Category: Tips and Tricks

Commit to a Per Diem

Per Diem… it’s a phrase that means “an amount of money paid per day.” In the world of personal finance, it’s a phrase that is not used nearly enough. I want you to commit to a per diem.

That’s right. I want you to pay yourself some amount of money every single day.

I’ve written about per diems before, but this article is about creating a per diem that’s specifically designed to take care of Future You.

The Four Steps of the Per Diem Plan

  1. Pick a daily amount to save.
  2. Set short-term goals for your money.
  3. Invest that money.
  4. Don’t spend the money until you retire.

Step 1 – The Amount

If all you can afford is $1, that’s fine. When you have more, you can give yourself a raise. The important thing is to get into the habit. Start the habit today.

Think about it. How would you like to have more than $3500 by this time next year? All it takes is $10 per day. That’s not a whole lot of money in today’s world. If you have it to spare, then I’d like to see you put it to good use. And what better use is there for your money than ensuring that you’re comfortable, warm & fed in your dotage?

Maybe you’re fortunate enough to be able to put away $20 per day. Great! Do it! I’m not a stickler on the amount that you save each day. However, I am adamant that you save something. Start with whatever you can then increase your per diem as you’re able.

Step 2 – Set Short-Term Goals

Like I said above, this per diem is for Future You. When I talk about short-term goals in this context, I don’t mean saving for a vacation or new sports equipment, although you should never go into debt for those items either. You should definitely save first then pay cash at point of purchase.

No. In this case, your short-term goals are monetary targets. Let’s say you commit to a per diem of $10. Set a target amount of $500 or $1000. Then create an automatic transfer from your main day-to-day bank account to a separate savings account. When you hit $1000 in your savings account, then you invest that amount into an equity-based exchange traded fund or index fund.

You do not want to keep your money in a savings account. Why? I’ll tell you why – the rate of interest paid on savings accounts is less than inflation. You are losing money by keeping your money in savings accounts for long periods of time. Inflation is a fancy way of saying that the value of your money is decreasing over time. When $100 buys 5 bags of groceries in 2019, but only 4.5 bags of groceries in 2020, then you are seeing inflation at work. Inflation means your money purchases less today than it did yesterday.

Savings accounts are great to accumulate money that will be spent in the next few weeks or months. (They’re also a good spot for emergency funds, in my opinion. Others disagree with me.) Commit to a per diem going into your savings account. When it hits the target number, you invest the money then start working towards the target again.

Step 3 – Invest that Money

You’re free to pick whatever monetary target you want. I like $1,000. It’s a nice round number and it will take roughly 3 months, at $10/day, to achieve. If you can save $20/day, then you’ll be investing money every 8 weeks. Also, it feels good to tell yourself that you’ve just invested $1,000.

Again, you don’t want to let your per diem languish in a savings account. That money has to work as hard for you as you do for it. That means you simply must invest your per diem money in the an equity-based product.

I have no idea how young you are at the time you read this post. The bottom line is that the longer your money is invested in the stock market, the better your odds of watching it grow to a nice, big mountain of financial security. That mountain won’t be built until you commit to a per diem.

Step 4 – Mitts off until retirement

The money you save today is for Future You. Even though no one is promised tomorrow, it’s best to plan as though you’re going to be here for a long time. It’s very, very possible to find the balance between enjoying the present while saving for the future.

Wouldn’t it be awful to live to 92 yet you ran out of money at age 74? The social safety net isn’t designed to keep you comfortable. It’s designed to keep you at a level of not quite starving to death. That would be a terrible way to live during your retirement years.

Allow me to be clear. Your per diem money is not to be touched.

You’re still responsible for creating an emergency fund, and for replenishing it if you need to use it. Sadly, the rest of life’s expenses don’t disappear just because you’re saving for your future. You’ll be saving for tomorrow while paying for today. Commit to a per diem, then live the rest of your life on whatever’s left over.

And if you find that you have too much money waiting for you when you’ve finally retired, feel free to leave me a message. I’ll happily take whatever amount of money you don’t want.

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Weekly Tip: Never grocery shop when you’re hungry. You’ll likely make more impulse purchases and that can throw off your budget. Whenever possible, eat before you go to the grocery store. Make it easy for yourself to stick to your list!

The Holidays.

As hard as it may be to believe, the holidays are only a few weeks away. Thanksgiving will be here in another couple of weeks. (Or in November if you’re in the USA.) Then it’s another few short weeks until we celebrate Christmas, or Hannukkah, or Kwaanza, or Festivus.

