Money Tips Canada http://www.moneytipscanada.ca Encouraging careful financial and life management. Mon, 27 Jul 2015 19:34:34 +0000 en-US hourly 1 http://wordpress.org/?v=4.3.1 Stuff I Like, Part 1 http://www.moneytipscanada.ca/stuff-i-like-1/ http://www.moneytipscanada.ca/stuff-i-like-1/#comments Mon, 27 Jul 2015 19:26:52 +0000 http://www.moneytipscanada.ca/?p=1339 You should spend money according to your values and priorities. The same is true of your time. This week my time needs to be spent on priorities that aren’t this website. Namely: studying for my certified financial planner tests taking…

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You should spend money according to your values and priorities. The same is true of your time. This week my time needs to be spent on priorities that aren’t this website. Namely:

  • studying for my certified financial planner tests
  • taking a business planning seminar
  • volunteering
  • travelling

With these commitments there isn’t a lot of time for other things, such as this website. So for this week and next, instead of my usual article, I’m going to share with you some of my favourite online and print resources, and Winnipeg businesses and non-profits.

Online Resources

Raptitude
A blog full of thoughtful, quality writing about mindfulness and how to best live your life.

Mr. Money Mustache
A blog and forums for those interested in financial independence and self-sufficiency, among many other things.

Simple Living Forums
A friendly community for those interested in the voluntary simplicity movement. I’ve been interested in simple living as long as I can remember. In 2003 I discovered the forums and the inspirational people there.

Financial Integrity Program
This program is based on the topics covered in the book Your Money or Your Life. There are tons of free downloadable resources on that website, and I have a few of my own here. I’m an FI mentor and would be happy to talk to you about the program at any time. 

Canadian Couch Potato
Detailed, specific investment advice for Canadians. This is the ultimate investing resource, in my opinion.

Books

Your Money or Your Life, by Vicki Robin and Joe Dominguez
For life changing books, this is the one I recommend to everyone.You should read it.

Playing Big, by Tara Mohr
If you are feeling stuck in your life and career, this book is a great choice.

Authors

Martha Beck
She has many books now. I’ve read most of them. For general life advice, I really enjoyed The Joy Diet. But you can’t go wrong with reading any of them. Even if you don’t need life or career advice, I think her writing style alone makes them well worth reading.

Barbara Sher
As someone who fits the “scanner” personality-type that Sher suggests, Refuse to Choose, made me feel vindicated that I wasn’t just a flaky commitmentphobe.

These are the websites and books that immediately come to mind. There are lots of other good ones, and I’m sure this list will be a work in progress. Do you have a resource that I should check out and add to my list? Let me know. 

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Managing Your Money Together, Part 3 – Let’s Talk it Out http://www.moneytipscanada.ca/part-3-lets-talk-it-out/ http://www.moneytipscanada.ca/part-3-lets-talk-it-out/#comments Mon, 20 Jul 2015 18:03:38 +0000 http://www.moneytipscanada.ca/?p=1334 This is the third post in a series about how to manage your money as a couple. Previously I discussed options for managing money separately or jointly. Last week I started outlining some methods to minimize your risk regarding joint finances. I’ll…

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This is the third post in a series about how to manage your money as a couple. Previously I discussed options for managing money separately or jointly.

Last week I started outlining some methods to minimize your risk regarding joint finances. I’ll continue with that analysis today. 

First, here are the general risks I will be discussing:

Joint money management

  1. One partner may assume control of all financial decisions and steamroll over the desires or fears of the other. (See last week’s post.)
  2. An uninvolved partner may not be capable or willing to take over money management in the case of death, disability, or just busyness of the other. (See last week’s post.)
  3. Differing styles of spending, tracking, investing may result in unnecessarily arguing.
  4. In an extreme situation one partner may abscond with all the money if they have full access to all accounts.
  5. One partner may work less or stop working altogether, intending to live off of the other’s income.*
  6. A more spendy partner may affect the other’s saving or debt level.
  7. One person may take over money management and then use that power to hide income, spending, or debt.

