One Million and Beyond

Cashflow – Tracking your Money

July 30th, 2007

One of the hardest things for me to do since I started this blog and within the concept of keeping my finances under control has been to keep track of exactly where my money is going. Inevitably I forget about spending money or things like smokes, food, and even small snacks I get every now and then. Unfortunately to keep everything as accurate as possible you need to keep these items tracked. The reason all these small items are so crucial is the fact that all of these small insignificant amounts really add up quickly.

For example if you forget to include your bank fees and ATM fees it’ll add up. My monthly bank fees amount to about $12 which is a bit ridiculous, but that’s a completely different issue, and say I don’t include $10 in ATM fees every month this adds up to $22. Normally this $22 isn’t a great deal of money but over the course of a year these forgotten fees add up to $264! If you completely ignore this amount you can’t plan for it or worse still see this as a potential item to bring your cashflow in line.

As part of this months goals I wanted to get a good handle on tracking where every penny has gone and for the most part I’ve been successful. I’m sure there are a few items that inevitably got missed but it’s a lot more accurate than it has been in the past. Here are a few things I did this month to track my spending in minute detail:

1. Ask for Receipts
2. Update your spending/tracking sheet daily
3. If there is no receipt write it down
4. Go back through bank records to double check things like fees

The whole purpose of having this accurate accounting for where I spend my money is going to be important in the next day or two as I come up with my budget for next month. I used to calculate my budget on a pay-to-pay basis but I’m shifting to a monthly budgeting since a lot of bills are monthly and can be overlooked or forgotten at budget time otherwise. Once you have a couple months of detailed spending numbers you can really see trends in how you spend and what you can do to adjust your spending to be more in line with the money you have coming in.

Remember this might be a difficult task at first but it’s a habit that you need to get into at least initially. Why do I say initially? Very simply once this becomes a habit you’ll not even notice it and once you’ve started accounting for all of the really minor items your budgets will be more accurate. I still think you’ll need to track the details but if your spending is under control you can simply allot a certain amount per month for the minor things and be confident that’s where the money is going. It might take me a while to get to that point but cashflow is extremely important in your budgeting and unless you’re living way below your means every penny counts.

Technorati Tags: cashflow, tracking spending, budgeting

Posted in Budgeting and Planning, Monthly Planning, Productivity | 2 Comments

Attitude and Mindset

July 27th, 2007

One of the blogs I like to read is Stevepavlina.com and over the past couple days he’s written some very good posts revolving about mindset. The posts brought up the concept of mindset or frame of mind, which often gets overlooked. Normally most people don’t think about their attitude or thinking towards something mostly because its routine and nothing special. The whole idea that you can’t and don’t make money coupled with the nagging knowledge of debt can put you into a very negative place mentally about your finances, I know I’m there now and thinking about making more money is hard. It’s an attitude and perception.

As hard as it might be to think in how Steve puts it, an abundance mindset, it’s an important thing. If you think about achieving small things and think you’ll achieve small things chances are you will actually achieve small things. But the same thing will be true with large things and large amounts of money lets say. Unfortunately it’s harder to do than it sounds sometimes, especially if you’re not in the right mindset to start with.

The good thing is that you can change your mindset with a little effort, think back to the last time you were angry – did you stay that way for a very long time or did it pass? Well if you apply the right baby steps in the direction of the mindset you want to be in then you will get there.

For me the whole idea of having an abundance mindset is a bit hard to grapple with because I’m still in debt rather than working towards my one million. But it’s all about attitude and changing how you think ever so slightly might be worth it down the road financially. Attitude and how you perceive things is incredibly important regardless of if you’re looking at it from a financial point of view or not. Having a strong positive attitude will be more productive and beneficial to you than you could imagine, people notice good/positive attitudes as quickly as they notice the really bad sour ones.

Posted in Commentary | No Comments

Quality – Doing it Right

July 25th, 2007

Most of us get up in the morning, shower, get dressed and go to the office to put in a day of work. The work we do is typically of decent quality sometimes of good quality but do we strive for great quality?

Yesterday I sat down at the computer and started writing a post; I got through a couple paragraphs and stopped. I looked at the screen and decided that the post was crap, the actual words and sentences were I’m sure perfectly fine but the overall effect was just a quick thrown together article. The quality of the post was not there for me so I stopped and just deleted it. It also got me thinking about a few things in the office and around the house.

Where is the quality?

Too often I see people throwing things together because they can and because they can get away with it. I’ve been guilty of it before and I’m sure a lot of readers have as well. Why does this happen? There’s a cost of mediocre quality in the time that it takes to fix the problems that become apparent and the actual dollars and cents of having to take a product or piece of work to that high level when its needed. Do you put in that extra effort to make what you do the best it can be?

