Author: Blue Lobster

Your Dreams Deserve to be Protected!

Welcome back! How have you been? We’re three weeks into 2023. It went by in a flash, didn’t it? How much closer are you to making your dreams a reality?

Hey! If you haven’t been able to do what you want, then cut yourself some slack. I know it’s not always easy to do what you want when you need to take care of the day-to-day of living. There’s laundry to be done. A commute to work is probably part of your day. Groceries need to be purchased and put away. Dishes needs to be cleaned, whether by hand or machine. Your body needs some exercise, lest it fall into disrepair sooner than necessary. And of course, we’re all supposed to get some 6-8 hours of solid sleep every night. It’s so very easy to forget about our dreams.

Well, I’m here to remind you that your dreams won’t make themselves come true. It’s up to you to see that they do!

Hear me now! Your dreams deserve to be protected from all those little things meant to drive them down your to-do list. Since this is a personal finance blog, I’m going to try and stick to the financial side of things. Temptation to spend money on everything but your dreams is everywhere and it’s very easy to succumb. After all, it’s “only” $10 or $25 or $50, so what can it hurt to spend a few bucks for a momentary pleasure? Well, those little expenditures add up quickly. This is why I encourage you to track your spending for atleast a few weeks. That way, if you ever find yourself asking “Where does all my money go?”, then the answer will be at your fingertips. Information is power, and you should definitely have power over your money.

You’ve heard me talk about the AdMan and his trusty sidekick, the Creditor. These two entities work tirelessly to separate you from your money. Sometimes, spending money gets you closer to your dreams. If you dream of a birthday lunch at the Eiffel Tower, you will have to spend your money to get there. Other times, spending money gets you further and further from your dreams. Paying for streaming services and food delivery immediately spring to mind. Indulging in these two things can add up to hundreds of dollars per year, spent on stuff that doesn’t last and is easily forgotten. I’m all in favour of binge-watching a few times a year, but I know that doing so won’t get me any closer to my big dreams.

Yup – AdMan and the Creditor are crafty buggers. It’s up to you to protect your dreams from temptations, and there are many. I’m a huge proponent of saving money. You’ve heard me talk about automatic transfers, investing for the future, and using sinking funds for short-term & medium-term goals. It may seem like I want you to save all of your money and never spend in the day-to-day.

That’s not quite true. I’d like to see you only spend money on things that really matter to you. After all, each dollar can only be spent once so maximize your enjoyment each time you spend. Most of us aren’t so flush that we can squander money on the meaningless things in our lives while also saving and investing enough for the things that we really want. And if you are that flush, then more power to you. The rest of us have to choose. I’m just encouraging you to choose that which matters most to you personally. If art classes make your heart sing, then that’s where your money should be going. Do not waste your hard-earned money on any of the million-and-one-bright-and-shiny things that the AdMan dangles in front of our faces and the Creditor is willing to finance.

Now, if you need to be frivolous with some portion of your money, then don’t let me stop you. Just keep that portion to 10% or less of your income. Unless you work really, really hard to make bad choices , wasteful spending of 10% of your money should not be enough to destroy the hard work being done by the other 90%.

No one else is going to care about your dreams as much as you do. Each of us has their own vision of a great life and no two visions are identical. All I can do is offer words of encouragement and maybe design a strategy for you to follow, but that’s it. At the end of the day, you’re the one who has to do the daily tasks that move you from where you are to where you want to be. I cannot promise that it will be easy. From what I’ve learned personally and observed from others, nothing worth having comes easy. Part of what makes success so sweet is the tangible recognition of dedicated, hard work paying off. Your dreams are no different. Imagine how it would feel to be living your dream life right now.

Think about your dreams every day. Nurture them by adding details and flourishes, until you can see them as vivid portraits in my your mind’s eye. Consider any possible impediments and craft plans to remove them from your path. Protect your dreams by cherishing them on a daily basis!

I promise that the more you think your dream, the more your mind will work towards making it happen. It’s like planting a seed in your subconscious. Even while you’re sleeping, your mind will be figuring out ways to make your dreams a reality. Tell yourself that you will make your dreams come true. Each day, remind yourself of you what it is that you truly want. Set a deadline for when you want to see your dreams come true and work backwards. What do you need to do today, next week, next month to meet your dream deadline?

Don’t let anyone else tear down your dreams. It’s a truly awful realization but you should know this. As you try to build the life you want, there will be occasions where those you love best will be a hindrance on the path to your dreams. Identify these people and acknowledge that they won’t help you make your dreams a reality. Cry about this, if you must. Yet do not under any circumstances allow them to prevent you from pursuing your dreams. Their derision about your life should never be enough for you to dissuade you from achieving the life you really want to live. Protect your dreams, no matter what!