Separate money management

  1. You might not discuss your goals and may have different plans for spending, retirement, etc.
  2. One partner can more easily hide excessive spending or risky investments from the other.
  3. You may not be working as a team regarding your asset allocation, retirement planning, etc.
  4. You can potentially from your partner inappropriate gifts or loans.
  5. You may not have a plan in place in case one partner can’t work due to illness or disability.
  6. If one partner dies you may not be aware of the locations of all of their money, or be surprised by how little or how much they have.
  7. Your partner may not be paying their taxes or other obligations.

 

What are ways to decrease the amount of risk in these situations? Let’s continue on with this discussion:

3. Differing styles of spending, tracking, investing may result in unnecessarily arguing.

  • Frequent discussions about money are imperative in a serious relationship, prior to marriage/cohabitation and continuing afterwards. I’d be extremely wary to join finances in any way with someone who refuses to openly discuss money with you.
  • Jointly managed finances work best when both parties feel similarly about spending and investing decisions, or when one party needs the other to help them be a better money manager. Remember, completely joint finances aren’t necessary in a healthy relationship. Some couples are just better off managing their own finances.
  • Try to compromise with your partner if your styles differ. Decide what elements are most important to you, and which you can give up.
  • Make all big decisions jointly. Don’t pressure your partner to make a quick decision.
  • If you disagree with a money management method be honest about this. Hiding things is never a good solution.
  •  Have rules in place that you will discuss plans prior to actually carrying out any actions. Your rules may include areas such as:
    • purchases over a certain amount
    • changes to asset allocation
    • beneficiaries
    • insurance
    • registered/retirement plans
  • Allow your partner some freedom. They won’t want to do everything exactly the same as you. Allow them to be an adult and make choices. Put your relationship above your personal preferences, as long as the decisions aren’t putting you into financial jeopardy.

4. In an extreme situation one partner may abscond with all the money if they have full access to all accounts.

  • Discuss with your bank the restrictions on your accounts. When are two signatures needed? What is one person allowed to do by themselves?
  • Even if you aren’t the daily money manager remember to check your accounts periodically, and make sure you understand any large transactions.
  • Be alert for signs of unhappiness or control issues in your relationship. Try to deal with issues before they become serious.
  • Consider each having some money in a separate account that is only accessible to you. In a trusting relationship there shouldn’t be any concern with your partner having their own money.
  • If you are in a precarious situation, see a third party, such as a lawyer, about potential risks of theft from your account.

5. One partner may work less or stop working altogether, intending to live off of the other’s income.*

  • This topic is one that is especially important to discuss prior to living with someone. Discuss your mutual obligations for the bills. Consider what you would do if situations were to occur, such as:
    • Involuntary job loss
    • Illness of self or a family member
    • A horrible job situation
    • Voluntary quitting a job
    • Mental illness or incompetency
  • Set a time frame for supporting the other person.
  • Discuss a dollar amount that you would be willing to contribute to a partner’s needs. For example, you may be fine covering their basic expenses such as food and shelter if your partner is not working. But what if they are spending their money on drinking or expense hobbies? It’s completely reasonable to only choose to pay for their needs, not their every want.
  • Discuss your insurance needs. Do you have disability coverage?
  • Make sure the same criteria apply to both people fairly (with accommodations for different education levels, salary expectations, and health). For example, do you think it is okay for one person to only work part time, but the other has to maintain a full time job? There are some cultural and gender differences that may come into play here. Make sure to discuss your expectations with your partner.

I’ll continue this discussion about risk in another post…

Read Part One

Read Part Two

 

* I’m not referring here to mutually agreed-upon decisions for one partner to not work for money.

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Managing Your Money Together, Part 2 – Let’s Talk Risks http://www.moneytipscanada.ca/part-2-lets-talk-risks/ http://www.moneytipscanada.ca/part-2-lets-talk-risks/#comments Tue, 14 Jul 2015 16:02:47 +0000 http://www.moneytipscanada.ca/?p=1308 Managing money as a couple can be rewarding and/or challenging. A couple can make more money than an individual can. Two people can combine their knowledge and strengths to make better decisions. And partners with different money management styles can…

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Managing money as a couple can be rewarding and/or challenging. A couple can make more money than an individual can. Two people can combine their knowledge and strengths to make better decisions. And partners with different money management styles can balance out each other’s extremes. However you can also be negatively affected by your partner’s money management, sometimes severely.