Unfortunately there are times in life when we are overloaded and overworked and we simply don’t have the time to put in the effort to make something of quality. Sometimes you don’t need to have the highest level of quality… but there should be a minimum standard (high or good quality).

Not striving for that minimal high quality means to me that the person doesn’t take pride in what they do that they just don’t care enough. Too many people just slog through life expecting people to give them everything, the produce piss poor work and then complain that its not fair that “Bob got a promotion and he’s been here a year less than me”. Are you one of them? Do you just do the bare minimum?

I think most people fall somewhere in the middle where they do a decent job but not a good one. They provide a good enough job that they don’t hit the radar as someone who produces quality work, nor do they register as someone who does bad work. I think it’s sad that we allow ourselves to sit in this mediocre middle.

So how does this relate to a Personal Finance Blog?

Very simply and on a few fronts; many personal finance bloggers are very frugal and want to make sure that they get their money’s worth for every dollar they spend. This is quality; they demand that quality, as producers of content for this blog I want to make sure that I produce quality, I take pride in what I write or I wouldn’t delete a post. I’m still learning and growing in my writing and my knowledge so it doesn’t mean that I’m right or it’s high quality compared to experts (yet) but I strive for what I believe is quality and something I take pride in.

The second aspect where quality relates to personal finance is that it will be recognized and your value will go up. If you continuously produce high quality work you’re proud of financial compensation is likely to come. People don’t want to loose their star performers. It doesn’t always happen and some of the people reading this site will have ogres instead of bosses; but instilling that level of quality into everything you do will be recognized.

Technorati Tags: quality, pride, personal finance

Posted in Commentary, Productivity | 5 Comments

The Value of a Vacation

July 23rd, 2007

Taking time off or even going away for a vacation is something that most people look forward to, even if you don’t get away. The reason that most people enjoy taking time off is for the change in pace, in the ability to take a step back and take stock and of course the ability to just relax. So how valuable is that time off?

Well I would have to say main value of a vacation is non-monetary (though I’m sure it’s possible to attach money to this), but more valuable than money. A couple reasons why I personally value time off and vacations specifically are:

• Rest and relaxation (recharging the batteries)
• Finding the focus you lost
• Taking stock of life, work, etc.
• Getting caught up on life (summer vacation with the kids)
• Increased productivity
• A different perspective

One of the things I remember most from when I was a kid wasn’t going to school, or any of the cool toys I got, it was the summer vacations with my parents and vacations in general. The reason I remember them is it wasn’t the daily grind of going to school or even during the summer having my parents out all day long. It was a time to chill out and go somewhere. The change of pace was awesome and even welcome to me as a kid.

Now when I take a vacation I get inspired and get a new perspective on life more than just taking the time to relax. Having that time to take stock and look around you and question why and how you got to where you are is now important to me and extremely valuable. If I had children making sure to spend time with them would have a similar value to it. But how valuable is it? Its hard to assign a dollar figure to any of this and I could invent some numbers like being X% more effective translates to X$ but that means nothing in the long run.

The value of a vacation is in the memories, the moments of clarity and the experiences we have.

About the only thing that we need to keep in mind is to not go into debt for a vacation, they have the ability to cost an exceptional amount of money if we’re not careful. I know part of my initially getting into debt was because I traveled around in an inefficient manner. I can only imagine how fast the cost can increase when it’s a whole family of people.

Technorati Tags: value, cost, money, vacation

Posted in Commentary | 3 Comments

The Purge has Begun!

July 19th, 2007

As you look around the room you’re in look at all of the stuff, papers, books, magazines, I could go on but it’ll change depending on the room you’re in. Regardless of how neat and clean you are if you look hard you could probably find a few things around that you don’t need but still keep. Our desks, rooms and lives are cluttered with stuff that we don’t need but can’t seem to convince ourselves to throw out. Essentially I’m at the point where I need to go through all of the stuff that I’ve collected over the years but for some reason haven’t thrown out and purge.

To start with this isn’t a process that only I’m going through but one that a few of our friends are in the middle of and one that a couple bloggers have posted about in the past little while. My wife and I started off by determining that we needed to clear up space and get rid of the stuff that we don’t need and identified a couple places within the house that had too much stuff. We started with closets and the den. My task was the den since has over the past couple years become the room in the house that collects stuff that belongs in no other room in the house. It’s the junk room and unfortunately for me its my default dumping space for anything that bring in.

