Forget “Personal” Finance, Think Business Finance!

Forget “Personal” Finance, Think Business Finance!

Ah, “Personal Finance.” This term often has some highly charged negative emotional connotations for many people. It is probably right up there with the word “moist” for the overwhelming level of disgust it can bring about.

Perhaps it is the lack of knowledge around managing money that induces anxiety even at it’s mention. Perhaps it brings up memories around stress in childhood when parents fought over money, and who would have control of it. Perhaps it is the shame felt by confronting the irresponsible spending habits that most North Americans share… You know, when you see that gorgeous pair of shoes that you can’t resist. Or that sleek new tablet… Or maybe, in a moment of extreme weakness and curiosity, you impulse buy that  fidget spinner! All the while thinking that you probably shouldn’t spend all of your extra money, especially since you still owe so much on your credit card…

Unfortunately, whatever the case, these pervasive negative connotations around money have led to a culture that perpetuates money matters as a “taboo” topic of discussion for the great majority.

What if instead of keeping all of our personal finances private, we actually had to account publicly for every single purchase? You know, like a publicly traded company, responsible to its shareholders, having to be transparent about EVERY decision, and at least try to give some rationale explanation behind our choices. What if EVERY purchase YOU made was being watched and recorded so that everyone around you had access?

Thankfully, that’s not the case… Even though many people would likely see a huge (probably even a “Trump huuuuuuge”) improvement if they were forced to “bare all” their money decisions to the world. In reality, the only people keeping tabs on your finances are probably you (hopefully after reading a few of these blog posts anyways!), your credit card company, and your bank. Well… who are we kidding, probably Google and Amazon too…

Making your own personal finances public to the world would be an extreme step to bump us all into action and better decision-making. Accountability on a global scale would work wonders. But what if you could start to run your finances just a bit more like a business?

One of the first rules of business is to “stay in business!” In order to do this, the business must be profitable. Income coming in, MUST be greater than expenses. What happens if a business doesn’t follow this basic rule? Well, it won’t be a business for very long!

Personal finances should be run in the same manner. What happens if a household fails to follow this same basic rule? A household can’t merely dissolve and have expenses wiped clean… Instead, the stress often follows the family members. It starts nagging and causing sleepless nights, irritability, and digs the family into a deeper and deeper hole that eventually appears nearly impossible to climb out of. Dreams of travel, that bigger home, spending more time with family and friends… All those dreams start to fade as the burden and stress increases because of habitual monthly deficits adding to an ever-growing debt-load. It’s a sad reality that often marriages end and families are broken apart as a result…

So how should you run your “household business?” Be like a good business owner and work at growing your business! As a start, you can focus on growing your Net worth by ten percent each year (Net Worth = Total value of everything you own minus everything you owe). Have a negative net worth? Decrease your debt by at least 10 percent this year! Every subsequent year you should be increasing the amount going toward improving your net worth. Ideally, every month a little more will go toward increasing your net worth than the previous month. Okay, December MIGHT be an exception…

One of the best books I’ve come across to start thinking in this manner is a classic by George Clason: The Richest Man in Babylon. It has timeless strategies and rules for becoming financially independent, and is fairly entertaining with its stories.

This post is getting a little longer than expected though. I’ll touch on some of the most prominent strategies of this wonderful wealth-building classic another day! Til’ then, “keep (financially) fit, and have fun,” boss!

Advertisements
“Take that out of your mouth! Money is Dirty!”

“Take that out of your mouth! Money is Dirty!”

My youngest child has begun to stand. She is pulling herself up on her own, no longer needing anything to grab, and fights her way to her feet. There, she will wobble for almost 10 seconds before falling back, flat on her bum. This also means that she is now getting very quick at crawling around on the ground and attempting to put every little piece of everything graspable into her mouth.

A few days ago, I was rustling around in the kitchen when I overheard my wife calling out to her “Don’t put that in your mouth! Money is dirty!” She had honed in on a little dime that found its way onto our living room floor. “Wait a sec…” I had heard almost this exact sentence, word for word, about a year and a half prior at a business marketing seminar. One of the topics discussed was around people’s experiences with money. From an extremely early age, it is almost ingrained in many of us that “money is dirty.” We are programmed to associate money with germs and “dirty dealings” from a very young age. The more money a person has, the “dirtier” or “germier”they must be. Or they must have “sold themselves to the Devil,” or maybe they “just use everyone to get more money.”

