Category: Single Money

5 Traits to Become Wealthy

Ever since I started learning about personal finance, I’ve noted that those who are successful at it have 5 traits in common. These 5 traits appear regardless of the path taken. Some people invested in the stock market, either through stock picking, mutual funds, or exchange-traded funds. Others became real estate investors and built a portfolio of rental properties. Then there’s the group of people who only invested in their retirement accounts and grew those a nice 7-figure amount before retirement.

Regardless of the path chosen, the people who accumulated a comfortable cash cushion all appear to have relied on the same 5 traits to become wealthy.

The Word “No”

To my mind, saying “No” is fundamental to achieving your goals. There will always be someone or something who wants your money. If you’re unable to say “No” to the requests that stop you from meeting your priorities, then how will you ever be able to create the life that you want?

Gathering the funds to meet your financial objectives will require you to use the word “No”, a lot. Let’s pretend that you want to start investing in real estate. Unless you can use the strategies Richard Fain discusses in this video, you’ll need a down payment to get into the real estate market. Saving for a down payment may take you a year or two. If you don’t use the word “No” when faced with other opportunities to spend, then it’s going to take you considerably longer to achieve your goal.

Delayed Gratification

This trait is a kissing cousin of the first one. It’s the ability to say “No…not right now.” It’s the ability to delay saying “yes” to whatever it is that you might want.

Instead of going into debt to buy something today, you save up the cash and buy it tomorrow.

Delayed gratification keeps you out of debt. If you pay cash, then you’re not using credit. When you don’t use credit, then you don’t pay interest to a creditor. The beauty of not paying interest is that more of your money can be spent on the pursuit of your life’s dreams.

Be honest with yourself. Wouldn’t you prefer to spend your money on your dreams instead of spending your money to pay off debts for purchases that don’t align with your financial desires?

Sinking Funds

My long-time readers know that I love sinking funds! I use them all the time because they help me to organize and track my money so that I can get what I prioritize most. Between sinking funds and automatic transfers, I very rarely need to think about how I’m going to pay for things. My paycheque lands in my chequing account. My automatic transfers whisk pre-determined amounts of money to each of my sinking funds. Whatever’s left over once the transfers have done their task is mine to spend freely.

  • Retirement money? Check!
  • Emergency funds? Check!
  • Insurance premiums? Check!
  • TFSA contribution? Check!
  • House renovations? Check!
  • Travel money? Check!
  • Utilities? Check!
  • Charitable donations? Check!

Your priorities will determine your sinking funds. If you want to buy your first home, or your first rental property, then you’ll have a sinking fund for your down payment. This is where you’ll direct a certain portion of your income until you have the down payment that you need to make your purchase. This sinking fund might be in place for one year, two years, five years, or more. It hardly matters. What does matter is that you are saving money towards one of the goals that is most important to you.

Some sinking funds will last longer than other. For example, your retirement funds are just a long-term sinking fund. You save and invest money in a retirement account so that the funds can replace your paycheque when you stop working for a living. However, your sinking fund for utilities exists to hold money that will be spent within the next 30 days. The money goes in – the bills arrive – the money goes out to pay the bills.

Whether designed to pay for long-term goals like retirement or financial independence, or to pay for short-term goals like paying your utilities, sinking funds are integral part of your financial toolbox.

Living Below Your Means

If you earn $60,000 and spend every penny, then there’s no way to build wealth. Your net worth remains at $0 because nothing is set aside for investing.

However, earning $60,000 and spending $59,000 means that there’s $1,000 available for investing. That $1,000 is available because you made the choice to live below your means. The money can go towards the down payment on a real estate purchase. It can be invested for retirement. It can be the seed money for a business.

Leftover money doesn’t happen by accident. Trust me – there is no amount of money that cannot be spent. The more you earn, the more spending opportunities you will find. The duty to impose spending limits in your life rests solely on your shoulders .

Money

Surprised that I saved this one for last?

You shouldn’t be. Its priority in this list is irrelevant. Whether you earn a little or a lot, wealth will always elude you if you can’t implement the first 4 traits that I’ve already discussed.

Let’s say you earn $250,000 every month…but you don’t know how to say “No” when presented with the opportunity to rent a yacht for the week to party in Monaco. And you’ll need to rent a private jet to get there since you can’t rely on traditional airlines to get you there on time. Let’s face it – when you’re earning $3Million per year, do you really want to travel on Air Canada? Or even British Airways if you can afford to rent a private jet for you and a few of your closest friends?

Let’s say that you earn $35,000 in a year, and you manage to set aside $3,000. You are living beneath your means. Those dollars might be allocated between a variety of sinking funds. You employed the trait of delayed gratification. The reason you have that $3,000 in the first place is because you said “No” to the various requests for your money.

