Budget Sense

For 2022, I set two goals in mind, one health related while the other was about money. In fact the second one was a mix of both:

Health: to do 10 push-ups a day, and increase it by 1 with each new month, so by December I was doing 22 push-ups a day. I stuck to this for the most part and rarely skipped any days. In fact, for Dec 31, 2022, I made sure to do 25 pushups to end the year on a great note and declare this goal a great success. Not only that, but having turned this into a routine and daily habit, I plan to continue to do this for the new year.

Wealth: I decided to skip most junk food purchases other than once a week (possibly twice at max) and put all the saved money into a piggy bank or an emergency fund. This alone helped me save close to $600.

Notice how both goals were easily defined and measured? In other words, I could easily know whether I succeeded or failed. My goals weren’t ‘to do pushups’ or ‘eat less junk food outside’ since these are not easily measured or able to compare to the alternative.

With 2022 now behind us and a new year to work with, if you haven’t already set a resolution or goal, no worries, you still have time. What matters is that you have a good goal, define it well, and stick to it no matter what. That is, you need to set clear SMART goals, with clearly defined OKRs. As some of you may know, SMART when it comes to goal settings stands for:

• Specific: Well defined, clear, and unambiguous
• Measurable: With specific criteria that measure your progress toward the accomplishment of the goal
• Achievable: Attainable and not impossible to achieve
• Realistic: Within reach, realistic, and relevant to your life purpose
• Timely: With a clearly defined timeline, including a starting date and a target date. The purpose is to create urgency.

With that in mind, here are some ideas to get you started with goal setting for the new year:

-Objective (goal) : save $5,000
Key Results (metrics that will help you get there): save around $199-200 from every paycheck (assuming you get paid biweekly) . If possible, you can save some from your salary and the rest to come from other sources.

-Objective (goal) : Reduce your total debt by 50%
Key Results (metrics that will help you get there): Start by ensuring you are not putting any more debt that you can’t cover immediately. Next, depending on your balance, you need to determine what 50% of that is, and then work backwards. For example, if your balance is $10K, then you know that 50% of that is $5K, so you need to come up with a plan to pay that off in 12 months. You can make it even simpler by deciding how much of that will come from your salary. Let us assume you dedicate $150 bi-weekly to tackle this amount, that works out to $3900 a year, meaning you need to come up with the balance of $1100 from other means, be it from your savings, work bonus, take on an extra side gig etc.

-Objective (goal) : Reduce amount spent on dining out to just $100 a month
Key Results (metrics that will help you get there): Simplify this by setting this $100 amount on the side at the beginning of each month and stick to it. If you blow through it all within the first week, well too bad, that would be something you have to live with. And believe me, it will feel good when it is the end of the month and you managed to only spend what you agreed to.

-Objective (goal) : Drive less to save on gas
Key Results: Start by making note of any unnecessary trip that you take and eliminate or reduce it. For example, if you go to multiple grocery stores that are more than 5 KM apart from each other, try combining them into one trip to one or max of two stores. If your commute to work is a long one, speak to your manager about working from home at least 1-2 days a week. While the amount of mileage we drive differs from person to person, one way to determine this in order to set a specific goal is to measure what your annual mileage is and then divide it by 12, assuming you keep track of this. I personally do, so it makes it easy for me to play with the numbers. For example, let us assume your monthly mileage is 1200 KM. You can decide to slash that by 7%, which means driving around 85km less a month. The number may not seem a lot, but annualized, the savings will be more significant, especially for those who drive a lot more than our example. This is savings not only in terms of fuel mileage, it is also savings on your overall car mileage and all the wear and tear that comes with that.

While the examples we gave above are mostly money related, you can take the same approach and set other goals related to your health or other areas of your life. To recap, you need to clearly define your goal and ensure it adheres to the SMART goal settings approach. Once you have that mapped out, then try sticking to your goals no matter what.

