Category: Single Money

Dollar Cost Averaging is a Great Tool

As the warm days of spring roll in and push harsh memories of winter to the recesses of your memories, you may find yourself enjoying the sunshine and asking yourself: What is exactly is dollar-cost averaging?

I’m here to tell you that DCA can be a powerful tool for investors.

In a nutshell, dollar-cost averaging is a method for systematically investing your money. Investors who use DCS invest the same amount of money into an investment on a regular schedule. That schedule can be whatever the investor choose – weekly, monthly, quarterly, annually, or any other increment. The purchase of the underlying asset occurs regardless of the asset’s price.

There are a few of good reasons to use this investment methodology.

Dollar Cost Averaging or Lump-Sum Investing?

Firstly, the DCA strategy facilitates quicker investment in the stock market. Investors can align their investments with their paycheques. Since one my guiding financial mantras is spend-some-save-some, I make sure that a part of my paycheque is promptly & automatically re-directed to my investment portfolio.

There’s a school of thought which says that lump-sum investing is better than DCA because the entire value of the lump-sum amount is put to work in the stock market all at once. If your plan is to invest a large amount in the market, the proponents of lump-sum investing recommend that you invest the entire amount at once. Check out this article from the wise fellow at www.fourpillarfreedom.com for a good discussion of the benefits and drawbacks of the two investment methods.

Theoretically, I have no quarrel with the lump-sum investment style. However, the practical reality of my life is that I don’t have large lump-sums of money lying around. I invest when I get paid because that’s when I have the money available. The money is deposited into my chequing account, then it’s shunted to my investment account, where it sits until it’s invested. For most people without large chunks of money at their disposal, DCA is a better option – in my opinion – because they can invest when they’re paid.

No Need to Time the Market

Secondly, DCA eliminates that temptation to try and “time the market.” Investors who time the market are trying to buy an investment at its very lowest price. Perhaps you’ve heard recent chatter in the system from economists about the impending recession?

What you will never hear from any of those experts is the exact date on which the recession will start. And absolutely none of them will tell you date on which the stock market will be at its very lowest point. People lucky enough to buy at the lowest point will have the best investment returns when the market recovers. Market-timers are always trying to pick the very best time to invest.

Like all investors, market-timers are trying to maximize the profits from their stock market investments. Unlike market-timers, investors following the DCA-method simply invest their money on a consistent basis. They do not bother themselves with trying to buy at the very lowest price. They’re not concerned with the very best returns. They understand that time in the market is more important that timing the market.

Automation Pairs Beautifully with Dollar Cost Averaging Investing Method

Thirdly, the power of automation complements the DCA investment strategy very nicely. If you intend to invest in the stock market, then automatically transferring money from your chequing account to your brokerage account is an excellent strategy.

Let’s say you decided to invest on the 15th of each month. Your automatic transfer will ensure that a chunk of money is in your brokerage account for the purchase. On the 15th of the month, you’ll buy as much of the asset as your funds will allow regardless of the asset’s price. Then you won’t think about investing again until the 15th of the following month. Maybe you want to invest quarterly? That’s fine too. Put the power of automation to work! Gather money in your investment account until it’s time to buy some assets. Never forget the DCA can’t work for you unless you’ve set aside some savings.

This is how I invest. Every month, I invest money into my dividend-paying investments. I don’t follow the price of my exchange-traded funds from one day to the next. Instead, I buy as many units as I can when it’s time to buy. Then I don’t think about my investments again until the dividends roll in.

Easy-peasy, lemon-squeezy – rinse & repeat!

I’ve been using the DCA method to invest my money since 2011. I wasn’t interested in learning to be a wizard at picking stocks. The DCA method was easy to implement and even easier to understand. Much like every other investment method, it’s not perfect and it’s not suitable to for everyone. However, it works for me. I’m confident in this method and I’ll continue to use it until something better comes along.

The Time Will Pass Anyway

I really hate delivering bad news, but there’s no way around this. You’re not getting any younger. Time is marching on. You can fight it all you want, but the time will pass anyway. The important thing to do is focus your time, attention and energy on answering the following question – are you doing what’s necessary today to create the life that you really want?

Happily, you’re the person who decides which of your dreams to pursue. You’re the one who knows what truly delights your heart, what always replenishes your soul. You get to decide which path to follow in order to achieve the goals that you have set for your life. Every day is an opportunity for you to better understand yourself and the way you interact with the rest of the world.

