Jan
10
We’re into a fresh new year which, of course, means a lot of people have started dieting this week. The health benefits of shedding some extra pounds are obvious. What’s hidden, however, are the financial costs of a healthy diet. I know it from personal experience. Three years ago I joined a weight loss program, and lost 40 pounds. The program cost was $1,200 for 6 months. When I signed up, I thought this was going to be my only cost. Soon after though, I was surprised to discover the diet came with two significant hidden costs that I hadn’t anticipated or planned for – the cost of healthy food, and the new wardrobe I had to buy. The cost of healthy food A recent study from Harvard showed that a healthy diet costs $2,000 a year more than an unhealthy one, for an average family of four ($500 per person). In truth, I thought the number should be much higher. My own average weekly grocery shop has gone up by almost $80 since I started my diet. That’s an annual cost of over $4,000. Fresh foods are more expensive than processed foods. The sheer volume of vegetables you need […]
Dec
16
When making decisions about where to spend money, generosity often trumps or supersedes money concerns at this time of year. For some, it can be so difficult to go against this pattern, they actually feel helpless to control their spending, budget or not. In a recent Investors Group poll, 1 in 4 Canadians feel helpless to control holiday spending. Two-thirds of this group admit this is a reflection of how they handle their finances, year-round. Even with a budget, they feel out of control. I suggest this is because a lot of people misunderstand the difference between a budget, and budgeting as part of their day-to-day lives. What is a budget? Is it a series of numbers entered into an Excel spreadsheet? Yes, but that is only the beginning. To make it work, there needs to be a system in place that will bring the spreadsheet to life, out in real world application. There’s a quote I love: ‘Personal finance is more personal than it is about the finance.’ We’re emotional people. We spend for all sorts of reasons. The holidays simply highlight our existing patterns. With that in mind, remember that actual budgeting starts where the Excel spreadsheet […]
Dec
01
We have a lot of decisions to make in life. Sometimes the easiest, or most reassuring way to go about making those decisions, is simply to spring for the best your money can get. Do you need to have the very best internet or cell phone package though? Maybe. In reality however, a lot of people overpay, without using even a fraction of the service they paid for. In other examples, people will pay for a really good television, for a top-of-the-line computer, or even for a really good dog leash. All of these are undoubtedly superior than their less costly counterparts, but most of the time their quality, any advances and superiority, are only marginally better, no matter what the higher, added cost might suggest. It’s common for people to pay for far more television than they watch – telecom company business models depend on it. When it comes to technology, or gadgetry, some companies in fact only make one model, then actually impair the technology in some way, to provide an entry level model for consumers. You can have the very best high-definition television that money will buy today; within six months, if not sooner, there will inevitably […]
Nov
01
It’s pretty common to think that having more will make us happy. In reality, though, the more we have, the more complicated our lives get. We are hardwired to think about the upside when we buy things. We think about how great it will be to take our new boat out on the lake, or spend summers at the cottage with our family. Maybe the cost of your purchase is a part of your decision making. Almost certainly, though, complications are not. What complications, you ask? What about maintaining the boat? Getting it into and out of the water each year is a chore, or a cost, or both. You’ll need to find someplace to dock it, and make arrangements. At the cottage, winter break-ins are a concern. Maintenance in your absence is a concern. Opening and closing the property each year is a concern. Virtually every weekend of your summer is spoken for before the season even begins. I hate to always pick on the cottage, and summer fun. So how about all smaller stuff we buy? All of this stuff ends up owning us: We buy stuff, and it takes up space. When we start feel the clutter, […]
Oct
01
Fixed expenses directly impact our discretionary spending ability, and our ability to save. Some fixed costs are inevitable: We need to pay down our mortgage, pay our utilities, and make good with the phone company every month. These so-called “fixed” expenses, though, have a way of creeping higher across the board, under the radar, without us acknowledging their impact on our lives and livelihood. The incremental increases seem insignificant on their own, and seem acceptable at the time. Sometimes each little bit we give up, would appear, even, to be a good deal: We agree to get the upgraded features package on our new car lease, and we “bundle” features on our cable television, and telephone bills. We spring for a faster internet connection, after hearing it will result in $5 dollars off our newly increased cable subscription (never mind that this new “bundle” easily costs $50 more each month). All too often, we jump into these agreements with our service providers, financial institutions, and other companies to buy new, or add to the existing services in our life. Most of the time we do this without thinking about, or realizing how each decision adds to the squeeze on how […]
Aug
06