Here is the problem with the current pandemic we are living in, other than the obvious health and economic implications impacting billions around the world: it is the fact that it came almost unannounced and that we have no end date in sight. It would have been much easier if we were told, for example, that the pandemic will last for 6 months (e.g March 10 to October 10) and we all go back to our normal lives after that. But it has been more like a playoff hockey game, where we have 3 periods, followed by overtime that could go on and on until someone scores a goal. While we can see some light at the end of the tunnel, we are far from seeing this thing through. In fact, for Canada at least, we are being told the population as a whole will not get vaccinated in full until early to mid 2022. And considering that pandemic restrictions and curfews started in March 2020, that will be a full 2 years that we will have to put up with living our lives in seclusion and isolation from one another and our usual leisure activities etc. For pre-teens for example, that almost one quarter of their life spent in mandatory isolation from society!

That means, at least for most of us, we have only finished the first half of this boring and dangerous game called Covid19: the second half is yet to start and will last through much of this fresh year and early next year. Unless there is a big breakthrough that will massively scale vaccine production and delivery to Canada and other parts of the world, which doesn’t seem likely at this point. So, with so much more free time on our hands, why not do something useful with it, so that when it is all said and done, these 1-2 years of your life will not be defined by Covid19, pandemic and vaccines, but rather how you used it to advance your life in every area possible. I did it myself already and you can too. Let me go through some of what I was able to accomplish in 2020, and what I would like to continue doing for 2021, until we see us through this once in a lifetime pandemic.

Heath

When the pandemic started, in my first week of working from home and with my GYM being closed, I literally looked at my wife and said: “how will we do this?” it was a week in which I opened the door to our fridge more than I opened any other door in the bedroom or the entire house. That was March. Then came April and something changed. Despite the weather still being cold-even snowy at times-I started to walk, sometimes alone and sometimes with my wife who was off work due to the lock-down. Then in June, as some restrictions were eased, our local trails and hiking parks reopened and i started to frequent them on a semi-daily basis. I also bought dumbbell sets to work out at home, during my breaks from work. To put it into prospective, by the time the lock-downs started, I was around 180 lbs and by new year’s eve, I had gone down to 167 lbs, and body fat from 25% to 17%! That is 13 lbs loss and 8% body fat reduction, with no GYM! All because I took the decision to walk and work out, even with no formal GYM to go to. Last but not least, using my Apple Watch, I am currently on a 203 day move streak, going all the way back to July 12! That is how long I have been active on a daily basis.

Wealth

I am proud to say I spent the entire lock-down so far without once shopping off Amazon, unlike the majority of the population! With not much to do, I saved most of my money and I did two things that will benefit me tremendously for the long term: first, I bought stocks when the market bottomed out in late March, and again during the summer and fall. Every single one of these positions were in blue chip high-yielding stocks. Combined, I will be making over $1800 in annual dividend returns ($450 a quarter) . The other thing I did with all the money saved during the lock-down was to pay off my line of credit balance of $8,500. It would have been close to impossible to do this had there been no lock-down, where i would have otherwise spent my money in a multitude of ways. Between the two (LoC payment + dividends), I now have $600 of net monthly income that I am saving/getting.

Self Development

Depending on how you define this, to me it is the process or steps you take to develop your character, learn new things, or help you reach new goals in life. Going by this definition, 2020 was one of my best years ever. The things I was able to accomplish speak for themselves and prove that you can turn an otherwise terrible year into something productive and better yourself in the process. To start, and this is as synonymous as it gets with the concept of self development, this was a record year for book reading for me. I was able to read a total of 20 books, compared to my average of 3-5 books on average. Not only that, but some of these books were business and technology references, one of which helped me earn an industry-recognized certificate specific to my profession. 2020 was also a year in which I found a huge new interest in audio-books and podcasts. For the latter, I have even developed a new hobby: podcast driving. This is the act of driving for leisure while listening to my favorite podcasts shows. From March to December, I listened to around 500 podcast episodes, in a variety of topics.

Don’t let another year go to waste, start now!

I am not here to download the seriousness of Covid-19 and the terrible human loss for millions of people around the world. But the point is to not let it define us. If 2020 was defined by a pandemic and lock-down, and nothing else for you, you still have time to make 2021 better and more productive year. Start by setting some small but specific short term goals: how about finishing a book, losing 5 lbs, saving $1,000 and so on. As you start and gain some momentum, you will notice wanting to go for more and then the sky is the limit. Think of a snowball that starts small and as it goes down the hill, it gets bigger and bigger.