Whatever it is that you want to achieve, there’s a financial cost to it. I don’t care if you want to travel, start your own business, buy rental properties, take a sabbatical, race in the Grand Prix, go sky-diving, or spend a week at home unplugged from the rest of the world. It’s going to cost you some money.

Start Saving Today

Start saving for your dreams now, even if they aren’t fully fleshed out. It hardly matters where you are in the stage of making your dreams come true. When the opportunity arrives, you should have some money set aside to chase those dreams. I accept that there are situations where money should not be the factor holding you back, but I would encourage you to minimize those situations as much as possible.

When I was 16 years old, I got my first part-time job in a grocery store. It wasn’t glamorous, nor was I well paid. If I remember, I was earning $4.85 per hour. I didn’t work a lot of hours either, since I was in school and living at home. I had to open a chequing account to deposit my paycheque, since this job existed before the days of online banking.

Even though I was 16 and I didn’t know beans from potatoes, I knew enough to open a savings account at the same time that I opened my chequing account. At the time, I’d never heard of automatic transfers. Every two weeks, I would receive my paycheque, then I would deposit it into my account with the bank teller. I would then walk over to the bank machine and transfer $50 from my chequing account to my savings account. I have no idea why I didn’t just ask the teller to do the transfer for me while I was at her wicket. Maybe I was trying to increase my step-count? In any event, I went through this process every two weeks until I got a job at a different bank and learned how to make the online banking system work for me.

“$50? Big deal!”

You’re right, Dear Reader. On its face, $50 is hardly enough for a grown-up to get excited about. It’s the kind of money that would delight a 3-year old at the toy store, but hardly enough to generate glee in an adult with adult-sized bills.

Habits are the Game-Changer

However, the importance of my story isn’t the $50. I’m telling you my story to impart the lesson that saving money has been the key to funding my dreams. I saved $50 every two weeks for years and years. What was most important was the habit of savings, not the amount. As I got older, I earned more money and I increased the amount that was set aside every two weeks. The habit stayed the same, even though the amount changed.

And once the habit was in place, it’s never disappeared. My “little savings habit” has allowed me to travel internationally, fund my RRSP and TFSA, buy a home, build an army of money soldiers, and generally partake in social events with family and friends.

I’ll be forever grateful to my parents who taught me about having dreams, creating habits, and saving money. My parents’ dream was for us to go to school, and they found a way to fund that dream. Part of the funding efforts went on behind the scenes as they invested all out Baby Bonus money instead of spending those cheques each month.

The other part of funding their dream was overt. When my brother and I were little, my father had created the habit of giving each of us $10 every two weeks from his paycheque. We would carefully fold that money and put it into our piggy-banks. Twice a year, we would empty our piggy-banks. My father would sit us down and make us fill out deposit slips for our bank. I still remember unfolding the money and clipping it together with the deposit slip before taking it to the bank. That money would ultimately go towards buying Canada Savings Bonds. Eventually, that money paid for our post-secondary education.

The Power is Yours

Whatever you dreams are, you have the power to create the savings habit now. Whether you start with $1 per day, $10 per paycheque or $50 per month, just start setting the money aside. The habit is more important than the amount. Once the habit is in place, you’ll increase the amount as you pay off other debts, as you eliminate expenses that don’t bring you joy, and as your income increases.

Create an automatic savings plan for yourself. Divert this money away from the funds that you rely on for your day-to-day needs. Use the savings habit to ensure that your precious and limited time is spent on the experiences that bring you the most joy. The time will pass anyway.

Spend Some of Your Money

Wait – what?!?!?!

I know. It’s a shocking thing to say out loud, isn’t it? In the personal finance world, these words are damn near heresy!

Day after day, we’re constantly inundated by news stories, articles, and blog posts about how we’re not saving enough money or that we’re not saving enough for retirement and that we’re in debt up to our eyeballs!!! For the most part, I agree with those sentiments. However, I’ve learned that the journey is just as important as the destination. Everyone is entitled to find ways to enjoy the Now, instead of depriving themselves until happiness, joy and fun can be attained Later. Finding the balance is key.

Today, I want to say something different to you. You should spend some of your money on those things that make you the happiest. I’m suggesting that you really focus on and prioritize those little luxuries that you normally sacrifice but which, ultimately, make your day a little bit brighter. Once you’ve figured out which one of your luxuries is the most special and magical to you, I want you to go and spend some of your money on it.

