Some say money is the root of all evil, I say money is the root of all dispute…

I’ll tell you upfront, I love money. Nah! That is not completely true, I don’t love money, I love what it brings: freedom, entertainment, comfort, security and good wine! My biggest financial goal is to be able to spend whenever I want. This is what I call financial freedom; living your life without having to worry about what’s left in your bank account.

I don’t expect to live an extraordinary lifestyle with a lot of expenses. But I don’t want to restrain my budget to the basics for living either. This is a balance that is quite hard to reach and I’ve been battling to find it lately. For the past 18 months or so, I’m on a crusade against debt. I’ve updated my net worth statement last week showing the first sign of real progress in almost two years. I’m proud of what I accomplished recently yet not proud of the time it took me to realize my problem.

It’s Been a While that I have Known

I’ve been aware that I was living over my budget for almost the past four years. This is exactly when my wife quit her job to stay home. At that time, I was working a project of mine called The $1,500 project. The goal was to generate an additional $1,500 in net revenue stream so my wife could quit her job and we could live a better life. I did find the money but additional expenses came into play as well. I didn’t budget that part properly.

I haven’t accumulated too much debt over the past four years for a guy who lives beyond his means. The reason is quite simple; I also generated some sizable bonuses since I work in the financial industry. My average bonus over the past four years is $37,750. Even after taxes and RRSP contributions, I still have about $12K in my pocket each year to tackle my budget. That’s another $1,000 per month. With this money, I was able to pay back a part of my debts. My total debts are showing $312K and the highest I was in the past four years was when I bought my RX-8. In June 2010, I had $334K in debts. So in the past three years, I’ve paid down 22K in debts while I increased my assets from $480K to $565K.

When I look at my situation over the past three years, I can’t say that I’ve headed in the wrong direction. My net worth has jumped by 100K in 36 months, that’s pretty good! But the problem remains the same: I have to count on my bonus to bring my debt level down. I’ve been working on this problem for a while and found it very hard to find a solution until I had a discussion with my wife at the beginning of the year.

The Discussion I Should Have Had a Long Time Ago

After we came back from Disney, I realized that I had to speak with my wife about a touchy topic; money. Since I work in the financial industry and my wife has little interest in finance, I manage all the financial aspects. I don’t update her very much about our situation since she is very insecure about money. Since I’m a big leverage fan and used our line of credit several times in the past to fund projects (trading on the market, start my online company, etc), I thought we were better off this way.

The problem is that she didn’t know that I was actively battling against our debts and that I was looking for a way where I can pay down my debts on a monthly basis within our budget instead of waiting for my year-end bonus. She is definitely not the type of woman who spends without counting. She is very careful with the household expenses. Still, managing a household of five can lead to more expenses when you don’t keep a close record of them.

It wasn’t easy to tell her that we had to take a closer look at our budget and cut down on our own expenses. We used to go out to the restaurant once in a while and treat ourselves; this time is over for now. It sucks to tell your wife that you are not going to go to the restaurant or the spa next weekend, nor in the following weeks months.

Since I’m the only income earner of the family, I feel a pressure to bring in enough dough for everybody. We can’t complain as we are living a great life. But I live the pressure of maintaining the same level of lifestyle alone. Having this discussion with her felt like I haven’t been able to complete my part of the deal. I wasn’t making enough money so we could spend as we want. In the end, it was admitting a failure on my part.

I also tend to enjoy life and rarely think twice before spending. This is why it was so rough to explain my wife that I changed and wanted to slowdown with our expenses. However, my wife didn’t take it badly at all. At first, she was worried about our financial situation. But I explained to her that it wasn’t that bad but we needed to take control of our budget today and not wait for bad luck to happen!

I now feel better about this whole story since we are now a team facing our debts, I’m not alone anymore and this makes a big difference for me! We are now working together to find alternatives and ways to save money and the results are showing already. I should have definitely not taken that long to speak with my wife about money management!

