Month: November 2019

Shopping Season

The shopping season is upon us once again! It used to be called the Christmas season or the holiday season but the notion of Christmas or holidays is no longer emphasized.

When I look around, all I see is the emphasis on shopping. Apparently, the proper and just way to show your love to family and friends is to empty your wallet. Every retailer under the sun is exhorting you to spend-spend-spend! If you’ve got a nickel, they’ll happily take it.

Need a gift for your bus-buddy’s grandmother’s snow-shoveller? Then head over to Staples and find just the right thing!

How about a little something for the hostess’ dog-groomer’s roommate’s twin sister? Surely you’ll find what you need at Tim Horton’s.

And let’s not forget to buy a gift for your neighbour’s chiropractor’s assistant’s step-sister’s tennis instructor’s mechanic’s first mother-in-law, okay? Surely, the perfect gift is just waiting to be found on Amazon.

I jest…but not by much.

Gift-giving expectations have exploded.

When I was a child, it was way back in the dark ages. People read by candlelight. A full-sized chocolate bar cost $0.05. It was a 10-mile walk to school, both ways uphill. Back then, a seasonal greeting was sufficient and no one expected anything else.

Today, the retailers have brain-washed us into believing that we should spend whatever it takes to buy something for everyone that we know. It’s insidious! What if my neighbour’s chiropractor’s assistant’s step-sister’s tennis instructor’s mechanic’s first mother-in-law doesn’t like the tin of saltwater taffy that I gave her? I spent $42 on shipping – she damn well better like it!

When we buy into the notion that everyone needs atleast one gift from everyone else, then we tacitly accept that money has to be spent or else someone won’t be happy.

Time – the Ultimate Gift

You know what has worked to create better relationships and strong connections? Spending time with people. Playing cards & board games, completing a puzzle together, or hosting a potluck allows for people to share their lives, talk about their dreams, laugh together, and make some good memories. Time is priceless because it is finite. You only get so much of it and it’s best not to waste it.

When you choose to spend time with someone, you’re giving them something precious. You can’t buy time, but you can use it to create spheres of intimacy where you, your friends and your family can just be. In today’s world, where the constant demand is to do more, be more, spend more, achieve more, one of the best gifts of all is creating a space where it’s okay to just chill, to simply relax, to be together with those whom you cherish.

I’m not trying to pretend that you don’t need some money at this time of the year. If you have to travel or you’re making something that’s not on your regular grocery list, then funds will be needed. If you’re hosting out of town guests, then you’re going to need some extra funds for the additional costs of running a household with a few more bodies. I don’t want to give the impression that this time of year doesn’t deliver some solid punches to your pocketbook.

However, I do want to disabuse you of the notion that buying stuff is the way to find the kind of relationship that you want. No one wants to feel like they’re simply a wallet-on-legs. You want to feel appreciated, not taken for granted. Going into debt to buy gifts for other people is not the way to create the genuine relationship that you most truly desire.

Spend cash! Spend cash! Spend cash!

If I can’t convince you to cut down on the number of presents that you dole out, then perhaps I can persuade you not to go into debt to do so. Keep the credit cards out of your wallet – don’t take them to the mall – most definitely do not use them online! If a website already has a copy of your credit card information saved, then go an delete it immediately. You need to slow down the speed at which you spend your hard-earned money. I call this slowing down process “financial friction”. You will need to create some friction between your viewing of an item and the purchase of that item. Friction will impede your ability to go into debt during the shopping season. This is a very good thing!

Trying to buy someone’s love is a bad idea. Going into debt to buy someone’s love is an even worse idea! If your plan to buy affection doesn’t work, then you’re in debt while also failing to get what you really crave from someone else.

At the root, everyone wants the same thing. People really want to be accepted and loved for who they truly are. They want a genuine connection to others and to know that they are cherished. Your wallet can only buy stuff – it cannot buy the intangible elements of a wonderful relationship.

After all, if your relationship is based on money, then what’s left if the money goes away? How do you know that you’re loved for who you are rather than for what you can buy?

