How Liquid are your Assets
May 16th, 2008
Liquid assets are assets that can be converted into cold hard cash quickly and without any significant penalty. By this it means that if you were to take your mutual funds and convert them to cash it would take a day or two tops and you might face a small fee but overall it would mean you get most of the money from them. A house on the other hand might be a very significant asset but one that would take a while to sell and reap any potential cash from.
The reason for this post is I’m currently broke waiting for a bunch of money to clear whatever holds that are placed on it. It made me question the term liquid assets because I am dealing with items that are already considered cash yet I can’t access any of this money until everything clears. Its a frustrating situation to be in because I have virtually no money on hand and a significant amount just sitting in some banks accounts waiting for some magic approval to be placed into mine.
I am currently cash shy but I’m also not in a dire need to have the money right away. If I had an emergency on the other hand I would be in some serious trouble. My liquid assets are not nearly as liquid as I would like them to be. What baffles me the most is why it takes a full 5 days for a check to clear letting me access the funds. Whenever I write a check its out of my bank account within a matter of a day or two - not 5! Its a frustrating situation and its making me question why banks and financial institutions can hold money for so long.
Have any of you encountered situations where your money was held when there was no reason for it?
Posted in Commentary, Financial Situation | 1 Comment
Why a Single Source of Income is a Bad Idea
May 15th, 2008
When it comes to investments everyone says that you need to diversify to protect yourself. If you invest everything into one stock and it crashes all of your investment goes along with it. Having one source of income is very similar. If all of your income comes from one job you’re at much greater financial risk if you happen to lose it or worse it becomes something you loath.
Personally I have worked for companies that have reorganized leaving me without a job and I have worked for companies that simply ran out of money forcing them out of business again leaving me without a job. The reality is when you make all of your money from one source you’re at great risk if you happen to lose it. There is little in the way of security when you only have one source of income.
Companies always try to have as many customers as possible, not only are they trying to ensure they make a profit but they are also ensuring that they stay in business if any one of their customers decides to leave. The reality is you can’t count on one source of income permanently.
The goal is to set up multiple sources of income for yourself to keep yourself protected. This isn’t always an easy thing to set up but even investing money in mutual funds that pay dividends can be turned into having multiple sources of income. Now that I am going to actively try increasing my income rather than just relying on cutting costs multiple income sources will be something that I am going to focus on. In some ways I’m already doing it but at a very small scale.
For most people they’ve only ever known how to make money from one source of income learning to add more to this is crucial to not being tied to your job. There are some simple ways of adding extra sources of income and I’ll start posting some of these ideas and my experiences if I have any with them (yes I’m going to be trying a few of them).
Posted in Financial Situation, Extra Income | No Comments
Frustration with my Finances
May 13th, 2008
When I first started writing this blog I was in a pretty rough financial situation but things didn’t look all that bad because I was making a pretty good salary at $75K per year. A few months after that I took a 33% pay cut to take a great opportunity which meant I was down to making $50K per year. I have to say that as a result of this the year was a difficult one but I was able to cut down on my expenses and slowly, very slowly, cut down my debt. Since I was let go from that job in February I started my own business and I took a full time contract where I’m responsible for a greater aspect of my money (such as taxes). The good thing in this setup is that I have more flexibility and the potential to pay less in taxes. The unfortunate item is that I’m making less still (Now I’m at $30K plus a great commission structure).
My frustration with my finances extends greatly to myself in that I’ve been making job moves and adjustments based solely on the position at hand and how it would help me. This current position/contract is one that I really like because it exposed me a great deal more to sales from the ground up. I’ve only been doing it for 3 months so my exposure has been limited but I am really starting to get frustrated with never having money for anything and paying my debt very slowly.
The net result is that although I’m still making ends meet I don’t know if I can continue to do this for an extended period of time. Any form of emergency will send me scrambling to find a way to come up with money which isn’t a way to live. I have a microscopic emergency fund which again is something I would like to grow.
I have learned a great deal about personal finance since I started this site and read a great deal about the topic and it boils down to being able to improve your financial situation by two means. The first way to do it is to cut down on expenses and to live as frugally as possible. I have tried this and had some measure of success. I know it’s possible for me to spend even less but the reality is that I don’t want to eat Kraft Dinner 5 days a week or give up having a bottle of wine here and there. I don’t spend nearly as much on food, going out or drinking as I did even a year ago but there is a point where cutting back means completely altering your lifestyle. I would rather not go in this direction if I don’t have to.
