Hey! You know me by now; I always think about how to make more money. I’m trying to get as many raises as possible from my day job and always looking for a way to make more money through my online company. After using my extra money to buy a lot of stuff, I am now calming down and started to think seriously on how to spend my extra income. Here’s my current list:

#1 Pay off my debts

This is the first time since I started working (back in 2003) that paying off debt is part of my priorities. Only a year ago, I was still trying to make more money to cover for my lifestyle. But I realized something in 2010; nothing is eternal. What if I can’t make a huge bonus at work next year? What if my online company starts crumbling down? What if interest rates hike big time? (I’m in variable rates on all my debts).

While these 3 examples are less likely to happen in 2011, I want to pay off my debts for another great reason: I want to reach financial freedom at a young age. Financial freedom is a combination of 2 achievements:

#1 Being debt free

#2 Having a recurrent income

While I have worked my way to building a solid income stream, I never looked at paying off my debts too much. It’s now time to clear the mark over my head.

#2 Invest in my house

I will use part of my bonus to make improvements to my house. I think it’s important because you spend most of your free time at home. This is why renovating or adding equipment to your home is a good idea. This year, I will work on my landscaping since it doesn’t cost much and I will also install central A/C. I know, I am talking about taming lifestyle inflation and simultaneously announce that I will spend a few thousand on my house…

But having A/C this summer is definitely a must. We had to sleep in the basement for more than 2 weeks last summer. I wasn’t super productive during that time!

What I also like about spending money on your house is that you don’t lose it entirely. When I renovated the basement of my previous property, I made back each dollar spent at the moment of the sale.

#3 Thinking of my kids‘ education

With my 2012 bonus, I will fund my kids’ RESP. I have been neglecting this aspect of my personal finance for too long already. Now that my RRSP is maximized and will be paying off a few debts this year, I will be able to use the 2012 bonus to make sure my kids will have a great future.

Education will definitely not be free and if you don’t save 15 years in advance, the bill will be pretty hard to cover when they reach University. In Quebec, we get a 30% subsidy from both provincial and federal governments. So if you invest $1,000, you automatically get $300 for free added to the account. Very interesting concept!

#4 Investing

A part of my extra income automatically goes to investing. It’s either by maximizing my RRSP or by not taking money away from my online company. While I want to drop my debt level in 2011, I’m still a firm believer that one should start investing before paying down low interest rate debts.

The stock market shows great investing opportunities (just look at my recent stock analysis over at The Dividend Guy Blog to know what I am talking about). I will see how the year goes but I might want to get back to my first idea of restarting a Smith Manoeuvre account…. We will see!

#5 Minimal rewards

There is one thing very important when you make extra money and it is to reward yourself. Extra money often means extra effort, extra hours worked and ultimately, extra sacrifices of time spent away from your family and friends. This is why it is important to reward yourself for what you do. In 2010, I went a little bit too far on the reward side of the equation (new big house, new sports car, new furniture and a huge load of clothing…). This year, I will do it differently!

What do you do with your extra income?

Are you traveling? Buying something? Saving? I’m curious to know what you do with your extra income?

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Woah! That’s it! Game over for 2010! It’s time to review how I made out, considering my financial goals for last year! At the end of 2009, I wrote about my 4 financial goals for 2010. Since I have had this blog, I am doing very well on the financial side. I don’t know if it’s related to setting up goals at the beginning of the year or the level of accountability since I am exposing my objectives to the world but this kind of post definitely improves my motivation & financial situation each year!

2010 Goals Reviewed

As mentioned, I had 4 goals. I’m happy to say that I was successful in meeting all of them! Here’s what happened:

#1 Paying off the loan from my parents

This was the toughest one. I had to reimburse the sum of $31,000 within a year because I didn’t pay back much in previous years. So I used my employer stocks along with the equity generated by the sale of my house to pay them back. You can say that I cheated a bit since I also had to use a low interest balance transfer credit card. So if you look at my current net worth, you will notice a substantial amount on my credit cards. This is something I am not proud off but I would rather owe money to the bank than to my parents, at this point!

