Dreams and goals

Posted on May 14, 2014 by Financial Underdog in family, silly.

An epic list of my dreams and goals

Dreams and Goals

Here are some of my dreams and goals (in no particular order) I’m trying to accomplish. Some of them are silly. Some of them are outright insane. Some are just mine, and some me and my wife share together. And some are rather simple.

Incidentally, not all of them have revolve around personal finance or investing although this is the main subject of my little blog. At the same time, if we ever get to financial independence status, achieving them might become a little bit easier.

1. Go whale watching on Vancouver Island

2. Visit abandoned city of Pripyat

3. Fully fund my kids’ post-secondary education

4. Create a successful Internet business with passive income

5. Complete post-secondary school

6. Cameo appearance in a movie (as “Police officer #3”)

7. Bring flowers to my grandparents’ graves

8. Become an angel investor

9. Spend some time working in Australia (and surviving it)

10. Teach my kids how to start and run a profitable business

11. Become a personal finance mentor

12. Drive an army tank (briefly)

13. Adopt a dog

14. Give $500 tip to a waiter/waitress on Christmas Eve

15. Compete in a power lifting competition on amateur level

16. Trace my ancestry and creating a family tree

17. Visit my extended family in Russia (aunts, uncles, cousins)

18. Buy my wife a brand new car as a surprise gift

19. Become financially independent

20. Sit on a board of a charitable organization

21. Start a personal firearms collection

22. Reach 190 lbs. in weight (and staying there)

23. Become a father

24. Finance an independent movie

25. Meet Kevin Smith

26. Visit North and South Poles

27. Visit Churchill, MB to see polar bears

28. Plant an oak tree in our backyard

29. Become a silent investor in a profitable company

30. Experience zero gravity (once again, briefly)

31. Take my wife to Paris for a birthday celebration

32. Accept an award

33. Build a cabin or small house with my own hands

34. Restore an old motorcycle

35. Start my own scholarship for young immigrants

36. Appear on Dragons’ Den and close a deal

37. Live abroad for one year

38. Sail from Vancouver to San Francisco with my family

39. Motorcycle trip from Spain to China

40. Reach $1,000,000 in net worth

41. Fly a jet fighter

42. Cycle across Canada

My wife bought me a motorcycle. Kind of.

Posted on February 7, 2014 by Financial Underdog in family, personal finance, silly.

For as long as I can remember, I always wanted to have a motorcycle.

I guess it’s one of these things guys like - motorcycles, battleships, machine guns, greasy burgers, and other gender stereotypes. Loud things and complete disregard for safety are very appealing to us - no wonder men don’t live as long as women.

When my wife asks me what I want for my birthday, I always say: “- No need to get me anything, unless you want to buy me a motorcycle.” I’m kidding, of course. And she always says, “- One day, when we have enough money, I’ll buy you a motorcycle for your birthday.”

And we laugh and go back to our daily lives.

However, for my birthday last week my wife gave me this:

My wife bought me a motorcycle

You’re probably now wondering if Mrs. Financial Underdog has somewhat cruel sense of humor. While she does tell me from time to time we’re having pie for dinner just to see me get excited for no reason, she’s generally a very kind non-cruel woman.

Then why would she give me a toy motorcycle?

As she quickly explained, while a real motorcycle is not exactly possible, it’s not always going to be this way.

And I completely agree with her.

See, right now we’re not financially set. We still have to go to work, have to make our own coffee because it’s cheaper this way, have to choose slightly cheaper detergent just to save $0.99. Every month we have to plan our spending - because we don’t have stacks of money lying around - and have to watch where our money goes.

At the same time, we’re doing everything we can to grow our investments in hopes that one day our money will be working for us harder than we have to work for our money (boy, that’s a bit wordy!). Every month we put a good chunk of our money away towards investments, throw some extra money towards the mortgage (more like bondage), and enjoy our simple lifestyle. No new cars for us, simple pleasures here and there, and a whole lot of dreams of things to come.

But one day it will change.

One day we’ll reach that financial independence everyone is talking about by following our plan. One day our investments will be producing a steady stream of income and work will become something we choose to do - not something we have to do. We will be able to take off and visit cool places once in a while. Maybe we’ll choose to buy ourselves some toys. And one day, I will choose to own that fancy motorcycle - and proudly ride around knowing that we did all the right things in the beginning of our journey, and now it’s time to enjoy the fruits.