If you don’t want to read the whole article, this is the most important point:
You must have full disclosure with your partner, regardless of how you manage your money choices on a day-to-day basis. Nothing can ruin your relationship or finances like hiding assets, debt, or spending from your partner.

In a previous post I explored what managing money separately or jointly may look like. Here are some potential risks with each method:

Joint money management

  1. One partner may assume control of all financial decisions and steamroll over the desires or fears of the other.
  2. An uninvolved partner may not be capable or willing to take over money management in the case of death, disability, or just busyness of the other.
  3. Differing styles of spending, tracking, investing may result in unnecessarily arguing.
  4. In an extreme situation one partner may abscond with all the money if they have full access to all accounts.
  5. One partner may work less or stop working altogether, intending to live off of the other’s income.*
  6. A more spendy partner may affect the other’s saving or debt level.
  7. One person may take over money management and then use that power to hide income, spending, or debt.

Separate money management

  1. You might not discuss your goals and may have different plans for spending, retirement, etc.
  2. One partner can more easily hide excessive spending or risky investments from the other.
  3. You may not be working as a team regarding your asset allocation, retirement planning, etc.
  4. You can potentially from your partner inappropriate gifts or loans.
  5. You may not have a plan in place in case one partner can’t work due to illness or disability.
  6. If one partner dies you may not be aware of the locations of all of their money, or be surprised by how little or how much they have.
  7. Your partner may not be paying their taxes or other obligations.

 

What are ways to decrease the amount of risk in these situations? I’ll start with tips for the first two, and continue this topic in future weeks.

1. One partner may assume control of all financial decisions and steamroll over the desires or fears of the other.

Part A: If you are the partner who is being ignored here are some options:

  • Practice good communication techniques. If you feel your needs are not being heard or met, try a straightforward, non-accusatory approach. It can help to put everything in writing first. Then go over your concerns with your partner when you are both well rested and have lots of time.
  • Decide ahead of time what you need to get out of the conversation and what action steps are mandatory for you, and which are negotiable.
  • Insist on monthly money meetings, shared bill paying, or switching off on money care duties. Review the financial statements regularly.
  • If you aren’t making progress using the above methods, you should insist on some financial separation. If you have a job, change where your money is deposited. If you aren’t working suggest transferring some money into another account that you control. Within a relationship you are as entitled to jointly earned money as you would be if you separated. It may be helpful to broach this point as improving your money management skills in case of an emergency, as detailed more specifically in my second section below.
  •  If you are being controlled to the point where none of these options are feasible, this is a serious concern and you should get professional assistance. See a counselor, family lawyer, or other family-support specialist in your area.

Part B: If you are the partner that is in sole control, try to acknowledge that this isn’t typically the safest or fairest method. Also consider why that level control is important to you:

  • Was this how the money was managed in your family growing up?
  • Are you naturally controlling and fearful?
  • Do you think you are better able to manage the money? And if so, is this justified? Has your partner demonstrated poor management in the past or do you just have a difference of opinion?
  • Is there a way to compromise and have a stronger relationship even if the money isn’t managed exactly the way you want it?
  • Consider having a neutral and knowledgeable third-party serve as the negotiator between the two of you.
  • Seriously consider relinquishing some control, but maintain open communication so you can be reassured by knowing what your partner is doing.

 

An uninvolved partner may not be capable or willing to take over money management in the case of death, disability, or just busyness of the other.

Part A: If you are the person who does not manage the money:

  • Get your partner to write a summary of your financial position in case you need to take over. This should include banks and account types, all debts, recurring bills and how they are paid. You should also have access to any joint accounts with the required passwords.
  • Have a monthly meeting to discuss money (it can be very brief) or start paying bills together. Get special food or drinks and make it a fun event instead of a stressful job.
  • Read up on basic money management so you feel more prepared to help out.
  • Realize that your significant other may not be always in a position to handle the finances. Be a good partner by serving as back-up. Remember that in any situation where you have to take over the finances is likely due to a stressful life event. Maintaining some money knowledge along the way will reduce how much additional anxiety you’ll be facing at an already difficult time.

