Category: Saving & Budgeting

Getting Rich Is A Two Sided Equation

Posted Mar.30, 2012 under Saving & Budgeting

Budgeting – a nine letter word that majority of the people hate. I’m different in the sense than the majority. I’ve never been the type to follow the crowd or a crowd please-er. I am uniquely “me”, different from you and from the rest of the majority out there. One key difference about me is that I enjoy budgeting. Sure, I have a love hate relationship with my budget at times when money gets tight and I can’t balance my budget, but 99% of the time I enjoy budgeting. Budgeting gives me a sense of fulfillment.  Knowing where my money is going and how much I’m stacking away from every pay gives me a peace of mind.

I’m actually not here to talk about budgeting. God only knows how many times I’ve already done that on this blog, with posts such as; Why do you budget? , Do You budget? and the Importance of paying your self first. I’m actually here to talk about getting rich. My goal (and your should be too) is to have more money coming in than money that needs to be spent, therefore making our selves rich.

Becoming rich is more of a formality than anything. Rich does not have a final number associated with it, but rather it’s a feeling. Feeling rich in terms of money is something that very few people get to experience. That’s not to say that none of us are rich. In fact we’re all rich because we have something unique about our selves. This could be our family, friends, education, general knowledge or even the investments we hold.

Becoming rich means conquering your budget. Being in control of how much money you bring in versus how much money you send back out. However, there is more to this equation!  No one became rich through penny pinching. If you ever had the opportunity to ask a wealthy person or read a biography of someone wealthy, you’d realize that they didn’t become rich through only cutting back.

The rich don’t become rich overnight, but rather they became rich (or well off as I call it) with a two sided equation; careful number crunching (budgeting) and boosting their income year in and year out.

Careful Number Crunching Only Takes You So Far

When I first started budgeting, I looked at the simple ways to cut things out in order to decrease the amount of money I was spending. And believe it or not it worked miraculously. I was (and still am to some degree) in debt and wanted to shift my focus to becoming debt free. I made sacrifices of switching to cheaper internet, driving less, eating less meat (cheaper grocery bill) amongst other things. I even went on a cold turkey on shopping with my 127 day shopping ban.

So, were all the sacrifices that I made and some that I’m still making worth it? Absolutely they were all worth it. If they weren’t  I would have not made the sacrifices. Becoming credit-card debt free in 347 days made it totally rewarding and it gave me inspiration to continue going forward.

I continued to enjoy the life I had before, except on a smaller scale. The days of going shopping on a credit card were long gone and instead I was carefully budgeting each grocery, clothing and any other shopping trip. I didn’t have the fastest internet anymore. Did it make a difference initially? Yes, but I got used to it and almost two years later I don’t even know that fast internet exists anymore, simply because I’m happy with the internet speed I have now and more importantly paying $29/month for it versus $65/month I paid before.

However, I’m not going to lie to you. If you’re a regular reader of my blog, you know well that I’m brutally honest. Everyone likes it for the most part, while other times it does get me into trouble. I didn’t become credit-card debt free by only cutting back. I wanted to eliminate my credit-card debt ASAP and knew that cutbacks ONLY were going to take me so far. And in order to reach my goal of becoming credit-card debt free in a year I decided to bring in more income.

This brings me to the second part of the two sided equation.

Everyday I’m Shuffling….I mean HUSTLING

I knew that in order to defeat my credit card debt that I had to bring in additional income. So, I became a hustler….sort of anyways. I started this blog (earning cash on the side), used this blog as a way to keep me responsible and finally expanded my commercial cleaning business into a full fledged business.

I eventually started working six days a week and putting in 70 hour work weeks consisting of my full-time job, this blog and my cleaning business. I wanted to work as much as possible to keep my self occupied – more work = less time to spend money.

In less than a year I managed to take control of my finances, pay off my credit card debt and even saved a few thousand dollars. None of this would have been possible without some side hustle. I’m certain that without my side hustle that I’d still be paying off my credit card. Budgeting only took me so far, and as much as I’m a religious budget-er, I needed extra income to fully accomplish my goal.

My Final Two Cents…

I’m a huge believer that the more money one earns, the more important their budget becomes. Those who fail to budget end up quickly on the bottom again. Take for example NBA, NFL, NHL and Hollywood Actors who continue to declare bankruptcies despite all the millions earned throughout their careers.

Budgets are not a drag, at least not to me, and it shouldn’t be to you either. A budget is like a wing-man to your money. When put together to work,  they’re a great one-two punch.