The other stuff is still very, very important. I want you to take care of it first before you implement my excellent advice:

  • Money set aside for emergencies? Check!
  • Mortgage/rent payment good to go? Check!
  • Fridge stocked with healthy food? Check!
  • All bills paid as they come due? Check!
  • Retirement monies automatically skimmed from paycheque then being invested? Check, check, check!

Excellent work! Now it’s time to take whatever’s leftover and spend a little bit – not all of it – on something that makes your heart smile. It might be something as simple as a rich, decadent dessert at your favourite restaurant or pie shop. Perhaps travel is what sets your soul alight and you’ve been saving up for your next vacation. Or maybe you just want the soothing comfort that comes from a 90-minute hot stone massage. Might it be possible that you need to take a mental-health day to spend the afternoon at the ballpark watching your favourite team? Or sitting on a beach? Or whatever you want to do with your day off?

You work very, very hard for your money and you deserve to enjoy it. You owe it to yourself to pay cash for the little things – or the big things – that make you happiest. Once you’re taken care of the necessities, you really ought to be spending some of your cash on the flourishes that make your daily grind a little less burdensome. Life is meant to be enjoyed, despite its challenges! Sometimes, spending cash to experience that joy is perfectly healthy and utterly normal.

Notice that I said “cash”? I mean it! I want you to pay for your luxuries in cold, hard cash. (And if you absolutely must pay for them with your credit card, then I want you to have the cash before you make the purchase to pay off the credit card bill when it comes due.) Your luxuries – whatever they are – will be all the more sweeter if they don’t result in any regret later stemming from a debt hangover.

I want you to find the balance between Now and Later. It’ll be good for your soul to indulge yourself every once in a while. If you’re being responsible with most of your money, by setting aside funds for your necessities and your life’s goals, then it’s okay for your to be a teensy-weensy bit frivolous with a portion of your disposable income.

Go ahead! Indulge yourself a little bit. What do you want that you haven’t had for a long time? If you have the money, then go and get it!

Freeze your Credit Limit

Recently, I had a discussion with someone who was worried about credit card debt. For ease, Gentle Readers, I shall call this person Oscar.

Oscar’s niece owed over $10,000 on her credit card and Oscar was beside himself! It seemed that Oscar’s niece had been fleeced by an acquaintance who was not repaying the borrowed money and was in fact enraged with Oscar’s niece for not lending out even more money on her credit card.

While the whole situation was bothering Oscar a great deal, I learned that he was most troubled by the fact that the credit card company had increased his niece’s limit without verifying her salary. Oscar somehow believed that the credit card company had acted in an untoward manner! Oscar appeared to be under the impression that the credit card company was in a fiduciary relationship with his niece.

For my part, I was stunned that Oscar would be surprised by the credit card company’s behaviour.

Credit Card Companies make profits, not friends

In case you, Gentle Reader, believe credit card companies act in your best interest, please allow me to clarify the situation for you. Your credit card company has no duty to act in your best interest. Credit card companies are finance companies – they are in business to make money, not friends!!!

As profit-seeking entities, the credit card companies are not going to do anything to stop you from going into debt with their product. Please re-read my last sentence a few times before continuing. Let it sink in. To the credit card company, you are the goose and your feathers are money. They want to pluck you naked.

The credit card companies will increase your limit, charge you interest and fees, and harass you for payment if you don’t pay them back each month. They are finance companies. Their sole purpose is to earn profits for their shareholders by giving you credit so that you pay them back with interest and fees. That is the only service that they are offering you. To believe anything else is to naive and self-destructive. When you go into debt, they make more money.

More often that not, it makes sense for these companies to increase your credit limit beyond your ability to repay the full balance in a single payment cycle. They will do this at a drop of a pin because it’s a good business move for them. Doing so vastly increases the odds that you will be forced to carry a balance and thereby pay them interest at a double-digit percentage.

The credit limit increase is good for them. Conversely, the increase is bad for you. If you are using credit and not paying it off every single month, then you are living beyond your means!!! This situation is very bad because it means that you are living in debt and that you do not have any disposable income to put towards building your cash cushion.

Your Salary is Irrelevant to Any Increase

Credit card companies don’t check your salary before they increase your limit. When you apply for a credit card, you have to state your income. However, once you’ve been approved and issued a credit card, your salary need never be discussed again. The credit card companies don’t care if you earn $1500/month or $25,000/mth. They will continuously increase your limit as often as they can in the hopes that you eventually start paying them interest by carrying a balance from one month to the next.

