Month: April 2023

Money – How to be Both Ruthless and Indulgent

First off, you should know that I’m a huge fan Ramit Sethi. He’s the author of I Will Teach You To Be Rich. One of the things he preaches is that everyone should be pursuing their rich life. According to Ramit, this involves being both ruthless and indulgent when it comes to your money. This means that you should be ruthless about cutting expenses that don’t mean anything to you. By the same token, you should indulge in those purchases that allow you to live your rich life.

I love this philosophy! It so very much aligns with my belief that you should prioritize your money in a way that brings your dreams to life. You work hard for your money. In turn, you should be spending your money in ways that satisfy your heart’s truest desires. You are the only person who knows what those desires are. Nobody else can accurately fill in the details of what you want with as much precision as you can. You should be answering the following questions every week, and taking the baby steps necessary to get to the end result that you want.

  • What brings you the most joy?
  • When were you the happiest in your life?
  • Are there things you want to see-do-explore-taste-experience during your limited time on this little blue ball we all call home?
  • How are you going to make those things a reality?
  • Do you need money to make your dreams come true? If yes, how much?

Spend Money Where It Matters Most

I’ll use myself as an example. Pre-pandemic, I loved to travel to new places. Each year, I would spend thousands on overseas trips and I did not hesitate to try new things/excursions. I had no idea if I would ever be in that part of the world again, so I indulged myself and said “Yes!” to whatever was on offer.

Saying yes to an indulgent whim was how I was able to be one of the very first visitors to a magnificent, family-owned olive farm when I was in Spain. Chocolate ice cream drizzled with extra virgin olive oil would never have touched my palate otherwise… and I am ever so glad that it did! While in Ireland, I indulged myself after casually strolling into the most wonderfully smelling leather good store in Galway and buying a beautiful wallet that I use to this day. And Italy…ah, Italia! A beautiful, glorious country where I left no carb undiscovered and drank atleast two glasses of wine each day. I said “Yes!” to everything while I was there.

How did I do that? I did it by saving money before heading to the airport. Flights, accommodation, food, and souvenirs were all paid for in advance. The spending money I took with me could be spent freely on whatever happened to catch my eye. Travel is one of those areas where I indulge with abandon because it’s important to me. A nice chunk of every paycheque goes into an account designated for travel. That way, I have money waiting for me when I get itchy feet. Travel is part of my rich life, as Ramit Sethi would say.

Stop Spending on Stuff That Doesn’t Increase Happiness

I’ll be very honest. It became a lot easier to save for my heart’s truest desires after I took a switchblade to my budget. I cut out spending on stuff that didn’t make me particularly happy. The first thing to go was cable TV.

I’m a cord-cutter of long-standing. Truth be told, I haven’t much missed channel-after-channel of nothing to watch. Nearly a decade ago, I realized that cable TV is terrible. The shows on streaming services aren’t much better, but they are definitely way cheaper. For the same quality, a whole lot less money, and slightly less variety, I could still watch TV in my spare time. I had to ask myself why I was paying so much every month for cable TV, something that I didn’t particularly enjoy? Since I’m not a huge sports fan, there was really no reason for me to pay for cable every month. So I stopped paying for it.

The second thing to go was breakfast from the coffee shop. Way back in the day, I would buy a coffee and a muffin on my way into the office. It was my breakfast, and it was only $6/day. That was $30 per week, which was $1500 per year. I planned to work for 25 years, so that’s $37,500… Wow!!! After doing the math, I realized that I didn’t want to spend that much of my life’s energy on coffee and muffins. Investing $1500 per year at 6% for 25 years yields $82,296.77. Hmmm….coffee or satisfying my deep and abiding desire to have a very comfortable retirement? Decisions, decisions!

