Financial New Year Resolutions , Start Now !

Every year, many folks try hard to break old habits, lose weight, or fix a “problem” in their lives, and they wait until January 1st to start this, but I have found that as soon as I call something a “New Year Resolution” it is doomed to failure. The pressure of calling anything a New Year Resolution, ensures that I worry far too much about it, and will eventually give up on this.

The University of Scranton put out some very interesting numbers on New Year’s Resolutions (in the U.S.)  and how long the attempted change continues, the telling stats (especially for old farts like me):

Age Success Rates Data
Percent of people in their twenties who achieve their resolution each year 39%
Percent of people over 50 who achieve their resolution each year 14%

So people my age who try to make a change have a 14% success rate? Wow, it is really hard to teach us old dogs new tricks, but, if you don’t call it a Resolution, maybe you can trick yourself into a higher success rate.

Silly Resolutions

2o14 Resolutions that failed miserably

If you want to try some Financial Resolutions (not Sarcastic Financial Resolutions ) you can set up for success by starting now, a few examples:

  1. If you have resolved to give more to Charities, give now, and then give in the new year, and you will get the tax breaks for both years.
  2. If you plan on putting more money in your child’s RESP, giving now and then in January means  you will get CESG kick ins for both of those “quarters”.
  3. The same can be said for an RRSP kick-in, yes you have until February to get the Tax break, but the sooner you put your money in, the sooner it starts growing (hopefully).

There will be plenty of useful End of Year Reminder articles on the web, use them as a good template on what you can do in 2014 to help you with your 2015 changes.

I was also glad to see in the Scranton results that money made it into the Top 3 (in fact #2 might actually be a financial thing as well).

Rank Top 10 New Years resolutions for 2014
1
Lose Weight
2
Getting Organized
3
Spend Less, Save More

Currently I am working on about 4 different changes in my life, but they are not going to be called resolutions, and I am not going to talk about them either, since that seems to ruin things as well.

 

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Sometimes The Problem Changes

Sometimes The Problem Changes
As part of my every day life, I help out at my Church with the computers (remember volunteering is a good thing to do), and one of the weekly events that should happen is back up of the computers at the Church (as it should for all of us, are you doing backups?). For the longest of times I used a CD-RW (read write CD) to back up this data, but over time the data set grew, and eventually we had to use 2 CD’s to accomplish the task.
The Problem changed when we got a new system for the church that came with a DVD burner and suddenly we were able to back up much more data onto One DVD-RW (holds about 7 CD’s worth of data, uncompressed), thus the problem changed, so we adapted the answer to that change.
This past little while the DVD burner has gone “on the fritz” (my term for being broken and I can’t figure out why), so I have been unable to do these backups, which frustrated me to no end. On the way home from a fruitless repair attempt it dawned on me that maybe the problem has changed again?
The price of USB memory keys has dropped dramatically lately, to the point where now, I can purchase a 4 GB USB device for about $12, so instead of attempting to fix the DVD burner issue, I simply have changed the problem, and will now do backups to USB devices instead, thus making it faster and easier to store (securely and safely).
A sidenote, remember that backups are very important, but RESTORE is the most important capability, so you need to test your backup sets are readable and usable occasionally too (don’t wait until you MUST have the backups to find out whether your backups are unusable).
So What?
What does this have to do with Personal Finances? Some of us sometimes become enamored with the solution we have put in place for a specific Personal Finance issue, examples would be:
* Putting money on RRSP dutifully monthly, and only paying normal Mortgage payments, when in fact you may already have a Pension at work?
* Making over payments on our Mortgage while still carrying balances on Credit Cards.
* Paying for Banking Services or fees when we can get it for free elsewhere.
These are exmaples of solutions to problems that may have (or may in the future), change and you may need to rethink your response (because it is an answer to a problem no longer in play).
Stay on your toes and keep asking “why am I doing this”, when it comes to your finances, and in life as well, becuase you might find a better way, if you re-think the problem you are solving.

As part of my every day life, I help out at my Church with the computers (remember volunteering is a good thing to do), and one of the weekly events that should happen is back up of the computers at the Church (as it should for all of us, are you doing backups?). For the longest of times I used a CD-RW (read write CD) to back up this data, but over time the data set grew, and eventually we had to use 2 CD’s to accomplish the task.

The Problem changed when we got a new system for the church that came with a DVD burner and suddenly we were able to back up much more data onto One DVD-RW (holds about 7 CD’s worth of data, uncompressed), thus the problem changed, so we adapted the answer to that change.

This past little while the DVD burner has gone “on the fritz” (my term for being broken and I can’t figure out why), so I have been unable to do these backups, which frustrated me to no end. On the way home from a fruitless repair attempt it dawned on me that maybe the problem has changed again?

The price of USB memory keys has dropped dramatically lately, to the point where now, I can purchase a 4 GB USB device for about $12, so instead of attempting to fix the DVD burner issue, I simply have changed the problem, and will now do backups to USB devices instead, thus making it faster and easier to store (securely and safely).

A side note, remember that backups are very important, but RESTORE is the most important capability, so you need to test your backup sets are readable and usable occasionally too (don’t wait until you MUST have the backups to find out whether your backups are unusable).

So What?