These ideas seem to be rampant. Some personal friends of mine that are very open-minded and non-judgmental have even made similar remarks around how most wealthy people have “sold themselves out” or are just “sleazy business people.” When I meet people who are quite wealthy, such as making seven-figure incomes, they seem to be the opposite of the stereotype. Of the ones I have met personally, these people are often very well-grounded, and are firm in their good beliefs and values. So why the incongruity?

Perhaps those subtle comments we hear from those around us really do shape our thoughts about money. That “money is dirty,” or “he may be rich but he’s probably a jerk” or the “I wonder who she slept with to be so successful” or whatever other passive, negative judgment a person may make. The end result: we hear these comments, and being social creatures not wanting to upset our peers or maybe someone very close to us (a parent perhaps), often go along with these ideas, and unconsciously they form us. They become a part of us. These snide comments from the people closest to us show us how we should view money and how we should view people who have lots of it.

Here is a challenge for you: what beliefs around money do you have? Can you trace them back to their origin? What view do you have of people who have a lot of money? Why do you think this way about them?

One of the most enlightening books I’ve ever read on this topic is “Rich Dad Poor Dad” by Robert Kiyosaki. He describes money as no different than a hammer: merely a tool to be used how we see fit. The trick is to master how to use the tool, so as not to let it harm you. A jackhammer is a powerful tool when used correctly, but can be a dangerous crushing death-machine for someone who has no clue how to operate it!

The same is true for money. For those who know how to master it, it becomes a tool of great value to them. For those who do not learn to master it, it becomes a force that can cause almost unparalleled stress in their life. Think debt, big mortgages, revolving credit just to pay things off… Huge stressors for those living in these circumstances, which, I hate to acknowledge, is most of us.

Isn’t it time, as a society, that we learn to master the use of money? What if we could take back control of it? What if we could teach the next generation how to take control of it?

It is my curious nature…What are your thoughts and beliefs around money? It would be interesting to hear some views in the comments below.

First blog- A Whole new world: shining, shimmering, splendid!

First blog- A Whole new world: shining, shimmering, splendid!

Like Jasmine on that first carpet ride with Aladdin, I’m currently feeling a mix of emotions while writing this first blog post ever. It is a step into unknown territory for me, bringing with it a plethora of mixed emotions. Excitement at the thought of sharing some ideas and knowledge with whoever happens to pass by this page and possibly giving a smidge of improvement in their life; nervousness as I feel a sense of vulnerability by actually putting my thoughts out into this vast, hyper-critical vortex known as the internet… Probably not unlike how our scantily-clad princess felt as the wind blew past her in the cold desert air that first flight, exposed to the elements, and a large drop just inches away… Where was her jacket!? The exhilaration of her new adventure likely drowned out any feelings of being cold whatsoever.  She could see all new possibilities and have her mind opened to a whole new way of seeing her same old world! The reality is that in those few moments above the city and dessert, suspended in the clouds, higher than she would have ever imagined she could travel, next to nothing in the world had changed… But for her, EVERYTHING had changed. Her exposure to a new way of seeing this amazing planet, and a new way of thinking, drastically altered the course of her life!

It is my hope that, on occasion, this blog may have a similar, albeit, tiny effect, in exposing those passing through to new ways of looking at every day situations. The blog posts will deal largely with two main areas: parenting, and personal finances. My wife is an amazing developer of little humans, and my psychology background helps me be kind of okay at it too. The finances sections will focus largely on saving money, and making long term plans. Talking about finances is scary for most people, largely because of shame in how they are handled, or the lack of knowledge in this area. While it has a huge impact on the personal level, the fact that problems in this area are so widespread points to a largely societal issue. Teaching about money in schools is very limited, and often falls on deaf ears when it is taught. There needs to be a better medium for passing on good information. Hopefully some of the posts shared here will provide at least a speck of benefit, to a few people. And hopefully, like the Disney classic about our high-flying princess and prince, it will be at least a little entertaining!

Please feel free to share your comments. As this is a new endeavor, there is no doubt there will be a steep learning curve! Thanks for taking the time to stop by!

Procrastination: Keep a Little, Lose a Lot

Procrastination: Keep a Little, Lose a Lot

Back in my college days I prided myself on being able to perform under pressure in reaching deadlines for papers that had been put off until literally the last possible minutes. The often decent marks received on said papers did not help to remedy the situation. In one such instance, an entire research paper in a Health Psychology class was completed, start to finish (including all of the research) in one solid 16-hour chunk. The task was started at about 8am, and it needed to be submitted by midnight. It was completed and sent just in time, at 11:52. This paper actually received the best mark of any of my papers  during my undergraduate degree. Unfortunately, this only reinforced this less-than-ideal behaviour… Sorry for causing you all that stress Dr.  K. Peace! She was my Honour’s advisor who royally saved my behind… Thank you Kris!