The other thing that has been pushing me towards the purge has been the concept of efficiency and effectiveness that is peppered throughout the business books that I’ve been reading. That in turn made me thing about all the things that I do on a day-to-day basis and what could be better about that. Naturally the moment I stepped into the den with this line of thinking in my mind I thought about purging now its time to gt to it.

The Difficulties of Purging

Saying that you’re going to purge the massive collection of unnecessary things that are doing nothing more than collecting dust and actually doing are two completely different things. In Tim Ferriss’ Four Hour Work Week he suggest the idea of Elimination as key point to getting to that mythical 4 hour work week; as part of this he does say it’s not easy. Until you’ve started going through shelves of books you haven’t opened in years and papers that have 3-year-old scribbles you don’t realize it’s not as easy as it sounds. The den, my space, had all sorts of books and magazines – mostly computer related books. Each book I picked up the though that would run through my mind would be: “oh I can see when I might need this”. The reality is if I haven’t opened it in literally years there was no point in waiting for that mythical maybe time; visions of possible future use that might never happen was one of those mental challenges I needed to get over. Needless to say I’ve managed to throw out 4 boxes of books (well recycled) and the more I purged the easier it became and I got better at picking out the junk from the things that I wanted to keep. Trust me it gets easier as you get going on purging the trash it’ll become easier to suppress the thoughts such as:

• But Aunt Millie gave me that hideous blanket we never use – I can’t throw it out
• Oh this is an electronic gizmo I paid a small fortune for – I can’t throw it out I paid to much for it
• I got this when we were on vacation in Cuba that time – I know we’ve got 3 of them but I can’t throw it out.

Organization

When you live in a small space you need to be much more efficient about how you use your space or stacks of papers and books will threaten to drown you in an avalanche of paper. As part of this whole process we went to a store that sells organizational things and picked up a bunch of boxes and things to organize our place a bit better. The boxes are primarily for storing things that we don’t need right now but don’t want to throw away. Remember you can find a nice solution for keeping things and storing them away efficiently but you can’t use this as an excuse not to throw out the mountain of stuff that we’ve all inadvertently collected. There are lots of stores and products that can help you keep your life more organized, take advantage of them when you can – stores like Ikea have whole sections devoted to organizing your small places.

Some Perks to Purging

Now there’s one final consideration that you need to keep in mind; as you go through all of your stuff you’ll find things you thought you lost that are important to you. But you’ll also find a bunch of things you don’t need or want that have some value to them. Personally I found a camcorder that I bought on a whim for way too much money that I never use. I’m going to sell it for some extra money, which I’ll use to pay down my debt that little bit. Remember your old baseball card collection or your comic collection? Well they might be worth something if you sell it; especially if you’re debating throwing it out anyways.

Purging all of the unneeded junk that I’ve collected over the yeas and throw it out isn’t the easiest process in the world but having fewer things frees up space that I didn’t have and just lightens life up. Less clutter simply means that you can find more things and just don’t have to worry about knowing or not knowing if you have something. Then there’s the added perk of potentially finding some old treasure you forgot you owned not to mention finding something worth money you don’t need anymore that you can sell.

Technorati Tags: clutter, efficiency, throwing out stuff, cleaning, extra money

Posted in Commentary, Extra Income | 3 Comments

Saving Money or Paying Off Debt?

July 17th, 2007

This is a question I encountered in the past and one that has come up for me again since I’ve started looking at my cash flow. The question is a very valid one if you’re far enough into debt that the money you save each month would actually make a difference to your debt. My cash flow is completely off balance at the moment and I was contemplating stopping setting aside the $100 every month in an effort to bring this back into balance. But it got me thinking about the benefits of trying to save money versus keeping cash flow down and paying off debt. Both sides of the argument have their benefits.

Benefits of Saving Money

I was trying to come up with a list of benefits that setting aside that extra money could bring, here’s what I came up with:

• You have a growing nest egg
• The money gains interest as it grows
• Gives you the confidence of having an emergency fund
• Depending on where you save money it’s less accessible than credit

Benefits of Paying Down Debt

Conversely I also came up with a list of plusses to paying down the debt instead of putting the money to savings

• The $100/mo should go onto credit cards which can be used in the event of a real emergency
• Will help brining cash flow in balance down – increasing the likelihood of my not using credit cards
• Paid down debt means that interest is lowered over time
• Credit card interest is much higher than any savings interest, the difference is you’re loosing money

Risks to Keeping Cash Flow High

Unfortunately there are some additional risks if I were to keep my cash flow out of balance, which really made me think twice about keeping monthly savings going even by the $100/month.

