Over the weekend I'll work on the summary of why we do what we do. In the meantime if you've finished the first 3 keys to controlling your money check out one of my favourite TED talks. It's not specifically about happiness but it is related and he mentions the two keys to happiness are Love and Work, i.e. relationships and what we think of what we do with our time. If we have poor relationships or if we think our job is a waste of time we're not going to be too upbeat. So once I get the why we do what we do wrapped up I'll have a few posts with resources to help out with these.
Tonight it was for another medical expense but this time in Armenia.
I find choosing a strange process, like who am I to choose, what am I looking for? But today listening to Happy Money they were saying people tend to get more happiness out of choosing where their money goes rather than giving to a general cause. I think it's in between, I think people like to know it made a difference, because, why else give, but the act of choosing one over another is not a necessary step, and sometimes a barrier. I heard in Sweden you can sign up to get a text message when blood you've donated has been used. I love that idea, I think that would be so great. I wonder how it could be applied in other areas. Maybe on Kiva you could put it in a pot and others could pick for you and then you get a message as to where it went.
1. Get a no fee bank account
2. Get the best rewards credit card you can
3. Set up an investment account (use low fee index funds to start)
These might not sound like much but they are some easy first steps to ensure you're not wasting money, missing opportunities to gain money, and to start saving for the future.
When it comes to money there are only two categories of things you can do:
a) Spend Less
b) Earn More
These three steps will help you do this but to be successful at this or at anything you'll have to keep at it, all day everyday. This is hard for two reasons:
a) We think about motivation totally wrong
b) There are legions of people spending trillions of dollars trying to make us make bad decisions that benefit them rather than ourselves
I'm not anti-capitalism I'm all for it, but for it to work we the consumers need to make more of an effort to make good decisions. Literally, in order for a market economy to function, in order for the best products to succeed it requires the consumers to make the best decisions possible, but we don't have the capacity to process all of the information (see Homo economicus). And I'm not saying I'm the only person that has cracked the code on human motivation, there's just a lot of research out there with counterintuitive findings that haven't made their way into our general knowledge yet.
So the goal of this site is to help everyone with these two issue. The lists of things you can do are intended to turn into resources to let people share what the best solutions to issues they've tried to solve (better decisions). And I'll have a section where we can build a better mental model of why we do what we do. We can use the latest research and all of our experiences to come up with something we can all keep in mind when trying to make decisions or achieve goals, some rules of thumb to help us make better predictions of how to avoid procrastinating or doing things we know are bad for us.
I plan to have a pretty solid start on writing out a summary of all I've found so far on the topic compiled into one concept you can visualize, but for now I'll just talk about the most important factor, Your Reason Why.
This may sound overly simplistic, but this is it, this is the main factor in success or failure. If you have a compelling enough reason why it will help you resist or ignore other distractions, and keep trying. This is the second important factor, the willingness to try and keep trying. You're going to fail, you're going to screw up, no one is going to just achieve something without any slip ups or any problems, you'll need to not get too upset with yourself and just keep trying.
So that's it for this post, the most important things to focus on are your Why and committing to Try.
I wanted you to do the first 3 items before we got here because this is where people can loose interest or go off thinking about their why and never nail it down.
I read something similar to this post 20 years ago, and I didn't think much of it. The advice was in the introduction to an investing course. It was to stop and take the time to figure out exactly what your goals are, exactly what house you want, what car you want, how much money you want to make, the life you want to live, the things you want to be able to do. I thought about it a bit but I skipped the step, I just thought I want to make as much money as possible, and I thought it was something I could come back to. I don't know that the exercise was perfect, but over the last twenty years I've come to see that it is your why that will determine if you stick with something or not. If your reason is not compelling, if it doesn't invoke strong emotions then your drive will tend to fizzle out, your time will be divided. And as I said, there are legions of people spending trillions of dollars and every hour of every day trying to figure out how to make you make bad decisions, decisions that benefit their shareholders rather than you. If you benefit that is irrelevant, they are legally obligated to do everything in their power to benefit their shareholders, even if that mean breaking the law. As long as the fine is less than the profit they are obligated to do it. Think of those Panama Papers where companies do mostly legal tax evasion, some illegal. It's more illegal for them not to try to avoid paying taxes. I don't want to end this on too negative of a note, I just want to let people know that the deck is stacked against them to make bad decisions, and to not beat themselves up over any setbacks. Commit to keep trying.
Click here for a follow up post to these 4 steps with a video.
Here's one of my favourite stories about what you can accomplish is you commit to trying.
$25 to Idelfonso to help him with a much needed eye treatment.
My first loan to someone in Guatemala. I'm surprised it's taken me this long, a few years ago some friends and I went down there to help out at some schools and this is the country where Living on One Dollar was filmed, and it sparked me to do the lending I'd been thinking about.
You can check out Living on One Dollar on Netflix or online
Tonight I was at Ripley's Aquarium and thought I'd share a few quick notes on things you can do to help the oceans.
