Limited Credit

The Value of a Costco Executive Membership

noreply@blogger.com (The Zafar Family) — Tue, 09 Mar 2010 18:32:00 +0000

For the past two or three years, Costco has intrigued me. Every single time I used to pass by one, I noticed the sheer amount of people who are there over the weekend and it got me wondering, "is it worth buying from Costco as opposed to other stores?"

In my opinion, the answer is dependent on how your life is structured. Before I was married, I did not see the need to go out and get a Costco membership (for what reason, I do not know). However, ever since I have been married, my life has become more organized and planned out in the sense that now I plan out what needs to be bought and when I will need to buy it by. Even when it was just my wife and I, we still did not see the need for a Costco membership until my wife became pregnant.

When we were one month away from the delivery date, we looked hard at what we would need once the baby was here and what we found was that there is a lot of things that Costco sells which we could buy and get it cheaper (over the long term) if bought in bulk. Therefore, we decided to get ourselves a Costco membership.

Once we were at Costco to get the membership, the question arose as to which membership would be get: would it be the standard Gold Star membership for $55 or get the Executive membership for $100? The difference is that with the Executive membership you receive 2% cash back (up to $500). I still was not convinced until the woman at the Membership Services counter told me that if you pay the extra $45 and you do not earn $45 in cash back, the $45 is refunded back to you so you would end up paying for a Gold membership instead. So I was thinking that if this lady was correct, it pretty much meant that I was guaranteed not to waste the extra $45 if I did not get the value for it, which I thought was a good offer and so I signed up for the Executive membership back in October 2009 and have been visiting Costco almost every two weeks to purchase the many items required for our daily living.

In closing, all I have to say is I love Costco and I love the savings (especially if the item is on sale, which deepens the savings even further!). For me, it is worth spending the $100 to get the Executive membership and even if you do not see the benefit in it, paying $55 for the Gold Star membership will pay off with the money you save by buying in bulk.

Canada's Mortgage Rule Change

noreply@blogger.com (The Zafar Family) — Wed, 17 Feb 2010 21:54:00 +0000

Hey people,

It looks like the Canadian government is doing something about the potential risk of a housing bubble. On Tuesday, Finance Minister Jim Flaherty, announced three changes to the mortgage rules.

1. All new borrowers will need to qualify for a five-year fixed rate mortgage, even if they intend to get variable-rate mortgages. The idea is if you qualify for a fixed rate mortgage then you can afford interest rate increases that is bound to happen soon.

2. The maximum limit that can be refinanced is 90% of the value of the home which is reduced from the current 95%. By reducing the maximum equity that can be taken out of the home when refinancing, it reduces the chance of higher loan payments.

3. All non-owner-occupied properties will require a minimum down payment of 20% in order to get a government-backed mortgage insurance. The idea here is to prevent speculation, which drives up the housing prices, which in turn makes housing less affordable for the rest of us.

These changes will go into effect on April 19th. I think it's a step in the right direction. Let's see what happens....

Financial Pondering

noreply@blogger.com (The Zafar Family) — Wed, 10 Feb 2010 04:18:00 +0000

Hi people,

I was listening to a local news talk radio program yesterday and they were basically talking about how due to low interest rates, it is fuelling another real estate boom and people were buying houses which is more than they can afford. The show went on to say the Canadian government may be mulling ideas to slow down the real estate market because they believe it is getting too hot and would indeed cause the bubble to burst, which is not a good thing to happen right now. The interesting thing I found was that the banking industry themselves were proposing certain changes the federal government should consider, such as:

increasing the minimum down payment amount from 5% to 10%
decrease the maximum amortization from the current 35 years down to 30 years.

In essence, the argument is that by making buying a house less easier to get, people may think twice about their budgets and how the mortgage payments would fit into it. Those who do end up buying with these new ideas, would easily afford the monthly payments and those who were wanting to buy but could not were saved from making a future financial blunder until they were in a better position to afford to buy.

From the point of view of saving the economy and people a lot of pain, these proposed ideas make sense. From the point of view of a person who wants to buy his first house in the next few years, it will take me longer before I can purchase.

Just like in life, there are pros and cons to everything. Let's see how this plays out.

Transaction Override

noreply@blogger.com (The Zafar Family) — Thu, 28 Jan 2010 23:26:00 +0000

Hey people,

I am happy to report that for the past couple of months I have been living on cash only. When I receive my paycheque, i pay all outstanding bills and credit card payments. Once everything is
settled, whatever I have left over I wihdraw as cash. The problem is that I do not have that much money left over. Case in point:

Last Friday, I was paid and I ended up with $190 in my hand. That Saturday we decided to go to the mall to buy a few things and let me tell you, money sure does flow fast. I mean, we bought some things for our bathroom (my wife had some money she received from the government for the Child Tax Benefit and even though we spent about $140 only $40 was all that I had to contribute. That evening I took my wife out for dinner at Boston Pizza ($70) then another $30 to $40 at the movie theatre. We enjoyed ourselves and I do believe we deserved to indulge that day because with taking care of our almost three month old daughter took away most of our time.

