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How I organize my personal finances

Posted: - Modified: | finance

Update: I found the image!

Mia is learning more about personal finance. She came across my post on my financial network map and virtual envelope system and wanted to know if I had a copy of the image. Unfortunately, I don’t seem to, but it’s as good a time as any to post an update.

What’s changed in the last two years? What have I learned about personal finances?

One of the key things I think people should learn when they’re mapping out how they organize their money and how they want to organize their money is this:

The logical organization of your money doesn’t have to be limited by the physical organization of your money – which bank accounts, which jars full of coins, whatever.

I make my logical decisions first: how much to save, what to save for, what levels of risk to accept. Then I use those decisions to guide how to organize my money: chequing, savings, GICs, investments; registered, non-registered, tax-free, etc.

I use a virtual envelope system to keep track of what I’m saving up for and how much I’ve budgeted for regular expenses. I like this more than a straightforward budget because of the flexibility. If I have a surplus in one category (say, I don’t sew as much), or if I need to spend more in a more important category, I can move money around.

Current envelopes (no particular order):

  • Retirement: maximize RRSP room every year
  • Medium- and long-term investments: non-registered
  • Charity
  • Sabbatical: replace one year of income every 7 years
  • Household
  • Internet: web hosting and domain names
  • Phone: cellphone service
  • Pet care: cat food, vet visits, long-term savings (self-insuring our pets)
  • Travel: visiting family
  • Personal care: clothing, supplies, health, massages, etc.
  • Hobbies
  • Dream: Larger expenses worth saving up for; experiences
  • Play: Miscellaneous expenses

I track almost all my expenses, with miscellaneous cash expenses grouped together if I can’t categorize them properly.

I keep my financial data in plain text files using John Wiegley’s awesome ledger tool. It’s very geeky. I use it because I can quickly answer questions like:

  • How much do I spend on groceries each month?
  • What are the balances in my virtual envelopes?
  • At what prices did I buy my index funds?
  • How much did I make last year after tax?

I use more financial institutions now. It does take me a little bit of time to check on my accounts at all of them, but I think the benefits outweigh the costs. Here’s how and why I use each of them:

  • ING Direct: I’ve been using ING for savings for a while, and I’ve also shifted my payroll direct deposit to the chequing account I created. I use ING because of decent rates on GICs, the ease of creating sub-accounts, and instantaneous transfers between chequing and savings accounts. I don’t want to make it my only chequing account, though, because the bank machine network isn’t as wide as the other banks.
  • PCFinancial: I used to use this as my main chequing and savings bank before I moved to ING. I also used to use this as my primary credit card before I moved to MBNA. I keep these accounts around mainly so that I can withdraw cash easily.
  • TD Canada Trust: I have a chequing account and a USD account here. The chequing account has the minimum balance needed to avoid fees. This account is mainly to make it easier for me to invest at TD (see TD Waterhouse).
  • TD Waterhouse: I switched from TD Mutual Funds to TD Waterhouse so that I could hold investments in my tax-free savings account (TFSA). I have three types of investment accounts here: my non-registered investments, my tax-free savings account, and my registered retirement savings plan. All of them currently hold TD e-funds, but I may shift to ETFs later on.
  • MBNA: The MBNA Smart Cash credit card gets me 3% cashback on groceries and 1% cashback on everything else, beating PCFinancial’s effective 1%.
  • Sun Life: Sun Life holds my defined-contribution pension plan from work. I maximize the IBM match, but I keep the rest of my long-term investments at TD because I get lower management expense ratios for similar index funds there.

Overall, I’m at about 6% cash, 20% GICs, 49% Canadian index funds, 9% US, 9% international, and 7% bonds. 31% of that is in my RRSP. It skews a bit more conservative because of the GICs.

Update: Here’s the old map:

Here’s what that map looks like now:

It takes me 15-30 minutes a week to update my accounts, reflect on my expenses, and review my goals. I like the steady progress.

Good personal finance is boring. ;) It’s mainly a matter of time: saving up, adapting to changes, letting interest compound, learning more… The next thing might be to move money from index funds to ETFs in order to take advantage of the teensy difference in management expense ratios, but it’s no big deal. I’m on track to make my savings target this year. I can’t do anything about the markets, but I can do something about how much I save. We’re getting better at what we spend on, too, as we learn more about what we value and enjoy.

