Category: General Thoughts

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.

A Faucet of Income

Even if you’re a Singleton like me, the implications of intergenerational wealth may have touched your life at some point. I like to think of intergenerational wealth as a faucet of income that helps younger generations to start their adult lives without debt. It’s a financial tool that allows young adults to master the skills of successful adulthood without being burdened by the yoke of debt.

In my case, my parents were able to pay for most of my education. They did the same for my brother. And had I not moved out during my second degree, they likely would have paid for all of it. I graduated with $15,000 in student loans and was fortunately able to pay them off within 2 years of graduating.

I’ve mentioned before that my parents weren’t rich, but they were long-term thinkers. My “Baby Bonus” cheques were deposited into the bank to buy Canada Savings Bonds from the time I was born. Interest rates were good – the money grew – my (and my brother’s) university was paid for – hooray! This is but one small example of the power of intergenerational wealth.

The parents in my social circle are using Registered Education Savings Plans (RESPs) to fund the costs of their kids’ educations. I’ve no idea how they invest their money, but I admire their determination to ensure that their kids have access to this form of intergenerational wealth when the time comes.

This week, I was listening to Beardy Brandon of Bigger Pockets on his YouTube channel. (Rest assured that I’m not getting paid for mentioning this website.) If you don’t know who he is, Brandon is a very successful real estate investor who runs a very, very successful blog teaching other people how to be successful real estate investors too. In one particular episode, Brandon mentioned buying properties for his children and having them paid off by the time that his kids started post-secondary school.

Wait! What?

Yes – you read that right. Part of Brandon’s plan to create a faucet of income for his family is to buy his children a property when they’re young, have it paid off by the time they graduate high school, and use the rental income and/or equity to pay for their post-secondary schooling. Along the way, Brandon’s kids will learn the real estate investment business while having some skin in the game.

Plans are the Result of Dreams Mixing with Money

Intergenerational wealth starts with a plan. This is not surprising. Yet, a plan without the money to implement it remains a dream. If Brandon didn’t have money, then he couldn’t have bought homes for his children. If my parents hadn’t had money, then they couldn’t have bought Canada Savings Bonds for their kids’ education. Sam Walton had to have the cash set aside to buy the first store way back in the day, long before the Wal-Mart empire took over the world and ensured that his kids never had to run a cash register for a living.

What I find so incredible about the stories of intergenerational wealth is that the parents (or grandparents) set a living-and-breathing example of delayed gratification for their children. They are long-term thinkers who find ways to use today’s money to fund the dreams of a tomorrow that may be well over a decade away. I always imagine young parents holding their new baby for the first time and thinking “How are we going to pay for med school?”

The decision by an ancestor to keep a little bit back in order to invest it in something profitable changes a family tree. The parent is taking a leap of faith, although hopefully a well-researched one. No one knows what tomorrow will bring and there are no guarantees that the investment will pay off. However, choosing to never invest in anything is guaranteed to bring a return of absolutely nothing.

Start Adult Life Without Debt

If not for my stubborn decision to move out of the house, I could have graduated completely debt free. My parents had created a faucet of income that would’ve allowed me that privilege. Instead, I made a short-term decision and there was a debt to pay.

Now that I’m well into adulthood, I have a better appreciation of how significant a gift it is to start adulthood without debt. I’ve paid off a mortgage, car loans, and student loans during my time. I took out the debt knowing full well that I had an obligation to pay it back – no argument there.

However, that doesn’t stop me from envying Brandon’s children who won’t have to take out a mortgage for a home. If they want to live in the homes that their father has bought them, they can. Should they decide to live in another home and have the first one pay the mortgage on the second home, they can do that too. And if they want to travel the world, their rental income can fund their travels. In short, they don’t have to take on debt because their father has created a faucet of income for them. It’s a plan that’s 15+ years in the making – another example of that long-term thinking that I was mentioning before.

Intergenerational wealth is a way to avoid assuming crippling debt burdens in your 20s. Beneficiaries of such largesse are able to start their adult lives on a firm financial foundation.

