (meaning any style that that you or anyone you knew in high school ever enjoyed), or the 'I give up', also known as the 'I surrender'.

While the former is obvious, the latter is basically the ubiquitous, shortly cropped treatment for those in follicle recession. Sporting the 'I give up' is a signal that one has accepted the inevitable and has come to terms with their hair loss (and corresponding lack of hairstyle choice).

As a result, it is quite acceptable to joke with a guy about his hair(lessness) if he wears his 'I surrender' confidently. We never joke with a guy that still maintains a high school haircut despite the fact they should have given up years ago (think Michael Bolton circa mid-nineties). This would be damaging!

I've been able to cut my own 'I give up' for almost ten years now, using a standard Walmart-ish hair clipper set (these last about a year). Having become handy with the buzzers in university (I barbered for a few friends) I also cut my own boys hair now.

Estimating $12/haircut/month this also allows me to save about $432 annually in hair cut costs for me and my two young sons. Less the annual clipper set (~$40) and I'm still ahead about $390/year.

Friday, February 17, 2006

Starting to DRIP

There is, in the heart and mind of certain investors, a watershed moment when the DRIP concept crystallizes and becomes an unquestionable thing of beauty. More than just another investment method, DRIPs represent, for these investors, a grass-roots triumph of the small investor over the entire fee-charging and sometimes exploitive personal finance arena and an opportunity to mathematically 'beat the system' on a number of levels, following the spirit and tradition of successful investors and prolific authors like Robert Gibb, Norm Rothery, and Thomas Carroll, and incorporating practices well-espoused by the likes of Stephen Jarislowsky and others.

For those who have not embraced this approach, DRIPs smack of complexity and seem slow, awkward to manage and a potential paperwork and tax burden. Compared to other approaches there are few books written on the subject, few, if any, flashy success stories and they are, by definition, not widely promoted by the mainstream investment community.

In short, DRIP investing generates very polar types of emotional appeal. Most people I've spoken with identify clearly with one of the above descriptions, there seem to be few fence-sitters, and by far the majority, not unpredictably, appears to be in the latter camp.

For this reason its not surprising that Robert Gibb consistently greets newcomers to the forums he moderates on dripinvesting.org with a half-joking "welcome to the Cult!".

As I openly admit I have had my own 'DRIP epiphany' I wanted to offer something of a rolling FAQ that not only outlines the basic how-to's I'm learning first hand, but also dispels some myths and outlines resources that I have found to be very beneficial.

So, as I mail in my first share transfer form this morning - I am now the proud owner of 1 (one) share of BCE - this seems like a good time to start.

1. What is a DRIP?
A DRIP, or dividend reinvestment plan allows shareholders of record (i.e. those in whose names shares are registered - usually excluding those who hold shares in the street name through a brokerage account) to have dividends automatically reinvested to buy additional shares, even to fractional amounts. Most also include an optional cash purchase (OCP) , allowing additional shares to be purchased at periodic intervals. In both cases, there are usually no fees whatsoever, even for the sale of shares held in the plan or the transfer of shares out of the plan.

2. Who manages the programs?
DRIPs are managed by transfer agents - third parties responsible to implement the plan as dictated by the plan terms set out by the sponsoring issuer. In Canada, the two big transfer agents are CIBC Mellon and Computershare.

3. How do I start investing with a DRIP?
First, have a look at the list of US and Canadian companies with DRIPs. For the companies that interest you, review the terms of the DRIP plan (usually on the company's web site) - minimum/maximum cash purchase amounts, discounts that may apply, number of shares needed to start, etc.

Then, get your first share.

4. How do I get my first share?
There are two ways to do this:

i. Buy a share through a discount broker and request it be transferred into your name.
While relatively quick, this will be costly as you will need to pay for both the purchase and the share transfer – sort of defeats the purpose.

ii. Arrange to buy one from an existing shareholder.
The ‘share exchange’ board at dripinvesting.org has a great community that has proven very willing to help newcomers start up. If anyone is looking to acquire a share I suggest you start there. Canadian Moneysaver also has a DRIP forum.