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December 31^st… the last day of the year to make things right! What have you done for the past twelve months? Are you proud of what you have accomplished? The best way to know if you have done something with your life is to setup goals at the beginning of each year and follow them. Here’s where I am at with my three main goals:

-          Dropping down under $300K in debt

-          Opening an RESP and invest $2,400

-          Make over $130,000

Let’s start with the unachieved goal…

Dropping Under $300,000 in Debt

This year has been such a bummer on my budget that I even quit on paying off my debts. I can’t say that I’m really proud about it but I have to accept what happened; I kept spending without bringing in the dough. I literally closed my eyes and dove into consumption like you would dive into a pool when it’s burning hot outside… speaking of which… my pool was a huge expense that was not properly budgeted for. In addition to that, my sport car broke every month for 5 months in a row at the beginning of the year. Even worse, I kept my eyes closed and bought my family a trip to Disney… Oh! And I forgot; I got the brilliant idea of switching jobs which threw my bonus down the toilet. Finally, having a third kid brings its wealth of expenses as well. Wow!

yeah… I really quit on paying off debt in 2012.

But you know what? I don’t care!

We spent the whole summer in the pool;

I still LOVE driving my sport car every day;

My trip to Disney is an incredible opportunity to spend time with the kids;

The job switch will become the best move I have ever done in my life over the next few years;

And the joy of a third child is just simply priceless.

So I’m not proud of failing on my first goal, but I don’t really care what happened to my finances. I’m young and full of energy. Even better; I’m darn good at making money and I’ll just make more in 2013 to drop that darn debt level under $300K!

Opening  an RESP

Having three kids is quite a challenge when they go to college and you get the bills. This is the reason why I wanted to open a Registered Education Saving Plan. I was a bit late in the year to open it and couldn’t find enough money to catch up to my goal of investing $2,400 in 2012. At least, I put $1,600 in so far and will continue to invest $200/month (plus subsidies) in 2013. At this pace, I calculated that I’ll have roughly $30,000 per kid to fund their tuition. Since I live in Quebec, this should be more than enough to pay for everything.

In the future, I’d like to increase it in order to be able to buy a duplex for them when they will move to another city. This would be awesome if they could share an apartment that is mine. Since I will have to help them to pay rent, I would rather buy the darn apartment and build some value! But I’m not there yet… I’ll have to wait a few years before I can think of this plan!

Making Over $130,000

At the end of November, I already spilled the beans and told you that I will be making roughly $131,000 in 2012. The drop in income compared to 2011 ($176K) is directly linked to my bonus that is a lot smaller this year. It’s normal; I’m starting a new book with no clients, there was an adaptation period to go through. It was a tough year to go from hero to a barely average employee. Still, I was able to rake in a great income!

But I’m already past that dark period and rocking my way through the beginning of my new year at work (starting on November 1^st). I’m already at 30% of my objective after 2 months and still working on other deals.

My 2013 Financial Goals

We are going to leave the year 2012 in a few hours and it’s now time to look at what I’m going to do next year!

Dropping Under $300,000 in Debt (SIC)

Yeah I know, I wrote about that… a year ago! I expect my debt level to be roughly where I left it at the beginning of 2012. So it means that I’ll have 12 months to drop my debt by $20,000 if I want to pass the psychological mark of $300K.

The good news is that I have absolutely no expenses planned this year. No pool, no newborn, no car repairs (lol! As if I could predict that!), no expensive vacations. All of this totalled over than $20,000 in 2012 so I should be fine .

I want to pay off my consumer debt since it was the first time since I got my first full time job that I have accumulated consumer debts. Now I have way too much on my plate and definitely need to settle down and deal with this crap. Fortunately, I’m not paying high interest on it but I would rather not wait too long before I see interest rates going up!

I’m planning on using my online company dividends to pay my debts off. I should technically be able to live off of my day job income and use 100% of my company derived income to pay off my debts. I also significantly decreased my insurance costs throughout 2012, this will definitely help put some money aside!

Opening a TFSA

In 2012, I opened up an RESP for my kids, in 2013 I want to open a TFSA… for my kids! William is turning 8 in 2013 and I will need funding to send him to private school in a few years. It’s very important that my kids benefit from the top education and the best resources are only available in private school. I have personally seen the difference between private and public school and it’s not an option for me.