Unless you impose some kind of spending limit on yourself, the money will be gone. It doesn’t matter how much you earn. This is why the simple act of earning money is insufficient proof that a person is also building wealth. It takes all 5 traits to become wealthy.

Without the first 4 traits, no amount of money will make you wealthy because you will spend it all. You cannot be financially wealthy without money.

Create Money Pots and Organize Your Money

Welcome to 2021! A bright and shiny new year stretches out in front of us. Have you figured out what you want to do with it? Any resolutions in place yet? Or do you firmly believe every new dawn brings you the chance to change you life as you see fit?

Whichever philosophy you adopt, I’d like to suggest that you organize your money in a way that best suits your lifestyle.

You know how your recurring monthly bills arrive every other day? It could be a bill for a utility like electricity, heat, or water. On the other hand, it could be bill for some service that you makes your life a little bit easier, like a housekeeper, or lawn service. Maybe it’s a subscription for some kind of pampering service, like a wine-of-the-month club or food delivery. Whether by email or by snail-mail, there always seems to be some utility/service provider out there who wants to receive some portion your hard-earned money:

  • $13.99 for Netflix;
  • $400 to heat your house;
  • $14.95 for your Audible books;
  • $104.71 to keep your mobile phone turned on;
  • $57.85 to keep the weeds away;
  • $60-$140 for your wine subscription;
  • $115 for your gym membership;
  • $Y-amount for product/service-of-your-choice.

You get my drift. Between you, me and the fencepost, it’s more likely than not that you have way more monthly subscriptions than the few I’ve listed above. Who do you know who has only one streaming service? I know people who pay for cable on top of Netflix, Crave, and Disney+!!!

And even though you agreed to pay for each of these utilities and/or services, are you ever truly and deeply excited to actually get the bill? Does your heart leap with joy when it’s time to pay for what you’ve ordered? Or is it more often the case that you ask yourself where the money is going to come from in order to cover the cost?

It’s been my experience that the fun is in the having of the whatever-it-is, not in the paying for the whatever-it-is.

Here’s another couple of questions for you. And you need not share your answer with the class if you don’t want to. I just want you to be brutally honest with yourself… Are you ever caught off-guard by these payment demands? Are the words “I thought I just paid for this!” a part of your daily lexicon?

If so, then I have the perfect solution for you.

Introducing the money pot.

Sadly, it is not the one at the end of the rainbow. Nope, these nifty little caches of coins are ones that you will fill yourself. You create money pots to segregate your funds based on their intended purpose.

A money pot is the place where you set aside money from each paycheque to pay for various things. In this particular circumstance, you should create a money pot dedicated to your recurring bills. If you use your money pot correctly, I promise that you will never again have to scrounge around for money to pay your monthly bills.

Money pots are an integral part of your financial armamentarium. Think of them as stopover points for your money. The money arrives via your paycheque, stays in the money pots for a little bit, then leaves again to pay for its intended purpose. If you create a dedicated money pot for your recurring bills and use it as intended, its balance will fluctuate without ever growing significantly. Money will go in – bills will arrive – money will go back out to pay them.

Where does the money come from?

You’ll fund this money pot by adding up your monthly recurring bills then ensure that this amount of money finds its way into your utilities/services money pot every money. If you receive atleast 2 paycheques each month, then you can automatically transfer half of that amount to you money pot. If you’re paid monthly, then the full amount comes out of your paycheque and goes straight into your money pot.

Let’s say your monthly recurring bills are $1000 each month and you’re paid every two weeks. You’ll set up an automatic transfer of $500 every two weeks. That money will be sent to the money pot dedicated to your monthly bills. By having these funds set aside, you can pay your recurring bills as they arrive. You have the comfort of knowing that your money pot will be replenished every 14 days. No more scrounging around for the cash to pay your bills!

From this point forward, your automatic transfer should be automatically funding your money pot every time that you are paid. To be blunt, set things up so that your paycheque goes into your chequing account and then some of it is automatically transferred to your money pot. Recurring bills land in your inbox or mailbox and you pay them immediately from the money pot.

You know what else is great about this system? You’re in control of the size of your monthly bills. If you want to shell out less each month, then you can do so. And if you think your life needs a little something extra each month, then you’re in charge of that decision too. The amount of money going into your money pot is entirely up to you.

Divide and Conquer for the Win!

It’s been my experience that having one stash of cash from which to pay everything makes it rather easy to delude one’s self. The precise details of the delusion vary but, at its heart is the false belief that a large balance in one’s chequing account means that all the money therein is suitable for spending willy-nilly. Don’t feel bad if you’ve ever succumbed to this fantasy. You’re human and this illusion is particularly seductive.

