Your personal financial journey does not happen in a vacuum.  It happens a little every day and it is influenced by hundreds of little things that seem totally unrelated.  Sometimes we find interesting and financially applicable things in the strangest places.

This is a wonderful example of the consequences of not having financial alternatives.  smbc-comics

Kevin Hart has wonderful advice about staying in your own financial lane.  There is a beauty in taking a difficult topic and making it lighthearted without taking away from the value of the lesson being taught.

There is a nice article from the Globe and Mail:  How the rich handle their money, from six financial advisers.  My favourite part of the article is the following quote from Christine Beaumont:  “For the people we deal with, the ordinary and simple things add up – like living within their means and paying off personal debt.  They practice delayed gratification and don’t spend it if they don’t have it.”

Here is another gem from the Globe and Mail:  Why the rich, too, are living paycheque to paycheque.  The power of this statistic is staggering: “…41% of working Canadians spend all or more of their net pay, often going into debt”.  Living Within Your Means isn’t about how much you make, it is about how smart you are with the amount you make.

I don’t only read articles from the Globe and Mail, but you wouldn’t know it from this list.  Here is another good one:  If households are this financially stressed now, how much misery is coming as rates rise?  In this article they reference a survey that says 31% of participants don’t have enough money to pay for their basic needs, and 52% say they just have enough to cover living costs.  The important factor to consider here is: this is an article about variable interest rates.  Credit card interest rates are horribly high, but don’t move with an increase in the Bank of Canada (BoC) overnight rate.  Unsecured lines of credit, variable rate mortgages and HELOCs (Home Equity Line of Credit) are the items impacted by this pending rate change.  If you are part of either group above and will be impacted by a change in variable rates you have made some personal financial choices that were far too aggressive for where you are with your financial journey.  If your finances aren’t stable you shouldn’t be overextending to meet some arbitrary external expectation of what your life should look like right now.  You need to make money your priority, and start pushing to Live Within Your Means immediately.


In 1998 three professors of finance from Trinity University (in San Antonio, Texas) published a very influential paper, which is often referred to as the Trinity Study.  This study was looking to determine a “safe withdrawal rate” from retirement portfolios that contain a mix of stocks and bonds.  They looked at all historical stock market average returns data for every 30 year period (30 years being the standard estimate of the years post retirement for financial planning purposes).  They concluded that if you withdrawal 4% of your portfolio value in the first year of retirement, and 4% plus inflation every year afterwards, you would reach the end of every 30 year period in history without running out of money.  This was the birth of the “4% Rule”.

Now most of you will be early in your personal financial journeys and find the safe withdrawal rate for retirement income to be a bit too far in the future to matter, but you would be wrong.  The 4% Rule has many aspects that are of great value to you now and as you move forward.

When it comes to personal finance you can’t ignore math for very long, but we will keep it simple.  Another way of looking at 4% is:  1 / 25 = 4%.  If you know how much money you need to cover your Expenses and Living then you can figure out how much money you need to save up for retirement.

Let’s say you need $40,000 a year to cover all of your Expenses and Living costs.

$40,000  *  25  =  $1,000,000

In other words you would need to save $1 million dollars to be able to retire on $40,000 per year.

To prove I didn’t pull a fast one on you:

$1,000,000  *  4%  =  $40,000

(Break out those calculators and keep me honest!)

For every $1,000 of ongoing expenses you will need to save up $25,000 for retirement, so the lower your expenses the less money you need to save.  The less you spend now the more you have to save and invest.  This is how you can super charge your path to Financial Freedom.

Many people may wonder at the value of trying to negotiate for lower rates for monthly expenses like internet or cell phone packages.  If you reduce a monthly bill by $10, you “only” save $120 per year.  But if you take it one step further, that $120 a year is $3,000 you don’t need to save for a sustainable retirement ($120 * 25).

At the end of the post LWYM: Buffer and Saving we started to discuss the idea of Gap.  This Gap is the money left over from your income after you cover your Expenses and Living.  It is the Gap that you will be Saving and Investing.  When you take your Gap and divide it by your Income you get your “Savings Rate”, which is the percentage of your income that you are saving.  Combined with the 4% Rule your savings rate changes your perspective on your personal financial journey in a very profound way.

In his post, “The Shockingly Simple Math Behind Early Retirement”, Mr. Money Mustache (MMM) is kind enough to do all the math heavy lifting for us.  There are a few assumptions involved in these calculations such as:  1) Your current Expense and Living costs will be the same as your Retirement requirements; 2) You can earn 5% investment returns after inflation during your savings years (conservative estimate); and 3)  You’ll live off of the 4% safe withdrawal rate after retirement, with some flexibility in your spending during recessions.  The following are some of the amazing results:

  • Savings Rate of 10% will allow you to retire in 51 years
  • Savings Rate of 30% will allow you to retire in 28 years
  • Savings Rate of 50% will allow you to retire in 17 years
  • Savings Rate of 65% will allow you to retire in 10.5 years

I encourage you to visit the link to get a deeper understanding of this perspective.

For those of you who are thinking that Saving and Investing 65% of your after tax income is impossible might be surprised to learn that my Wife and I are usually around the 68-70% range (including our aggressive mortgage reduction).  We do both make nice salaries, which helps, but this isn’t the greatest factor in our Savings Rate: it is the choices we make.

