Aug 312011

I’ve mentioned in an earlier post that most of the big 5 banks in Canada are raising banking fees this year. But there is a silver lining. See if you can follow along with this plan.

The minimum balance required to wave the $3.95 monthly fee on my TD bank account used to be $1000. So for that reason I’ve always held at least the minimum in my account before. I basically save $47.40 a year. In other words, if I could make more than $47.40 a year (after tax) with that $1000 (or 4.74%), then I would be better off investing that money in the financial markets and just pay the monthly service fee.

However, starting this month, the minimum requirement to waive the fee has gone up to $1500, but the fee itself remains unchanged at $3.95/month. I now have $500 more capital at my disposal if I choose to invest it. $47.40 from $1500 means I only need to make a 3.16% total return (after tax) in order to cover my bank account fees. Making 3.16% per year for the foreseeable future sounds a lot more doable than 4.74%. So from now on I’ll put the $1500 (that would’ve been tied up in my checking account) into buying common shares of TD Bank, and just pay the $3.95 monthly fee. Here’s why.

TD shares currently pay a healthy dividend of 3.50%, at less than 50% payout ratio (very safe,) which means the dividend alone paid to me, even after tax, which ends up being about 3.3%, is enough to cover the 3.16% return I need, to break even. Not to mention the future potential for dividend growth and capital appreciation. Plus, many people who kept $1000 in their accounts before to avoid the monthly fee will just top-off to $1500 starting now, which will give TD more capital to grow its business boosting value for its shareholders (me.)

In the end, this method is a little risky but if the banks are going to grow and make money at the expense of their customers, then it’s like that saying if you can’t beat them, join them. Of course only time will tell how this will play out. Don’t try anything on this blog without consulting with a financial advisor first.

Aug 242011

How my perception about materialism/income have drastically changed in the last decade or so.

Year – 2002
occupation – high school
mood – emo

Adult life sounds so hard, so much responsibility. What’s the point of making so much cash? Money isn’t everything. As long as I have enough to live on then that’s all that matters. The average Canadian makes 40 grand/yr. Sounds like a lot already, I will be very satisfied if I can make $40,000/yr some day.

Year – 2005
occupation – college
mood – apathetic

Looks like post secondary education is a necessity these days, I’m not actually ahead of most people. I should work harder or else I’ll get left behind when all my friends start working. If I work hard enough I should be able to make $60,000/yr some day.

Year – 2008
occupation – junior associate
mood – inspired

Starting my first real job, great! My entry level compensation is pretty low as expected. But looks like there is lots of room for career advancement. All my co-workers are making much more than me and they have nicer homes, newer cars, and give off sophisticated auras. If I include the income from my part-time job, I can probably make $80,000/yr some day.

Year – 2011
occupation – intermediate associate
mood – optimistic

Got a promotion this year. Also starting to make a small bit of investment income. I’m buying all the comics, toys, and food I couldn’t afford before when I was broke. Cash really is king. I’m only making mid 5 figures now, but I think some day I can make $100,000/yr and eventually reach financial independence.

I guess a lot can change in 9 years.

Aug 082011

Vacation for last 2 weeks. Now, back to business.

*Dividend Income:
  • Discount Brokerage = $300

*Discretionary Spending:
  • Eating Out = $100

  • Others = $200
*Net Worth:
  • Assets:

  • Cash = $4,700 (-$1,400 MoM)
  • Stocks = $71,200 (+$3,000 MoM)
  • Home  = $243,000 
  • Liabilities:
  • Mortgage = $210,100 (-$300 MoM)
  • LOC Balance = $1,500 (-$2,500 MoM)
  • Other Loans = $20,600 (+$4,100)
Total Net Worth = $86,700 ( +0.35% MoM)

Losing money never feels good. But the silver lining is the great buying opportunity now. I’ve already picked up some more Deere & Co shares to lower my ACB. US stocks will continue to fall when the market opens later today, I’m currently eyeing Siemens, Pepsi, and Caterpiller. I don’t have any money available to buy stocks now, so I’m planning to borrow from my margin account. Managed to squeeze out an small increase in overall net worth.

* Numbers are rounded to the nearest $100.