Rebuild – Some Final Thoughts

Being financially independent is something that I have always wanted; having the freedom to do whatever I wanted regardless of cost. Tackling the debt is the first step towards this and its one that really needs to occur. Having a plan in place for beating debt is important to me. But what is more important is after having done this exercise is I have a better handle on the why’s behind my spending and not necessarily just the hows.

Knowing why I spend my money the way I do, at least to some extent, will allow me to start changing the habits I have around this. Realistically there is no need for me to spend money as an excuse to have fun and to escape reality. I’ve worked hard lately to make sure that my reality is a lot better and it really is. Reviewing why I spend shows me that I’m spending money in ways that I don’t want to be. Spending money to escape reality is no way to live life because it’ll be a self-propagating problem with no end. Now when I am about to spend money I will be asking myself a few questions: first off why am I spending this money? Do I really need to spend this money or am I just spending for the sake of spending?

The initial goal will be to get into the habit of asking myself these questions; by simply asking these questions I should be able to curtail some of the types of spending that are unnecessary. This will over time help me change the whys behind how I spend hopefully brining them more in line with what I want these why’s to be.

[tags]spending, money, financial reality[/tags]

My Finances: Deconstruction and Rebuild

So now that I’ve examined some of the how and whys behind my spending I think its time to deconstruct my finances a bit more and rebuild them the way they really should be rather than the haphazard way they exist now. I have learnt that I need to plan and budget and that these budgets need to be enforced for them to work. I might not make as much money as I did in the past but I make enough. Its time to look at my expenses and figure out a good approach and plan to keep everything in check while starting to save money and get out of debt.

First off I’ve got a significant amount of debt, still, and this really needs to be cleared up and I’ve got to start using credit cards not as a form of cash but realistically as it should be: a short term loan to cover an expense that is more than I have. So how much debt do I have kicking about?

  • Credit card #1 $6,675
  • Credit card #2 $5,085
  • Line of Credit $14,500
  • Car Loan $13,885
  • Yearly Marina fees $1,500
  • Owing Marina Fees: $300

Minimum Payments:

  • Credit Card #1: $75
  • Credit Card #2: $205
  • Line of Credit: $460
  • Car Loan: $162.37 every two weeks set up automatically.

Unfortunately for me the yearly marina fees are simply something that I’m going to need to pay off, and I’ve cleared some money out of my savings (mutual funds) to deal with this. So it’ll dent my bottom line when it comes to my net worth but it won’t be a mental burden.

Now I like the snowball method of paying my debt down; I’ll start with the lowest limit card for one primary reason – it has the highest interest rate. The line of credit and credit card #2 are with the same bank. I have no problem keeping my line of credit at its limit while paying down the credit card. So the plan for the next few months will be to pay my line of credit on time and whatever I can pay up to my limit will go directly onto credit card #2. This should translate to about 300 odd dollars going to pay it down. This payment will be above the minimum limit and should allow me to bring the debt down a bit faster. I would destroy this card but I have no emergency savings and as a result I’m just going to take the card, all credit cards out of my wallet. The next thing will be to make sure all the minimums are met with the other cards/loans.

Paying off Credit Card #2 will take a while but it should be quite doable, the key it so keep spending down to a minimum and to ensure no additional debt is accrued. No more impulse spending and I have to keep the escapist spending down to an absolute minimum.

I think the debt needs to be brought under control and reduced considerably before any significant saving can be made. I have a wedding to pay for and any saved money will need to go to this before it goes into an emergency fund.

[tags]money, paying debt, debt, money, finances[/tags]

My Spending and My Childhood

One of the points that I wanted to cover in this evaluation of my financial self is how I spent money and how I saw money spent when I was a child. For me this is an important item because as Harv Eker describes in his concept of a financial blueprint we have an imprint created that is based on a lot of factors including how we witnessed finances in the world around us. In my particular case I didn’t witness a great deal of financial planning from my parents side though I know that they did plan their finances to some extent. But the items that I did witness were very basic in their nature and I believe that my parents still plan their money this way. At least they had this simple method.

When I grew up I had some very simple planning in place, mostly to cover off my bills even though I know that I should have done more. I figured that you just needed to pay your minimum payments and the bills came in. It was a frustrating combination with my using credit as cash.

