People always seem to amaze me once in a while.  In my other job, as a school board trustee, we had a difficult decision last night regarding a school closure and I was surprised that the board actually voted unanimously in favour of a hard choice.  It wasn’t an easy choice, but it was the right one.  This got me thinking about people and their spending habits.  Do people overspend just because it’s the easy choice and they are avoiding a hard choice?

If you really think about it, if you are making good money and you have access to credit, it isn’t a big deal if you overspend in one month.  Then perhaps you have a few odd events in another month and you get some more debt. So slowly over time you get used to spending more than you make and then before you know it your up to $30,000 in debt and wondering where the hell it came from.  Getting into debt is an easy choice.  Staying out of it or even paying it off is a hard choice.

I won’t lie and say that saving up for what you want before you buy it is easy.  The reality is it is hard to wait when you are so used to getting things NOW regardless of price thanks to credit.  Saving is the harder road but the payoffs can be bigger as well.   That is the point of hard choices, they are not easy ones, but doing what is right in the long run can produce amazing results.  In my case it is reducing my mortgage at a huge rate and allowing me to dream doing what ever I want all day long in just over a decade.

So how do you make a right choice even when it is hard?  To me there is no set formula on decisions.  Some times I look at the math involved and use that to decide.  Other times the decision is mainly emotional and I have to feel my way to a solution.  Regardless of how you come to a choice you need to decide how much do you want your dream.  If it is important enough you will find a way to make it happen even with all the hard choices to get there.

So what hard choices have you faced lately and you did the right thing? In my case, I’m proud I decided to pay off the mortgage in the next few years.  It would have been easier to just spend more, but my wife and I choose a bigger hill to climb and we are looking forward to the view from the top.

I was struck a little dumb after reading the following from an article in the Globe and Mail:

A new report has found the number of home-cooked meals Canadians are consuming has dropped steadily in recent years. NPD Group Inc., a global market research firm, said Canadian households consumed 380 homemade meals on average in 2009, a significant decline from 398 the year before and 423 meals in 2003.

At the same time, the report found that the consumption of frozen food rose 15 per cent since 2004 to reach the highest level in a decade. More than 75 per cent of meals and snacks Canadians ate last year were prepared in 15 minutes or less, NPD group reported.

For a point of reference if you eat three times a day you should eat 1095 meals per year.  So on average a Canadian home-cooked 35% of their meals in 2009, which leaves the other 2/3 to eating out or prepackaged food.  Is it any wonder than that this country is getting fat and our debt loads are going up? Yikes!

Out of point of comparison I would guess that we are the complete inverse of that ratio, about 2/3 of our meals are home-cooked (if not more than that).   It’s not like it takes much time or anything.  A double batch of muffins on the weekend will provide breakfast for a week and can be done in 30 minutes and then frozen.  Then heating up a couple in a microwave takes all of 20 seconds.  Not to mention the savings our food budget is about $300/month for a family of four while our eating out budget is another $60/month.

For lunch and supper you just need to buy a 30 minute cookbook.  Heck if your time during the week is that tight for time you can even cheat a bit and pre-cook a batch of ground beef and onions on the weekend.  That way your can drive you cooking time down towards 20 minutes.  Same idea applies to other meats if you are really that rushed.

Perhaps the only thing required of people when the cook home-made food is planning.  Take 15 minutes on Sunday night and get a small whiteboard and write out what you are cooking each night.  That way you can put meat in the fridge the night before to defrost and you avoid the last minute “Oh, what are we eating?” rush that drives a lot of people towards convenience foods.  I always find our week flow so much smoother when we remember to plan out the meals in advance.

Also keep in mind it is ok to use some convenience foods.  It’s completely fine in my mind to eat a frozen pizza on Thursday night if you know you have swimming lessons for the kids at 6:10pm. The problem occurs when you are doing that every night.

So in conclusion, with a little bit of planning and a small amount of cooking skills you can easily drag up your home-cooked to 50% of the time.  Then from there you can get better at cooking and drive that percentage up.  As you go you will likely notice a drop in your grocery bills and your waist line.  So how does your family do for home-cooked meals?  Are you closer to that 35% or up towards 50% or higher?

Habits in personal finance are your best friend and your worst enemy.  On one hand when you develop good habits like using low cost investments like ETF’s or perhaps learning you don’t have to spend that last $20 in your pocket just because you have it.  On the other hand when you are so used to saving a lot then hard to get in the habit of spending more when you can honestly afford it or given yourself permission to just enjoy spending some of your money.

