Posted by Tim Stobbs on December 10, 2009
It’s an interesting fact how we tend to label our money and treat it different. Using some savings for a trip is fine, but using emergency savings is a horrible way to pay for a trip. What’s different? Just one word on the label.
It’s like putting the money in little jars and being scared to borrow from another jar when we are short in another. The reality is there is no difference about a $1 in a chequing account and a $1 in a savings account. We assign that difference as to our intention on what we are going to do with that money. So for me chequing is the holding account for our usual spending money while savings are for longer term items. The money is the same, but the intent is different.
This particular effect even extents beyond our different accounts types. This is the reason why when you win some money or get find a $20 on the street it’s hard to put it in savings. We tend to think of it as ‘found money’ that we were not expecting anyways and therefore give ourselves permission to spend it.
Yet when you start to remove labels money something interesting happens. Your money management get a bit simpler since you don’t have these emotional attachments to where the money came from or where it is going to. It also means you can cross borrow money from different sources without feeling so guilty about spending your money. So for example, then if you know you are getting a bonus once you get back from a trip does it matter if you borrow the money from your emergency savings for a week? When you remove the label from your money the answer becomes obviously: no.
Like all good things, removing labels on money does cut both ways. By removing your intention from some of your money you might lose focus on your long term goals. After all you need to still keep track of your money to know if you meet a goal or not. Also you can risk starting to overspend your savings by too much cross borrowing of money if you don’t keep track of it well.
So far my experiment with removing labels from my money has gone well. By creating my Super Fund I have removed many different saving labels that I used to worry about. So far I’ve noticed that I do like things being much easier overall, but I do occasionally miss knowing the sub-amounts that I use to track. Yet at the same time I still use some labels. For example, anything I deem for retirement is strictly off limits for any other use.
So how do you use labels for your money? Does it help you or perhaps is it holding you back or making things more complex than they need to be?
Posted by Tim Stobbs on December 9, 2009
So with my focus on paying off my mortgage you would think making a goal would be easy. In some ways, yes since I’ll be picking a number related to my mortgage. On the other hand doing the math to determine a specific number and cross checking if I can put all that money on the mortgage wasn’t easy.
Yet in the end I did the math and came out with a few things. First off I expect the mortgage to finish the year at about $121,600, which would mean I’ve paid off about $15,000 this year on principle. That’s fairly good given I haven’t focused too much on it. So in 2010 I’m really going after it I’m heading for a goal to have my mortgage at $78,000 or less by Dec 31, 2010. So for those of you with sharp math skills I’m planning on paying off over $43,000 in principle next year.
So obviously that is a huge number, so how the hell can I get there? Well that’s got a few factors to it:
- I’m reducing my investment activity down to just my pension, regular RRSP contributions and regular RESP contributions which should free up some cash.
- I’m putting all my after tax income from my second job towards the mortgage.
- I’ve increased my regular payments by 15% and the balance has dropped so each regular payment I’m now paying off a fair bit of principle.
The longer term result of all of this should be paying off the final mortgage balance sometime in 2012.
So do you have any goals for 2010? If so, what are you focusing on?
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Filed Under: Debt
Posted by Dave on December 8, 2009
Around this time of year I am passively berated by charities everywhere I go (I’m guessing most people are), the food bank requesting donations for families to have a nice Christmas dinner (which I am all for); The United Way asking for payroll-deductions that would go to various charities; and the almost nightly calls from telemarketers asking for money. Maybe the constant exposure to people asking for money has put me on edge, but it has also made me think about charities and my budget.
I am not a regular giver to charity. In the past, I have given money to several, including the Shriners, Canadian Cancer Society, Heart and Stroke Foundation and other minor organizations. I understand the concept of giving to charities – helping people and organizations achieve goals that they would not be able to attain without money provided by donors, but on the other hand when looking at an early retirement financial plan it doesn’t entirely make sense. On a daily basis, I think about each and every purchase that I make, whether I should be wasting $1.26 on a muffin when I could have baked a batch of them for $3, to the best way to save on heating and cooling in the house. The thought of just giving away money is essentially alien to the budget and goals that I have set up for my financial future, but in the past I have continued to give.
I understand that giving to charity is a good thing – providing for others that are unable to provide for themselves. I just don’t feel attached to any cause. I have never used a charity, nor have any of my friends or acquaintances and I just don’t know when I would, but generally I think that’s how everyone feels until the day comes when they need to approach a charity for assistance – I just can’t imagine the circumstance.
So, in the next year, I’ve decided that rather then give money to charity I’ll give time (call it a New Year’s Resolution). Time is something that I have enough of to give and donating it to a charitable organization would have a two-fold impact:
Allow me to better understand a specific organization: This understanding would perhaps allow me to understand the importance of the charity, as I am basically a newbie in what they do and how they do it.
Allow me to donate without impacting my budget: I have time, I waste a lot of it doing things that are not productive to myself or others. What I don’t have is excess money kicking around, and as you may surmise from my muffin decision, I would fret a lot less about giving up a couple hours here and there then just giving away money that I so carefully oversee for the most part of my life.
Does anyone else have plans to donate time or money to charity? Are donations a regular part of your budget?