As hard as this may be to believe, I have nothing against gifts! I enjoy giving them and I enjoy receiving them. What I’ve learned over my years is that the amount spent doesn’t correlate to the importance of the relationship in my life. The people in my life love me after shopping season is over, whether I’ve given them a $2 garage-sale mug, a tin of homemade baking, or the latest fancy electronic toy. Tossing aside my financial goals and going into debt to buy gifts for other people hasn’t resulted in stronger relationships.

Look, I’m not telling you to stop buying gifts. I just want you to think about why you’re buying gifts. And I’m going to gently suggest that you spend a little bit less this year in presents. Those who really and truly love you won’t stop loving you if the box under the tree is slightly smaller this year.

Trust me on this one.

Can I Afford It?

Such a simple question, isn’t it?

“Can I afford it?”

At first blush, it seems ridiculous to even ask the question. It’s a yes or no question. Either you have the money or you don’t.

Appearances can be deceiving. Having the money is only the first part of the equation…

Okay, Blue Lobster – just what in the hell are you talking about now?

The question of affording something is much larger than the question of whether you have money. Making the purchase is relatively easy. Take out wallet – hand over cash – get what you want. Easy-peasy-lemon-squeezy!

Nope. Actually being able to afford something means knowing what it is that you really, really want.

What are your priorities for your money?

Prioritizing your money means that you get to say “Yes!” to some purchases while saying “No!” to others. You won’t be able to buy everything you want unless you’re a multi-gazillionaire. And if you are multi-gazillionaire, please let me know so that I can follow you on Instagram.

Let’s say your Fur-Baby needs an operation that costs $1200. Your pet is not suffering and the operation isn’t a emergency, but it is necessary. You’ve got 75% of the cost saved up and you’ve calculated that you can save up the rest over the next 6 weeks if you set aside $50 per week into your dedicated Fur-Baby Fund.

And let’s say you happen to be at the mall with a friend after a year-long week at work. There’s a very nice item on sale for $50. You like the item and you have $50 in your wallet.

Can you afford it?

You tell me. Your pet needs an operation and if you spend the $50 on the mall item, then you won’t have that $50 to put towards the Fur-Baby Fund. You’re the only person who can determine which priority is more important to you. Do you want to pay for the operation or the item at the mall?

Going into debt isn’t an option. Debt put you in chains to your creditors. Debt means committing money you haven’t yet earned to someone else for purchases made in the past. Relying on debt to make consumer purchases is a very bad idea. As you’ve heard me say before, debt is a financial cancer. There’s no need to ask for cancer by whipping out a credit card. Old-fashioned savings and delayed gratification will get you to your financial goals.

Now, knowing that you have $50 to spend, you have to decide: can you afford it?

Saying “No!” is a good thing.

Though only two letters long, this one word is a powerful weapon in your financial arsenal. Though small, this little word is mighty. If used correctly, it has the power to keep you on track towards your dreams.

It’s more than okay to say “No!” when asked to spend money in a manner that doesn’t align with your priorities. You work hard for your money and spending it on non-priority items is akin to lighting it on fire.

To be fair, there are times when it’s perfectly okay to say “Yes!” to spending your money. Should you be so fortunate as to have gobs and gobs of leftover money after your priorities have been funded, then you can probably fritter it away on non-priorities while still meeting your goals.

For the rest of us, frittering is a luxury that should only be indulged in sparingly. The more frittering that is done, the longer it will take to achieve our financial goals. And the less money we have, the more deleterious an impact frittering will have on our money priorities.

Never, ever let anyone bully you into making spending choices that don’t reflect what you truly want. This bring me to the Others.

Don’t let the Others determine your priorities.

There are a great many people out there who are willing to step into your wallet and disperse your money. I call these people The Others. Sometimes, the Others are easily identifiable. You’ll recognize them as the Ad Man and his trusty sidekick, the Creditor. More often than not, the Others take the form of our friends and family. Every so often, co-workers fall into this category too.

The Others have no qualms whatsoever about telling you how to spend your own money. It’s been my experience that the Others think that I should spend my money on their priorities. The very possibility that their priorities aren’t the same as mine is an utterly foreign concept to them.

One time, a friend of mine told me that I could afford a weekend trip to Las Vegas. Truth be told, I was floored by her audacity in opining about what I could afford to do with my money. It would have never occurred to me to tell her how to spend her money. In all honesty, the same thing has happened with members of my family.