We have to keep the future in mind - and stop focusing on today’s problems only. You can’t always look under your feet - once in a while you have to look up and see your destination getting closer and closer. Because this will give you energy and motivation to keep doing mundane “Left foot, right foot” routine every day and say “- Hey honey, we’re almost there. We’ll get there soon!”

My wife bought me a motorcycle

So, for now this little toy motorcycle will sit on my desk and remind me of our destination. Think of it as a symbol of that future, or a small advance against it. To be completely honest, I’m not even sure I’ll want to buy a motorcycle when we get there - maybe by that time flying cars will be all the rage. But it will sit here for now and remind me to keep going.

Left foot, right foot, left foot, right foot…

*****

PS: For those of you who thought this post is way too long to read, here’s a musical rendition of it featuring scenes from TV show “Kings of Queens”:

Why I call myself Financial Underdog

Posted on January 11, 2014 by Financial Underdog in family, personal finance.

Why “Financial Underdog”?

Underdog is defined in sports as somebody (or some team) that are expected to lose. The chances are stacked against them, and history of achievements is not quite there. In fact, it doesn’t even exist.

Financial Underdog

For example, the movie Rocky is about an absolute underdog Rocky Balboa going into a fight with a favorite (or top dog) named Apollo Creed. Apollo had everything going on for him - great track record, a whole team of coaches looking after him, great environment for training, and sponsor money to support all of this.

What about Rocky? Rocky (portrayed by Sylvester Stallone) was trained by an obviously crazy coach Mickey in a dirty gym, he jogged through dirty streets of Philadelphia dressed like a homeless person (seriously, have you seen his outfit?), punched dead cows instead of punching bag, and lived in a small dirty apartment. He was a nobody. Not exactly a recipe for championship - and because of that everybody expected Rocky to lose.

But a miracle happened - and Rocky put up one hell of a fight. Technically he did lose, but he was a true winner of the fight by lasting against Apollo this long and not going down. A guy from the streets went against the champion, and became the legend of the streets, a true folk hero.

Financial Underdog

What does it have to do with finances?

As somebody who grew up in a poor family in final years of USSR, I lacked common knowledge about money from day one. My parents never had much money (especially when the country was slowly breaking apart) and they couldn’t teach me how to manage it - which translated into very bad money habits for me when we came to Canada. If you can think of one stupid thing to do with money - I did it. For the most part, I simply didn’t know how money works and what to do with it.

My family came to Canada when I was in my early 20s - and I had to start my life from the very beginning with zero knowledge. Heck, I didn’t even speak English when I came here - and even right now I still have a fairly thick accent. Imagine trying to get your first job when you can barely speak English and have social skills of a newborn - not the greatest start towards financial success, am I right?

No university degree for me - I simply couldn’t afford it. No inheritance from a helping uncle. No high paying jobs for me either as those require skills and education. No slick investments or smart money habits.

But the dream is there

But the dream of becoming financially successful despite all of this is still there. Yes, I want to put up one hell of a fight. I want to achieve financial independence for my family, and leave a legacy. I want to prove that even if odds are stacked against you, there’s still a chance to win with money by working hard, investing wisely, and teaching yourself about money.

An average person by all means can become wealthy in this country. Even if you start at the very bottom, you can get a degree in street smarts through school of hard knocks. You may need to punch some proverbial cows - but it’s just the part of the process. There are mistakes to be made, and successes to be enjoyed. But even financial underdogs get their chance, and when it comes you have to strike hard and fast.

My name is Financial Underdog, and I’m working towards my degree in Street Smarts majoring in Personal Finance.

Goals and Resolutions - 2014

Posted on January 4, 2014 by Financial Underdog in family, personal finance.

Excuse me for being stereotypical…

Now that the Christmas insanity is over and New Year’s partying ended, I’ve decided to sit down and come up with a few goals and resolutions of my own - seeing that so many financial bloggers are doing it. After all, if everybody else is jumping off the roof, then why shouldn’t … wait, bad example.

They say the difference between goals and wishful thinking is that goals have to measurable, exact, and have a time frame. Unfortunately, not all of my goals qualify fully. Also, far from all of my goals and resolutions are centered on personal finance. While I mostly ramble about money (hence “money ramblings”), I think of other things too, you know!