I’ll admit this to you as well…..

I  didn’t like budgeting when I started my out of debt journey. It was a pain in the rear end seeing my money go towards my debt mountain. Eventually I started liking budgeting more and today I can’t see my self without my budget. Now I enjoy and relish getting into my budget because it’s fun to disperse my money to my investments, savings and purchases.

Eddie

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Hard to Get Excited About a 0.05% Return

Posted Mar.13, 2012 under Saving & Budgeting

Big banks have been around for 150 years and are the place where most Canadians go to save their money. They offer us all sorts of different accounts to save our hard earned money. One problem though! How can anyone get excited about a 0.05% return on their savings? Even kids know that’s a brutal rate of return.

I do most of my banking with RBC and at one point had a savings account with my local branch. The interest rate I was getting was 0.05%. On $1,000 that works out to $1.50 in interest earned over three years or .50 cents per year. A measly $1.50 return over three years is pretty hard to get excited over for anyone.

It actually gets worst.

My monthly fee on the account was $10.95 or $131.40 per year. Let’s use the three year scenario from above, and over the course of three years I’d pay the my bank a whopping $394.20 in monthly fees. After all was said and done, the true rate of return would be -392.70 over three years.

I blame my self for that. I set my self up, and was irresponsible with my money. On a more brighter note, I smarted up and no longer use my home bank for saving money. In fact I pay $0 in monthly fees anymore.

It’s a tough sell to save when there really isn’t that much incentive out there, in terms of interest. Looking for yield is a great past-time for all ages and in today’s tech driven society, savers should be encouraged to search around themselves for the best rate. And trust me, there are a lot of options to stash your money and get some return.

The good news is it’s only getting easier for Canadians to compare where they can save money. Competition is fierce and savings account options have become more of a commodity that you can go see the rates and then look if the account is good for you. Comparison websites like  ratesupermarket.ca are making it easier than ever for Canadians to choose the right savings account and even the best credit card for everyone’s unique needs.

We all know that ING Direct offers a decent interest rate on savings, but doing a little more research and you’ll find rates as high as 2% for the general population at other online entities like Canadian Tire Financial and Ally Financial.

Despite very little incentive for saving, we must save for the future. Every dollar saved is better than a dollar spent. Create your own incentive. Are you looking to purchase your first home? Buy that new car? Take that big trip? Incentive exist all around us, we just have to take a step back and find what’s important to us.

Anyone who has ever asked me in the last two years since I started blogging on how ways to get motivated to save, I’ve always said; “Create a budget and start budgeting.  Once you see where your money is going, I guarantee you that it will give you all the incentive you need to start stashing some money or start stashing even more money”

OK, maybe that wasn’t inspiring, but it’s hard to motivate anyone to start saving. It’s much easier to spend than save. True fact.

Give your self that savings boost. Open up a savings account at a different institution, create an automatic withdrawal option and don’t look at the rate. In fact forget about the rate totally. This way at least you’re shielding yourself from the brutal reality of today’s rates while still saving something for the future. At least that’s my two cents worth.

How do you get excited about saving money?

Eddie

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Why Do You Budget?

Posted Mar.05, 2012 under Saving & Budgeting

budget. budgeting, create a budget, why budget, money In my previous post I asked the question; Do you budget? This post got a fairly nice response in return, and 90% of you responded that you budget. Point taken, and take makes the majority of us on the same page. In this post I want to get behind the wall and find out the real reasons you budget. By now most of us know that budgeting is good for us in multiple ways, and that it’s a solid starting point towards financial independence.

So, why do you budget?

People save money for various reasons. Some are working hard in saving their money for larger purchases, such as a home or a car. Most of us are  budgeting to fund our retirement savings goals, so that when we retire we can mostly live off of our savings. Others budget to be prepared for the future in case of an emergency.Everyone’s budgeting goals will be different and no two will be the same. Similar? possibly, but never the same.

The key to budgeting and getting the most out of your budget is to gain a habit. Actually make that two habits. The first habit is the “The Habit of Savings” and the second would be “The Habit of Controlling Your Spending”. The two habits work hand in hand. You can save all the money every month, but if you blow your budgeted savings, you’re still at square one.

And with that in mind, budget accordingly and stick to your budget. Find a goal that you’ll budget for and stick to it. The most important step is to get started. Start small, and don’t dip into your savings unless it’s an emergency. You’ll need that money for other goals in your future.