What have you learned about personal finance?

Stuff or experiences

| analysis, decision, finance, life, reflection

Soha wanted to know what I thought about the differences between spending on stuff and experiences. This took me several drafts to figure out, and I don’t think I’m all the way to a clear understanding yet, but I’m trying to say something I haven’t really found in the personal finance books and blogs I read.

Stuff or experiences? Neither. It’s a false dichotomy, and one that often starts with the wrong question: “What will make me happy?” If you aren’t happy, it’s very difficult to buy happiness. Probably impossible.

What will make me happier than I am now?” – is that a better question? Not really. What’s “happier”, anyway, but something that draws an ever-moving line between you and some ideal?

I like this question instead: “What do I want to learn more about?” No guarantee of happiness, no pursuit of happiness, just curiosity. Happiness doesn’t have to be pursued. It just is. Happiness can be a chosen, developed response. So what I decide to spend money or time on is determined more by what I’m curious about.

I confess to having a strong distrust for people trying to sell me ways to happiness. A designer handbag won’t make me happy (or happier). Neither will a three-week vacation of idle relaxation on a pristine beach. Quite possibly even an enlightening weekly course on meditation wouldn’t do the trick. My life will be a good life even if I never stay in the best suite in a five star hotel, see the aurora borealis, or learn to fly a plane (ideas from Richard Horne’s “101 Things to Do Before You Die”, which does have amusing forms). It will simply be different if I do, and that only matters if I can do something with the experiences and ideas I pick up and recombine.

In fact, I’d rather spend on stuff – the raw ingredients of an experience – than on pre-packaged experiences. I’d rather spend on groceries for experiments than on a fancy meal at a restaurant or a cooking class with a famous chef. I’d rather spend on lumber and tools to build a chair, than spend on a cottage rental. Turns out this is based on sound psychological principles: we value what we work on more than what we buy. (For more on this, read Dan Ariely’s “The Upside of Irrationality.”)

You can’t untangle good stuff from experiences. The bag of bread flour I buy leads to the experience of making home-made buns, the experience of enjoying them with W-, and the lasting enjoyment of developing skills and relationships. Fabric and thread become simple gifts accompanied by stories.

Besides, it doesn’t have to be the question of what you want to spend money on. That’s just a matter of budgeting. Many things are possible, but you may save up a little longer for things that require more money. What it really comes down to is a question of time: do you want to do this more than other things you could do? (For example: yes to cooking and gardening; a theoretical yes to improv, but it’s not as high as other things on my list, so I focus on other things; no to the massage deals I see on when I wander by.) If yes, then budget appropriately. Don’t get distracted by low-cost, low-value activities or expenses. (Or worse: high-cost, low-value ones.)

If you feel you’ve made a mistake about spending, don’t beat yourself up over it. Learn and make better decisions next time. Not saddling yourself with consumer debt helps, as debt has a way of multiplying regrets. Stuff can be second-guessed more than experiences can, but it’s even better to break the habit of second-guessing yourself. Think of your sunk costs as tuition. You’ve paid for the learning, now go and use it.

Money can be considered in terms of time, too. Is the incremental benefit you might get worth the opportunity cost of enjoying other things earlier, the compounding growth you may give up, or the corresponding days of freedom in the future? (For me: yes to some wedding photography in order to reduce friction, but no need to get the top wedding photographer; yes to a wonderful bicycle I feel comfortable with; no to the latest version of the Lenovo tablet, although I may reconsider in a year or two.)

Stuff or experiences? Start with what you want, not what other people want to sell you. Treat it as an ongoing experiment. Evaluate your purchases and improve your decisions. Think about what you want to spend your time on, not just money. Good luck!