While the holidays will be different this year, the fact remains that people will do what they can to keep tradition alive. That might mean mailing more presents, or swapping recipes instead of baking in the same kitchen. It might mean less travel but more time doing video chat. Or it might mean more road trips and fewer flights.

No matter how you and your loved ones plan to celebrate the holidays COVID-style, there’s a good chance that your wallet is going to take a gut punch before the celebrations are over. The time to start saving for the holidays is now. There are roughly 13 weeks left in 2020. Start setting some money aside each week so that you can pay for the upcoming expenses without putting them on credit.

Homemade for the holidays?

I’m going to take a wild guess and say that you’re one of the many people who are staying closer to home. If that’s so, then maybe you have some extra time on your hands. This might be the year that you take up baking Christmas cookies or other holiday treats. If you start a few weeks before the big day, you can probably bake some presents for the people you’ll be seeing.

After the year we’ve had, and the social distancing we’ve done, I suspect that a great many of us don’t want more stuff. However, we’d appreciate sharing a bite of something delicious with those we’ve missed. Stuff is easily forgotten. Happy time spent together? Not so much. People want the connection… and most of us connect over food in one way or another.

If you’re doing to be online anyway, try watching some videos of people baking (or cooking) something you’d like to share with your loved ones. I recently discovered the Preppy Kitchen on YouTube. I’ve spent hours watching the host bake delicious desserts. My eyeballs have consumed more calories than I could ever possibly burn off in one lifetime! That said, I’m still considering which of his delicious recipes I will be baking for Christmas dessert.

It doesn’t have to be a baked gift. You could make or create so many other things to be shared. Here’s one list of ideas that might appeal to you. The internet is a vast place so keep looking if none of these suggestions are the ones for you.

Spend cash, not credit!

Maybe you’re not the creative or crafty type. No worries! I’m not either. I bake year-round, but only make Christmas cookies at the end of the year. I’m more of a mall-shopper when it comes to presents for the holidays.

That said, please follow my lead. Only spend cash on the presents for others. No one wishes for their loved ones to go into debt to get them stuff. Well, maybe kids do but that’s because they don’t understand credit and debt just yet. The adults who love you don’t want you to be financially harmed over doodads and knickknacks. If you must buy people presents, then stay out of debt to do so.

Figure out a budget of how much you want to spend on others, then stick to it. Thanks to the pandemic, there’s a chance that your discretionary spending on other stuff has been curtailed this year. There’s a chance that the money not spent on commuting, the gym, sports activities, and eating in restaurants has resulted in a little bit more jingle in your pocket. I’m not encouraging you to spend more than you otherwise would! Savings should not be squandered simply for the sake of doing so.

What I am saying is that, hopefully, it’s easier for you to keep the credit cards tucked away this holiday season. If you’re fortunate, then you can spend cash only to fulfill your desire to give.

We are two thirds of the way finished with 2020. The holidays are coming up quickly. It would behoove you to start planning for how you’re going to pay for them. I want you striding into 2021 with a smile on your face and without debt on your mind!

Weekly Tip

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Make extra payments over the life of your mortgage to minimize the interest you pay over the life of your mortgage loan. This can be done by increasing your minimum payment each year. Or it can be done by putting a lump-sum down against your mortgage. The more extra payments you make, the less interest you will pay to the bank.

Silver Linings

The silver linings are there if you look for them, even in a pandemic. We all know that COVID-19 has changed things in a fundamental way at a societal level. However, as with most things in life, its impact on individual lives is different depending on one’s access to money and resources.

Over the past few months, I’ve been reading articles about how some people are seeing an improvement in their finances in the midst of COVID19. Working from home means that people are saving money on professional wardrobes, commuting costs, grooming products, cosmetics. Some people are even moving from their expensive locales to cheaper areas since they no longer need to be physically close their offices. In other words, people haven’t had to spend their money in certain categories because COVID19 allows them to work in their pyjamas in the comfort of their own homes.

There is no arguing with the fact that the pandemic has severely impacted life as we knew it a mere 7 months ago. Yet, there are some pretty serious financial benefits for some people. The people I’m referring to still have steady and substantial paycheques, yet they can work from home. For this fortunate group, their income is the same yet their outgo has dropped.

If you’re one of the fortunate ones who still has a reliable income, assess your own situation. Determine if you’re saving money by working from home. If so, calculate whether those savings are getting you closer to your financial goals.

There’s some chatter in the system about a vaccine for COVID19. No one knows when it will be found, nor how quickly it will take for all of us to get it. All we know for sure is that the pandemic won’t last forever.