Frankly speaking, the majority of mere mortals aren’t particularly good at ensuring today’s wants do not take priority over tomorrow’s needs. It’s okay to admit it – wants are generally more fun that needs! 

You’ve heard me talk about sinking funds before. Once you’ve identified your priorities, you direct your money to paying for them by relying on automatic transfers. The money pot for your recurring monthly bills is a sinking fund designed to handle the very short-term demands on your money. You’ll use the funds within the money pot to pay for the routine bills that come around every 30 days. It is to be kept separate from your emergency funds, your retirement funds, and your investment portfolio. This is not the money that you spend on groceries, clothing, or vacations. This money is for funding those bills that come around, month-in-and-month-out, until such time as you cancel them.

Since you’re the only one in charge of your money, it’s on you to ensure that your recurring utility bills are funded, before you start spending on your wants. Creating and funding a money pot for your recurring bills is an effective way to complete this monthly chore.

Trust me on this! Automatically funding a money pot for all of your recurring monthly bills guarantees that the money doesn’t “accidentally” get spent on something else. 

The Day After…

Hope you had a good Christmas, even if you may not have celebrated exactly as you would’ve pre-pandemic. And if you were able to celebrate in your normal fashion, then good on you. Another Christmas is in the history books.

It is now the day after the extra calories, the all-day pjs, the gifts, the video calls, the sports games, the board games, the laughter. The preparation and the anticipation can all be put away for another year. If you’ve taken time off this week, I would urge you to take a few minutes to ponder upon and flesh out next year’s financial goals.

What new things do you want to accomplish in 2021?

If you’re satisfied with your life as it is, what do you need to do to stay on your chosen path?

Either way, you should have a good grasp of how you want to spend your time and your money next year. Both are precious and neither should ever be wasted.

The day after is as good a day as any other to make the necessary plans to ensure that you’re moving towards the life you really want to live.

See you in 2021!

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Weekly Tip: Never stop learning about money.

Do You Have a Car Fund?

A car fund is a tool that will help you stay out of debt. Avoiding car payments is a great way to keep your financial stress to minimum. Your car fund is the place where you save money for your next vehicle. It’s a sinking fund dedicated to the purchase of your next motorized chariot.

Pay cash. I can’t be any clearer than that. Keep saving for as long as it takes you to have enough cash to pay for your next vehicle.

Once you’ve bought a vehicle, continue making that same payment to your car fund. Whatever you’re driving now will not last forever – all vehicles eventually need to be replaced.

How much should you be contributing to your car fund?

That’s an easy one to answer. Go to any car manufacturer’s website and use their loan calculator to determine the monthly payment for the vehicle that you want. That’s the amount that should be going into your car fund every month. If you were planning on making bi-weekly payments on a car loan, then arrange to have that bi-weekly payment sent to your bank account.

This method serves two purposes. First, it will assist you to build the savings needed to pay cash for your next vehicle. While it’s obvious, I’ll say it anyway so that there’s no room for misunderstandings. The more you save, the faster your pile of money will grow. Secondly, and less obviously, saving your car payments in advance of purchase allows you to experience the real-time effects of a car payment on your current budget. If the calculator says your car payment is going to be $600 per month, then that’s the amount you set aside every month.

If you had taken a loan, you’d be making that $600 payment to the creditor. Making payments to yourself tells you whether your budget would’ve been able to handle a payment of that size. By saving the money in advance, the impact on your budget is the same – you’re still giving up the use of that money. The fact that the money is going into your car fund doesn’t alter the fact that you’re not at liberty to spend that money on something else.

Can your budget handle a car payment?

You’ll quickly get the answer to this question by setting aside this chunk of money in advance of your purchase. Either you’ll be able to comfortably live on the whatever’s left over after the contribution to the car fund, or you won’t.

So if the answer to the last question is yes, great – keep saving until you have enough cash to buy the vehicle outright.

Should the answer to the question be no, then you’ve got some decisions to make about your money. Maybe you want to consider buying a less expensive car. Alternatively, you may decide to simply save your money over a longer period of time so you can get the vehicle that you really want. There’s also the option of getting a part-time job, or finding a side hustle, that will bolster your contributions to your car fund.

Avoid taking out a car loan if at all possible. Incurring that kind of financial stress won’t make your life better. Instead, pick a cheaper vehicle and save up your money until you can pay for it in cash.

Finally, if you absolutely must take out a vehicle loan, then follow the tips that I’ve talked about here. Debt beggars the borrower while enriching the lender. It’s in your best interest to minimize the amount of debt that you pay on a vehicle loan.