For example, take student loans. For some people, they’re a path to a financially secure future. After all, one can’t become a cardiologist without somehow footing the bill for medical school. However, there’s no denying that student loans can also trap people on a hellish repayment treadmill because they borrowed $100,000 for employment that pays $35,000.

It’s astonishing to me that people as young as 18 are allowed to take on huge financial debts, yet they’re not allowed to legally imbibe alcohol in many jurisdictions in North America.

“I’d like to borrow $30,000 per year for a degree, please. I have no idea how much I’ll have to pay back for these student loans once the interest is calculated. I’m not certain whether the salary of my desired career will allow me to pay off these loans while still saving for a home, a family, and a retirement. I also have no idea how to calculate how much my anticipated monthly repayment will be.”

“Sure – not a problem. Just sign here.”

“And I’d like a beer.”

“What the hell is wrong with you?!?!! You’re too young to drink!”

Play the Hand You’re Dealt

When you have access to intergenerational wealth, then debt isn’t such a significant factor in your life. You don’t have to borrow money for your education. You might not have to borrow money for a home! Just imagine how different your life would be if you didn’t have any debts to re-pay.

The reality is that not all of us are born to parents who have the money to buy properties for us. Some of us have parents who have the money but also believe that we should take out loans or find another way to fund our educations without their help. What can I say? You play the hand you’re dealt and you do the best you can.

Singleton or not, you have the power to create a faucet of income for someone else.

Living hand-to-mouth means that there’s no room for savings. This is a tough way to survive since you’re always living on the edge. Your income is barely enough to satisfy your necessities of life. This is a poor foundation from which you can build intergenerational wealth, but I’m not saying it’s impossible to do so.

You might want to think about how you’d like your money to be spent when you don’t need it anymore. Do you have nieces or nephews? Maybe there’s a neighbourhood kid who doesn’t drive you crazy? Perhaps you’ve always wanted to start a scholarship for kids interested in the things that tickle your fancy?

Even if you’re not a parent, you have the ability to create intergenerational wealth for someone in your world.

Credit cards everywhere!

Earlier this week, I went shopping at Canada’s last remaining national department store. I’ve been searching for black pants for the past few months and I had some time to kill between appointments so I took myself shopping, an activity that I normally hate very much.

To my very pleasant surprise, I found the pants that I was looking for and they were on sale for $29.99. Hooray for Blue Lobster! Exactly what I wanted at a price that I was willing to pay. Does it get any sweeter than that?

So I took my awesome find to the till…and the credit card tussle began.

The cashier asked me if I had a last-remaining-national-department-store credit card, which I’ll refer to as the LRNDSCC for simplicity’s sake.

I said that I did not.

She asked me if I wanted to apply for one.

I said “No, thank you.”

At this point, she gave a look that very nearly had me checking my shoulders to see if I’d grown another head.

The cashier doubled-down. She told me that I could save 15% on my purchase if I were to apply for a LRNDSCC that very moment.

Again, I replied “No, thank you.” And then I threw her for a loop. “I don’t need any more credit.”

I thought she would faint, but she held it together. That cashier indicated that it wouldn’t take but a minute and she repeated that I would save 15% on my purchase immediately.

Once more, and with a smile, I told her “I don’t need any more credit.”

At that point, she stopped pushing the credit card. I have assume that, during her cashier training, she’d been instructed to keep pushing credit until the customer had denied it three times.

She was so perplexed by my refusal that I almost felt sorry for her… until she asked me for email address. I told her I didn’t want any email. She started to tell me that providing my email would allow me to get notice of sales and special offers. I just shook my head. Still reeling from my denial of credit, that hard-working cashier simply gave up and rang up my purchase.

Why not accept the credit card offer?

I thought about this a lot on my drive home. It’s a bit more complicated than the fact that I don’t need more credit. Tis true – I don’t need more credit. I have plenty and it’s sufficient for my purpose. In a certain respect, credit is like dish soap. Why would I use more than I need?

The other reason I didn’t accept the offer was because I don’t believe that the reward was worth the risk.

Risk, Blue Lobster? What risk is there in accepting a store credit card?

