July 29, 2011, 6:00 am

Yakezie Challenge Time

by: MD    Category: Financial Rambling

Earlier this week we asked if you would still be a rat in one year? This is all about a new project that will be introduced here in the near future as part of a 4 part eBook series. The post goes into great detail about being a rat and improving your life right now. Are you ready?

Let’s jump into the Yakezie links:

1. Stock Advice from Tony Chou @ BITFS.

2. Debt Ceiling Debacle’s Bright Side: Standing Up For What You Believe In @ Financial Samurai.

3. Semiconductor Penny Stocks @ Buy Like Buffet.

4. Contentment Through Appreciating The Basics @ KNS Financial.

5. How to Make More Money: Stop Watching TV! @ Free From Broke.

6. Plastic Bags Banned @ Retire by 40.

7. Consequences of a U.S. Debt Default @ Yes, I am Cheap.

8. My New Financial Hero @ MJTM.

9. Steps to Forming Good Financial Habits @ Bucksome Booomer.

10. Tire Shopping @ Buck Inspire.

11. Are You Prepared For Retirement? @ The College Investor.

12. Sending Money To Family And Friends – My Search For A PayPal Alternative Ends Here! @ Money Cone.

13. At What Age Should You Teach Kids About Money? @ Not Made of Money.

14. Hate Winter? Here’s How To Avoid It Forever @ Canadian Finance Blog.

15. Advanced cash flow diagrams @ ERE.

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July 28, 2011, 6:00 am

Could You Decrease Your Lifestyle Spending?

by: MD    Category: Assets and Net Worth

Could You Decrease Your Lifestyle Spending?

An older friend came out for drinks with us the other night. He was being very generous, he kept on ordering rounds, and would refuse to let anyone else order the drinks or pay for them. I finally got fed up with this because I don’t like it when someone spends money on me. He explained to me that he worked hard his whole life so that he can be in a position where he earns lots of money and can afford the simple pleasures in life (covering drinks for everyone).

Mike reviewed his 2011 financial goals the other day. He mentioned that he wasn’t stressed out about his credit card debt because he knew he would get a nice bonus at the end of the year.

What I’m getting at is that when you work hard and earn a good chunk of change it’s really easy and rewarding to increase your lifestyle and enjoy yourself.  When you’re successful and making lots of money, it’s feasible to spend money.

I wanted to play Devil’s Advocate today and look at the other side here. My question to you guys today is could you decrease your spending/lifestyle if you were to lose your job or if you were forced to?

This is a tough one to answer. I know personally that it would be challenging for me to cut out certain things from my lifestyle if I needed to right now. It’s simply to theorize about cutting down on certain expenses. The reality is that most cutbacks would have a negative impact on my lifestyle that would be difficult to accept. Let’s go over the factors involved in decreasing your lifestyle spending:

Could you embrace frugality?

Could you be frugal if something were to happen and you really had to save money? When you’re making good money or have few responsibilities you don’t exactly have to be frugal and tight with your finances. What if you had to be frugal? Would you be ready?

I would consider myself to be frugal in some areas of life. I don’t like to pay for things if I don’t see any value. I don’t like to  feel like I’m being ripped off either. On the other hand, when I see value in something (a trip for example), I don’t mind spending the big bucks.

Could you cut out the luxuries?

I really enjoy my luxuries. I enjoy my fancy smart phone. I enjoy my trips. I enjoy my MMA gym membership. What if you had to decrease your lifestyle spending by cutting back on the luxuries? Which luxuries could you cut? Which ones would you really miss?

I think that I would really miss my smart phone and driving every where. I’ve taken the bus around town for many years. I’ve spent many cold winter mornings freezing at the corner waiting for the bus hoping that it comes before I freeze to the ground. Now I enjoy being able to drive wherever and whenever I want.

Is spending money the reward for making big bucks?

Do frugality zealots just not earn enough money? I find that the harder I work to make more money, the more rewarding it feels to spend some of this money. What would be the point of always working if you can’t have a decent lifestyle? Working hard for your money would definitely make lifestyle deflation tough.

Sam of Financial Samurai once wrote that there’s no point to making money if you don’t spend it. I agreed with the article because life really is finite. Once you take care of your expenses and main savings, it’s okay to splurge money on yourself. This is why I might not be so good at decreasing my lifestyle spending.

Time to ask the readers: What do you think? Would you be able to decrease your lifestyle spending? or would you find other ways to make more money?

(photo credit: rawartistsmedia)

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July 27, 2011, 5:00 am

In One Year From Now, Will You Still Be A Rat?

by: The Financial Blogger    Category: Rat Race


escaping the rat raceI have a shocking confession to make today: I’m a rat. But don’t start laughing too fast… chances are that you are a rat too! Which Rat am I talking about? The one stuck in the rat race of course! Today’s article is a prelude to my eBook that will be launched at the end of August, beginning of September:

 

The Rat Race: In One Year From Now, Will You Still Be A Rat?

