Tips and Tricks - Millionaire on the Prairie

Per Diems Move the Needle

One of the best things about being a Singleton is that you alone are responsible for your financial choices. You need not debate each purchase nor do you need to compromise with anyone about how your household’s money will be spent. You have the freedom to choose which of your life’s goals to pursue and how to fund them.

Based on my own experience & observations of others, personal goals often have a financial component. Money has to be sourced somehow. Children have the benefit of someone else generally paying for their lives. They get to write lists to Santa Claus to get what they want. They can even leave teeth under their pillows in order to wake up to money. Adults – not so much. (Some of my friends pay their kids $5/tooth… the power of inflation is real, ladies & gentlemen.)

Enter the per diem…

Pray tell, Blue Lobster – what is a per diem?

I first learned of them when I started travelling for work. On top of reimbursements for my meals & accommodations, I earned a per diem for the incidentals that I might have to buy while away from the office and home. Most of the time, I didn’t have to use my per diem so I would simply sock it away in a savings account.

In terms of personal finance, a per diem is simply is a daily amount of money that you pay to yourself.

You can create your own per diem by deciding how much money you want to pay yourself each day. You know how you choose to pay a certain amount each day for rent/mortgage? Student loan payments? Credit card bills? Utility payments?

Add up each of these payments then divide that amount by the number of days in the year. This is how much you’re paying on a daily basis for each area of your financial life. If you haven’t already done this exercise, trust me when I tell you it’ll be an eye-opener!

Next, I want you to pick a number and pay that to yourself. It could be $1 per day, $10 per day, or $100. The amount is up to you since you know your numbers better than I do. Keep in mind that a higher per diem means that you’ll reach your goals and accumulate money faster.

Why do I like this money hack?

I want people to be aware of how they spend their money. I hear so many people complain about never having any, yet I never hear them articulate where it goes. To my way of thinking, setting a per diem forces a person to be very specific about what they want their money to do. They are assigning a purpose to their per diem money. They are giving those particular dollars a task that goes beyond the basic elements of survival. The per diem dollars are going to be allocated towards a person’s most important financial goals, not just towards the nice-to-have-but-not-important-stuff.

Spend your per diem however you want!

Yes – that’s right. At the end of the day, this is your money and you’re the one who gets to decide what to do with it. I’m not familiar with your heart’s deepest desires. I’m a fan of the theatre. Your joy may lie in beach volleyball championships, taking self-development courses, Grand Prix auto-racing, or raising salamanders to sell online.

After selecting your per diem amount, your task – should you choose to accept it – is to focus your efforts on the goals that have the highest meaning for you. The order of your goals isn’t set in stone. Again, it’s your life and your money. You’re the lucky duck who gets to determine the order in which your goals are satisfied. Once you’ve accomplished the highest priority goal, you can move on to the next one and keep moving down your list until you’ve achieved what’s most important to you. In this way, your money is working hard to create the life that you want to live.

For some people, the goal is to take a really awesome vacation once a year. That might mean renting a houseboat for a week every summer. It could mean a weekend with friends or family at a favourite campsite. Maybe it means a six-week trip overseas. However an awesome vacation is defined, the per diem money can help pay for it if you so choose.

For other people, the goal is to pay off a debt, to build an emergency fund, to save for a down payment, to go back to school, or to renovate a home… The goals are as endless as your imagination. The sad reality is that your paycheque isn’t infinite. (And if it is infinite, please leave a comment explaining how you’ve managed to create such a wondrous thing!) No matter its size, your income has limits. That’s why per diems are such a great money hack. They help you to satisfy those desires that are most important to you. Nothing wrong with that!

Two things to keep in mind about per diems.

One – don’t be deterred by how long it takes to reach a goal. It’s obvious but I’ll say it anyway. Some goals take longer to reach than others depending on the size of your per diem. Buying tickets to a concert might take a few days or a few weeks. Gathering the down payment for a second home in Cinque Terre might take a bit longer.