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Weekly Tip: Make a will. No one is promised tomorrow. The province will divided your earthly belongings according to a pre-determined list if you die without a will. For those of you have specific bequests in mind, get yourself to a competent lawyer to have your will drawn up and properly witnessed. This way, your wishes will be followed when you’re no longer around to tell people what your wishes are.

Student Loans are an Anchor

When I was younger, I was convinced that student loans are an anchor. I believed that the best course of action was to eliminate them as soon as humanly possible. Full stop – no further discussion needed. Paying off student loans ASAP was a sign of being a mature adult. One did not carry debt if one could pay it off early. Being debt-free was the Holy Grail!

Suffice it to say that my views on student loans have become more nuanced as I’ve aged.

Full disclosure. When I graduated from post-secondary, I had student loans of just under $15K. My salary was paid bi-weekly, so I made extra student loan payments from every paycheque. These were on top of my regular monthly payment. I was fortunate enough to receive bonuses at work, so my first two years’ worth of bonuses went towards my student loans. Within 2 years, those loans were gone!

For the most part, I still believe that student loans are an anchor for many folks. If you’ve got a $200, $400, $700 student loan payment every month, that’s a big chunk of money that isn’t being used to build a better future for yourself. It’s not going towards a down payment. The money isn’t being set aside for your “thirsty underwear” years. (Hat tip to Garth Turner at Greater Fool for that descriptive phrase!) Those funds aren’t seed money being deployed in your own business. Depending on your circumstances, it could take you a very long time to pay off your student loan debts. Time that can never be recovered.

Truth be told, I still encourage people to focus on paying off their student loans. After all, it’s good to have less debt. Do what you can to make extra payments. Set up a per diem and have that money sent to your student loans every week. Do it via automatic transfer. If it’s $1/day, then send make an extra payment of $7/week. If you can afford $5/day, then that’s an extra $35/week. And if you can swing $10/day, then you’re looking at extra payments of $70/week… which is a very sweet $3,650 per year. The higher your per diem, the faster the debt goes away. Make this extra weekly payment on top of your regular minimum monthly payment. If you’re fortunate enough to get a raise or income from a side hustle, then use some of that money to pay off your student loans even faster.

When my student loans were gone, I felt very proud of myself. A debt obligation had been lifted from my shoulders! I was one step closer towards being debt-free. Yay, me!

Nuance…

It’s been over 15 years since I paid off my student loans. And I’ve learned a lot about investing in the stock market. Had I paid the minimum monthly payments on my student loans and invested in equities… <sigh> … Well, I’d be the Retired Blue Lobster by now, and my student loans would also be completely paid off. All else being equal, my loans would have been paid off in 9 years and I would have an even larger investment portfolio. My money would have had an extra two years to grow and all those extra payments would’ve been invested for growth.

Make no mistake! I still believe that student loans are an anchor. Yet, I’ve also come to believe that investing the stock market for the long-term is slightly more important than paying off student loan debt ASAP. This is because the weight of that debt burden, i.e. anchor, is reduced in two ways. Firstly, the debt gets smaller each time you make your minimum monthly payment. Secondly, the debt becomes a smaller portion of your net worth as your investments grow over time. Eventually, the debt will be gone and you’ll have a nice cushion of cash in the form of your investments.

If you go hard on your student loans to the exclusion of investing, you’ll be debt-free sooner but there’s no cash-cushion at the end. If you’re fortunate enough, you’ll be able to immediately re-direct your former student loan payments to investing. It seems trite to say this but I will anyways. Focusing solely on paying down debt robs you of the time that your money could have been working hard for you in your investments.

Investing early is a key to building wealth.

I’m not talking about investing money in a single stock and hoping that you’ve managed to get in on the ground floor of the Next Big Thing. From my perspective, that path is simply gambling. If you want to gamble, save your money and go to Vegas – it’s a lot more fun to gamble in Vegas!

The kind of investing that I’m referring to involves holding a broad-based equity exchange-traded fund (ETF) over a very long period time. Regular, consistent contributions to this kind of product gives investors access to the entire stock market and removes the temptation to jump from one promising stock to another.

An ETF offers you the chance to invest in a lot of companies at once. While they’re hardly exciting, ETFs offer regular people the opportunity to invest in some of the biggest companies in the world. You don’t have to be a genius, nor do you have to be lucky. The Next Big Thing will eventually become part of the ETF’s holdings, so you’ll still wind up own a sliver of it. And you’ll have avoided the risk of investing all of your money in one single company.

You should definitely read The Simple Path to Wealth by J.L. Collins. He does an excellent job of explaining why and how this works. Rest assured that I am not being paid for mentioning this book.