My wisdom for you is this: your credit limit should never exceed the amount of money that you could repay in a single month. If you have an extra $1,000 per month after all your needs are met, then your credit limit should only be $1,000. You’ll be in a position to use your credit card up to its limit and still pay off the balance without incurring any interest. If you don’t have $10,000 in disposable income each month, then you don’t need a $10,000 limit.

A very smart friend of mine who introduced me to the Disposable Income Method of using credit cards. It’s ingenious and highly effective. I’m sure that the credit card companies hate it! If so, that’s means that you should love it and start implementing it immediately. Briefly, the Disposable Income Method requires you to set your credit card limit at whatever disposable income you have between paycheques. Every purchase can go through your card and you pay your credit card in full each time you get paid. Easy-peasy-lemon-squeezy!

Protect Yourself from Limit Increases

There are two ways to protect yourself from credit limit increases. The first method is to never have a credit card. This method is drastic and foolproof. In today’s world, it’s also quickly becoming unrealistic. Even I use credit cards on a regular basis. However, I never borrow more than I can repay when the bill comes due.

The other way to protect yourself from these increases is to phone your credit card company and to tell them the following: “Do not increase my credit limit without my express request to do so. I don’t need more credit than I have right now. I do not want my credit limit increased without my explicit permission. Please make a note of this conversation in your computer system.”

This conversation works – trust me. I do not want a 5-figure credit limit because I cannot repay a 5-figure debt in a single billing cycle. It has been several years since I’ve seen an increase in my credit card limit. By telling my credit card companies to freeze my credit card limit, I’ve eliminated some of the risk of carrying a credit card. I’ve pre-empted the possibility of spending more than I can repay.

So pick up the phone – call your credit card company – freeze your credit limit. Don’t feel bad or sad or guilty about doing so. Rest assured that the credit card companies will always be there to offer you more credit at very high interest rates. Fret not, Gentle Reader – you can always go into debt tomorrow!

Make Hay While the Sun Shines

This week, I was very sad after reading an article in the Walrus about how so many people in Canada go hungry on a regular basis.

The article reminded me that being able to eat every day is a privilege that I take for granted. I have enough money so I can go to various grocery stores and buy the food I need to eat three good meals each day. I have money to go to restaurants with my friends. I have sufficient funds to eat fast food when I’m too lazy or too disorganized to have done my meal prep. I have money and, therefore, I have food.

However, eating shouldn’t be a privilege accorded only to those with money. Without food, people die. It’s that simple.

There are many reasons why people don’t have money, why they can’t afford to feed themselves. Unemployment, mental health problems, evictions, rental increases, homelessness, family conflict… These are just a few examples that readily spring to mind. Regardless of the reasons for lack of money, that article from the Walrus made me question if we, as a society, are really willing to let people starve to death for lack of funds?

I don’t have the answer to that question, nor do I have any particular wisdom on how to eradicate the pervasive presence of poverty. My purpose with this article is to encourage you to think about what you can do today to minimize the risk of starvation becoming something that you have to face.

First things first – be grateful. If you have food, shelter, family, health, then you’ve already been blessed with what’s most important. Be grateful for what you have and never take your situation for granted.

After reading this blog for some time, you know that I’m a huge advocate of squirrelling away your money. Yes, it’s important to enjoy each day as it comes but not if it means spending every penny you have. You don’t know when the next emergency will hit, when you’ll get sick, when you’ll lose your job, etc…

The time to save for tomorrow’s emergencies is now. Money is the buffer between you and many bad situations. Money in the bank gives you options when you need them most. Having money in the bank means you can survive between employers, between contracts, between assignments, between paycheques. It means that you can continue to live somewhere with a kitchen and a fridge and a stove and a place to store the food that you will be cooking for yourself. Having money set aside means that you’ve created a bigger gulf between yourself and a situation where you don’t know when you’ll next have something to eat.

Once you’re in that situation, it’s very hard to get out of it because you’re too focused on daily survival to make plans for the future. Take my advice – start now!

I want you to calculate your personal per diem, ie. your daily cost to survive. Track all the money you spend in a month then divide that number by the days in the month. For example, if you spend $3000 per month, then your per diem is $100/day.

Then figure out how long you think it would take you to find another source of income if you lost your current one. Double that timeframe! Finding good paying positions – whether through freelancing, self-employment or working for others – isn’t easy. Be conservative! Assume that it will take longer than you expect and plan accordingly.

Then look at how much money you already have set aside in a savings account. How many days could you survive off what you’ve saved?

