… until they get punched in the face! Evidently, this quote was said by Mike Tyson (allegedly). It outlines how life is: everyone has great plans and hopes, but when life punches you in the face, that is when your plan and YOU are being tested. I heard it again after the Super Bowl. I do like the message it sends: “Plan, but remember to react and change the plan if need be“.
This article was written in 2008, right before the financial crisis dropped retirement plans into the abyss. Back then, RRSP season was already a stress tornado, but we didn’t have TFSAs, CRA My Account portals, or robo-advisors. Today, the tools are better, but February still hits like Mike Tyson. The punch hasn’t changed, just the gloves.
February, the Month of Pain 🤕
Not sure about the rest of my readers, but February is a harrowing month for me every year (financially speaking), because you have a perfect storm of Financial "trigger points" to cause stress:
- If you have managed to pay off Christmas, you are now very cash poor, or you may still be paying off the Christmas debt load.
- A month into your year-long financial plan, you most likely are not seeing much progress (due to the debt load from January).
- This is a short month, but all the bills still need to be paid (your cost per day of living this month is actually higher, because it is so darn short).
- RRSP silly season begins, and you are inundated with messages about how you must save for your retirement, or you will be eating cat food (and not the low ash stuff either, the cheap, no-name cat food) when you retire.
- Taxes loom on the horizon, both Federal and municipal property taxes, and you wonder whether you can pay one with the rebate you hope to get from the other? Sometimes you do your Federal taxes and get a rude surprise, like you OWE money (due to your HUGE income from financial blogging (yes, that is a joke)).
- This year's extra concerns are looming University fees (and possibly living-away-from-home costs).
All of this creates a "perfect storm" of financial stress to deal with in a very short month. Remember that Mike Tyson quote, I think this month is punching me in the mouth.
Financial Punch in the Mouth Redux
February exposes weak points in your financial plan, but that can be useful. A plan that only works when everything is perfect is not a plan, it is a wish list. The RRSP panic ads, the tax deadlines, the surprise bills, and the Christmas credit hangovers all show you where you’re vulnerable. Now is the time to react and revise!
If February is beating you up, that’s feedback. Track the pain points. Were you too generous in December? Did you under-save for taxes? Did you forget that kids’ activities all restart in January? Did you forget CPP and EI restart in January? Being honest with yourself now makes the other 11 months smoother.
Three Common Mistakes
That led to a financial punch in the face.
- Treating RRSP ads as personalized advice. You don't do that with other ads, do you? I cringe to think what your medicine cabinet looks like if that is the case.
- Making panic contributions to “do something”. Just doing something can be some folks' entire career, but it's rarely a good thing.
- Expecting visible progress after four weeks of effort. Much like our favourite, Debt is Like Fat, these things take time.
FAQ Financial Punch in the Face
February crams tax prep, RRSP deadlines, short-month budget pressure, Christmas leftovers, and early-year debt into a tiny window.
The universe designs February to test you. Adjust your plan, don’t throw it out. If you throw it out, don't just find another one someone told you to use, this is YOUR plan.
Yes. The marketing alone could make a monk punch drywall. An interesting turn of phrase I heard the Pope use once.
For Bi-Weekly folks!!!!!
I budget for a 13 month year. That is my monthly budget is 28 days or exactly 4 weeks, and in each month there are two income periods from my job. So I pay all my bills on a 28 day cycle not 30 or 31 days. I put money aside for Food and Gas and Clothing and prepay my credit card with the anticipated livings expenses amount I will require for 4 weeks. 13 prepayment periods for 12 months of living. When budgeting you should be able to resaonlby expect what your future month’s heating and water bills, insurance bills, etc should be, within reason of course. Pay tomorrow’s bills today.
If you do it right you actually end up with the last 4 weeks of the year paid, no telephone or water or electric or oil or gas card or winter clothing bills, therefore you have no living expenses from Dec 8 to Dec 31 and you should be able to have Xmas paid before Dec 31.
Then Jan 1 you start the “13 month” cycle all over again, XMAS DEBT FREE. If you can’t pay for Xmas with your two free paycheques, I don’t know what to say to that….
You always get 2 “bonus” months of 3 paycheques under a 26 pay period structure (bi-weekly). Under my budget I was able to transfer those bonus pay periods to the time of year I need cash the most. HOLIDAYS!
Anyone follow?
Ugh – I read that quote, too, and it was referring to my beloved Pats getting punched in the face on Sunday night. Painful… but an exciting game, nonetheless.
Anyway, in a financial sense, I think that the quote summarizes just about any month in which the unexpected occurs – for us this month, it is an expensive (but necessary) overseas trip. There is no insurance against these things happening, and because they come out of nowhere they cannot be scheduled, so the best thing to do it just to manage them as best you can! I also think that staying positive in the face of distress can lead to a better outcome, because it keeps you from freaking out and making poor choices. (Like New England did for 3 quarters… argh.)
Jerry
Also true, but for those of us paid bi-weekly it is a royal pain.
> This is a short month, but all the bills still
> want to get paid (your cost per day of living
> this month is actually more, because it is so
> darn short).
A different perspective: because I get paid bi-monthly instead of bi-weekly, February actually means a few less days of daily expenses than other months.