Two – if you use your per diem to pay off debt, then you an added benefit once the debt is gone. Your former debt-payment can be used to increase the size of your per diem. A larger per diem means that you can achieve your next goal even faster. There’s always the option of simply frittering your former debt payment away on stuff and keep the same per diem amount. As always, you’re the one in control of allocating where your money goes.

In my humble opinion, paying yourself a per diem gives you the psychological boost of knowing that each day is taking your closer to your goals. When your head hits your pillow, you can be satisfied knowing that your money is working towards building the life of your dreams. And who doesn’t want that?

Minimize Your Vehicle Debt

It is ridiculously easy to incur as much vehicle debt as much as possible – aka: more than absolutely necessary – when buying a new set of wheels. You simply have to do the following three things:

borrow as much as you possibly can,
get a really high interest rate; and
pay the absolute lowest minimum monthly payment.

Taking all of these steps will ensure that you acquire and maintain the maximum amount of vehicle debt for as long as possible.

… Wait – what?!?!?

On the off-chance that you’d like to keep more of your money for yourself, this article will teach you how to manipulate a few financial levers. By following some or all of these tips, you’ll get a new vehicle. The side benefit is that more of your hard-earned money will stay in your own damn pocket.

Ideally, you’ll pay cash for your next vehicle. The sad truth is that we don’t live in an ideal world. Gentle Readers, I know that most of you will take a loan and spend several years paying off your vehicle debt.

Should you wish to avoid paying the maximum on your debt, then heed the following words. There are several levers at your disposal to keep your vehicle debt as low as possible.

Lever 1 – Buy a less expensive vehicle

First, you don’t need the most expensive vehicle that your budget will allow. It’s perfectly okay to drive something that costs a wee bit less than what the car dealer wants you to finance. Be completely honest about what you need, not what you want. All you really need is a vehicle that will safely get you from A to B.

Your worth as a human being is not determined by the car you drive. Transportation should never have any impact on your self-esteem. People who care about how your car looks aren’t the ones who are paying for it. If they want you in a $95,000 SUV, then let them foot the bill. Your goal should be to drive what’s best for your budget because you know that your value as a human being is not dependent on the kind of vehicle that gets you from one destination to the next.

It never ceases to amaze me how many people never consider the option of spending less money in the first place!

Lever 2 – Get the lowest possible interest rate

I cannot stress this enough. There are 2 portions to each of your loan payments – the interest and the repayment of principle. The interest rate is the price you have to pay to the lender for borrowing their money. If you have a low interest rate, then more of your payment will go to repaying the principle instead of lining the finance company’s pockets. The opposite is true. A high interest rate means that more of your payment goes towards paying interest.

The interest rate applied to your vehicle loan will fluctuate with your credit score. A higher credit score results in a lower interest rate. Conversely, a low credit score results in a higher interest rate.

Lever 3 – Increase your monthly payment

Increase your monthly obligation results in the loan being paid off more quickly.

For example, let’s stay that you can get a 5-year loan for $150 per month. If your budget will allow for a $350 payment, then make the higher payments for a shorter period of time and pay off your debt years earlier. Hear me well as I say the following to you…

Making the minimum payment never benefits the borrower!

Paying the lowest minimum amount always results in the maximum amount of interest being sent to your lender. Paying a higher amount than absolutely necessary is a form of short term pain for long term gain.

Lever 4 – Make a big down payment

Your down payment on your next vehicle should be as large as you comfortably afford. The larger your down payment, the smaller the monthly payments required to completely eliminate the loan.

You’re going to have to pay for the vehicle anyway so minimize the pain by paying for it as fast as you can. Hopefully, you’ll be able to sell your previous car privately and get more money than by selling it to the dealer. There’s always the chance that you’d been saving up for your next car in anticipation of being able to pay cash, but something went awry and you had to buy sooner than you’d anticipated. If that’s the case, then good on you! Use the money from your vehicle savings fund as your down payment.