My plan is to revisit these goals and resolutions one year from now and see if I missed any of them - and how badly.

Goals and Resolutions

1: Invest 30% of our income

This isn’t exactly new to us - we’ve been diligently transferring a set percentage of our paychecks into a special account reserved for investments for few years by now. It used to be a much lower amount though - if I’m not mistaken we’ve started with 5% just to see how it feels. Once we’ve gotten used to losing 5% of our income, we’ve upped the bar to ten - and so on. We’ve reached thirty percent not too while ago and I don`t think it will change much from here - we’ve already cut our lifestyle quite a bit, and my wife might be right (I hope she doesn’t read me admitting it) in a sense that we shouldn’t be focused on just saving and investing money - we should enjoy it once in a while too. She is one smart cookie, eh?

Also, all of our investment income (dividends, distributions, and growth) gets re-invested - and we don’t spend it on our living expenses - not yet at least. This is simply because we want our assets (little pile of money/retirement account/freedom fund) to grow as fast as possible to the point when it starts growing by itself or even without our regular contributions. Wouldn’t be wonderful to have money working for us as opposed to us working for money?

Short and sweet: Invest 30% of our paychecks + 100% of all proceeds

2: Update my blog on a weekly basis

When I started this blog, I thought I’d update it every month or so. But for some reason I feel the urge to do it more and more often - every comment here or every new Twitter conversation get me fired up like I just made a new friend. I do appreciate people helping me and providing feedback - I just hope this blogging thing doesn’t become an obsession for me. After all, it’s just a place where I sort my thoughts out and voice some opinions (sometimes rather strong ones) without being called a numbers nerd by my friends.

Also, I think my little DIY blog needs a bit of a facelift. But I have no idea what a good looking blog should look like. I know mine isn’t exactly appealing and hard to read - so I think I’ll invest some time (or money if I have to) into redesigning it to bring readability up. If somebody can suggest changes or share some wisdom, I would be absolutely ecstatic.

Short and sweet: Update this blog every week and redesign it to make it user-friendly

3: Lose 50 lbs. of weight by budgeting

No, I’m not talking about cutting our grocery budget to $50/month and starving myself into thinness (because I tried it before and failed miserably). Recently, I had a bit of revelation. I’m not sure if you’ve noticed it, but I’m a bit of a geek when it comes to numbers - to me not a lot of things are equally satisfying as balancing our monthly budget or calculating rate of return on some investment (even if this investment is buying pickles in bulk). What if I could use my superpowers (if being a numbers nerd can be classified as a superpower) for good?

What is the key to losing weight? Most experts will say it’s balancing input (food consumed) with output (physical activity). What if I start tracking my consumption on everyday basis and balancing it against the energy I use - either by increasing my exercise or cutting down on consumption? They say just by tracking the numbers, people usually drastically improve their eating/exercise habits.

So, as one of my goals and resolutions, I am going to lose 50 lbs of my weight by the end of the year. Currently sitting at around 240 lbs., my weight can use a bit of an adjustment (to put it lightly), and an entire calendar year is a reasonable target. If you think about it, it’s only 4.16 lbs. /month - or just about a pound a week. I’m pretty sure I can do it!

Short and sweet: Lose 50 lbs. of weight by the end of 2014

Goals and Resolutions

4: Read a new book every two weeks

I used to read quite a lot. Unfortunately, lately I’ve noticed that slowly I switched to listening to podcasts and even comedy shows. While entertaining, they bring no new information for the most part.

So, as of one of my goals and resolutions for this year, I will pick a book every two weeks, read it from front to cover, and ponder over the material read. To make my life a bit easier, I will favor audio books as they’re easier to consume for me as I do chores around the house or commute to work - perhaps I’ll even invest some money into Audible membership. To keep myself a bit accountable, I will even post short book reviews if they happen to be on the subject of personal finance or just money in general. I even picked a new book already and started reading it!

Short and sweet: Read a new book every two weeks and post reviews if related to finance

5: Practice a bit of “selective ignorance”

This is a bit of a wishy-washy goal. Another thing I’ve noticed about myself is that I spend too much time paying attention to things that don’t really matter to me. I’ll listen to a radio show about some phenomena in another country, start reading about it on Wikipedia, and pretty soon I will waste some good hours of my time over something I don’t really care about.