We can also very be certain of the following. Regardless of whether we move back into our old offices, spending will go up. Think of the concerts, retreats, tournaments, and conferences that have all been put on hold due to the pandemic. Those will return with a vengeance. People who’ve chosen not to risk traveling will be on the way to the airports within days of getting vaccinated. After all, time is precious and the world is a big place. Those struck by wanderlust will be making up for lost time.

What I’m saying is this. Take this opportunity to save. Nothing obligates you to spend the money you’re saving by working from home. I’m not even suggesting that you hoard every penny. I’m urging you to take note of the financial silver linings that available to you during this pandemic.

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Weekly Tip: Listen to podcasts about money. You’ll learn a little something about a great many things. Try out a few different ones. Take what you like. Leave what doesn’t work for you. Be open-minded, but don’t let your brains fall out. As I’ve said before, you need not make every mistake yourself. You can learn from the mistakes of others.

Why I love Tangerine

As you know, I hate paying bank fees. Thankfully, there are many great options available so I never have to. (And if you’re still paying bank fees, please tell me why? You don’t have to pay them either if you’re willing to spend roughly 20 minutes setting up a free online bank account.)

However, I digress. The three best online banks in my opinion are Simplii, EQ Bank, and Tangerine. And to be explicitly clear, I am not being paid by any of these banks for this post. I’m simply sharing my opinion. Feel free to do your own research make your own choices.

At the time of this post, EQ Bank had the highest interest rate on its savings accounts.

Tangerine is my favourite online bank for the reason that it is best suited to help me achieve my goals. First of all, one customer number allows me to create and access up to 5 sub-accounts. Secondly, I can ascribe a name to each of these sub-accounts. Thirdly, I’m able to use automatic transfers from my real-world bank account to the sub-accounts.

All of my favourite personal finance tools are available to me in one online bank. What’s not to love?

Make use of Sinking Funds!

The older I get, the worse my memory becomes. Raise your hand if you can relate! Anyway, having sub-accounts means that I can create pools of money for my short-term goals. Before COVID-19, I traveled every single year so one of my sub-accounts was appropriately named “Travel”.

The beauty of naming my sub-accounts is the inherent prioritizing function that I had to go through in picking those names. Again, I only have 5 sub-accounts so I had to figure out which of my many short-term goals were the highest priority. Travel is still more important to me than furniture, which is why I still don’t have a sub-account called “Furniture”.

Having various sinking funds for my short-term goals means that the money is there when I need it. Un-sexy things like insurance and property taxes need to be paid every year. One of my sub-accounts is a sinking fund for those expenses. When those bills come due, the money will already be there. Do you know how nice it is to not have to scrabble together the money at the last minute?

I also have a sub-account for medium-term goals, namely anything that needs to get purchased in the next 2-5 years. When it was time to replace the windows & siding on my house, I got the quote then got to saving. It took nearly 2 years to save up the money but I wasn’t worried about how to pay my contractor when the work was done.

And once that particular job was done, it was no longer a priority. So that particular sub-account acquired a new name… “Landscaping.” Trees need to be cut down… grading needs to be levelled… new sod needs to be laid. (For those of you who don’t yet own a home, know that it is a money-pit. On top of the mortgage, you will be on the hook for repairs, maintenance, upgrades, and all the other financial joys that come with home ownership.)

Automate!

You know what else I love? Automatic transfers! Yes, you heard me say it – I love automatic transfers. I have my main bi-weekly transfer from my checking account to my very first Tangerine sub-account, which I call my Freedom Account. (Shout out to Mary Hunt of Debt-Proof Living!) I have more transfers in place from sub-account #1 to the various other sub-accounts.

Here’s another reason why I love Tangerine. This particular online bank has a rather unique feature that I haven’t found anywhere else. Tangerine allows me to implement “Money Rules” and these rules allow me to control what happens to the overflow.

Overflow? Blue Lobster, what the hell is overflow?

Dear Reader, if you’ve been doing automatic transfers for any length of time, you know that money piles up. One day, you account has $25 then the next time you check it, there’s way more! That’s the power of implementing automatic transfers. You do it once then move on to other tasks in life. Your money will accumulate automatically without you having to remember to make every single transfer manually.

At Tangerine, you have the option of re-directing money once a pre-determined amount is sitting in your sub-accounts. That re-directed money is the overflow. Pay attention – here’s where the steak starts to sizzle.

Money Rules in Action!