5 years ago when we were looking to buy a house we had many choices in front of us.  We looked at how much money Banks would be willing to lend us, and we looked at our Income vs Spending and decided that we were not comfortable borrowing that much money.  The monthly payments would have been very high and prevent us from being able to manage emergencies as they come up.  We also both work in an industry where job stability at our level is an illusion.  As a co-worker of mine once said: “In our job if you are over 30 and haven’t been downsized…you’re next!”.  So we planned our finances, and therefore our house purchase, around being sustainable on a single income.

With a firm limit on the price range for our house purchase, we made other choices:  1)  Must be fully detached (my primary criteria); 2)  Good flow and line of sight on main floor (both of us prefer an open concept approach); and 3)  Must be our “final” home (we did not want to “upgrade” in a few years).  So what did we have to be more flexible on?  Location.  We both would have loved to be in a nice established neighbourhood in Toronto, but with the above choices it wasn’t possible.  We made sure that the location we looked for had good transportation to Toronto, and all the local amenities we would need.  And as a result we found our home an hour commute north of the city (travelling by Go Train).

I was already working towards Growing the Gap and increasing my Savings Rate before I met my Wife, and had run across the above post by MMM shortly after we started dating.  So the idea of making our choices count and being aggressive about keeping our monthly Expenses, Living and Mortgage Payments low was only logical.

For the Millennials and Post-Millennials (really need a better name for you guys and gals) out there, you are no doubt hearing a lot of people say that unless you get a huge inheritance you will never own your own home.  This is a load of crap.  Owning a home is a choice, for sure, and it comes with consequences, but it is absolutely possible.  If you LWYM, focus on increasing your Savings Rate, and make smart choices with your finances you can own a home and still retire comfortably.


The topic of this blog post should come as no surprise to anyone, and yet I am sure it is the topic that causes the most dread.  Even more dread than the idea of having to budget or track your spending.  There are so many horror stories going around about people who have invested and lost everything.  Other stories of people who have had unbelievably epic wins, which we suspect are just stories.  So what is the truth about Investing?  Let’s take a look.

I started my personal financial journey, where most of you did, with a basic savings account.  The interest rate, generally, wasn’t much to look forward to.  But it was the first time I experienced the magic of my money working for me, instead of me working for my money.

The next step for me was Canadian Government Bonds, and some Ontario Government Bonds for variety.  And for the first few years this was great.  The returns were so much better than a savings account.  I am not old enough to be able to sing the praises of Bond interest rates seen in the late 70’s and early 80’s (okay, I am old enough, I just wasn’t rich enough back then).  It didn’t take long for the declining Bond interest rates to sour my new found happiness.

At this point in my journey it was suggested that I try investing in Mutual Funds.  I understood that Mutual Funds were a pool of investors’ funds that were used to purchase a mix of stocks and bonds.  And this mix was determined at the creation of the fund.  The balancing of these assets was actively managed, and as a result some of my returns would be used to pay for this service.  My local Bank was more than happy to sell me Mutual Funds, especially if I didn’t know what Mutual Fund I should be buying.

Your Bank is required to assess your “Risk Tolerance”, typically by a short list of questions, and make sure that the fund they sell you is within your Risk Tolerance.  At no point was I educated on the real risks involved, nor given a context for the questions about Risk Tolerance.  So without guidance my Risk Tolerance came back as “Low”.  So I was sold units of a Balanced Fund.  I think I held that fund for 4 years and definitely didn’t get as much back as I had initially invested, and forget making any sort of return.

Mutual Funds left me very bitter about investing for several years after that.  Ironically it wasn’t the very high Management Fees (MER) that soured me to investing.  Instead it was the lack of a simple piece of financial advice:  If you are not currently Living Within Your Means you have no business investing.  Everywhere we look we are told that we should ALWAYS be Saving and Investing.  This is wonderful advice, if your individual financial situation is LWYM friendly.  Mine was most definitely not when I bought that Mutual Fund.

As a response to this set back I did what most people do, I turtled.  The money I had in my RRSP account I stuck into a Guaranteed Investment Certificate (GIC) and promptly forgot about it.  Despite requiring my direct instructions at renewal my Bank was more than happy to keep rolling my money into whatever GIC term (length of investment time) was being promoted at the time of renewal.  This unasked for action was the excuse I needed to continue to ignore my investing for many more years than was healthy.

It was several years later, after I had managed to get my finances in order, that I returned to investing.  At this point I was far more knowledgeable about finances and investing.  I wanted to make up for lost time and started doing lots of research into individual companies.  I spent hours and hours every day doing research.  Then I bought individual stocks using the Discount Brokerage offered by my Bank.

At first I was doing well.  I had focused on stocks with “proven” dividend paying track records.  They also had very high yield dividend payments (this usually means it isn’t sustainable).  Some of my stocks did very well, both in dividend payments and increases in share price.  A few did okay.  Some were small losses over the long run.  But there is one in particular that was a painful loss.  The CEO held a news conference on Wednesday reassuring investors that the company’s finances were in order and the dividend was sustainable.  On Friday there was another news conference where the CEO admitted that they had been lying for years about the company’s financial wellbeing.  The stock tanked instantly and the dividend virtually vanished overnight.

While my individual dividend paying stocks started to crumble and fall apart I had been doing a lot more reading about personal finance.  A friend pointed me towards Index Investing.  If you have listened to the news I am sure you have heard some of the following terms:  NASDAQ, S&P 500, S&P 60, or DOW Jones Industrial Average.  These are just some examples of indexes or collections of stocks that are traded on certain stock markets.