In college, when procrastinating on papers, the major cost was a good night’s sleep (or in some cases, any sleep that night). What are the costs of procrastinating for some issues in adult life? Many people have heard about the benefits of starting to save for retirement early… But what is the real cost of waiting to begin?

Let’s look at some numbers! Let’s use a 25 year old in our example. Someone who may have finished some post-secondary education, had a little time to enjoy some extra money, and is now looking at saving. Obviously we need to make some assumptions. If this 25 year old had a “regular” nine-to-five, 40-hour work week, was making $25/hour (a realistic number if they’ve been in the workforce for a few years or if they have post-secondary education), and they started saving/investing 10% percent of their income properly on their 25th birthday, it would look something like this:

$25.00/hr multiplied by 40 hours = $1000 per week.

Multiply this $1000 by 52 weeks in a year = $52 000 earned per year.

Ten percent (the amount to save) of $52 000 is $5200.

$5200 divided by 26 (52 weeks divided by 2 is 26 “biweekly” payments each year) and you come out with a bi-weekly payment schedule of $200 going  into the savings plan every 2 weeks. Ideally, straight from the paycheck or direct deposit, right into the investment account, and interest (we’ll assume) is compounded monthly.

If the investment account gives a yearly return of about 7 percent (we’ll use a fairly conservative long-term investment here), by the time our friend is 65 years old (40 years of saving and investing), they would have $1,142,465.22 saved up. Of that, $934, 265.22 was interest earned, meaning the total amount put in was $208, 200.00. The initial investment grew to over 5 times it’s original value!

Now, let’s look at someone who started just 1 year later, with all of the same assumptions, except this time they are only saving for 39 versus 40 years. This 26 year old would end up with $1,060,428.24. Of that, $857,428.24 is interest earned. Still nothing to sneeze at, but that one additional year of saving early on resulted in an extra $82,036.98! For just 1 year of difference! Putting off the savings plan for A SINGLE MONTH would cost the 25 year old over $8200! Let me re-phrase that:

Waiting 1 extra month to decide to save and invest in their future, costed over $8200. Just for waiting one… single… month!

Friends, I want you to understand how important it is to start saving NOW! Don’t let any more months or years slip away on you, thinking “Oh, I’ll get to that soon enough…” You would not even think to leave $8200 on a table if it was in your hands, yet many of us forget to look at future money in this manner. Do not neglect your future self and put off saving for your retirement.

If you procrastinate in this area, there will come a period later in your life when I can almost guarantee that it will cost you a lot more than just one or two sleepless nights in a row!

 

If you found value in this article, please like and share it to spread the knowledge, and just maybe reach one more person who needs to see this. Thanks for reading, hope it provided some value!

Please note: In the future, retirement will cost much more than the numbers provided due to the effects of inflation and rising living expenses. The amount calculated was used for an easy analysis, and to illustrate the importance of saving early. To figure out how much you will personally need to retire it is best to consult a financial professional proficient in retirement planning.

How a Cashier Helped Me Earn $180/hour

How a Cashier Helped Me Earn $180/hour

As a young father there are a few different types of trips I take the grocery store. Sometimes the trips are a rushed “errand-run” on my way home from work. In this case, there is lazer-focus on getting the required items, while pretending in my mind to be on an ever-so-important mission to get the needed goods as fast and efficiently as possible, Bond-style. Sometimes the grocery store trips are a family adventure and “outing.” My little guy will run rampant having a blast whilst my wife focuses on the acquisitions, and I chase the quick little monkey, regularly apologizing to the people with carts that he just cut off.

Another type of trip is reminiscent of my single days, when there was an abundance of time. These occur when the kids are down and there are a few essentials needed. It is these trips where there is no rush, and it is nice to just slowly pace along through the aisles, and even venture into unnecessary areas! This was one of those trips.