For example, you need to accumulate $3000 for your pet emergency fund. So you set up an automatic transfer. Once your $3000 is in place, you’re not going to cancel your automatic transfer! Instead, Tangerine gives you the power to have that money re-directed to one of your other sub-accounts. Maybe you’re saving up to go on a road trip or new furniture. Tangerine’s system means that money that otherwise would’ve stayed in your pet emergency fund is sent to your next highest spending priority.

And you don’t have to worry about fiddling with the automatic transfer should you need to use some of your emergency funds. Let’s say you need $1500 for your furry friend’s surgery. Your pet emergency fund will drop down to $1500. The automatic transfer will go back to funding that sub-account until it gets back up to $3000. At that point, future funds – the overflow – are whisked away to the sub-account named for your next highest priority.

It’s a pretty sweet little feature. Again, it ensures that your money is going towards your highest spending priorities.

Do yourself a favour.

At the very least, consider opening a Tangerine account. The purpose of this account was, and mostly still is, to make it somewhat difficult to access this money until I really need it. I wanted a simple method to siphon money from my day-to-day spending to my financial goals.

You don’t have to obtain a bank card for this account. I’ve had my Tangerine account for more than 10 years. I’ve never asked for a bank card. Without one, I can’t withdraw money at a bank machine. My money stays in place until I need it. What more could a Single One want?

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Weekly Tip: Figure out your priorities and spend accordingly. There will come a point in life where you realize that it makes absolutely no sense to spend your money on things that don’t make you happy. The sooner you reach that point, the better.

Guilty Pleasure – Big Haul Grocery Videos

Yes… it’s true. I’m a Single Person who loves to watch YouTube videos about people – almost always women – who do huge grocery shops and create videos about it.

Since the Pandemic, and before I found these videos, I thought I was buying lots of food when I went to Costco. I’d buy two packages of chicken thighs and one package of chicken breast. Then I would head to the Real Canadian Superstore and buy a bulk size package of extra lean ground beef. Being a Single Person, I’d round out my shopping with a trip to Sobeys for bread, vegetables and fruits. I’d pat myself on the back for buying an extra loaf of bread, or maybe 2 packages of soft Kaiser buns, to put in the freezer. And let’s not forget about those 6 cans of sliced peaches!

Yes, indeed – job well done – way to go, Blue Lobster!

I was pretty proud of myself… until I found The Queens Cabinet on YouTube. This woman knows how to shop! From what I’ve gathered so far, Shelby and her husband Ken live on a farm and are raising 4 sons. When theywere younger, they had to budget their money and lived quite frugally. As a result, they chose to stock up on the things that they always use so that they always have food in their pantry.

Big deal, Blue Lobster – most everyone who can already does this!

Gentle Reader, I would suggest that few people stock up their pantry with a year’s worth of food the way that Shelby and Ken do. How many people do you know with 7 freezers? And how many people have their own baking centre, yet alone one that is so well-organized?

I’m not ashamed to admit it – a tour of her pantry made me wish that I had a slight touch of OCD just so I too would be motivated to take the time and organize my food storage space. In my world, a $3700 (or more!) grocery shop is still a very rare thing…even for those I know who go to Costco!

While a 4-figure grocery haul is not part of my life, I can see its benefits. You can stock up when things are on sale. This saves you from shelling out more when the price is higher. Secondly, meal planning is easier when what you need is already in your home. You can put the money-saving magic of your kitchen to work more easily when you have ingredients at your fingertips.

I’ve no doubt that Shelby still runs to the grocery store throughout the year for certain items. Fresh fruit and vegetables immediately come to mind. However, I would guess that she doesn’t have to waste money on condiments, meats, prepared drinks, and baking supplies throughout the year. She stocks up when it’s on sale, then it’s on hand when she needs it.

And if you subscribe to her channel, you’ll see that she’s a big fan of meal planning. I can’t say that I blame her! If I had her kitchen, I’d want to spend a lot of time in it too – cooking and baking things. Try to find the videos where she talks about her fridges – yes, more than one fridge in a kitchen!

Their Pantry is an Emergency Fund

What Shelby and Ken have done is to create an emergency fund of food. If their income stops for a period time, their monetary savings need not be used to feed their family. They have a cache of food already set aside so everyone will be able to eat while another source of income is found. Their cash-money doesn’t have to be spent on food, which means that it will last longer.

Take a look at your own budget. What percentage of your monthly income goes towards food? And if you lost your income tomorrow, how much longer would your emergency fund last if you didn’t have to use it to feed yourself?