5. What do you do once you get your first share?
Contact the transfer agent to confirm requirements. In the case of BCE, I had to mail in the transfer form first, then mail in the DRIP enrollment.

Some resources:
DripInvesting.org (check out the articles and the discussion boards)
Canadian Issuers with DRIPs (and their plan specifications) via Computershare and CIBC Mellon

Wednesday, February 15, 2006

Frugal Focus Bank Shopping Part 4 - Online Tools

Almost there, honest.

As I mentioned before, I've come to rely heavily on online banking. TD Canada Trust has recently won a number of awards for their online banking solutions, so I fully expected theirs to be a tough act to follow.

As a very brief summary, both BMO and PC Financial offer 'online banking tours' that allow you to get a good feel for their services. I like the BMO user interface better than PC Financial and maybe even TD. As far as features go, both BMO and PC Financial have the core functionality one would expect - account summaries, account details, bill payments, transfers, export to accounting software, etc. I appreciate the ability with the BMO site to pay multiple bills through a single process (I always end up paying bills in batches).

From what I could tell, neither offered online cheque images, which will force me to start carefully logging cheques again, which arguably I never should have stopped. PC Financial also doesn't have epost integration for bill presentment, but I'm still getting a number of paper statements with TD anyway.

In summary, PC Financial appears to be the way to go - they have no fees, they will reduce my grocery bill by $33 - $213 annually, they have a decent online banking system, and when needed, offer in-bank services through CIBC. If things go well, I may also evaluate their insurance products for house and home.

The only question remains how to logistically manage the switch, and whether or not to keep my TD account, though shifting to a lower-fee plan.

Tuesday, February 14, 2006

Carnivals, Nest Eggs, etc.

I'm currently remote on a business trip but quickly wanted to highlight the Festival of Frugality #10 and the Carnival of Personal Finance being hosted by Boston Gal's Open Wallet and The Dividend Guy, respectively.

I also want to add Canadian Capitalist has continued the Nest Egg vs. Cash Flow investing discussion with a new post on his site. I'm personally finding this discussion very educational - keep the comments coming!

Monday, February 13, 2006

Natural Gas - The Good, The Bad and The Ugly

The good: I still recall being somewhat suspicious of all the gas providers that came knocking in the weeks after people began moving into our new subdivision. However, with the 30% rate hike that took effect in January, I sure am glad I signed up when I did with a 3-year fixed rate plan with Select Power. This took effect just as natural gas rates rose in January by 30% and while I'm saving only a fraction of a cent per cubic meter at present, I'll definately benefit as prices rise. (Gas rates have gone up 400% in Ontario since 1999.)

The Bad: As a new consumer client, Union Gas put me on an equalized billing plan (EBM), meaning that they fix the amount I pay monthly and then reconcile any balance outstanding after 11 months. Though I like the fact my gas bill is predictable and even throughout the year, I have a $175 balance accued in my favour. The EBM rate of $150/month seems to have been applied pretty arbitrarily at the time the account was setup as no one bothered to inquire about the size of my home, number of occupants, number of gas appliances etc.

The Ugly:
As promised, Union Gas reevaluated my equalized billing rate this month based on my usage, current weather, etc. and astoundingly, they lowered my monthly billing rate by one cent. Yes folks, my new equalized billing rate is $149.99 (!) and I still have $175 in my favour!

Sunday, February 12, 2006

Frugal Focus Bank Shopping Part 3 - Incentive Programs

So in looking at a new bank for my everyday needs, I wanted to figure out which offered the better incentive program - either PC Points (PC Financial) or Air Miles (Bank of Montreal). Grocery savings were the 'unit of measure' in comparing the point systems (frugal!). PC Points earn one grocery dollar per 1000 points, while a $20 Dominion gift certificate can be earned with 140 Air Miles.