Which leads me to the second means of improving your financial situation and that is making more money. Unfortunately I haven’t been doing a very good job of this. My salaries and income have actually been going down over the past couple years and I’ve tried to supplement it a few ways here and there with minimal success (the $3/month that Adsense ads make on this site simply don’t make enough). My side projects are have been slow in getting done because of life and the need for some downtime. I believe that I am now at a point where I need to shift gears from saving even more money to making more money. I have an opportunity to take a salaried job that would bring me back in line with what I should be making but that’s still just an opportunity.
I’m just frustrated with having no money and juggling to save and make ends meet. It’s time to make more money, the opportunities to do this are there (even if we’re in an economic downturn). Ok my rant is now done – thanks for listening and keep reading I’ll start disclosing a bit more about my spending and earnings and how I’m trying to make more money. I’m done with the frustration and trying to get things done by only cutting back.
Posted in Commentary, Financial Situation | 2 Comments
Don’t Be Afraid of your Financial Situation
May 8th, 2008
One of the most common reactions to something we don’t understand is fear. It drives us into many of the stupid decisions we make and thoughtless things we say. I know I don’t speak for every person but too often when we don’t understand something and rather than trying to find information we simply react with fear. What does this have to do with personal finance? Everything! As a society we are uneducated in the ways of personal finance, even at the most basic level, and we react spastically when something comes up.
Don’t be afraid of your financial situation. Understand it.
Before you do any more damage that might take years to fix, stop and take a look around you. If your financial situation is healthy and you’re living well below your means then congratulations, you’re in the minority. But if you’re in debt, living paycheck to paycheck, and wondering how you’re going to pay your bills then take a good look. Are you simply reacting to what’s happening around you or do you really know what’s going on?
You’ll probably have to ask yourself a few questions to get a better understanding of where you stand such as:
- Am I spending too much money? Why?
- Do I know where my money goes?
- Do I buy things because I don’t want to admit I can’t afford it?
- Do I understand how my credit cards and debt work?
- And the list goes on and on.
When I first left university and started working I was making good money which I in turn was spending at an alarming rate. When I ran out of money I simply turned to my credit cards to cover the difference. At first this wasn’t a problem because the credit cards had low limits. But that changed very quickly and before I knew it I was heavily in debt. I was living from paycheck to paycheck and afraid of my finances and how I spend my money.
If at that time I had stopped and understood more I would be in a far better situation today. Not understanding and being afraid of your financial situation can mean that you’ll continue to spend money when you shouldn’t (or don’t have it) to keep appearances up because you don’t want to admit being in debt.
Educate yourself! Understand the consequences of your actions and take some responsibility for them. That doesn’t mean you need to stop all of the fun things in your life that cost you money but you might want to consciously cut back to get a grip of your financial situation rather than reacting because you’re afraid of your financial situation.
Posted in Financial Situation | 4 Comments
Next Steps
February 8th, 2008
Originally uploaded by dziner
A week ago today I was let go from my job. Unfortunately I’ve spent most of the week trying to get over a bout of the flu rather than relax a little. When life throws us these little curve balls it makes sense to stop and look at what happened and why. To analyze where you’ve been so you can take the proper next steps. I started this process this week.
The very first step was to pull back a little and not be too concerned about the money or what am I going to do. I’m glad the parting was a good one because I don’t want to try dealing with the negative emotions that can be brought on by that. This first step was to stop what I was doing, accept the fact that everything has changed and start figuring out the next steps.
It was time to detox a little; no I didn’t go on a bender trying to drink the last year into a comatose memory, but slowing down does let you get some of the pent up stress out of your system. The last year was stressful but I learnt a great deal; probably more than I have in the last five when it comes to managing and running a business. Not only did I learn a great deal about the world of running a small entrepreneurial business I learned a great deal about myself, my strengths, my weaknesses and most importantly my desires, but that self-analysis is another post.
For now I need to figure out the next steps. Because I have the luxury of a little time I’m going to take baby steps in a couple directions. The first direction is in the job search; the job market in my area and occupation is pretty good right now. Unfortunately that doesn’t guarantee that it will continue to be this way. I’ve cleaned up my resume and its time to polish it up a bit more and post it on a few job sites. This is to get a good lay of the land and to see what the job market is really like and what I can expect.
Taking the first job that comes by just to be employed isn’t something that I’m looking to do right now. I want to make sure that the next job I take is one that is a good fit for me as well as one that is challenging but not insanely stressful. Essentially I want to find the right job, not just any job. As I go through the process I’ll post my thoughts and experiences.