It was about 10pm, so there weren’t too many people around in the store. After slowly pacing along, grabbing the needed items, and venturing off to browse the housewares aisles (home organization items have strangely become a mesmerizing and tantalizing section since having kiddos…), it was time to head to the check-out. There was no lineup, and nobody else around, aside form the cashier. I placed my items down: some yogurt, bananas (we go through a ridiculous amount of these), apples, and milk. Just a few essentials. Then it happened, the cashier said to me “there’s a coupon for this yogurt out front if you want to go grab it.” If it were busy, the decision might not have been so automatic, but since nobody was around, I said “Okay, thanks” and left the goods in her protection briefly, while walking over to find this beautiful piece of paper. A few steps, the automatic doors opened, and it was only a few seconds of searching to find the spoken-of coupon. Back at the til was another “thanks!” for the cashier, and then off on my way back home.

Now, most of us have heard the expression “a penny saved is a penny earned.” Business owners and many DIY’ers know this to a great extent. In business, it is vital to success to watch all the expenses. Unfortunately, many people who trade time for money in the form of an hourly income do not bring this mentality of earning to the same degree as for saving. On the quiet drive home my brain started to do what it does so often, and the analysis of the numbers began. In this case, the coupon had saved me $2. Not an exorbitant amount, but when you look at the time and effort put in to achieve this, it is an amazing rate of return. Here we go!

The whole ordeal in acquiring the coupon may have added 40 seconds to my trip: a few seconds for the cashier to tell me about it and ask if I’d like to grab one, probably about 10 seconds each way walking to the entrance, and a few seconds to find and grab the coupon. For 40 seconds of work (and that is generous in the amount of time it took), $2 was saved. This is the equivalent to about $3/minute, or about $180 per hour! The “work” involved was just walking and finding the coupon. Now it is important to note that I was purchasing these items regardless of a coupon or not, and was not buying something because of having a coupon. The effect of her action on my overall net worth was the same as if the cashier had pulled a $2 coin out of her pocket and placed it in my hand for walking to the front. Not a bad deal!

For anyone who is not yet financially free, and is still trading time for money at a job, an opportunity to earn $180 an hour, even if just for a short duration, should be a welcome event. The accumulation of many of these types of short instances of large earnings can have a large impact in the long run, and maybe even help reach some of those lofty financial goals just a little bit sooner!

“Pick Up Those Screws!” A Money Lesson From Dad.

“Pick Up Those Screws!” A Money Lesson From Dad.

My dad owns a construction company. Every summer beginning at the end of grade 9 there was a conversation (if you can call it that) that went something like this:

Dad: Ryan, you’re working for me this summer.

Me: Uhh… kay.

That was essentially the conversation. No discussion, just my dad telling me that I’d be busy for the rest of the summer working for his company, 5 to 6 days a week. My friends were out getting into trouble, having fun, going to the gym, and some worked part time. When I finally saw them on the weekends it seemed like years had passed with all the fun stories they’d accumulated. For me, the summer consisted of long hours drywalling. At least my older brother was doing it too.

The hard work was a blessing as it lit a fire in me to get into post-secondary school.

One particular memory and lesson from my early days of drywalling sticks out. It was nearing the end of another long day, my brother Jason and I were sweaty and wreaked of obscene teenage-boy body odour mixed with drywall dust.  We had been working hard and efficiently, feeling great about how fast we were working and how proud our dad would be of all the work we had finished up that day. A few minutes left in the day and there he comes, dad walks onto the job site, takes a quick look at us, the walls we were working on, the floor, and then pauses. Me smiling, him soaking in all of our hard work…

“Pick up those screws!” he barks. It probably wouldn’t have rung so deep and created such a vivid memory had I not been gloating and expecting praise. Looking down along the perimeter of the wall, there were indeed enough screws laying, strewn across the floor, to make even a screwdriver blush. He went on to explain “Every one of those screws is like a nickel or a dime. You not picking those up, is like throwing away nickels and dimes.”

While it took several more scoldings for this lesson to fully sink in, it eventually stuck. Now, when my analytical mind steps back and analyzes this lesson from a practical perspective, the impact is quite large:

When he first got on our case to pick them up, about 5 minutes of sweeping probably resulted in ten to fifteen dollars of screws being saved. Say he has an average of 3 job sites going at any given time. Ten dollars saved, per day, per job site is 30 dollars. Multiply this by about 22 work days per month, that’s $660 per month., or $7920 a year. This could have been a large cost had he not been on top of his workers about saving and picking them up. Saving these screws just went to improve his profits. That’s a great family vacation right there (5 of us), just for picking up screws! Over the course of a career, say 20 years: that’s over $95 000.

With my own kids now, and mounting future expenses: sports, education, weddings… The value in looking for different ways to not let the nickels and dimes get thrown out is becoming ever more important. Heck, they may be extinct here in Canada now, but I’d probably even still pick up a penny!