Having per diem money put away is your safety net. It should go without saying, but I’ll say it anyway, that the more money you have then the stronger your net.  Per diem money will help you to avoid the risk of starving if your income disappears for a time.

There is no perfect fix to the issue of poverty. However, there are steps you can take to lower your risk of falling into a poverty so deep that you cannot feed yourself.

As a Singleton, there isn’t another breadwinner in the home to supplement your income. It’s all on you, which is both a blessing and a curse. It’s a blessing because you don’t have to save as much money. It’s a curse because you do have to build and reinforce your safety net all by yourself. It’s my experience that the unexpected expenses of life still crop up while you’re building your cash cushion. It won’t always be easy but you’ll have to find a way to save money and also have funds to cover unexpected items without relying on debt.

The cash cushion won’t be built overnight. Depending on how much disposable income you have, it could take you weeks, months, or years to set aside a big ol’ bucket of money. Do not let that deter you! Trust me when I say that this is a goal worth pursuing – no matter how long it takes!

Never ever forget that money is the barrier between you and poverty.

A Simple Truth

“You can’t become financially independent with someone else’s money.” – Farnoosh Torabi of the So Money Podcast

The frankness of this statement amazed me.

While being interviewed by Jamila Souffrant at Journey to Launch, Ms. Torabi spoke of the need for women to control their own money. She posited that a woman without her own money could not truly be independent of someone else for her financial security.

I’ve been thinking about this idea for a while now, and I believe it wholeheartedly. A woman without her own money will always be dependent on someone else for her financial security – a parent, a spouse, the state. It’s not a great way to live, yet for millions of us it is a reality that we accept as easily as we accept that the sun rises in the east every morning.

Women who control their own money aren’t as rare as they once were but they’re not as common as they should be either. One of my friends was married to a very good-looking man who decided to stray. She decided that she wouldn’t tolerate that particular decision and they divorced. One of the reasons why she could make that decision was because she holds a professional degree. Her education allowed her to secure her own financial future – she could pay the mortgage, the nanny, the divorce lawyer, and all the costs associated with being a single mother raising babies. From a financial perspective, my friend was very okay because she was and continues to be financially independent. She doesn’t have to depend on anyone else’s money to live the life she wants to live.

Full disclosure – I’m a Singleton. While I hear about the debate between married people who share all of their money and the married people who keep things separate, it’s an academic discussion to me. I’ve never had to seriously consider whether I would share my money with another person.

Additional disclosure – the idea of sharing my money makes my stomach turn. And when I’ve considered why I’m so against the idea of co-mingling my money, it’s because I view that decision as increasing my risk instead of increasing my security. If I were a Singleton living paycheque-to-paycheque, or living in debt, then the idea of sharing another person’s wealth might be quite attractive. Similarly, if I could be certain that a partner’s views of money were compatible with my own and that he had also built up a nice-sized war chest while a Singleton, then the concept of a joint bank account wouldn’t cause so much anxiety for me.

Even without hearing it articulated, I’ve always known that having control of my money has meant that I retained the power to make independent choices about how to live my life. Since leaving my parents’ home, I’ve never had to ask for permission to spend a single dollar. I’ve never had to discuss a purchase with another person because the money was mine. I’ve never had to compromise with anyone about how to invest my money.

You see, I’ve always understood that having control of my money meant having more control over my future financial well-being. Even if I was married to the kindest, gentlest, most wonderful human being on the planet who took care of my every financial need, there’s no guarantee from anyone or anything that my Wonderful Human would be there forever. People die – people leave – people get kidnapped – people get sick – employment disappears – businesses fail – etc, etc, etc… If any of those things were to happen to my Wonderful Human, I would not want to be in a position where I had to worry about money while also dealing with the emotional grief that would inevitably accompany that loss.

By the same token, I always knew that I didn’t want to be forced to stay in a relationship just because of money. I didn’t want to be financially dependent on someone who was abusive to me, or who didn’t treat me kindly. I wanted to have the ability to walk away from any relationship that didn’t work anymore, or that wasn’t giving me what I needed. I never wanted to be financially dependent on anyone else because that would mean that they controlled my financial future. If they had the power to make the financial decisions for my life, then I would forever have to wonder when, or if, they would take away their financial largesse and give it to someone else.