Goals and Resolutions

I’ve heard of low-information diet before, and I think it’s time to explore it. I should start asking myself “- How does this help me and my family reach our goals?” more often. Cause if it’s completely unrelated to me or my family, why do I even bother? And I’m not talking about going full-tilt and starting to live in a informational bubble without knowing what’s happening next door. But cutting down on informational noise can be quite beneficial to me, I think.

Short and sweet: Cut down on unnecessary and unrelated information intake.

Do you have any goals and resolutions for this year?

How Supermarkets Trick You Into Spending More Money

Posted on December 16, 2013 by Financial Underdog in budgeting, family.

Supermarkets can trick you into spending

While I have nothing against big box stores, every time I walk into a supermarket (Superstore, Safeway, Save-On-Foods, etc.) I have to protect my money. If you are like me - you don’t have a money tree growing in your backyard - the amount of money you can spend on food every month is limited. At the same time, big grocery stores are after your wallet in a sense they want to sell you as much product as possible. Solution? You have to look out for yourself, and stick to your guns - and it means recognizing how supermarkets trick you into spending more money.

Flashy discount stickers

How Supermarkets trick you

All big stores use flashy discount price stickers to trick you into thinking you’re getting a good deal. Sometimes these stickers are red, sometimes yellow. But quite often the actual discount given is either non-existent or very minimal. But psychologically we pay more attention to discounted items and grab them just because they have “discount!” sticker attached to them.

One of the good ways to compare one item to another is comparing it on “money per unit” basis. Since different products are packaged differently, “money per unit” measurement will tell you which product ultimately offers you a better deal. Real Canadian Superstore started posting these numbers on their price stickers and it really helps us when we shop.

For example, if one package of peanut butter sells for $4.00 dollars ($1.50/100g.) and another brand is larger and sells for $7 ($0.95/100g.), one quick look at “money per unit” number tells you the second product is a better deal. Of course, at that point the question is - do you really need this much peanut? In our case - definitely!

Large shopping carts

How Supermarkets trick you

Shopping carts have been around for a while - first shopping cart was introduced in 1937 at Piggly Wiggly stores in Oklahoma. Now, here’s an interesting thing - shopping carts used to be much smaller. Store owners noticed that if you make shopping carts bigger, people will buy more items without even thinking about it. As a result people buy more items than they need.

My advice to you? If you ever pop into grocery store for a small load, grab a basket. And always have a plan for your grocery run - make a list of what you need and stick to it at all costs.

Placing healthy veggies and fruits at the door

How Supermarkets trick you

All big box grocery stores do that - Real Canadian Superstore, Walmart, Safeway, and Save-On. Have you ever wondered why veggies and fruit are always at the door?

Shoppers’ behavior has been tested throughout the years. What researchers found is that if grocery store shoppers buy something relatively good and healthy right away, they’ll be more relaxed after it and more likely to buy something outside of the norm - say, potato chips or pastry.

As a side note, all supermarkets spray their veggies with water to make them appear fresh because most people equate “fresh” with water and shiny appearance. So, the veggies in front of you may appear fresh, while in fact they’ve been sitting there for quite some time.

How supermarkets trick you into being hungry

How Supermarkets trick you

Ever noticed how grocery stores always have a pastry stand right next to the entrance? They are there for a reason - to make you hungry. Hungry people buy more food - and grocery stores want to make you hungry while you’re inside so you’d buy more items. Nothing like freshly baked muffins or croissants in front of you to get your stomach going. All of a sudden, you’re buying giant frozen lasagna to take home and eat right away - that’s how supermarkets trick you without you even noticing.

My grandma always told me - never go to the store on empty stomach. Boy, was she right.

Tricky layout and design

There’s nothing random about how supermarkets are laid out. In most cases, you’ll find essential items (bread, milk, meat, veggies, etc.) in opposite locations. This is a tricky way to make you walk more - and in turn walk past all the other products. If all essential products were in one location, you’d out of the door in 10 minutes. But with a tricky layout most grocery stores employ, you end up picking up items you didn’t have in mind and slowly filling up your shopping cart.