Real estate is another way to make long-term investments for the future. To be explicitly clear, this is not my preferred method. I am not an expert in real estate investing. If this interests you, then check out Bigger Pockets. I follow this account on social media and I’ve learned a lot. Again, I’m not being paid for mentioning them.

Some people can’t do both.

Fair enough.

I appreciate that not everyone has this option of to investing while paying down debt. Maybe you don’t have the money to do both. Reality being what it is, money only stretches so far. Or maybe the thought of debt causes you psychological distress. If that’s the case, then pay off your student loans as fast as you can. They are an anchor on your wallet. They prevent you from investing in your future because they force you to pay for your past.

You’ll make the best choices that you can with the information and money that you have available.

However, there are those in my audience who have enough to pay off the minimum student loan bill while also investing. If you’re fortunate enough to be in these circumstances, then I strongly urge you to do both. It may take you years to pay off your student loans. That is time that you can never get back. It makes the most sense to be investing in the stock market or in real estate while also paying down your debts. Your investments should be growing while your debts are decreasing.

Student loans are an anchor. There’s no doubt about it. However, how your handle those student loans will drastically impact your wealth-building goals. I don’t have all the answers because everyone’s situation is different. I just want you to think long and hard about what will work best for you.

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Weekly Tip: If you must finance a car, follow the 20-4-10 rule. Always put down 20% of the car’s purchase price. Make sure the loan is for a maximum of 4 years. Do not let the car loan be more than 10% of your annual salary. When your loan is paid off, keep making the payment to your Next Vehicle Fund so that you can pay cash the next time around.

A Potentially Horrible Boss

This summer, I was lucky enough to have a socially-distanced visit with some friends. As we enjoyed our cheesecake, the host mentioned that he was worried about what would happen when his boss retired. My friend explained that his boss’ child would likely take over the company. This likelihood was causing a good deal of angst since the offspring’s… leadership style… wasn’t particularly inspiring nor admirable. My friend was facing the very serious, very probable situation of working for a potentially horrible boss.

The worst part is that there is very little to be done. My friend has sought other employment, yet that pursuit has not been fruitful. Further, there are bills to be paid. The twin goals of paying off the mortgage and saving for retirement still have to be met. There’s no realistic option of just walking away from the bad situation which is looming. Like a great many people, my friend doesn’t have an income-producing portfolio as a safety net.

I had no words of wisdom for my friend. Instead, all I could do was be supportive and listen. However, that conversation has stuck with me. Perhaps I don’t have a way to fix the situation for my friend. Yet, I’m confident enough to believe that I do have a suggestion for those who aren’t yet in my friend’s circumstances.

Assess Your Situation

If you are very, very lucky, then you’re working for pay doing something that gladdens your heart. You’re satisfied with your work life and it’s a source of contentment for you. Your boss is an asset, rather than a point of stress. Still… you should always be aware that this is a situation that can change on a dime. Lots of things can happen. Maybe your current boss takes a promotion, moves away, retires or gets sick. In any of these situations. you’re suddenly facing the risk of a potentially horrible boss taking her place.

Trite though it might sound, the following statement must be acknowledged. Most of us do not have the financial ability to just walk away from our job. We realize that having a steady paycheque ensures we can feed ourselves and pay the bills. The vast majority of people have to keep working and hope for the best. In other words, a potentially horrible boss is a source of stress and there’s little that many workers can do to avoid it.

You, Gentle Reader, don’t have to be one of those people.

Get Horrible Boss Insurance

This is a form of insurance that insulates you from the risk of working for a potentially horrible boss. Unlike car insurance or house insurance, you don’t pay a premium to a company to acquire it. Nope! This is the kind of insurance that you create for yourself.

How so? By creating your own income-producing portfolio over time. The amount of time is up to you. You can save a little bit over the very long-term. Alternatively, you can save a lot over the short-term and engage in extreme frugality by saving up to 70% of your income. Or you can find a balance that works on a time-table that best suits your personal goals.

How you invest your money is your choice. Save-invest-learn-repeat. This is my mantra. Feel free to adopt it as yours too. You can learn about whatever investment you want. Some people are big fans of real estate investing. This is not my area of expertise but I have been devoting some time to learning about it over the past two years.

If you’ve been here for awhile, you’ll have noticed that I’m a big fan of the stock market and dollar-cost averaging over time. You’ve often heard me suggest that you should invest a portion of each and every one of your paycheque in a broad-based equity product, preferably an exchange-traded fund. The fees for ETFs are lower than the fees for mutual funds. Stock-picking is most likely not your strong suit so I’d advise you to only do it with 10% (or less) of your entire portfolio.