• I might have to fall back on credit cards if I’m completely out of money (in an effort to keep the savings alone)
• The savings might be too inaccessible in the event of a real emergency – if you pay down your credit card debt you have this as a fall back in the worst case scenario
• The cost of interest on the cards doesn’t come close to matching savings growth

Other Options

I’m essentially looking at this from a black and white point of view, do I keep the $100 going to savings or to reduce my cash flow in an effort to keep my debt down. Personally this isn’t a question of if I put the extra $100 onto my credit cards but if I should keep it going into savings. One of my readers, David Hunter, left a comment suggesting a slightly different idea which was to cut back all luxury spending for 3 months to pay down the debt but to keep the savings going. Its an interesting idea in that dropping all luxury spending would bring my cash flow back into balance and pay down the debt some more. The unfortunately thing is that if I were to attempt this I’m sure it would fail and I would cave into some of my vices. I’ve started cutting back on these luxuries but to the point that I’m still enjoying them but I’m not bleeding out money for them. Take going out for example, between my wife and I we’ve stopped going out a couple times a week to maybe once and when we go out we keep it simple and look at costs.

I like the idea of going cold turkey on pretty much all-extra expenses but I also want to be realistic, I don’t want to slip in a fit of frustration, which might cost me more money. Its very similar to a person on a stringent diet who caves eating their favorite foods in a time of stress. I want to slowly reduce the luxury expenses so it’s not a shock and I find a nice balancing point between still enjoying the frivolous things in life from time to time.

Another option was to increase my income. I’ve started pulling together some ideas and plans for creating some passive income but these are still plans and ideas that haven’t been put into action. So the only other way to do this would be to change jobs, which I’m not willing to consider at the moment.

The Net Result?

For the next month I’m going to reduce as many of the luxury expenses as I can without feeling like I’m giving up too much. I want to see how much I can reduce while keeping my lifestyle somewhat similar. If it turns out I can bring my cash flow close to balancing then I’ll keep the savings going and further concentrate on cutting other costs. If it doesn’t work then the extra $100 per month will stop flowing towards savings; my cash flow needs to balance or I’m living beyond my means.

Technorati Tags: savings, cash flow, debt, luxury expenses

Posted in Debt, Financial Situation | 2 Comments

The 109th Carnival of Personal Finance is up!

July 16th, 2007

This week’s Carnival of Personal Finance is up and I’ve got an entry in. You should definitely check it out; it’s hosted by Mint this week.

Posted in Sites/Articles | No Comments

July Goals – Mid Month Review

July 16th, 2007

I really want to stay on top of my goals this month because things got so lax for a while. The purpose of this blog was not to write about my adventures of staying in debt but to make a million dollars. At the rate I’m going the only way I’ll get to a million dollars is if I keep writing until my vested pension gets there. With that said the first step is to get out of debt and this month is all about figuring out where I stand in the grand scheme of things.

I’ve already posted about my Cash Flow issues and my current net worth, which cover off the first two goals I had for this month. I’ve also gotten my credit score but I don’t have the actual report and I wanted to do a bit of research regarding this before posting so that one is partially completed. I haven’t as of yet started the budget for next month but instead I have started tracking every penny I spend again. The main purpose here is to get a true sense of cash flow. I’m doing this using excel and I’m sure there will be mistakes but I wanted to get a more accurate view of what is happening with my money. So far it’s going quite well.

Towards the end of the month I’ll come up with a budget for next month based on my cash flow estimates and what I’m seeing in my daily tracking. I think it’ll end up a bit more accurate than if I were to take a stab at it now.

Moving onto the next couple items from my goals, I’ve started thinking in a bit more detail about the internet business but I need to devote a couple hours a day to plan the project out and do some additional research to see if its viable. This is a matter of time and I want to make sure I’ve got a rough plan in place by the end of the month.

My net worth on the other hand shouldn’t have any trouble increasing by $250 even from the time that I posted about my net worth mostly because I’m trying very hard to keep my cash flow balanced. Going through the cash flow exercise I’ve really come to realize that I should be increasing my net worth between $5-800 monthly without much effort. I guess time will tell about this goal but I’m very confident about it.

Finally applying the 80/20 rule – I’ve started looking at things much more critically and determining if I really need something or if it’s just something catching my attention. I’ve also started looking through all of the junk I’ve compiled in the den in an effort to eliminate as much as possible. I’m not there yet but the frame of mind is definitely improving in this respect.

Overall progress is definitely being made and with a little bit of perseverance I’ll achieve all of my goals this month.