As you read at the start of this article, I started with a simple question and a simple walk, and those progressed into much bigger goals and accomplishments. And in fact, I am even more fired up for 2021. For January, and thanks to a milder weather so far, I have walked almost every day, for a minimum of 30 minutes. My fear was that I would start gaining some weight back during the cold winter months. Thankfully, that never materialized and I have kept the weight off. As they say, if I can do it, so can you. In fact, you may be be able to do more than I do, depending on your personal circumstances (whether you have a family, kids, full time job etc) . I would love to hear some success stories of how people used these pandemic months and years to better themselves and start a new chapter in their life that will forever change them for the better. Ditch the countless hours of Netflix binge-viewing and Tiktok scrolling and pick a book, go for a daily walk, or start a new online course!

Time is a very crucial concept when it comes to saving money and paying off debt. It could be your friend or enemy, depending on how much of it (time) you have. Generally and simply put, the more time you have, the more you are able to save money and pay off debt. Having said that, is it really as simple as that? Other than having a time machine, how can I make sure I have more time to be prepared financially? The key is to be prepared and able to anticipate upcoming situations where money is needed. Let us go through this checklist which ensures you are prepared, whether you have little or a lot of time on your side.

Planning ahead

You know you tend to go on vacations at least once a year, so why leave it to the last minute to save money for an upcoming vacation? Even if you don’t know when or where you will be going next (Vegas in August?) you should still have an idea of how much you need to save.  In fact, travel for some of us is such a big and routine part of our lives, we have integrated it within our financial budgets (see next point.)  Same goes with general life savings. You know you need to save money for the future (retirement, new house, etc.) so why not give yourself more time and start early? one of the most asked financial questions by by baby boomers is whether they will have enough time to save for retirement. Had they started early (in their 20s or even 30s) they wouldn’t have to ask that question.

Budget for it

Like we mentioned, the solution to having little time on your side is to use your budget. For example, if you have to make a down-payment on a car in 3 weeks, and you don’t already have the money, you can either borrow money or use your credit card and then use your budget to pay off this money that you have to borrow.  This is why it is crucial to start early so you are not faced with a situation like this.  The sooner you know about an upcoming purchase or debt repayment the better it is of course. So your forecasting has to be pretty good, to give yourself enough time. And when you have an idea of what you have coming, it will allow you more time to integrate it into your budget.

Emergency Fund

In the finance literature, the important of an emergency fund can’t be underestimated. It is of vast importance, especially in situations where time is not on your side. Such a fund can be used to pay for an unforeseen or unexpected financial emergency.  Obviously, it wouldn’t be an emergency if you had enough time to deal with it. If you car breaks down, that is an emergency that you have to deal with almost immediately, unless you had a second car to use.

So while you may not be able to create, bend or pause time to work in your favour, you can still do a few things to be prepared, even
when you don’t have a lot of time on your side. The key is to be prepared and realize that time will not always be on your side and there will be situations when your past preparations will help you deal with the immediate situation.

And remember: time is, you got it, money!

There is no denying that we have officially-some time ago actually-entered an unchartered territory for Canadian real estate prices.  Prices for houses and condos are through the roof. They are up some 10% in just the last 12 months which is quiet amazing!

Some of these price increases are fueled by competition and price wars. Others speculate that wealthy Asian immigrants are fueling this even further, paying a fortune for what other average Canadians couldn’t, thus keeping the latter group from being able to get into the market.

Which brings us to this question: are those would-be buyers, who can’t compete with the other buyers, waiting or hoping for a crash? We keep reading that a correction or a full crash is just a matter of time.  Both Macleans and Canadian Business magazines have predicted that the Canadian real estate bubble is about to burst. But what is the timeline and how would you know if it is a good time to buy?

I think it is better to wait and play it safe for now. For one thing, the market is being flooded with condos and many of those would-be home buyers who can’t afford to buy a house will opt for a condo instead. In other words, the demand for condos will continue to rise while demand for houses will stagnate or even fall. This is bound to keep prices level or even down soon.