On top of it, some of the stores use small tiles in some areas. Why? To make your shopping cart rattle loudly which in turn makes you slow down and spend more time inside the aisles. In turn, you pay more attention to the items in front of you and perhaps pick up one or two.

Have you ever noticed how meat and fish is often sold in areas that are painted white? This also has a reason, and in this case to make these items appear fresher. At the same time, other parts of the store can be painted in warm colors - apparently studies found these colors relax people and put them in a better mood.

They hide cheap products

Have you ever noticed how more expensive brands are always located at the level of your eyes? Since more expensive products have better margins (translation - more profit for grocery stores), they tend to place them just where you’ll see them right away - at your eyes level. These are the products people tend to grab first - if they don’t take their time and look around. Some of the best deals I found at Real Canadian Superstore were always located almost at foot level - where people rarely look. More expensive brands actually pay for prominent location inside the store - because they know a lot of us grab the first thing we see without looking at other items.

Supermarket music?

There’s a reason why most stores play music - and not just grocery stores. Quiet music relaxes you while you’re inside, and your mood improves. All of a sudden you slow down, and let your guard down. You start walking around and humming music while checking out the products. This almost always results in increased shopping.

This is actually widely used inside shopping malls. Almost all clothing stores play their own music picked specifically for the target audience of this specific store. If the store sells hip clothes and targets young shoppers, they’ll play recent hits. If the store is all about older and more sophisticated audience, they’ll play easy listening or some soft jazz music.

Impulse buying

So, you’re almost done. You’ve loaded up your cart, and you’re heading straight towards the exit. But first you stop at the cashier and wait for him or her to scan all your purchases. Take a look around - around yourself you’ll find inexpensive items (chewing gum, chocolate bars, drinks, magazines etc.). These are the items people like to reward themselves with for a long and painful process of shopping. When you’re spending $100 on groceries, a small chocolate bar doesn’t seem like a lot, and you grab it as a small reward for yourself. And that’s exactly why it’s there!

Morale of the story?

If you don’t have unlimited amount of money (and who does these days?), pay attention to your shopping habits. Mrs. Financial Underdog always writes down a list of items we need before we head out - and this list only drives our shopping as opposed to letting the supermarket drive our purchases. You have to be aware how supermarkets trick you into spending more.

Once again, I have nothing against big stores and supermarkets. But unfortunately, we’re at the opposite sides in this war - they’re fighting to take as much money away from me as possible, and I’m defending my money - my little soldiers - from them.

Did you know about these? Leave me a comment with some of your own thoughts!

Best personal finance software - my personal experience and what you should consider

Posted on September 18, 2013 by Financial Underdog in family, personal finance, Reviews.

Why do you need personal finance software?

There comes a time in every person’s life when he/she asks a simple question:

” - I work day in and day out. I volunteer for overtime when it’s available. Sometimes I leave for work when it’s dark, and come home when it’s even darker. My paycheck is actually quite decent. When I’m at the store I go for a generic brand of corn flakes as opposed to fancy Kellogg’s just so I can save $0.49 and yet I have way too much month left at the end of the money. Where do my money go and how can I wrangle them back?”

I know it happened to me. I just couldn’t quite figure it out - money comes in, and even though I don’t spend much on anything, it’s always quickly gone. Some people call it paycheck to paycheck living. So, following the advice I picked up in multiple books, I’ve decided to track down my own money (sounds like an adventurous movie!).

The usual approach is to purchase a computer program and upload transactions from your bank to get a realistic picture of where your money is going. You can also use spreadsheets (that sounds like fun, right?) if you’re good with Microsoft Office products. A good old notepad and a pencil will also do the trick if you are old-fashioned.

For a couple of years by now, my wife and I been using Mint.com to keep track of all our expenses and plan our cashflow. Mint.com is an online website that lets you keep track of all your finances, keep an eye on your balances, plan and budget your expenses.

Personally, I think tracking our expenses was one of the best moves we did to improve our finances - we felt like we got a pay raise by simply watching where we spend our money.

What makes Mint the best personal finance software?

- It’s absolutely free

Traditional software packages start around $50 and go up as high as $150. With Mint, you’ll never be asked to pay for anything. It doesn’t matter how many accounts you have, how many people in your family use it, or how many devices you use to access it. It’s free. Zero. Nada.