2011-04-24 Sun 16:45

Book: Let’s Get Real About Money: Profit from the Habits of the Best Personal Finance Managers

Posted: - Modified: | book, finance

Let’s Get Real About Money: Profit from the Habits of the Best Personal Finance Managers
(c) 2008 Eric Tyson
FT Press, New Jersey
ISBN: 978-0-13-234161-5

My expectations were low. The subtitle “Profit from the Habits of the Best Personal Finance Managers” made me think of celebrity-focused “secrets”-type books with more fluff than content. But hey, it was on the library bookshelf, so I picked it up anyway. I’ve found all sorts of gems in unlikely books, and I’ve skimmed my way through seemingly-solid books that proved to be disappointments. It’s easy to take risks on books when they’re free. ;)

I was pleasantly surprised by what I found. The book has a lot of practical advice on money and relationships, family, raising savvy kids, spending plans, frugality, investment, insurance, and learning more. Well worth a read, and possibly one of my new recommendations in this area.

I’ve been thinking about whether I’ve got the right balance of saving for near-term expenses, investing for the future, and enjoying the present. The book has an entire chapter on this (pp.103 to 112). I particularly like the section on reflecting on whether you’re postponing achievable dreams, and the quote:

It is very well to be thrifty, but don’t amass a hoard of regrets.

  • French poet, Charles D’Orleans (quoted on p.118 of Let’s Get Real About Money)

I’m reminded of Ramit Sethi’s story about how some people set aside money for meeting interesting people. Might be a fun experiment, although perhaps not to that scale. Ditto for learning and experimentation, which I do explicitly save for, and which has paid off quite a bit in terms of interesting life experiences. So I’m not doing too badly in this area, and I’m continuing to learn.

There are useful tips on p131 on keeping saving in proper perspective. Here’s the summary:

  • Understand the standard of living that can be provided by the assets you’ve already accumulated.
  • Get smart about investing your money.
  • Go on a news diet.
  • Regularly buy something that you historically have viewed as frivolous but which you can truly afford.
  • Buy more gifts for the people you love.
  • Go easier on yourself and family when it comes to everyday expenses.

This year’s probably going to be pretty easy to plan for, actually, because we’ve got the two big trips planned (Netherlands and the Philippines), and we might look into improving the insulation of the house. We’re also saving up for other adventures over the next year or two. Big rocks. It’s easy to plan other things around those: perhaps piano lessons, sewing lessons, gardening experiments, and woodworking projects.

Anyway… “Let’s Get Real About Money” is a good read. Try the self-test in front, and check out the chapters on insurance and managing risks. Have fun!

2011-01-13 Thu 21:22

Personal finance

Posted: - Modified: | finance, life, reflection

So, about this influence map thing:
(click for a bigger version)

I’ve written about introspection and goals. Now to write about personal finance and planning!

I enjoy learning about personal finance. I love balancing my books, evaluating my spending, and even doing my taxes. I’ve set up my retirement investments and a good opportunity fund. I live a simple, frugal, and abundant life. 

What I like about personal finance isn’t just the dollars and cents of it, although I do enjoy working with numbers. I like the way decisions help me understand and clarify my values. Is that really worth spending on? What do I want to save up for? What would make my life better? How can I use money and/or time (they’re very closely related) to make other people’s lives better?

How did I get to this point?

Relatives: I learned a lot about personal finance from our relatives on both sides of the family. People had different kinds of luck. Sometimes they struggled with finances, and they turned to my mom for help and advice. Sometimes they did well, and I saw how perseverance helped them make the most of opportunities. Sometimes, they were blindsided by sickness or accidents, and I learned that I needed to prepare.

I learned from the stories my mom and dad told me about growing up in very different circumstances. For example, my mom told us how she used to walk back and forth in front of one family’s house hoping to be invited in for lunch, and how her mother used to make and mend her dresses until the fabric fell apart. My parents told us stories about starting their business with PHP 1,000 and a borrowed camera, and how they built it from the ground up. I liked how they saw money as a tool to create or pursue opportunities, not as an end in itself, and I learned a lot from that.

House: Another story my mom told me was about how she and my dad bought the house which eventually grew into the studio. It was the worst of times – martial law and the assassination of Ninoy Aquino—but my mom and dad realized that they still liked the Philippines more than anywhere else. So while real estate was at the bottom, my parents scraped together enough money to buy the property they had been renting. I remember my mom telling me how she avoided debt as much as possible, using savings and reinvested profits to grow.

