As Didi says in the novel (Findependence Day), “There’s no point climbing the Tower of Wealth when you’re still mired in the basement of debt.” If you owe credit-card debt still charging an usurous 20% per annum, forget about building wealth: focus on eliminating that debt. And once done, focus on paying off your mortgage. As Theo says in the novel, “The foundation of financial independence is a paid-for house.”
Here’s my latest MoneySense blog, entitled The Cost of Leisure Activities in Retirement. Given the media fuss today over Sun Life’s latest “Unretirement” survey — see Barry Critchley’s piece at the FP and my subsequent blog here at the Hub — you may find some solace in the MoneySense blog, which suggests that many common activities in retirement just don’t cost that much.
As for the prospect of more of us working until age 66, I don’t think that’s all that tragic: this web site focuses on longevity and the concurrent idea that the longer we stay active and productive the better — both for our financial situations and our sanity, or that of our significant other!
By the way, I expressed my views about the Sun Life survey and “Unretirement” Wednesday evening on CTV TV, which you can find here.
You can find more on the same theme here at Financial Highway, where the writer goes beyond the beaten path with his suggestion of writing a love letter. Or a “personal gift card” providing various future services to be rendered. (around the house, of course!)
I recently delivered my debut “Ice Breakers” talk at the local (Port Credit) chapter of Toastmasters, an organization I highly recommend for anyone who wants to polish their public speaking and leadership skills.
I began by pulling out a $5 bill and dropping it at my feet. I asked how many audience members would pick one up if they saw a stray fin on the sidewalk. Most would, but also admitted they probably wouldn’t bother to stoop to pick up a penny or a nickel. I also remarked that when you pull a green $20 bill out of your wallet and consider what it can purchase, your attitude to that bill’s value is probably about what it was to a purple $10 bill some two decades earlier. Inflation, it seems, is forever with us.
If this is inflation, bring it on!
But if you ever wanted a concrete demonstration of the value of a lowly blue $5 bill, then go the website fiverr.com. That’s FIVERR, a “fiver” with an extra R. Continue Reading…
In many ways, Elizabeth Warren’s 2005 bestseller All Your Worth was ahead of its time. Warren, a relentless consumer advocate, eschews mindless frugality and focuses instead on finding the right balance so you always have enough to pay your bills, have some fun, and save for the future.
The author suggests a simple formula for spending your after-tax dollars on needs, wants, and savings:
Allocate 50 per cent to needs: These must-haves include housing, transportation, groceries, insurance, and clothes that you really need.
Spend 30 per cent on wants: Wants include cable television, clothing beyond the basics, restaurant meals, concert tickets, hobbies, etc.
Set aside 20 per cent for savings: This includes both short- and-long term savings, as well as debt repayment.
Warren encourages saving AND having fun rather than scrimping and pinching pennies on the things that make you happy. That means saving money on big-ticket items like housing and transportation – effectively reducing the amount you spend on needs to free up money to save for the future and spend on wants.
“If you can’t afford to have fun, you can’t afford your life.”
When I applied this formula to my own spending I found the following breakdown:
Needs took up 53.5 per cent of our monthly budget, including the mortgage payment, property taxes, car payment, insurance (life, home, car), groceries, gas, utilities, cell phone, hair cuts, prescriptions, and clothing.
Wants made up just 18 per cent of our monthly spending, including cable and internet, restaurants, alcohol, children’s activities, hired cleaners (bi-weekly), credit card annual fees, subscriptions and memberships, gifts, summer vacation, and discretionary spending.
Our car will be paid off late next year, which will free up $10,000 per year and reduce our “needs” allocation from 53.5 per cent down to about 44 per cent. Ideally, I’d prefer to shuffle that money over to savings and build up our TFSAs; however, I’ll keep the idea of balance in mind and consider adding a few thousand dollars into our “wants” allocation.
Final thoughts
A balanced financial plan will ultimately lead to a happier and more fulfilling life.
Too many of us are living close to the edge financially because they’ve over-extended themselves on house and car payments and can’t afford to live.
Launched last week, the Hub’s Weekly Wrap aims to be a weekend read with brief commentary and links to some of the more interesting items touching on Financial Independence that appeared in North American cyberspace in the past week or two.
We aim to split these roughly half from American blogs and online media and half from Canadian. (That roughly corresponds to current traffic levels at the Hub.)
We’ll begin with this piece from Next Avenue: Unemployed, 55 and Faking Normal. This blog about the common fear of becoming a bag lady (financially speaking) was widely tweeted, including by a few women I suspect were in similar circumstances. No doubt about it, a combination of divorce and job loss can add up to a tough go, especially if you’re still not old enough to qualify for Social Security or the Canadian triad of CPP/OAS/GIS.
Fast-casual dining
Moving on to the more fortunate comes this piece from the Washington Post, mentioned on the Motley Fool’s Market Foolery podcast on Tuesday. The Chipotle effect: Why America is obsessed with fast casual food is an analysis of the trend to “Fast Casual” dining and the stocks of the major players capitalizing on this change (Chipotle and Panera to name two.) This is a threat to the old-time fast food joints like McDonald’s: ironically, McDonald’s incubated Chipotle in its early days.
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