I’ve seen the cost of cars broken down to the cost per kilometer of driving, and I’ve seen it broken down to cost per year. However, neither approach seems to measure costs in the way I want. So, I set out to figure out how to model the cost of my car. I want a better idea of what it costs to have a car and how much it costs to drive it. I began by recording all my car costs in the following categories: – Purchase price – Fuel – Maintenance and repairs – Licensing – Insurance I recorded the month of each cost so that I could use historical Consumer Price Index figures to adjust for inflation. For example, to adjust a cost of $100 in January 2010 when the CPI was 115.1 to March of this year (CPI 122.9), calculate ($100/115.1)*122.9 = $106.78. Then I added up the adjusted costs in each category to get the totals in today’s dollars. The big question is what to do with this data at this point. One possibility is to work out the cost per kilometer. But this seems misle...

The standard age to start collecting CPP benefits is 65, but you may get a reduced pension as early as age 60, or get a larger pension by starting as late as age 70. A factor affecting the decision of when to start collecting CPP that I hadn’t considered before is the penalty that comes with years when you make no CPP contributions. Most descriptions of how to calculate your CPP benefits are too hand-wavy to be useful. However, Doug Runchey wrote a great post at the Retire Happy Blog on how to calculate your CPP retirement pension . I used this post to work out my own projected CPP benefits. I worked out 3 scenarios: collecting at age 60, 65, and 70. When you take your CPP before age 65, your benefits are reduced, and if you postpose benefits until after age 65, your benefits increase. We’re working through a transition period right now, but by 2016 and beyond, the reduction before age 65 is 0.6% per month and the increase after age 65 is 0.7% per month. This means that if p...

Here are my posts for this week: Making the Most of the Principal Residence Exemption The Canadian Guide to Will and Estate Planning People Respond to Incentives The Hidden Cost of Active Investing Here are my short takes and some weekend reading. Canadian Couch Potato explains the different reasons why an ETF might fail to exactly track its index. The Blunt Bean Counter says that delays in sending out tax slips has compressed the time he has to work on tax returns. He vows to make changes for next year to reduce his stress level. Preet Banerjee interviews Kyle Prevost, co-author of More Money For Beer and Textbooks , in his latest podcast. Big Cajun Man says that if you keep important financial information on your computer, you need to do backups.

Few investors understand the long-term drag on returns that comes with active investing. Even if you guess right your share of the time, the higher volatility that comes from a more concentrated portfolio costs you money. I did a small experiment to illustrate this effect. Jim started 20 years ago with $20,000 that he planned to invest in only Microsoft and AT&T. He gave $10,000 to one money manager with instructions to always keep the money split evenly between the two stocks. Jim split the other $10,000 between two money managers, Alice and Betty, and instructed them to decide each day whether Microsoft or AT&T would perform better. Alice and Betty always invested all the money they controlled in one stock or the other. By coincidence, Alice and Betty disagreed every day about which stock would perform better. Each money manager alternated days between being right and wrong. Based on this setup, the actively-managed money was invested “correctly” exactly half the ...

My family frequently blows through the limit our internet provider places on the number of gigabytes (GB) per month we get without extra fees. Frequent pleas from me had little effect. Warnings from our internet provider when we reached 75% and 100% of our allotment for the month were ignored. Then I came up with an economic solution. Each computer in my house has a desktop network meter that measures internet usage for the month. Each member of my family gets an equal share of the “free” GB each month. Then any overage fees are shared by all of us in proportion to the amount we exceeded our shares. Here’s an example. Suppose a family of 3 has a limit of 75 GB per month (25 GB each) and one month they use 5 GB, 35 GB, and 55 GB. The overuse is then 0, 10 GB, and 30 GB, respectively. If the overuse fee is $40, then the second person pays $10, and the third $30. Making my family actually hand over cash seems to have made quite a difference. I no longer harp about internet ...

Douglas Gray and John Budd have published the third edition of their book The Canadian Guide to Will and Estate Planning . They do a good job of explaining in simple language the bewildering array of ways to protect your estate from taxes when you die. The range of topics covered includes building your estate, wills, trusts, probate, taxes, U.S. taxes, cottages, family businesses, charity, insurance, advisors, retirement care, and funerals. It’s almost enough to make me renounce all my worldly possessions – almost. I won’t try to summarize this book and further – even at 400 pages, most topics are covered quickly. The main value of this book to me was to become aware of possible estate planning strategies. Actually acting on this information likely requires further investigation or professional help. For the rest of this review, I’ll point out some parts of the book I found interesting, surprising, or I disagreed with. CDIC Coverage “You are protected up to a maximum of $...

Canadians don’t have to pay capital gains taxes on their principal residences. However, the definition of “principal residence” is quite flexible making it possible for families who own a second property, such as a cottage, to save substantial amounts on their taxes. Douglas Gray and John Budd, in their book The Canadian Guide to Will and Estate Planning , explain that your principal residence isn’t necessarily your “main place of residence.” If you own a vacation property, “as long as you, your spouse or at least one of your children occupy the vacation property for some period or periods of time during the year, that is enough to bring you within the principal residence definition.” “The fact that you show your home address on your income tax return does not mean that you are designating your house as your principal residence.” Further, “it is not generally necessary for you to decide which property is to be designated as the principal residence for capital gains tax purposes ...