It should come as no surprise that I choose to wake up a little bit earlier so that I could eat breakfast at home. Guess what? I’m perfectly capable of baking my own muffins and making my own coffee. Now that I’ve started doing more meal prep each week, I’ve even started making pancakes and eating a couple in the morning before I leave my house. If I can buy frozen, processed pancakes from the grocery store, there’s no reason why I can’t make and freeze my own. Who doesn’t like a warm breakfast in the morning?

Getting to my office is atleast 30 minutes in one direction. Parking that started out at $5/day years ago is now up to $25/day, depending on the location. Each year, the cost of parking goes by $1-$3. Was $5 or $6 per day really such a hardship? When I was younger, the answer was “No”… but I had to admit that spending $12/day – parking and breakfast – was $60 per week! On top of parking, I had to fill my tank more often and I had more wear & tear on my vehicle. It was very, very easy to switch over to taking transit. Believe me when I say that $108.50 for a monthly bus pass is much, much cheaper than $250 or more for monthly parking. My gas costs are much lower and traffic problems are someone else’s to manage.

In order to find the money for one of my deepest desires, I ruthlessly cut my spending in these three areas. I don’t regret my choice one little bit! Missing season after season of Survivor has not diminished my life in any way, shape, or form. (Honestly, how is that show still on the air?) As for sports, sometimes my local sports team wins and sometimes they lose. Either way, I hear all about it during the morning-after chitchat on the radio and at the water-cooler. And should my local sports team be so lucky as to make it to the final game, the one for all the marbles and a year’s worth of glory that comes with winning The Big Game, I usually watch that game at the home of a friend for the low, low price of bringing snacks and dessert.

Are You Willing To Be Ruthless And Indulgent?

You’re the only one who can honestly answer that question for yourself. Whatever you decide is up to you, since you’re the one who has to live with the answers. I’m not here to tell you how to amend your current spending. Rather, I’m suggesting that you consciously decide how to spend your money so that you can maximize its use to acquire as much of what you really, really want as possible.

If you’re already satisfied with your spending, bravo!

However, if you think your money is going to something that doesn’t get you any closer to living the life you want, then be ruthless. Cut out whatever spending that doesn’t make you happy. It’s worth experimenting with cutting such expenditure(s) from your life for a little while to see how it feels. After all, the purveyor of the whatever-it-is that you trimmed from your budget will always happily take you back as a customer. And if you find that you can live without the aforementioned whatever-it-is, then you can redirect that money towards indulging on the things that bring you the most joy.

Figure out what it is that you want most and start arranging your money so that you can get it. Being both ruthless and indulgent with your money is a very effective way to ensure that your heart’s desires become your lived reality.

I Need to Work on Getting Better at Budgeting!

Earlier this year, I decided to try my hand at budgeting. Some of the bloggers I follow online repeatedly state that having a budget is integral to managing your money. I’m always willing to learn and improve how I handle my own money. Since I work hard for it, I don’t want to waste a single nickel if I can avoid it. After hearing about OhhYouBudget, I watched a few of her videos on Instagram and TikTok before purchasing the budgeting dashboard. It’s been 3.5 months now, and I’ve learned a few things.

Budgeting is very definitely not the same as tracking your expenses. I’ve been tracking my expenses since 2016. That was the year I created 2 spreadsheets – one for my household/recurring expenses and another one for my day-to-day variable expenses. I would spend money, record my expenditures on the appropriate spreadsheet, and go on with my life. At the end of the year, I had a pretty good idea of how much I’d spent and what percentage of my annual spending was covered by my dividend income.

It’s a whole different ballgame with a budget. You see, the budget requires me to say in advance how much I’m going to spend in the categories of my choosing. Then I’m supposed to spend only that amount of money in each category. This where I face a serious challenge.

Never in my life have I limited myself to spending a certain amount in a given category. My #1 rule for spending my money was to never spend more than I earn. My #2 rule was to spend however I wanted after my automatic transfers sent funds to pre-determined destinations. You know – the emergency fund, the sinking funds, and the investment/retirement accounts. So long as I only spent whatever was leftover after the transfers went through, it didn’t matter to me under which category the money was spent. I honestly and truly believed that I was pretty good at managing my money.