You May Hate Your Job

You need an emergency fund because, one day, you may hate your job. When the day comes that you simply can’t take it anymore, you’ll need money. After all, most of us work for money. Our paycheques let us buy food, shelter, and other little things to keep body and soul together. Quitting a job doesn’t eliminate the need for money.

People have told me that I need to be more positive. Okay – here goes. I’m positive that you need an Escape Fund. If you’re very lucky, then you love your job. Each morning, you spring out of bed with a ferocious eagerness to get back to your paid employment. Accomplishing your employer’s tasks put a smile on your face and a song in your heart. If that’s the case, fantastic! You are living a great life and you probably can’t understand how the rest of us aren’t as happy at work at you are.

If you’re not one of the Fortunate Few, then you should building your Escape Fund. This is the money that will tide you over between jobs. If you’ve ever thought that you may hate your job, then you should have an Escape Fund. This is the money that will pay for your life between your last paycheque and your next one. Let’s say you need to move across country for your next opportunity. That’s unlikely to be a cheap trip. Maybe you’ve found a new job but it doesn’t start for another 3 weeks. If you have money tucked away in an Escape Fund, then you can quit your job today. You don’t have to prolong the agony of working at a job you hate for any longer than you have to. Your Escape Fund can allow you to have a 3 week break before you start your next job.

Burnout is real. Given the capitalist structure we live in, there’s no real incentive for anyone to talk about it. If you’re a super-stellar employee, there’s a good chance that your employer will want you to recover and continue to be a profit-center stellar employee for the company. And if you’re not valuable, then it’s far more likely that your employer will wish you the best of luck and get down to the business of finding someone else to do your job.

Today is when you should start preparing for the possibility of burnout. Maybe it will never happen to you. And if it doesn’t, then great! However, hope is not a plan. If you do get burnt out, then you may need to make some serious choices about your future employment options. Having an Escape Fund will buy you some breathing space to make well-considered decisions. You need not do anything super-drastic so long as you know that your basic needs will be met. Having the funds to buy yourself some time and space to think clearly is imperative. You do not want to ever feel like you don’t have options.

You may hate your job years from now, even if you love/like/tolerate it today. Maybe your work-bestie leaves. Perhaps the management style changes or your responsibilities increase to an unsustainable level. There’s always the possibility that harassment in the work place is left unaddressed or increases. Maybe the monotony of your role becomes too much to bear and you just want a change. There are any number of reasons why you may hate your job at some point in your working life.

My suggestion to you is that you start preparing for the possibility. After all, thinking about the possibility will also get your thinking about solutions to the problem. Who knows? One of the solutions for you just may lead you to something that you do love. Wouldn’t that be great? A job that you love and a nicely pot of money sitting on the side, just in case?

One Week Closer to Your Dreams

Well, the first week of 2023 is in the bag. Either you’re one week closer to your dreams or you’re not. No need to share your response with the class, but which one is it?

Personally, I don’t do New Year’s resolutions. Any day of the year is a great time to make beneficial changes to one’s life. January 1 doesn’t hold any special power when it comes to setting priorities for how you want to live the rest of your life. That said, I do use the sentiment of season as incentive set and re-assess the goals for my life. (Since this is a personal finance blog, I’ll only discuss my personal finance goals.)

Some of my financial goals are long-term, i.e. retiring ASAP, while others are in my near future, i.e. maximizing my RRSP contribution in May or June. I find that January of each year is a good time to figure out what goals are most important to me. This way, I can focus my spending in ways that get me closer to the life I want to live.

So far, and in no particular order, my goals for 2023 include:

  • paying cash for Christmas 2023 (no credit card hangover in January for me!)
  • contributing to my TFSA and RRSP
  • taking myself to the spa for my birthday in August
  • upgrading my iPhone
  • increasing my dividend cashflow by 10%
  • using my newly-creating slush fund (shout out to Bridget Casey of Money After Grad)
  • taking lunch to work more often than not
  • doing more meal prep so there’s less motivation to choose for fast food
  • maintaining my contributions to my non-registered account
  • beef up my emergency fund to account for inflation

These are the financial concerns that are currently most important to me. And since it’s my list, I’m the only one who gets to add, amend, or remove items. By the same token, I’m the person who has to fund them too.

