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Monday, October 20, 2014

Using the Information

Posted by Dave on October 14, 2014

I was talking to a couple of guys at work over the past week – they knew that my wife and I had paid off our mortgage earlier this year and had a lot of questions about spending. Both guys seem to be living paycheque to paycheque, and have trouble making it through all of their bills by the end of the month. I explained how my wife and I set up our finances and how we prioritize our spending on a month-to-month and annual basis.

One thing that I told them might help them find “holes” in their finances would be to use an app and track every dollar they spend for a month or two. There are a ton of free apps, and a lot more for under $5 that have easy tracking of expenses along with weekly and monthly reports and comparisons. From the standpoint of someone “not knowing where the money is going”, this kind of thing would be really helpful.

Personally, I’ve never used budgeting software – almost every cent I spend in a month is on my credit card, so I can easily look at a statement and see where my paycheques have been spent. What I have used in the past is diet tracking apps on my phone. I’m 6 feet tall and weigh somewhere between 175 and 180 lbs at about 15% bodyfat (based on the handheld tool I own). I have this goal of getting my bodyfat percentage down under 10% to demonstrate that I have abdominal muscles.

I used the calorie tracking app consistently for a few weeks – tracking each and every thing I was eating….until I didn’t feel like doing that anymore. There was a weekend where I knew I wasn’t going to hit the caloric goals that I was supposed to, in order to achieve the lofty goal I had set for myself. So, I didn’t count calories that weekend, and then went back to tracking during the week when my diet is much healthier and stable.

What makes this kind of tracking stuff work, is actually using it. If I had a day where I was supposed to eat 2,000 calories and basically ate a whole pig instead, tracking anything isn’t really all that beneficial. Similarly, tracking expenses doesn’t really do anything if you aren’t willing to give up spending on things that you find are causing you to run out of money at the end of the month. The tracking doesn’t really work if you don’t use it.

Do you track anything on a daily basis? How do you stick with the tools?

What is Middle Class?

Posted by Tim Stobbs on October 6, 2014

So while reading a book the other day, it noted that despite the common usage of the term ‘middle class’ there is no definition.  So of course I did a little Google of that fact and the author was entirely correct.  I came across many definitions of income ranges trying to lock down what exact is middle class.

Then I came across one idea that I liked.  Take the median family income in a given country and +/- 40% that is the middle class.  In Canada for 2012, the median family income was $74,540 per year.  Adding our range of +/- 40% results in a the middle class being from a family income of $44,724 to $104,356 per year.  That is a broad range that covers a huge number of families in Canada so I think it could easily work as a passing definition.

Yet what stuck me the most about those numbers was despite considering myself middle class for the majority of my life I in fact likely never been a part of it.  Growing up I always knew we weren’t poor by any stretch of the imagination, but at the same time we never had expensive cars, overly nice houses or only bought a run down tiny cabin as a vacation property when I was in university.  So I never felt very well off either.  Yet looking at those values and doing a bit of an inflation adjustment, I was forced to conclude I grew up above the middle class.  Now that I’ve grown up and I have my own family that has largely continued.  Ironically other than a few of the early years of my career, our family income was also above that upper end of the middle class range.

Of course the problem of making a definition dependent on income is it ignores the fact I don’t spend the majority of my income.  Instead we save the majority of it and we spend on average a little under $30,000 per year, which of course is under the lower end of that range.  So which is it – am I’m under the middle class or over it?

In the end, the answer doesn’t matter.  Middle class is a way of referring to the majority of the people, not the upper class or even the poor.  It’s merely the bulk of the people who are trying to get through life.  It’s somewhat of a fiction which becomes useful to the political class since they can refer to the majority and allow even those on the edges to include themselves if they want.  Sort of like I have for most of my life.

Yet as we continue to save for early retirement I also become more aware that I have less and less in common with the middle class.  I don’t kiss ass or cower to those in a higher position than me at work.  I don’t fear losing my job since I have a decade of spending cash saved up.  I don’t try to blend in with my neighbours and I certainly don’t try to keep up with the Joneses.  In short,  I do what I want because I want to…nothing more and nothing less.

So I’m not middle class, but I’m not sure what label to us anymore and I’m not sure I even really care.  Labels are at best a crude picture of a person…a stick figure that lacks any meaningful detail.  So perhaps the answer is just be myself and let others call me what they will.

Do you ever worry what class you are?  Why or why not?

Keeping it Separate

Posted by Dave on September 30, 2014

Because I think it’s something interesting to write about for a Personal Finance website, I thought I’d write in response to Nelson from Financial Uproar. He wrote in his “Sunday Morning Link Dump”, and talked about how he couldn’t figure out “why married couples feel the need for separate bank accounts”. My wife and I happen to be one of those weird couples who keep separate bank accounts. We’ve been married for five and a half years now, and have been what could be described as financially linked for an extra couple.

Not only do we not have any shared accounts, we haven’t even set up electronic transfers between the two of us. This fact isn’t due to any reason other than we’re by nature kind of lazy with paperwork, electronic or otherwise.

We keep separate accounts mainly because we haven’t found a reason over the length of our relationship to combine them. Maybe if we had kids, or even a goldfish together, there would be enough of a reason to make it worth our while to just have one large shared account – rather than have everything kind of fractured off as it is now. We have about 8 bills per month that we have to pay. We split the bills up, put a certain amount of money towards our “fun savings”, a good chunk towards retirement savings and the rest is ours to spend every month.

This system works for us, it’s not a trust thing, it’s more of a “don’t talk to me about the disposable clothes I buy, and I won’t talk to you about all the stupid golf you play” that we’ve worked out over our years together. If for whatever reason I want to know how much money we have to spend on a potential weekend trip to Niagara Falls, I can ask and find out – the same way my wife can find out how our retirement finances are going, or how we were doing in paying off our mortgage.

We both understand how divorce laws work. We both understand about shared marriage properties work, along with my pension and any other savings that may be somewhere. We just feel that for the spare couple hundred bucks we get to spend every month, we’d rather not have that in a shared account.

Maybe the whole thing works because we don’t have any spare money around – there’s not a lot of “wiggle room”. We never really thought about another way of doing things – I was 25 and had looked after my own money from 17 on, and my wife was the same way. I’m not sure at what point it would have seemed natural to start dumping money together. We haven’t gotten there yet, but maybe after a major job change (like getting fired or laid off), or when we retire it will seem like the right time.

At what point did you combine finances (if you did) – how did it start?