1. If you buy fish products look for sustainable products. They recommend looking for the OceanWise logo (oceanwise.ca), and ask restaurants you go to if their fish are from sustainable resources.
2. Commercial fishing often make use of large nets which catch more than what and they toss these fish back but they don't usually survive. This is called the bycatch. One of the worst items that produce the most bycatch is shrimp. One item with a lower bycatch is mussels, maybe switch to mussels rather than a shrimp ring for your next party.
3. Eatting less meat in general helps too, so first start by only ordering or buying what you know you'll eat, and then look for some vegetarian alternatives once in a while. Even reducing your red meat intake helps the oceans because factory farms create a lot of air pollution which impact the oceans. The book I'm reading right now (Happy Money) suggests making things a treat by doing them less often in order to get more enjoyment out of them!
4. Be aware of what's in the cleaning products you use. Firstly watch out for microbeads if they aren't yet banned in your area, and secondly try cleaning products from company's like Method which are committed to making the cleanest cleaning products around. I just read 'The Method method' and they say if you only try one of their products try the 8x concentrate laundry detergent. I just got it and I didn't think I'd like the pump, but I love it :)
5. Aside from those things, anything you can do to reduce air pollution (which is good for humans) is also good for the oceans. I'll have more posts about that later.
See my Get 2 Free Audio Books blog post to see how you can get those two books free!
Still sticking to one loan a day. All the best to Zamira in Tajikistan tonight, hopefully you get fully funded.
1. Was get a no fee bank account - Don't spend money you don't need to
2. Was get the best rewards credit card you can - Get as much money back as you can
Now tonight is about saving, where to save and how much?
3. Set up automatic payments to a low cost index based fund
If you are just starting out I'd say it's more important to get started than to wait until you figure out the perfect investment stratagy. First off no one knows the perfect strategy and secondly it's helpful to be in something to get a sense of how things work.
The general consensus from the best investors to late night talk show hosts is to invest in a low cost index fund. This is investing in the stock market, you're buying shares in the biggest companies in the world through an investment company. When you pick an index fund that means the fund managers aren't picking the stocks to buy they are just trying to keep your investment growth on track with the stock market as a whole. When fund managers try to beat the market rather than track the market they usually do worse so that's why index funds are recommended.
Again Tangerine has some great products. You can get a mutual fund with a 1.07% fee.
Check out Candaian Couch Potato Model Portfolio's site. They seem on track with everything I've read in a number of personal finance books.
When I look at the 20 year history on that site I think the balenced portfolio looks the most appealing.
Now to figure out how much to save.
This is tricky because everyone is in a different situation. In general you want to get thinking of saving. Step 1) make sure you're spending less than your making so that you can save. Step 2) use those savings to pay down debts, the highest interest ones first (try to consolidate debts, that can really speed things up too) Step 3) Even if paying off your debts would save you more money than investing will make you I'd say invest at least $5 a month into an account like a Tangerine.ca mutual fund. It will help you learn about investing and get a feel for it so once you have paid off your debts and have money to invest you will have had some practice. Some people focus paying off their mortgage and then have an extra $1000 or more a month to spend/save and they don't know what to do with it, they don't have any practice and then they might just spend it rather than save it because of this.
Next we'll get into the most important aspect of success... Why?
Saving for the future is usuallly thought of as an obvious thing we know we should do, so we often overlook the specific reasons for it.
While you're waiting for that post sign up for an investment account!
Oh, and here is John Oliver reiterating what I said ...
(you can skip to 17:45 for the summary)
I'm going to recommend books often, to remove any excuses you might have to not getting the book the link below is for a free trial of Audible where you can get 2 free audio books!!
And if you use this link you'll help me pay for this site, no cost to you, which would be much appreciated :)
(the link still goes to Audible but the 2 book deal is over)
2. Get The Best Rewards Credit Card For You
Warning: If you have a credit card it is more than likely you'll spend more money than if you pay for everything in cash. So if you're looking to spend the least amount of money possible consider not using a credit card despite the free cash back programs. If using cash for everything just isn't going to work or if you plan to do that but still want a credit card to help build a credit rating to be able to get a mortgage I recommend putting in a few minutes of effort to find the best card you can. I can't see any reason not to.
Aside from a car or a home I don't recommend ever buying anything you don't have the money to pay for. I think of credit cards as convenience cards, compared to debit cards they have added benefits of cash back rewards, free warranty extensions, and free travel insurance. You may not realize it but everything has an invisible 'credit card tax' on it. Retailers are not allowed to say things cost more if you use a credit card (credit card lobbyists got a law passed to make it illegal) so they have to raise the price of everything by 2% or more in order to cover the transaction fees (interchange fees) they get charged. So you might as well use a credit card to get some of that hidden tax back, unless you want to carry cash around and ask for a cash discount. I'm not talking about tax evasion, I'm saying some retailers will take 2-3% off the price if you pay cash because it saves them money. They are allowed to advertise cash discounts but most don't bother.