(Geek alert warning- yellow) I actually built a calculator to help me figure it out, which, if anyone is interested, (geek alert warning- orange) is available for download below.

In general, if I do not change my debit and credit card usage behavior, Air Miles via BMO is a better offer, even factoring in the service fees with the BMO i.connect plan. However, once I begin to start using the related credit card (i.e. Mosaik Mastercard or PC Financial Mastercard) instead of my debit card for the same purchases I make today with a debit card, PC Financial is the winner by a landslide.

Here are the details:

Scenario 1: Points are estimated based on everyday banking activity and credit card transactions are not taken into consideration.
BMO - Air Miles: $80 savings on groceries annually
PC Financial - PC Points: $33 savings on groceries annually
Scenario 2: Points are estimated based on everyday banking activity and current annual credit card purchases, using either a 1point/$40 Mosaik MC (Air Miles) or the PC Financial MC (PC Points).
BMO - Air Miles: $80 savings on groceries annually
PC Financial - PC Points: $45 savings on groceries annually
Scenario 3: Assumes I will replace a percentage of current debit card usage with credit card usage in order to maximize points, in addition to my current average annual credit card spend.
BMO - Air Miles: $80 savings on groceries annually
PC Financial - PC Points: $213 savings on groceries annually
As I think scenario three is quite reasonable (if not simply the most intelligent), again, PC Financial looks like the leader. One more quick test (online banking facilities) and I think we can wrap this up!
Download - Incentive Points Calculator (28 Kb)

Friday, February 10, 2006

A Frugal Focus Letter To Parliament

This afternoon I happened across the weblog of Garth Turner, (my) Member of Parliament via a link in the Toronto Star. While I can appreciate the level of transparency and grassroots participation Mr. Turner is trying to offer his constituents, with respect to his very public criticism of some appointments to the new cabinet, we all know that, like any other job, sensitivity to 'company politics' can certainly help achieve one's aims (especially in, um, politics). Though I agree with Mr. Turner's position, pulling a CLM* on one's first day on the job doesn't bode well for his effectiveness in addressing the same constituency concerns he is earnestly soliciting.

That being said, I read with piqued interest some of the points of his proposed, private member's Middle Class Act, namely:
  • Single-income families where one spouse stays home with a child should be able to split income and drop to a lower tax bracket. Retired couples with one person on a pension and the other with little or no income should be able to do the same
  • Better encouragements for people to save for retirement, with RRSPs for stay-at-home spouses
  • A lifetime retirement savings plan in after-tax dollars.
  • The ability to deduct a portion of rising property taxes from family income, to stifle the impact of this tax on unrealized capital gains
  • A family tax return, treating families as economic units
(For our American friends reading this, private members bills rarely, if ever, succeed.)

As a response to the input he was soliciting, I sent Mr Turner the following letter this evening:
February 10, 2006

Dear Mr. Turner:

As one of your new constituents I wanted to express my support for the grassroots approach you are taking in ensuring better transparency in your representation of the Halton community. I found your weblog this afternoon via the Toronto Star and wanted to offer my input, for what its worth, to your Middle Class Act proposal.

Last year, income taxes and statutory deductions were my single highest expense, more so even than the costs I incurred to pay my mortgage and feed a family of four, combined. While I understand it would be contrary to your platform, I have to voice my support for the tax reduction and increase to federal personal amounts announced in the fiscal update of November 2005 by the former government. As an example, in order to enjoy the same relief of $379 this presently offers at source, I would have to spend $37,900 to enjoy a similar gain via the proposed 1% reduction in the GST. Where I do see the GST is clearly problematic is with regard to the double taxation on gasoline. An elimination of this punitive anomaly would certainly have my support.