Spending money on the other hand was somewhat impulsive at home, my parents would be good with their money for a long period of time and then my dad would go buy something relatively expensive. Initially a lot of this stuff was purchased through payment plans or on credit. There was little to no planning for these expenses and when I started making money I really took up this habit. I would spend money on things that I didn’t need or in some cases didn’t want often for the sake of spending money. This impulsive buying is something I’ve seen for a while in myself and I’ve been able to curtail it to some extent. Unfortunately the urge to just buy stuff is still there; thankfully I see it, recognize it when it happens, and I can avoid it.

The impact of how I witnessed the world when I was a child on how I spent money is something that I have to deal with and work hard to ensure I can outgrow it. I’ve done well in recent months but it’s hard to undo literally years of bad habits. I am starting to put plans in place and care about where my money goes and what it does. I haven’t gotten to the stage where I can invest significant portions of it but I will in due time; first its time to get rid of this debt.

[tags]spending, financial blueprint, money, financial self[/tags]

Welcome Canadian Capitalist Viewers

I noticed this morning that I was getting a bit of traffic coming in from Canadian Capitalist, he was kind enough to include my blog in his list of Canadian Blogs. Thank you very much and don’t forget to go check out his site, its a good read.

Why there is no planning in my spending

When I was growing up I didn’t really have any need for money; I got most of the stuff I wanted and all of the stuff I needed. I understood that my parent’s weren’t rich and that I couldn’t have all the cool toys. But because I wasn’t expected to work, in fact my parents discouraged me from trying to get a job at the local mall they provided me with the necessities. They figured that school was more important and I was able to work at my grandmas business here and there for a bit of extra pocket cash. I wasn’t ever required to plan and set any form of financial goals.

On top of that I never or rarely saw my parents planning out their purchases. My parent’s weren’t bad with their money for the most part they simply didn’t spend money when they didn’t have it. Big-ticket items were often purchased with credit that was slowly paid off or bought on installments. Money simply wasn’t discussed at least not in front of me very often and when it was I wasn’t involved in the conversation.

When it came time for me to have some money of my own I simply spent it and didn’t really have any appreciation of what went into planning even a simple budget. By the time that I needed to start planning and keeping myself in financial check I was already in debt and spending my money to do the fun things. I was young and as youth often does I simply did the things that were fun for the sake of doing them. Credit became an extension of my cash flow, which is something I never learnt not to do. I stumbled from pay to pay and the idea putting some thought into my bigger expenses seemed so daunting that it was easier to keep myself busy and occupied with fun items and activities.

Not only was there little to no learning about finances I was never encouraged to plan anything or set any goals. My grade and high school careers were nothing more than an aimless floating along. I was smart enough that I could get good grades with virtually no effort. Planning came when it was time to write programs or play video games but that didn’t apply to school and when I started working it didn’t apply to my finances. Over time I’ve learnt to plan quite well and I do it for my job, yet the idea of planning my finances still brings some hesitation for the simple reason that I don’t have the years of experience and knowledge.

Because I don’t have a good comfort level planning my finances it’s left to the last minute, floating along is something that has gotten my by for years and its comfortable. Stepping out of this comfort zone is something that leaves me with fear because I really don’t know the best way to approach it, even though I’ve successfully done it in a business setting. It’s easier to float along barely scraping by than to potentially come up with plans that don’t come to fruition.

Getting over this will involve some baby steps and some collective thinking with my fiancé. This is something that shouldn’t be a problem but it will require stepping out of my comfort zone.

[tags]planning, money, finances[/tags]

Spending Money as a form of Escapism

The first item that I wanted to tackle is the fact that I use spending money as a form of escapism, before we go any further I want to make sure that we’ve got a clear idea of what escapism is. defines Escapism as:

the avoidance of reality by absorption of the mind in entertainment or in an imaginative situation, activity, etc.

And that’s exactly what I was doing for years, spending money to go out to eat, going to see movies, and just generally spending money on things that I really didn’t need or care about. I was spending money to escape from the drudgery of my life at the time. When I was growing up things like going out for dinner were a really rare treat. My parents would cook dinner at home and make sure that there were leftovers so a meal could be extended beyond a single day. This translated to a pretty standard and uniform approach to something that I really enjoy, eating. Rarely were meals anything extravagant though they were always good. For me to go out to dinner with my friends was a treat. So when I started making money I started going out to lunch and dinner with friends as often as possible.

