No, not on the money markets I am talking about the weather (at least here in Ottawa). Evidently it will be hot enough to cook eggs on the sidewalks for the next few days.

As I have mentioned in my younger days, I didn’t have Air Conditioning (none of us did back then, we just walked around and sweated, but thanks to smokers, no one had a sense of smell, but I digress), but now I live in air-conditioned comfort, and I seem to spend more time inside in the summer than I do in the winter (if you want a little irony on the side).

If you have Air Conditioning, your Electric Bills are up, but if you are in Ontario and have a Smart Thermostat, you might be able to save a little money, not using your A/C during peak hours, and such (you won’t save that much, but you will save some money). I know some folks who only turn on their A/C on “hot” days, whereas I run it pretty much the whole time from May 24th to Labour Day (closing the house up). I realize I could save more money turning it off sometimes, but due to my allergies I prefer a closed home environment.

I had a discussion with my daughter who is living away from home in an apartment with fans for cooling and we discussed how to stay cool without A/C:

• A public pool or beach is quite nice sometimes (but don’t forget your sun screen)
• Libraries are great with Air Conditioning, Computers and resources, you can even research Personal Finance while you are there (and kill two birds with one stone).
• Movie Theatres are good, but are not free (although if you have kids they seem to be having cheap matinees these days).
• Going to work, and having your employer cool you off is great too (think of it as a free benefit). If your work doesn’t have A/C, this doesn’t really apply to you does it.
• If your house has a basement, that is actually a naturally cooler place too (that was what we did a lot of time when I was younger, just hang out downstairs).
• You could ruin a lovely walk in nature by playing Golf (again, not free, but given how slow some rounds go, you get a lot of time for your money).
• Going for a Walk or Bike Ride is good exercise, but be careful with the heat advisories. Remember that only Mad Dogs and Englishmen go out in the Mid-Day Sun (and I think of that song every time I see someone jogging during a heat advisory).
• Go window shopping at the mall (if it is a closed in mall like Yorkdale in Toronto or the Rideau Center in Ottawa), but remember the loitering laws too.
• A good financial way to stay cool is to go to your Bank, make an appointment with a financial advisor and set up an RRSP or an RESP, which can take hours, or have them devise a financial plan for you? Banks make enough on service charges, have them cool you off too!
• If you are a politician in Ontario,  you might be out beating the pavement due to a Summer Election too! They have air conditioned buses, so I feel no pity for them.
• Remember to drink lots of water too if you are out in the heat (very important).

Any other cheap or free ways to stay cool in the Lazy Hazy Crazy Days of Summer?

The CCPA (Canadian Centre for Policy Alternatives) put out a fun graphic on their site yesterday which has really caught the fancy of the Media in Canada. The graphic is an updating graphic showing the Clash for Cash: CEO vs. Average Joe which gives you an idea how much some of the top 100 CEOs in Canada make in compensation.

This kind of tool is always useful to show folks just how much is spent on the top end of the management tree in many of Canada’s largest companies. The actual numbers suggest that a CEO makes about 189 times what an average employee makes in a year (but the graphic is just so much more fun to look at).

The question does arise from this simple ratio, are the CEOs of Canada’s Elite 100 companies really worth the $8.38 Million (on average) that they make every year? I have no idea, but my opinion is that the reason these folks make what they make, is that they have convinced someone they are worth that, and thus they get that kind of compensation. Is this fair? Fair doesn’t really come into it, if the company is successful, then the CEO has earned their pay, and if they don’t they are fired, that should be the way it works (although in some cases like Nortel you had to wonder what was going on).

The mainstream media seems fixated on pointing out the 1% that make so much money and such, but I’d like to point out that there are a couple of Hockey players earning that much, a few more NFL Football players, even more Basketball Players, and pretty much every baseball player that earn that kind of compensation as well. Is that fair? Some billionaire is willing to make a Multi-Millionaire out of someone who is talented at their job, that is just what happens in this world.

Do I like all of this? Hell no, I’d love to make that kind of money myself, but if I did, just think how much folks who were more talented might make?

I do still like the graphic as well:

CEO Income, REAL BIG

If you go to the link (click on the picture) you’ll see it being updated (which makes it that much more depressing).

This quote (Don’t mistake activity for achievement ) from John Wooden reminds my coworkers about often, and it is something to keep in mind when doing financial planning. John Wooden was the dean of College Basketball coaches in the U.S., but his simple theories on life live on in so many ways.

Simply monitoring your spending and religiously using Quicken does not mean you are Achieving anything (other than time spent looking at numbers). Grouping together a set of similar activities is still not assuring any achievement in that area.

If you:

• Download all financial transactions into Quicken
• Keep all of your receipts
• Make sure you know the value of all of your assets (stocks and such)

All you are achieving is information collection. You must act on this information or plan how you react to the data to impact things. Mindlessly doing busy work may seem satisfying, but if you have nothing gained from it, why did you do it in the first place? Having a plan or at least spending thresholds that you can act upon will make this data collection step towards a worthwhile goal, but you must do more than collect data. It would help if you analyzed it as well.

A great example of this was pointed out by a coworker, who mentioned that a “guess how many rice kernels are in a jar” contest had been won by someone, who had guessed 5000, and the actual grain of rice count was 5018. So someone during work counted all 5018 rice kernels? Was that a good use of a worker’s time? In terms of the contest, I guess not in terms of them doing this during work hours.

If you are unsure why you are doing something menial everyday task, ask yourself, what am I achieving doing this?

Collect data, however, use tools to analyze it and then act upon the new information you have learned, and you will be achieving more than simple data collection.

Michael James wrote an interesting review about Parkinson’s Law yesterday and I commented on his site quoting C8j’s 3rd Lemma of Money which is one of many simple Lemma’s I have about how money and finances work (one day I will publish the entire list).

This simple Lemma states:

Any increase in income (e.g. Pay Raise) will then cause a 115% increase in spending in reaction to that increase so that after a short period (no more than 6 months), effective income will have dropped by 15%

Lifestyle Creep

Simple idea isn’t it? How many times have you been pining to get a pay raise, and then when you get it you actually end up with less income at the end of it? If you are being honest, pretty much every single time.

This simple Lemma is actually a very good offshoot of my Found Money Lemma as well.

If you are older this is a very simple proof, remember when you first started working how little you made? You were still able to live, but now you make what 4 or 8 times what you made when you first graduated, yet you are farther in debt, how is that possible?

The explanation is simple, we fall for the C8j’s Planned Money Paradox, which is the following:

Whenever new money arrives, the items and expenditures that it is planned to be used for is no less than 125% of the actual found money (with no upper limit on the actual amount spent).

Again, a simple observation, which is painfully true. If you know you are about to receive a 5% pay raise, the following could easily happen:

• You plan to trade your car in because, your current car is just costing too much to run (even though it is paid off).
• Your wife plans to replace the dishwasher because it is just not doing the job, and you were planning on replacing it soon anyhow
• Since you got this great raise you plan on taking a nice vacation, because you deserve it
• To celebrate you take your wife out for dinner
• Your kids always wanted horse riding lessons, so you figure you can afford that now too
• Etc., etc., etc.,

Never happened to you? If it has not, you are in the minority, and I applaud your ability to control your spending.

Theory of Found Money ?

How to stop this? Follow C8j’s 1st Theory of Found Money:

Found money cannot be spent for at least 6 months after it arrives, and no planning around the use of this money can start until 3 months after it arrives.

This Theory does not guarantee a good use of this found money, however, it will at least allow you to attempt to create a found Financial Plan around this new found money.