Money in the stock market is going to be invested for the long-haul. That means it is going to be invested in the stock market for decades. To be clear, your stock market investment money is separate and apart from your emergency fund money. It also shouldn’t be co-mingled with money you set aside for short term goals, which are those that are to be funded within a year or two. Oh, and you’re going to want to be very disciplined about ridding yourself of debt as fast as you can.

Money Buys Options

Gosh! That sounds like a lot, doesn’t it? Saving for retirement. Building an emergency fund. Funding short-term goals. Paying off debt! Life is meant to be lived and no one wants to be richest person in the graveyard.

Blah-blah-blah!

Believe you me when I say the following. The day that you have to work for a potentially horrible boss, you will not regret having money in your emergency account. You won’t ever regret having a second, back-up income generated by your portfolio. The Ad Man and the Creditor want you to believe that it’s some monumentally unfair disadvantage to not spend every penny you make. They are lying to you! The most precious thing in the world is time. Ironically, it is one of the few things that money cannot acquire. The second most precious thing in the world is having options. Money most definitely purchases options.

If a potentially horrible boss is on the horizon for you, then I promise you that you will want to have the option of getting away from that person. Having money allows you to do that. You need not work for someone who is going to make your life a living hell for want of money.

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Weekly Tip: Make extra payments towards your debts so that you minimize the interest that you pay to your creditors.

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Well, Gentle Readers, there are currently less than 60 days left in 2020. How are you doing with your financial plans? What needs to be tweaked for next year? Which financial habits will you keep in 2021?

Money in Your Kitchen

I’ve said it before, and I’ll say it again. There is money in your kitchen! The room of your home where you keep your fridge and your stove, your pots and your pans, your cutlery and your crockery is a treasure of stored value.

The way to find this money is to use your kitchen for …(drum roll please!) …COOKING!

Yes, I know this is a novel idea. And yes, cooking results in dirty dishes. I’m even willing to admit that you might not even know how to cook!

I don’t care. I want you to learn to feed yourself, and to save money while you do it.

Gentle Reader, there is nothing quite so satisfying as a delicious meal that has been prepared with your own hands. I say this a person who often socialized with my friends at restaurants in the Before Times. Steak – sushi – Thai – Greek – Italian – chain restaurant – bistros, cafes, and holes-in-the-wall! I loved them all, and I freely spent money on food prepared for me by others.

That said, very few meals – save for everything I ate in Italy – have been as sumptuous as the ones I’ve made for myself. If you eat out a lot, then you’ll understand me when I say the following. After a while, it all starts to taste the same.

Treats are special when they’re rare

We all know this. If you only eat out once every three months, then it’s a treat. It happens 4 times a year! It’s rare and that rarity makes it special. You might get dressed up. Possibly, you turn it into a special occasion. Dining out becomes an event and you anticipate it. You might savour each bite because you know it’ll be another 89 days before you eat out again.

But when you eat out everyday, it becomes part of your routine. It’s as mundane as brushing your teeth but exponentially more costly! When was the last time that you truly and deeply savoured the meal you picked up at the drive-thru window? Or had delivered to your home in an insulated carrier bag?

Get into your kitchen and cook for yourself. Turn those restaurant meals back into a treat! In the process, the money in your kitchen can stay in your wallet.

This week, I was lamenting to my sibling that I needed a new recipe for the extra lean ground beef that I’d taken out for dinner that evening. Trust me when I say that COVID19 has robbed me of my love for my own spaghetti and my homemade hamburgers. I’ve made them too often since the pandemic was declared and I don’t want to make them anymore! Though younger and much taller than me, my sibling is very wise in the ways of the kitchen. My younger relative suggested that I make Korean Beef.

Taking the suggestion to heart, I went to the World Wide Web and typed in the words “Korean beef recipe”. A plethora of results instantly appeared on my screen. I chose the following recipe from Damn Delicious, and I was not at all disappointed. What I love about this website is that so many people leave comments, tips, and insights into how to tweak the recipe. (I readily admit that the recipes can be made as-is and are still very, very tasty!) One such commenter suggested adding julienned carrots to the dish.

At first, I was afraid – I was petrified. I’d never julienned a carrot in my whole entire life!

(Apologies to Gloria Gaynor!)

However, there’s another marvelous invention in our universe called YouTube. It’s almost as good as the local library when it comes to a free resource for learning how to do stuff. I went to YouTube, searched for “how to julienne carrots”, and happily julienned my first carrot a few minutes later.

Another commenter mentioned that his family liked a lot of sauce, so he’d doubled that portion of the recipe. Guess what? I like lots of sauce too! So I followed his lead and doubled the sauce for my dish. No regrets! Doubling the sauce was a simple, easy, foolproof tweak that would increase my enjoyment of my own cooking.