This reminds me of another story my parents like to tell, and which my mom has shared on her blog:

There were two entrepreneurs, one Filipino and one Chinese. They both had a “sari-sari” store (a humble variety store that sells, in retail, only small low-priced everyday items).

After a year, the Filipino used the profits of his store to buy himself a TV set. The Chinese man reinvests his money into the store, and turned his “sari-sari” store into a mini-grocery.

After the second year, the Filipino bought himself a second-hand car while the Chinese continued to commute using public transportation. He expanded his store, while the Filipino still had the same “sari-sari” store.

After the third year, the Filipino bought himself a house in BF Homes (a medium-level suburban subdivision) while the Chinaman continued to live in a tiny room above his store, which was by then, close to looking like a department store.

At this point, my husband butted in and said, “You see, the Chinese way is better,” to which I replied, “Better for the business but look at the two and see who is smiling.” It was easy for the three of us to reach the conclusion that the Chinese knew how to do business, while the Filipino knew how to enjoy life.

“Let’s have a Chinese decision,” John said. “Let’s offer to buy this house. After all, the studio is here, we won’t need to transfer, we might lose clients if we transferred, we won’t have to change business forms and stationary, etc.”

“Okay”, I said, “for now, we will have a Chinese decision, but I hope someday, we can enjoy a Filipino decision.”

The Chinese Decision, Harvey Chua

This taught me about the power of reinvesting and the value of enjoying the rewards.

Passbook: I remember my mom opening a savings account for me and showing me the regular deposits in a small passbook. I didn’t do much with it, but I remember realizing that you can have money even if it’s not in your wallet, and it’s great when it grows without much work.

Potlatch: I remember reading (in Childcraft, of course – loved that series!) about a Native American custom called the potlatch, where people demonstrate their status by giving away or burning (!) expensive goods. I liked the part about providing for others and how it all balanced out, but I wasn’t sure how burning goods made sense. Some cultures value frugality, too, and they provide an interesting contrast.

Monopoly: Our childhood games of Monopoly shaped my drive towards financial independence.

My mom occasionally tells a story about how we played Monopoly when my sisters and I were growing up. In the game, my eldest sister often gave my parents investing advice, my middle sister kept giving her money away, and my parents would often end up giving me money. With a seven-year difference between me and my eldest sister, I suspect that the finer points of real estate value, probability, and negotation were lost on me, and my parents probably just wanted to help me stay in the game. (Saling pusa.)

My mom probably sees the story as a wonderful example that three children can have very different temperaments. For me, that story’s one of the reasons why I think about money a lot. I plan and save so that I can enjoy financial independence. I find it difficult to accept gifts that feel extravagant, because I don’t want to be the spoiled youngest child. I keep my life simple and live within my means.

It also showed me that although luck can change the situation a little bit, once there’s a bit of an advantage, it’s easier to succeed if you’re successful and harder if you aren’t.

Parents: I learned a lot from my parents’ decisions, and I also learned from their partnership. My dad’s more of an generous and impulsive spender, while my mom is the one who budgets, saves, invests, and keeps records. It works well for them, and they’ve figured out how to avoid the control conflicts that often challenge other couples with different spending styles. My dad has come to enjoy Suze Orman’s show (particularly the part about whether people can afford something or not), and he’s even made jokes about it, like whether he could afford to buy a La-Z-Boy recliner for my mom. (“Mr. Chua, go buy your wife a La-Z-Boy!”)

Books: I learned a ton about personal finance from books, of course. I devoured all the personal finance books my mom had, and even today, I enjoy reading things I pick up from the library. Most of the personal finance books cover the same basics and I’m happy to keep my finances boring (index funds, etc.), but sometimes I come across interesting insights. Blogs and forums are great for ideas, too. Books give you the “bones” of a good strategy, while blogs and forums are good for figuring out more about what you want and what’s worth spending on.

My favourite personal finance book is “Your Money or Your Life'”, which has a particularly clear explanation of how to evaluate your expenses and calculate how much of your life you’re swapping for the things you have.

I also remember reading Virginia Woolf’s essay, “A Room of Your Own”. It talked about the freedom you can have by having your own money and a space where you won’t be disturbed. I remember thinking: I love what I do, but I’d still like to save up enough money so that I can freely do what I want to do.