Then there is the issue of Canadian debt-to-income which is at historical highs and that could accelerate a crash in the market. While we may not see a dramatic crash like that we saw in the US 4 years ago, it will still be significant and cause house prices to go down.

And last but not least, there is the issue of interest rates which are at a historical low and are bound to go back up again. As rates begin to go up, less and less people will be willing to take the dive. That is bound to put pressure on the price of houses and condos.

So to those who are waiting or even hoping for a crash, your wish may come true. When? that is the half a million or million dollar question. For now, just keep saving for that big down payment.

You hear it all around you, cutbacks, austerity measures, new efficiency programs and other measures that are being implemented by companies and government worldwide.

It is the new world we live in. World economies and finances are in the worst shape they have been in decades. It all started in 2008 with the US sub-prime mortgage and credit crisis. Ever since, and despite having hints of a recovery, the situation is still dire and in fact turning worse in certain places like the European Union.

So if this is norm and the new world we live in, how can you be ready, immune from it all and stay relevant? As an employee, consumer, or someone responsible for a family, there are a few things you can do to protect yourself and even thrive in the face of these sweeping waves:

-As an employee: be as productive and indispensable as you can be. If there are cut-backs at your company, the last one to go should be those that are the most efficient and valuable to the company. Be sure you are one of them. Learn as many things as you can about your job and those related to you so that you are flexible and can transfer to other roles should yours become obsolete.  The new emphasis is on those who can multi-task and have various skills that are transferable to other roles.

-As a consumer: with the economy tanking, people are spending less which means prices are coming down. Whether it is low-priced items such as food and clothing or something as high as a new car, companies want your business and will compete for it. So be sure to shop around and negotiate. Case in point, when shopping around for my wedding recently, I made sure I look at many different vendors before making any final decisions. Hungry for business, companies are reducing their prices and more.  Did I mention ‘don’t pay the full price!‘?

-As a family: with so many job cuts happening, don’t take your job for granted no matter how safe it seems. Star networking now.  And should the worse happens and you lose your job, you have to have a plan of survival in place, until you find a new job. Most importantly, this is where an ’emergency fund’ comes very handy. This is not your RRSP money of course but something else like your regular savings or TFSA account. How much should this account hold? For the average family, anywhere from 1.5 to 3 times your gross monthly income. The more, the better. Also, ensure you have a budget in place and that you are not paying for things you don’t need around the house.

Heck even the Pentagon is completely overhauling the US military to make it it smaller, leaner and generally more efficient. So if the powerful and huge US military can go smaller, you probably can too.

In this new world, the old adage ‘Less is more…’ couldn’t be more accurate.

Are you lean and efficient enough for the new world?

Let me try and blend both the good news and bad news together: while  Canadian (and North American in general) food prices will continue to go up in 2012, the increases won’t be as large as the ones we saw in 2011. According to an article in the Toronto Star:

“University of Guelph economists predict that while food prices will continue to inch ahead, the rise will be modest compared with the spike in prices in 2011“

Compared to the average 4.9% increase we saw this year, 2012 will see an increase that is less than half of that; just about 2%!

Meat products will see a 3% increase compared to the 5% we saw in 2011. As for fresh vegetables, you will be relieved to learn that the increase will average about 1-3% compared to the dramatic-up to 10%-increases that we saw in 2011.

Thanks to various factors-weather, increased world demand, higher energy prices-food prices have been going up every year for the last 10 years. 2012 may be the first year in a long time where consumers will see less pressure. But like I mentioned earlier, let us not fooled by this: there will still be an increase, not a reduction in prices, albeit a smaller one than we have been seeing last few years and this year (2011). Some necessary items, though, will see a price decrease actually, notably core grains and sugar.

This is a much welcome news for families and individuals, especially those who have been struggling to make ends-meet or having trouble paying down debt.

Our blog is 1 year old! Thank you for helping us get here.

So, what have we (the bloggers and our readers) learnt? lots of things. Most importantly, things that will make a difference in your personal finance matters and at the end of the day put more money in your pocket.

Most importantly, a frequently recurring theme has been that of smart spending and efficient saving. You have to do your best to minimize your spending and maximize your saving. As you go along you will discover that this becomes easier, to the point of becoming a habit or a routine.  If you haven’t even tried toying with these fundamental and powerful concepts in personal finance, it is time you did.