If you know you will buy more than you can afford if given credit you can get cards that you have to pre-load, and you can have it on hand for the handful of times when you need a credit card. If you are already in credit card debt problems there are cards with no rewards but low interest which will help you get out of debt much faster.
If you have a card or want a card you might as well spend 10 minutes to figure out the best one for you rather than settle for which ever one the bank happend to give you. When I mention this to my friends they often tell me they love the card they have, and it's gives them so many rewards so they don't want to switch. But when I get the details out of them the card usually gives them a 1% return or less, and they are usually eligible for a 2% cash back card. Meaning, they are getting ripped off! They might get $500 in free groceries, but that could've been $500 in groceries and another $500 to spend on anything else they want, or just $1000 in groceries!
Step 1. Figure out what rewards you are getting, if any
- If these are travel rewards or other merchandise rewards ask yourself if you are redeeming them for things you'd buy anyways. Like, if you get free movies from the card are you going to more movies then you would if they weren't 'free'? If you're using the points for things you wouldn't buy anyways this equates to no reward, sometimes a negative reward because you spend more in the redemption process, like buying popcorn when going to a free movie, or paying for a hotel to go with a 'free' trip. For scenarios where you are using it for things you'd buy anyways try to calculate the % back you are getting. Just take the value of the reward and divide it by the amount of money you spent on the card to get it, then multiply by 100.
Example: Let's say you need to spend $10 to get 1 Air Mile, and you need 95 miles to get something, you spend $950 to get that reward. Let's say the reward is $10 gift card.
So $10 Gift Card divided by $950 spent (10/950) = 0.01, multiply that by 100 to see it is like getting 1% cash back.
Step 2. Compare your card (or other card offers) to these ones
Note: the higher your credit rating and the higher your income the better cards will be available. Unless you're really going to get into this I'd avoid travel cards and I'd stick to cash back cards. Travel cards can make you end up spending more by getting you to go on more trips than you would if you got a cash back card. (Here is a comparison)
A good starter card
This is going to sound odd but Rogers Media has some very good rewards cards, and no websites seem to promote them. They don't have fancy insurance plans, they just give you a lot of cash back.
No Fee FIDO Mastercard 1.5% cash back on everything
$29 Annual Fee Rogers Mastercard 1.75% cash back on everything. If you spend more than $1000 on your credit card per month you'll come out ahead with the Rogers card over the FIDO.
A better card for those who can get it
MBNA Rewards World Elite (owned by TD Bank), you get 2% cash back on everything, and lots of free insurance, like double the warranty on everything you buy, and 90 insurance if anything you buy gets lost stolen or broken. You'll need to spend $
A credit card you can transfer a debt to and get 12 months no interest
MBNA Platinum Plus Mastercard, 0% interest on balence Transfers for 12 months, after that and for all purchases it has the usual 19.99%. Use this for a year to pay it down then move to a better card before you have to start paying the high interest.
A credit card that only lets you use money you have
There is a Visa card available at Petro Canada gas stations that you pre-load with money, but it acts like a Visa incase there are situations where interac won't work.
So how does your card stack up?
MBNA Smart Cash Platinum Plus (owned by TD Bank), you get 2% back on gas and groceries, 1% on everything else. And you get a bunch of features see this chart. There is a limit on the 1% cash back, it stops after you spend $1,250, but try calling to see if you can upgrade to the 'World' version rather than the 'Platinum' version to get unlimited cash back.
Links to Part 1, Part 3, Part 4 and the video
The next few posts are going to focus on things you can do for yourself, then we'll move on to other issues.
I've spent a lot of time reading and thinking about money, budgeting, investing and spending money. Before I lose you to something more interesting, here are the three things you should do.
1. Get A No Fee Bank Account
Everyone seems to want to save but says they can't find the money. If you are currently paying fees on a bank account, switch to one with no fees and then save what you used to pay in fees.
I like Simplii Financial (previously PC Financial) and Tangerine (previously ING Direct). Tangerine has a cash sign up bonus of $50 - $100 (promotions vary) if you have a referral code. If you use mine we both get the cash (Orange Key: 16332442S1).
If you love your bank which has fees first you can ask them if there is a way to reduce your fees. It's better to have an action plan filled with things you are looking forward to rather than one you're dreading. If you're dreading the idea of changing banks, don't. Just make sure you know what fees you are paying, ask if they can be reduced, and then keep it in mind each month and see if it's worth it. If it is and you can afford it, go for it. I love my no fee bank account, so that's why I do it.
It's getting late, I'll continue this tomorrow, while you're waiting work on step 1.
Links to Part 2, Part 3, Part 4, and the video
Tonight I lent someone in Palestine $25 to fix up there house.
What projects are you looking for help with, let me know in the comments.