Three Financial Rules of Thumb

Kerry from Squawkfox was doing an exposé and asked me for three quick financial rules of thumb to live by (well I think she asked me, rules of thumb that I live by, but those are useless given my financial situation, so I decided to give her a better answer). Remember that everyone should have their own way to deal with their financial situation, but it’s always good to start with a couple of simple rules and then figure out what really works for you.

What were these nuggets of Financial Wisdom that I passed on?

  • Spend less than you make, sounds simple but for some reason lots of folks NEVER figure that out. Even Dickens knew this one as he wrote:

    Annual income twenty pounds, annual expenditure nineteen six, result happiness.
    Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.
    Charles Dickens, David Copperfield, 1849

  • Never confuse spending less with saving money, you cannot add by subtracting financially. Don’t get me wrong spending less for something is a goal, but you aren’t saving money, you are spending it, you are just spending less of it. Save by not spending in the first place.
  • Lifestyle creep is dangerous, and never an excuse to build up debt. You don’t “deserve” those nice things necessarily, never go into debt for something you want, and figure out the difference between what you WANT and what you NEED (and stick to that).

Yes, I have written these things before (note the links to the earlier posts about those exact topics), but sometimes it is worth chewing your cud in the name of financial literacy.

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Personal Finance: Lent Begins Today

As part of Lent, I am reflecting on my previous writings a little more, and this little chestnut was from 5 years ago, however, I have done some judicious editing  as well.

Mardi Gras was on Tuesday, so that means that Lent begins today and this is a perfect opportunity for folks to start something new with their Personal Finances (and their spiritual life, if they wish as well). Easter is a time for new beginnings or restarting something you need to resume, however, most people view Lent as a time to “find something to give up”. That is one way of viewing your Lenten journey, but another way is to look for something to Enrich your life for the 40 days of Lent (leading up to Good Friday and Easter).

Financial Lenten Journey

What areas of your personal finances could use either Enrichment or Better still a sacrifice that might help your financial well being? There are some very simple ones that I think about every year (and have done a few of them):

  • The Latte withdrawal penance. Cut out buying coffee for the 40 days of Lent and put that money aside, to either save, give to charity or pay down your debt. Keep track of this and see how much money you might be saving here, it’s worthwhile finding out where this discretionary money is going.
  • Read 4 Personal Finance books over the 40 days to enrich your understanding of your personal finances or your investing adventures. Building up your expertise over Lent is a good thing.
  • Brown bag it for 40 days, give up buying lunch at work, and bring your lunch instead. Another way to find out where your discretionary spending is going.
  • Take the bus to work for Lent. Leave the car at home, buy a bus pass and take the Bus to work. Yes gas is cheaper right now, but not driving might have other benefits for you (less stress, more exercise, etc.,).
  • Live on cash for 40 days and get rid of your credit cards. Freeze them in your freezer, lock them in your safety deposit box, or cut them up, but live on CASH only (no debit either) and see if you can do it, does it change your spending habits?

Think about these or suggest others, I am open to suggestions myself.


Best of: Debt IS like fat!

Given I am starting to pack pounds back on (slowly, but I am now about 30 lbs. above my ideal weight and it is rising), I read over one of my favorite posts from the past Debt is Like Fat. I am doing better with my debt, but now not as well with my fat.

Debt is Like Fat

I was telling my daughter that comment and she looked at me like I had five heads. I tried to explain that building up debt rarely happens overnight, just like building up your body mass is not done overnight, and I think it is true.

I was so fat I was a Human Cannonball

I was so fat I was a Human Cannonball

When I had my weight gain it happened over about a 14 year period, and it was slow, but by the time I finally did something about it, it was significant. It was a compounding of eating the wrong things, in the wrong quantities at the wrong time, and a complete lack of physical exertion, luckily I have taken the weight off and am keeping it off (mostly).

Debt build up is the same way, usually (unless you make some gruesome investments, an incredible blunder or you are a victim of a fraud), slowly without you noticing you are doing it. Buying your lunch every day isn’t going to put you into debt, neither is leasing your car, vacationing in Las Vegas, or buying lottery tickets either, however, start adding these together with spending more than you make and suddenly you are building up debt, instead of equity. Keep doing this over a long period of time, and suddenly you have a debt load that you cannot afford and you are just not sure how the heck you did it. It was done one small step at a time.

Unfortunately, or fortunately, debt reduction is accomplished in the same way. Unless it rains money, getting out of debt is done slowly and one month at a time, using a plan and self-control and a wililngness to change your lifestyle (because losing weight and debt reduction are BOTH lifestyle changes, not just a quick fix that allows you to go back to your old habits).

Losing the financial bad habits is the key to debt reduction, keep that in mind.


Financial Wing Men?

When I was a young man, sometimes I would end up being a “wing man” for one of my friends when they went out to the bar. My duties were simple, help my friend find the girl of his dreams (or was it the girl of the night?) and then once “true love” was in bloom, I would disappear (some might say like a fart in the wind).

This got me wondering, why aren’t there any financial wing men out there? Are there financial planners who think they are financial wing men? Any bankers, or stock brokers who help out and then just disappear?

I don’t think that is the way things work in the financial world, no one simply helps out, knows their job, gets it done, and then walks away knowing they helped get things done.

Ultimate Wing Man !

 My guess is a few of the financial bloggers that I read religiously are actually good financial wing men (or wing women), but I have yet to meet someone in the financial industry who made me think they knew their job and I was confident they were going to do what was needed.

Am I missing something, are their financial wing men out there that you have met?

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End of Year Is Almost Here

Yup, the real end of year is almost here, given the last real business day is December 29th, 2011 (you know, Friday), have you got all of the things done you needed to get done for the End of 2011?

What kind of things do I mean?

  • Taxes if you pay quarterly or monthly for one thing, pay them first. If you haven’t sent in your taxes for 2010, maybe it’s time to start thinking about doing that soon as well?
  • RESP contribution, they bursaries tend to be paid quarterly, but it is still important to get as much out of this system as you can. Tuition fees are not going to be dropping any time soon!
  • RRSP contribution, yes, I know you can wait until February 29th, but you could make one now too, and you’d have two months of growth?
  • Charitable donation, better get those in right now, for it to count for your taxes. Having worked on the collection at my Church there is a significant amount of money that appears this last week of December, but get it in soon.
  • RDSP contribution, yes this has an over all maximum, but then again, the sooner the money is in place, the longer it has to grow.
  • Tax loss selling? Too darn late for that one, the deadline for that was December 24th.
Any others that I may have missed? You have 2 days left!!


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