Posted by Canadian Dream on October 15, 2010
You come home stressed out and tired from the work week and your commute home, but there is no rest yet. You have to cook dinner, clean up some of the mess you didn’t get to last night and then take the kids to their lessons or head out to a friend’s place. So by 8pm your even more tired and just a little grumpy since you haven’t even started to relax yet. If this sounds a little like your Friday night, you need to make some changes to be happier and save some money.
Save money? Yes, just think for the minute about the amount of money you spend on all those entertainments and distractions in your life: dinners out, drinks, movies, TV, books, computer games….the list just goes on and on. Not to mention the money we spend on drugs and health care problems that all go back to we are too stressed. The truth of the matter is you won’t need a lot of that if you had the start to a better weekend and controlled your stress level.
What is the solution? You need to book out some decompression time right after work. Going from full speed during your workday into full speed into your weekend isn’t healthy for you (since your body keeps thinking its in stressed state). You need some time, not even that much, to shift gears and enter your weekend in a more relaxed state. Then you can really start to enjoy your weekend.
In my house I typically come home and do a few different things to help me shift from full speed work to slower speed at home. I first get a snack if I’m starving (since as my wife will tell you I’m a bear when I’m hungry) and then I go upstairs and change clothes. Do I need a new outfit? No, but I do it to help separate my work day from my home life. Then I take perhaps 10 to 15 minutes to either read some blogs on Ipod Touch or a book in the bedroom by myself. I love my family, but I just need a little time to myself to relax before I place myself in the middle of the supper rush. The total cost of this routine is some gas to get to the library once a week for a book and a few extra groceries.
At that point I’ve decompressed enough that I can handle helping with supper or playing peace maker with the kids. Then I pour a glass of wine for my wife and I and we can both relax a bit more during supper (providing the kids are being good). Then the rest of the evening can happen and I don’t feel stressed out anymore. Now that is my method of decompressing after work on a Friday. Your method might be completely different, but it is important to have some method of downshifting from that stressed out state.
Stress management is one of those grossly under estimated items in our lives that can save you a fortune in other costs. Do you shop when you are stressed or perhaps you get something to eat out? We tell ourselves its ok to have a little treat or a pick me up: because we had just a hard week and we deserve it. All of that can be avoided with some simple stress management (ideally every evening), but especially on Friday before the weekend. Why before the weekend? Basically you are much more likely to do your shopping at that point and if you were stressed out you are much more likely to impulse buy.
So your mission for tonight is simple: book some time for yourself to decompress regardless if it takes a half an hour soak in a tub or prepare a small snack before supper to push off cooking for an extra 15 minutes. Whatever you can come up with that doesn’t cost a lot and helps you downshift from your week. You will feel better and likely also spend less.
So how do decompress at the end of the week? Or do you notice what you buy when you are stressed?
Posted by Canadian Dream on October 14, 2010
Did you failed again at doing a budget? After a few months it just wasn’t working and you gave up. I know I used to have that problem. You plan it and put all into neat categories and then somehow it all comes apart on you in a few months (or less). Yet why did you fail? Well I’m not an expert on this but here is where some things went wrong for me.
- Too Much Change. People often try to go from overspending to saving by huge amounts in record time and then get frustrated by the entire process and quit. It’s sort of like a crash diet. It doesn’t work that way for most people. Phase it in slowly. Stop over spending and break even for a month or two then start to devote a bit more to paying down debt. Slowly change your life and you will see results.
- Not Enough Data. Another major issues budget fail is people assign numbers with no idea with what they are really spending in a month. So instead of just trying to create a budget from a magazine article, make one based on how you actually spend. Just track your spending for a month and then use that as a template for a budget. It won’t be perfect the first time, but it will be closer than a budget that wasn’t even based on your life.
- Not Expecting Changes. Budgets are not static numbers in a sheet, especially in the first few months of using one. Don’t worry about having to change the numbers that is a normal part of a budget till you get a good handle on what your spending is. For example, you might realize you had a low power bill the month you started up your budget and need to move that amount up a bit.
- No Controls. Budgets don’t work unless you have some sort of controls on some areas of your spending where you know you are likely to go over. That is why I use cash for certain items in a month like spending cash and gas. Otherwise I would have no idea what I’ve spent so far. Cash makes it easy to track those minor transactions and do some quick planning by looking at what cash you have left. For example, if I’m going out on Saturday night and down to $40, I guess I shouldn’t go out on Friday as well.
- No Misc line or float. Life happens when you don’t expect it. It’s a fundamental rule, unexpected things keep showing up all the time and often with a bill. Some common examples for me are those low cost fixes to the house like insulation on the hot water pipes or a new towel since the kid spill bleach on the old one. So rather than getting frustrated by it, plan for it. Keep a $100 a month or more around for those things that just happen. If you don’t spend it you can always just add it to your emergency fund (if you have one) or even start an emergency fund with the leftover.
That’s my thoughts on why budgets fail. Have you failed at a budget, if so was it one of these items? Or if it worked, what made the difference?
Posted by Canadian Dream on October 13, 2010
Occasionally I sit down and reflect on plan to retire at 45 and wonder if I’m going about it all wrong. Why? I know there is a significantly hole in my plan. I assume during my calculations that I never earn a dime of money again after I retire despite the fact I do intend to do some work. I even found out the other day that my wife is toying with the idea of continuing to do some work once we are financially independent. So the question becomes am I doing this all wrong because of a false assumption?
Perhaps the way I should be looking at my savings if the liberation from having my day job (but not all work) and treat the money as a giant version of an income stabilization fund. That way my savings would have just two phases: money for actual retirement around 60 and then backup money for the years that we don’t earn enough to cover all of our expenses.
So in that case let’s say I need about $200,000 for actual retirement (I’m picking round numbers out of thin air here so don’t take the value seriously). Then if my expenses are about $25,000 a year, an additional $250,000 would provide a giant income stabilization fund. So that fund would be 10 years of completely not working or 20 years of just earning $12,500 between my wife and I. The advantage about thinking in these terms is you only need your ‘income stabilization’ money to keep pace with inflation since you don’t have to rely on the income generated from that money.
Also because you only need that ‘actual retirement’ money at 60 you don’t need to save the full $200,000 before you quit your current job. A portion of that can be gained from compound interest over the next 20 years. Obviously you don’t to pick too high of a rate of return in your plan if you don’t save all the money upfront, as that could set you up for failure later on. Yet a modest rate could likely take care of some of your savings for you. So in reality if you earned a 4% real return on your money for 20 years you only need to save about $100,000 before quitting the day job.
So in theory I could get by with a ‘retirement’ savings target of $350,000 rather than double that for full financial independence at about $700,000 in savings. If that were the case I could potentially hit the lower target in about five years. It’s a tempting line of thought to explore.
Yet temptation also exists on keeping working the day job just a year or two more beyond the $350,000 mark. Why? Because at that point every year worked plus compounding interest gains approximately another $100,000 in savings which continues to reduce your reliance on income from a job.
So where is that line in the sand if you choose semi-retirement? On hand you can leave earlier by relying on your ‘work’ more in semi-retirement and the other hand you can reduce your dependence on any work. Which freedom do you want more: freedom from your day job or freedom from all work.