But I don’t have the room for that much food, Blue Lobster!

I hear you. And trust me, I don’t have that much room either. However, I do have freezer in my basement and I have a freezer area in my fridge. That means I can freeze a much smaller, but no less important, amount of food. I have 6-8 packages of extra lean ground beef. Is that too much for a Single Person? No, not if I lose my job. A single package becomes 4-5 hamburgers, or a cookie sheet of meatballs, or a big pot of meat sauce. Whatever the final product, that’s a few meals that I don’t have to buy with money from my emergency fund.

The same principle to the chicken thighs that I’ve bought. A bulk package of chicken might have cost me $30. Yet, I can get 25-28 chicken thighs that I then divvy up into Ziplock bags of 4-5 pieces. It takes very little time to prepare a marinade, pour some into each bag with the chicken, and then freeze the bags for later use. I haven’t bought chicken in several months. I do the same thing with my pork.

I’ve started going back to my office, which means taking a lunch and taking snacks. My freezer allows me to baking a big batch of cookies, or muffins, then tuck them away for when I need them. If you’d rather have something else for snacks, then be my guest. My point is that it’s not a bad idea to have some extra food stored away. Save money now by buying things when they’re on sale. Save money later by not having to buy outside food unless the purchase has been planned in advance.

Use Your Pantry and Freezer Space

Do what you can with what you’ve got. Your pantry and your freezer space are tools that can help you save money. I’m not an expert. No one’s expecting you to be an expert either. That said, I learn a little bit more each time I watch videos about how other people do it. I can take a tidbit or two and incorporate it into my life. There are ways for me stretch my dollars.

Build up your own emergency fund by learning to buy a bit more when things are on sale so that you can stock your pantry and your freezer. Watch a few more cooking videos on YouTube so you can cook for yourself a little bit more. Figure out how to cook or bake what you like to eat, then do so. If you don’t already, learn to love leftovers.

You have to eat. Keep your pantry and your freezer well-stocked with foods that bring you joy. Then learn to cook & bake what you love in your own kitchen. Doing so is another way to insure that you’re using your money to create a life that maximizes your happiness and joy. And isn’t that one of the very best reasons to have money in the first place?

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Weekly Tip: Contribute to your Tax Free Savings Account every year. Invest your contributions in a broad-based equity exchange-traded fund or index fund for 2-3 decades. (You can select a mutual fund, if you wish. However, mutual funds have higher Management Expense Ratios than ETFs or index funds so it makes little sense to spend more money for the same product.) Let your money grow over the years and re-invest all the dividends. When you finally do withdraw your money from the TFSA, never pay any taxes on the principle or the growth.

Never Stop Reading!

Learning doesn’t stop with graduation. You should never stop reading. Read everything that you can get your hands on. Reading opens your mind to new ideas & perspectives. No one says you have to agree with everything that you read, but you owe it to yourself to learn as much as you can in the time you have left.

Since this is personal finance blog, I’m going to talk about the personal finance books that have shaped my financial life.

The Automatic Millionaire by David Bach

I loved this read for its simplicity and ease of implementation. After reading it, I didn’t have to spend too much time setting up my automatic transfers. 20 minutes? Maybe 30 minutes? In less than an hour, I’d created a system whereby a portion of my money went to my long-term goals, another portion went to my short-term goals, and the rest stayed in my chequing account to get me from one day to the next. Easy-peasy-lemon-squeasy!

I’ve been using automatic transfers for more than 2 decades. They eliminate the need for me to remember to transfer money from my chequing account to my investment account. The money is magically in place when it’s time to make an RRSP or TFSA contribution. There’s money waiting to be deployed to pay my monthly utility bills. Learning how to automate my money at a young age set me on a good path when it came to personal finance.

The Wealthy Barber by David Chilton

There’s something special about your first. I was 21 years old when I read this book. I was naive and very un-sophisticated when it came to money matters. However, this book impressed upon me the important of starting my Registered Retirement Savings Plan as soon as possible so I did. I was a student who paid nothing in taxes, hence I got a full tax refund back every year. Still, those little contributions to my RRSP have since grown into a nice six-figure income. What I took from this book is that investing is best started as soon as humanly possible.

The Two-Income Trap by Elizabeth Warren and Amelia Warren Tyagi

Senator Warren’s book was my first foray into the political implications of personal finance, and the risks that are associated with dual income families spending both of those incomes. I promised myself that if I ever married, I would make sure that my partner believed in living below our means just as much as I did. That way, we could live for today while still saving and investing.