What does this have to do with Personal Finances? Some of us sometimes become enamored with the solution we have put in place for a specific Personal Finance issue, examples would be:

  • Putting money on RRSP dutifully monthly, and only paying normal Mortgage payments, when in fact you may already have a Pension at work?
  • Making over payments on our Mortgage while still carrying balances on Credit Cards.
  • Paying for Banking Services or fees when we can get it for free elsewhere.

These are examples of solutions to problems that may have (or may in the future), change and you may need to rethink your response (because it is an answer to a problem no longer in play).

Stay on your toes and keep asking “why am I doing this”, when it comes to your finances, and in life as well, becuase you might find a better way, if you re-think the problem you are solving.

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If I made $ 5 Million Would I Blow it All?

Michael James (nominated by the Globe and Mail as one of Canada’s top Financial Bloggers) and I were having a discussion on Friday night about an interesting article written by Jon Chevreau at the National Post: Even Young Millionaires Need to Worry About Financial Planning.

The article outlines how young athletes who suddenly come into large amounts of money tend to expand their lifestyle and spending to reflect their new riches and many times don’t learn the importance of Personal Financial Planning until much too late in their lives. I quote:

Within two years of retirement, 78% of former NFL players have gone bankrupt or are under financial stress, while an estimated 60%  of former NBA players are broke within five years of retirement, according to the March 23, 2009 issue of Sports Illustrated magazine.

Michael James did not believe the number and questioned whether it was as bad as all that (he agreed that there is a problem, he just couldn’t believe it was as bad as all that). My view is this is very possible and I would not be surprised if it was worse than the numbers quoted by Sports Illustrated or by Mr. Chevreau.

The allure of a “rich” lifestyle and the fact that you have worked very hard to receive this monetary level does tend to throw off a lot of people’s Financial Gyroscopes (as it were). I have seen this at a smaller scale with folks that have got University degrees have lived a frugal lifestyle to get through the studies and when they graduate and get a good paying job, at first they remain frugal but then some folks just decide, “Heck, I deserve it!”, and start to lose their financial minds (I will plead guilty to this once or twice as well).

My guess is this is what happens with Professional Athletes, but they have the added problem of an entire species (for lack of a better term) of humans that seem to exist to prey on them, the hangers on (much like lampreys or other parasites). These people raison d’etre seems to be to leech off these walking banks, and this does not help these young people who suddenly get more money than they could ever dream of having. They get very odd financial advise from alleged professionals, and maybe trust people they shouldn’t trust (or worse trust people who then betray that trust). The players unions are trying to fix this, we shall see how well they might do (see the Sports Illustrated article for an eye opening statement by Raghib Ismail).

I remember when I was growing up and pro athletes did not make a lot of money (they made more than most working folks), but I remember a scout leader I had telling us about Dick Duff, because he played for the Canadiens (and the Leafs), but he had gone back to school to become a teacher, so he had a job after he finished with hockey. Do today’s athletes need to do this? Depends on the sport, and their pay level, but if they don’t plan their finances and plan for their ENTIRE life they are doomed to fall into the Rich Lifestyle trap.

Would I fall prey to this trap? We’ll never know, since my athletic talents were never a danger of putting me in this predicament.

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Write it down!

I have written previously about if it’s not written down, how do you know it happened (a phrase I stole from Tom Clancy), and last week I wrote about financial plans (and revisiting them mid-year), and that is another good example of something you should write down somewhere. Simply thinking up a financial plan but not writing it down, or building a spreadsheet to monitor it (or some tool like that), how can you tell if you are succeeding or not?

Write it all Down

Without writing down your goals and your plans, your mind can play tricks on you, or worse you can forget important goals that you need to achieve to reach Financial Nirvana (as it were)? You don’t need to be journaling or anything like that but simply creating a simple document with your goals written down may be enough for you to keep those goals in mind over the year. It’s not very hard, and a very useful way to keep yourself focused and also a way to keep yourself motivated.

Examples of things you should write down:

  • Your financial plan, and goals for the year and maybe for your life
  • Every cheque you write, as well as every monthly withdrawal from your bank account
  • If you don’t know where all your money goes, write down for a week every time you spend money and then at the end of the week look and see where you spend your money.
  • Use a calendar to remind you about when bills are due, monthly payments, birthdays, and anniversaries too (maybe reminders before those last two about when to buy presents)
  • Many, many other things, that you think you might forget financially!

 

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Financial Planning: Like Meccano?

When I was a kid, one of my favorite toys was Meccano, a metal building set that allowed you to make some amazing projects. I include a wonderful crane configuration that I saw at the Kemptville Toy and Model Train Show, as an example of the complicated projects you can create, from a simple set of girder, nuts, bolts and a lot of time on your hands. I never dared to move to any project of this complexity, but I did enjoy the feeling of accomplishment this toy gave me.

A Financial Plan can seem as complicated as this daunting structure, but it all starts at the same point, and you need to start your plan first and foremost.  Your plan can become something as magnificent as this structure, but it doesn’t have to start small, pay off a single debt and prove to yourself you can do it, and then move on to more complex goals.

Personal Finance Tool Box

Personal Finance Tool Box

Isn’t that an Amazing looking project? It started with screws, metal and an idea, and it turned into this astounding structure.

Financial Plans Aren’t This Complicated

The first step is to look where you are, decide where you want to end up and then make a plan to join the two points.

Another excellent example was when asked how he made such beautiful statues out of blocks of marble, his answer was, “I knock off all the parts that don’t look like the final statue, it’s simple”. Your financial plan can be just that simple, but you need to start on it now.

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