Part B: If you are the money manager in the relationship:

  • Before you do anything else, write up an emergency money document, including your banks, account types, debt, and bill payments needed. Leave instructions on how to deal with money in the short term. Make sure that you have a few months’ worth of money around that is easily accessible to either partner. If you have a joint account, check with the bank to ensure your partner can still use that money in case of your sudden death or incapacity.  
  • Insist on some level of involvement from your partner. Try to make it short and stick to the absolute essentials. In an emergency it won’t matter that your investments don’t get rebalanced right away, but it will matter if you bills don’t get paid.
  • At each money meeting talk about one thing at a time. Don’t overwhelm your partner.
  • Remember that no one is born learning how to manage money. You can only learn by trying, and possibly making mistakes. Give your partner the freedom to learn and to develop their own system.

To be continued…

Read Part One

* I’m not referring here to mutually agreed-upon decisions for one partner to not work for money.

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Why I Don’t and Won’t Have Ads on this Site http://www.moneytipscanada.ca/why-i-dont-and-wont-have-ads-on-this-site/ http://www.moneytipscanada.ca/why-i-dont-and-wont-have-ads-on-this-site/#comments Tue, 07 Jul 2015 01:24:55 +0000 http://www.moneytipscanada.ca/?p=1300 I consider it imperative to carefully consider each purchase and to minimize impulse spending. It would therefore be hypocritical of me to profit off of internet ads which are intended to encourage impulse clicking and buying. I’d rather make no money at all, than…

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I consider it imperative to carefully consider each purchase and to minimize impulse spending. It would therefore be hypocritical of me to profit off of internet ads which are intended to encourage impulse clicking and buying. I’d rather make no money at all, than earn money in this manner.

Also, ads are just annoying. I prefer websites without ads, especially the pop-up ones, and suspect that you do as well.

Will I ever have ads on my website? Maybe. I would consider an ad if it was for a product or service that I am very familiar with and am comfortable recommending to most people.

I hope you enjoy the advertising free environment. I know it’s hard to come by nowadays. It makes me happy to be ad-free.

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Are You Spending on the Wrong Things? http://www.moneytipscanada.ca/spend-wrong-things/ http://www.moneytipscanada.ca/spend-wrong-things/#comments Mon, 06 Jul 2015 16:51:41 +0000 http://www.moneytipscanada.ca/?p=1288 Do you spend money on things that you don’t even like? Are you cheaping out on areas where you derive the most enjoyment? This is a type of financial risk. The two previous posts in this series on money and risk…

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Do you spend money on things that you don’t even like? Are you cheaping out on areas where you derive the most enjoyment? This is a type of financial risk.

The two previous posts in this series on money and risk are:

Inflation Risk

Risk of Needing Money Suddenly

This article is about the risk of spending money on things that don’t matter to you.

Reckless spending can be defined as overspending or getting into debt. However it can also be defined as thoughtless spending; purchases that don’t line up with your values. This is a recurring theme in the book Your Money or Your Life (which I highly recommend). It’s not just about the dollar amounts, but about the benefit you get for those dollars. Ideally you don’t want to feel guilty after a purchase, nor do you want to make purchases without thought.

There are two components to this risk:

  1. Overspending on items you don’t want, need, and/or like
  2. Underspending on things that would improve your life and increase your happiness

How does the first one occur? We are under constant pressure from advertisers, friends, relatives, and society to make certain purchases. A house and car come to mind as far as big purchases. But little purchases matter just as much. It’s considered normal to own many clothes, shoes, tools, household items etc…

Not too long ago you’d only have a few sets of clothes. You might borrow a tool from a neighbour. You wouldn’t be running to the coffee shop on your way to work. You’d either make coffee at home or drink it at work. Going to a restaurant would be a big event, not a common occurrence.

When did our culture become consumer-driven? It’s a slow transition over decades, but now most of us have grown up in the era of discount department stores, malls, 24-7 convenience stores, and more restaurants than you could possibly visit if you went to a different one every day of the year.

It’s so easy to get trapped in doing what is normal. As a child or teen when you get your own spending money it’s exciting to make your own purchase choices. For a young person this is an important part of growing up; learning how to decide what to buy and when. With limited money you were more likely to consider your choices carefully. (I used to only buy the O’Henry type of chocolate bar, as it was the heaviest, which meant a better price to quantity ratio.)