#2 Increase my base income by at least 15%

This was also an ambitious goal since I have earned several raises over the past 8 years. My average annual income has increased 8% since I started at the bank 8 years ago. I had to exert a lot of energy to get my base income increased but I definitely think I deserve it. Why? Because I have succeeded in goal #4 (being a top 10 planner in Montreal) for a 2^nd year in a row.

#3 Increase my online income by 50%

If you read my post about how I went from 18K to 125K in 12 months, you will see that I crushed my objective once again. I must admit that I was pretty confident in this one. The company is growing at a very fast pace and we are looking for a great year 2011!

#4 Finishing in the top 10 financial planners in Montreal again

I have finished top 5 out of 90 financial planners. The way it was calculated was referring to the net business brought in during 2010. This means everything that comes out of my book was hurting my results too. Fortunately, since I take care of my clients, I didn’t have anyone transfer out.

2011 Goals Now!

In this post, I won’t talk about my company’s goals as I will break them down in another article. So this year, I’ll be following up on both personal and corporate financial goals!

#1 Paying off all my credit cards

A financial planner with credit cards debt, huh? That’s not very bright! For the past 6 months, I’ve been switching around between my credit cards and my low interest HELOC. This year, I want to get rid of those debts and start paying my HELOC for real. I thought of doing a Smith Manoeuvre but I have changed my mind recently since I really want to see my debt reduces. So here’s the plan:

- Use my January bonus in full to pay down debt (besides contributing to my RRSP) (about 8K, once the Government has served themselves!)

- Maintain my lifestyle in 2011 (good bye spa and garage… I might make an exception for central A/C though…)

- Pay interest only on my HELOC and use my capital payment toward my credit cards (that’s about $750/month)

- Use my employer stock contribution to pay down my credit cards in June (that’s about $575/month)

So by the first 6 months, I should have almost $16,000 paid off out of $22,000. I should be able to pay the full 22K by December.

#2 Increase my Net Worth to Over 200K

This obviously goes along with my 1^st financial goal but I want to increase my net worth significantly. At the moment, I am roughly at 150K. This means that I want to jump by 33% over the upcoming year. Here’s my plan to achieve it:

- Pay down $22,000 in debts

- My house value will increase according to inflation (that’s roughly 7K)

- My pension plan should increase significantly (I have been working with 2008 numbers in 2010 so early 2011 numbers should show an additional 10K)

- I’m making a 5k contribution to my RRSP (coming from my bonus)

- My online company should also increase in value (hopefully determining that it is worth 200K, so 100K each for my partner and I).

#3 Get in The Top 3 Financial Planners in Montreal – Make 150K

Doing the top 10 was done in 2009 and 2010. So far this year (our financial year starts on November 1^st), I’m having a huge year in terms of volume in. This is why I’ll try to reach the top 3 and get myself a bigger bonus. But this time, I won’t spend it.  I will use most of it to pay down my debt. I am usually able to get a part of my bonus in June, I will probably take it and clear a credit cards by then. At the same time, by succeeding, I’ll surely be in excess of 150K in annual income. This would be a great milestone (especially when I remember that I was making 37K back in 2003!).

That’s it for my personal goals; I’ll follow up with my online goals shortly. Do you think I should aim higher? Or that I am already putting enough pressure on myself?

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The time is upon us. Black Friday is so close. All of the American readers (and Canadians that plan on crossing over) are excited about some of shopping deals that are going to come up this Friday. It might finally be time that you get that new jacket, that new plasma TV, or the newest iPhone, that you’ve had your eye on for the past few months. If you have the money saved up and are excited about doing some shopping this weekend, allow me to assist you with your Black Friday shopping with a few quick tips:

Plan ahead.

Going out to the mall to walk around could be very dangerous if you’re not a savvy shopper. There’s not a more tempting work in the English language than the word, “sale.” Just the fact that something is on sale is not a strong enough reason to make the purchase. If you buy everything that’s on an “amazing sale,” then you’re going to be going home with a packed car (or van). It’s critical that you understand what you’re looking for before you decide to step foot into the mall. Remember that Black Friday is your chance to snag up those Christmas gifts for loved ones on your list or to make purchases that you’ve been waiting to make for a long time.