While I’ve never married, I still set aside a good chunk of my salary for investing purposes. Mental gymnastics allows me to split my household income into two! Sometimes I pretend that the monthly dividends generated by my portfolio are the take-home pay of my imaginary spouse. It’s the best of both worlds – a second income without any money fights about how it will be spent!

Debt-Proof Living by Mary Hunt

This book was fantastic. I loved it because it gave me an infrastructure for how to set up my short-term money. One of the best ideas I’ve ever come across is the Freedom Account. Its purpose is to cover the irregular expenses that come up every year, but aren’t emergency expenditures. Think of things like oil changes, clothes purchases, pet expense, vacations. These are the expenses that do not occur regularly but still have to be covered. You don’t know exactly when you’ll have to pay for them but you know it’s going to cost some money.

I’ve had my Freedom Account for decades, and it’s been my safety net more than once. If you don’t have one, I suggest that you get one.

The Richest Man in Babylon by George S. Clason

It’s a parable that’s also a quick read. I loved this book! The financial principles about savings and investing have been around for centuries. And so have the mistakes that people make with their money. This parable touches upon the difficulties of not spending every nickel earned, finding good mentors, investing properly, and repaying debts. It’s also about the fact that get rich quick ideas are scams, more often that not. Building wealth takes time and consistency, but almost anyone can do it by following the right principles.

Quit Like A Millionaire by Kristy Shen & Bryce Leung

This inspirational story of retiring in one’s early 30s will stick with me for a long time. I learned about the challenges and strategies for early retirement. This book opened my eyes to idea of living outside of North America in order to save money. I learned about how to segment my money so that I wouldn’t have to sell from my portfolio during a market downturn.

Kristy and Bryce are the brains behind the Investment Workshop, one of the best free sources I have ever found for learning about how to create, maintain and re-balance your portfolio. Take advantage of their lessons to set yourself on a path for a comfortable retirement, early or otherwise.

Again, never stop reading!

As I’ve said before, you need not make every mistake yourself – you can learn from the mistakes of others. Books are a source of knowledge. They’re free from the library. Even in our COVID-19 circumstances, you can still access library books – you simply need to go online instead of into a building. Never stop reading!

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Weekly Tip: Create you own pension by investing your money towards your retirement. Fewer and fewer employers are offering pensions to their employees. This means that you have to save for your own retirement. If you don’t save the money for Future You, then no one will. Start today by squirrelling away a little bit of money, invest it for the long-term, learn a little bit more about investing, then start over. Save, invest, learn, repeat!

When Should I Start Saving?

In a perfect world, you would have started saving with the first dollar that you ever received, i.e. birthday money, paper route money, graduation money.

You would have gone to the bank – or your parent would have taken you – to the bank and you would have opened an account. Then you would have deposited that dollar before you’d had a chance to spend it. Everyone seems to know that the sooner you start saving, the better. However, there appears to be a disconnect between knowing and doing.

You’re the only person who can bridge the chasm between knowing what to do and then actually doing it. The truth is that it is quite simple to open a savings account in today’s world of online banking. It’s another very easy and straightforward matter to put an automatic transfer in place, thereby eliminating the need for you to manually transfer money into your savings account. The automatic transfer kicks in every time you’re paid – easy peasy lemon squeezy!

The very next best time to start saving money is immediately. I cannot stress this enough! Savings work best if you take steps to save money. Step one – save. Step two – don’t spend your savings. If you’re not yet accomplishing these two things, then you’re only dreaming about saving… which is all fine and good but it won’t help you very much since you can’t use dreams to acquire what you want. Dreaming about saving is not the same as actually starting to save.

I love dreams as much as the next lady, but dreams don’t put the cream in cupcake. You need to actually start saving – the sooner, the better. I speak from experience. One of the reasons that I’m able to seriously consider an early retirement is because I started saving a portion of my first paycheque when I was 15 years old. I’ve made many stupid decisions with my money over the years, but starting my savings plan in my teens is not one of them.

Now, let’s say there’s a good reason why you can’t start saving today. If this is your situation, then I want you to start saving money on any day that ends in the letter “y”. That leaves you with Monday, Tuesday, Wednesday, Thursday, Friday, Saturday, and Sunday. Each of these is a very fine day to start saving your money.

Whatever else you do, please don’t start saving tomorrow. First of all, tomorrow is promised to no one. Further, it is not a day ending in “y” so it’s not a suitable day on which to start saving. And while I hesitate to state the obvious, I feel that it’s best to articulate the fact that everyone eventually runs out of tomorrow’s. No one ever runs out of today’s – go back to my first point. Today is the very best time to start saving money.