Was this activity because I wanted food? I ate when I needed to eat but the reality behind what was happening is that I was eating out because I wanted to escape the mental reality behind how I had eaten in the past. Often I would pay for people who didn’t have enough money so that I wouldn’t be out there eating alone. It was really a form of escapism rather than a need to eat.

But beyond the example of eating I would often hang out with my friends and spend a lot of money for the privilege. I had grown up putting spending money on a bit of a pedestal while at the same time being bombarded with the idea that it’s normal to spend money, eat out and enjoying life to the nth degree. Our media outlets associate being successful with spending money and having nice things. Realistically the people who are most successful don’t send their money in frivolous ways; they set aside money for the things they really want and to be able to live their lives the way they want to rather than getting the instant gratification. I was living in a bit of a false reality. I never spent money on the fancy toys that a lot of people in my situation did but never the less I still spent the money.

Over time my spending money as a form of escapism morphed into escaping the fact that I had gotten myself into debt. Going out with my friends was something that was fun, I would get a paycheck and promptly go spend the money because I knew that I would end up being tight for cash before the end of the pay. Part of the problem was that I was inadvertently causing myself to be tight for cash instead of stopping and really looking at the reasons behind my spending.

Before we go too far, going out with your friends is something young people do and it’s a normal part of going up. Unfortunately spending money all the time for the sake of spending it is nothing but escapism. Originally I thought that spending frivolously was just that frivolous, now I understand that I have a tendency to spend money this way. Knowing this is a really good thing because I can take this knowledge and question why spend money when the idea crosses my mind. Does this mean that I’m not going to go out at all and not spend money? Of course it doesn’t, it just means that I’m going to be considerably more conscious of why I’m spending money. There are a lot of things that I want to have but can’t afford. In the past there was a chance that I would simply spend the money and deal with the consequences.

Knowing that I spend money to escape the world around me is something that I wish I had known when I was 21 or 22; part of life should be about having fun but constantly keeping your head in the sand is no way to exist. I’m considerably more grounded than I was when I was younger but I still try to escape from time to time and if I’m not careful I can spend more money than I really should.

[tags]money, spending, escapism[/tags]

How I spend my Money

This is the first post in my attempt to get a better handle on my financial self. I guess the first step in this process is that I should explain a bit about what I mean by my financial self. What my financial self is to me is how I interact with money, how I spend it, why I spend it and the reasoning behind the financial decisions that I make. This goes from the impulse buys such as a coffee or a chocolate bar all the way to the big-ticket purchases like cars. Anything and everything to do with money is intricately tied to my financial self.

How do I spend my money?

Well I buy myself the things that I need and pay for the bills that need to be paid like everyone else. I pay for part of a mortgage and for groceries in these items I’m not much different from the wealthiest of people. We all have bills and expenses that we have to pay for regardless of who we are. The necessities of food and shelter have to be covered, but what about the other items such as credit card payments? And phone bills?

Are all these expenses created equal? Not in my mind. For example I often find myself treating credit like money in my pocket rather than what it is. When I got my first credit card I was very conscious about putting any money onto it because I didn’t have any income. When I started to bring home a paycheck I started spending it and when I ran out of money I would simply use my credit card knowing that I was going to have to pay it back someday. It was a small limit so I never worried about it. Over time this small limit grew but I kept using the cards. I spent money I didn’t have and I wasn’t ever really conscious about it (except maybe for a day or two before my next pay would come in).

This leads me to the next point about spending the money. Paying for the necessities is one thing, we’ve all got to do it (unless we’re kids living under our parents wings). But I was making a decent living and still living at home for a good chunk of this time and I was spending money all the time. I really didn’t have much to show for it. So what was I doing?

I was thinking about this for the past few days and it really dawned on me that I bought a lot of stuff out of impulse, some of it was simply frivolous spending for the sake of spending. Surprisingly there was very little thought that went into how I was spending money. Now before I get too picky some spending of this variety really isn’t bad as long as it’s within limits. In essence I was spending money for the sake of spending money.