How I Meet My Goals

Unsurprisingly, I’ll be using sinking funds for many of my goals. As I get paid, various chunks of money will be saved in various sinking funds until it’s time to spend the money. Most banks allow you to create nicknames for your various accounts. I love this feature! Nicknames are the perfect reminder of which priorities are being funded with my money. Should I ever need to withdraw money, then I know exactly which priority is being sacrificed for some other purpose.

Let’s use Christmas 2023 as an example. I get paid bi-weekly so I have 26 paycheques coming to me this year. My sinking fund will see contributions of $50 bi-weekly, which will give me $1300 to spend on Christmas in 12-months time. Now, if I think Christmas is going to cost more than that, then I can bump the amount up to $75 ($1950) or $100 ($2600) to cover my anticipated expenses. Thankfully, my family is nearby so I don’t have to cover huge transportation costs. We’re also not too big on gifts and prefer to focus on the food, playing with the kids, and playing board games. The lower amount of $1300 should be more than sufficient to cover the anticipated costs.

By starting to save for Christmas 2023 now, I won’t be scrambling for $1300 in 11 months time. I’ll have been saving throughout the year in small chunks. When the time comes, I can spend on gifts, food, and decorations without wondering where the money will come from to pay for everything. The money will have been tucked away just for this purpose. Easy-peasy-lemon-squeasy!

Automatic transfers take a good many money-decisions off my plate every year. They allow me to fund my priorities with the least amount of stress. I achieve my goals and get what I want by following this simple 3-step formula:

  1. My employer deposits money into my account on payday.
  2. Automatic transfers whisk a good chunk of it away to fund the things that are most important to me.
  3. Whatever’s leftover is spent on the day-to-day expenses of living: shelter, groceries, utility bills, entertainment, and other little nice-to-haves.

I never have to ask myself if I’m going to transfer money from my chequing account to my various savings and investment accounts. Thanks to the power of automation, the money is siphoned away before I have a chance to spend it.

51 Weeks Left

The first week of 2023 is in the history books. Hope it was a good one for you and that you’re one step closer to living your dreams. And if you didn’t get any closer to your dreams, then take a few minutes to figure out why. Ask yourself the following questions:

  • How are you going to spend your money over the 51 weeks left in 2023?
  • Are there any financial obstacles that are preventing you from getting what you want?
  • If yes, what would it take to remove them?
  • Are you willing to bear the consequences of removing money impediments from your life?

I get it. Change is hard, and I’m not terribly fond of it either. Still, life has taught me that sometimes changes have to be made in order to get what I want. Other people will always have opinions about how I’ve chosen, or not chosen, to spend my money. Guess what? They’ll sleep just fine with their opinions, but I’m the one who has to live with my choices. I’ll consider their opinions, before I do what I think is best for me.

You’re in the same boat. My opinions on this blog are mine. You know your financial situation way better than I do so you have to make choices based on the facts of your life. After all, you’re the one who is going to be saddled with the consequences of every choice you make. Life is a series of choices, after all.

When it comes to your money, I’m suggesting that you be the one to choose what happens with it. Don’t let anyone else spend it for you. Never let anyone else put you into debt! No one else knows what is most important to you. At the end of the day, your choices with money will affect every aspect of your life. This is why you should put in the effort to articulate what you want most then craft a spending plan to achieve it.

This is the very best way for you to move closer to your dreams, and to seeing them come true.

If you only do one thing in 2023…

Those of you who’ve been around here for a little while know how much I hate paying bank fees. However, if you’re new around here, then welcome! Here’s my free advice to you – use it as you see fit. If you only do one thing in 2023 to make your financial life better, consider moving to online banking.

Paying a bank to use your own money makes little, if any, sense to me. It’s a great move for shareholders since it’s a continuous revenue stream which boost bank profits. Most people don’t hold shares in banks, so they’re not reaping those particular rewards. As a consumer, bank fees are an easily avoidable financial nuisance. They’ll run you atleast $100 per year. Ask yourself if there’s anything else in the entire world that you would rather pay for than bank fees. And if bank fees are still at the top of your list, then please continue to pay them and come back next week for more of my bon mots.

The Expensive Banks are plucking you.

I don’t much like being the bearer of bad news, but here I go. You are the golden goose. The Expensive Banks are plucking your money feathers, every single month. Money goes into your chequing account and they reach in, with your permission & consent, to take some out every single month. These were the terms when you opened the account. Good for the Expensive Banks, not so good for you.

At the time of this blog post, the major banks in Canada all offer unlimited banking for various monthly fees:

I’m forced to acknowledge that some of these banks will waive their monthly fee if you’re willing to leave $4000 sitting in your chequing account, earning no interest. In short, you have to leave several thousand dollars in your chequing account in order to avoid paying the monthly fee. I’ve always hated this requirement. In my personal opinion, I don’t think you should have to ransom several thousand dollars in order to keep your money.