Enter the budgeting dashboard to show me that I might need to change my perspective.

I suck at budgeting.

To say that it is not going well for me would be an understatement.

First off, I consistently overspend in the groceries category. I’m doing more meal prep, which means taking a list when I go grocery shopping. Not to brag too much, but I don’t waste food. I eat what I cook. I freeze various things for later use. Since I really hate cooking every day, I portion out my meals so that there’s always something tasty to take for lunch or eat for dinner. Yet somehow, I am always going over my budgeted amount for groceries.

Secondly, my MISC category is a wildcard. I allot a decent amount to this category. Some months, I spend nearly nothing. Yet the next month means that I’ve spent way more than planned. How does one predict MISC expenses? Am I not using that category properly? I have an emergency fund and multiple sinking funds for large, anticipated purchases so rest assured that my MISC fund is not being used for those kinds of expenditures.

Thirdly, I have to admit that I don’t say no to myself except when it comes to dining out. Planned meals with friends is one area where I don’t skimp. I have money allocated for that. Stopping at the drive-thru on the way home from work is verboten. I’ve stopped doing that because the reality is that I have food at home, and the stuff at home is healthier for me.

In order for this budget to work, I need to limit myself. I really, really dislike this aspect of budgeting.

Up until I started using this budget, I was very proud of myself. Automatic transfers funded my priorities from each and every paycheque. Whatever I had left over, I spent however I wished and my credit card bill was paid in full each month. I felt very good about how I handled money.

Then I decided to try and use a budget! Man, oh man! I’ve really been knocked down a peg or two. Every time I update that dashboard and see all the red, I feel badly about myself. This budget is telling me that I’m doing money wrong. I’ll admit that it’s a burr under my saddle. How is it possible that I’ve been doing money wrong all these years yet I’ve still managed to create a 5-figure dividend cashflow and to become a member of the Double Comma Club?

A Few Key Take-Aways

Even though I suck at budgeting, I’ve learned a few things about myself and how I handle money.

There is no perfect budget. Each month, I get to tweak my numbers as I see fit. The budgeting dashboard that I use comes with various graphs and charts, and I really do love them! They’re easy-to understand, visual representations of where I spend my money each month. I can tell you that a vast majority of my money goes to savings and investment accounts. And if I simply cut back on those contributions, I wouldn’t be going over-budget my other categories.

It only took two months of seeing lots and lots of red for me to ask myself the following: “Am I going to cut back on my monthly savings & investing?” And the answer I’ve arrived at is: “No, I’m not going to do that.”

While I might hate being in the red in multiple categories on my dashboard, the bottom line is that I am not going into debt every month. The credit card bill gets paid in full every single month, and that’s what matters most to me. Should there come a time when I have to choose between earning 5%-6% on my investments and paying 29.9% to my credit card company, then I’ll cut back on my monthly savings and investing to pay that debt. After all, it makes no sense to pay 30% to a credit card company if I’m only earning 6% on my investments!

Even though I spend too much in a few categories each month, there are some categories where I spend considerably less than I’d planned. Surely that signals that I’m getting pretty good at budgeting certain things.

Another thing to be noted is that my budge has nothing to do with my new worth. I’m only tracking my paycheque income on this budget, not my entire income. I also earn dividends and capital gains from my investments, but that money is separate from my salary income. My dividends accrue in another account, but I don’t use those to pay for my current expenses. They’re on a dividend re-investment plan (DRIP). If I absolutely had no other choice, I could use my dividends to supplement my paycheque. Even though I can’t get my budget to balance every month, I’m still earning passive income and my net worth is increasing over time.