In order to fund it without having to hit my head on the wall each month, I decided to open a TFSA account and start putting some savings aside. Once I will pay off a part of my debts, I will open my TFSA account and start investing $100 or $200 per month.

Making over $150,000

Financial goals for the year wouldn’t be goals without an income goal! After dropping from $176K to $131K this year, I want to go up half way and make $150K. This would be the definition of my perfect level of income. If I continue to close deals at work at the same pace, making $150K this year shouldn’t be a problem.

In addition to that, I have some good ideas to make money from my online company and have made sure that I’ve put the money engines in place at work to reach my goal. If I can crush it, this will only mean that I’ll be able to enjoy life even more

Going to Hawaii

Yeah… that’s actually not a 2013 goal but a 2014 goal! I want to go to Hawaii with my wife in 2014 because it will be our 10^th wedding anniversary. I’m not the type of guy who enjoys all included in Cuba so I thought that jumping from one island to another could be more entertaining!

The deal I made with my wife was that I want to pay cash for that trip. I guess it will cost something in the range of $10,000 so I had better rack-up a healthy bonus to get us there! This is also the reason why I started working on this goal a year in advance! Let’s hope that it will work!!

Personal Goals

I also have a personal goal that has nothing to do with finance; I want to lose weight. I’ve been carrying a few extra pounds in 2012 due to the lack of intensity in my workouts. I tried to do it 4 times a week but I didn’t make it most of the time. Part of it was due to the lack of sleep (thx Caleb!) and the other part was due to the lack of motivation. I want drop under 180 pounds (currently sitting portly at 193). 175 would just awesome but I will need to cut down on my eating habits at the same time while working out intensively four times a week. I have done it in the past, so I know that I can do it again!

2012 has been a rough year in many aspects (money was flying out the window, my online company was hit by Google twice and building a new book of clients is not the easiest thing to do!).

But I’m glad it’s over. I look forward to 2013 with hope and optimism. Most of the things that happened in 2012 can’t really happen again next year so I should be able to crush it like I do best .

What about you? What is your #1 goal for 2013?

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I particularly enjoy the period of end of November and December as it is the moment of the year where I resume my successes and failures and setup my goals for next year. Last year, I’ve wrote about my biggest personal income report ever making $176,000. Was I able to repeat it this year? Not at all… but I knew I couldn’t since I started a new book with new clients.

For those who are in the business, you will understand how hard it is to start from scratch and show a big 0 in the $ under management column. Even thought I knew I was going to make less money this year, I made the move for several reasons:

-          I save 2h30/day in transportation time

-          I also save the cost associated to this transportation

-          I increased my base salary

-          My future potential bonus is better than my previous job

-          I have the opportunity to work for the best department in the financial industry (private wealth).

Nonetheless, all these very good reasons don’t pay for my mortgage at the end of the month! Lol! But I can’t really complain as “on a bad year” I made slightly over $131,000 this year.

How My Income is Earned:

As you know already, I’m the only income earner in a household of five. This is why I feel additional pressure to make money in order to insure that my wife and three kids live a great life without money problems. This is also for this reason that I have built a sideline business to ensure stable income over time. My online business represents 27% of my overall income this year (as compared to 19% last year). It’s been three years that both my partner and I are benefitting from our online company even though we don’t pay ourselves salary. We are better off leaving the money inside the company to ensure its growth as opposed to bleeding it right away.

In 2012, our online revenues didn’t grow since Google hit both private ads and our traffic on sites that were doing well with Adsense. Nonetheless, we should make roughly the same revenues we earned in 2011 as we were able to generate additional sources of revenues such as our newsletter, affiliate programs and our eBook (now showing over 300 copies sold already!!!).

My other source of income is obviously my day job. I’ve separated this source of income into 3 different parts:

Base Income

My base income is super important since it is my main source of income throughout the year to pay my bills. I was able to increase it this year by having a promotion to work in private wealth. While I know I could make a lot more money if I was a broker paid strictly on commissions, the security behind a stable biweekly pay check is awesome when you have a young family. I just don’t want to stress with money and have to work 70 hours a week to compensate for this stress.