Also, the monthly fees go down so long as you don’t go over a pre-determined numbers of transactions per month. For most of these banks, that number is 25 transactions per month. If you do more than 25 transactions, then you’ll pay a fee for each additional transaction.

To recap, the Expensive Banks allow you to pay them a couple of hundred dollars per year. For the low price of a couple of tanks of gas, you can have 25 debits, utility payments, e-transfers and/or ATM withdrawals. Should you need more than 25 transactions per month, you can pay for a more expensive bank account or you can get dinged atleast $1.25 for each transaction over the limit.

What if I were to tell you that there is a way for you to have unlimited debits, utility payments, e-transfer and ATM withdrawals without depriving yourself of access to several thousand dollars?

You have options, and you should choose to use them.

If you only do one thing in 2023 to make your personal finances better, please let it be doing some investigation into the following online bank accounts.

At the time of this post, two banks offer chequing accounts with unlimited transactions with no minimum balances required to have monthly fees waived. You can set up direct deposit with these accounts, just like you can with the expensive banks. These are great products! Why pay fees if you don’t need to? Unless it is your dream to pay bank fees, why not put that money towards making your actual dreams come true?

I’ll admit that online banks don’t have great interest rates. So what? None of the banks offer great rates on their chequing accounts! Besides, the truth of the matter is that your emergency funds should be in EQ Bank, where they will earn atleast 2.5%. Money for your retirement should be invested in well-diversified equity exchange traded funds (ETFs) so that they can benefit from the stock market’s long-term average growth, which is well above whatever rate your bank is giving you.

In case no one has ever told you this, you should not be keeping your emergency funds or your retirement money in your chequing account. Your chequing account is for daily transactions: debit payments, utility payments, debt payments and rent/mortgage payments. Money that is not needed for daily living should be in your emergency fund and in your retirement accounts, never in your chequing account.

Cease paying bank fees, unless you really enjoy doing so.

There’s no getting around the fact that you probably need a bank account. However, I’ve yet to hear a good, persuasive reason for why you should be paying several hundred dollars each year for the privilege of having one. There are equally good options available to you and they are free. Why do you want to pay for something when you can get the same thing for free?

Setting up a new online bank account is not hard. It doesn’t take an exceedingly long time either. You can probably do it on your phone. There are 365 days in 2023. If you only do one thing in 2023 to save money, find some time to save yourself a couple of hundred dollars.

And if you’re absolutely 100% committed to paying bank fees, then atleast buy yourself some shares in the banks so that you can recoup some of your fees in the form of dividends!

Full disclosure: I bank with both Simplii Financial and Tangerine. My accounts have been open for years, and they’ve served me well. If you open an account at Simplii Financial, please use my referral code: https://mbsy.co/6qqBSr We will both get paid money if you do.

HAPPY NEW YEAR!!!

I’m not an expert but….

I am not certified by any governing body to tell you how to spend your money. My words of advice were earned at the School of Life, a place where all of us are students. I’m telling you this so that you realize that I’m not an expert, but I’ve still learned a thing or two. If you do what I did, you’ll do fairly well with your money over a lifetime. Here are my tips to acquiring a heavy wallet.

Don’t spend every penny you earn.

First off, I’ve yet to meet anyone who’s been harmed by living below their means. Spending less than your take-home income has no downsides, as far as I can tell. The difference between your net income and your expenses is called “savings” and savings can always be stashed away for various things.

Emergency Funds are not optional.

Secondly, life without an emergency fund is an invitation for financial trouble. There’s an emergency in your future. You simply have no way of knowing when it will show up. I promise you this though. No one in the history of the world has ever lamented about having too much money set aside to deal with the inevitable emergency. If you don’t have an emergency fund, start one immediately and set up an automatic transfer from your paycheque to fund it.

It’s going to take a bit of time to build up a decent emergency fund. That doesn’t matter – just start building it. When the emergency hits you smack in the face, you’ll be quite grateful that you won’t have to worry about the financial side of dealing with it.

Investing for Tomorrow You isn’t optional either.

Thirdly, start investing your savings. Yes – some of your saving will go to building an emergency fund. The rest of your savings should be split between your short-term, medium-term, and long-term goals.

One your most important long-term goals is how to feed, shelter, clothe, and entertain yourself when you’re too old to work. Tomorrow You still needs money to survive until the very last day of your life. The steps you take today to invest your savings will increase Tomorrow You’s chances of having a financially comfortable life once employment is over.

