Category Archives: Money Management

How to Begin Financial Stability

They say that money can’t buy you happiness. But it can buy you food, shelter, clothes and the time to find your true calling in life. In one sense, money represents the distance between you and starvation.

Money is your “score” in the game of life. If it ever falls to zero, you will surely know the pain of financial consequence.

It’s absolutely critical to get ahead. Beyond the need for food, shelter and transportation, your next most immediate need is a safety net!

This is your first step to financial freedom. Using the Cash Dash will help you monitor your progress at all times.

Make every sacrifice to get 6 months of living expenses in the bank and keep it topped up. Do not borrow against it, either. You must stay at least 6 months on plus side to truly be able to “afford” a new luxury.

When your savings goals are being met and your investment potential is growing on schedule, then you can enjoy the surplus.

 

What is Money?

Money is freedom, control and options. It determines the quality of life. Health and happiness may very well depend on it.

Once upon a time, cash was backed by gold in a treasury. Before that, we just used gold itself. Pieces of eight were used as currency because of the intrinsic value and rarity of the metal and the ability to break the coins into smaller “pieces.”

Today, money is nearly an abstraction. We use credit cards to make purchases while our paycheques are direct deposited into bank accounts. With the exception of laundry day, we can live a cash-free existence.

Canada’s currency is fiat, meaning it only has the value the government assigns to it. Those plastic bills have no intrinsic value, except that we, as a society, agree to recognize them as legal tender.

Money solves the problem of asymmetrical trade. Not everyone wants to trade chickens for toilet paper, or rockets for beer helmets, hence the need for intermediary currency.

The dollar represents time, energy and knowledge. We sell ours for legal tender we can then trade in the grand marketplace of society for whatever our hearts’ desire.

Money is the essence of your life’s productivity. There will always be more choices than money and only a finite amount of time to live, so you must manage it wisely!


 

Why Budgeting is Easier than Dieting

In all honesty, budgeting isn’t as bad as dieting. I’ve done both on several occasions and not surprisingly, at the same time. Dieting is much, much worse.

Dieting makes you weak and dizzy and all you can think about is food.

Budgeting makes you bored and lonely and all you can think about is the future.

The problem with dieting is that all that effort not eating can be reversed in a weekend of moderate taco consumption. Technically, the same is true of budgeting, but once you have scraped a few thousand dollars into a bank account, it becomes more natural to want to protect that money.

There is a critical difference between these two very similar disciplines :  losing 10-15 pounds can make you feel better and look better, but having $5000.00 in the bank will give you real world options.

Keeping your emergency fund topped up should be your 1st priority, but after that, you have choices. I would recommend creating a list of priorities. Maybe now would be a good time to find a new job? Or move into a new apartment?

Maybe you should just keep saving for a while. At least when you have savings, your next decision won’t be all-or-nothing. That feeling of “living on the edge” won’t keep you awake at night.

And you won’t be forced into situations that make you miserable, like bad roommates or crappy jobs. As long as you have the emergency fund in place, you’re doing OK.

If you manage to build it even further, it may be time to start some basic investing.

 

Why do we Overspend?

The simplest explanation for overspending is the biochemical reward from our brain whenever we receive something we want. It’s the reason we do most things, really.

Getting stuff feels good. Ever heard the expression, “retail therapy?”

It works, too. Ice-cream, chocolate, toys, cars and jewelry can all produce a profound biochemical reaction. What’s worse, they create a reward-system of behavior. Doing things that feel good is natural, hence, the behavior of overspending, even though we probably should know better.

Fortunately, humans have evolved the pre-frontal cortex specifically to moderate unchecked emotions. The “executive center” of the brain. We can consciously decide what impulses we want to respond to. We call this self-control.

The average human doesn’t reach full developmental maturity until the approximate age of 26. Which is why unscrupulous marketers target younger audiences. But even most adults can be swayed if the prize is shiny enough.

Knowing this about ourselves can help us make better choices in general. Rational decision making is aided by access to unbiased information. The single best tool you can have at your disposal is the financial spreadsheet.

The Cash Dash is the perfect tool for limiting overspending.