Over the years, I’ve learned to ignore the Others’ exhortations to spend money. When I’m feeling generous, I tell myself that the Others just want the best for me. Or that they believe spending money will make me happy. When I’m not so generous, well… let’s just say that I don’t ascribe such kind motives to their opinions. The bottom line is this: I know what my priorities are, and I have a plan for my money. I don’t expect the Others to agree with, understand, or share my priorities. The Others’ opinions of my spending choices are irrelevant to my goals. Since I’m okay with ignoring their “advice”, I always know if I can afford to spend my money on something.

So….can I afford it?

The answer to the question is as simple as 1-2-3. One, determine your financial priorities. Two, use the word “No!” as often as needed so that your money goes where you want it to go. Three, ignore the Others since they most likely want to spend your money on what’s most important to them.

Once this framework is in place, you will be extremely adept at answering the question of whether you can afford it, whatever it happens to be.

Know Where Your Money Goes

It is a simple truism that what gets measured is also what gets managed. I can think of few other places where people fail to put this truism to good work beyond their money behaviour. People will track their calories, the amount of gas they put in their cars, the number of times they work out. Yet so few people will track their own money.

This is very perplexing to me. Tracking your money is one of the first steps towards controlling it. You have to know where you money goes.

Lately, I’ve been hearing a lot of talk about “self-care”. Since this is a personal finance blog, I’m going to put my own little twist on this idea. You can feel free to share this bit of wisdom with anyone and everyone.

One of the best ways for you to practice self-care is to know where your money goes. Every single time you spend money, you should know exactly where it is going and why. Anything less is a self-inflicted financial wound.

When I had cable, I loved watching “Til Debt Do Us Part”. (Sadly, the show has since been cancelled.) It was a TV show about couples who turned to a guru to help them figure out their money before money destroyed their relationship. The very first thing the couples had to do was track their money for a month or so before Madam Guru showed up.

Most of the couples had never tracked their money. I always enjoyed the look on their faces when they discovered that they were spending hundreds of dollars each month on bank fees and coffee! It was as though they’d convinced themselves that small amounts didn’t really count when it came to spending their money.

Does this sound familiar to you? Is it possible that you’re one who believes “it’s only a couple of bucks” each time you buy a coffee? Never mind that you buy coffee two or three times a day, Monday to Friday… which works out to over $1000 per year on coffee alone. That amount could fund a nice weekend getaway somewhere.

Relax, relax! I’m not going to tell you not to buy coffee. It’s your money – that means you get to decide how it’s spent. If you would rather spend money on coffee than on something else, that’s your business. Your money, your choice.

And yet… Who among us hasn’t looked in their wallet or bank account and asked: “Where did all my money go?”

I’m here to tell you that getting a solid answer to that question depends on you. Measure you money so that you can manage it. Given how hard you work for your paycheque, it’s in your own best interest to understand why each of your dollars leaves your hands. In other words, you must start keeping track all of your money.

Some people use Personal Capital. Others use Mint. There are probably many other apps for money-tracking that are unknown to me. Myself? I’m relatively old-school. I don’t keep track of my money with lead pencils by candlelight anymore. Instead, I created two personalized spreadsheets. When I spend money, I keep the receipts then I add the amount spent to the appropriate spreadsheet. If I don’t get a receipt, I make a note on my phone of how much money left my wallet. Every nickel is accounted for. This how I know how much it costs me to run my life.

Thanks to the wisdom of TDDUP, I started tracking my spending in 2016. I have a spreadsheet for the cost of running my home where I track my monthly expenses. Those include lawn care, snow removal, Netflix, phone, power, water, car registration, property taxes, insurance premiums and internet. These are the standard bills that have to be paid on a recurrent basis, whether monthly or annually. Some expenses can be eliminated if I choose since they’re luxuries – lawn care & snow removal – while others are fixed. My car and home certainly won’t insure themselves! And I suspect my municipality will get testy if I were to neglect to pay my property taxes.

I have a second spreadsheet for the day-to-day variable expenses of my life. This document tracks my groceries, clothing, medication, gasoline, parking, entertainment, travel, gifts, donations at work, outside food & drinks, taxis, books, etc… Anything that doesn’t go towards the recurring expenses on spreadsheet #1 is recorded on spreadsheet #2. My goal is to spend less than $1,000 each month on these variable expenses. Since 2016, I think I’ve hit my goal twice!