The S&P 500 is an American stock market index.  It contains the 500 largest companies that have stocks listed on the NYSE (New York Stock Exchange) or NASDAQ (National Association of Securities Dealers Automated Quotations).  Now that the silly definitions are out of the way, this index represents the top 500 stocks traded in the United States.  The index also has a complex formula for representing each of these companies “evenly” compared to each other.  What matters is the index doesn’t represent just 1 share of each company, but several shares of each company to give them “equal weight” or value within the index.

Where the S&P 500 is the 500 Largest Companies there are other indexes that focus on many other market breakdowns.  Some of the most common are:  medium sized companies; small sized companies; specific sectors (ie. Metals, Energy, Technology, Financial, etc.); and some are “broad spectrum indexes” or “Total Market” (ie. Total Market US Index would be every US stock being traded).

When people invest in the stock market they are trying to make lots of money, obviously.  The way people measure their success in the stock market is to compare their returns against the Index returns.  With all of the professional traders and fund managers (people who invest other people’s money like Mutual Funds do) around the world you might expect that there are some who are very good at what they do.  Unfortunately stock markets are very complex and have a way of defying even the “experts’” expectations.  It is very rare for a trader or fund manager to consistently beat (make more than) the index return.

So if most people make less with their stock picks every year than the average return of the entire stock market why wouldn’t you invest in the entire market yourself?  This is the fundamental approach behind Index investing.  But there are a few problems with this approach:  1) it isn’t practical for an individual to buy each and every stock out there; 2) the S&P 500 Index is a calculation not a physical thing; and 3) trying to adjust your trading daily to account for the balance of stocks within the index is impossible.

Remember we discussed Mutual Funds and the fact that they are a collection of many people’s money.  With a large enough pool of money this would overcome issue #1.  It would also be a single place that had the right balance of all the stocks in all the right proportions as the index, solving #2 and #3.  But Mutual Funds have a very high fee structure, especially in Canada, and that would eat away at your gains very quickly.

Many companies, such as Vanguard, have proposed a solution to this problem:  Exchange Traded Funds (ETF).  An ETF is: 1) a pool of funds from many investors; 2) follows a basic formula, like the S&P 500 Index; 3) is automatically balanced by computer algorithms, so no active manual trading / management; and 4) can be bought and sold the same way as a stock is.  This allows you to buy any Index you want, easily, cheaply, and with a very small management fee (where Mutual Funds are 2.5% or more a good ETF is 0.15% or more).

I know this last section has been rather heavy, and may have started to lose some of you.  But it was important to build a basic understand of what an index is and how you can invest in an index.  In the next post we will be able to move on to the value of this approach.  And more importantly I want to share the numerous financial epiphanies that I experienced as a result of starting down this path; simple ideas that have surprising depth and insight when considered just a little bit differently than normal.


We have examined our Income for ways to optimize our current situation and start planning for future opportunities.  We have also examined the differences between Expenses and Living, as well as how to make the spending in these areas align with our goals and values.  This has led us to forgo the traditional budget in favour of tracking our spending and in turn forecasting our spending.  Now we will address where Buffer and Savings come into play.

At the start of every month I take my Income from the prior month and like YNAB’s Rule #1 Give Every Dollar a Job.  This is a forecast of my anticipated spending.  The longer you follow the methodology of tracking your spending, and reviewing monthly, the more realistic your forecasting will be.  I also set savings goals by categories, such as TFSA contributions, RRSP contributions, and Mortgage Principle Reduction.

At this point some definitions might help:

  • TFSA = Tax Free Savings Account
  • RRSP = Registered Retirement Savings Plan
  • Mortgage Principle Reduction = Directly reducing outstanding mortgage balance in addition to regularly scheduled payments

Note:  Despite the sound of it both TFSA and RRSP accounts can, and should, hold investments and not just cash.

Then I allocate all remaining Income into my Buffer.  Here are some specific examples of what the Buffer is used for:  1) funding monthly spending that exceeds my forecasting; 2) covering the cost of handling any emergencies that might arise; and 3) a place to capture savings that exceed our monthly targets.

There are two ways I manage forecasting: pre-saving and monthly budgeting.  For bills like Hydro, Gas and Water, I estimate my average monthly costs and pre-save.  Every month I allocate $70.00 to Hydro regardless of the bill amount, in the winter my payments are less than this, but in the summer my payments are more than this, and in the end it all evens out.  On the other hand my Groceries category is budgeted for monthly, and though there are fluctuations from month-to-month I am able to adjust my spending choices monthly to keep it from growing out of control.

At the end of each month I review my actual spending against the forecast.  For pre-saving categories I only make sure that the actual never exceeds the total available.  If it does the amount being saved monthly needs to be increased to ensure there is enough money to cover these expenses.  For all other categories the forecast is adjusted to reflect the real spending.  This process will either leave you with more money needing to be assigned a job, or a shortfall that needs to be covered.  An excess is added to the Buffer, and a shortfall is funded from the Buffer.

Now it is time to follow YMOYL’s process for examining your monthly spending by category.  Remember that this process will help you maximize your enjoyment while controlling or reducing your spending.  During this monthly review I look at my Buffer balance.  When the balance is greater than the money I would reasonably need for an emergency I direct the excess funds into one of my Savings goals as a one-off contribution. Since buying my house five years ago this “extra” money has been reallocated to paying down the mortgage faster.