Lever 5 – Make loan payments to yourself

Once your loan is paid off, continue to save the payments in a separate account. Your current car will not last forever. And no – paying off one loan is not an automatic trigger to buy your next vehicle. Drive your vehicles until the wheels fall off!

Trust me on this – your car purchases will always incur far less hassle, angst and financial worry if you already have money in place when it’s time to buy the next vehicle. By continuing to save your car payments, you’ll give yourself two options: you’ll either have the cash on hand to simply pay for it all at once or you’ll have a sizeable down payment to ensure small monthly car payments.

Have Money, Will Travel!

Last week, I was fortunate enough to travel to Ireland for the very first time. And I loved it! The Emerald Isle is gorgeous, from its rolling green hills to its beautiful canals to the innumerable cows & sheep & horses to be seen from the motorways. The people are warm and friendly, cheerful and welcoming. I learned so much about the history of this country and the perseverance of its people. I saw a cultural performance consisting of Irish dancing and traditional musical instruments. I ate dinner in a castle and enjoyed an evening of poetry. I visited the Cliffs of Moher, the production floor of the House of Waterford Crystal, and a genuine Irish pub.

The Claddagh Ring – an unmistakable symbol of Ireland

You know what else I loved about my first visit to Ireland?

That it was paid for in cash before I left home!

Yes – that’s right! I saved up my money first then booked my trip. I’ve been travelling for years. At first, it was just within North America but now I go further abroad, mainly to Europe. Yet, no matter the direction in which I point the plane, my motto has always been – have money, will travel!

Always Pay For Travel in Advance

So now that I’m home, it’s time to start planning my 2020 trip. Have I picked a country to visit? Nope. Do I know how much my trip is going to cost? Also, a firm “No.” Do I have any sense of whether I’ll be travelling in early, mid or late 2020? That’s a negative!

I am absolutely certain of one thing though. Whatever I wind up doing and wherever I wind up going, it’s going to cost me some money. At a minimum, I’ll need to pay for airfare. And since I’m in Western Canada, I can count on my airline ticket costing me atleast $1,000. If I book another trip with my preferred travelling company, then I’ll need a minimum of $2700 for my chosen package. Leaving Canada means that I’ll have to buy currency for my destination. And that might cost a pretty penny depending on the exchange rates in force at the time. And let’s not forget travel insurance & souvenirs.

The trick is to start saving for my next trip today so that I have the money when I need it. Even though I’ll charge the trip to my credit card, the money will be in the bank so that I can pay off the card when the bill arrives. Points – yes! Travel – yes! Debt – NO!!!

Next year’s travel is a short-term goal. I know that I spend a good deal of time telling you to save for your retirement and to build your own pension. However, the fact of the matter is that you have a right to spend some money on the things that bring you joy. In my case, that’s travel. And this is how I pay for my magnificent vacations each year…

Getting the Money Together for Travel in 2020

First, I rely on having a dedicated sub-account at Tangerine Bank, which is nicknamed “Travel.” (Originality is not really my strong suit.) The money that goes into this account is spent only on… you guessed it – traveling to wherever I want to go. It could be a weekend in the mountains – it could be a spa weekend in Vegas – it could be another overseas trip to a new-to-me part of the world!

Second, I’ve created an automatic transfer from my chequing account to my travel account to fund my voyages. This transfer seamlessly ensures that my short-term goal is partially funded every time I get paid. A portion of my paycheque is re-directed to my desire to see & visit new corners of the world. The more I can save from each paycheque, the longer I can afford to be away from work.

Third, I visit different websites and talk to other travellers so that I can figure out where to go next. This also gives me an idea of just how big my travel account has to be before I can travel again. It’s also a great incentive to keep my hands-off my travel funds! Travel is one of my priorities, but I’m only human. Just like everybody else, sometimes I’m tempted to spend my money on other things. (Right now, the 2019 Nissan Rogue is calling my name even though my current vehicle is more than sufficient to meet my needs.) Talking to other travellers and dreaming about my next destination keeps me from spending travel-money on non-travel stuff.