This will be the first of a series of 4 eBooks on how to reach financial independence. If I was going to sell my house and downsize my lifestyle, I could technically exit the rat race at the age of 29. Since I want to enjoy the good life, I have made the decision to keep “racing” for a few more years. However, just the fact that I wake up and go to work by choice and not by obligation already makes my day! In this series, I want to share all my tricks and steps I have accomplished to get out of the rat race in so little time. So before I make the big launch, I wanted to start a series on this blog (which will not be copied / pasted into the eBook!) about the rat race and how it sucks to be stuck in it!

So who’s a rat and why?

We pretty much are all rats 😉 the thing is that if you have to wake up and go to work to pay your bills each morning, no matter how much you are making; you are a rat. You’re a rat since if anything happens to you this morning; your rat wheel will stop turning abruptly. This is why maybe up to 95% of the population is stuck in the rat race and don’t even realize in what kind of trouble they are in.

 

It’s like the Matrix

Why is it that bad to be a rat? Well this is the whole point: most people don’t realize they are stuck in a never ending race. It’s like being in the Matrix; you get used to living this life, everybody around you is living it and you don’t really see any other choice. When you take your 2 weeks vacation and go camping, you think it’s the good life and feel happy about it. If you make more money, you simply go down south for 2 weeks or to Europe and you live in a bigger house. But in the end, you are still stuck working every single day of the week. This is called the Rat Race Deluxe… but you are still in a stupid maze!

 

What else can I do? Everybody has to work! I just have to work harder, pay off my loans in the hopes a debt free life and enjoy a decent retirement. Well you know what? If you are thinking that way, you really are  deep in the Matrix!

 

The Shocking Truth: Throw Your Retirement Projects In the Bin

So tell me, how old are you? If you are reading this blog, there is a 70% that you are aged between 25 and 40. I’m lucky to have some “older” readers too but I know it’s not the majority of my readership. Chances are that you are working and living a decent life: a home, a car, maybe a family. Your plan is probably to work until you are 65 and retire… but are you making any serious plans to build your retirement nest egg?

 

Do you realize that if you want to retire at 65 and spend 47K per year (in today’s dollars of course), you need about $2,6M in retirement savings to say “bye bye boss” at 65? If you don’t have a pension plan, this means that you need to save $1,000 per month, starting from the age of 30, at an investment yield of 5.5%, considering an inflation rate of 2.25%. On top of this, I’m being generous regarding the 47K you could spend, I include a government pension (which is about 17k per year in today’s dollar). So technically, saving $1,000 per month during 35 years will only grant you a 30K income (always considering inflation)…

 

Why do you need such huge numbers?

There are 3 things that people underestimate when they think about their retirement:

a)      Inflation (see how 2.25% over 35 years can hurt your plan?)

b)      Life expectancy (if you are in the 30-40 range, chances are that you will live over 85)

c)       The capacity to save (are you really able to save $1,000 per month at the age of 30? Chances are that you can’t since you are just building your family, buy your first house/condo, etc.)

So the sad truth is pretty obvious: unless you work for the government with a defined benefit pension plan (which means that your employer guarantees your pension no matter what happens on the market), you are stuck in the rat race for real!

 

So what are you going to do about it?

Well, if you really like your Matrix and want to continue that way, you will have to choose among the following options:

a)      Work harder (extra hours & no lunch time, in the hope of making more money and get some promotions)

b)      Work longer (past the age of 65 since you won’t be able to stop working at that age)

c)       Cut your expenses (e.g. cut out what is great in life such as going on vacation, renovating your house, driving a nice car, doing sports, going to the theatre, paying for private college for your children, etc.)

d)      Die younger (well… I don’t advise it.  But technically, if you don’t take care of yourself over the years, chances are that you won’t reach the 70 year old mark… but I don’t think you will get fat on purpose 😉 ).

 

Personally, I chose to get out of the rat race and find other means to reach financial independence… This what I will be discussing in this series and even further in my books.

 

So… tell me, which option do you choose?

Do you have any plans for retirement? Are you doomed to work until you are 70? Or are you going to work 50-60 hours per week to cope?

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July 26, 2011, 5:00 am

2011 Financial Goals Reviewed

by: The Financial Blogger    Category: Assets and Net Worth,Personal Finance

Last year, I wrote down my 2010 financial goals and followed up during summer to know if I was in line to make it. You know what? I crushed all my 2010 goals! This year, I’ve established 3 financial goals :

#1 Paying off all my credit cards (22K!)