I should make a few confessions before you get the wrong impression.  First of all it isn’t “my house”, or so my Wife likes to remind me, it is “our house”.  And the same goes for our finances.  We have our own chequing (or checking for our American Friends) accounts, and our own high interest savings accounts.  We do have a joint account for our mortgage payments, but for planning and functional purposes our finances are 100% combined.  This approach doesn’t work for everyone, but it does work nicely for us.  Second, though my Wife believes in tracking and categorizing spending she doesn’t see the value in getting every penny captured.  She has no problem with me doing all of the tracking, since I am the one who wants to be precise and complete (yeah, I might have financial OCD).  Each month we jointly review our spending and make adjustments together.

At the start of every year my Wife and I sit down and review our finances and set goals for the year.  We take our average monthly Income and subtract our average monthly Expense and Living amounts.  This leaves us with a ball park of what “Gap” we will have for the coming year.  Together we work out what our Saving priorities will be for the year, these fall into two categories: Real Savings and Saving for Large Expenses.

Real Savings for us are TFSA contributions, RRSP contributions and Mortgage Principal Repayments.  Each year we identify how much we want to go to TFSA and RRSP, and how much priority we are putting on paying down our mortgage faster.  Then we pick one or two large ticket items to save up for.  For instance we like to travel so we set aside money each month for a vacation where we fly out of the country.  Or something like a renovation or a new car that we will save up monthly for and only buy when we can pay for it in full.  We make these savings goals reasonable, meaning we don’t make our total savings goals for the year equal the full anticipated Gap amount.  Because life happens we need to have financial room to adjust, and that is where our Buffer comes in.

This annual planning session is, for us, probably the most important phase.  It makes every monthly forecast quick and easy because we have a master plan.  If things change during the year we discuss if our priorities for the year have changed, or if the excess from our Buffer category will solve the issue.  Three years into using YNAB and our monthly meetings take between ten and twenty minutes.

During the month you will be capturing all financial transactions that flow into and out of your life.  As the month progresses YNAB shows you your actual spending against your forecasted spending.  This allows you to make informed purchasing decisions before they are made instead of weeks later at your monthly review session.  It is this aspect of YNAB that helps people gain total control over their personal finances.  Controlling your spending real time is a major cornerstone to a healthy financial outlook.


Within the LWYM framework, Living represents the Wants that you are purchasing.  It is important that we actively manage the Living section to ensure that we are able to make ends meet now and still have the ability to save for our Future Happiness.  It is by far the most difficult category to manage.  When money is tight and we are feeling that we don’t have any choices the drive to “live a little”can become overwhelming.  Budgeting feels like we are depriving ourselves of any enjoyment in life, and when the pressure builds a strict budget will snap in a sea of Living related excesses.

This tendency to splurge on ourselves isn’t limited to a scarcity of money either.  When we get a promotion we convince ourselves that any extra Living purchases are a reward because we “earned it”.  Or when trolling Facebook and seeing all of our peers Living it up, we justify additional purchases with thoughts of  “competing with the Jones’” or “FOMO” (for those following along at home – “Fear Of Missing Out”).  Humans are very skilled at justifying Living purchases, enhanced by the rush of immediate gratification.

Traditional budgeting often fails because of this one category.  But YMOYL has provided us with the framework to approach the Living section of our spending and make informed spending decisions.  But to apply this framework we need to monitor our spending first.  By tracking every penny into and out of your hands you start to see where everything is going.  As YMOYL teaches, you take a look at your monthly spending by category and use your Real Hourly Wage to measure your spending in Hours of Your Life Energy.  Then assess each category’s Life Energy cost against the pleasure you derived from it.  And make note of which areas you want to reduce spending, and which you want to increase spending.

In this way you can reduce overall spending without ever feeling like you are depriving yourself.  By cutting spending that doesn’t bring you joy, and maximize spending where it does, you feel like you are living a luxurious lifestyle while saving more.

Tracking your spending, and doing a monthly analysis against your enjoyment, gives you the ground work to really take your Personal Financial Journey to the next level.  You are now able to estimate what your monthly spending will be for each category.  Instead of budgeting you can forecast your spending by category.  As time passes you will identify expenses that are infrequent or periodic, such as quarterly bills, property taxes, license plate renewal costs, etc.  Instead of surprising you when these expenses occur you can anticipate them and save in advance.  This approach is “expense accrual” or pre-saving.  For instance if you have a $120.00 expense once per year, you can save up $10.00 per month so that when the bill comes in you already have the money set aside for it.  This not only makes sure you can easily meet your payments regardless of their frequency, but you “even” out your month-to-month expenses.  This evening out process normalizes your expenses and builds another layer of Buffer into your finances.

Now there are many ways you can go about tracking your spending, but the most important part is finding a way that works for you.  I started out tracking my spending in a spreadsheet.  But after a few months I found myself waiting longer and longer to update my spending, until I eventually couldn’t remember where everything had gone.  A process that isn’t sustainable, isn’t practical nor useful.

There are many different programs, apps, and websites that offer to help you with tracking your spending.  Personally I am a huge fan of YNAB (You Need A Budget).  Don’t let the name fool you, it isn’t a traditional budgeting approach.  They have a method of tracking that relies on 4 Rules:  1) Give Every Dollar a Job; 2) Embrace Your True Expenses; 3) Roll With The Punches; and 4) Age Your Money.

Personally I am using their previous version, which was aimed at a more mindful approach to tracking your spending.  My version does not have a way to import data from your various accounts electronically, but the newest version does.  And my version didn’t age your money in the same way; it would take all income this month and only make it available for allocation next month.  The new version also comes with a monthly fee model instead of a lump sum purchase.  Regardless of the differences it is a wonderful approach to managing your finances.