My understanding is that Mint.com makes money mostly by referring clients to services - credit cards, GIC investments, life insurance, and others. I have no need for such referrals so I simply ignore small banners.

- It’s very easy to use

Expensive software packages do offer an array of features. They’ll drown you in a sea of pie charts and break-even analysis. They’ll create complicated debt-repaying plans, and even project your expenses into the future.

But I prefer simplicity over sophistication. I don’t need to see a 90-day breakdown of my expenses by category or graph representation of how little money I have. Thank you very much, I don’t need pie charts to explain it to me. I simply need to know where my money is going on a monthly basis, make sure I’m not overspending, and send me a quick alert if bank account dips below a set mark. Keep your pie charts, they’re not as yummy as they sound.

Best Personal Finance Software

- It uploads all transactions automatically

You don’t have to upload or record transactions. This part is especially sweet for me because I just wouldn’t be able to keep up with the extra work involved in it. I know some people who use sophisticated programs (MS Money, Quicken, You Need A Budget to name a few), and all of them require you to manually download transactions or create transactions when you purchase things. To quote a recent viral video - Ain’t nobody got time for that!

Mint.com automatically downloads all transactions from all accounts, and even does a decent job of classifying your expenses - like putting Superstore or Save-on purchases into “Groceries” spending categories. Quite often you have to change it, but it literally takes 5 seconds on any given day.

- You can use it anywhere

When it comes to traditional personal finance software, you usually install it on your computer. In order to use it, you have to run it from that specific computer unless you buy a mobile application to sync your data. Also, if you’re need to install it on another computer - say you bought a new one or your wife would like to use it too - you’ll have buy additional licenses. Mint on the other hand can be open on any computer using a simple browser. Even if you are in Australia, you can quickly check it while sitting at Internet cafe.

- Fantastic features

Best personal finance software

Mint has a lot of built in features that I wouldn’t be able to live without - it allows you to create and stick to a budget, reminders for bill payments such as credit cards, and sends you email alerts if you’re overspending in any category or your bank account is below your set minimum.

Monthly budgets are very easy to set up especially if you spend some time and do it properly from the very beginning. Once you organized it the way you like it, setting up monthly expenses is a piece of cake and takes about five minutes every month.

Unlike other personal finance software products, Mint allows you to customize your budget with ease. Its simplicity is what really appeals to me - instead of modifying a gigantic chart of accounts in MS Money, you simply add or delete spending categories on the fly.

- It has a kick-ass mobile application

Best personal finance software

They also have an absolutely fabulous mobile application (or “app” as cool kids say) which comes in handy. We often use it when shopping to makes sure we have enough money in our budget and check account balances in one place (as opposed to visiting 2 or 3 banks online). Just like Mint itself, it’s completely free.

Some concerns about Mint.com:

- Privacy issues

Some people are concerned about privacy when giving away their bank information to an online service. And rightfully so - these days identity theft is a very serious problem. Personally, I have no such concerns. Mint.com is owned by Quicken - one of the largest personal finance software company in the world. If anything funny was going on with Mint, it would compromise millions of dollars they are making - companies like this take your privacy as serious as you or even more serious than you.

- Investments tracker isn’t very sophisticated

Mint also allows you to add investment accounts, but I completely ignore this feature and simply use Mint to control my cash flow on a daily basis. I feel no need to check my investments every day. So, my preference is to leave investment side of our finances completely out. If somebody needs to keep track of their brokerage accounts, there are more sophisticated tools for it.

- Cash is harder to track

If you use cash on daily basis, it might make things a bit more complicated - because in this case you’ll have to manually enter cash transactions into Mint. This can be rather painful for some people (including yours truly). Thankfully, me and my wife never use cash and switched completely to debit cards (and one measly credit card) and electronic payments between banks. This way Mint always captures all of our transactions, and lowers the amount of work we need to do to a minimum.

Conclusion (short and sweet):

Mint offers is a fantastic free tool to control your spending and watch your cash flow without paying for an expensive software package. You can use it anywhere you go - on your mobile (Apple or Android), on your home computer, or even your friend’s computer if you’re away (be sure to logout after you’re done). It will make budgeting and financial goal setting completely painless. If you like simplicity, you will like it. All of it makes Mint the best personal finance software in my opinion. Did I mention it’s free?