But then you get a real job and you could do away with some of that childhood discernment. You may have started to lose sight of how each purchase should be thought of as an individual choice, affecting your future money choices. If you had a credit card, then your available cash increased even more. Soon you were buying things because your parents had them, your friends bought them, or to feel more adult.

Personal side note: “Adults have matching furniture” is something I felt was true for a long time. Mismatched, mostly free furniture meant I wasn’t living up to my full potential as a member of society. It was embarrassing to have people over with my hodge-podge of cheap stuff. Now I’ve decided that my real friends won’t care.

Then (if you are lucky) you suddenly wake up and realize you don’t even know why you are buying the things that you buy. You are spending money carelessly on things that you may not even want. That money could be put to better use.

The Opposite Problem

Are you avoiding purchases that would make your life better in the name of frugality or to balance out other poor choices?

If you don’t have unlimited money it can be easy to slip into the habit of self-denial. Some people are extremely frugal in all areas of their life, possibly to their detriment, but that is a topic for another post. For this article let’s assume you have a certain degree of disposal income and aren’t super-frugal in all areas. You are overspending on some items, often those that are visible to others such as a nice house or meals at restaurants, but then feel you have to make up for this excessive spending. So you respond by being really cheap in areas that other people can’t see — items that are just for your own amusement.

Perhaps you’re a knitter and you’d love to use alpaca yarn, but you feel you can’t justify the extra expense, so you buy a cheap synthetic yarn instead. As a result the product and the process aren’t as enjoyable as they could be. But you are making careful money decisions, so it’s worth the sacrifice, right?

Or you love gourmet cupcakes (who doesn’t?) but one cupcake costs $3, so instead you buy 6 chocolate chip muffins at the grocery store with that $3. They’re good enough, but not gourmet-cupcake good, and since you have six you end up eating them all in 3 days, and feel fat and sluggish as a result. Was this really a better use for your money?

What is happening is that your spending choices aren’t lining up with what you actually enjoy. We all do this to some degree.

If you charted your spending amounts compared to your enjoyment levels you might get a graph like this:

You are spending more on things you don't like, and less on what you do.

You are spending more on things you don’t like, and less on what you do.

What can you do about this?

Step One:

Think about your currently owned items and recent purchases. What purchases do you least regret? Why?

  • Was it because you had a great experience?
  • Spent time with your friends?
  • The item is exactly what you wanted?
  • You use it all the time?
  • It’s beautiful?

Use this what and why list to think about what matters to you. What end result made a purchase a good choice?

Now what items do you wish you hadn’t bought, that turned out to be a waste of money? (Like my car.)

  • Did you end up not using them as much?
  • Already have too many?
  • Could have got it cheaper elsewhere?
  • Clutters up your house?
  • Not as pretty as you once thought?

This will help you start a list of the types of purchases to avoid in the future.

Step Two:

Put your analysis into practice. Enter your lists and shopping tips into your phone so you can easily review them wherever you are.

Here’s an example of mine:

Do Not Buy:

  • Sugar – remember how you feel bad when you eat sugar
  • Alcohol – same as above
  • Have you checked the second-hand stores or kijiji first?
  • Is this mass-produced and could you get it made by someone local?
  • Have you thought about this purchase for a while?

Buy:

  • It’s made locally and you really like it
  • This will make your life easier and it’s small and portable
  • It’s on your shopping list because you’ve already thought about it and decided you need it

Once you implement some of these changes, your graph may look more like this:

You are starting to spend less on things you don't like and more on what you do

You are starting to spend less on what you don’t like and more on what you do.

 

Ideally, the items you spend the most money on will be the items that you also enjoy the most.* I enjoy fresh, local food, so it makes sense for me to spend more at the farmers’ market and less at the big chain store. Do I always make the right decision? No. I’m still struggling with this. But the more you think about this kind of thing, the more closely your spending will align with your values.

The ideal? If you need to spend money, do so on the most important things (to you).

The ideal? If you need to spend money, do so on the most important things (to you).

*Yes, many enjoyable things cost no money. I’m not saying that the more money you spend, the more enjoyable the activity will be.  The point is that if you truly like something, be willing to spend money on it. And most importantly stop wasting money on things that don’t improve your life.

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