By the time this week rolled around, I had no money but I lingered until yesterday when I received $60 reimbursement from my group health plan from work. My spirits have been lifted and God willing, they will remain so until I get paid next Friday.

Job Issue

noreply@blogger.com (The Zafar Family) — Wed, 27 Jan 2010 03:44:00 +0000

First, let me mention a couple of things:

My degree is in Political Science but I decided after mid-way through my time at university that I wanted to do accounting. Instead of starting from scratch by switching programs, I completed my degree and then enrolled into the Certified General Accountants program (it is a Canadian accounting designation) and started looking for accounting jobs since one needs to have progressive accounting experience while you are studying for the designation.

Here is the chronology of my career history:

In 2004, I landed a job as a credit analyst for a Toronto-based collections company (pretty much first-party collections for American Express), which I held onto for two years. In between, I did a three-month stint in third-party collections (not my cup of tea!) and I found an opportunity as a Junior Accounting Clerk for three months as well. I did this to strengthen my resume.

In 2006, I landed a job as an Accounts Receivable Administrator with Ticketmaster Canada which was located in downtown Toronto as well. I can tell you it was a lot better working environment and the work was more in line with where I wanted to take my career.

In 2007, I was offered an Accounts Receivable Clerk position for a small, local company (I live in the suburbs of Toronto). My title may have said Accounts Receivable but all I was doing was creating invoices and mailing them out to the clients. The job was boring and tedious but worse was the fact that the work environment was horrible! Every single person, from the CEO to the guy who worked in the warehouse, used profanity! I found this very disappointing and unprofessional! I endured this for about a year and I quit that job since I was getting married and I had been offered a better job, which would start once I got back from my honeymoon.

In 2008, I was offered an Intermediate Accountant role with a local manufacturing company for a far better pay and better work environment. The best part was the ideal job that I was looking for for years and I finally had found it! I was only there for eight months when, due to the worsening economy (the company derived 80% of its business from the US housing sector), 15% of the workforce were laid off (including me).

After being laid off for three months, I finally got a job as a Grant Accountant with a world-renowned children hospital located in downtown Toronto in August 2009 and this is where I currently am employed (the salary is 26% higher than my previous job so I am thankful to God for His blessing).

As the title of this post states, there is an issue with my current job. The issue is this: the position is a one year contract that ends in July. I love the job. I love the people I work with. A manager who was on maternity leave is coming back and it looks like my job could be eliminated. I spoke with the Finance Director yesterday and she said she doesn't know anything until the manager comes back in March but she wants to keep everyone. However, since this is a quasi-government organization, there is always office politics. My co-workers have been telling me to start looking for another job now because the director is known to say that your job is safe when in fact you will still lose your job and she had no intention of keeping me in the first place. So, now the job hunt is back on for something else. I dislike this situation because I love my job and I now have to support a baby as well.

Anyway, this is life and without drama in life, it would be quite boring living. Let us see what the next day brings...

I Am Back! (Hopefully)

noreply@blogger.com (The Zafar Family) — Tue, 26 Jan 2010 04:02:00 +0000

Hello people,

It has been a long time since my last posting. There is a lot of things that have happened and I will try to summarize them as simply as I can:

I got married in July 2008
I was blessed with a baby girl in November 2009.
I have changed jobs twice since my last posting with the first occurring in August 2008 and the second in August 2009.

That pretty much summarizes life events that I have experienced.

The issue of my finances is another thing to discuss:

I had to wipe out my registered retirement plan (about $6,000) to help pay for my wedding.
I had started to get back on track in terms of saving 10% of my net pay into my RRSP but about a month ago I realized that it is better to pay down debt (I have over $65,000 in consumer debt) than to save since I would be earning a higher return via debt reduction.
Money is tight because out of my biweekly pay cheque, all I have left for discretionary spending is less than $200, which isn't much in my honest opinion. It has taken me more than five years to finally force myself to begin paying down my debt because once a few of the credit cards are paid off, I will see more money in my hand but it does require patience and perseverance on my part, which is hard but in the end I tell myself that I have faith that I will survive.

Anyways, this is what I have to report for now. My intention is to try to keep up with posting as much as I can but let's see how my busy schedule reacts to it.