The second direction that I wanted to go in the next little bit is setting up my side business. I had the idea back in October and I’ve been slowly working on setting it up since then. But when you’re tired from work and mentally drained there isn’t going to be great progress. Now is the time to truly get this up and running; heck if it works out I might not need to go back into a full time job unless I really want to. This whole process is completely new to me; thankfully other bloggers have and I can learn from them.
The net result of my next steps will be to figure out where I am and where it is I really want to go. I don’t want to take the first job that comes up and I don’t want my side project to be a perpetual side project. The next couple weeks will be interesting as I start interviewing and looking around the job scene as well at the same time figuring out all of the stuff for setting up a side business. I’ll keep you posted; it should be a lot of fun.
Posted in Financial Situation | 4 Comments
Reality Shift – There goes the Job!
February 6th, 2008
Last Friday ended up being my last working day as I got let go. It wasn’t a surprise at all and I can’t say I’m unhappy about the situation. Actually I’m rather relieved that I’ve got the luxury to concentrate on finding another job that is likely to be a better fit for me.
So what happened?
A little over a year ago I took a substantial pay cut to work for a small company that was growing; recently as part of their growth they decided to go down a certain direction that I was not really happy about. I learnt a great deal over the year that I was there and I have been infected with the entrepreneurial spirit. I was already looking for a replacement job when I was let go. There are no hard feelings and I am grateful for the experience.
What next?
Loosing the day-to-day grind wasn’t the only piece of event this past weekend; I caught the flu, which is only now starting to dissipate. I am getting some severance (well money owed me), which will last me for about 2-3 months of time with little effort and possible more if I am careful. This will be sufficient for me to find another job.
While I’m searching for another job I’m also going to continue to work on one of my side projects – I’ve been slowly working on it during weekends but now I can put a few hours a day to it. If this works it will allow me to be pickier with jobs and salaries to make sure the next job is a perfect fit.
In short I’m in an OK place trying to detox from the previous job and start looking for the next one. Posting here will become more regular again starting today. Loosing my job has forced me to think about things, which will in turn be brought here.
Posted in Budgeting and Planning, Financial Situation | 3 Comments
From not getting paid to getting paid twice
January 17th, 2008
In my last post I talked about not getting paid when my paycheck was due and the impact that this had on my life. Yesterday I received my second pay in two days. I have now been paid in advance an extra pay. This wasn’t intentional but the reason that things were a little screwed up with my paycheck caused this problem as well. Now don’t get me wrong I am not complaining about the fact that I have more money. Its actually quite nice at the moment.
Getting a months worth of money does bring with its own challenges though. I am used to a standard pay which comes in every couple weeks. I plan most of my debt repayment and expenses around this. Having a sizable amount of money is never a problem but having to stretch it for a longer period is. I now have to make sure that the money I do have lasts the full length of time without running out.
The nice thing about the whole situation is the fact that my raise has kicked in. Its not as much as I would have liked but it is by no means bad. The way I am intending to tackle this problem is to make sure that I pay all of my necessary commitments up front. This will allow me breath a little easier if all of the upcoming payments are handled (especially the important ones such as the mortgage).
As with not getting paid on time getting extra money and then not getting paid for 4 weeks is yet another reminder that I need to ensure I stop living from paycheck to paycheck as quickly as possible.
Posted in Debt, Financial Situation | 1 Comment
October Assessment
November 5th, 2007
I may have not been writing very much in the month of October but I didn’t stop living nor spending money. You really can’t get around either without some serious effort. I managed to keep all of my finances tracked and my cashflow was only off by $100. All things considered that was a drastic improvement. This also means that I’m back in the habit of writing down all of my expenses, which I am very happy about.
The biggest issue I had with the month of October was how busy I became at the office. I would literally come home and try to avoid the computer as much as possible on the rough days. And on the days that weren’t too bad I was trying to work on my business plan. The good thing is that the business plan is in pretty decent shape and I’m actually starting to work on the details and parts of the implementation.
Overall the month was just way too busy. I had to start dropping things from my to do list that I enjoyed and wanted to do (like this blog). I needed to have time to calm down and decompress because of the 60+ hour weeks. The good news is that this is now starting to pass; the workload has lightened and there’s now help. I’m taking on a slightly different direction at the company and it won’t be nearly this rough for me anymore. At least I hope it isn’t.
I should be back to writing more frequently now, my November goals will be up tomorrow morning. I really missed the writing when I had no time for it. Now its just a matter of time getting back in the groove.