I face this little push and pull on my savings all the time.  It sort of creates an interesting internal debate on what I want in the future (ie: retire at 45) versus what I want now (today that is a toss up between a Blu-ray player or an extra half an hour sleep in).  For the longest time I sort of avoided this debate by focusing mainly on what I needed rather than what I wanted, which worked fine for a while but recently has fallen apart.

Why? Well that’s easy.  I’ve began to realize that any extra savings I do at this point is fairly minor in the overall picture.  For example, I’m currently putting an extra $2900/month to my mortgage beyond my regular payment.  At this rate the mortgage should be paid off in a bit over than 2.5 years.  So yes I could save my next raise at work and shave off perhaps a month more, but really what’s the point?  If a month going to help my long term goals out that much? No not really, so why not spend some of that next raise.

This is the point where I get into trouble.  I’m not even sure what I would spend the extra money on yet.  You see I’m nervous about getting in the habit of spending more on a monthly basis and falling into the lifestyle inflation trap where you just keep spending more for each raise that you earn.  So I’m somewhat stuck in a saving groove and a bit nervous about getting out of it.

Perhaps the answer really shouldn’t be mind this time.  Perhaps I should just turn it over to my wife and say “So what do you want most in life, beyond what you already have?”  Then spend the money on that.  After all I have to say several excellent compromises have come from my wife over the years like increasing spending money but focusing it on certain areas like eating out.   She’s got a better intuitive balance on spending for today that I do.

So if you’ve been in the savings groove how did you get out of it?  Or what do you want most beyond what you already have?  I’m just curious what people spend their extra money on.

I eat pretty healthy, probably a lot better then most people.  I also eat fairly cheaply on a per day basis (as you can see by the title of the post, between my wife and I we eat for approximately $50 per week).  For full disclosure, I don’t include restaurant trips in this budget, that is included in our entertainment budget.   Basically 20 out of 21 meals per week are included in the $50.  Saving money on food, especially good quality food is pretty easy, although it is a radical change over what I ate from childhood up to a couple of years ago.  Here are some tips that I can offer if your current bill is higher then you want it to be:

1.) Learn how to cook/bake: It’s not as scary as it seems - when I first started, my main companion with any meal was ketchup and hot sauce to cover up some of the weird tastes I was putting together.  As an example, I bake my own bread, sometimes by hand, but usually with a bread machine I got as a wedding shower present last year.  For $10 you can buy a 10kg bag of flour that last us approximately three or four months, making 1 loaf a week.  I also make my own tortillas, pasta, tomato sauces, baked beans - basically anything can be made from scratch rather quickly and easily - the internet is a really good source for recipes and troubleshooting when recipes go terribly wrong. :)  By making all of your food from scratch, you also know exactly what you’re eating, whereas a lot of prepackaged food includes ingredients that are not pronounceable, and probably shouldn’t be consumed.

2.) Don’t be afraid to try new foods: From my childhood on, I hated squash - I hated the texture, the taste, the colour - I was definitely not a fan.  I had not tasted squash in well over a decade, but when I did, I found that it isn’t terrible and is really healthy to eat.  I basically buy fruit and vegetables when they are in season and switch throughout the year what I eat.  There are some serious savings to be taken advantage of by buying in season rather then maintaining a constant diet year-round.  Try brussel sprouts, eat some butternut squash, try some weird fruits or odd looking green things that are there - they are generally pretty healthy.

3.) Eat less meat: I love meat, but it is expensive and there are much more healthy sources of protein.  I eat a lot of beans and legumes, which I buy dry from bulk food stores, soak and cook in a pressure cooker.  If even one or two days of meat are removed from your diet, especially in a household of more then 2 people, significant money per week can be saved.

I put this advice into action this weekend, when I hosted a “Christmas” dinner for my family of 10 people.  I made - vegetarian chili, homemade pasta, and fresh-baked french bread with garlic butter - all from scratch.  It was very well received and probably cost me a total of $10-$15, was reasonably healthy, and made from fresh, whole ingredients with no preservatives or chemicals in it (with enough leftovers to last until Wednesday or Thursday of this week for lunches) and didn’t really take a ton of time to do at all.

