Falling Into Ruts

Habits are an interesting beast.  On the one hand, they can be incredibly helpful to allow you to automate things that you know you should do but just never seem to get around to otherwise.  For example, I’m a big fan of setting up automatic savings from bank account into your investment accounts.  That way, you know you are saving what you should each month.

Habits also have a dark side, which often seems to get discussed using the phrase: falling into a rut.  We talk about people that stop trying to climb the corporate ladder and stay in the same job for ten years as being in a rut.  Or sometimes when someone always does the same thing every weeknight (eg: watch TV) or eats the same meals all the time (eg: Sunday roast chicken) we say they are in a rut.

Yet are ruts always bad?  Not entirely.  I do think that some change in our lives is a good thing but I can understand the desire to not rock the boat as well.  It just depends on the context.  For example, if you are working on getting a small business off the ground you might very well appreciate being in a bit of a rut at your day job.  After all, knowing what is expected of you each day can be rather nice when in the evenings and weekends you are constantly pushing yourself out of your comfort zone.

I personally think the real issue is when that is all  of your life is nothing but a set of ruts.  When you get up at the same time, do all the same things in a day and never go outside of your ruts, then you have a problem.  Why?  Because you can never learn anything new when you are in a rut and for me that would be an incredibly boring life.

I like trying new things even if I fail at them.  I might try a new recipe that a friend gave me and have it turn out bad.  But often I at least learn something from it (even if it is not to try that again in the future 😉 ).  Or I might try to watch or read something different from my usual fare and once in a while I discover something wonderful.  But most of all, I like to keep exploring the world even if it is just my own backyard because it keeps me from mistakenly thinking that I know everything.

For example, when you comes to personal finance I know a fair bit after ten years of blogging, but I still skim new blogs just to see what their point of view is.  Often I don’t come back, but a few times I come across someone who challenges my point of view and makes me reconsider my assumptions.  I won’t always agree with them but I do enjoy at least questioning if I should leave my rut on something.

Do you think ruts are a good thing at times? Or do you try to avoid them?

May 2017 – Net Worth

The following is an update of Tim’s plan to retire early.  Please note we are mortgage free.

Our ultimate goal between investments and the home equity is a net worth of around $1 million.  The investment part of that target is $582,000.

Investments

Accounts

RRSP $60,030
LIRA $16,590
TFSA $86,810
Pension $164,870
Wife’s RRSP $88,870
Wife’s TFSA $76,960
Wife’s Taxable $50,560
High Interest Savings Account $33,190

Investment Net Worth $577,880 (increase of $5890 over last month)

Home Equity

Estimate $395,000

Spending

Last Month $10,069

So this was officially the second higher spending month for us…like since I started tracking (the highest was when we bought our car in case you were wondering).  The good news was that $7159 was the new roof put in at the start of the month.

Our other big spending spots were income taxes owing for $588 and then finally we paid to put our kids in a science and technology day camp for a week this summer for about another $500.

As I mentioned last time I’m breaking out the renovations separate from the rest of our spending this year.

Trailing Last 12 Month Renovations $9509

Trailing Last 12 Month Average Everything Else $2750 (or $33,006 for the last 12 months)

Results

PF Score: 29.5 {Target 31}

Net Worth ~$972,880

Commentary:

Well you might be wondering how we even managed to increase our net worth with all that spending going on?  Well there was a bit of good luck in that work paid out a bonus which I wasn’t expecting.  It was a nice surprise as I figured we would be a net worth decrease for the month.

Any questions?

(click to make bigger)

Windfall

It’s it wonderful when you get money you were not expecting?  A windfall where money almost seems to fall out of the sky into your hand.  It almost doesn’t seem the matter on how much it is or how you get it.  You still get that burst of excitement when you pick up that $5 bill on the ground or get a big bonus from your work.

Yet regardless of how you get the extra money just about everyone seems to have the same thought right after getting it: how do I spend this?  Oh, should I get a coffee with this money or perhaps some donuts (mmm, donuts so sweet and…what was I talking about? Oh right).  Which I do understand the reaction, but I should point out it isn’t a particularly healthy habit to have.

Why? Because you really should set some reasonable limits about investing some of your windfalls in life.  This isn’t to say you should always invest all of your windfalls, but rather consider investing most of them.  While I don’t have any particularly hard and fast rules about mine I do have some general rules of thumb regarding money that fall into my lap.

Rule #1 – If it is less than $20, do what ever you want with it.  This rule then allows me to not bother tracking small amounts of extra money.  Of course I could still invest the money, but I usually don’t for very small amounts.  I generally just put it in my wallet and send it on something that catches my eye later on.  I’m usually not in a rush to spend small amounts of found money.

Rule #2 – Celebrate your big windfalls (greater than $100).  I don’t know about you but I once won a colour contest and got like $75 as a prize and that was a BIG deal to a little kid.  So while I’ve adjusted the amount slightly upwards I still tend to celebrate windfalls.  Now the term celebrate usually means I either buy something small or do something fun to note the occasion.  My most recent one I picked up some beer ($14) on the way home and enjoyed a glass with my wife that evening.  That’s it.  Why? Because this allows me to get the buy something with unexpected money out of system and to note the occasion.

Rule #3 – Invest the vast majority of the money into your priorities in life.  Now your priorities change in life but windfalls can provide a nice boost to what ever you happen to be working for in life.  So if you are focusing on paying off the mortgage, then you make a lump sum payment.  Or if you are going back to school, then you put the money towards your tuition.  Or if you are saving for an early retirement, then you put that extra money in an investing account.  The point here is to move things along a bit faster than you expected and then you really do appreciate the extra help of the windfall.

Rule #4 – Do NOT depend on windfalls.  I used to have a job that I would get huge bonuses (I mean like in the range of $5000 to $12,000) ever quarter (if we met our targets). Yet I never lived off that bonus money.  The mortgage was paid and our groceries bought with our tiny base salary, because I never spent or investment a cent of my quarterly bonus until it was in my bank account.  Why?  Because you can’t depend on variable money…what happens when things beyond your control take that money away?  You end up borrowing money to keep  going and you are breaking one of the core rules of money: don’t spend more than you have.

So those are my guidelines for windfalls, how you handle bonuses, tax refunds or 50/50 draws winnings?

A blog about early retirement and happiness