You need to start funding your retirement accounts – namely the Tax Free Savings Account and the Registered Retirement Savings Plan.

If you have to choose between filling the TFSA or the RRSP, my recommendation is to fill up the TFSA first. The TFSA contributions do not generate a tax refund, but the money invested inside the TFSA will grow tax-free and can be withdrawn tax-free.

Should you be so fortunate as to have sufficient money to fill both your TFSA and your RRSP, then do so.

If you still have savings After you’ve filled your retirement accounts, then open a non-registered account with an online brokerage. Invest your remaining savings to earn capital gains and dividends. The money earned in your non-registered account will be taxed every year. The upside is that the taxable rate on your capital gains and dividends will be less than the taxable rate on your earned income.

Inflation isn’t going away anytime soon.

Fourthly, inflation is running high. No one knows when it’s going to go down, so assume that things will be increasingly expensive for the foreseeable future. There are no simply answers to this problem, so my advice to you is to cook more of your own food. I love socializing over food as much as the next person. And I do sometimes yield to the incessant call of the fast food window or the food delivery app. However, inflation running at 7%-8% has forced me to be a lot more disciplined. I’m heading to the grocery store instead of tapping out an order on an app. I’m slicing and dicing, mincing and sautéing, frying and baking in my own kitchen. One of these days, I’ll even master the art of meal planning for the week instead of simply for the next 3-4 days.

My advice to you is learn to grocery shop then spend more time in the kitchen. If there’s something you want to learn to make, there’s someone on the Internet who has a recipe and a video to show you how. I can promise you that $60-$80 spent at the grocery store will yield you a ton more food than the same amount spent at a restaurant, fast food outlet, or food delivery service.

Stay out of debt

For whatever reason, our society has decided that it’s a good idea to put people into debt. The scope and manner in which any one person is able to go into debt is truly breathtaking: student loans, vehicle loans, mortgages, credit card debt, etc…

There’s no legal limit either. It’s not like there’s a law which says “No person is permitted to carry more than $650,000 of debt at any one time.”

So long as there is a creditor who is willing to extend you credit, you can dig a deep a hole as you choose. Even after a creditor stops extending you new credit, the hole still gets deeper thanks to the power of compound interest and the piling on of fees.

Do yourself a favor. Don’t go into debt. If you’re already in debt, then work very hard to get out of it.

You know those savings that I was talking about at the start of this post? Take 25% of them and throw them at your debt. You can use the snowball method or the avalanche method to make extra debt payments over and above your minimum payment.

I really don’t care, which method you choose. Just start making those extra debt payments and get yourself out of debt as soon as possible.

Again, I’m not an expert.

I’m just a person who has learned a few things about money from my own experience. I’ve also observed the financial choices and outcomes of others. Getting out and staying out of debt has done wonder for my financial life. Spending less than my net income has allowed me to set aside money for my retirement while also fulfilling most of my short-term and medium-term goals. Cooking at home has definitely contributed to a heavy wallet. My emergency fund helps me sleep well at night.

Even though I’m not an expert, some of these tips might help you too. Take what you need – leave the rest.

Sinking Funds – Making the Most of Your Money

I’ve written about sinking funds before. They’re pools of money that are meant to be filled then emptied, as many times as you want, for as many goals as you have. You prioritize what you want to accomplish then you decide how much money goes into each one. Sinking funds are to be held separately from your emergency fund, your investment account, your retirement account, and your daily chequing account. These funds are where you hold money for your short-term goals:

  • annual premium payments & subscriptions;
  • holiday spending, birthdays & celebrations;
  • travel;
  • tuition and annual fees;
  • house down payments;
  • renovations;
  • vehicle purchases & maintenance;
  • furniture purchases;
  • annual taxes;
  • RRSP & TFSA contributions.

Sinking funds allow you to save first, then spend your money. In case you were unaware, they are highly effective at keeping you out of debt while allowing you to still earn points/cash for using your credit cards. Let’s imagine that you’re planning to take a culinary tour in 2024. Dedicate a sinking fund to that expense and start saving for that trip today. When the time comes to book it, you use your credit card, collect your points, and pay off the credit card bill in full. You can enjoy your trip without wondering how you’re going to pay for it. Sinking funds are simply fantastic!

I have to confess that it took me years to set up all of my sinking funds. The truth is that you can’t save what you don’t earn. Early on in my career, I had a lot more debt and ridding myself of loan payments was top priority. The only sinking fund I could manage to fill was the one for my annual vehicle insurance and annual property taxes.