I like what another personal finance book suggested: preparing a bare-bones plan, a comfortable plan, and a realistic plan. The bare-bones plan gives you confidence and a safety net, the comfortable or luxurious plan teaches you about what you value, and the realistic plan helps you enjoy some of that luxury without going overboard.

School: I liked math in grade school and high school, although calculus and I had a bit of a fight in university. Because math didn’t scare me, dealing with numbers in my personal life was okay, too.

I remember how my parents used to help us with math by translating exercises into real-life situations. That helped me learn, and it also showed me that math is useful.

Another story from school: my mom told me about how they were surprised by a bill from the school canteen. Apparently, my middle sister had negotiated her own line of credit with the canteen staff and had forgotten to tell my mom. She used it to not only buy extra snacks, but occasionally treat her classmates. I learned that negotiation skills are awesome, but surprises might not necessarily be so.

Credit card: My mom was always very firm on this. Credit cards are useful, but never carry a balance on them. I never have. She also taught me about keeping enough in my checking account to be safe from overdraft fees, and never buying anything unless I have the money to pay for it. I remember realizing that even though my parents signed for things, they didn’t get them for free, and they earned the money by working hard.

Travel: I learned a lot from how my parents saved up for and planned our big trips. We stayed in youth hostels instead of hotels, ate sandwiches instead of eating in restaurants, and walked or took public transit instead of taking cabs. This meant that we could enjoy more days on our vacation, and we had a more local experience, too. I learned that you don’t have to spend a lot in order to have a great time. I also learned a lot from the way my sister saved up for her trip to South Africa. Normally more of an impulsive spender, she became very careful with her spending. I remember how she shared with us that she was about to buy a hamburger, but then she realized that if she didn’t buy the hamburger, she could enjoy one more meal in South Africa. =) She also told us stories about how she backpacked and lived frugally while in South Africa, making the money last as long as she could. I learned that a clear and vivid goal can really help you examine your spending decisions, and that decisions have opportunity costs.

Immersion: In university, we all went on immersion programs, spending a few days living among the poor. Some of my classmates lived in the countryside. My group lived among the urban poor in one of the city slums. Many of my groupmates couldn’t take it, trying to soften the experience by bringing lots of canned goods or taking a breather by escaping to a nearby mall. Aside from being a little self-conscious about my accent and the attention we drew, I was fine with staying there and sharing people’s lives, eating rice and sardines with my hands, showering with a dipper, and learning how to prepare the food that they sold in mobile street carts.

I remember thinking about how my classmates were shocked (shocked!) once they stepped outside our lives of relative privilege. I remember listening to my host mother’s wry reflections that some families work hard to get out of the muck and some families drink and gamble themselves into oblivion or destruction. I remember the parish priest talking about how there were just so many children, and my host mother saying, ah, well, what can people do? I remember walking past shanties with shiny DVD players and karaoke machines, thinking about the story my parents told about the Chinese entrepreneur and the Filipino entrepreneur. I remember how some people were happy and some people were angry and some people were sad, and it was just like all the rest of the world.

Opportunity fund: When I was in second year, my team and I won a programming competition that had a top prize of PHP 1M, or roughly USD 20,000. Split five ways, it was still a decent sum and more money than I had ever had. I was on a scholarship and didn’t need the money, so my mom saved it for me.

In my final year of university, I wanted to explore wearable computing for my final-year project. The head-mounted display was pretty expensive for an experiment (USD 750 at the time, I think), and I wasn’t sure if it would be worth it. I realized it would be useful to think of my programming competition winnings as an opportunity fund for experiments. I ordered the head-mounted display, and I got tons of mileage out of that. Not only did I learn a lot about hacking, Emacs, wearable computing, and the interaction of society and technology, but I stumbled into the public imagination and I learned how to deal with television interviews, magazine features, and so on. Mass media had covered some of our programming contests in the past and one tabloid had featured me as a computer prodigy at the tender age of five or something like that, but the Borg-like contraption was something else entirely. Even as I protested that I’d shifted from head-mounted displays (too heavy, too obvious, too distracting for people) to speech synthesis (much more interesting, with applications for accessibility), people fixated on the cool stuff. I was made up (as in eyeshadow!), celebrated, misquoted, misspelled (often – my name is hard! ;) ), misrepresented (I hadn’t invented the thing, despite what Seventeen Philippines printed)… and yet, looking back, it was a good thing to do. It was good to be able to take some of that money, create that opportunity, learn something new, and nudge people’s imaginations. I learned that an opportunity fund and the freedom to experiment can lead to all sorts of good things, and that it takes very little to get something going.