By having access to YNAB on your smart phone you are able to capture and categorize your spending as it is happening.  While I am waiting for change from cash transactions, or awaiting the confirmation for credit card transactions, I can quickly capture the details and forget about it.  And this habit is ingrained for me because my phone case is my wallet.  When you are reviewing your bank accounts and credit card statements online, using your desktop or laptop computer, you can verify against your YNAB balances as well.  Any device you have allows you to interact with your personal financial data.

Despite the last three paragraphs of fanboy outburst, this is NOT a paid advertisement for YNAB.  Feel free to check out other options to see which one works for you.  Some people find MINT to be helpful, and if you are in the United States I have heard great things about Personal Capital.  (P.S.: Personal Capital, if you are reading this…please come to Canada!)  The important part is actively tracking your spending and becoming more mindful of the choices you make everyday.

There are many expenses that are attributed to “Adulting” (for the non- Millennial portion of the crowd – “Being a Responsible Adult”) which are a huge drain on your finances and provide little to no enjoyment.  Feel free to eliminate these expenses entirely.  Owning a home before you are 30 isn’t a requirement to be an adult.  Having a wife / husband, 2.5 kids and a handful of pets doesn’t automatically secure your status as an adult either.  But being good with your finances totally does.


Your Personal Financial Journey starts with passively learned interactions with money from your parents, their day-to-day actions and transactions.  As you grow, and depending on how open your family is about money matters, your parents try to actively teach you financial lessons.  However, they cannot teach what they do not know.  This is where you would expect our education system to step in to assist.  Unfortunately Personal Finance isn’t a topic that is covered in any meaningful way in public school, College or University.

When I was growing up my Mother was very open about our financial situation.  She taught me how to manage the day-to-day money matters like deposits, withdrawals, chequing accounts and savings accounts.  When I got my first job as a Teller in a Bank I realized just how lucky I was for this education as so many clients were unable to fill out a simple deposit slip.  There is a very good reason why many Millennial readers won’t know what a deposit slip is, and that is because Banks realized their clients couldn’t list out amounts on a piece of paper and total them up accurately.  Thankfully computers have also removed the need for Tellers to do this as the general education around money matters has declined across the board.

It was about this time in my life where I was desperate to learn more about Personal Finance so I could further improve my personal situation.  So I asked my Mother, and she admitted that the “Next Level” of learning would need to come from books as we were on a similar level of knowledge.  She did have the advantage of having done some reading herself and directed me to “The Wealthy Barber”.  When it comes to books on Personal Finance, and Blogs as well, the vast majority are aimed at Americans.  So the fact that “The Wealthy Barber” is Canadian is a wonderful bonus.

There was one passage that I found particularly enlightening:

“…’a business only has to budget for needs.  It’s in the best interest of the business to limit those needs as much as possible.  An individual, on the other hand, must budget for both needs and wants.  It is the rare person who can do that successfully because, for too many people, a want becomes a need.’”

As a result of this insight the Living Within Your Means (LWYM) equation has Expenses reflect Needs, and Living reflect Wants.  By making this segregation we stand a better chance of being able to manage our Needs more similarly to the way a business would, by limiting the cost as much as possible.  There will of course be a bit of lifestyle inflation hitting this category as you travel further along your Personal Financial Journey, but we will develop ways of monitoring this.

Expenses are made up of the necessities of life:  Food, Shelter, and Internet.  If you live at home, even if you are paying room and board, you have a great opportunity to save significantly in this area.  Opportunities are to be embraced not squandered.  Saving on expenses needs to be reflected in your Savings, maybe not 100%, but don’t short change your Savings.

Food is a difficult category to manage.  Everyone needs to eat.  Eating isn’t limited to survival, it is also an integral part of socializing.  Cutting Expenses can also be an exercise in skill building.  It doesn’t take a lot of initial knowledge or effort to learn to cook some basic meals.  Every meal you cook yourself improves your skills and saves you money you would otherwise have spent out at a restaurant.  And if you are still living at home you have a wonderful opportunity to learn to cook all the meals you grew up eating.

When I was in High School my friends and I would host parties when someone’s parents were out of town.  Regardless of who’s house was free 3 of us would always take over the kitchen and do all the cooking.  To this day the dishes I was responsible for during High School are my best culinary creations.  Your cooking skills will slowly improve, and it doesn’t take long for you to be able to make consistently tasty meals for much less than a restaurant.

As for social eating, do you go to a restaurant with friends for the food or the company?  Sometimes it is about the food, but it is always about the company.  So don’t feel you can’t go out and socially eat, but that is covered under Living.  Most social groups just need someone to offer to cook and provide the place to gather.  Be that person for your social group and everybody wins.  Or offer to host a pot luck event to reduce your time in the kitchen.

You have often heard financial types go on and on about the “Latte Factor”.  There are many people who are pro Latte Factor, and just as many who are anti Latte Factor.  The Latte Factor does a nice job of pointing out how a relatively small purchase repeated frequently, and more importantly, unconsciously, can turn into a significant amount of money over time.  And those opposed to the Latte Factor will point out that if you derive enjoyment from it you should direct your spending to it as the small amount won’t bankrupt you. Neither side is entirely right, nor are they entirely wrong.