Bonus

The most interesting part of my day job is the time when I receive my year-end bonus. It is usually the most interesting moment. But not this year and this is my biggest disappointment of the year. I knew it was coming because I started a new book, but my bonus is nothing compared to what it was last year. I don’t even want to write down the drop in % as I would cry! But sometimes you have to accept taking a step back to move forward. I did this back in 2008 when I barely increased my overall income and suffered from another drop in bonus. In 2009, this career move allowed me to jump from high 60s to over 100K. I hope I’ll be right again this year!

Employer’s benefit

Most people don’t consider their employer’s benefit as $ in their pocket and I think they should. But I don’t consider all my benefits because some of them are too complicated to calculate. For example, I ignore my insurance and pension plan benefit. I know they count as an important part of my overall income but I can’t really put a dollar sign in front of it.

I do consider the interest I save on my mortgage because I work in the financial industry and I have an additional rebate on my interest rate. The other thing I consider is the “free” portion of my employer stocks paid by my employer. Since I cash out my stocks each year, this is clearly cash in my pockets!

My overall sources of income from 2011 to 2012 have been relatively stable. In fact, each part increased besides my bonus. Here’s how it is distributed:

This Year:

Last Year :

As you can see, the main difference between 2011 and 2012 is the importance that my bonus is taking in my overall income. On the other hand, if I consider how much I save in gas and transportation cost, there is a big part of my loss of bonus that is being compensated! Plus, I don’t feel tired anymore which is priceless.

What’s Coming for 2013?

I was happy to see my overall income staying well above 100K even though I’ve turned my back on a potential bonus over 35K for a 4^th year in a row. Overall, my other sources of income have proven that my “personal business model” is solid and can provide over 100K in income even in a bad year. A 6 figure income is great for a single individual but when you factor in that I have to compensate for my wife’s income, I’m not making more than any family household with two average salaries of 50K each.

In the upcoming year, I’ll be first working on increasing my bonus. I’m already working on a plan to generate a bonus over $25,000. It’s not going to be easy as I will have to do around 150% of my objectives while my book size is a quarter of what it should be. I’m still in the dark as of to what my exact objectives and payouts on bonus will be for 2013 so I’m currently working with this year’s metrics. I hope it won’t change much and that my plan will be successful. I have identified where I can get business to with my existing clients and made a list of potential clients I can approach. The rest is pure mathematics: the number of calls you make gives the number of appointments you get gives the number of deals you close .

My base salary and employer’s benefits are fairly stable over time and I should only see an inflation adjustment on them. I wish I could get more but it’s impossible in my position. The only way I can get a bigger raise on my base salary is to crush 2013 and build a huge book. At that time, I will be in a good position to ask for a raise. In the meantime, I’ll stay quiet and concentrate on my job!

As for my online revenues, I don’t expect a huge increase this year either. The reason being we are paying off our corporate debt at a super high pace. We were at $100,000 in corporate debt at the beginning of the year and we are now showing $73,000 as of November 1^st. We should continue to reduce our debts by about $3,000 per month for the next 2 years until we have nothing left owed. Then, I should see a huge increase from my online income, hehehe! More seriously, I expect to increase my online income by 5% only this year in order to leave enough liquidity to the company so it can pay back its debts. In 2 years, we will have a marvellous debt free money making machine.

Overall, my income goal in 2013 will be to reach $150,000. This won’t be as great as my record year at $176,000 but this should be enough so I can treat myself to a nice trip . The only reason why I focus so much on money is to be able to treat myself and my family. If not, there won’t be any reasons to bust my ass like I do!

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Money is the fuel, YOU are the engine

What if you could have all the money in the world? Would you be happier? Not necessarily, I agree with you. But what if you are not making a dime? Can you be happy? I don’t think so. This is why I’m saying that making money is important. It’s actually one of the most important things in life. Bear with me through this post and you’ll understand…

Life is Too Short To Wait for Retirement

I see too many people working hard all their lives with their dreams hanging in front of them. It’s like they are running on a treadmill with a carrot dangling at the end of a stick: they will never get it. You can’t just spend all your life saving money for the day you will retire and to finally enjoy life the way it should be.