I used this idea in Japan, too. Taking advantage of the decent stipend that the Association for Overseas Technical Scholarship gave us during our internships, I took weekend trips using cheap overnight buses to get to Osaka, Kyoto, and Kobe. I took public transit to places like Hakone, and I went to onsens to enjoy the hot springs. I explored different places in Tokyo and surrounding areas, too, like Akihabara (of course!). I think that of all my classmates, I probably had the best time. Again, it helped to set aside some money in my budget so that I could explore without worry.

Canada: Moving to Canada made me grow up. I managed my money carefully as a student. My funding covered tuition and a decent stipend, which I stretched by cooking for myself and keeping my lifestyle simple. I tracked all of my expenses and reviewed my budget regularly. I finished my master’s with no student debt and decent savings.

Using an insight from one of the productivity books I’d read, I listed my goals and ideas, and I started figuring out the price tags for them. I realized, for example, that having a good set of plates and cups and bowls meant something to be, that Corelle was well within my budget, and that tea parties or dinner parties were definitely doable.

When I started working, I kept my student lifestyle, eating at home and borrowing books from the library. I took advantage of the registered retirement savings plan program to defer taxes on my investments. I started building up an even bigger opportunity fund and a decent emergency fund, too. I tried the free financial counseling at work, but the advisor and I figured out that it wouldn’t work out for us, as I had figured most of the stuff out and I liked my low-MER index funds more than actively managed high-MER funds.

W- is also pretty frugal, although I update my books more regularly than he does. We often talk ourselves out of watching movies or eating out because we enjoy the alternatives. We’re both good at saving up for major expenses and keeping a buffer for emergencies. We both enjoy the little things in life, but aren’t afraid to spend where it counts. I’m glad we both care about financial responsibility. That reduces the risk of money causing tension. If many couples fight over money and we can figure out how to keep money from putting us under pressure, we’ll be better prepared for great adventures.

What have I learned about personal finance and planning?

  • Money is a means to an end. You can use it to create experiences or explore opportunities.
  • Goals and experiments can be surprisingly affordable. Plan, prioritize, and figure out the price.
  • There’s a difference between needing something and wanting something.
  • Be careful with your financial commitments. Don’t commit to more than you can handle.
  • Invest for the long term. Don’t be scared by volatility, but don’t try to be too fancy.
  • Don’t beat yourself up with buyer’s remorse. Learn from your decision and move on.
  • Contribute to your favourite charitable causes. It helps you make a bigger difference than you could on your own.
  • Build in room for “play money” in your budget, and use that to treat yourself and others. If you forget, you might end up feeling deprived, which throws your willpower out of whack.
  • Build in room for “dream/opportunity money” in your budget. Use that for key opportunities and experiences.
  • It really helps if your partner and you are both frugal, but even if you have different spending styles, you can make things work if you work together.
  • The library is awesome. Tax dollars hard at work.
  • A little planning today can lead to lots of awesomeness tomorrow, twenty years from now, and so on.

For love of numbers

| finance

I enjoy thinking about money. I mentally calculate unit prices in the produce section (counter-intuitively, loose garlic was cheaper than 5-head packs). I built my own spreadsheet to support financial decision-making, and I’m tempted to figure out how to do those Monte Carlo simulations. I have fun balancing books and filing taxes, and I even volunteered to help W- with his.

Why do I enjoy personal finance?

My mom occasionally tells a story about how we played Monopoly when my sisters and I were growing up. In the game, my eldest sister often gave my parents investing advice, my middle sister kept giving her money away, and my parents would often end up giving me money. With a seven-year difference between me and my eldest sister, I suspect that the finer points of real estate value, probability, and negotation were lost on me, and my parents probably just wanted to help me stay in the game. (Saling pusa.)