Cash vs. Debit Card?

noreply@blogger.com (The Zafar Family) — Sat, 24 Nov 2007 03:40:00 +0000

Recently, I have been skirmishing an internal battle with myself about how I should approach using cold cash versus using my debit card (credit card is undeniably out of the question!). Beingfrugal.net had this debate as well and there were some motivating points of view. Sorry to say, I am still sitting here conflicted. :(

I lately came across a posting at the American Consumer News blog titled Five Reasons to Always Pay with Cash (And Throw Your Credit Cards Away) that took the view of using hard cash and its benefits. The focal points by using cash were:

1) You spend less
2) There are no finance charges
3) There are no overdraft charges
4) You do not really go over the budget (but only if you have self-control, in my honest opinion).
5) You could get a better deal if you pay cash

I liked this article enough that I will endeavor to use cold cash as much as possible (seeing as how I was leaning in that direction anyway).

You can read the Beingfrugal.net article here and the American Consumer News article here.

Investment Update

noreply@blogger.com (The Zafar Family) — Thu, 22 Nov 2007 19:48:00 +0000

Due to falling market prices for bank stocks (among others), I was able to purchase an additional four shares of Bank of America on Tuesday. If anyone is wondering, “who buys just FOUR shares?!” Well, for one thing, I do. My investment philosophy/strategy is one that follows the buy and hold principle and I buy ONLY if by purchasing more shares, my weighted average cost per share reduces, otherwise I do not buy. So, while short-term investors are nervous (hence why they are sending the stock prices in a downward manner), it allows me to add additional shares, which accomplishes two things:

1) Reduces my weighted average cost per share
2) Increases my dividend income

Consequently, in my modest point of view, this is more of what I would describe as a ‘win-win’ situation. Accordingly, to all you jittery investors out there, sell away. Continue selling for you are doing me a grand favour! :P

Link up

noreply@blogger.com (The Zafar Family) — Tue, 20 Nov 2007 02:58:00 +0000

Last week, Lifehack.org had an article about living without credit. It certainly does apply to my intended goal(s) in life. The article gave a few good reasons to live without credit:
- It forces you to live within your means.
- Things cost more than what they cost.
- It forces you to discipline your spending.
- You cannot default on cash.

I concur with all the points made in that article and I have to confess that I have come to a stronger understanding that debt (for all the goodies it can get you) is malevolence. Unless one knows precisely what they are doing when dealing with debt, one should tread lightly; or else, the next thing you know, you end up with a huge load of monies you owe to multiple creditors.

Transaction Override II

noreply@blogger.com (The Zafar Family) — Mon, 19 Nov 2007 00:45:00 +0000

Well, looks like I got off to a great start (please note the sarcastic tone)! I just spent $15 on dinner, which leaves me with $6 to get me through until Friday. On the plus side, my Dad repaid $50 of $150 that he still has to pay me for a laptop I paid on his behalf. Patience is a virtue, they say, and once Friday is again upon us, things will look better.

Transaction Override

noreply@blogger.com (The Zafar Family) — Sun, 18 Nov 2007 22:01:00 +0000

Well, I paid a long distance phone charge to my credit card, which leaves me with $21 until Friday (payday, yay!). With positive thinking, I believe/have faith that I will get through this week without requiring funds; and if I do require money, I hope it will be a smaller amount than $21!

Welcome!

noreply@blogger.com (The Zafar Family) — Sun, 18 Nov 2007 17:19:00 +0000

Welcome to Limited Credit. This is the first time I have dived into the world of blogging. I have to admit that at some time in the past, I had been sceptical about writing anything but somewhere along the way, I thought, "hey, if I can find some time to write, particularly on a topic I know about, perhaps it's not as bad as I thought."

One may inquire as to the reasoning behind the existence of this blog and the answer is quite simple. After many years of mismanagement of my personal finances, particularly when it came to debt, I have decided to do something about it. I have decided to remove the addiction (if you will) of credit card/loans/debt in general as a source of material acquisition and use it as little as possible.

In other words, my intended goal is to use cash for anything and everything and try to bring myself out of debt. I have to admit that a couple of days ago, when I put gas in the car and paid via debit card, I had this immediate feeling of satisfaction that it was my own money I was using. Before, whenever I got paid, I would set aside whatever savings, minimum payments, and bills due that needed to paid, then the remaining I would dump onto my credit card(s) and any other expenses that came up I would charge to that card, in the hopes (yeah, right!) that I would be spending less than I was paying onto the card.

Ever since I have decided that anything and everything that I want to spend on has to be with cash, I have found out that I spend more than I thought and I really do not have that much left over by the time the next pay cheque rolls around. In other words, my income seems to equal my expenses!

So, let’s see where my journey of life takes me.