So I made the recipe, doubled the sauce, and added my julienned carrot… and I wound up with this…

Then I added a little extra something….

Together, they produced the following…

And it was delicious! As another very wise friend would describe it, I served myself a meal that was yummy-yummy-in-my-tummy! There were enough leftovers for lunches and dinners the following days.

While I’m quite certain I could’ve ordered a pizza for $9.99 from a well-known chain, I’m equally certain that the pizza would not have tasted nearly as good as my homemade Korean Beef. Yes, I had to do dishes but it was a small price to pay for having a wonderful meal at home. And I received the added benefit of keeping the money I found in my kitchen. :-}

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Weekly Tip: Start an automated transfer to a savings account. The last time I checked, EQ Bank was paying 1.70% on deposits. I’m as un-impressed with that rate of return as you are. The point is to automate your money so that it’s there when you need it. The money siphoned off via automatic transfer is to plump up your emergency fund. If you’ve already got one that’s nice and fat, then use this automated transfer to save up money for your annual expenses: insurance premiums, property taxes, professional dues, etc…

Maybe you like to invest in big chunks. Fine. Set up the automatic transfer. Every time the account hits your pre-determined amount, transfer the money to your investments and then keep your mitts off it until you retire. Automatic transfers reinforce the savings habit so, if you haven’t already done so, set up your automatic transfer today.

Use This Time Wisely

Gentle Reader, I’ve been working on staying COVID-free. I’ve been staying home, washing my hands, wearing my mask, and trying not to go down the What-If rabbit hole. While I wait for a vaccine/innoculation/nasal spray, I’ve chosen to use this time wisely. The pandemic will end – we will all be able to breathe around each other like the Before Times. Until then, I’m going to use my time to learn things that will save me some money.

Towards that end, I’ve decided to use YouTube to save money.

Whatever do you mean, Blue Lobster?

It’s this simple, Gentle Reader. Like the public library, YouTube is chock-full of free stuff just waiting to be learned by people such as ourselves. This summer, I learned about gardening – both flowers and vegetables – from the very sweet couple who host Garden Answer. Just this week, I stumbled upon a wonderfully soothing channel called Savor Easy, where I’ve watched videos that consist of two hands baking bread or buns. I find this channel to be the antithesis of most social media. It’s very therapeutic because there are no visual distractions. And you can practically taste the final product through the screen!

Flattening the curve and stemming the spread of COVID-19 requires us to stay home more than usual. Since you’re going to be at home anyway, why not use the time more profitably than binge-watching your favourite show?

Use this time wisely by learning how to do things that will help your finances. Baking your own bread (or cookies, muffins, cakes, pies, tortes, etc…) will save you some money. You’ll probably enjoy the results a lot more than the store-bought stuff too. The same goes for starting your own flower gardens, or growing your own herbs. Up until this year, I was a huge fan of annuals. However, spending so much time in my own backyard has forced me to re-evaluate my stance. Perennials suited for my climate will come back year after year so long as I learn how to properly care for them. And YouTube has multiple videos that will show me how to do just that.

Maybe you’d prefer to channel your energies into something that will last a little bit longer than a sheet of cookies, or a season of sunflowers. Why don’t you learn a craft? There are a ton of videos about learning to crochet or how to knit. For the record, I’m a fan of crochet simply because I never stuck with knitting long enough for my index fingers to stop being sensitive to the pointy ends of knitting needles. The only reason I stopped crocheting is because I’d run out of people to give my blankets too. That said, one of my most challenging patterns was calling my name today… so I might have a new project to tackle this winter. (I’ll figure out who to give it to later.) I’ll be home anyway and having a cozy blanket to snuggle under never gets old.

Perhaps you’d like to get into something even more long lasting. Real estate investing, anyone? You’ve heard me talk about Bigger Pockets before. I still watch the new videos posted on this channel and I learn something new each week. Even though the laws are different between Canada and the US, the math doesn’t change when it crosses the border. You might want to consider whether you can implement the principles discussed on this particular channel. Do you have the interest, desire, and finances to build your own little cadre of real estate properties?

Use this time wisely to learn something that will add a little jingle to your pocket.

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Weekly Tip: When renewing your mortgage, shop the market and ask for a lower rate. If you’re about to renew, you know that 5-year rates are under 2%. I make no predictions about how much lower a bank is willing to go, but you owe it to yourself to ask for a lower rate. Trust me – the bank won’t just give you one so you have nothing to lose by asking!