Monthly Payments Aren’t For Me!

I’ve always hated the idea of someone being able to withdraw money from my bank account every single month. I want to be the one in charge of when money leaves my bank account. The idea of a business accidentally withdrawing a payment twice and then having to fight with that organization to get my money back makes me furious and queasy. As a result, I’ve always chosen annual payments for my insurance premiums and tax payments. My first sinking funds were for those two expenses. Any other goals were funded from my bi-weekly paycheque via automatic transfers.

Once my student loans and vehicle loan were eliminated, I re-directed those payments to other sinking funds. My next big priority was travel! Every two weeks, a chunk of money went into my travel account up to a pre-determined amount. When it was time to book a trip, the money was there. It was awesome!

Did I stop setting aside that chunk of money once it was no longer going to the travel sinking fund? No! Instead, that money was re-directed towards my next highest priority until that pre-determined amount was met. In this way, my sinking funds were funded every year and I had the money set aside to pay for what I wanted.

Homeowners Need Sinking Funds.

Eventually, I moved from my first condo to a house. Woah!!! Anyone who owns a home will agree that it’s a money-pit. There’s always something to be fixed, replaced, maintained, or updated. As soon as I moved into my house, I realized that it was definitely time for a few more sinking funds dedicated to renovations and maintenance. Since being in my house, my sinking funds helped me to do the following:

  • renovated the basement and downstairs bathroom,
  • pour a new driveway, garage floor and walking paths,
  • have trees removed,
  • have landscaping work done,
  • change my main bathroom,
  • install carpet,
  • replace windows, eavestroughs & siding,
  • pour insulation;
  • buy new furniture & electronics;
  • install a new water heater & furnace;
  • remove a shed;
  • install a sprinkler system.

Believe it or not, there are still many other things that I want to do around here. If I hadn’t created my sinking funds when I first moved in, I would be neck deep in debt and stuck on a payment treadmill. Planning out my purchases in advance allowed me to plan out my money too.

It Can Take a Few Years.

For as much as I love my sinking funds, I was never able to fill all of them at the same time. I simply didn’t have enough money. There was no way my paycheque could have paid for everything all at once when I first started. As my income grew, so did the amount that I could allocate to my sinking funds.

Some funds had to be replenished every year, so they went into a dedicated account. Insurance and property taxes come to mind. They need to be paid every 365 days so I group them together in one sinking fund. It has been filled then emptied on a regular basis for the past 30 years. Once that sinking fund is filled, my money goes towards filling my other ones.

Other sinking funds have been for one-time purchases. Trust me – it’s highly doubtful that I will be cutting down the same trees more than once. The monies for one-time purchases goes into an account where the nickname could be changed as needed. “Tree Removal” would become “New Tire Fund” or “BAC Subscription” or whatever else happened to be next on the priority list.

Finally, there are the sinking funds that were put aside due to global events. During the pandemic, I discovered a love of my own backyard. Literally! The summer of 2020 and 2021 were spent in my own yard, tending to my annuals and watering my lawn. International travel fell to the bottom of my priority list. It still kind of blows my mind that it’s been over 3.5 years since I’ve been inside an airport!!!

My point is this. You may have more priorities than money. So what? Use sinking funds to maximize the enjoyment of your money. Ensure that it’s dispersed in ways that will allow you to live your best life. Like I said before, I didn’t start out with enough money to do everything that I wanted. International travel took backseat while I fixed up my house. Fixing up my house took backseat until I was out of debt. Getting out of debt was secondary to stuffing my RRSP as best I could on my entry level salary.

The bottom line is that I had to get a few pay increases under my belt before I could increase the amount of money going to my sinking funds.

If it takes you a few years to set up all of your sinking funds, then so be it. That’s completely normal. Only the privileged can do it all at once. The rest of us have to do more strategizing. The time will pass anyway so you might as well be using your time and your money in ways that get you what you want most.

Know Your Own Numbers

You need not be obsessed with personal finance but you do need to understand it.

Wisdom from the Internet

It’s long been said that information is power. This maxim is just as applicable to your money as it is to anything else. The more you know about your own finances, the better decisions you can make to create the life you want.

In the past few months, I’ve started following a channel on YouTube where people are interviewed about their money. They all have debt, which they say that they want to eradicate. Each of them says they want to live on their own, or start a business, or buy a house. Invariably, all of the interviewees reveal that they don’t know how much money they earn each month. Of the interviews I’ve watched to date, nearly all of the interviewees are paid hourly. Most of them have received a paycheque yet none of them know how much they bring home in a month. None of them!

