fbpx

Spring Financial Cleaning

I spent a busy weekend taking care of many small tasks that have piled up over the long cold winter here in Ottawa. One of the most important task that I have procrastinated about is cleaning up my Quicken data files. I have done some quicken spring financial cleaning, but there was a lot of information that just never got cleaned up.

To make a tool like Quicken, or whatever tool you use to track your finances, useful it must be up to date and reflect your current financial standing.  I was not happy to see that I had left around:

  • The mortgage to my previous house was hanging around as a “hidden” account, with basically the balance from when I bought that house. Not sure how it got to that state, but cleaning that up, suddenly made my balance sheet look a lot less lopsided.
  • There were at least 2 RRSP, and two mutual fund savings accounts that were hanging around as well, that have been long since closed, that added a little too much optimism to my retirement planning as well.
  • All of the RESP accounts and pretty much all the remaining active RRSP accounts did not reflect the actual investment levels in them, due to me simply dumping money into the account without actually completing the task by “purchasing” the investment vehicles used.
  • Growth from DRIPs and mutual fund reinvestment were also not included in the savings accounts as well.

My Spring Cleaning Findings

Needless to say this took a very long time (some very quiet swearing) and a few huge mistakes that had to be undone, to fix up most of these issues, but now I think I have most of it straightened out.

The biggest issue I have with Quicken as a tool is that it seems to work very nicely with day-to-day banking things, however, as soon as you enter into investing too many things become far too manual, and then far too easy to procrastinate about.

{ 4 comments }

Adapt Your Financial Goals

When I started working at BNR and then Nortel there was always a “goal” for the company, and one of the most interesting goals was Vision 2000. This goal was that Nortel was going to be the #1 Telephone equipment sales company in the world, and (I think) Nortel achieved that Goal, however, by the time that 2000 rolled around, the Goal no Longer mattered. The business of selling phone switches was circumvented by the Internet and Wireless phones and how all this worked together.

This is why it is very important that you set your Financial Goals, but you also every once in a while do a “sanity check” on the Goals themselves to measure whether they are still relevant.

Changing Plans

Always have a Plan B

Say you had children and you had a plan with RESPs and such, but then your child was diagnosed with a disability? Suddenly your goals may no longer be relevant, however, you can change them and react to the change in life that has happened to your child and to your financial plan. This happened to me, although I am not quite sure what my financial plan was then, it now includes an RDSP and saving for my child’s future as a disabled Canadian.

If you suddenly got a windfall of money from an inheritance or a bonus, it is obvious that your plans are no longer up to snuff (unless you planned for that, in which case, good planning!). When you end up “in the money”, don’t just squander it and then have to make up other plans (like what to do when you are out of bankruptcy), rethink and re-jig your plans or expand your goals.

If one of your goals was to have $2 Million saved for your retirement by age 55 (a good goal, in my opinion), however, over time you have also built up a substantial amount of discretionary debt, which will not be paid off by the time you reach age 55, your retirement savings Goal is now irrelevant. If you reach your goal of having $2 Million in savings, yet you are carrying $300,000 in mortgage and debt by that age, your goal has not really been achieved has it? Stop saving, kill the debt and then get back to your plan.

All plans need to be tended often to ensure you are chasing the right brass ring, or ensuring that the brass ring is still there and that you still want to have it.

{ 3 comments }

Honest New Year Resolutions

Yes, a new year is upon us and like the rest of the heard, I am sure you have made some resolutions about how you will be a better person this coming year. I applaud your originality, OK, that ruins my “no sarcasm” resolution, and I am writing this on New Year’s Eve.

Last year I wrote some Sarcastic New Year’s Resolutions, so why break with an old tradition let us see if I can hit a few more of the more trendy resolutions for 2014.

My Personal Opinion On Resolutions
My Personal Opinion On Resolutions

Financial Resolutions for Next Year

As I pointed out the “not write any more sarcastic posts” one is already shredded, so we shall forget that one completely.