As an example of how I eat, here are a few things that I ate last week and this week:

Breakfasts:

“Green smoothies” - spinach/kale/some other kind of green mixed with seeds, berries, banana, flax, and other weird healthy stuff that my wife drinks, but doesn’t understand the awesomeness that is irish moss with her kale and beet smoothie.

Eggs on home-made toast

Lunches:

Usually leftovers from dinner the night before

Dinner:

Stir fry with tons of vegetables in a home-made peanut sauce

Chicken breasts, rice and brussel sprouts

Sweet potato fries, rice and beans

I’m not sure if my diet is typical, but I think it is generally healthy - made with whole foods, full of fruits and vegetables.  I’m working on cutting back on grains, but I really really like them, so we’ll see how that goes.  How about you, have there been any major changes to your diet as you strive towards early retirement, or a healthier lifestyle?  Food is one of my more serious interests right now, so I look forward to comments.

Happy Groundhog Day!

I started writing this post while somewhat hungover after a night out in Toronto with friends from University that included a bar that had 343 different kinds of beer on it’s menu.  This was an expensive night (with that many different flavours, I felt it was my duty to try to get through as many as I could) that I don’t regret (other then the tiredness and sore head in the morning) and got me thinking about other things that I buy or spend money on that I know are a waste of money and are counterproductive to my end goal of retirement at 45, but I do anyway because of various justifications.  Over the years, I have also learned how to limit the amount of money I spend on these activities in order to at least have some semblance of budgeting with my vices, which are as follows:

Video Games: This “hobby” is probably my most expensive habit.  I own an XBox 360, Wii and Playstation 3, which means in total, I have approximately $1,000 worth of hardware that all play essentially the same games (in my defense though, the PS3 was a wedding present).  Trent at the Simple Dollar gave tips on how to reduce the cost of video games by buying only games that have long-time playability, reducing your cost per hour to a minimum.  I don’t have an attention span long enough to continually play a game for months and months and after I have beat it, I rarely feel the need to return to it to play it again.  Up until a few years ago, this meant that I would be trading in games for 25% of what I bought them for to get new games, something that is not entirely desirable.  Now, I spend $17 per month and rent games over the internet through zip.ca.  I pick the games I want to play and the company mails them to me as I mail them back.  This allows me to play several more games then I normally would for a flat fee, thus limiting the expensive ownership cost of the games.  The only downside of the service is that I never know what game I’m going to get, which is kind of interesting sometimes.

Golf: I love to golf.  If I had a choice, I would spend most of my summer wandering around courses in the area.  This is a very expensive hobby as well, with equipment and usage costs, a person could spend significant amounts of money over a season.  I have limited my costs in couple of ways:

1. I golf in the evenings, utilizing “twilight” deals offered by most public courses in the area.  For most courses, it works out to 25-50% just by starting the round later.
2. I limit golf equipment spending.  I limit club purchases to at most one per year.  Golf balls can also be expensive, but you can find deals online on used balls.  In my experience, a $0.20 golf ball will go just as far in the bush, or just as deep in a pond as one you’ve spent $1-$3 on.  Last year I bought 10 dozen used balls for $30 + $10 shipping.  These should last me several years and work just fine.
3. I budget year-round for this hobby.  I could fix the playing cost by purchasing a membership, but in general unless you play 50+ rounds at the same course during the day, it doesn’t work out to be cheaper then paying on a per-round basis.

Gambling: This vice actually costs me the least amount of money per year, and actually allows me to make a little bit of profit on a per year basis [If I pick the right teams, which I didn't do yesterday when I went 1 out of 4 in the first round of the NFL playoffs :(  ].  I found a gaming site that accepts bets as low as $1 per game and use this, reducing my risk, while still allowing a wager on the game, which is really all I want.  Profitability is uncertain, but if bets are researched (similar to stocks), I think that a skilled person could make decent long-term profit through betting.

Beer: I’ve been led to believe that most people also enjoy beer (unless I’ve been watching too many football games), which can get expensive to drink in Canada where alcohol and tobacco are taxed significantly.  This year, I am going to start brewing my own beer, mainly because I enjoy making most things from scratch, but also because I believe if I learn to do it well, it could lead to some cost savings down the road, after purchasing the equipment.  Right now, I just drink cheaper beer, after finding a few brands that I enjoy (I’m not sure if it’s available elsewhere in the country, but I would highly recommend Brava Light). It would be healthier to give up beer altogether, but it is something that I enjoy occasionally, and it’s just tasty :).

How about you, what are your vices?  How do you fit them into your financial plan?