Taking Care of Future You

Quick! Take a look at your current net worth. If you had known 10 years ago that it would be what it is today, would you have been angry if you had been forced to save more money???

The reason I ask is because I’m getting older. And the older I get, the more I notice things. One of the things I’m noticing is that my friends are getting older too. And they’re starting to make worrying noises about not having saved enough for retirement. These disquieting rumblings are leading me to wonder if perhaps people shouldn’t simply be forced to save for their retirement.

It’s Easy to Put Off Saving

Want to know why I’m such a huge fan of automating your savings?

It’s due to the fact that automation removes freedom of choice. I know myself. If I to deliberately choose to siphon money from my paycheque to my future, then I wouldn’t. I’d go through that money like a hot knife through butter! I’d be no further ahead financially but I’m sure I’d have more stuff – clothes, electronics, whatever…

I’ve curbed my ability to spend away my retirement savings by setting up automatic transfers. My paycheque comes in – the automatic transfers are triggered – I spend whatever’s left over.

Yet, I’m realizing that a lot of people don’t use automation to improve their financial futures. To be fair, I’m not talking about people who don’t have any fat to cut. Sadly, lots of people are living by the skin of their teeth and an automated savings plan won’t help those people.

I’m talking about the people who do have fat to cut. The ones who can cut back without eliminating all the little extra in life in order to fund their future financial goals. Many of them don’t do so… a situation that I find perplexing.

There’s Little to No Urgency

Perhaps the Ones-Who-Can simply don’t because retirement is so far away. It’s in the distant future, so why worry about it now when it won’t be here for a very, very, very long time?

Good question.

The answer is that tempus fungit, which is Latin for “time flies”. Yes, I’m old enough that I took a semester of Latin in high school. It still blows my mind that this year was my 30-year anniversary of graduating high school!

Your retirement will be here before you know it. Everyone gets the same 24 hours in a day. And they pass by at the same speed for all of us. No matter how busy you are, no matter how full your life is of other priorities, believes me when I say that you will get old…unless you die. Sorry to be so blunt, but it’s the truth. The only people who aren’t getting any older are the ones who have already passed.

Regardless of how far away it feels, your retirement is on the horizon. Saving up enough money to pay for it is a priority that you should focus on throughout your life.

Money From Others…

Yes, that’s right. It’s up to you to pay for your own retirement. Whether you’ll earn CPP, OAS or GIS (or Social Security and its equivalents), the amount of money you get from the government won’t be enough.

If you’ve been promised a pension, then all you have right now is a promise. The harsh reality is that pensions can fail. Think of a pension as a repository of deferred pay. Your employer pays you less today with the promise that they will pay you after you’ve retired. When a pension fails, it means that the employee who did the work doesn’t get paid as he or she was promised. It sucks and it’s unfair, and it causes a lot of havoc to pensioners who can’t turn back time and go back to work.

You should be saving your own money to supplement whatever you receive from the government and your pension. If the government and/or your pension still has money to pay you in your dotage, then that’s great. If not, then you’ll be very happy that you made the choice to tuck a little something away over the years. Err on the side of caution and start saving for your retirement.

It’s Vitally Important

There’s not much more to say at this point. You know how happy you are when you’re hungry and you eat something? That awful hungry feeling goes away and you can go on about your daily life.

You will continue to be hungry when you’re retired. You’ll still need shelter, a few clothes, access to transportation, some entertainment once in awhile. When you’re retired, I promise you that you will still yearn for your creature comforts – much in the way that you do today. In order to acquire them, your retirement funds will have to take the place of your paycheque.

Gathering sufficient retirement funds is an integral step in taking care of Future You. For the vast majority of us, it’s going to take a very long time. So unless you’re next to destitute, take immediate action. Set up a plan whereby you funnel some of today’s money towards tomorrow’s financial needs. I promise that you won’t regret doing so when the time comes to live off your retirement nest egg.

Yet…

I suspect you’ll read this, think it’s a good idea, and go on about your lives. There might be one or two of you who actually take my suggestion and plant their money tree. The rest of you… not so much.

All of us will need money until we draw our last breath. That’s the world we live in. And that’s why I’m starting to come around to the idea that people must be forced to save for their retirement. It cannot be optional. If it’s optional, then people will choose not to do it and that’s a bad choice. No one is telling you to give up all of the things that make you happy today in order to save for tomorrow. Instead, I’m encouraging you to cut back a little bit. This is so you’ll have the money you’ll need for Future You. Isn’t taking care of Future You worth a little bit of sacrifice today?

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Weekly Tip: Use your tax refund in a way that allows you to pay down some debt (30%), to invest in the future (50%), and to enjoy the present (20%). Life is about balance and enjoying the journey along the way.