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5 Ways to Optimally Use Your Pay Raise

In the next little while many folks may be getting a pay raise and as a service to you folks here is a short list of some wonderful ways to optimally use your new pay raise.

You do know my great love for lists, so I hope you appreciate this as much as I did compiling it.

  1. Forget that you got a pay raise, use your current budget and use the extra money to pay down debt. Did you need this extra money to live on? I doubt it, so why not get yourself out of debt? Avoid Lifestyle Creep and live within your means.
  2. If you have automatic payments to your Mortgage and/or RRSP ( or TFSA ), increase them to reflect the amount of your raise (if you got a 4% raise, then up your payments by that amount as well). This way you are at least getting ahead more. The same should be done if you have young kids and you are putting money away in an RESP for them, more money NOW, means less pain later.
  3. If you haven’t started saving for the future, now is the time, and now you have extra money to do it with (unless of course you still have debt, if so go back to step 1). Get that RRSP going or a TFSA and your future self will thank you profusely.
  4. If you must “celebrate” keep it low-key. Vince Lombardi told his players, “When you get into the end zone, act like you’ve been there before.“, same thing with your pay raise, no reason to go bananas and blow your money, you deserved it, you worked hard, now keep it!
  5. If you feel you must go out and spend, make it on something that will help you be a better you , like a course to help your career, or even a gym membership to help stay in shape. It’s great to have all this money, but if you are sick or unhealthy it isn’t going to mean much. The educational aspect of this is the right way to go. Help expand your horizons by expanding your mind.
  6. Here is an extra one (for no extra charge) for those who aren’t really driven by money, but more by quality of life questions: if you are making 4% more (or 8 days more pay )how much less can you now work and make the same money (I mean days, not effort on the job)? If your firm allows you to take unpaid leave, have you got yourself a few more days off that you can take? It’s trite but nobody says in retirement, “I wish I was at the office more days”.

I am sure I have missed many other great ideas, but remember hopefully this is the first of many pay raises, so don’t go berserk spending or celebrating, act like it will happen again (soon).


Best Way to Save Your Money

I borrowed the concept from another article, but the idea is so flaming simple, I think it does need to be repeated.

The best way to save your money is to not spend it.

The simplicity of this is clear, but most folks just really don’t get it, do they? I have railed on about the Semantics of Money, but let’s get back to the basics on this one, and here are some simple questions I’d love to hear some opinions from my good readers.

Also very True

Also very True

Someone goes out and spends less on some interesting piece of stuff (maybe it was planned), is that person more likely to take the unspent money, and spend it on something else (due to the halo effect of saving money on the previous purchase)? I have caught myself doing the same thing, “I saved money, so I can splurge on something else”.

Conversely, does someone who decides not to buy something that was planned, less likely to have that kind of “halo of savings”, and thus less likely to splurge the “saved” money?

If someone spends time trying to figure out how much can be saved buying something, why isn’t the most important question, that is usually not asked,  “Do I need this?”. Spending less money is not saving your money, it is just using less. Saving money, is keeping the money in your pocket (or your bank account).

Have you caught yourself saying (or heard a friend say), “If I buy this on sale, I can get two of them”?

Have you heard someone else say, “I decided not to buy that thing, but because of me not spending the money, I’ll go buy something else”? I guess (as Mrs. C8j pointed out) that if you decided not to buy a $5000.00 TV, and decided to celebrate with a cup of coffee and a donut, that might not be too bad.

Which of those previous two statements are more likely? I’d like to think that the second one is more likely, but I must admit, I have caught myself doing the first statement (far too bloody often). Does impulse spending compared to planned spending change the decision point?


Lifestyle Creep

About a year ago I asked Do You Make More than You Did 5 Years Ago and I got some interesting responses on the question, so let us delve a little deeper into what I call Lifestyle Creep ™ which seems to be one of the things that may cause the economy to fall over, all by itself.