Pros: Absolutely free, lots of features, easy to use, completely automatic, and platform-independent

Cons: Lacks sophistication with investment accounts, doesn’t have tax component, and sends you occasional marketing pitches for financial products

Action step:

Mint.com has a demonstration website you can visit before you sign up. It has made-up bank accounts and transactions to give you a feel for features and usability. Give it a whirl, check it out! Once you see how useful it is, just sign up and start using it. You won’t look back!

What do you use to keep track of your finances? Please comment and let me know your experience!

The Tale of Two Christmases - Saving for Christmas Presents

Posted on September 16, 2013 by Financial Underdog in family, personal finance.

Are you saving for Christmas presents? It’s only six paychecks away!

Saving for Christmas presents

Just few days ago, I was out for a walk at the mall. Yes, I’m one of those people who sometimes pointlessly walks around the mall for no good reason - I’m not there to buy anything, I was basically trying to kill an hour or two. I do like to check out certain stores from time to time without actually buying anything - Chapters for books, Apple store for iMacs, electronic stores for all the gizmos, and couple others. You never know when you discover a good book - and new iMac’s are shiny and pretty!

So, when I was walking through Sears, I couldn’t help but notice an open door into their warehouse - and what I’ve seen shocked me a bit. Their warehouse already had Christmas stuff piled up! After initial shock, I exchanged a few words with a clerk (after he made sure I’m fine since I was a bit pale), and he mentioned that Christmas stuff starts arriving just about now.

And that made me think about how we used to buy presents…

Buying presents at our house 3 years ago:

Saving for Christmas presents

Three years ago, we did what most people do around Christmas - get stressed out about buying presents, spending too much money, and then paying off our credit cards well into February. My wife loves giving presents and is absolutely fantastic at finding something special for everybody. I on the the other hand wouldn’t voluntarily step into a mall around Christmas even if they were giving out free iMacs.

Typically, we would wait till December to even start thinking of presents, and that would translate into an obvious money problem - we wouldn’t have much left after all the expenses. Because of that, we’d be forced to put everything on credit cards which would guarantee no sleep for me until they are paid off - and it would cost us since it would be impossible to pay them off in one month. All of this would turn a pleasant process of buying presents into nerve wrecking mall trips and money-related bickering between me and my wife. Absolutely appalling, if you ask me.

Not to sound cliche, but there has to be a better way! And we found it.

Buying presents at our house NOW:

Saving for Christmas Presents

Step one: Make a rough list of all occasions throughout the year.

That includes birthday presents, Christmas presents, occasional visit presents, etc. for ourselves, my mom, my brother’s family, my wife’s family and a few of our friends.

Step two: Get a rough estimate on how much money this represents in total.

Some are small inexpensive presents, while birthday presents are usually a bit more expensive. Keep in mind any weddings coming up or special occasions. Leave some room for error too - add 20%.

(did you know an average American spends $646 on holiday gifts? Seems high to me!)

Step three: Open up a separate savings account linked to our debit card.

Every month transfer 1/12 of the figure from step 2 into this account automatically. This year it came to $130. Your figure might lower or higher - depends on number of people in your family and your standards which are always individual.

Step four: Enjoy stress-free saving for Christmas presents (and other occasions).

Buy presents with money in your savings account when the need arises.

Step five: Re-evaluate every year.

Sometimes the monthly transfer number needs to go up or down. I believe we started with $100, but brought it up to $130 last year.

What a big difference a little planning makes!

Now we’re never stressed out about buying presents because we always have access to money specifically saved for presents. Now my wife can freely buy presents when she sees a good one for somebody. It actually saves us money now since now she doesn’t wait till Christmas season to buy them - and can buy something that is on special at fraction of a price.

At the same time, the financial nerd in me is finally at peace - no longer I’m stressing out about spending large amount of money in short period of time and dealing with debt afterwards. No longer we’re paying interest on credit card purchases. No longer we’re bickering about gift buying during what supposed to be a family time. Life is good!

I strongly recommend this approach of saving for Christmas presents

Not only it will bring you fiscal peace around Christmas, but it will make your relationship stronger by avoiding unnecessary stress. Number one reason why couples fight in North America is fighting over money. One less reason to fight equals stronger marriage.