Well, there’s the risk that my information will be compromised. The more cyber locations housing my personal information – name, address, social insurance number, salary, etc – the more opportunities for Bad Guys to steal it and engage in identity fraud against me.

Limiting the number of creditors with my information offers me some measure of comfort and control.

Check this out – 37,000 customers from Transunion have had their information compromised. This is not a good thing. I might already be one of those unfortunate customers, so I’ll have to keep a close eye on my credit cards to ensure that my financial identity remains safe. I suggest you do the same thing too.

On a purchase of $29.99, I wasn’t willing to increase the risk of identity fraud simply to save $4.50. Fortunately, I had the extra $4.50 in my budget to make the purchase without impacting my ability to pay for shelter, food & my bare necessities. My choice to spend the additional $4.50 means that I won’t be taking on the risk that Bad Guys hack into the credit card information of the LRNDS and steal my personal information.

The third reason why I didn’t accept the credit offer is simply because having credit in my wallet means being tempted to spend on that card. Why put myself in a position of temptation if I don’t have to?

The 15% discount was a one-time thing. Again, I would’ve saved $4.50 on a pair of pants if I’d accepted the offer. Yet, I would have a shiny new piece of plastic winking at me from my wallet. And the sole purpose of that new little item would be to put me into credit card debt.

So how many credit cards do I have?

I have two. They’re accepted everywhere. One is for my day-to-day, and the other is for travelling. Both of them are free. Both of them offer rewards that suit my lifestyle perfectly. Personally, I see no reason to get anymore credit.

While I’m willing to accept that credit cards are a convenient tool for many people, I still think it’s a great idea to limit one’s access to this particular tool. My rules for this tool are simple – pay it off, in full, every single month. If you can’t do that, stick to cash.

Physical currency will buy you the exact same things that credit cards will, and it provides the additional benefit of preventing you from ever going into debt. Cash is still king for a reason.

The next time you’re offered a retail credit card, be brutally honest with yourself. Think about whether you really need it. Will you be tempted to spend on that new credit card? Is the savings of that particular purchase worth the risk of someone hacking your information?

Why Isn’t Credit Card Math Taught in School?

Today, I checked my credit card statement and found out that I have to pay $191.13 by October 10, 2019. The box at the bottom informed me that if I were to make the minimum payment ($10) at my current interest rate, then I would pay off my balance in 2 years and 0 months.

WTF?!??! At $10 per month, it would take me 24 months to pay off $191.13. So, I’d be paying $48.87 (= $240-$191.13) in interest over 2 years. The interest of $48.87 is 26% of the outstanding balance of $191.13. Ridiculous!

I also have to remember that if I make any other purchase during that two year period, then the amount owing would go up. that would mean that my bank would charge me even more interest.

So why isn’t credit card math taught in school?

I remember learning how to add, subtract, multiply, and divide. There were lessons on algorithms, on calculus, on algebra. My teachers spent time on the subject of simple interest, compound interest, and how they differed. I very definitely recall word problems involving distance and time.

Yet at no point during my many, many years of schooling do I remember any lessons on how to calculate credit card interest. Sure – I know that if I don’t pay my bill then I’ll be charged 19.97% annually. But is that compounded monthly or annually on my outstanding balance? Does that rate apply to any fees that I might have to pay if I miss a payment?

Math lessons would have been that much more useful to my adult life if I’d been required to solve the following math problem:

Henry indulged in some retail therapy and charged $7500 to his credit card. If he only pays back the minimum monthly payment of $225*** while being charged a rate of 29.99% annually, then how long will it take Henry to repay his credit card? Secondly, how much interest will Henry pay on that credit card debt? *** The minimum monthly payment is equivalent to 3% of the outstanding balance.

Not My Parents’ Fault

I’m not going to blame my parents for this gap in my education. I’m fairly certain that credit cards weren’t a thing when they were in school. You can’t teach what you don’t know.

