Know Thyself

One of the keys to getting what you want from your money is knowing who you are. The very first step to getting what you want is identifying it. There is no way around it – you must know thyself.

Are you a person who buys something because everyone else buys it? Or are you saving up for something that may only be magical to you? Do you care about others’ opinions on how you spend your money? Are you a person who can live with the consequences of your choices?

Be very honest with yourself about how you want to use your money. Some people want to use it to impress others. Then there are those who use it to control or manipulate the people around them. A good number of people use their money to alleviate suffering in the world. And there are some who want to hoard money in an effort to build security for themselves.

What do you want from your money?

As the years roll by, my perspective on money is changing. I’ve always been a saver, a very good saver. And when I first learned about the FIRE movement, my goal was to one day save 50% of my income – maybe even 70%! However, as I approached this arbitrary yet magical allocation, I started to seriously consider the impact saving that much money would have on my desired lifestyle.

Thanks to several money mistakes, saving 50% wouldn’t allow me to retire in my 40s…which would have been awesome, since I’m long past the ability to retire in my 30s. I suppose if I were willing to commit to very reduced standard of living, I could retire in my 40s… But I know myself. I don’t want to retire and hope that nothing goes so wrong that I have to return to work. I want to be done with working once I retire. Saving 50% wouldn’t get me there. Even saving 70% wouldn’t give me the kind of retirement cash flow that I want.

So I stopped chasing that arbitrary goal and crunched my numbers. Saving a solid chunk of my paycheque would allow me to retire in my early 50s. And I’d have a little extra jingle in my pockets to enjoy the journey. Speaking of the journey, travel has always been one of my favourite things. The “extra money” that wasn’t squirrelled away allowed me to travel overseas. Before the pandemic hit, I was fortunate enough to visit Italy, Spain, and Ireland. Had I been saving 50% of my paycheque, those trips wouldn’t have been possible… and they also wouldn’t have been possible after retirement because my retirement cash flow would not be enough to pay for them.

See… I know myself. And I know that I don’t want to be a penny-pincher during my retirement. I won’t be keeping tigers on a gold leash, nor skipping across the globe to spend equal time in my 4 homes. However, I will have the flexibility to do more international trips, to make renovations to my home, to replace the appliances as needed.

What I also know is that if I had been smarter sooner, I would have made different choices. There’s no sense regretting my choices because I don’t have a time machine to go back and change them.

Knowing myself means that I’ve made peace with the following truth: I don’t use a budget. My money-management system does not involve very many categories. The only ones I have are: retirement, short-term goals, charity, and Everything Else. I’m a huge fan of using automation to ensure that my first three categories are funded. My paycheque hits my account – my automatic transfers are triggered – I spend whatever’s leftover in my chequing account. The leftover money has to last me until the next payday. I can spend it however I want, on whatever I want, secure in the knowledge that the priorities most important to me are being funded.

Your choices need not please everyone else.

Thankfully, I’ve reached the stage in life where I don’t require a popular vote to feel good about my financial decisions. When I was younger, it bothered me that my friends’ financial priorities didn’t align with mine. I intensely disliked being told that I was “saving too much money.” When others blithely told me “you can afford it”, I would bite my tongue so very hard in order to not lash out in anger. How dare someone else tell me how to spend my money?

I’ve since learned to let those comments roll off my back. Their priorities are not mine. And their hearts were probably in the right place. They honestly believed that their spending habits, which obviously made them happy, would make me happy too. And I’m sure I drove them nuts talking about retirement and investing and saving. Those were the things that made me happy. Over time, I learned to only talk about money with friends who are also interested in investing and retirement planning. Again, knowing myself has led me to find like-minded people who encourage and support me when it comes to pursuing my financial goals.

Know thyself. What is it that you want your money to do for you? Once you’ve answered that question, the next question is whether your money is actually being put towards achieving those goals. Finally, what changes do you need to make to align your spending with your financial goals?

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!