#2 Increase my net worth past 200K (from 152K)

#3 Get in the Top 3 Financial Planners in Montreal and Make 150K

 

Those were pretty ambitious goals as they required both lots of effort and money! This is also why it is very important to follow-up today with my goals and see where I stand:

 

Paying off my debts

I suck!!!! Back in January, I was at 22K in personal loans and credit card debt. As of last weed, I’m at 28K!!!! How can I be so bad? The first reason is called central A/C that cost $7,000! The second reason is because I didn’t use my employer’s stock yet to pay off my debts. Since I’m paying a very low interest rate on my debts and the stock is going well, I’m waiting ;-). I should be able to pay down my debts faster in the second half of the year. But let’s be honest, I definitely count on my year-end bonus to clear this mess… I’m still not worried about my situation as things seem to be under a better control now ;-D

 

Increase my net worth

I don’t know why but creating assets and making money always sound easier for me when compared to paying down my debt! I started the year at 152K and I’m already at 180K. The last $20,000 doesn’t seem to be quite a challenge since my house and pension plan values should cover this. In addition to that, I will max out my Jan 2012 RRSP contribution by 9K so aiming 200K is like a done deal ;-).

 

I’ll actually concentrate on pumping my net worth a little bit higher and try to reach 250K by the end of Jan 2012. I can’t wait to see if I’ll be able to make it! If worse comes to worse, I guess that with our next share valuation update in May 2012, I’ll be going over 250K!

 

Top 3 Financial Planners in Montreal, Making 150K

Well this is another great challenge! As of today, I know I am part of the top 10 for sure, but the top 3 is always hard to determine until the fat lady sings ;-). Everything can change until the very last minute, so I’m still in the dark to know if I’ll make it or not. I know that I’ll have a record year in 2011 compared to my previous 3 years as a financial planner. However, it doesn’t mean that others won’t have a record year too! I still have about 3 months (our financial year ends on October 31st) to work on it and I have a few good deals on the table. At this point, I can tell you that the difference between 10th and being top 3 is about luck. If you get the right timing to bring in the numbers and another planner doesn’t, you go through and make THE year ;-).

The good news comes when I look at my potential bonus and overall income. Last year, I had a record year at $135,000. If I don’t make the 150K, I’ll be darn close! I was able to manage an interesting income raise last month and I should be looking at a bonus between 30 and 40K. So if I keep working the way I do for the next 3 months, the 150K will be mine this year!

 

Final thoughts

Overall, I’m pretty happy about what I see over the mid year. Reviewing my financial goals is helping me keep focused and I know now that I need to put more emphasis on paying off my debts while my net worth and income goals will be reached simply through following what has been implemented so far.

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July 25, 2011, 5:00 am

Social Media Does Matter… Time To Call Out My Partner

by: Silent Partner    Category: Business

Mike is an incredible partner, no doubt about it. But like everyone, sometimes he can be way off. Earlier this month, while reading his June earnings post, I got stuck when he wrote:

To be honest, I don’t believe in social media promotion. They are good for increasing the number of backlinks but people coming from social media rarely stick around. Most of them jump from one site to another without reading much

Am I surprised by Mike’s statement? Of course not. He has told me this over and over. However, up until now, he had kept this to himself. Now that he’s discussed this publicly, I’d love to hear your thoughts. To be fair, I think Mike was speaking specifically about StumbleUpon. If you have any type of website, you know that when a post starts getting stumbled, you can see visitors running into the website. The problem of course is that they leave with the same speed in almost all cases. You’d have to see the average time spent on our sites for StumbleUpon visitors… to say that they only stay a few seconds would be an understatement. That being said, I would draw two conclusions:

StumbleUpon Is Perhaps Not A Great Source Of Traffic

I think that some things can be done with SU traffic and perhaps with a better design, that would help new visitors quickly (very quickly!) figure out how to use TheFinancialBlogger, I’m certain that at least a few of those could become regular readers. A minority? Absolutely, but at least some of them. These users would also be ones that tend to share what they like, be social about their favorite links, etc. I see clear value in that.

Social Web Is Not Only About StumbleUpon

It would be crazy to judge Facebook, Twitter and others as if they were the same as StumbleUpon. They are clearly nothing like StumbleUpon. I think Mike has got it wrong on social media however. To be fair, he is fairly active on Twitter and has been gaining a following. I think he keeps doing it because to some degree he doubts that social media is useless. And these doubts are well founded.

Measuring Social Media Effects

In my opinion, social media will be a growing part of TheFinancialBlogger. As the blog evolves, TFB is becoming a strong brand.  Interacting with fans on Twitter, Facebook, and maybe eventually an iTunes podcast or YouTube video will only help make the brand even stronger.  In the end, I don’t think it’s about seeing how many users are directly referred to TFB from these services. If users find out about TFB through these alternative ways, that will increase our presence,  our influence, help us reach and help more visitors and eventually that will translate into revenues and profit.

I understand that it’s much more difficult to measure how someone who is following TFB on Twitter will have more interaction with us.  This is so, especially when you compare it with SEO for example, which is so easy to measure (simply having Google Analytics makes it incredibly easy).

I’d love to get your thoughts on this…  Am I all alone to think that Mike was way off to write that? I will eventually convince him to create a Facebook page for TFB and when I do, I hope it will give us one more example of how social media can help TFB. In the meantime, if you don’t already, please follow TFB on Twitter and share your thoughts here!

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