My Financial Life
A post about finances because I’m about reach a big-ass financial milestone and can think of nothing else but money. (I know it’s pathetic.)
Personally, I think my financial achievements are kind of middling, but other people disagree and I get asked regularly how I got to where I am. In fact, I’ve done a few lectures at a local post-secondary institution on this topic, which helped a lot when I compiled this list. (Isn’t that scary? It’s even scarier that the kids pay attention!) Be warned that I do get rambly and boring and preachy.
The Non-Technical Stuff
I set goals. I have one big, all-encompassing goal and many little goals to get me to the Big One. Goals are motivating. You need goals, otherwise you’re just passing time until you find yourself running across a football field with a flesh-eating zombie on your heels (go see Zombieland)–and doesn’t that sound exciting? Whenever I’m about to whip out my credit card, I ask myself whether or not it will help me reach my goals. More often than not, the answer kills the temptation. Sometimes, though, my immediate wants do win out. Hence, the PS3 gracing the fireplace mantle.
And what are my goals? The Big Goal is Freedom 55 (I can probably swing Freedom 50–even Freedom 45–but I decided to give myself some buffer room). Little goals in the past included paying for my education (check); living and working in Europe (check); saving for a decent down payment on a home (check); saving for good furniture because I’m not an IKEA kind of girl (check). The current little goals are paying off the mortgage; buying the Honda Fit; reflooring my parents’ house; sending my sisters to Europe; and turning the cash flow on my rental property positive.
I started early. I knew at the age of 13 early retirement is my nirvana. (Those Freedom 55 commercials were really well done. I didn’t exactly understand the concept of Freedom 55 at that age, but I knew I wanted those idyllic scenes for myself.)
I reward myself when I reach milestones. Rewards can be anything from time to read a book to buying a new MacBook. If you take all the joy out of money, you’re pretty much guaranteed to fail because no one wants to wait until retirement to enjoy life. And if I reach a milestone and there’s nothing I want for myself, I’ll do something special for my mom, my sisters, and/or the significant other. Making them happy makes me happy.
I have a money buddy. Basically, he and I have frank discussions about money. The biggest issue with finance is the secrecy surrounding it and the attitude that talking about money is crass. My buddy and I bounce ideas off of each other, celebrate our financial successes or milestones, and keep each other in line. Most importantly, telling him about MY goal makes me feel accountable to HIM, and that is a great motivator. I was never fond of public failures.
I don’t care what other people think of me. Sticks and stones, and all that. This point is key because keeping up with the Joneses is what got so many people in the UK and US into financial trouble. Personally, I’m okay with people looking down at me because they think I’m financially challenged. I’m actually amused by it. I totally get a kick out of going into a store; having a clerk snub me on the basis of my jeans, hoodie, and sneakers; then going to her co-worker (it’s always women who snub me); and giving him the commission on a new TAG Heuer watch.
I don’t compare myself to other people. There are simply too many variables involved. Comparing myself to them doesn’t help me one iota because, chances are, their goals are entirely different from mine. For instance, according to Money Magazine, people my age have a median net worth of $8525–which scares me–while someone in my income bracket should be at ~$300k. Uh, yeah. I’m beyond both numbers. Apparently, I’m not normal for either my age or my income bracket. Meh. Normal people are boring.
The Technical Stuff
I plan and budget. A lot. A goal, after all, is just a fantasy until you have a map to get to it. More importantly, I make detailed, ACHIEVABLE plans and budgets. If you make a plan or budget you can’t follow, the inevitable failure will drain your motivation. Save a million dollars in one year? Uh, sure…if you’re Nora Roberts. Save a million dollars over 15 years? With a decent rate of return, it’s definitely doable for the rest of us.
I track EVERYTHING daily. Sometimes several times a day. How do I know if I’m meeting my plan if I don’t record all my financial activities? Yes, I even record that $2.30 I spent on brekkie. And according to my Excel spreadsheet, I’ve been doing this since I was fifteen.
I automate as much as possible to simplify my life. My salary, mortgage payment, condo fees, property tax, electricity, cell phone, Internet access, and five credit cards are all set up with automatic (credit for the salary payment) debit directly from my chequing account. And since I’m not a fan of money sitting idle, I arranged my bills to fall on or within a few days of the 15th and last day of every month because those are the days I get paid. I honestly can’t remember the last time I manually set up a bill payment (but I can probably find out if I look at my financial tracking spreadsheet).
I use credit cards wisely. I use them for 99.9% of my purchases and pay off the FULL BALANCE every month because (1) I get between 1% to 5% cash back on my purchases so it’s like the credit card companies are paying me to buy stuff, (2) I can cancel a credit card if it gets stolen (canceling cash just isn’t the same), and (3) the payment is automated (see previous point) so no worries about late payments when I’m traveling.
I only invest in things I understand. Dividend funds? Yes. Derivative investments? No. If it fails the elevator pitch, I can live without it.
I trust but verify. And–this one really annoys my bankers–I read everything before signing anything. If I hadn’t read my mortgage agreement, I would’ve been stuck with a 25-year amortization instead of the 13 I negotiated over the phone.
I choose to work in a well-paying industry. There, I said it. For me, it’s about the money. Frankly, I don’t get the stigma attached to working for Big Business. No, I’m not curing cancer, but the paycheque from Big Business let’s me donate to various charities, including the Canadian Cancer Society.