Technorati Tags: monthly goals, goal update, cash flow, net worth

Posted in Monthly Planning, Commentary | 1 Comment

My Current Net Worth

July 15th, 2007

Part of my goals for the month was to come up with a net worth statement and I’ve been somewhat procrastinating completing it in favour of continuing to fix assess my badly broken cash flow. Needless to say it was a bit of a pleasant surprise to see that my net worth had actually increased since I last calculated it back in April. Now a couple items of note on this are that I haven’t gotten my semi-annual statement for my pension so I’m using an old number (it should have gone up) and the value of the car remained the same but I think it might have gone down.

This is up since my last assessment back in April and if it wasn’t for my pension fund I would be very heavily in the negative column. I’m very glad for that little thing (too bad I can’t access it to clear my debt). Overall this is a decent snapshot of where I’m at and cash flow aside this isn’t too bad.

As I’m cleaning up my cash flow situation this should improve in leaps and bounds as credit cards get paid down. If I can balance my cash flow to 0 within a month or two what will happen is the $4-500 per month that my debt is reduced (after all interest) will start appearing directly on the bottom line. But first thing is first and I’m working on it as much as possible.

Technorati Tags: net worth, cash flow, credit cards, debt

Posted in Financial Situation | No Comments

Cash Flow out of Control – Now What?

July 13th, 2007

In my last post I wrote about the differences and benefits between Net Worth and Cash Flow to the conclusion that both are useful but it’s the cash flow that will in fact determine what’s going on with your finances. I was going to use my own personal examples to illustrate cash flow until I came up with a rough cash flow on paper that made me pause to thing. Ok lets be realistic it didn’t make me pause, it hit me like a ton of bricks. I knew I was spending more than I was bringing in but I honestly didn’t think it was completely out of control and I have a feeling there might be more than one person out there in the same shoes I was in.

So my cash flow is off, it can’t be that bad can it?

Well in my case it really was that bad, after compiling the list of everything that I spend money on in a month I was about $760 off each month. I’m still using estimates at this point which I think I’ll stay at until I tabulate my spending at the end of the month and plan for next month. If anything that number is a bit conservative. Now comes the bigger question:

Why is it so bad?

Because I don’t pay close enough attention to my money is the first and most important answer. But that’s also not drilling into the actual cash flow to see what’s going on and why the spending is so high. Without turning this into a long list of line items here are a few things that I found that were a bit on the high side (and not necessary side)

1. Smoking ($200/month) – smoking is expensive there’s no ifs ands or buts about it. The worst part about this type of spending is that you don’t see the money going out in big chunks but in small $10 increments.
2. Lunches ($200/month) – Again this is something that can be trimmed down significantly by taking lunch to the office.
3. The gym ($150/month) – ok before anyone screams at me about the high cost of that; this figure includes personal training sessions that have long been finished but need to be paid for. I’ve got 2 months left and I can leave the gym penalty free.
4. Wine ($300/month) – I like my wine and I don’t always buy the cheap stuff.

I just pulled out a few things there and very quickly I can add up to that $760 that I’m spending over what I’m brining in which leads us to the next question:

So now what?

The list above really does hold an answer, but only a partial one. Quitting smoking isn’t necessarily an easy thing for everyone and it might take some time. I went through the items that really could be cut down without forcing me to completely stop enjoying my life and here’s what I came up with:

1. Quit smoking – its time to get this out of my life ($200/month)
2. Bring lunch on most days ($100/month) – I’m being realistic if I cut the cost in half I’m doing good.
3. Pay off the gym now since I have some extra money and close it down. ($150/month)
4. Cut the wine drinking – I’m thinking if I cut this down by half I probably won’t notice the difference as I have a glass with dinner ($150/month)
5. Temporarily get rid of the $50/month going to mutual funds. Saving is incredibly important and if I was only $50 a month over on my cash flow this wouldn’t be an issue.
6. Cut down going out and food costs wherever possible, about $100/month is reasonable without any impact to my current life.

Some of you might ask why I’m trying to reduce costs without impacting my life and the simple answer is I enjoy it and I want to see if I can take the cash flow situation under control without going to a dramatic extreme. I want to bring it into balance and then I’ll be able to realistically look at what I can do and what I am willing to do to increase my debt payments. If it turns out that I need to take some more extreme measures to just get it under control then I will.

The final point of now what is that going forward I’ll be using a cash flow statement on a monthly basis to track my progress and set my goals. Just getting it from being so far out of whack is the first step.

Technorati Tags: cash flow, spending, controlling cash flow, money

Posted in Debt, Financial Situation | 5 Comments

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