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Weekly Tip: Practice delayed gratification. Wait a day or a week or a month before buying what you want. It gives you a chance to assess if you really want to make the purchase. It also gives the retailer a chance to put the item on sale. This is good because the whatever-it-is-that-you-want will be cheaper if you decide to make the purchase after a prescribed waiting period.

Budget? No, thank you.

I don’t use a budget. I’ve been in charge of my own money since I got my first part-time job, in a grocery store, at the age of 15. Not once since that time have I ever written out a budget in order to allocate a certain amount towards food, towards clothing, towards entertainment, towards X.

If you’ve been reading my blog for the past couple of years, you’ll know that I’m a huge fan of automatic transfers and sinking funds.

Very simply, my paycheque hits my bank account. My automatic transfers kick into high gear. Various amounts of money are dispersed among my many, many bank accounts. (Each account has a very specific purpose!) Then I spend whatever is left in my account.

For the cheap seats in the bank, I say again that I don’t use a budget.

If budgets work for you, then stop reading.

For my part, I’m not against budgets if they work for you. Everyone needs a good money-management system and budgets are one of the options available for controlling spending.

A budget simply doesn’t work for me.

See, if I’m at the grocery store and I see something that I want but which isn’t on my list, then I’m still going to buy it. I don’t want to walk past it solely because it’s not in the budget. (I might walk by it because I don’t need more calories/sodium in my diet, but that’s a different blog topic.) The same principle applies to clothing, shoes, gasoline, whatever isn’t already covered by my sinking funds.

And lest you think that money runs through my fingers like water, I promise you that there is a method to my budget-free madness.

The backbone of my money-management system lies in taking care of the Big, Important Priorities first. Once my priorities have been funded, then it doesn’t matter if I buy a couple of extra things at the grocery store or drive more than I’d intended in a given week. The most important elements of my financial life get funded first so that daily decisions don’t matter too, too much so long as I don’t go into debt. Rule number one of my system is always avoid debt!

Although I’m still fine-tuning it after all these years, the system I’ve developed for myself ensures that my medium-term and long-term priorities each get the lion’s share of my paycheque before I start doing my day-to-day spending. The impulse purchase of a pair of jeans while window-shopping at lunchtime is not going to derail my retirement dreams.

Automatic Transfers & Sinking Funds

The most important quivers in my money-management arsenal are automatic transfers and sinking funds. One of the most burdensome realities of adulting as a Single One is that all the expenses of my household are my responsibility. That means, I pay all the utilities and taxes and insurances. It also means that if I want to travel to Vancouver to enjoy the cherry blossoms in the spring, then I’m the one who has to scrounge up the money to do so.

In the pre-COVID19 days, I had a far more active social life that included concerts, travel, and meals with friends. Those activities have been curtailed for now, but I’m sure that I’ll get to enjoy most of them again.

My point is that I rely on automatic transfers and sinking funds to pay for the expenses of my life. For example, I pay my insurance premiums on a yearly basis. I have a sinking fund for that particular bill. I take the amount I paid last year, increase it by 10%, then divide that number by my annual number of paycheques. The final amount is then automatically sent to my sinking fund every time I get paid. When the premium due date rolls around, I’m not left wondering where to come up with several thousand dollars.

While I realize that some people pay their insurance monthly, I abhor the idea of anyone other than me withdrawing money form my account. I’d prefer not to grant access to my bank accounts to anyone else.

I have sinking funds for all of the following:

  • insurance premiums;
  • property taxes;
  • annual vacations;
  • birthday and celebration gifts;
  • Registered Retirement Savings Plan contributions;
  • Tax Free Savings Plan contributions;
  • renovations;
  • MISC.

Yes, I set aside a segment of my paycheque for miscellaneous stuff. I might decide to do something fun and unexpected, so I need to have a bit of money tucked aside for this unanticipated spending. Sometimes the MISC-money has to be spent on not-fun stuff, like a new pair of glasses – they’re quite necessary but they won’t be cheap.

Leftover money gets spent…

Yes, that’s right. Think of my automatic system as a blackjack dealer in a casino. My sinking funds are the players. The deck is my paycheque. Once the system has dealt money to each of my sinking funds, I’m free to spend whatever’s leftover however I want.