I think that being good at budgeting is helpful to building wealth, but I don’t think it’s essential to doing so. Other factors are so much more important when it comes to increasing your net worth and benefitting from long-term investments. In my humble opinion, a budget is an excellent tool in forcing you to articulate where you want to spend your money. Reviewing your budget at the end of the month is equally important. Doing so forces you to admit to yourself where your weaknesses are and whether you have properly identified your priorities. Sometimes, people think they want one thing when they really want something else. That’s okay. There’s no harm in learning what you truly want and spending your money in a way that allows you to obtain it.

When You Have a Safety Net, You Have More Options

Think of yourself as the star trapeze artist in your own life. You swing from one day to the next, endlessly until your part of the show is over. And each day brings its own options, challenges, and choices. Some of these involve risk. Think of these risks as letting go of one bar so that you can catch the next one. It’s easier to take risks when you know that there’s a safety net down below to catch you if you fall.

In real life, a cushion of cash acts as a safety net. If you start a new business and it fails, money in the bank means you’ll be disappointed but not financially crushed. Perhaps there’s an unpaid internship that you want to take. Having a multi-unit revenue property that covers your expenses, or parents who are willing and able to foot your bills, means that you can work without renumeration in order to pad your resume. Perhaps you’re simply mentally exhausted from work so you decide to take a sabbatical while living off your dividends.

Dividends. Cash-flowing rental property. Parents. These are all forms of a safety net. If you have access to them, then you have a surer foundation from which to pursue various options. To go back to the trapeze analogy, you can let go of the trapeze bar knowing that missing the next one and falling down won’t break you.

Try to imagine taking time off work to protect your precious mental health without anyone or anything around to pay the bills. How long could you go before being evicted? What kind of impact would the financial stress have on your mental well-being?

Having a safety net gives you room to breathe, to make choices that bring you closer to your goals. You’re not stuck. Getting un-stuck from whatever bad situation is making you unhappy is rarely ever easy, but it’s always easier with money. Hate your job? Quit! No longer love where you live? Move! Need 9 months off to pursue your Bucket List travel itinerary? Go!

When you have the safety net that money can provide, you’re free to pursue those options.

I’ve talked about having a safety net for Future You and that you need to save for your retirement. While that’s very important, you still have to live in the present moment. There are probably some things you want to try before you get to your golden years. It’s very likely that whatever those things are, they’ve got a financial component to them. I want you to pursue your dreams, but I don’t want you to be impoverished if those pursuits aren’t successful.

For my own self, I knew that I wanted Future Blue Lobster to have access to a stream of dividends in retirement. I’m happy to report that my army of money soldiers is growing nicely. I’m not doing as well as Tawcan and his annual dividend projections, but I’m getting closer and closer to my own goals each month. In other words, I’ve created a safety net for myself. I don’t have wealthy parents who can pay my bills for me. Instead, I now have an annual stream of income that will allow me to live without employment should it become truly necessary. It would be Lean FIRE in the extreme, but I would survive without going into debt.

Money buys options. Having a solid safety net in place means that you can pursue those options without worrying that doing so will lead to complete financial ruin. You can hope that your plans work out while knowing that you have the resources to recover if they don’t. The safety net of money allows you to consider risks that you otherwise would have disregarded. Imagine if you had rental property that paid all your bills, what would you do with your time? If you love your job/career, maybe you’d keep working. But if you wanted to spend a few months in an artist colony, you could do so without worrying about going bankrupt.

If you don’t already have one, I suggest that you work on weaving your own safety net. The bigger and stronger it is, the less risk you will face in pursuing whatever option you think suits you best. You won’t ever regret having a safety net if the time comes that you need one.

Spending Time! Use the Money in the Sinking Fund!

Hooray!!! It’s spending time! Break out the debit or credit card because we are going to use the money in the sinking fund!

One of my sinking funds – and I have many! – is dedicated towards my flower garden. I’m an amateur gardener in every sense of the word. Each year, I devote a few hours to planning what I want to buy and where I want to put it. The tail end of winter in Alberta can get mighty dreary so planning my garden is a good way to remind myself that spring is on its way. Container gardening brings me much joy. My wonky knees don’t allow me to comfortably kneel and work the ground like I see others doing. Containers raise everything up off the ground. And there are so many different styles of containers that I find it a bit overwhelming to choose. They’re not exactly perfect since planting can still be a bit hard on my back, but one of my Christmas presents last year was a gardener’s stool. I can hardly wait to use it this spring!