It’s astonishing to me that they don’t know the most basic information about their financial lives. And it’s not an age thing. The interviewees I’ve seen have ranged in age from 19-32. These aren’t all fresh-faced high school graduates who’ve just left the nest. Most of them live with roommates, so they’ve had a taste of the adult responsibility of paying rent & making sure the lights stay on while putting a bit of food in the fridge.

If you’ve stumbled upon my blog for the first time, welcome! I hope you like it here and I hope you come back. Most importantly, I want you to know your own numbers. This is foundational knowledge. You need to have to this information when setting financial goals for yourself.

*** If you’re already a person who tracks their income, then the rest of this post might not be for you. ***

In order to build the life you want, you need to know your own numbers. I’ve written about the importance of tracking your expenses. The same importance should be placed on tracking your paycheques.

At the very least, know how much money you’re bringing home in your paycheque. This is your net income, aka: money you keep after taxes and deductions. When you spend less than your net income, then you have money to build an emergency fund and to invest for your goals. If you spend more than your net income, then you’re living in debt. This is a bad situation and it needs to be curtailed immediately. If your expenses are exactly equal to your net income, then you’re living paycheque-to-paycheque. Just like being in debt, this is a bad situation because you have no wiggle room. Any unexpected expense will push you into debt because you don’t have an emergency fund. You also don’t have any extra cash flow coming in from your investment portfolio in the form of dividends, capital gains, and interest.

I’m always baffled when people say they don’t know their net income. How can you make financial plans for yourself when you don’t know how much you have to work with?

Nearly everyone has a cell phone. They all come with calendars. Go into your phone, set up alerts to tell you when you’re getting paid. When you get your paycheque, track that amount. You can use a pen and paper, a spreadsheet, or an app. It doesn’t matter. You just need to know how much money will be in your pocket until your next paycheque.

Once you have that number, you can start subtracting your expenses from it. I would suggest that you always allocate money to your needs first. After that, every other expenses is a want. You’re human, therefore food and shelter are your top priorities. Given that you’re working for a paycheque, you’re probably not independently wealthy. So that means your next priority is paying for transportation so you can get to work. Life offers no guarantees. You need to put some money aside in your emergency fund.

Do you still have money leftover after paying for these four critical items? Great! Get busy figuring out which one of your many, many wants is the next most important to you. Cell phone or clothing? Gym membership or gifts for loved one? Pet care or charitable donation?

When your expenses have exhausted your paycheque on paper, then you stop spending. Wait! Are there still things that you want but can’t be covered by your net income?

Then you’ve learned something! You’ve discovered your shortfall amount, aka: the amount of money that you need to earn to pay for all the things you want to buy. Your next step is to figure out how to make more money to cover the shortfall. Maybe you get a promotion. Perhaps you sell some things that you no longer need or use. You could find a better-paying job or get a promotion with your current employer. Maybe you pick up a part-time job or offer your services to people who need them.

Again, information is power. It’s up to you to know your own numbers so that you can figure out what it will take to build the life you want. If you start today, then you’re one day closer to making your dreams come true.

Take Action Today – Don’t Wait for New Year’s Eve!

As you may know, I’m not a fan of New Year’s resolutions. To my mind, if something is good for me, I should start doing it today if it’s in my power to do so. Waiting for some arbitrary date on which to implement something beneficial seems a little… stupid. Delaying means that I’m continuing with something not-good instead of making my life better as soon as possible.

But that’s just me. You do you as you see fit.

There are exactly 6 weeks left in 2022. You might to cast a thought or two towards the status of your money and how it’s done in the past 10.5 months. Are you happy with how you handle money? Do you think that there are areas where your habits & choices could be tweaked? If you could go back in time, would you make the same choices?

Most importantly, what have you learned about yourself from the way you use your money?

Emergency Fund

How’s your emergency fund? You really should be plumping it up. Inflation is still a bear and interest rates are going up. When the emergency lands, you’ll be grateful that your emergency fund is on the larger side. Make sure you’re adding a few dollars to your emergency fund every time you’re paid. It takes quite a while to get it to a five-figure size. Even if it’s only $5, start there and work your way up. More is usually better when it comes to having money in your emergency fund.

I have yet to hear anyone complain about having “too much money” when they’ve lost their job, or had to repair the vehicle they need for work, or had to wait for their sick leave benefits to kick in. An emergency fund is supposed to replace your income for a short-term period until you’re working again. No one really ever knows how long they’ll be out of work, so more is better when it comes to having money set aside.