Posted in Monthly Planning, Financial Situation | No Comments
September Assessment
October 2nd, 2007
I have to say that I’m both a little disappointed with my September accomplishments and happy with them. I ended up traveling a fair bit for work and for personal stuff (nothing bad) which impacted my overall goals a fair bit. On the positive side I was able to keep the spending down as much as possible but I wasn’t able to keep track of all of my spending so I have no accurate view of where my money went this month. This is very frustrating since this information is crucial to being able to cut down my cash flow problem. On the slight positive note I was able to keep almost all of my receipts so I should be able to reconstruct a fairly accurate picture. The goal isn’t to collect everything till the end of the month but to track it as the spending is occurring because inevitably some receipts get lost and you don’t always get one.
The monthly goal/accomplishment that I am most happy about is the fact that I was able to increase my net worth by $1,092.72 to $16,608.07, which was very nice since the goal was a quarter of that. This increase is a bit inflated since I put extra money onto my credit cards for my business travel, which is something I wouldn’t have done otherwise. I also have a couple outstanding payments, which are also not reflected in that snapshot. This month thankfully is a month with three pays (the benefits of a bi-weekly pay structure).
Overall the month just flew by and I wasn’t able to address the day to day tracking as well as I could have but on the flip side I wasn’t reliant on my cards to get me through the month. This just goes to show that although I don’t have an accurate picture of my cash flow it couldn’t have been nearly that bad.
On a final note I have started the process of planning out my business idea and I’ve actually gotten some thoughts and plans down on paper. Although this isn’t a full business plan it’s a definite start. I really need to spend more time getting this up and running because of how much of a benefit I think it could be to me financially. Ideas are a dime a dozen, even good ones, you have to act on them and try them out or they’re nothing more than ideas.
Posted in Monthly Planning, Financial Situation | No Comments
Spending Now VS Saving for Retirement
September 24th, 2007
This is one of the quintessential questions of personal finance in my opinion. We are taught from a fairly young age that we need to save for our retirement. Retirement, that magical day when we turn 65 years old and we can all of a sudden stop working and begin enjoying life. The reality is that by the time you turn 65 you can’t do all of the things that you would like to do because of physical limitations – your window of opportunity has either become so small or simply vanished on living your dreams out.
So the quandary remains – do we put our extra money into our retirement funds or do we live our dreams now? Well lets look at a the two extremes:
Spending Now
When it comes to spending now I’m not referring to spending your money on essentials like food and housing; I’m referring to extra money that would normally go into retirement savings. If you were to take that money and buy yourself a fishing boat because you’ve always wanted one and learn to be a great fisherman (which might be a dream of yours). If you get the opportunity to adjust your life so that you’re able to live your dreams sooner rather than later then that’s an amazing thing.
For this to be really worthwhile you need to understand what your dreams are and know how to live them within your means. So for example if you’re able to take 6 months to sail in the Caribbean and have the money to do it then you’re probably ok for spending the money now. If on the other hand you don’t have the money then you’re living your dream at the expense of reality then the credit card bills will catch up and you’ll be in debt with little to show for it.
Saving for Retirement
The other extreme of the argument is you save money all the time and put it away for retirement. Again I’m not referring to being extremely crazy and saving everything just your average amount (maybe a bit more) for retirement. The unfortunate thing about this aspect is you have to wait till your 65 before you can start spending that money and living your dreams. Attached with that is fact that you might not be as spry at 65 than say at 35. But saving for retirement means that you’ll be able to take a few trips here and there have no financial worries and live a nice happy life.
Personally the idea of retirement scares me because I would become bored, I’m always moving around doing things and yes at 65 many of them are still possible but at 75 and 85 most of them aren’t. Buying a new car every year versus a new one every 5 or 6 wouldn’t be a defining point nor a high point of retirement for me. If it is a dream for you to be able to do that then you want to save for retirement.
The optimal solution – Balance
The optimal solution is a little from column A and a little from column B. You can’t ignore retiment because you’ll need to have money for when you’re no longer working full time and on the other hand you don’t want to ignore your dreams and not spend now. The balance is making sure that you live both lives. You spend some money now on living your life but set aside enough money so that when retirement does come you don’t have to worry about not having any money.
Finding what the balance actually is will be a personal choice, for some people their dreams are very physical and they want to accomplish a lot of them before they hit their 40s lets say and for others they might actually be dreams that can start when you’re a little older.
Unfortunately the very first part of this equation is knowing what your dreams are and what your goals are. Until you have those figured out spending now is simply spending without purpose.
Posted in Budgeting and Planning, Financial Situation | 7 Comments