In “Your Money or Your Life” (YMOYL), and the previous post, you were encouraged to work out your real hourly rate.  Later in the book they use this as a measure of enjoyment and alignment with your goals and beliefs.  Take your monthly Latte Expense and compare it to your real hourly rate.  For this example we are going with a Tim Hortons coffee, because on minimum wage you cannot afford Starbucks:

            Tim Horton’s Large Coffee:  $2.00

            Business Days in the Month:  21 (typically)

            Total Monthly Cost:   $42.00

            Real Hourly Rate:  $10.60

            Hours of Work Spent on Coffee Per Month:  4 Hours (with 0.40 change)

Are you happy with working for 4 hours a month just to enjoy your Tim Hortons coffee?  But wait!  Since time is money, haven’t we overlooked something?  If you are a morning coffee drinker you have to spend 15 – 30 minutes in line every day to get your coffee.  Being kind we will calculate based on a 15 minute wait time, you spend an additional 5 hours and 15 minutes a month to get your daily fix.  Over 9 hours of your month were spend getting and affording your daily coffee fix, and that doesn’t include any weekend coffee addiction.

If you purchase a coffee maker, ground coffee, filters, sugar, cream, and a thermal travel mug you will save time and money, over the long run.  There is a bit of an upfront cost, but your starting coffee pot can be as cheap and reliable as the “Black & Decker Digital Coffeemaker, 12 Cups” for $27.99 CAD.  As with cooking skills, your coffee making skills and tastes will evolve the more you brew your own coffee.  Over the years I have changed from pre-ground coffee to roasted beans and do my own grinding just before I brew.  My quality of bean has also evolved and I mix my own blend before grinding.  Even with this evolution, my cost per cup is still less than half that of a trip to Tim Hortons.

There used to be other monthly expenses that were categorized as Needs, but are no longer as relevant, such as cable TV and landline phones.  Some people might argue that cable TV is alive and well in 2018, but I would argue against it being even remotely close to a Need.  Personally I haven’t had cable TV since University when it was included in my rent.  There are so many other options like Netflix, Crave TV and Hulu that are subscription based services best categorized under Living rather than as Needs.

Internet, however, is definitely a Need in our modern world.  And having a smart phone with a good data plan is quickly becoming a Need.  Taking a look at the minimum wage example we have been following, if you are trying to fit either internet or smart phones into the picture you need to be aggressive about finding a cheap and effective plan, and avoid upgrading hardware for as long as possible.  The newest flashy model isn’t going to revolutionize your life.  The move from flip phones to smart phones was a significant change, to the point of creating a have / have not divide.  But the move from iPhone 7 to iPhone X isn’t going to do much but put a dent in your financial well-being.

Expenses that are truly based on Needs lend themselves to be minimized in price and maximized in value or enjoyment you receive from them.  The key to success here is making the choices that are right for the situation you are in right now.  Take the opportunity to evaluate every Expense and make sure it makes sense for where you are in your life.  Many of my financial difficulties were a direct result of choices I made in this category.  After University I insisted that I have my “own place”, ie. I rented a one bedroom apartment instead of cutting that cost significantly and sharing rent on a 2 or 3 bedroom place.  Also, as soon as I transferred my work location from the suburbs to the downtown core I insisted on moving closer to work instead of commuting.  At that time in my financial journey I didn’t have the funds to support that move, but I didn’t let it stop me.

We are our own biggest roadblock to Personal Financial success, and the cornerstone of that roadblock is the choices we make.  It is NEVER too late to review those choices and determine what is really best for us, both now and for our future goals.


Eighteen days before my eighteenth birthday my, now Ex, Step-Father kicked me out of the house.  Obviously this turned my world upside down, and I was presented with lots of choices that needed to be made.  As mentioned in my first post, I moved around a lot when I was growing up, and I didn’t want to go to yet another school and start over again.  My desire to hold onto my friends and continue living where I was overrode the logical decision to live with my Father.  It is a decision that had a huge impact on my Personal Financial Journey.

Essentially I was on my own for the first time in my life, and in hindsight I took steps that I would live to regret.  I dropped out of High School without completing my OACs (that is grade 13 for those of you who aren’t familiar with the term).  After some misadventures I ended up renting a room in a house with a few friends, and in desperate need of a job…any job.  My fear of returning to the years of not knowing where the next meal was coming from had become my reality.  If I am being honest with myself, as much as my early childhood years were a bit lean financially, this was by far the worst financial situation I had ever been in.

Prior to being kicked out of the house I hadn’t had much work experience:  a flyer delivery route; some data entry for my Mother’s bookkeeping company; and a summer working in a factory making Christmas lights.  Not the best set-up for success in the “Real World”.  And at the time I was looking for my first real job the Ontario Government had instituted fair hiring quotas as a way to try and legislate against racism and sexism.  Needless to say nobody needed a White Male 18-24 to complete their hiring quota.

I eventually landed a minimum wage job working at a bulk food store.  This job taught me a lot of lessons, both life lessons and financial lessons.  Some of the more important ones were:

  1. When you are working for minimum wage you can afford rent, food, and public transit if you are lucky;
  2. Hard work and dedication will get you more responsibility, more hours, and promoted;
  3. When you don’t have enough money you don’t have the luxury of choices; and
  4. Companies will make take advantage of you if you let them.

When you are living hand-to-mouth you don’t have choices.  People will tell you that you always have a choice, and though they are technically correct, the choice of eat or starve isn’t much of a choice.  And when you are in that position you survive.  But you need to do more than just survive.  You need to find the way out of that subsistence level existence.

This is when you need, more than ever, to focus on Living Within Your Means (LWYM).  Control the choices you make so you can make the most out of what you have…and strive to change your situation for the better.

Can you control your Income?  Absolutely.  There are many options open to you, but the first thing you need to do is make sure you are maximizing your current income.  Start where you are.