Credit card math was never an issue in my house when I was growing up. My parents had two credit cards between them. My dad had a gas card that he used when we took our annual summer holiday. My mom had a retail store card that was used to buy appliances for the house. What they taught me about credit cards is as follows: NEVER CARRY A BALANCE.

Full stop. This is what I learned from my parents’ example respecting the issue of credit cards. This is a basic lesson that pretty much works in all situations involving a credit card balance. Pay your credit card balance in full every single month.

Unfortunately, my parents’ example failed to explain how credit card interest will be calculated for those unfortunate folks who do not pay their balances in full each and every single month. Though incredibly useful and entirely admirable, the lesson from my parents taught me nothing about credit card math.

Surely the Credit Card Websites Have the Answers I Need

Let’s recap. My parents didn’t teach me credit card math at home. My schools didn’t teach me credit card math even though I was in their care and custody from the ages of 6 to 17. Despite receiving my undergraduate degree from the school of business, I never learned how credit card interest was calculated. For that matter, my business degree was also useless in teaching me about the nefarious death-grip of student loans or anything else related to personal finance.

The next logical place to search for answers is from the source. Surely the banks who issue credit cards would have a calculator dedicated to credit card math on their website. It would seem only logical that they would have some kind of online tool that explicitly shows how interest on credit cards is calculated and compounded. Customers would be able to enter their outstanding balance and the interest rate on the card then press a button to get a number representing how much interest would be owing on the outstanding debt.

CIBC offers a credit card calculator to encourage you to accumulate points. There’s not a single mention of how the interest is calculated if you don’t pay your bill in full. To be fair, the inquiry “How is interest calculated on my purchases?” results in a link to the cardholder agreement. Pages 6-7 of CIBC’s cardholder agreement set out how payments are applied to a credit card balance. Yet, there’s no calculator that allows borrowers to plug in their own numbers to see just how much interest they will pay if they don’t pay their balance in full.

I’m not picking on CIBC. I went to Scotiabank’s website too, and they didn’t have a credit card interest calculator either. Similarly, TD’s website was a bust. BMO has a variety of calculators for mortgages and savings, but does not offer any online calculators to help their customers figure out how interest is calculated on credit cards.

Maybe Canada’s biggest bank has what I want… RBC’s website isn’t perfect but atleast it offers an explanation, but not a calculator, of how interest is charged on its credit cards. Kudos to RBC for not making its customers wade through a cardholder agreement!

How disappointing… It’s almost as though the purveyors of credit cards do not want their customers to be able to figure out how much interest they will have to pay on their credit card debt if balances aren’t paid in full. I’m willing to go out on a limb here. I believe that credit card issuers don’t want their customers to understand credit card math.

Even the Gurus Can’t Answer my Questions!

If you’re not yet familiar with his teachings, then allow me to indulge for a moment. Dave Ramsey has created a series of Baby Steps to help regular people get out of debt and to achieve wealth. To be clear, I love the lessons about how to get out of debt by creating a debt snowball. If you’re ready to commit to a get-out-of-debt-plan, then start doing what Dave Ramsey says and keep doing it until all of your debt is gone.

Yet, even Dave Ramsey fails to explain how credit card interest is calculated. This is hardly surprising. He hates debt and he encourages people to never carry credit cards. Still, he’s been in the business of helping get out of debt for nearly 3 decades. I thought that maybe, just maybe, he would be the one to explain credit card math to folks…even if just to tell people that they’re stupid for partaking of it.

Government of Canada to the Rescue!

The good folks at the Financial Consumer Agency of Canada have a partial solution. Their website offers a credit card payment calculator that will tell you how much interest will be charged if you don’t pay your credit card off in full. The calculator lets you add in your current balance and your interest rate. The search results ably demonstrate the impact of paying more than the minimum monthly balance and how much interest can be saved.

So far, this is the best credit card math tool that I’ve found online.

I’m still in the dark about how to calculate interest on my credit card balance. So I will resort to my parents’ wisdom. I resolve to never carry a balance. The mystery of credit card math may or may not haunt me for the rest of my days, and that might be okay.