But I digress. My sinking fund for gardening is supposed to cover all of the following over the next few weeks:

  • compost, fertilizers, potting soil, and worm castings
  • a wide variety of annuals (petunias, marigolds, geraniums, verbena, sweet potato vine, coleus, and whatever else catches my eye while at the greenhouse)
  • new containers for all my annuals
  • new gloves, tools and hoses (if necessary)
  • more perennials and bulbs (lamium, hellebores, hostas, daffodils, tulips, balloon flowers)

Perennials are fabulous! They usually come back bigger and they bring their babies too. Free plants are a good thing as far as I’m concerned! My balloon flowers were transplanted 2 years ago. Last year, they did just okay and I let them go to seed. This year, I’m anxiously awaiting to see if they seeded themselves. Since they’re one of the last things to emerge in the spring, I’ve got another 5-6 weeks before I’ll have an answer to my question.

Bottom line – I’m always happy to see the return of my perennials, and I do what I can to ensure that they continue to love their space. This year, I’m finally going to implement the wisdom I’ve learned from Garden Answer and will add a new layer of compost to all my in-ground plants and containers. It’s supposed to refresh the soil since I don’t change the soil in my containers every year.

I’m just as much a fan of annuals. They have a place in my heart because they offer continuous flowers throughout the spring, summer and early fall. I’m in zone 3. For me, annuals always start small – since I’m too cheap to buy bigger plants! I don’t mind since I love watching their progress in the first 3 weeks. I’m not super-gentle when planting them, so they need a week to recover from transplant shock. Once settled and well-watered, they start to perk up by week three. Within six weeks, they’ve doubled in size and start to fill in the containers nicely. I love watching my annuals blooms! Watering them brings me a sense of peace, and takes away the stress of the day.

In another few weeks, I’ll be able hitting the greenhouses with my friends. And I won’t worry about how I’m going to pay for what I want. My sinking fund will cover the costs.

You should set up sinking funds too, if you haven’t done so already. I talk a lot about having sinking funds for the non-sexy parts of life, like vehicle insurance and property taxes. Maybe I should’ve also encouraged sinking funds for the fun parts of life too! What are your hobbies? Do you want to travel? Are you going to be buying seasons tickets to the theatre or to sporting events? Is there a new crafting skill that you want to master?

Use your sinking fund to pay for the fun aspects of your life too! I know a lady who blissfully spends her money on concerts. She never hesitates to buy the best tickets for whomever she wants to see! She loves going to concerts so saving money to do so is a priority in her budget. I know another lady who goes to writing workshops. One lady I talks about flying to another city for the day just to visit a particular restaurant. Different strokes for different folks, right? The thing they all have in common is that they identified their priorities and they use sinking funds to pay for them.

Let’s face facts. Spending money so, so, so much better when there’s no worry that it will result in debt. There’s no credit card hangover when you rely a sinking fund to pay for your priorities. When spending time rolls around, you can spend with ease knowing that you have the money to get what you want. The purpose of money is make your life better. It’s meant to alleviate stress, not to create it. Use sinking funds to buy what you truly want and to bring your dreams to life. There’s truly no down side to doing so. Happy, happy, joy, joy all around!

When Will You Stop Grinding for More?

Personal finance is personal. Read that again. For most folks, it’s hard for them to believe that there isn’t one perfect path out there, and that they will get everything they want if they find and follow it.

Hear me now. The only universal, iron-clad rules that applies to everyone is that you must live below your means in order to have money to invest. This rule is an immutable as the sun rising in the east and setting in the west. Everything else is details.