Think about it - if all the stores are preparing for Christmas well in advance, shouldn’t you preparing too? Good planning always makes life easier for everybody.

Now that Christmas is only six paychecks away, how about a little test drive? Instead of waiting till Christmas to worry about buying presents, how about saving for Christmas presents ahead of time this year? Figure out what you will be spending, divide this number by six, and put the money away - I promise you’ll feel more relaxed when the time comes! You can always go back to unstructured chaos of spending if you don’t like it!

- But what about buying presents for each other?

This is one of the drawbacks of this system - your spouse would be able to see what you buy him/her as a gift. We solved it rather simply - we basically tell each other when we’re buying presents for each other and promise not to look at online statements for a bit. Problem solved!

Family Money - Combined accounts vs. Separate accounts

Posted on June 24, 2013 by Financial Underdog in family, personal finance.

From my experience after talking with people or reading about personal finance online, there are basically two approaches to how people run family finances when it comes to family money.

Disclaimer: I`m talking about management of family money - if you`re in a boyfriend/girlfriend situation, or just recently started living together this doesn’t necessarily applies to you. I’m talking about people who live together as a family, in a serious relationship, and who may or may not have kids together.

Combined Finances - when family has a number of joint accounts (checking, savings, credit, etc.) and run their affairs (financial that is) accordingly. They pay expenses out of joint account, deposit paychecks into their joint account, buy things with that money, and save for the future by putting money aside into their joint savings account.

Separate Finances - each partner has a separate checking account where they deposit their paychecks and pay for their things out of it. Sometimes they have a joint account for family expenses such as car payments or house payments where they transfer portions of their paychecks. Most likely they have their own separate debts (school loans or credit cards) which they pay with their own money. They might also have a joint savings account where they deposit agreed-upon amounts every month. I’ve seen some extreme examples when people run their financial lives completely separate even though they’ve been living as a family for years.

Family Money

Now, personally I don’t understand how people live together as a family and don’t combine their finances. There are huge upsides to combining your finances and very little downside.

Benefits of running combined accounts:

Clarity. Having all accounts as joint accounts provides clarity to your finances. At any given point, you’ll know exactly how much you have, how much you owe, and what is your current cash flow. Doubling the number of accounts only muddies up the water and makes things difficult to see, let alone follow some sort of plan. Family money is complicated enough - why make it even more complicated by doubling number of accounts.
Ease of access. If my wife calls me and tells me that our Visa account is due tomorrow and I need to pay it, I have instant access to our account. If there was a problem with one of the transactions, call center folks wouldn’t even talk to me - because my name isn’t on the account.
Single plan of attack. When your family money are combined, it’s very easy to work out a plan of attack. How much do we want to have in the future when we retire (as opposed to how much I have to have and how much you have to have)? How much debt we have vs. how much you have and how much I have? The plan of attack becomes very simple - as opposed to doubling every single task and mudding the water.
Commitment. I think this is by far the largest benefit - when people combine their finances and become a family, they commit to certain goals (saving, investing, etc.), agree to specific rules (how much to spend and on what items), and become one unit of the society. I completely miss the point of starting a family and living separate lives financially - with separate goals and plans of attack. What, you miss feeling independent? Hate to break it to you, but that’s what being married is - commitment to your family. Family isn’t a joint partnership with independent partners.
Accountability. My wife and I are accountable to each other for our finances. If we agree to a certain spending pattern, we make sure we stick to it. Having family money separate would destroy any type of accountability we have - I’d have to be accountable to myself only. That’s what makes joint accounts great - sense of accountability for your family finances.

What is the downside of combined finances?

Basically, after living with my wife for almost seven years, I can honestly say there’s only one downside - buying presents for each other. If few days before her birthday she looks at our online budget on her phone or computer, she might see something that will give away the nature of the gift I’m buying - and same for me. Simple solution? We just tell each other before we buy any presents and promise not to check accounts online prior to gift giving. Easy as that.

So, call me old-fashioned (even though I’m in my 30’s), but I don’t believe in keeping family money separate. From family dynamics, from financial perspective - it makes sense. Combine it all, what’s yours is mine, and what’s mine is yours - there’s no other way in my opinion. I mean, there are - but they don’t make sense to me.

I’m The Financial Underdog, and I like clarity and simplicity.