So long as I pay off my credit card balance every single month, I’ll never need to worry about the box at the bottom of my statement which tells me that it will take 24 months of my life to pay off an amount as small as $191.13 if I make the minimum monthly payment while never charging anything else during that time period.

Money Mistake – Not Buying Equities

I think I’ve made a money mistake.

According to the personal finance blogs that I follow, the stock market has been on a bull-run since 2009. A “bullish” stock market is one where the stock market is rising. A “bearish” stock market is one where the stock market is falling.

Since 2011, I’ve been busily building my army of little money soldiers and I’ve been rewarded with nice, plump dividend payments every month. I don’t use those dividends for living expenses – instead, they’re automatically re-invested into buying more dividend-producing assets. I’m proud to say that I’ve created a lovely cash-flowing side income for myself that will supplement my other retirement income when the time comes.

After hearing about pension failures and the impacts on retirees, I wanted a source of cash that would allow me to survive during retirement if my monthly pension payment happened to be cut or eliminated. I’m a Singleton. This means that I can’t depend on someone else’s salary or expect that anyone else will take care of me. Creating a portfolio that pays me dividends every single month eases my worries about how to survive if my pension disappears.

That said, if I had invested that same money into the stock market over the same time period, my net worth would be a lot higher. I would be that much closer to early retirement!!! I hate to admit it but I’m realizing that choosing not to buy equities since 2009 was a very big money mistake.

Choosing dividends over straight equity investments was very definitely not the right move to make in 2011. According to the good folks on the Internet, the stock market returns have been higher than the returns on my dividend portfolio. In my defence, I wasn’t as knowledgeable as I am now. I succumbed to one of my many flaws – I’m stubborn. I was utterly convinced that my path was the absolute right one for my circumstances.

So now it’s time to fix this money mistake.

My new plan is to invest in an exchange-traded fund that invests in the global market place. This is an equity ETF and I plan to hold it for a very long time. I do believe that over the long-term, the stock market rises.

One of the wisest things I’ve ever read on the internet was an article that stated that one shouldn’t invest believing that age 65 is a portfolio’s end date. It persuasively argued that one’s investment horizon ends at death, not at retirement. People are living into their 80s and 90s, which means that a 40-year old still has a 40+ year timespan over which to watch their money grow. That bit of wisdom shook me up. I’ll need the growth from my equity investment to power my portfolio until the end of my life, not just until the end of my career.

I’ve also decided not to divest myself of my dividend-producing assets. They’ll continue to grow over the next few decades. I’ve accepted that their growth will be slower since I won’t be adding new money to that part of my portfolio. Once my equity holdings make up 40% of my investment portfolio, then I’ll start to consider re-directing new cash into buying more units in my dividend ETFs.

So my portfolio will continue to churn out dividends, and my new money will go towards buying units in my global equity-focused ETF.

What about the recession that’s coming?

Yes – I’ll admit that the Talking Heads of the Media have been nattering quite a bit about the upcoming recession. It caused me concern for about 3 minutes, then I chose to ignore them. I won’t allow their incessant chinwag to dissuade me from my chosen path.

First, no one has been able to tell me when the recession will start, how long it will last, nor how bad it will be. There’s nothing I can do about the recession.

Second, there will be a recovery from the upcoming recession. There is always a recovery from a recession. I have no reason to think this time will be any different. Much like the recession itself, the recovery’s details are a mystery. No one knows when the recovery will start, how long it will last, and how good it will be.

Third, recessions are a natural part of the economic cycle. Stock markets do not rise forever. They go up and they go down. It’s normal and natural. The best bet is to ignore the hysteria from the Talking Heads, to invest early & often, and to go about the daily business of life.

Fourth, I plan to be in the stock market for the long-term. I’m not timing the stock market. I’m starting to put time into the stock market. The only way for me to have time in the market is to start buying now. I’m going to follow the advice of J.L. Collins, who wrote The Simple Path to Wealth, by buying into an equity product and letting the stock market do its thing for a very long time.

I’m never going to make the perfect investment choices all of the time. However, what I am going to do is continue to learn and think about how best to achieve my money goals. And when I find that I’m making a money mistake, I’m going to stop making it.