When it comes to saving, anything and everything helps. Even small pennies and spare change.  In fact, we recommend you diversify your sources of saving for a better future.

We also learnt-and probably bored some people to death-about the very important and almost unavoidable concept of budgeting.  This whole blog is based on this powerful tool upon which any successful personal finance strategy would depend. We learnt that to manage your finances better and smarter, you have to have a budget. Once that budget is created, you then learnt to live with it, tweak it, update it and be creative with it to maximize your income value and savings.

Going forward, our focus and effort will continue to revolve around topics that help you get the most out of your personal finance. And we will continue to deliver that in simple and easy to understand language.

Please let us know if you have any topics you would like us to cover by emailing us at: moremoney@budgetsense.ca

And please don’t forget to leave your comments below.

It is early November and we are now less than 2 months away from Christmas, which is about enough time to do all your Christmas shopping.

But instead of putting it all on your credit card this year like you have often done, why not start budgeting and saving for it from now? you have at least 4 pay periods from now till the last few days before Christmas and if you allocate a small amount or percentage from each check towards Christmas shopping, you will have more than enough to get all you want for yourself and for your family and friends. And by doing this simple strategy, you get to spend January relaxed and not worrying about upcoming credit card bills.

For example, if you deduct $100 to $150 from every paycheck (less if you get paid weekly), you will have saved anywhere from 500-600 dollars for Christmas shopping which is close to the average amount that North Americans spend on Christmas shopping.

And as an added bonus, you can still go ahead and pay with your credit card to get their loyalty points, and then pay it back right away with the cash you have saved.

The depression that usually sets-in after the holidays are over,  can be partially eliminated this year by following this simple strategy. Not to mention, you are learning a very important lesson in budgeting and finance that can apply to many other situations in your life.

We all have our life mistakes and regrets. That crush you had on that girl in high school which you now look at as a waste of time. How about that decision to not finish high school? But what about your biggest financial mistakes, the ones that you have regretted till this day? We all have them and it is not about making them but how much we have learnt from them. In talking to people I know, reading people’s admissions online and from my own person experience, here are some of the most notable ones.   Some people regret these so much so that they would hire an exorcist to erase their ghosts from their memory if they could.

Taking on too many credit cards and debt at once

I couldn’t resist putting this on the top of the list and I am sure many of you agree. In fact, I am guilty of this myself.  While in school and a few years after graduating, I was carrying up to 4 different credit cards at once! I look at that stage in my life with total financial disgust. How was I able to manage? well I wasn’t really and it took me years to eliminate all but one of these cards.  People have gone credit-crazy in the last few years, ignoring the very bad economic situation we have been in for the last few years. People are refinancing their mortgages so they can do expensive home renovations and buying new cars they don’t even need.

Not starting to save early

In his book “Debt Free For Life…”, famous financial author David Bach confirms that it is never too late to start saving and I agree. While that may be true, it is not telling us the full picture though: the later you start, the less money you can save. In fact, when you are young, you generally have less expenses than when you are with a family, a mortgage to pay and other life expenses.  As youngsters, the tendency or motivation to save is usually not that strong as it is later on in life.  Make use of TFSA, RRSP and other saving programs out there, from as early an age as you can.  For example, if you are wise enough to start saving at the age of 18, and assuming you are able to put $250 a month on average, by the time you reach 35, you will have close to $56,000! (assuming an accumulated 2.5% interest)

Cars, cars and more cars

There is no question about it, cars can be big suckers of your income money. Sometimes up to half of your income if not more. There it insurance, maintenance, finance payments and of course, gas! Most of these costs have been on the rise as of late. I am not saying people shouldn’t buy a car if they need one but the mistakes lies in what people bought and how frequently they replaced their cars. Some people would buy a new car, make the payments for a few months, and then sell it for half the price to buy a newer or better model. Total madness! Buying a new car in and of itself usually means you will end up losing money as the price depreciates over time. But to buy a new one before you have had time to pay off the first one is setting yourself up to lose lots of money for years to come. And let us not forget to mention money spent on expensive car re-modelling and upgrades. 