That aside, I also appreciate a number of the suggestions you make in order to more fairly tax single wage earning families. To this end I can appreciate the $1200 child allowance, and your suggestion of better integration of multiple earners for treatment as a single family ‘economic unit’. As I’m also concerned about the affect of rising property assessments in the area, (particularly where the assessment process is opaque, confusing, and appeals are mired in bureaucracy) I would also support your proposal to allow a portion of property tax increases to be deducted.

I look forward to participating in the town-hall discussions you have planned. Again, thank you for providing the opportunity to voice my opinions.
Needless to say I am looking forward to his response.

* Career Limiting Move

Thursday, February 09, 2006

Cash Flow vs. Nest Egg Retirement Savings

Now that RSP season is in full swing, many publishers are providing special features and extra material geared towards investment strategy, retirement planning, and general good personal finance behavior. As pointed out by Canadian Capitalist, the Toronto Star is no exception. That being said, I read Ellen Roseman's article in today's edition (How Much Do You Need to Retire?) with that same mix of doubt I experience with every planning workbook or RRSP calculator (usually produced by companies that sell investment products) that focuses on determining the size of the nest egg needed to generate a targeted retirement lifestyle.

In most cases, the 'next step' after calculating the nest egg (while struggling to mask the fear and incredulity that accompanies this) , usually involves a selection of investment products or mutual funds with MERs > 2% from the workbook/calculator sponsor. I went through this same process when recently setting up my employer-matched RSP at work. No where in this literature do we see promoted low-cost index funds, DRIP programs, value dividend investing, etc. that offer a mathematical advantage to the small investor. As my favorite professor in school insisted we ask ourselves of all things (he was a wee cynical) I find myself wondering qui bono - who profits?

This is why I'm perhaps instinctively attracted to the (deceptively?) simple approach of placing a greater priority on passive income/cashflow over the size of the nest egg. Where the nest egg model dictates that I accrue 1M? 2M? and then whittle away 4-7% per year in retirement, the cashflow model dictates that I buy and hold (hopefully forever) quality securities that continue to pay dividends year after year. In growth mode, these are reinvested, and in retirement mode, its income. This model also says that the underlying value of assets supporting the cashflow may fluctuate all over the place and it doesn't really matter. Even in crashes the dividends for such companies, in most cases, continue to be paid out.

I say 'deceptively' simple as I have also begun to carefully consider if the Fosterian approach is as much a repeatable strategy as it was a phenomenon of market conditions over a particular period of history, coupled with a bit of luck. All this being said, my long-term goal is really based on a nest egg-cashflow hybrid, and I imagine I will continue to track my monthly accruals (read nest egg building), and not income from investmensts, for quite some time.


For the record, I enjoy Ellen Roseman's columns. It was one of her articles, in fact that made me aware of the financial blogging community.

Frugal Focus Bank Shopping Part 2 - Fees

Picking up the thread from the previous post on this topic, I spent some time comparing fees. Using my current TD Canada Trust Infinity account as the control, I looked at BMO and PC Financial.

My first observation is that BMO offers many plans, with basic permutations based on account activity requirements, overdraft needs, and travel and out-of-Canada services. PC Financial on the other hand, true to its marketing model, offers just one everyday account plan. For the purposes of my investigation, I chose BMO's i.connect plan as it most closely reflected my needs.

Here are how the fees look:

Based on these numbers, I estimated my annual fees would be $51.80 with TD and $44 with BMO, assuming my balance drops below the required minimum 4 months of the year. With PC Financial I would pay no fees at all.

These costs assume that I wouldn't go over the 60 transaction limit with BMO, that I limit my ATM usage to the home bank (as I do now) and that I waive the cheque return/monthly paper statement. As I do all my banking online, I'm also not concerned with assisted service fees.

After this initial pass, its obvious PC Financial is the front runner. I still need to weigh the benefit of incentive programs (Air Miles vs. PC Points) and look at online banking.

If you are a BMO or PC Financial client and I've gotten the fees wrong, please let me know.