I hope that you budget. If you’re not budgeting, then I’d love to know what your brilliant alternative idea to budgeting is exactly.

I Budget Because…..

1. Control

I like to be in control of my money. I want to know exactly how much I’m bringing in every month and how much of it is going back out. I budget and track my expenses so that I am sure I haven’t forgotten anything. I budget to plan for the future, whether I want to take a vacation or buy that fancy car. Budgeting gives me a sense of reality, and when I do set any goals my budget will give me an idea of how long it will take me to reach my goal.

2. Future Planning

The only way to plan for the future is through budgeting. Whether you’re looking to buy your first home, second home or purchase a car, budgeting for it before the purchase, pre purchase and post purchase is essential. I’ve never been the one for surprises, and I’ve always tried to limit the surprises by planning ahead. I try and be prepared as much as possible for what lies ahead. Even though it’s impossible to predict the future, planning for the future is never a bad idea.

3. Keep My Spending in Check

I’ve made my share of money mistakes in the past (How I go into $9K worth of debt) , and I’m not ashamed to admit it. Most of the mistakes came directly from not knowing where my money was going in the first place, and the single reason why I never know where my money was going is not having a budget in the first place.

Sometimes I buy things, regret them later, and I end up returning the item.. and other times, I feel good buying something that I really didn’t need,  but because I wanted it for a long time (usually), I had the money for it, and it was in the price range I was willing to pay for.

I review my monthly budget at the end of every month. For example if I budgeted $100 for groceries and I spent $250, I blew $150 over the budget. Instantly I know that for the next month’s budget that I’ll have to make an adjustment, and get under budget.

Now that I’ve told you my three biggest reasons for budgeting, I’d like to know a little about your reasons for budgeting.

So, why do you budget?

Eddie

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Do You Budget?

Posted Mar.02, 2012 under Saving & Budgeting

budgeting, budgets, budget, savings, moneyI’ve been budgeting for well over a year now, and I’ll admit that budgeting has become a big part of my life. Prior to becoming a budgeting nerd I never believed in budgets. I didn’t want to deprive, irritate or go through the hassle of budget up keep. A year later I believe budgets are next greatest thing to sliced bread and I still don’t understand how I made it before without budgeting. I suppose I somehow made it through and accumulated a fair amount of debt along the way – probably due to not budgeting.

I proudly discuss my budgeting and how important it is to me. Despite being a religious budget-er, I still have friends who don’t understand how I can live on a budget. They don’t understand how I afford certain things in life such as playing soccer on 3 teams, travel, saving for retirement and funding my investing dreams. Most of my friends claim that they’ve tried budgeting, but felt “limited” by the budget, so they scrapped the whole budget idea.

Comments like the one above make me laugh. The only reason I’ve been able to eliminate a nice chunk of my debt, save for retirement, fund investments and still have a life is directly due to budgeting.

Some people are just very good with their money. They know how much they bring in, and spend less than they earn. People like this are very rare. Next are people like my self – the one’s that are bad with their money. I’ve always made decent money, yet I’ve managed to accumulate over $10K in debt. And that’s why I personally need to account for everything that I purchase, as well as every dollar that I save.

Budgeting is no walk in the park and any time I tried to explain budgeting to friends. In the end I came across as some budgeting preacher. Most people within my circle don’t know about this blog or my debt struggles. I don’t divulge about my debt, yet it’s hard to talk about budgeting to someone without fully explaining why I started budgeting in the first place.

I’ve tried to explain as best I could that being on a budget does not automatically mean you have to cut out every single fun thing you’ve ever done, or will do in your lifetime. It is about taking control, understanding where your money goes, and realizing what you value in life.

Budget is all about this mind frame:

Instead of “I can’t afford Item X,” it became, “I am choosing not to buy Item X.”

Before I started budgeting I spent money I didn’t have because I didn’t want to feel deprived of anything. I wanted to experience life to the max.  I always found a way to justify the purchase to myself, and bought whatever I wanted in the end. Obviously I didn’t think about the repercussions and after years of being in debt I woke up and realized the mess I had created.

Since I’ve started budgeting, I’ve cut my discretionary spending by more than half, and I felt more deprived before when I was in debt. Oddly enough it’s absolutely amazing how fast the little purchases add up.

Starting to budget is all about changing my mindset. I stopped the process of my money controlling me and fully becoming in control of my own money. Today I decide where my money goes and more importantly I’m in the drivers seat of planning for my future and still having the ability to afford everything.

So, just like the title asks, do you budget?

Eddie

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