Selling and Buying stocks at the wrong time

This is a tough one to judge since no one chooses to buy or sell stocks at the wrong time. It is simply a matter of wrong guessing or bad timing. I was reading an interview with one of Canada’s millionaires and renowned entrepreneurs and he talked about his regret for selling a certain stock too early. Had he waited a few more years he would have made close to a quarter billion in profit! To minimize your losses, be sure to diversify your portfolio and invest based on your risk tolerance.

School and Career mistakes

Few people know what they like to specialize in before entering higher education and even then, many don’t stay in the same program and end up changing it. Sometimes more than once. Others regret dropping out and not graduating at all which I agree to be one of the biggest mistakes, particularly in situations where you are more than half way to graduation.  For those, they paid thousands in school and tuition costs only to see it gone down the drain.

The fact that we are humans is enough of a guarantee that we will always make mistakes. No one is without one. The real question is not whether you have made financial mistakes in your life but more importantly, how much have you learnt from them? If you read the biographies of people who have accomplished a lot in their life-including top billionaires- you will often notice something common between all of them: they either built on the mistakes of others or learnt from their own mistakes and did things differently in their new attempts. Learn from your mistakes and don’t dwell on them. While you can’t undo what is in the past, you can certainly change how your future will shape up to be.

Are we about to be hit with another recession and a global economic slowdown? many signs are leading us to believe this may be imminent.

Regardless of what happens, it is better to be ready for something that won’t happen than not be ready when something bad does happen.

You would like to think that people have learnt a lot from the economic downturn of 2008 and 2009, but I don’t think that to be the case.  People have a very short memory.  People are spending more than before, accumulating more debt and generally not caring about the state of their financials.  Sure, spending is generally good for reviving an ailing economy and to bring it out of recession, but we are talking about healthy spending and not credit card and borrowed spending!

To be ready for whatever comes, here are some of the ways to weather any upcoming recession or a downturn in the economy.

Tighten your spending: this is the easiest and most obvious one. This is one that you have full control over. Tightening your spending helps in saving you money that you will need in a rainy day. It will also help you get used to a frugal life should things get hard later on. And last, reducing your spending will mean you will only have to spend on things that you need, and avoid maxing your credit card and loans on things you don’t even need nor want-you buy them simply because you think it is cool or have been tricked by promotions and advertising.

Time for a budget: hey,  there is that ‘budget‘ word again! Surprise surprise! Well get used to hearing it over and over until you either leave this website for good or finally decide to give up and create one.  A budget, whether in good or bad economic times, makes a lot of sense. But when it comes to a downturn in economy or even a recession, it will help you prioritize your spending and purchases.  When money is tight, the last thing you want to do is spend it blindly without any accountability. A budget will be your guide through tough times.

Solidify your Job and Networking: So you have a job now and you think your position is very secure and have nothing to worry about? well tell that to all the millions of people who were laid off from their jobs during the recession, many of whom had thought their jobs were very stable.  Like a hurricane that sweeps through a town and doesn’t care about what objects it encounters, a recession is the same: no matter how much seniority or experience you have, when a company decides to lay down the axe, you could easily be let go. If anything, companies will try to save as much money as they can during a bad economy which means firing and laying off those that make the most money. Conversely,  if you have the least seniority and experience in a company, you could be the easiest and cheapest human asset they could let go without feeling a pinch to the operations of the company.  The point is, during a recession, anyone is vulnerable to lose their job.

This requires that you solidify your position at your current job and enhance your networking reach. That is, make your position as recession-proof as possible. Make yourself a very valuable commodity and asset to your company. If what you do is general and doesn’t require a lot of analytical thinking or specialized skills, you may want to learn something that is more specialized and precious to the company’s operations.  For example, if you are in an IT Help Desk doing general troubleshooting, you may want to look into that position of troubleshooting ‘servers.

Strengthening your networking reach and circles is also crucial.  You don’t want to lose your job before you start networking with people to find a job. You should build and grow your network while you still have a job! Make use of all your current coworker and other contacts you deal with, get their contact information etc.

So while it may seem like there is nothing you can do to weather a recession storm, there actually is like we outlined above. The key is to be ready and not live like there is no tomorrow.