Fourth, I book my trip. I do this once my travel account has enough money to cover my flight, my package price, my insurance, and the cost of my foreign currency, if required. I generally book my trips atleast 6 weeks out. This gives me 2 or 3 more pay periods in which I can gather a bit more money for my trip.

Fifth, I enjoy myself wherever I go! I believe in carrying a heavy wallet on vacation since I have no guarantee that I will ever be back to that spot again. If something catches my eye or there’s an experience that I want to have, then I need to have the cash on hand so that I don’t have to deny myself. I want to get as much out of my travels as I can without going into debt to do so.

Have Money, Will <Heart’s Desire Goes Here>

You know your heart’s desires best, so I want you to set up your own dedicated funds so that you can achieve what brings you the most joy. Today, technology allows you to easily create accounts for saving towards particular goals. Open an account – set up an automatic transfer – save enough money for what you want – attain your goal by paying cash for it – repeat!

It doesn’t get any more straightforward than that!

Personal Finance – the Greatest Hits

This post is going to be short and sweet. If you’re new to the world of personal finance, the following gems are the building blocks of wealth. If you’re an old hat at the mastery of money, then I would ask that you forward these greatest hits on to anyone who might need them.

If I knew more, this post would be much longer. I don’t know as much as I wish I did, but I’m still learning. These old chestnuts will get you well on your way to a place of financial stability. I’ve written them down for you but it’s up to you to put them into practice in your own life.

Pay yourself first – always.

I don’t have too much more to say on this point. If you don’t pay yourself first, then you’ll never have money for investing. There might be money leftover after you pay everyone else, but it’s highly unlikely. Most of us don’t have anything leftover to save before the next paycheque rolls in. If you pay yourself first, then you can spend the rest and you’ll have the comfort of knowing that you kept a little something back for yourself.

Emergencies don’t make appointments.

(Credit for the insightful phrasing of this bit of wisdom goes to Patrice Washington.) You need an emergency fund so start building yours today. In my humble opinion, this kind of fund needs to hold atleast 6 months worth of living expenses. No one has ever regretted having too much money on hand during an emergency.

Automate your money.

This means setting up an automatic transfer to fund your priorities. Needs come before wants, but wants are prioritized too. You’ll need an automatic transfer to your emergency fund so that life’s little surprises don’t require you to live in your overdraft or to carry credit card balances from one month to the next.

The next automatic transfer you’ll need is to your retirement fund so that you’re saving for Old You. A portion of each paycheque must be saved for the day when you stop working. You cannot assume that you’ll be wholly in control of when you retire. Time flies and Old You will be here in two shakes of a lamb’s tail. Do what needs to done today so that Old You has sufficient money tomorrow.

Track your expenses.

Yes, you know where this is heading. I want you to keep track of your money. What gets measured, gets managed. This is an old adage that I heard around the office and it has always stuck with me. If you want to know where your money is going, then you have to keep track of it. You’re a Singleton so you’re the only person who’s spending your cash. If you don’t keep track of it, no one else will.

Invest in an equity-based exchange-traded funds.

There are low-cost investment products that allow you to put your money to work in the stock market. While you’re busy figuring out the”best way” to invest, your money might as well be working hard on your behalf in the interim. This is money that you’re setting aside for retirement and long-term goals. In other words, this is where you put the money that you won’t need for atleast 5+ years.

Never stop learning about investing. Don’t get cocky! You’re not an expert, and you don’t have a magic touch. Investing in ETFs is a way for you to get profitable exposure to the stock market, without relying on market timing or picking the next Netflix. There will be volatility and I want you to ignore it. Just keep investing and compounding your money over a long period of time while you continue to learn.

Only spend your money on what brings you the most joy.

Unless I’ve been seriously misled, each of us is entitled to have some fun & pleasure in our lives. This greatest hits list would be incomplete if I failed to acknowledge that money is also meant to be spent in order to create joy for ourselves and for others. I’m not talking about mindless consumerism or rote daily purchases.