I accept that there are no guarantees in life. However, I also accept that women can take steps with their money to build a solid financial foundation for themselves and that they should not look to others for financial security. Having money of her own means that a woman can make choices for her own best interests without worrying about how to accommodate the wishes of someone else. A woman with money can leave a bad situation, a bad job, a bad relationship without worrying how to feed, shelter, clothe herself. Money gives women the option to finance the basic necessities that they need without requiring them to depend on anyone else.

Ms. Torabi is right – you cannot become financially independent if you’re relying on someone else’s money.

Priorities vs. Right Now

What are your priorities for your money?

I’m not asking to be airy-fairy. It’s simply been my observation that people who know what their priorities are allocate their money in a way that ensures that their priorities are met.

Speaking for myself, saving for a comfortable – and hopefully early! – retirement has been one my priorities for the past 15 years. So in addition to devouring early retirement blogs and learning about investing, I have made it a priority to save a big chunk of my paycheque and to allocate it towards my retirement fund. That chunk varies between 41%-42% of my take-home pay.

Those of you who follow personal finance blogs know that living on half of your income is considered the Holy Grail, while saving more than 50% is even better.

In a perfect world, I’d be able to save half of my take-home pay. However, we don’t live in a perfect world and I have other financial priorities. I’m willing to spend a little bit of my money now to enjoy my life between today and retirement.

One of those other priorities of mine is travel…hence some of the magnificent pictures that you’ll find at the top of my blog posts. All of scenic pictures on this website are from my own little camera! (Check out the Sagrada Familia above – it’s in Barcelona. You should go see it!) The world is a big place, but I’m already in my 40s so I won’t see all of it before I die. My goal is to visit and see as many of places that interest me before I shuffle off this mortal coil, Shakespeare-style.

This year, my house is nudging its way up my priority list. I love my home, but it’s a never-ending source of expenditure, even though it no longer has a mortgage on it. In addition to property taxes, insurance, and utilities, there’s the pesky and recurring issue of maintenance and renovations. Believe me when I tell you that I’m not renovating because of some awe-inspiring episode of Renovate-This-And-That which I happened to see on HGTV.

Nope – my house needs to be renovated so that it doesn’t fall apart. I’ve been setting aside money for a major renovation, so that means a different priority will be pushed down my list until next year when – knock on wood! – I won’t have to do anything major to my house.

See, that’s the thing about priorities. You can have way more than one, but they need to be put in order and that order can change. However, if you know what your priorities are, you’re halfway down the path to allocating your money in a way that facilitates your ability to satisfy all of them.

If wishes were horses, then beggars would ride! This is an old-fashioned phrase that has withstood the test of time because of its unassailable accuracy. It’s just a fancy way of saying that wishing for something isn’t enough to make it come true. It’s also a not-so-subtle way of recognizing that people need money to make their wishes come true.

I firmly believe that everyone has spending priorities. It’s just that some people are conscious about them, while other people aren’t. Have you ever known someone who has talked for years and years and years about doing some particular thing but they never actually get around to doing it, presumably due to a lack of money? And does this person you know always seem to have money for a coffee, a meal away from home, a pack of cigarettes, a whatever-item-you-can-imagine?

It’s funny how they never seem to make any headway on what they say that they really want to do…

You want to know a secret?

It’s this – whatever it is that they say they want to do isn’t what they really want to do. What they really want to do is spend their money Right Now. They make the choice to spend Right Now instead of taking a chunk of money and setting it aside for their alleged priorities.

Their truest priority is the Right Now, whether they know it or not!!! Their truest priority is whatever they want at that moment – the coffee, the meal out, the cigarettes, the whatever. That’s where they are spending their money. That immediate purchase represents what is most important to them right then and there.

What about you? Have you figured out what your priorities are for your life? Are you spending your money in a way that gets your closer to your conscious priorities?

You only have so much time. Wouldn’t it be better to spend your time pursuing your priorities so that you’re doing what you want with your life?

52-Week Savings Challenge!

Christmas 2018 has come and gone, which means that a brand new year is nearly upon us. Does anyone else wonder how an entire year can pass by quicker than two shakes of a lamb’s tail???

And does it also not seem like the holidays cost money every single year? I don’t know about you but I rarely ever wake up in mid-December and say to myself: “Self, it’s a good thing that I found that mysterious pot of money in the closet the last time that I was putting away the vacuum cleaner – I’ll need that money for this year’s celebrations!”

Nope! I have never – not even once – had that particular conversation with myself. I’ve always managed to fund my Christmas celebrations with cash, but I’ve never made a challenge out of it. And this 52-week savings challenge will ensure that I have more money than I usually do for the festivities of 2019.