Many companies have compensation packages that go beyond base salary.  It is these extras that you need to take advantage of.  For example many employers have an RRSP Matching Program.  This program will look something like one of the following:

  1. Employee contributes 3% of their salary and Employer contributes 3%, both are deposited into a Registered Retirement Account – This is known as 100% Matching Plan; or
  2. Employee contributes 6% of their salary and Employer contributes 3%, both are deposited into a Registered Retirement Account – This is known as 50% Matching Plan.

This means if you don’t take advantage of this you are missing out on a 3% increase to your salary.  Don’t leave money on the table!  So find out what your current employer offers and see what you need to do to maximize their contributions while minimizing yours.

Some companies will also pay for your continuing education.  Some pay the whole amount; some only pay part; and others will only re-pay you for the costs once you have successfully completed the course / program.  Especially in your early career years your continuing education is an investment in yourself and your earning potential.  Find out the details and plan to maximize investing in yourself.  Focus on skills that can be leveraged in more than just your current role / industry.  Make yourself recession proof by building skills that are valued in many industries.  And later in your career becoming a specialist can also become very lucrative.

Once you have maximized your current situation you can start looking to improve or change your employment.  Adding part-time gigs or side hustles can add much needed cash flow to help you make ends meet.  These additional employment options should also provide you with skills that can be taken with you to future opportunities.  Nobody I have met has ever regretted learning how to use Excel.  And as an Excel Addict I can’t promote improving your Excel skills enough.

In the book “Your Money or Your Life” they define work as trading Your Life Energy for Money, where Your Life Energy is a limited commodity.  For me the story of Joe Dominguez, one of the authors of the book, drives home the importance of that definition.  Joe retired from his Wall Street job at the age of 31, and never accepted any money for his work from that day forward.  He died of cancer when he was 58.  If he had followed the standard work model, 9 to 5 until 65, he would have died before he could retire and pursue the things he really enjoyed.  We don’t know just how much Life Energy we are going to have, so we need to make the most of it.

If you have a minimum wage job in Ontario right now, how much Money are you trading Your Life Energy for?  Most people would say $14 an hour.  But is this number correct?  Nope.  It is what you are being paid per hour of work, but there are other factors to consider.  These factors fall into two categories: work related expenses and work related time.

To get to and from your minimum wage job you need to take TTC (Toronto Public Transit) for $3.00 each way.  You probably won’t have dry cleaning costs for a minimum wage job, but you might have a work uniform you need to purchase and maintain.  These are a few examples of the cost of working and should be considered when calculating the true amount of money you are making for an hour of Your Life Energy.

Also, your trip on the TTC is 30 minutes each way, or an hour of unpaid work expense.  And your job is so mind numbing it takes you an hour once you get home of gazing mindlessly at the wall before you are human again.  If the job is particularly bad you might need some alcohol to take the edge off of the day.

For the purposes of this example we will factor in $6.00 of transportation cost, and 2 hours of  time getting to and from an 8 hour work shift and unwinding afterwards.

            8 Hours * $14.00   = $112.00

            $112.00 – $6.00      = $106.00

            $106.00 / 10 Hours = $10.60

Your real hourly rate is closer to $10.60 per hour.  Don’t forget the following deductions:  CPP, EI and Income Tax.  At this level of income those won’t have a huge impact on your hourly rate, so we won’t worry about them for this example.

Everybody will have a different combination of time and money expenses that wouldn’t exist if they didn’t have that specific job.  You can work out your own calculation on your own, and I highly suggest that you do so.  This approach allows you to truly compare jobs, gigs, and hustles to see if what seems like a “promotion” is actually a step forward or backward financially.  Some factors that would quickly change that “promotion” into a cut to your real hourly rate would be:  More expensive transportation (ie. Go Transit or owning a car); longer commute times; and business clothing and dry cleaning costs.

With this calculation you can start making active and informed decisions that will have a direct impact on your Income.  Remember, if you don’t value yourself nobody else will.



Every personal financial journey has a beginning, a context that sets the stage for every step taken out in the “real world”.  Throughout this blog I will be sharing some of my experiences and background to provide a context for you to examine your journey, learn and grow as you go.

My parents got divorced when I was two and a half, and from about three until thirteen I didn’t see my Father.  I had been born in a small town in Eastern Ontario but we moved to Toronto close to when I turned five.  You have to remember that at the time divorce wasn’t as common or widespread as it is now, and though it wasn’t as bad a stigma socially as it was even ten years earlier, it still wasn’t very common.

Though city jobs had higher paying salaries than small town jobs typically offered, we were definitely starting to feel the decline of the “single income family” model.  (Where a household only required a single income to thrive and prosper.)  Each time my mother got a promotion we moved from our very sketchy neighbourhood to one just a little bit nicer.  This meant new schools, new friends, and snug household finances.

At an early age, due to my maturity level, my Mother started sharing a large amount of our household finances with me.  Though we never went without food, there were many times when being able to have enough food for the following month was a clear and present concern.  This reality, and the knowledge I had of our finances, resulted in me supressing any wants and focusing strictly on needs.  To this day I am very good at pushing down wants as a reflexive defence mechanism.

The first lessons in personal finance that we learn aren’t actively taught, but passively learned from observation of our parent’s actions.  It is the small things, the little day-to-day actions and transactions.  Despite being a bookkeeper by trade, my Mother never actively taught me how to budget, because while growing up there wasn’t enough money for her to really budget.  The closest I was used to was:  Total Income – Fixed Expenses – Necessities = Zero (If you were lucky).  To some people this might seem very close to their best household budget, but the mindset here reinforces an approach that prevents you from looking to the future.