Tuesday, February 07, 2006

Festival of Frugality #9

A Blueprint for Financial Prosperity is hosting this week's Festival of Frugality. As always, a lot of great content - I personally enjoyed:

Frugal Focus Bank Shopping Part 1 - Intro

I promised myself that I would spend some time looking at everyday banking options in an effort to reduce costs and/or better capitalize on incentive programs. This is really the first in a series of posts that I will use to track my findings.

Before I start, I want to clarify that I’m most interested at this time in everyday banking needs, and not a high-interest savings account. Though my needs are fairly standard, I will be looking at a few criteria specifically:
  1. Obvious things like package fees and per use fees associated with direct debit purchases, ATM withdrawals, pre-authorized debits and pre-authorized deposits, and minimum balances.
  2. Any incentive programs offered with the account and/or corresponding credit cards.
  3. The robustness of online banking options.
I don’t have a lot of special banking needs, though I do make heavy use of my debit card as I don’t like to withdraw cash (just gets spent and have to guess the Microsoft Money categorizations). I would also need, ultimately, 2 additional youth accounts for my children.

The benchmark for my comparisons will be my current experience at TD Canada Trust, whose ‘Infinity’ account allows me unlimited self-service transactions with a minimum monthly balance of $3K, or a $12.95 monthly fee (I pay no real other service charges). They have quite a robust online banking solution, though no real incentive programs to speak of.

As part of this activity I’ll take a closer look at my short-list candidates – PC Financial and the Bank of Montreal.

Monday, February 06, 2006

Embracing Public Transit

Back in my “Simple Life Changes…” post, the researchers cited bringing one’s lunch, taking the bus and buying in bulk as three small habits that can have appreciable long-term saving benefits. While I analyzed BYO lunching last week, I thought I would take a closer look at public transit.

I have to discolse that in and of itself, I don’t enjoy the act of driving. Earlier in my career I commuted across the city, and after four years and one serious, if not inevitable accident, I knew I had enough. Coupled with the fact I live and work near an urban area, I’ve been taking public transit for the better part of the last 3 years.

I actually have two public transit options available to me - a bus route and a train route. The train offers a level of comfort over the bus and is about a half-hour shorter each way. At the beginning of the year I wanted to understand what the impact of taking the train full-time would be, so I worked on a little budget forecasting – the chart below summarizes costs and savings associated with each option:

A couple notes:
  1. These models are based around 20 working days per month.

  2. The car model assumes my current automobile insurance would go up about $20/month if I was driving to work, as I currently receive a 'barely on the road' discount.

  3. Relative savings compares the transit option with most expensive option (car).
As is readily apparent, I have been enjoying a huge savings by taking the bus, and most of this would be lost if I ‘upgraded’ to the train. Annually, this savings of $3,120 equates to 15% of my gross annual savings goal. Invested for five years at an assumed 7% rate of return and this becomes $17,942.31 – a frugal win and enough to say, buy a car!

Based on my current situation I'll be sticking it out on the bus, as low-glam as it is, for at least the near future.

A couple other transiting fringe benefits:
  • I can sleep (in fact, lately I have been factoring this in)
  • I can read (enjoying The Investment Zoo at present)
  • It’s more environmentally friendly
Update (02/08/06): A couple of people aptly pointed out that in the 'car' costs I wasn't including depreciation, maintenace, wear and tear, etc., and in the transit examples, I wasn't factoring in the expense of additional travel time. I did consider these factors, but as you can imagine, unless broader assumptions are made, the concrete impact of these is difficult to quantify. Though I still feel the above illustrates the closest approximation of actual hard costs, I did want to see what the impacts would be, even if more hypothetical, should travel time and maintenance costs be included. The chart below is based on the following additional assumptions:
  • As suggested, I'm using the prescribed $0.42/km to estimate maintenance costs, based on the Canada Revenue Agency guidlines for reimburseable mileage.
  • I'm using a rate of $28/hour to measure my 'time costs', based roughly on my after-tax hourly wage. (I know, this model is getting somewhat stretched)
In addition, I also added gas and maintenance costs to the transit options as in both cases, I do need to drive a short distance to access these. Using these new assumptions, our model looks something like:

Even if only hypothetical, this shows very different results, and highlights for me the willingness I have at my current life stage to sacrifice time (for better or worse) in order to save money. Once you factor time in, its a whole different story. I don't need to ask myself which option my young family would prefer.