For those of you who enjoy having extra money kicking around, I thought that the following chart might be of assistance in helping you to figure out how to fund your goals for 2019. I discovered this wonderful little nugget during my forays through the labyrinth of the Internet so I can’t take credit for inventing it. Happily, I found this particular gem at Clever Girl Finance.

The following chart burrowed its way into my memory and I decided it would be a good one to share with all of you. I know I can’t be the only one who likes to pour herself a nice glass of wine, settle in on my couch with my journal and favorite pen, and set about writing down my financial goals for the upcoming year… Or am I?

It hardly matters. One of next year’s goals is to ensure that I continue to pay for all of my Christmas expenses with cold, hard cash. This challenge will help me to achieve this particular goal. As a matter of fact, it will give me ample cushion since I rarely ever spend more than $600 on Christmas! Such is a benefit of coming from a small family that is slowly moving towards a less-is-more attitude when it comes to gifts. While my brother wants to eliminate the gift exchange entirely, my mother still likes to receive things. My sister-in-law and I are of the same mindset – consumables are best! Baking and wine are perfectly fine presents. 🙂

The concept behind the challenge is simple. There are 52 weeks in a year. Your assignment – should you choose to accept it – is to save an amount of money equivalent to, or more than, the number of the week of the year. By this time next year, you’ll have over $1,300 sitting somewhere waiting to do your bidding. It’s not a complicated challenge, but it does require that you engage in a wee bit of self-control to make sure that you squirrel away the requisite amount of money each week and that you don’t spend it before the 52 weeks are gone.

If you’d like to hit a higher target, then double or triple the weekly amount. There’s no rule saying that you can’t save more. Stretch yourself to see just how much you can set aside. After all, if you wind up saving …<cough>… too much money, you can always get a head-start on another goal that will no doubt require money.


WeekDeposit AmountAccountBalance WeekDeposit AmountAccount Balance
1$1$1 27$27$378
2$2$3 28$28$406
3$3$6 29$29$435
4$4$10 30$30$465
5$5$15 31$31$496
6$6$21 32$32$528
7$7$28 33$33$561
8$8$36 34$34$595
9$9$45 35$35$630
10$10$55 36$36$666
11$11$66 37$37$703
12$12$78 38$38$741
13$13$91 39$39$780
14$14$105 40$40$820
15$15$120 41$41$861
16$16$136 42$42$903
17$17$153 43$43$946
18$18$171 44$44$990
19$19$190 45$45$1035
20$20$210 46$46$1081
21$21$231 47$47$1128
22$22$253 48$48$1176
23$23$276 49$49$1225
24$24$300 50$50$1275
25$25$325 51$51$1326
26$26$351 52$52$1378

Happy New Year, Everybody!!!

Finding the Balance – Saving Money for Today and Tomorrow

When I was a very young girl, I’d heard about a marital method of allocating money to both present and future goals that made a lot of sense to me at the time. Essentially, in a situation where both spouses worked, the household’s present needs would be paid for from one paycheque while the other paycheque was devoted to saving for the future. To my naive mind, this division would be split evenly since obviously both parties would earn the same amount and there would be no reason to fight about money… Ah, the innocence of youth!

 

Now that I’m an adult, I realize that many, many, many factors go into the process used by couples to decide how their money is allocated. Many of my friends are married. As far as I know, not a single one of them uses the “ideal allocation” that I’d envisioned as a child. They’ve worked out money rules that work for their relationships and they all seem very happy with their decisions. Still though, I remain convinced that spending one income while saving the other is a great idea.

 

If you’ve read enough personal finance blogs, you’ll have noted that the common minimum savings target in the online world of personal finance is 50% of your income. There’s often the admonition to save as much as you can, as soon as you can but 50% should be considered the baseline if you want to reach financial independence sooner than 65!

 

The challenge for singletons is obvious! We don’t always have that second income coming into our households, which means it’s not always as easy for us to live on 50% today while saving 50% for tomorrow. Economies of scale are missing since there’s only one paycheque to pay for the entire cost of housing, all of the food, all of our entertainment/travel/debt payments, etc… There are ways around some of these costs. For example, those singletons living with roommates have found a way to decrease their housing costs but not everyone wants to live with roommates. Also, it’s highly unlikely that roommates are willing to fund one another’s retirement accounts from the disposable income that results from lower housing costs! A couple’s desire to share their financial goals and to pursue them over a lifetime together is something that is very definitely missing from the roommate relationship.