I’m talking about the special treats, the little extra something that makes you feel special. It’s something different for all of us. Whatever yours is, make sure that you’re spending some of your money to acquire it.

So there you have – the short and sweet list of the greatest hits of personal finance according to the Blue Lobster. Do with it what you will!

Track your expenses!

You’ll always know where your money goes if you track your expenses.

As trite and obvious as that sounds, I’m always amazed by the number of people who don’t do this simple task.

Have you ever experienced getting a paycheque then wondering where all of your money has gone? If your answer is yes, then you might want to consider engaging in an old-fashioned activity called keeping track of your money.

There are so many ways to track your expenses. Pen & paper is very, very old-school but still highly effective. You can use an app, since nearly everyone has a smart phone. You can download a spreadsheet from any number of websites. If you’re the creative sort, you can even customize a spreadsheet tailored to your needs. This is my preference since I’ve yet to find an app that has all of the categories I need and want. I also like to play with the color scheme to highlight various pieces of information at a quick glance.

For the past three years, I’ve tracked every nickel of my money on a spreadsheet. I know how much I’ve spent on donations at work, cab fare, groceries, eating out, and a myriad of other spending categories. At the end of the year, I add it all up and figure out whether I’ve spent too much, too little, or just the right amount for the life I want to live.

As you know, I’m a huge fan of automatic savings plans. I have a number of automatic transfers in place to fund my long-term goals like retirement, as well as short-term goals like annual vacations. It’s also how I find the money to do renovations around my house. I think ASPs are the cat’s pyjamas! I encourage everyone I know to use them to fund their own goals and dreams. If you haven’t created one for yourself, I promise you that it’s as easy as falling down. Go ahead – give it a try – create atleast one today!

The Others will take your money

Want to know a secret? The same people who won’t set up an ASP to fund their dreams are the very same people who allow others to automatically transfer money out of their bank accounts every month. Withdrawals such as these aren’t as much fun since they represent money leaving the warmth of your bosom…to go and warm someone else’s!

Some of these withdrawals are necessary. If you have a mortgage, then the bank’s going want to get its money or the bank will eventually take your home away from you. And if you decide to get a car loan instead of buying in cash, then I can assure you that vehicle finance company will want access to your bank account so that they can grab their loan payment on the appointed day.

Gym membership? Subscriptions? Insurance dues? Bank fees? Cable? Internet? Membership in the beer-of-the-month-club? Each of these purveyors will happily withdraw money from your bank account each month with an automatic transfer that benefits them, not you. If it comes out of your bank account, then it’s s direct hit to your bottom line. Most often, these good people want to take their skim from your wallet indirectly, which means that they will charge your credit card. Should you not pay your credit card balance in full, then you’re paying interest to facilitate someone else’s automatic transfer of money out of your bank account. Ask me if this is a very good thing and I will tell you: NOPE!

When you allow someone else to withdraw money from your bank account every month, you’re less aware of where your money is going and when. And I’m convinced most people have no idea when monthly bills are charged to their credit card. By drib and by drab, someone other than you regularly drains your account because of decisions that you made years ago about products and services that you may no longer even use. This is an utterly ridiculous way to manage your money.

Track your expenses & avoid interest charges

Like I said before, some of you might be putting these same monthly expenditures on your credit card. Notice that I said “card” – there’s little if any need to have multiple monthly charges on more than one card. One card means one bill, which is to be paid in full each month as it comes due. You do pay your credit card off in full every month – right?

Some people carry credit card balances from month to month, year after year. They pay exorbitant interest rates for the privilege of doing so! If you’re in this group, then I strongly urge you to cut back on your automatic monthly payments. You’ll have to live a lean life to get out from under your credit card debt. That means you stop using credit and you start using cash. When you run out of cash, then you stop spending money until you get more. It’s a very, very old-fashioned way of living but it is guaranteed to prevent you from going into debt.