And since no one ever knows when something will happen that will threaten their income, it’s best that you take action today. Do not wait for the next calamity to arrive before you start funding your emergency fund. Think of the people who lost their jobs when COVID-19 arrived in 2020. Want to bet that many of them wished they’d had an emergency fund in place to cover their bills while they were unable to earn their income?

Funding your retirement – TFSA and RRSP accounts

Maybe you’ve got a pension. Maybe you don’t. Either way, you should be saving for your own retirement. After all, a pension is simply a promise. Sadly, promises get broken. Just ask the pensioners who worked for Sears and Nortel. Those retirees did not get the money that they were promised. In short, these workers held up their end of the bargain by working for their employers for decades with the understanding that they would be paid a pension amount every month. To put it mildly, the employer did not come through on that promise.

Don’t let this happen to you! Start saving money for your own retirement, over and above whatever your employer has promised you. Every time you’re paid, shuffle a little bit of money into your personal retirement account. If you’re fortunate enough to have money for both, start with your Tax Free Savings Account and fill it up before you move on to contributing to your Registered Retirement Savings Plan. Despite their names, do not leave money in your TFSA and your RRSP in savings accounts. Invest your money in the stock market by using exchange-traded funds or index funds that are equity-based.

The sooner you invest, the sooner your money can start to grow. Take action today.

Once you’ve invested your money, leave it alone. If you’re more than 5 years away from retirement, then you’re investing for the long-term and you can safely ignore the Talking Heads of the Financial Media. The THFM are there to generate ratings for their media platform, not to give you a personalized assessment of your current financial situation. If you want that kind of attention, then hire a fee-only financial planner. You’ll pay the bill and you’ll have the assurance that her or his opinion is about your money circumstances. Again, hire a fee-only financial planner. Anyone else is probably just a salesperson who get a commission when you buy a recommended product.

Track Your Expenses

Where does your money go? How many automatic expenses go through your bank account or your credit card? How much do you spend with cash?

It’s my belief that knowledge is power. In order for you to be powerful with your money, you need to know how you spend it. Start tracking your money. Use an app. Fill out a spreadsheet. Pick up a pen and put it to paper. I don’t care what method you choose. The bottom line is that you need to know where all of your money is going.

Armed with that information, you’ll be able to figure out if your spending choices align with your life’s priorities. In other words, are you spending your money in the best way possible to get what’s most important to you?

Right now, we’re in an inflationary period. Everything is more expensive!!! The same dollar buys less today than it did last year. Given that reality, it’s vitally important that you’re satisfied that you’re spending choices reflect your goals. Unless you get a raise, it’s not like you have more money available for daily life. Winning the lottery, inheriting lots of money, and getting an insurance payout are not reliable or predictable ways to obtain more money. For most of us, we work – we get paid – we spend-and-invest our paycheques. Unless our paycheques increase, there’s precious little flexibility to get more money.

You give up time doing whatever-you’d-rather-be-doing to work and earn money. Respect your efforts enough to know where that money is going. Take action today and become intimately familiar with how, when and why you’re parting with your hard-earned money.

Slay the Debt Monster

We all know that it’s incredibly easy to get in to debt. Credit is everywhere! A few clicks on your phone, tablet, or computer and some creditor will be sending you a credit card in moments. Credit and debt are two sides of the same coin. You cannot go into debt unless someone has extended you credit. Alternatively, you can’t be in debt if you don’t use credit. See how that works?

If you have debt, then do what you can to get out. Maybe you take a second job and the paycheque from that job goes straight to your debts. Perhaps you start selling things that you don’t need or use anymore. Money from those sales goes straight to your debt. Do some batch cooking so you can cut back on eating out. There’s always the option of giving up subscriptions for a few months. Do you need all of your streaming services right now? Could you live with one of them for 2-3 months, then switch to a different one later? While they’re still only less than $20 each, if you have more than 5 streaming services then you’re spending close to $100 per month.

Take that $100 per month and throw it at your debts. Pick the smallest debt – pay it off first by adding the $100 to your minimum payment on that debt. Take that former payment and add it to the $100. Apply that payment amount to the minimum payment on the next smallest debt and pay it off. Now two debts are gone. Take those two former minimum payments and add them to the $100. Apply that amount to the minimum payment on the third smallest debt and pay it off.

This method works. You’re making minimum payments on all of your debts, except for the one that’s getting the extra money.

That’s it – that’s the post.

Hopefully, you’re doing okay. No one can predict the future, but I can promise you that tomorrow’s challenges will be easier to handle with money in the bank. Take action today and make the money moves that will help you to make your dreams come true.