 

If you’re a singleton with a side hustle, then maybe you’re one of the fortunate ones whose side hustle income is equivalent to what you earn from your regular job and saving that income already amounts to saving 50% of your income. Or maybe you’re a singleton with a nice, fat paycheque that allows you to live well below your means. If so, then hooray for you! You’re well on your way to funding the very desirable status of being a financially independent person where working for a living is an option rather than a requirement.

 

Singletons without lucrative side hustles or incredible incomes have to find ways to increase the savings target so that they can also reach financial independence and have the option of whether to continue working. Even singletons who love, love, love their current jobs should be saving big chunks of cash from their paycheques. The things that we love about our jobs can change over time. When they do, it’s best to be in a position to leave when those changes become intolerable and it’s even better to be able to leave without financial fears for the future.

 

What’s a singleton to do? As one singleton to another, I would urge you to save money towards your future. Personally, I automatically transfer money from my paycheque to my investment and retirement accounts every single time I get paid. The convenience of automatic transfers cannot be overemphasized because automation is beautiful!

 

If you need a daily reminder to commit to your future, consider the savings method employed by Grant Sabatier of www.millennialmoney.com where he decided to save a fixed amount every single day in order to reach his goal of financial independence and early retirement. Not everyone is able to save as much as Grant does. If you can, great! If not, then pick an amount that you can save and go from there. The point is to start saving money for your future as soon as you can. Once you’re in the habit of saving money, you’ll more likely than not increase the amount that you’re saving so that you can reach your financial goals sooner rather than later.

 

And the reality is that saving something is far better than saving nothing, even if your financial situation doesn’t allow you to hit the target of saving 50% of your income every year.

 

In a perfect world, I would be living on 50% of my income. I would pretend that my Illusory Partner was bringing in the other 50% of the household income and that his income would be going into the bank towards our goals of financial independence and early retirement while continuing to enjoy a standard of living that’s as good as the one I have now. Unfortunately for me, saving 50% of my income would mean that I wouldn’t enjoy my day-to-day life as much as I already do because I’d be living on a very tight budget that wouldn’t allow for the little luxuries that make life sweet. That’s just a fancy way of saying that I’m not yet prepared to cut out any of today’s expenditures in order to save even more for the future.

 

Am I still working towards the goal of saving 50% of my income? Of course I am! Yet, I will freely admit that my choices about how I want to live my life from one day to the next have prevented me from reaching this goal.

 

This particular singleton has made the decision to live below her means and to save as much as possible while still incorporating travel, entertainment, and spontaneous fun into her life. It’s a constant battle, but I’ve managed to create a budget where I save 40% of my net income and I set it aside for my aforementioned goals of financial independence and early retirement. I’m not terribly hard on myself for not being able to save the full 50%. As far as I’m concerned, 40% is still a respectable chunk of money so I think I’m doing okay.

 

The extra 10% that stays in my chequing account is for the small extravagances and short-term goals that are most important to me. It has paid for my recent international trips to Italy (2016) and to Spain (2017). It paid for a last-minute invite to a production of Comedy of Errors at Shakespeare in the Park. It has paid for my annual theatre subscription. It has paid for the costs associated with flying all over North America to attend family reunions. That extra 10% allows me to enjoy life now without having to wait to do all of my enjoyment later. I’ve been able to find a balance that works very well for me.

 

Could I have lived without those little extras in order to save the money? Of course I could have! And had I made that choice, there is no doubt in my mind that I would be closer to my financial goals. However, the other reality of choosing to save more money would be that I wouldn’t have seen as much of the world as I already have. I wouldn’t be as close to my extended family as I am now because I would have missed time with them nurturing the familial bonds. Similarly, I wouldn’t have had as much time with my friends building great memories around time spent doing things that we’ve enjoyed.

 

It’s very important to me to be free of the obligation to work as soon as possible – that’s why I save 40% of my net income and invest it for my future. Hopefully, I will continue to earn raises and receive larger dividend cheques from my army of Little Money Soldiers. One day, I will be in a position to meet my target of saving 50% of my net income.

 

Until then, it’s vitally important to me to live my best life each and every day on the other 60% of my paycheque. I don’t want to reach early retirement and realize that I haven’t nurtured important relationships or that I don’t have enough good memories of my life-before-retirement.

 

It’s taken me the better part of nearly 5 decades to figure out the best balance between my today money and my tomorrow money. Life is so short and the time flies so fast! There is a balance and I’ve been lucky enough to find it.