Thanks for the feedback - I learned more in this exercise than I planned!

Saturday, February 04, 2006

Mergent Index Updates

Mergent recently updated a number of their Dividend Achievers Indices, including their Canadian index.

Out is the West Fraser Timber Co.

In are Canadian Western Bank (CWB), First Capital Realty Inc. (FCR), H & R Real Estate Investment Trust (HR UN), Industrial Alliance Insurance and Financial Services Inc. (IAG), Legg Mason Canada Holding Ltd. (LMI), Manulife Financial Corp. (MFC), SNC - Lavalin Group Inc. (SNC) and Sun Life Financial Inc. (SLF).

Have a look at the full press release, including changes to their US indices.

It's good to see more Canadian companies making the cut. Also, not only is Manulife now on the index, but it recently announced a dividend reinvestment program.

Friday, February 03, 2006

An Interesting Week for Energy (and Pipelines)

  1. The Ontario government announced that they are willing to purchase energy directly from individuals, presumably those that have installed solar panels or similar devices in their homes. Interesting, though I’m not sure where I would start to gather the information I would need for a business case.

  2. On Tuesday, TransCanada Corp. (TSX:TRP) annouced it is increasing their dividend by 5%, their sixth consecutive annual dividend increase.

  3. On Thursday, Imperial Oil (TSX:IMO) announced a record profit and stock split as part of their quarterly earnings report.

  4. Enbridge (TSX:ENB) also released earnings this week. Among its notes, profits were down slightly due to impact from last fall’s hurricane damage to its web of natural gas pipelines in the Gulf of Mexico. This has me thinking a little about this risk - aren't most climatologists forecasting increasingly violent storms in this region?
Current dividend yields for Imperial Oil, TransCanada and Enbridge:
  Imperial Oil                    0.80%
TransCanada Corp. 3.60%
Enbridge 3.20%
FD: I own shares in none of these organizations, though am interested in picking up one of the pipelines at some point.

Wednesday, February 01, 2006

A Frugal Focus Monthly Recap - January 2006

Budget Summary
I cleared $855.95 in January against a plan of $695 representing a savings rate of 16.6% (bleh - for a good savings rate check out Frugal Canadian's performance for January). These results were actually aided by a $400 refund for an upgrade my home builder never installed. I was over budget in a number of areas in January, including gasoline, groceries, household items and electricity.

Investment Summary
I'm allocating my my entire budgeted savings for January to future investments. My accounts look like:
  • RRSP: $379.92 (including a YTD gain of 0.2%)
  • Non-registered: $695 (all currently cash)
Frugal Focus Savings this Month - $18.62
As noted throughout the month I made a number of small changes in January that should reduce my regular monthly expenses by $18.62 - enough to cover a new subscription to say, Canadian Money Saver (almost).

Goals for February
  1. If anything, keeping this online account has really prompted me to take a critical look at all the nooks and crannies in my fiscal behaviour, even the untouchables like personal banking. In February I will do (and share) some cost-benefit analysis around switching banks.
  2. As a stretch savings goal, I also want to do some really quick market surveying to see if I can't get better rates on my home and auto insurance. More on this will follow.
  3. Start a DRIP investment.
  4. Pretty up this blog. Just because the material tends to be a little staid and stodgy, there's no reason why it can't be a little easier on the eyes; have a look at WordPress.
In all, a modest beginning, but a start nonetheless.

Disclaimer: These articles are for information only, and are not to be construed as financial advice, legal advice, or a solicitation to buy or sell securities.