When you know better, you do better.

Start Today

There’s no one perfect way to become financially savvy. Yet, I can promise you that you won’t obtain the knowledge you need unless you start today.

There are very few people in your life who will care about your financial health as much as you do. If you’re lucky, your family will take it upon themselves to teach you what you need to know to be successful with money. Once you’re an adult, you owe it to yourself to build upon the lessons that your family taught you and to share that increased knowledge with those closest to your heart.

Your employer pays you to do a job. She really doesn’t care what you do with your money so long as it doesn’t negatively impact how you perform as an employee. She doesn’t care if you save to pay cash for your goals, whether you pay off your debts, or if you invest for your retirement. At best, she cares that you don’t ask for her to pay you any more than you currently earn to do your job.

On the other hand, the AdMan cares about your money very much, and so does his trusty sidekick, the Creditor. They care about taking it away from you. The AdMan’s sole goal is to convince you to give your money to someone else – a restaurant, a retailer, a car dealership, a pharmaceutical company. The AdMan doesn’t care who you give it to, so long as you give your money away.

The Creditor simply wants you to give your money to him. The Creditor will lend you money because he wants you to pay it back with interest.

Your ability to avoid falling into a deep debt hole is contingent on learning how personal finance works. Creating effective strategies to achieve your goals and dreams is going to be somewhat dependent on how you handle the money that comes your way. Part of self-care is learning the lessons of money.

Start today. Whether you need to pay off a debt or you want to save for next year’s vacation, I want you to start today. It may take a while to achieve your goal and that’s perfectly okay. The sooner you start, the better off you’ll be. No one has ever regretted handling their money in a way that allows them to meet their life’s goals.

Don’t be too hard on yourself. No one has ever learned it all at once, and you won’t either. Believe me when I say that you won’t pick the perfect investment – no such thing exists. You can start immediately – there’s no need to wait until January 1 of next year. There’s no time like the present. Transfer $1, $5, $10 to your savings account. If you don’t have a saving account, open one then make the transfer. Commit to one no-spend day per week or per month. Figure out how to prepare and cook more of your own meals. These are small changes within your locus of control. They will help you reach your goals.

Your money situation won’t change by itself. Nothing changes until you do. Start reading books and blogs today. You don’t have to master it all at once. Open a savings account – set up an automatic savings plan – accumulate your first $1,000. And while you’re doing that, read books and consume blogs about investing so that you feel more comfortable with the topic. Again, don’t be too hard on yourself; no one knows everything so you’re not alone. And when you are finally comfortable making your first investment, I want you to only invest in things you could explain to your grandmother. If you don’t understand an investment product, do not invest in it until you do. Never let anyone bully you into putting your hard-earned money towards something you don’t understand.

Today is the best time to plant your money tree. The sooner it’s planted, the longer it has to grow.

Start learning – don’t ever stop. Start saving money – don’t stop! Start taking care of yourself financially so you’re not dependent on others to do so.

Knowledge is power. Take the small steps first. Start today.

The Money-Saving Magic of my Kitchen

I have to admit that it sometimes takes me a very long time to learn lessons that should be obvious. One of those lessons is how the kitchen can be used to significantly cut food costs. Today’s lesson, Gentle Reader, is about the money-saving magic of my kitchen.

At the end of last week, I found myself in the very happy position of having some extra money in my bank account. Hurray! Being the money nerd that I am, I promptly started reviewing my outstanding credit card charges and my surplus funds went to paying them off.

But I had to ask myself – where did that extra money come from? I’m almost always wondering how to stretch my remaining money at this point in my paycheque cycle. If my bank account were a gas tank, I’d characterize this point of the cycle as “running on financial fumes.” It’s not fun, but I’d also believed it was unavoidable.

I was wrong.

The reason for my unexpected largesse was the money-saving magic of my kitchen.

Clarification please, Blue Lobster – what in the hell are you talking about?