Again, I don’t use a budget. The leftover money is spent on groceries, clothes, gasoline, liquor, dining out, whatever I want. What I love best about my money-management system is that I can spend however I want in the very short-term because my medium-term and long-term goals are also being met. It’s the best of both worlds for me.

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Weekly Tip: Consider following the 50-30-20 rule for your money, which I first learned about in the book All Your Worth written by Elizabeth Warren and Amelia Warren Tyagi. In a nutshell, the rule says that 50% of your net income is spent on your necessities, otherwise known as MUST-HAVE’s. Then next 30% is spent on non-necessities, the Want-to-Have’s. The final 20% goes straight into Savings and Investing.

Decide – Execute – Enjoy!

The first step to getting what you want is to prioritize your goals. You’re the only one who can decide what you need in order to live the life that you really want. The next step is to create and execute the plan to turn your dreams into your reality. The final step is to enjoy the reward of your efforts. Decide – execute – enjoy!

I’ve followed this three-step plan to achieve many goals in my life, both large and small, long-term and short-term. When I got tired of saying that I’d never been to Europe, I decided to go overseas. Between 2016 and 2019, I travelled to Europe three times. For each trip, I found a way to set aside the money from my paycheque so that I could visit Italy, Spain and Ireland. Getting to Europe was important to me so I found a way to make it happen.

The Claddagh Ring – Dublin, Ireland
The Sargrada Familia – Barcelona, Spain
Trevi Fountain – Rome, Italy

One of the keys to my success was using technology to remove the temptation to spend money on things that didn’t get me closer to this particular goal.

Automatic Transfers are Your Friends

I absolutely and completely love automatic transfers. They are reliable – they’re effective – they’re simple to understand. All a body has to do is decide how much money to put toward a particular goal, and then put an automatic transfer in place. For example, if you wanted to create an emergency fund of $3500, then you could automatically transfer a fixed amount from each paycheque into a separate emergency fund account until you’d saved $3500. Easy-peasy lemon-squeezy!

Once one goal is reached, you simply keep the transfer in place and use the money to go towards the next most important goal.

And you needn’t limit yourself to having one transfer. For my part, I have 4 automatic transfers in place. One is for my long-term goal of early retirement. Another is for short-term goals like travel, house repairs, birthday & holiday presents, theatre tickets, vehicle replacement, and the like. The third transfer is in place for my charitable donations. And finally, the last transfer is in place to cover the costs associated with being a home-owning adult who has bills to pay.

Once my automatic transfers go through, I can spend the rest of my paycheque however I want! My long-term goals are being funded. My short-terms goals are also getting a little love. The costs of running my house and various other bills all get paid on time. And I have money set aside for charity. The rest of the money can be squandered and I can still create the life I want for myself.

I enjoy the theatre and I go several times each year. When it’s time for me to renew my subscription to Broadway Across Canada, the money’s there. Holiday traditions are important to me since they mean time with my family and friends. Is it time to buy some Christmas presents? The money is already there. And let’s not forget those special occasions that aren’t always so predictable. Invitation to a wedding or a spa weekend with friends? The money’s waiting for me.

Sinking Funds are Key to Paying for It All

Automatic transfers are a magnificent way to build sinking funds for all of your anticipated expenses.

While we live in an instant gratification society, one of the realities of good financial stewardship is that we can’t always get what we want when we want it. Credit cards create the illusion that you’re living your best life. They allow users to buy whatever they want the very second that they want something. However, unless that person has the money sitting aside to pay the bill, credit cards burden people with exorbitant interest payments.

Credit cards don’t teach people about patience. Let’t be honest. Most credit card purchases aren’t for emergencies. For a great many people, credit is used because someone doesn’t want to wait a little bit long to buy!

If you’re serious about spending your money on the things that matter most, then take my advice. Siphon a portion of your income every time you’re paid into an account dedicated to your most important goals. Use automatic transfers and sinking funds to acquire the things that you really and truly want.

You work too hard for your money to waste it on purchases that you won’t remember 48 hours after you’ve made them. Create a financial plan for your money by telling it where to go instead of wondering where it went. Automatic transfers and sinking funds are financial tools that will help you to build the life you really and truly want for yourself. Start using them today and move that must closer to achieving your dreams.

Decide – execute – enjoy!

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Weekly Tip: Don’t let websites store your credit card information. Firstly, doing so makes it that much easier for you to indulge in instant gratification purchases. The few extra seconds of typing in your information might be all you need to make you reconsider whether the purchase is moving you closer to or further from your goals. Secondly, if the retailer’s website is hacked, then your information is at risk and your odds of being the victim of identity theft go up.