You see, the beauty of my spreadsheets is that they provide me with information and insights into how I spend my money. Up until a few months ago, when I started cooking at home more often, I was spending atleast 1.5X more on food outside my home than I was expending on groceries. I don’t begrudge the money spent on outside-food (as I like to call it). I was hungry. The food was there. I had money – I ate – I wasn’t hungry anymore. The system was satisfactory… until I started pondering on my priorities for my money.

Was spending so much on outside-food getting me closer or further away from my goals? Was I spending the same amount each month on eating out? Would my money go farther if I cooked my own meals more often than not?

Tracking my money helped me to answer these questions. I was able to look at my historical spending patterns to see where I was spending too much. I analyzed which categories needed to be trimmed in order for my spending to align with my personal goals. The information garnered from knowing where my money motivated me to make better spending choices.

I challenge to you to track all of your purchases for a few weeks. Then determine for yourself if your spending choices are helping you to fund the priorities that matter most to you. Know where your money goes.

Getting Ahead vs. Getting By

You have to earn money to even be able to save and invest a portion of it… by MI154 of ESI Money

There’s a silent assumption in the Financial Independence Retire Early world that is, in my opinion, at the root of the derision heaped on this community. And it is this: everyone has a little bit of extra money that can be invested somewhere.

My position is that this assumption is false.

I’ve no doubt that there are those who believe that they can’t live without unlimited data plans, gym memberships, annual vacations, spa weekends, second homes, and cable TV. People get used to their luxuries. They easily conflate their daily, monthly, or even annual wants with basic survival needs. It’s called acclimation.

And why not? Luxuries make life better.

However, there is precious little useful information for those who are already living without any luxuries. This is a fundamental flaw of the FIRE sphere. Many of the most prominent bloggers of the FIRE community are tone-deaf to this reality. They appear to assume that everyone has money that can be diverted towards investing.

This assumption is wrong. There are many people who are barely making it from one paycheque to the next. Almost half of the Canadian population is struggling to pay their costs of living. These people aren’t setting aside money and then not using it because they’d prefer to struggle. They’re using all of the money that they earn to get from one paycheque to the next.

Now, I realize that some of these people will have some flexibility in their budgets once they pay off their debts. Former debt payments can be re-directed towards investing, a la FIRE-philosophy. This is fantastic news!

Yet, I also realize that there are many people who aren’t in debt…and are still living paycheque-to-paycheque. These are the ones who don’t have the money to spare for investing. And for these people, the FIRE-philosophy is as foreign as breathing under water.

  • Cable and gym memberships were sacrificed years ago.
  • Vacations are only taken in the imagination.
  • Wifi hotspots – if one even has a mobile phone – are the only source of connectivity.
  • Roommates and multiple part-time jobs have been part of the picture for years.
  • Cooking at home isn’t optional – it’s a requirement to ensure that one eats on a semi-regular basis because outside food is out of reach financially.

There are huge swaths of people who have already cut their budget to the bone. What does the FIRE-philosophy have to offer those who have no money to spare?

You need extra money in order to get ahead. And when you don’t have any extra money, you’re relegated out of necessity to just getting by. The FIRE movement offers little instruction on how to go from one stage to the next beyond the simply admonition to earn more money. Now that I think on it, I’m sure that those in poverty’s grip have never even considered the option of earning more money! <sarcasm off!>

Having access to “extra money” is the foundation of building that cash cushion, creating the army of money soldiers, or planting your money tree. If there’s no extra money to be found, then time and focus must be spent on using the available money to simply survive from one day to the next. Without sufficient money, life’s about figuring out where the next meal will come from and how to handle the inevitable rental increase. Heaven forbid that you should get sick and not be able to work. There’s never been enough money leftover between paycheques to build that vaunted 6-month emergency fund.

I’m not pretending to have an answer to this situation. My goal with this post is simply to remind those who have that there are many, many who have-not. If you’re one of the ones who has the ability to get ahead, be grateful. And appreciate that you might only be one misfortune away from falling down the ladder of financial security.

The paths to FIRE are varied but they all start with having a little bit of extra money. Anyone who argues otherwise is blind to the reality of poverty’s vicious grip.