Prioritize what’s most important to you

When you track your expenses and you simultaneously commit to living on cash, prioritizing your money is mandatory. In other words, you have no choice but to rank what’s most important and apportion your funds accordingly. Is paying the mortgage more important than your Netflix subscription? Does a gym membership trump the cable bill? Can you keep your wine-of-the-week and still meet the car payment?

From what I’ve observed, there are only two ways to satisfy all of your spending desires. The first and definitely more destructive way is by accumulating debt via credit cards. The second way is to limit your desires such that they can all be met by the money that you bring home. This is called living within your means.

I would urge you to pick the second method since it causes far less stress. You retain the power to decide how best to spend your money on the items that matter most to you. Start tracking your expenses and only spend your money on the experiences and things that bring you joy.

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 15^th of each month. Your automatic transfer will ensure that a chunk of money is in your brokerage account for the purchase. On the 15^th 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 15^th 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.

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!

Prepare for Burnout

Do you want to know a secret about burnout? Here it is… almost everyone keeps burnout a secret from everyone else.

I’ve attended many graduation ceremonies in my time, my own and those of loved ones. I’ve also had various mentors over the years. While they weren’t all great, they all taught me something valuable. And I’ve also had the opportunity to read many, many books & blogs about career-planning.

Here’s the secret… Not a single one of those sources has ever told me that burnout is a thing, and that I might one day face it. Not a single one of my mentors gave any hint that they were dealing with or had ever dealt with burnout – not a single one of them said a word about it. There was never a hint that decades in a given career could lead to anything other than stability, satisfaction, and challenging work.

It’s astonishing! When you think of how many people you might know who just go through the motions, it’s really quite remarkable that there’s an almost coordinated collusion by those-who-have-gone-before to never tell those-who-are-coming along that they won’t always be happy, engaged, or fulfilled by their chosen career.

Quick! Do you love your job?

Whether the answer is yes or no, you should save money now in case you get burned out at work at some point during your working life. In my humble opinion, people don’t talk about the possibility of burnout when planning their careers. If you’re lucky, you start out eager and happy and engaged. And if you’re very, very, very lucky, you’ll continue to be enthusiastically engaged with your career for a long as you have it.

Not all of us are so fortunate. There are people who simply get burned out and simply. Can’t. Do. It. Anymore! They can’t drag themselves into work another day. If you were to ask them to be honest, they would say that they feel like their lives are being wasted as they grind it out. In short, they hate the lives that they’re living.

Of course, maybe it’s not your job that’s causing your burnout. Maybe you have obligations to extended family that are stressful. Perhaps you’re having trouble getting out of debt. There could be an undiagnosed physical illness. Whatever the reason, the end result is burnout as you try to handle everything that’s on your plate. The ugly reality is that burnout drains your ability to feel joy, to laugh with abandon, to experience that joie de vivre that makes life so much more enjoyable.

If this is you, then know that this is not a good way to live the only life that you have!

The antidote to your burnout might be a break from work. Definitely speak to a medical professional for a proper diagnosis. At the very least, a doctor can figure out if what you’re feeling is caused by something other than your job. And your doctor is the one who can put you on stress leave if that’s what you need to recover from the horrible feeling of burnout.

Build Your Stash

Trust me when I say that the bills won’t stop during your recovery period!!!

What do you mean, Blue Lobster?

Money in the bank and cash flow from investments gives you some options when you’re facing burnout. Instead of being miserable and continuing to feel the bleakness that penetrates to the very depth of one’s soul, you have money so that means you can quit if you need too. You have the financial wherewithal to leave employment situations which make you want to cry.

Having a nice, fat cash cushion alleviates any concerns about how to pay for life without a job. Think of your recovery as a mini-retirement, or a little sabbatical. There might not be any income coming into your household, but the cash cushion means that you don’t have to worry about that. You can focus on doing what you need to do in order to feel some joy in your life again.