For most hobbies, most passions, money is the first requirement. How can you travel without money? How can watch a sport or play sports for that matter, without money? How can you start a collection of coins, stamps or Star Wars’ bobbleheads without money? If you have a passion or a hobby, you need money to live it.

You can’t simply hope that you will achieve your dreams at retirement. What if you die before then? What if you are not healthy? What if you run into bad luck financially, so you still don’t have enough money to achieve your dreams at retirement? Wouldn’t this be the worst story of all?

This is why it is so important to make money: because you can achieve your dreams while you can still appreciate them!

Money Can Bring Health

I’m sure you have heard someone tell you that he “is better poor and healthy than sick and wealthy”. The problem with this expression is that most poor people have a higher chance of being sick and most rich people have better chance of being healthy. Therefore, I’d rather be healthy and wealthy than poor and sick!

Think about it:

-          You need money to eat fresh and healthy food (trust me, filling my cart at the supermarket full of chips and chocolate is much cheaper than buying fruits, vegetables and fish!)

-          You need money to workout (home gym or membership, you still need money to workout)

-          You need money to have time (if you take the bus to work 50 hours in a shop, you certainly don’t have much time to workout and cook healthy meals!)

-          You need money to pay for the best healthcare (not to mention that rich people can afford to stop working while they recover)

It would be too simplistic to think that money will save you from illness. But it will certainly prevent a part of it and make your life much easier if you become ill.

You Can’t Do What You Want Without Money

The frugal band will sing that you don’t need a lot of money to do what you want in life and that you can do other stuff that will be just as good. I can tell you that these people never:

-          Felt the adrenaline going skydiving.

-          Felt the emotion in theBellCenterwhen Michael Cammallieri scored the winning goal againstWashingtonin game 6 of the playoffs.

-          Saw their spouse completely astounded by your marriage proposal on the top of a tower inBruge,Belgium.

-          Lived 40 days with a backpack travelling Europe with a train pass.

-          Ate the best food, drank the best wine in the best restaurant of NYC with their best friends.

-          Saw the sparkles in their children’s eyes at Disney.

-          Spent incredible family moments on the beach during their summer vacation.

-          Etc. Etc. Etc.

I’m only 31 and my life is full of exciting moments and my memory is full of magic pictures with my wife, children and friends. But when I think about it, most of these moments would not have been possible without money. Of course, money can’t buy the moments. It can’t buy your spouse, your kids, your friends. But it can help create the perfect setting. It’s like a movie. Money doesn’t buy a good script, it doesn’t buy a good character but it certainly helps if you can hire a top actor and shoot in amazing settings.

I have a fulfilled life already. I can tell that I would be happy if I had less money than I have right now. However, I would be terribly sad to tell my kids that they can’t do the activities they want to. I would be sad to tell my wife she has to go back to work because we need more money. I would also be sad to skip our summer vacation and spend it at the park instead of going to Virginia Beach. The sand in the park is just not making it in my mind! This is why money is so important.

Best Memories and Feelings Are Often Bought

In the same train of thought of doing what you want when you want, my best memories and biggest feelings were definitely boosted by money. As I mentioned at the beginning of this post, money is the fuel but you are still the engine. If you are not working properly, read not happy, money won’t do much. But if you are running full out, read enjoying your life, money will boost your experience to another level.

Family vacations are cool. Going to the park, walking in the zoo and playing Yum with my children are all fun and cheap activities. But diving in huge waves, building a sand castle for a competition and walking on the boardwalk at night with your favourite ice cream create a little bit more magic in our hearts. It’s not the money itself, but what you can do with it. We live 5 minutes away from a small lake. We go there all the time to play with our children. It’s fun, it’s free, but it’s definitely not the beach on theAtlantic Ocean!