  • When to start saving?
  • How much to save and for how long?
  • Short term goals? Medium term goals? Long-term goals?
  • Pay down down debt or invest? One before the other, or both simultaneously?
  • Spend the dollar today or spend the dollar tomorrow?

Every other decision about your personal finance is a detail that you can adjust to fit your personal circumstances.

Your Priorities are Your Choice

You get to the identify your dreams and prioritize them as you see fit. Concert tickets before down payments? Charitable donations before travel? Clothes before adopting a pet? It’s your money, so you get to decide which expenditures are most important to you. Your dreams for how you want to live your life will guide how you spend your money as you move through the world. Read that last sentence again and continue doing so until you’ve embedded it into your subconscious. Once again, for the people at the back: You are the person who gets to decide which expenditures are most important to you.

The vast majority of us do not have enough money to buy everything we want as soon as we want it. Using credit to do so is unwise.

Why is credit bad, Blue Lobster?

Well, dear One, it is bad because credit isn’t free. When a credit card bill isn’t paid off in full when the balance is due, you pay interest. Interest payments to the bank do not benefit you…unless you hold shares in the bank. Still, even if you’re a shareholder in the bank, dividend yields are less than half the interest you pay on your outstanding balance. Moral of this little side-story: don’t pay interest and buy bank shares.

Back to Priorities & Choices

You get to set the timelines for your dreams. Some dreams can be made real sooner than others. These would be classified as short-term goals, and they can be achieved within 12 months or less. Long-term goals would cover the dreams that will take more than 5 years to achieve. Anything taking more than than a year but less than 5 would be a medium-term goal. Your dreams aren’t going to be the same as mine, so your timelines will also be different.

Next, you get to create the budget for your dream. This is where you put pen to paper and determine how you’re going to pay for it. Salary? Side-hustle money? Dividends and capital gains? Royalty payments? Inheritance? Insurance settlement? Lottery win? So many options! Admittedly, some are less dependable than others but I want you to consider all of your options.

You also get to determine how much research you’ll do to achieve your dreams. This might mean talking to others who’ve already done what you’ve done and asking lots of questions. It might mean taking a few courses, or watching some videos on line, or borrowing some books from the library. If your dream is important to you, then you’ll do what it takes to make it come true.

Never Forget – You’re the Dream-Weaver!

And as the dream-weaver in your life, you get to decide when you’ve fulfilled your dreams or when they’ve changed. Yes… sometimes, dreams change. When I was in high school, I was going to buy myself a Jaguar sedan for my 40th birthday. Let’s just say that this particular dream changed – and not because I didn’t have the money to do so by my 40th. As I matured and thought about what I really wanted for my life, the Jaguar XF would not have gotten me closer to what I really wanted. If what you want no longer accommodates yesterday’s dreams, then feel free to eliminate them from your priority list.

In short, you get to decide when you’ll stop grinding towards your dreams. Life isn’t about working 24/7 until you die, particularly if you’re doing so to fulfill dreams that you no longer hold dear. Only your money should be sent out to work that hard, so that you, the dream-weaver, can take the time to relax and to enjoy and to laugh and to just be…

So, Dream-Weaver, ask yourself when you will stop grinding for more?

The Grind

Go back to what I first said at the start of this post. Personal finance is personal. If you want to continue grinding for more, then there’s no reason for you to stop. Again, it’s your life, your time, your choice.

By the same token, if you want to stop, then do so.

However, if you feel like you can’t stop, then ask yourself why. There’s no one right answer for everyone but you owed it to yourself to understand your choice and your actions. There will come a point where your investment portfolio will support all of your dreams. (This assumes that you invest the difference between what you earned and what you spent, while you are living below your means.) At that point, you can ease off the gas pedal and enjoy the fruit of your efforts. This is a fancy way of saying that you can live out the dream-life that you so painstakingly built for yourself.

If at that point, you still want to grind as hard as you did when you first started, then you owed it to yourself to understand why. Knowledge is power; self-knowledge is no less so.