Then it hit me I was spending a lot of money as a form of escapism without really seeing it. Sure I spent money to go hang out with my friends but I did it all the time. I went to movies 2,3 sometimes 4 times a week. Spending money had become my hobby; the activity I did after working all day for fun. I didn’t see it that way at the time but now looking back this is exactly what I was doing. I’m still seeing the effects of this when I don’t get a chance to go out and spend money for days at a time I try to find an excuse to go out for a nicer lunch. No real thought put into it, even when the little voice inside my head says that I can’t really afford it I reason myself out of not spending money and go ahead and spend it.

Over the years that I’ve been working I’ve stumbled upon spending patterns and tried to change them. For example I like going out for lunch and I’d do it every day; when I ran out of money I’d simply go to a cheaper place. So I would start brining lunch but the pattern of spending money without thought and as a way to escape was already there and would be back before I knew it.

I don’t want to go into countless details of poor spending that I’ve done over the years that would just make me want to escape it all (like I’ve done for years on end). The next step is to sit down and figure out why I never pay attention to my spending and see what patterns exist there; I already know about some of the patterns in how I spend money now its time to figure out the why. Tomorrow I’ll try to elaborate on the why’s behind spending as a form of escapism.

[tags]money, spending, escapism[/tags]

Zen and your Financial Situation

Last week there were a bunch of guest posts over at Blogging Away Debt and one in particular really struck me, it was by Golbguru from The Tao of Making Money. The post was about Zen and the Art of Financial Prudence; the Zen aspect along with a comment that was made about deconstructing your financial situation and then building it back up correctly really got me. I’ve been struggling to keep my finances in some semblance of order for quite a while now and I keep coming up against stumbling blocks.

The notion of a financial blueprint that was put forward by T. Harv Eker in his book Secrets of the Millionaire Mind struck me because I spent money in often very stupid ways but never gave the thought of why any merit. The post by Globguru not only made me think about this but also made me think about this idea of a financial blueprint. I’ve been thinking about this for a few days and the more I thought about it the more I figured I really needed to stop and have a conversation with myself and honestly try figuring out why I spend money so poorly and why I have such a difficult time saving it up.

The basic premise behind the financial blueprint is that you didn’t make your spending habits they were made for you by what influenced you when you were younger. Some of these influences were reasonable and good and others were well pointless. I’ve never really thought much about how I spend my money let alone why. I think it’s time to change this; I don’t want to fritter away my hard earned money on stupid things anymore and I think I really need to look at my spending habits and adjust them. But before I try to make changes in how I spend my money I think I need to get down to the meat of why I spend my money the way I do. I think this will give me a stronger understanding of my financial self and once I’ve got that all figured out then maybe the changes will stick a bit better.

Struggling with my money has always been something I’ve dealt with no matter how much money I made I’ve always just spent more without really noticing it. Over the next couple days/posts I want to look into this in a bit more detail. I’m going to be honest with myself to the best of my ability and the scariest part is I’m going to put it down on paper. Having lofty financial goals is all fine and dandy but I’m never going to reach them if all I do is spend more than I make.

[tags]spending, financial blueprint, money, financial situation[/tags]

Net Worth Statement Update

On Monday I wrote about figuring out what goes into a net worth statement. Like many people in the PF world I’ve read Robert Kiyosaki who argues that assets are things that bring money into your pocket and liabilities are things that take money out of your pocket. One of the comments on the post by Enough Wealth argued that an asset can be cash flow negative and you know what I agree with him.

An asset is something that has value if sold, that doesn’t mean that you’re not still paying for it. If we were only to include items that we owned outright then houses with outstanding mortgages would never be on our net worth statements. With that said I owe my bank money for the car that I’ve been putting on my net worth statement that’s in the liabilities section.

I have to say I like My Kyosaki’s definition in that it really makes you think positively and aggressively to get a strong net worth, his ideas are based around cash-flow and not a net worth statement.

When the end of the month comes around I am going to alter my net worth statement slightly but in general items such as my car and boat will remain on the list because they really do belong there.

[tags]net worth statement, asset, liability, assets, liabilities[/tags]

Happy Valentines Day

I know, I know it’s a Hallmark holiday but I’ve got to say it’s always nice to make sure those around you know you care about them. It’s pretty sad that we need a special day to do this but in all reality some people might not say anything otherwise. Remember the best way to save some money on a day like today is to make Valentines special by taking the effort to do something creative and personal. Instead of buying a $5 card make one or instead of going out to some fancy dinner stay in and make a special meal at home!

Remember to tell those that are special to you that you love them!