It would be unfair if I didn’t recognize that there are some great employers out there who recognize that burnout is a reality. If you have burnout and work for such an employer, then you’re quite lucky despite how you feel about your job. If you’re considered a good employee, then you may be able to get time off from you employer to recuperate. In other words, good employees may be offered a sabbatical. Great! Kudos to employers who recognize the benefits of helping their best employees to deal with burnout. However, sabbaticals need to be funded with real money.

And let’s be realistic – this is a benefit that is very rare. Be brutally honest with yourself. Would your current employer give you months off to recover from burnout?

Hopefully, you’re reading this when you don’t have burnout. And if the deities are kind, you will never experience this horrible condition. But as the Wise Ones know, hope is not a plan. Take steps today to start preparing financially for a time when you just might need to take more than a week or two of vacation to re-charge your batteries.

No one likes to think about bad things happening. Sadly, this preference won’t stop burnout from occurring. Be proactive! Take steps now to financially cushion yourself just in case you need to walk away from your job to protect your mental health.

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.

Dialing for Dollars

This week, I managed to save myself $250 per year for the next two years simply by sitting on hold for roughly 15-20 minutes. I think the resultant $500 that will stay in my wallet is a good reward for navigating the phone tree, talking to three different people, and asking for what I want. It’s what I like to call “Dialing for Dollars” and it works like a charm.

You see, my Internet provider had decided to increase my monthly bill by $5 starting in April. I have no idea why since they didn’t give any indication of offering more service, more data, or a higher connection speed. I have to assume that they simply wanted more of my money to line their own pockets.

Most of the time, I get a bit a lazy and simply pay the increased costs. I assume that it’s part of involuntary lifestyle inflation. Costs go up every year, right? I mean, that’s where inflation comes from, doesn’t it?

However, something about this hike made me mad! I’d been a loyal customer for years. I’d paid every bill on time. I never asked for anything. Yet here they were jacking my bill again. The last hike was a little over 18 months ago. No, not this time – I was having none of it!

So I went to their website to look at what was on offer. There was a lovely little package of services, including a doubling of speed from 150mbps to 300mbps for the same price. There was even a contract price, which would be lower than what I was already paying. Hurray! I’d found what I wanted at a price I was willing to pay.

So I dialed… The first person I spoke to couldn’t help me so I was transferred. The next person on the line was definitely in the business of signing up new contracts. Great! I happily told him which package of services I wanted. He proceeded to tell me that the deal which had enthralled me so much was only available to new customers.

I’m still proud of myself! Instead of getting upset, I remained calm and politely asked him how long I would have to use his competitor’s services before I would be considered a new customer again. To his credit, that nice young man immediately understood what I was really saying and he promptly transferred me to the Loyalty Department.

So here’s where the rubber hits the road. There’s no online listing for the Loyalty Department so one must have the patience of a statue while waiting on the line for someone to pick up the phone. Thankfully, I had my hand-computer with me so I happily entertained myself by playing numerous games of Juice Jam. (Yes – I’m old enough to have both a landline and a mobile phone. Deal with it!)

I sat on the phone for 15 minutes, waiting for someone to pick up. Eventually, my persistence was rewarded! The first thing I asked the fellow from the Loyalty Department was: What kind of deals are you offering to retain your current customers?

Much like his predecessor, this fellow knew exactly what I was really asking. Within minutes, he had offered me a package that included faster internet and more phone features. Best of all, my new package would be $21 cheaper per month than my old one. In other words, more for less. Who wouldn’t love that?

I know that $21 per month isn’t going to change my life or allow me to add caviar to my daily menu. However, it will assist me to pad my cash-cushion just a little bit more and a little bit faster. It’s also tangible evidence that my service provider is sufficiently interested in keeping my business and is willing to lower its prices.

Odds are good that you might have a subscription or two in your life that you’ve had for a significant period of time. Think cable, newspaper, magazine, phone apps, memberships, internet, phone plan, insurance, gym, etc… The list is almost endless! When was the last time that you reviewed how much you’re paying? If you were to switch to another service provider, what would it cost you? Most importantly, what is your current service provider willing to do for you in order to keep your from switching?