Posted by Canadian Dream on December 23, 2009
For a book that in some respects was not even a personal finance book I found The Secret Language of Money by David Krueger with John David Mann a fascinating read. Yes, first off you will find no discussion of tax savings or where to invest, but rather a series of deeper questions: why if the math so easy do I have trouble paying off my debts? If I’ve got all this money, why am I not happy? Why do I buy dumb things when I regret them afterwords?
Effectively the book explores the crossroads of psychology and personal finance and this is what made it an interesting read for me. It provided a window into why we do some incredibly stupid things with our money and also the book explores a key point: spending is emotional. Money is never just money: it’s your hopes, fears, wishes and comforts all wrapped up in a thin bill or coin.
The book actually taught me several new things that I’ve always known, but never known why. For example, I’ve been a big fan of sleep on it before making a big decision. I never really understood why it worked until this book. In a nut shell when you are tired or highly emotional basically your brain starts to by pass the parts of the brain that do logic so you are basically making decisions mostly on emotion and instinct which is fine when a person is deciding to run away or fight, but sucks when you are deciding on selling a stock or not.
The book is structured about the concept of your money story. Your money story is what you tell yourself about money. It may show you why you buy new things, why you don’t’ save more or why you just can’t seem to make a go of your own business. In the end via a series of exercises we are shown what are money story is and better yet, how to change it if you want to.
This is where the book pulled out a fact that blew me away. Apparently your brain can’t tell the difference between you actually doing something and visualizing doing something. In either case it will develop new pathways in your head if you practice enough either in real life or in your head. So you can basically if you visualize succeeding at a goal long enough your brain will literally change to support that goal happening. You can reprogram yourself if you want to. You have no excuse for “I’m not a saver or I can’t do that” you can be or do anything that you want.
Overall I highly suggest reading this book as you are likely going to learn a few items about yourself and hopefully make you a bit more understanding with some of you own money behaviours. After all the math is easy, it’s the why we do things that is hard.
Posted by Dave on December 22, 2009
Over the holidays, my wife and I will spend a lot of time in the car. According to Google Maps over the next three weeks I’m driving 2,400 km which is basically a giant circle around Southwestern Ontario. I’m not sure what other people do on their trips, but for the most part our time is split equally between the following activities:
- Listening to podcasts: I am heavily attached to several, but I would highly highly recommend The Vinyl Cafe podcast (available through iTunes) – most of the other ones are not really family friendly. Many hours have passed by listening to these.
- Dance Parties: I do all of the driving on these trips (my spouse does not have a license) and the only way my passenger will stay awake is with the stereo cranked and singing/dancing along to some country (or at this time of year Christmas) songs – a lot of people like to “admire” these dance parties.*
- Talking: Over 20+ hours in a car allows for some fairly in-depth conversations on many topics (if you want to get caught up with your significant other, just start driving).
In a recent conversation we talked about what we were going to do with my car. I am currently driving a 2002 Nissan Sentra S-ER. I bought the car used five and a half years ago and have averaged 19,000 km per year in driving (it currently has about 155,000 km on it). There are a few obvious rust spots starting to show up that will need attention in the spring, as well as a few repairs that will probably total about $1,000 to $2,000 over the next year or so. We were planning on buying a car in the fall of 2011, but after a lengthy discussion came to the following conclusions:
We’d like a “new” (to us) car, but don’t need one: The current car just had a new engine installed 50,000 km ago (under warranty). The engine in this car is probably in just as good or better condition then anything we’d buy right now.
We’d rather pay off the house then have a new car: Provided there are no major repairs, it seems like it aligns better with our current financial goals to use any available money to pay down our mortgage then to have something that is not really needed.
In the end we decided that we are going to drive my poor Nissan into the ground. Financially I think this makes sense, to essentially bring the vehicle value to $0 and get all of the use we can while we are paying down our mortgage.
While we are paying down the mortgage we will still be saving money for a new car. There has to be a point where it isn’t worth fixing. We decided that $3,000 would be our cut-off where we would essentially call it quits, even if it happens next year. I’m hoping that because I have kept the vehicle maintained this will never happen, but sometimes this kind of thing is beyond a car-owner’s control (as I have found out with previous vehicles).
I’m sure this plan will get refined over time, but that’s what we are currently thinking.
I’d like to take the opportunity to wish everyone a happy and safe holiday season. If you see a silver Nissan driving around with a girl dancing in the front seat, after you’re done pointing and laughing, give me a wave 
What do you think of our plan for our car? Any Suggestions?
*According to my iTunes most played songs – the current favourite is “My Favorite Things” – as made famous in The Sound of Music.
Posted by Canadian Dream on December 21, 2009
Well after this post I suspected I would have to provide some follow up. One comment from Jordan summed it up well with:
I’d be really interested in reading an update on your household balance sheet, how you’ve managed to swing this so soon. Maybe give me some tips to get closer to the same goal.
So I’ll try to answer that question. First off my year end net worth post is coming up next week so I won’t jump into specific numbers on each account, but I’ll provide a brief overview of the items that make up what happened.
First off it’s important to recall I have a low cost lifestyle, so if you added up everything I typically need about $3100 a month to cover my costs, but that includes a larger mortgage payment than required. My normal mortgage payment would be around $750/month, but I’m currently paying about $1100/month.
Then you need to add up my non-day job income which includes:
- Distribution and dividend income from TFSA and taxable accounts which is about $2200/year
- I assumed a return off my RRSP’s and other retirement accounts of 4%, so that’s another $2200/year (based on my last Net Worth post)
- My wife’s daycare clears approximately $6000/year in profit
- My school board job pays about $23,400/year
- Total $33,800/year or $2816/month
So from here it is simple math. If I lowered the mortgage payment to the $750 my income from other sources is greater than my expenses. Or if my wife takes another kid in the daycare and clears another $350 a month in profit we also get to the same place.
Obviously there are a few holes in this crude analysis. Income taxes have not been considered on that income so that will lower the monthly amount a bit and it isn’t sustainable since it doesn’t include cash for retirement savings or expenses that are currently covered by my dental/health coverage at my day job. Yet once the mortgage is paid off in the next three years I’ll firmly be fine without the day job regardless of taxes and other expenses.
So by looking at the numbers you can see the major driver for this is my school board trustee job, which ironically I took without caring about the pay at all. So it brings for an interesting conclusion: following your passion will sometimes lead you to where you want to go sooner than you thought possible.
For many years I’ve been focusing on the expenses and savings part of the early retirement, but the other side, income, is ultimately what go me to this milestone. So this leads the path of semi-retirement which I intend to investigate in the New Year a bit more. Perhaps the issue isn’t that I want to retire early, but rather leave my day job and work on other things instead.