Use the internet to your advantage.

You can take advantage of the internet in a variety of ways this Black Friday. Don’t let the long line ups in store and the headache of finding a parking spot at the mall prevent you from taking advantage of some great deals. A few ways the internet can benefit you with your shopping are:

Discount codes.

Discount codes all over the place. Every time that I go online I find discount codes for various retailers. Now the big question is: how can discount codes help me? The way I see it is that saving a few dollars here and there is always beneficial. Whether you find a certain percentage discount or a deal that you may have not heard of, you will still be better off.

Free shipping.

Why pay for shipping? Gone are the days where shipping costs take up a significant chunk of the final price paid. This holiday shopping weekend you need to use the internet to find as much free shipping as possible. The best part is that most sites will offer free shipping as they compete with each other.

Comparison shopping.

Comparing prices can be a bit difficult when the mall is completely rammed and you’re having difficulty just getting around the store that you’re already in. You can use the internet this Black Friday to compare prices between retailers to see where the best prices can be found. This way you can save even more money than the average Black Friday shopper.

Take advantage of Cyber Monday.

Since we brought up the internet, let’s talk about Cyber Monday. Those with a family or with obligations won’t exactly be able to stand outside at 2 in the morning waiting with the other maniacs. Many of you reading this either don’t have the patience to wait in line all night & day or simply hate going to malls. This is why you can save money altogether by avoiding the Black Friday rush and holding out for Cyber Monday.

What do you think? How do you plan on saving money this holiday shopping weekend?

(photo credit: Jason Tester)

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A scant 5 weeks and you will be comfortably installed on the couch with your glass of wine (a good one if you are the host, a risk if you are an invitee ) and you will witness one of most beautiful things in the world; a child’s reactions when they are about to open their Christmas gifts.

I like Christmas, I always have. I like this time of the year when you have an “excuse” to see all the people you want (and sometimes that you don’t ). What I like about this excuse is that generally, people go the extra mile to make sure they make room in their agendas to get together. We always try to host several suppers with our friends and family during this time of the year.

This is what money is for

Some say that Christmas has become a huge parade of consumption. It is a capitalist’s favorite holiday. The trick is that they are right. Christmas is a commercial challenge. Every year, they start sooner and sooner. They used to respect Halloween and wait until November 1^st before putting Christmas ads and decorations in stores. But this year, I saw Santa next to Freddy Krueger’s costume…. But I don’t care, I like Christmas for what it really means anyway .

On the other hand, Christmas is the perfect example of my perception of money; it should be used to create some magic around you. While I *sometimes* look at my budget and try to control it, I rarely manage this during the holidays. I spend a lot of money because:

#1 I like to buy great gifts for my kids (Don’t tell them but they getting an air hockey & baby foot table (William) and a child size doll house (Amy)). The glitter in their eyes are priceless.

#2 I like to buy great gifts for my friends and family (Too many people read my blog now, I can’t disclose this information ).

#3 I like to host several parties and dinners (having all my friends grouped around my table is the gift I give to myself for Christmas each year).

#4 I like to give to charity (each year, my partner and I make donations to 2 charities of our choice). We gave $200 last year, I hope to give even more this time.

These 4 reasons for me to spend money on Xmas have the very same goal; to create magic and make people happy. I don’t mind much about money, yet it helps to create smiles all around me and I really appreciate this .

Do you limit yourself during the Holidays?

As you know, I am very bad with limitations. I consider that we should live our lives in a sports car at 100mph . During the Holidays, I don’t work out, I eat a lot, I drink a lot and I spend a lot. And you know what? I’m having a lot of fun spending all my time with my family and friends. What about you? Do you try to remain in control? What do you do during the Holidays?

This article was part of a “finance and holidays group project” coordinated by Go Banking Rates.