There are some fixed assumptions with this approach that should be questioned and not taken for granted.  Every day we make decisions / choices.  And these choices have direct impacts on our personal financial journey.  Your current Income is the result of choices you have made.  It isn’t fixed, it can be changed in many ways (more on this later).  Your Fixed Expenses are the results of choices you make, actively or passively.  The biggest of which is Where You Live (ie. City, Housing Situation, Alone / Shared).  Necessities are tricky because we as humans are very good at taking a Want and turning it into a Need.  Our ability to justify our choices is unlimited.  Also, there isn’t any consideration of equally important Budget requirements like Savings, Investing, Breathing Room, and some Wants.

The first personal financial lesson we should learn is:  Live Within Your Means.

This might also sound simple, but the number of people who haven’t mastered this step is staggering.

You have failed this step if:

  • You pay off less than the full balance of your credit card every month
  • You have a line of credit with a balance at the end of the month (more on this later)
  • You have a car loan or a car lease (more on this later)

I haven’t added Student Loans and Mortgages to this list, but there is an argument to be made for both / either to be added (more on this later).

If you approach your personal financial situation from the perspective of Living Within Your Means as the primary rule you start looking at these choices and realizing which serve you and which oppose you reaching your goals.  By Living Within Your Means you accept the reality you are in now and provide yourself the ability to change that situation actively for the better.  Don’t beat yourself up or blame yourself for where you are.  What’s done is done.  You can’t go back and change it.  But you can take active control over where you are headed and correct the steps that distracted you in the past.

Most Budgets have a formula that looks something like this:

Income  –  Expenses  –  Emergency Fund  –  Savings  =  Zero

Here is the formula for Living Within Your Means:

Income  –  (  Expenses  +  Living  )  –  Buffer  –  (  Saving  +  Investing  )  =  Zero

Income:  Start where you are.  There are many ways to grow this.  Are you under employed, less than “full time” hours?  Pick up extra work.  Develop a skill that will get you paid more for your effort / time.  We are in an economy where there are lots of workers and little employer loyalty.  Often cases you need multiple income streams to make ends meet or to ensure if one source dries up you won’t be caught without enough income to survive.  In your early years of employment invest in yourself, grow your skills and be willing to do things you won’t want to until you have the luxury of doing what you enjoy.

Expenses:  Accept your current expenses, hiding from the truth isn’t going to change anything.  These Expenses represent needs: Food, Shelter, and Internet.  The largest of your expenses will likely be Shelter.  There are several cultural groups where living at home with your parents is not only acceptable, but actually expected.  Don’t be in too much of a rush to pass this up, but also don’t be that 30+ year old living at home and blowing all your money on partying.

Living:  Wants or Fun are often things that people believe should be included in your Budget, but I like looking at it as Living.  You have to balance your future happiness with your current happiness.  It is possible to Save Aggressively, Invest Wisely, and still enjoy a fulfilling life right now.

Buffer:  Life Happens.  Or if you prefer, Shit Happens.  Some shit can be anticipated, and as you progress financially you will be taking that into consideration.  But there is still the shit that can’t be predicted or anticipated.  As corny as “Be Prepared for the Unexpected” may sound, it is the only way you are going to be able to Live Within Your Means.

Saving:  This is the first step to Financial Freedom.  Financial Freedom is the ticket to having total control of your life.  The Freedom to choose what you do with your time, allowing you to do things you enjoy instead of doing things that pay well.

Investing:  This is the second step to Financial Freedom.  Investing WISELY will be your ticket to Financial Independence and the ability to Retire Early or, well, anything you want.  We will cover what Investing Wisely looks like later on, but it is far easier than you suspect it will be.

Looking at where you stand right now it might seem like there is no way to have that equation balance.  Trust me, it is absolutely possible, and not by setting Saving and Investing to zero.  You need to develop the way you look at personal finance, and your daily choices and find that balance.

Personally I have found the book “Your Money or Your Life” to be an essential cornerstone to this process.  Depending on where you are along your Personal Financial Journey this book maybe of more or less value, but it gives a perspective and language to allow you to bring your Journey in line with your Goals and Values.  When I started dating my Wife I FORCED her to read this book…needless to say she was not at all impressed.  Her money journey wasn’t as…damaged as my own, so much of this book wasn’t something she needed to learn.  But what it did provide was a common ground for us to have those difficult financial conversations and ensure we could get on the same page.

You do not need to read this book to follow my blog, I will cover the key aspects as needed so we build our own common ground.  But I still think there is value in the perspective “Your Money or Your Life” (YMOYL) will provide you.

When approaching this book, or any personal financial book, you need to understand some key points about it.

  1. This was written by Americans for Americans.  Canada does not have a way for you to buy Government Bonds directly from the Canadian Government, but there are other ways to get the same outcome.
  2. This was written a while ago and the economic environment we are in now isn’t the same.  Bond Interest Rates are SIGNIFICANTLY lower now than they were when this book was written.

Neither of these points is a deal breaker, or a reason to ignore what knowledge this book has to offer.  You will find out quickly that most books on Personal Finance, and most Blogs, are written by Americans for Americans.  It will require effort in some cases to adjust for this perspective.

If you read “Your Money or Your Life” I recommend focusing on everything but the investment suggestion of holding Government Bonds.  We will cover many ways of Investing Wisely as we progress in our journey.