Starting a business might be scary, but for those already invested in a venture that’s underperforming, knowing when to pull the plug is by far the more terrifying prospect. To be an entrepreneur, you require a certain amount of blind faith, drive and ambition. At some point in your business venture, and long before you have too much invested though, it is absolutely necessary to do an analysis to know how much “financial runway” you have to make your business take off. Avoiding this analysis can lead to absolute ruin. Here’s why: Your “financial runway” is the amount of money you are able to invest or risk in business, without putting yourself, and your future in real financial jeopardy. It’s virtually impossible to start a business without incurring some debt. The business itself will also provide plenty of opportunity to overspend, particularly if you’re already inclined to do so in your day to day life. Even if your spending is necessary “for the business,” it’s your name on the debt being issued or incurred. If your business succeeds, your early spending will weigh on this success until you pay it off. Here’s the scary part: If your business fails, you […]
Jul
08
No matter who you are, no matter what you do, no matter how much income you earn each year, if your debt is growing, even just a little bit, your lifestyle is not sustainable. Why? Because eventually, that debt will start eroding your lifestyle. Even before you get to that point, you will probably feel stress, or other unpleasant emotions. At the end though, we reach a point where the debt gets so big that we can’t pay it back without apparent consequence to our lifestyle. We stay on trajectories like this one, however, because we believe we have two ways out at our disposal: The first is to earn more money. This doesn’t work. I’ll explain why in a minute. The second false belief is that we can consolidate and simply start over. It’s relatively easy to see how consolidation efforts don’t work in practice. Virtually everyone knows someone, or has firsthand experience with the cycle where debts are consolidated, and even sometimes paid down, while our lifestyle spending carries on unchecked, and the debt begins to creep higher once again. In the long run, multiple consolidations can lead to an accumulation of large debts, that force us to […]
Jun
05
Watch your pennies. It’s not terribly difficult to do, and the pennies, the little things, are usually what add up to big savings over time. I was speaking with a client recently who was introduced to the concept of tracking his daily expenditures. This task of “watching the pennies,” really had him questioning things. “What’s the big deal?” he asked us. “How could this help me save money?” Think about it though: $21 a day works out to $7,665 a year. How often, without much thought at all, do we pull out a $10 bill here, a $5 bill there, then spend loose change on gum or a lottery ticket? (Or whatever it is that you spend your loose change on.) Before you know it, even on a relatively frugal day, you’ve spend at least $20, if not much, much more. All of it can add up to thousands of dollars each year, but somehow we think it’s beneath us to keep track of it all. The fact of the matter, though, is that even rich people watch their pennies. According to documentarians, industrialist Andrew Carnegie, who died August 11, 1919, was the richest man in the world during his […]
Apr
25
The urge is typical. You’ve completed your tax return, happily confirming your hope the government owes you a refund. Before you’ve even received your refund in that recognizable brown envelope, it’s likely you’ve already earmarked that money for goodies you want, but haven’t had the chunk of cash to pay for. In the back of your mind though, you know paying down your debts, and saving your money for a rainy day or retirement is the responsible thing to do. Although at a first glance it seems like the least satisfying course of action, but in truth, it’s not. By paying off your debt and getting ahead, you may not be buying your way to the tropics, but you are paying off your worry, your stress, and the pressure that money can make you feel. Think of it this way: If you could purchase a magical wand that could take away (or at least significantly) reduce your financial worries, there’s a good chance you’d whip out your cheque book and pay top dollar to buy that wand. You would probably even allocate a large portion of that tax refund we were talking about, to get some peace of mind. How […]
Mar
15
There are two, very common, hurdles people face when attempting to budget. Unfortunately, these hurdles often go unacknowledged, setting a lot of people up for failure, almost before they even get started. Quite simply, there are two hurdles or speed bumps people encounter with the process: The first challenge is the not-so-simple task of getting started. Unlike starting a diet (which is difficult enough), budgeting requires a lot of work and planning up front. This heavy lifting phase requires a lot of time and a concerted effort to track spending, and categorize those expenditures. Done properly, it can be a prolonged exercise. The second, predictable challenge comes four to six months down the line, when boredom sets in, or when the excitement about initial, early success begins to wear thin. This creeping discouragement (boredom, malaise, or even rebellion) can manifest itself in a few ways: One person might start to slack off in their effort to document expenditures. Procrastination kicks in. Others will overspend in certain categories. Avoidance of the subject altogether is another big sign that plans are off (or on their way off) the rails. How can a Personal Financial Trainer help? Much like the work you do with […]
« Previous Page — Next Page »