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“Hi, my name is Mike, and I am suffering from a Lifestyle infection. But before I start with my lifestyle problem, here’s how I realized that I have a problem”

I was having a beer with 3 of my friends the other day. This ritual goes way back, it started while in University (this was 7 years ago!). We all went to the same school but we now work in different industries. The thing we have in common is that we all make over 100K annually and, to be honest, I am the one with the lowest income . However, I am the one with the most expensive lifestyle…

Rumor has it that someone who makes 30k per year will spend his salary. This is not hard to believe; once you have paid the rent and for transportation, you don’t have much left over with this kind of income. The rumor also says that someone who makes 100K will find a way to spend it all (and even overspend!). Well in the case of my friends, I can tell you that it’s the opposite! They got used to living off lower incomes and save most of their bonuses and leftover income. They use this extra money to:

- build a down payment for a house

- build an emergency fund

- pay off their debt

What is lifestyle inflation?

Lifestyle inflation is when you start making more money and instead of using it effectively as mentioned above, you start increasing your lifestyle. A bigger house, a new car, furniture payments, a TV amortized over 60 months, more activities for the kids, etc.

All these new expenses become a burden as you now need to make more money to support your new lifestyle. This is why it is called inflation.  I call it a lifestyle infection when it becomes too difficult to support.

This is when the train hit me; I am infected!

Lifestyle inflation is probably the worst sickness in North America. It’s hard to see the first symptoms, it grows fast and when you realize that your lifestyle inflation has become an infection, it is almost too late to recover from it.

After I moved into my new house this summer, I knew that I had spent a little bit too much of my bonuses and extra income coming from my online company. I was getting out of a tough period when I switched jobs, got my CFP certification, finished my MBA and had a 2^nd child. Let just say that I had the urge to enjoy life and, for the first time, I started to borrow not only to build assets but just to enjoy myself.

Getting infected by lifestyle inflation

Now that I have my new house, my new car (and my sports car on top of it), I know need to slow down. I just realized that I seriously need to do get well as during the past 4 weeks, I have suffered many expenses over a short period of time:

-$1,500 for a washing machine and dryer (totally unexpected)

-$5,000 in municipal and moving taxes (they told me it would be payable in January 2011!)

-$300 in car maintenance (better be ready for winter)

-$1,000 in notary fees to write my will (in case winter or my other bills kill me)

As I have mentioned before, when you realize that lifestyle inflation is getting to you, it’s almost too late…. The train of my lifestyle just punched me in the face this month.

Recovering from a lifestyle infection

Over the past 2 years, my income has been increasing dramatically. My 2007 tax return showed an income of about 65K and my 2010 will be about 120k. The problem is that I have increased my lifestyle according to my new income. Fortunately for me, I will take control of my expenses before the infection takes over completely. Starting in 2011, for the very first time since I started working, I’ll be concentrating on paying off my debts. This means that:

- I will use my extra income from my online company to increase my line of credit payments

- I will use my entire bonus (payable on Jan 2011) to pay off my credit cards and make my RRSP contribution (I wanted to go on vacation but this won’t happen)

- I will use my next raise to increase my debt payments

- I will delay all my projects (garage, vacation, spa, central A/C) until I can pay them cash.

House That’s Too Big

Many people often fall into the trap of buying the biggest house they can possibly afford. This sets them up to encounter problems if the budget gets tight. Not only will home repair be an issue, especially for large older homes, but the cost of furnishings and the need to update appliances could be disastrous in hard times. Having the prestige of a large glamorous house could be tempting us into decades of poverty.

Lenders won’t tell you, but they tend to approve mortgage loans based on what you could theoretically afford, not what you should really be spending. Just because you are approved for a home loan does not mean you can truly afford to buy the home. If there is any dip in income or a flood of unforeseen expenses, making the huge mortgage payment on time when your funds are already stretched thin becomes much more difficult and you run the risk of losing your home.

Do You Suffer from Lifestyle Inflation?

Have you been infected yet? How do you manage your extra income? What is your trick?

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