My kitchen is home to my fridge, an old-fashioned upright refrigerator with a handy-dandy freezer at the top. The weekend before last, I went grocery-shopping and purchased a bulk pack of chicken. I decided to cook several pieces for lunch. The rest of the chicken was rubbed in a lovely marinade, portioned into freezer bags, and set inside my freezer. I took my lunch to work with me four days last week, saving myself atleast $80 in the process.

In addition to my magnificent refrigerator and its freezer, my kitchen is also home to a working oven & stovetop. Again, I cooked some of the chicken and I also prepared some saffron rice for myself. After dinner, I portioned out the chicken and rice into several reusable containers. They were stacked in the fridge and I simply tossed one into my lunch-bag each morning before I left to catch my bus. No more scrambling to make a tasty lunch in the morning. I didn’t have to figure out which of the it-all-tastes-the-same-to-me dining establishments would have the privilege of serving me their food.

As I’ve written before, cooking at home is a money-saver. It’s healthier and often tastier than whatever you can buy at a restaurant or fast-food outlet. For the most part, you control the amount of sugar, fat and salt that goes into the food you cook because you get to adjust the recipe to suit your tastes. The cherry on the sundae is that your wallet stays heavy as you eat your own homemade food.

The beauty of using the freezer along with my range is that I minimized the amount of cooking and grocery-shopping that I have to do. For as much as I love eating good food, I really hate shopping for groceries. In my family, I’m an oddity. Both my mother and my brother love grocery-shopping. I chalk it up to them both being Pisces…

After a long day in the office, I’m not exactly excited to get into the kitchen and create a lovely meal from scratch. I’m far more likely to eat Triscuits with cheese, or enjoy a lovely bowl of breakfast cereal. These aren’t good meal options!

The awesome appliances in my kitchen minimize the drudgery of cooking every single day!!! I cook on Sundays, then – maybe – again on Thursday or Friday night. The marinated meat that I’d stashed in my freezer is ready to be put into the oven after having been safely thawed in the fridge. It doesn’t take long to cook some rice, to boil some potatoes, or to make some pasta to go with my meat. Add in a bag of salad or some veggies and voila! Dinner is ready to go relatively quickly. Again, there is no need to cook every day – make enough rice/potatoes/pasta/whatever-side-you-prefer to last for a few days.

No Fail Marinade Recipes

If you’re a fan of sweet-and-spicy, try this recipe for sriracha brown sugar chicken. It’s absolute delicious! I wish I could say that I created this recipe but I did not. It’s from the website Dinner then Dessert, one of my favorite places to find new recipes. I’m already salivating as I sit here thinking about how tasty my lunches are going to be this week!

Here’s another magnificent recipe for honey garlic chicken. Again, I can’t take credit for this recipe. I found it at Chef Savvy. What I can take credit for is creating a honey garlic marinade for the two packages of chicken thighs that are currently sitting in my freezer. They will be utterly scrumptious when I cook them for lunch in the future.

This particular recipe for sheet pan chicken tinga bowls has been on my mind since I first saw it on my Instagram feed. Again, the credit for this recipe has to go to the website called Pinch of Yum. Technically, this is a make-ahead meal but I think you could make the sauce, let it cool, pour it over the chicken, then freeze it until you’re ready to eat it.

So far, I’ve only used chicken with my marinades. This is because I love chicken in all forms, except feet & liver. Chicken liver = yucky! That said, I’m not adverse to finding marinade recipes for other meats. Ideally, I’d like to find an equally delightful marinade for pork chops that can be baked in the oven.

Learn it, live it!

I have learned my lesson. There is no way around my deep-seated fondness for eating. However, I do have the capacity to find recipes that will make my tummy happier. I’m smart enough to cook without starting fires. The internet is filled with recipes and You Tube is bursting with videos of people making those recipes.

I’ve learned my lesson – cooking once a week is grand. Marinating my meat in advance will save me trips to the grocery store and will save me some prep time during the week. My range & my freezer are my friends. I can eat well without whipping out my wallet on workdays.

Let me say it again – I love the money-saving magic of my kitchen! I have the tools at my disposal to create fabulous meals for myself while saving a boatload of money at the same time. When it comes to food, what could be better than that?