I truly enjoy a good meal with a good glass of wine. Each Friday, my wife and I sit down and talk for hours around a good meal and a good bottle. This is one of my favourite moments of the week. But if I wasn’t making money, I couldn’t afford my “weekend feast”. I would have to plan it, wait for it and eat pasta with a glass of water in the meantime.

What’s Life Without Money?

In short, I think it’s pretty boring. Months of deprivation, budgeting and calculating to make sure to meet your financial responsibilities doesn’t seem like the definition of the life I want to live. Without being extravagant, I think that having enough money to have fun and enjoy life at a certain level is necessary.

Since my wife doesn’t work, I’ve found that my magic number is slightly over the “average ideal income”. I figure that with around $125,000 per year for my family, we have enough to enjoy life as we want and not stress about money. Under that magic number, I would have to cut down in my expenses which would directly mean some frustration on my part. Over that magic number, I would do more with my money but not much. Not when compared to the additional hours of work required to reach that level. As long as I can work 4 days a week and make 125K, I’ll be happy!

Readers, what is your magic number? Do you think that making money is important? To which level?

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A few weeks ago, I read an interesting piece from Allen Tucker who says that it’s best to pay too much. After so many technological progress and the economic phenomenon of globalization, we all expect to pay less, not to pay too much. This concept is totally counter intuitive. Nobody wants to pay too much for something. When you compare what you have with your friends or your neighbour, you always want to be the one who got the deal.

I  Hate Paying Too Much

I’m the first one to be frustrated when I pay a premium on any goods. If I buy a TV, car or dishwasher, I have this stupid tendency to check flyers and rebates for a month following my purchase. When you think about it, I’m not adding any value by doing this. At best I’ll be wasting an hour or so checking for potential deals that I can’t even benefit from and at worst, I’ll find a better deal than I paid and be frustrated.

On the other hand, this “after the fact research” process is only the last step of a bigger process. Each time I have to make an important purchase, I take about a month to identify exactly what I want and establish what the market price is and what is a deal. So far, so good, I’ve been either lucky or just do a good job at researching the right deal in the first place.

But I Pay Too Much All The Time, Still…

Here’s an interesting twist. I truly hate to pay too much for something, but keep paying too much all the time. How’s that possible? Because I value things I buy and don’t want to go cheap. That was Tucker’s point when he says that he is paying too much for many goods he buys. It makes sense when you think about it: if you pay a higher amount for something, chances are that you are getting more quality and durability. What if you buy something and pay more than the average but it lasts a lot longer? Would it make more sense? I find that quality overcompensates for the price you pay Vs buying cheap stuff for the sole sake that it’s cheap!

Here’s a list of things where I really pay the price:

Suits – I’ve bought cheap suits and they don’t last and they look and feel like cheap stuff

Sporting Gear – I have had the same bike for the past 15 years

Electronics – I have the same TV for the past six years (my previous TV lasted 17 years!)

Food – It doesn’t last longer but I guess it will taste better!

Appliances – I have the same microwave for the past 15 years!!! My refrigerator is also pretty old and still running like a new!

Cars – I don’t go crazy with cars but I like them well equipped. It’s better for the resale value and way more comfortable!

Mattress – My sleep is not the same anymore since I paid $2,000 for a mattress!

Beware of Cheap

The hard part in today’s consumer environment is that some times, expensive is cheap and cheap is expensive. On the other hand, you can also go cheap on some stuff and end-up getting a lot more for your buck. For example, someone who knows how to invest, buying index ETFs or doing stock picking could do well and save a 2% fee charged on mutual funds.

There is no free lunch in life; if you save on something, it’s because there is something you are leaving on the table. If you take the investing example; you save on the management fee but you are also leaving professional advice and financial planning on the table. If you don’t get the advice along with the plan and you are still paying the 2%, then you are not on the winning team. If you don’t need advice and financial planning, then you don’t need to pay the 2% fee. I guess it’s the same thing if I was able to make my own clothes; I wouldn’t need to pay for higher quality suits! So I manage my own portfolio and buy suits

I guess I’m more trying to optimize my money rather than save it!

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