My mom probably sees the story as a wonderful example that three children can have very different temperaments. For me, that story’s one of the reasons why I think about money a lot. I plan and save so that I can enjoy financial independence. I find it difficult to accept gifts that feel extravagant, because I don’t want to be the spoiled youngest child. I keep my life simple and live within my means.

Living within my means and building up good reserves helps a lot. Being an immigrant means that I don’t have a ready safety net aside from the one I make for myself. I can’t just temporarily move in with my parents or crash with some relatives.

Love has a lot to do with it, too. W- is eighteen years older than I am. If I live frugally and manage my finances well, I might have the flexibility to retire when he chooses to. If he’s anything like my parents or his parents, though, we’ll probably live and work for quite a long time. Money is a major issue in many marriages. Good planning, good habits, and good communication can mean that money isn’t a source of friction, but a source of fun.

What do I think about?

I don’t spend a lot of energy worrying about stocks. Day-trading is a zero-sum game that I’d lose. I invest in the market as a whole instead, building my portfolio out of no-frills index funds.

I think about what’s worth spending money on, and what isn’t.

I think about the balance between the present and the future.

I think about what I need to learn from others.

The last time I talked about saving on my blog, my mom said she was uncomfortable with my sharing that I save more than half of my income. Money is taboo. It makes people feel judgmental, envious, or disappointed.

I write anyway. I need to connect with more people. I like reading about what other people are learning about money. I’ve read tons of personal finance books, and I can’t find enough information to cast light on the road ahead. Most of the personal finance books I’ve read focus on paying off debt, managing a mortgage, dealing with cars, setting up the right kinds of insurance, and investing. My favourite personal finance book is Your Money or Your Life, which also helps you learn how to make better decisions by thinking in terms of chunks of your life.

I’m learning that books can’t teach you everything. Books can’t cover what’s worth spending on, because that’s personal. Books written for young professionals often assume you’re shackled by student debt and buried under the debris of reckless credit card use, and not that you’ve gotten things mostly sorted out. Books don’t talk much about blended families or age-gap relationships.

I need to write and to connect. I can do that here, or I can do that in some anonymous blog to at least nod to the taboos. But I always tell people not to count on anonymity on the Internet. Sooner or later, someone will out you. And I’d rather take a look at that taboo and figure out if there’s a good way for us to talk around it.

What are the next steps for me so that I can learn more about personal finance?

Save and invest. Continue building and using my “dream/opportunity fund” for experiments, reflecting on the results.

Connect with other people who are figuring things out or who have figured this out already.

Flesh out goals. It’s good to put a price tag on dreams – not so that you can sell them, but so that you know when they’re within reach.

From the book bag

Posted: - Modified: | book, entrepreneurship, finance, reading, sketches

I love reading. Love love love love.


Here are a few more books:

image Fight For Your Money: How to Stop Getting Ripped Off and Save a Fortune
David Bach, 2009

Decent reference, useful form letters. Nothing too surprising in terms of advice. I like this more than his other books, which tend to hammer in the Latte Factor a bit much. Good to give to people who are just starting out in Canada.

The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By
Scott A. Shane, 2008

Surprising data-driven insights into entrepreneurship. Depressing in some places (such as when he’s looking at the statistics for women and entrepreneurship), and encouraging in others (such as when it comes to capitalizing new businesses). Something to read in a library.

How are these Friday book reviews working out for you? How can I make them better?

Closing my 2009 financial ledger, looking forward to the next year

Posted: - Modified: | finance

Although the personal accounting program I use (John Wiegley’s ledger) can happily process decades of transactions in one file, I like using one file per year. Closing my financial books prods me to make sure that all transactions are accounted for and all my statements balance. It’s nice seeing all the numbers line up.

I saved almost 55% of my net income, which is good because I need to save aggressively in order to meet certain goals. I’ve maxed out my RRSP and TFSA contribution room. I now have a healthy opportunity fund that I can use to start my own business if I want to. In 2010, I plan to save at least half of my income again, setting aside money for some major upcoming things.

(And if the the stock market eventually goes up instead of staying mostly level, all the better!)