What do I mean by lifestyle creep? In my interpretation, it is the same as “Feature Creep”, a term used in High Tech Development teams, where someone keeps trying to shove more and more into a release of software or hardware, thus slowing things down, and eventually making the whole thing unusable. This scenario is pretty much what happens with young folks these days:

lifestyle creep
You Deserve this don’t you?
  • Graduate with a debt load of student loans.
  • Still need to start saving for a house, and things, because that is what you need to do
  • You need a car to get around
  • That furniture you have is really crappy, after all you aren’t a student any more
  • The laptop stinks, it’s the same one from school, and it isn’t even supported any more
  • Must need a Big Screen TV
  • Good High Speed Internet access is important
  • Need to go out with friends, after all you aren’t a hermit, life is short let’s have fun
  • Man, this work thing is hard, must need a fun vacation
  • Getting married, you can’t scrimp on that, after all you only get married once (hopefully)
  • etc., etc.,

How Does this Add Up So Quickly ?

Isn’t it easy for all of it to build? Before you know it, you are now paying off student loans, credit cards, car payments, and rent and thus you have no money to save with any more, but you have great earning potential, you’ll get a raise next year, and it will all be good.

Speaking as a 59-year-old, Lifestyle Creep ensures you never make enough to live up (or down) to your lifestyle.

Image courtesy of  foto76 / FreeDigitalPhotos.net


Financial Anarchy Day?

Hollywood’s latest retread of the idea of one day where everybody goes completely nuts and no laws apply is a happy little movie called The Purge: Anarchy (it’s been done a few times, by the Twilight Zone, Star Trek and other similar genre of movies), but when I saw that if I put on my Financial (rose-coloured) Glasses, I realize that we have many such days every year.

Financial Spending Time!!!
Financial Anarchy Let’s Buy it All!!!

What could I possibly mean? There are days every year where all financial rules seem to go the hell out of the window. What days could I possibly mean?

  • Black Friday (the one that is the Friday after American Thanksgiving)
  • Cyber Monday because Black Friday isn’t enough for this pre-Christmas orgy of spending
  • Christmas Sales (also known as December)
  • Boxing Day (the day after Christmas)
  • End of Year, I have extra money, better spend it (December 31st)
  • St. Swithin’s Day
  • Opening Stores after a major Pandemic??
  • Back to School (also known as the summer)

Yes the last few are  just me being my normal sarcastic self, but if stores, banks and credit card companies had their way, we’d have Financial Anarchy every day of the year.

What is needed in the Financial World are more days where the Financial Rules are followed. How about a Thrifty Tuesday every week? A fun Financial Friday, where we make sure all our bills are paid? Maybe make January 2nd and July 2nd Financial Planning Days?


For  ThrowBack Thursday I’d like to look back on something I wrote almost 10 years ago, $301 for a $90 Cat ?

Unfortunately the center of the story, my cat Jinx, has passed away a few years ago, and also unfortunately the economics of the situation described has changed as well, but this one paragraph from the original post sums the previous article nicely:

Cats can make you a basket case with their vet bills

Cats can make you a basket case with their vet bills

This year, Jinx gets so sick he goes to the vet, who rehydrates him (intravenously!), and suggests he stays over night, but luckily Mrs. Cheapy C8j convinces them that Jinxy should go home instead. Final cost of fixing this $90 cat (no complaints about that price, it went to the Humane Society)? $301.00 and at the end of it we saved $200.00 by him not staying over night Whoo Hoo!

The problems with the story are that you can’t buy a cat from the humane society (in Ottawa) for $90 any more the cat in the basket picture was $230 (because she was a kitten), so that part of the story is off by 250% (or so).

The cost of rehydrating a cat, I am confident, might be a great deal more expensive as well, as the whole Veterenary world is much more pricey.  How can I make that kind of broad statement? The Pet Insurance business also seems to be growing.

According to IBISworld’s report, in 2012 the Pet Insurance Biz in the US  had revenues of $651 Million and an annual growth of 6.0% from 2007-2012, which is very impressive.

My point is that if the industry that underwrites the insurance for the Veterenary world is growing that fast, my assumption is the Vet Biz is growing at a similar (if not maybe even higher) rate, and all of this to say that the cost of owning a pet is becoming a more and more expensive luxury for families.

Is it cheaper to have a hamster or a fish?


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