  1. Control impulse spending better than last year, but those boxing quarter sales are just so enticing, I am not sure how I can stop myself from not buying that 110 inch TV for $150K. Seriously, I am only human, how can anyone resist that?
  2. So the automatic saving thing didn’t work too well this past year, so what I should do is put the money in my TFSA, that way I know I can’t easily take money out every month. That may cause a problem around March when all the Christmas bills show up, so I might have to then get another line of credit to pay for all of this, so I had better not have a resolution about not adding any more credit lines to my financial world.
  3. Don’t join a gym this year, since I haven’t figured out how to cancel last year’s gym membership, so maybe I’ll buy some exercise equipment. I figure a tread-mill, stationary bike and an elliptical trainer (and maybe some free weights) should be sufficient, and the fitness supplier has a buy now, pay at the end of the year deal, so that will work out well (if I can figure out how to cancel my old gym membership).
  4. I should really get a new car, because my current one is a bit tatty, and with a lease it is dead simple and so cheap. Another bi-weekly payment won’t hurt me (that much), and I get to raise my self-worth by getting a new car (and not that crappy old thing I am currently driving). Cars are a valuable asset, so it will actually make me worth more.
  5. Eat out less than we did last year, of course we ate out 4 out of 7 nights last year, so I only need to go out 3 out of 7 nights and we are ahead, so that should be easy (except when you get home and you really don’t feel like cooking, but you are hungry, then that doesn’t really count).
  6. To save money on coffee and lunch at work, I am just going to steal other folks’ lunches out of the fridge, and drink coffee from the coffee fund, and just not pay for it. This means this is basically free, and a huge saving, except for those days where I really need a latte, then screw it, I am going to get my $7.50 coffee!
  7. Get rid of cable, because it is too expensive, but then I can sit at home and complain about nothing to watch on TV and be generally miserable. I could get an antenna, but it would make me happier just to bitch and complain, and it would help me feel more pious as well.

Any other useful resolutions that I have missed?

{ 3 comments }

The Infinite Income Fallacy

Understanding what Infinity means was one of the fun things in my Mathematics education.

The first time I started to really understand it was after  a Professor gave our class an example in a first year algebra course:

Suppose you have a hotel with infinite rooms, and every room is occupied, what do you do if someone shows up and wants a room?

Tell everyone to move 1 room down, and give the first room to the new guest.

Infinity
Infinity

Trust me that is a good answer to that question, but it also allows me to talk about the Fallacy of Infinite income.

When you are 20, 30 and sometimes even when you are forty, you feel that you will be earning income long enough to make all of your goals (financially), however, your potential to earn income is not infinite, and in fact it is quite finite (and countable, to use another mathematical term).

Countable? Think of it this way, if you assume you are being paid twice a month and you start working at age 24 and you retire at age 65 the number of pay cheques you have is:

 Total # Pay cheques = 24 * (65-24)  = 24 * 41 = 984 pay cheques

Certainly not infinite, and a quite optimistic number, because this assumes you work all the way to 65 (or that you can work all the way to 65). What might cause less pay cheques?

All of these will reduce the number of potential pay cheques in your career, but even worse is not having a pay cheque number in mind by when you reach your financial goals.

  • By pay cheque 864 being out of debt
  • Pay off the house by pay cheque 900
  • etc., etc.,

I Won’t Have Infinite Income ?

The concept of infinite and income do not belong in the same phrase.

{ 7 comments }

Let’s start that plan, eh?

Continuing with my lazy rehash rummaging through the archives, I found a great old chestnut for the start of the year, but remember that Easter can also be the start of a new year too. This is what real financial planning looks like.

Maybe it is time to start that financial plan for the coming year, don’t you think?

real financial planning
How Financial Planning in Families REALLY works

Steps for Real Financial Planning

If you were good enough that you made a plan for last year your life is even easier:

  1. Pull out last year’s financial plan
  2. Examine whether you succeeded or not (don’t be too rough on yourself, this is a journey, not a destination).
  3. If you had areas where things didn’t work out as you’d hoped (e.g. you paid too much at Christmas), make a list (hopefully a short one) of them.
  4. Pat yourself on the back, buy yourself a gift, go out for a nice dinner, reward yourself in some fashion, you tried to follow a financial plan, good for you. You are one of the 5% of people who tried (ok maybe 10%). (I disagree with my old self, ignore this step!)
  5. Start your plan for next year, which is easy because you have last year’s plan to work from, and your list of stuff to “tweak”.

Only 3 Plans Total ?

My Father, whose job it was to plan things for a large company (no, it’s not hereditary, I stink at planning), told me a valuable piece of advice: Once you start planning things, you end up having 3 plans:

  • Last year’s plan (which you use to learn from what did and didn’t work)
  • This year’s plan (the one you are working on now)
  • Next year’s plan (which you think about and maybe write some notes for)

That’s it. Sometimes you can cheat and only have two plans, because Next Year’s plan might end up being exactly (or remarkably similar to), your current plan or last year’s plan.

Become a Tangerine client today

Just Do it !

My advice, just start planning, don’t get bogged down, write a plan you think you can live with Financially, and figure out a way to track it and figure out if you are succeeding or not, and there you have it. More ideas later on what you should plan, but plan you should.

Planning is not as hard as you think, just use a system that works for you. 

{ 0 comments }

%d bloggers like this: