The best way to be rich is to start thinking and acting like you are already rich.  This might sound a tad ridiculous but it works.  Rich people always make every deal tip in their favour.  They do not borrow but lend money.  They make sure every asset of theirs is returning a profit.  They collect fees and commissions instead of paying them.  Whenever you are making a transaction think “if I was rich, and thus money savvy, what would the outcome be?”  Well it would of course always be in your favour .  Be like “Thurston”. You sell when everyone is buying and buy when everyone is selling.  Never use your own money if you don’t have to and think of how much you can lose before you think of how much you could make. If you truly want to be a millionaire you need to model their actions and decisions making so you too can be a millionaire. Never envy but emulate.

            The middle class is middle class because of their actions.  If you want to stop being middle or lower class and jump to the higher class you need to change your actions to mirror the upper classes.  Look at the middle classes behaviours compared to the upper classes that we just mentioned.  They spend every dollar they make.  Borrow heavily and pay interest instead of collect it.  Banks and brokerages get rich of the fees and commissions on the middle class.  The economy and its services are made on the backs of the middle classes.  If you want to break the cycle you need to change your behaviours.  Start living like you’re already rich! 

Dave

After the Holidays it is easy to feel a bit down because of the amount that you spent. When you’re falling asleep isn’t it always the thought of credit card debt that comes to mind? The best way to deal with that anxiety is with a plan. A plan to stop the bleeding, set spending thresholds and eliminate that debt! Below I’ve outlined my best strategies to flex your money muscle and live in the black.

Step 1:
Figure out where you want to be. It is crucial to envision yourself debt free on a particular date in the future. Day dream of yourself looking at your financial statements and knowing that you are master of your own house. You don’t owe anyone anything. Bask in that feeling of complete freedom and then remember that joy when you’re about to charge more crap you don’t need.  

Step 2:
Map out where you are. Take an evening, open a bottle of wine or drink of your choice and make a list of every debt you owe and the interest rate. Include overdraft, credit cards, department store cards, bank of Mom and Dad or Auntie Gertrude, student lines of credit, personal lines of credit, home owner’s lines of credit, auto loans, rrsp loans and mortgages. Make sure to include if you have a don’t pay now until later loan too. Just because you aren’t spending money on it right now doesn’t mean it isn’t debt.

Step 3:
Which of your debt products have the highest interest rate. This can be emotional interest too. If Auntie Gertrude makes you feel like jumping out the window every time you’re at a family event then prioritize that she needs to be paid off first. The killer interest rates come with department store cards and credit cards. Department store cards have up to 30% interest and credit cards are around 20% interest. If you buy a $1000 sofa on a department store card and only make minimum payments you’ll have paid $1,000 MORE in just over three years at 30% compounding interest. You could have had two sofas if you paid cash.  Crazy, right?

Step 4:
How you are going to bust that debt? Everything is on the table now. Remember how AMAZING you felt owing no one anything? First, holster the cards. Put them in the freezer or bury them in the living room fern. Next, figure out how much you need each month to pay all essential bills, eat and minimum payments on all of your cards. If you don’t need it don’t spend it. Deduct that from your monthly after tax salary. With the extra income throw it on your debt — highest interest first. Make it a game. We all love games! Try to live on as little as possible for one month. Brown bag lunch, drink office coffee, eat at home, watch TV, play board games or have a “nookie” night with your love monkey instead of going out. Use your imagination and cheap out for only 30 days and make a huge dent in your debt. It’ll feel incredible.

Step 5:
Make more money to throw on the debt. Put everything you don’t want on e-bay, craig’s list, take to a pawn broker or have a garage sale. Old comics, jewellery, coins, toys and collectibles can make you a tidy sum. Old furniture, cars, boats or trailers that you never use can get you a quick cash hit too. Ask for a raise or try to get extra cash doing something that you love to do anyway. Whatever you’re awesome at — try to sell it for some coin. Collect as much money as you can from selling your services or items that you don’t need and put it right on that debt. Be sure to celebrate your success every time you see that balance drop. Hard work deserves a pat on the back. Make sure you know how much you owe at all times to keep your eye on the prize.

Step 6:
What can you live without after your cheap-o month? Commit to an amount that you want to allocate to the debt and every pay transfer the money in chunks to pay down the most expensive debt first. Use cash for everyday variable spending and limit it by taking a tiny set amount out each week for the entire week.  When it is gone it is gone.  Calculate based on your payments when you’ll be debt free and mark your “liberation” day on a calendar. Write the date on your day timer or on the back of a card and carry it around in your wallet. It will motivate you every time you look at that date so post it everywhere. Tell your closest friends and family to crystallize how important the date is for you.

Step 7:

Dream how you’re going to reward yourself for that hard work.  When you’re debt free of all of your consumer debt (not including investment loans or a mortgages) you’ve turned the tables.  The consumer shackles are off and you need to be treated well for your discipline and industriousness.  Think of a “carrot” that will get you through your weak moments and think of how sweet that prize will be when you’re there!

Get your Personal, Professional, and Material 2010 goals lists out that you’ve already worked on. Figure out which of them will be your priorities for 2010. How much will the first one cost? It could be a trip, new motorcycle, flying lessons – whatever your heart desires! Divide that by twelve. Write the number down on your Goal Budget. If it is not a substantial amount of money you can add more items and divide their costs by twelve. If some of your goals are large purchases, like a cottage, then it makes sense to amortize the cost over the number of months or years it will take to put together a down payment or to purchase the item completely.

This system works! Dream big and budget to achieve your goals. I saved $1,000 a month for a year to pay for a trip to Europe. Last summer I spent a month in Europe visiting all of the ancient ruins and historical sites, swimming in the Santorini volcanic springs, eating pork knuckle and sauerkraut in Bavaria, living the bohemian life in trendy East Berlin, and shopping my heart out in Sweden. I love Swedish designers and their clothes fit my build perfectly.

As you complete each of your goals, the next on the priority list will be added to the goals funding equation and divided by twelve. This process will continue until all goals with a #1 priority are achieved. Goals that do not cost anything, like reading, should still be on the list. They can be equally valuable to your happiness. 

Next, figure out how much you spend every week on things like groceries, gas, coffee, clothing, and eating out. The best way to figure this out is to take a three months average by going through your credit card and bank account records. This will be a huge learning opportunity for you. When I did this I learned that if I had two coffees a day at $2.05 it was costing me $4.10 a day, $20.50 a week, $82 a month, and $984 a year! Eating out for lunch at $10 a day cost $50 a week, $200 a month, and $2,400 a year. If I were to cut out coffee and lunches, I would have another $3,384 for a trip to hang out with penguins in the south of Chile or to buy three really nice suits.

Write down all of your monthly variable costs and figure out how much you are spending a year on those items. Good ones to watch are your total automotive costs, clothing, restaurant bills, and bar tabs. When you are looking at the yearly totals you will realize that if you eliminate or reduce those expenses you will have new sources of money to invest in yourself. Pump those savings back into your own happiness.

And that is how I scrimp on the everyday stuff to get my tooshie back to Europe.  Hope you got value from the post. Next weeK I’ll be talking about what everyone is thinking about after the Holidays — debt busting.  Yee haw!  

Dave

The New Year is hours away and there is no better way to kick off the year than with an ULTIMATE plan for 2010.  This year, instead of just writing down the same old stuff like going to the gym and reading more — blow out your ideal life.  Plato wrote about his theory on true forms and I’ve applied it to people’s lives.  Live the “True Form” of your own life.  Only you can create the vision of your perfect life.  And only you can get it for yourself.  Think about what you truly want each area of your life to be. Imagine each area in great detail. Dream your reality and then live it!
 
You know those things that you have always wanted but were afraid to ask for?  Add them.  Do you want better food, a better body, more fun, or more adventure? List the things that will make the hair on your arm stand up because you’re so excited by the thought of them in your life.  What do you want from these categories: Education, Money, Health and Fitness, Spirituality, Family, Relationships, and Sex.  For Plato’s sake, don’t forget sex.  

The best way to motivate ourselves in life is to design our ideal reality.  Don’t try to change one or two things that you think you can easily accomplish; go after every single thing that you can dream.  Spend an evening with a bottle of wine in a quite place and let your mind go free.  Don’t sensor anything.  If it comes to you, write it down.
 
For example, you may want a million dollars.  But instead of writing “a million dollars in the bank,” write what that million dollars would allow you to do.  You could travel 6 months of the year, spoil your family, save it for a comfortable old age, or buy the dream car that you have always wanted.  There is nothing more powerful than dreaming our ultimate reality, confirming why it is important to us, and then achieving it.  What is happiness if not that?

Take three pieces of paper and write at the top of each one “Personal Goals”, “Professional Goals”, and “Material Goals.”  Take the time with each piece of paper and fill both sides with everything that you want.  This is your life so dig deep for inspiration. Personal Goals could be classes you want to take, creative expressions through music, dance or art, or to spend more time with your dad. Professional Goals could be getting your MBA or writing a book to share the skills you have learned through business.  Material Goals are every thing you want to buy.  If it costs $5 or $1.5M, it goes down on the page.  This is my favourite one.  
 
After you have filled a page front and back for each three areas, write beside them a priority–”1″ if it is super important, “2″ if is is less important, and “3″ if is the least important to you.  We’re going to do everything so don’t feel bad about the “3″s you softy!  Write down all of the items that you have a “1″ beside and commit to yourself the EXACT date when they will be achieved.  These will be your top goals to accomplish this year.  Keep them close to you. When you feel less motivated, take them out and re-energize by thinking about how amazing you felt when crafting the list.  

Next week I’ll show you how to commit to your goals and then allocate resources to achieve them all!

Wishing you all a Happy New Year and continued personal and financial success in 2010,
Dave

What is better than holiday parties, presents, and delicious food? 2009 budget reconciliation time!  Not too many people get excited at the end of the year to see how much they have saved, but I sure do.  I go over all my expenses, income, investments, and loans to see how much I made and spent.  If you don’t know where the money is going or how it is coming in, how will you change your spending habits for the better?  This is the time to see where to cut next year to save for something that you really want.  

The quick and dirty way is to input all of your information into Quicken.  There is an amazing program at quickenonline.intuit.com that is super easy to use.  It populates all of your credit cards, bank statements, and investment accounts right off of online banking and lets you review them in one single program.  It shows you your spending trends for the last year.  You can set goals and it tracks your progress.  If you want to go over your statements the old fashioned way, you can do that too.  Just grab your bank statements and credit card statements with some Egg Nog (spiked) and get ready for a ripping evening.   

I look at cash from ATMs, bank fees, restaurants, clothing, and miscellaneous spending. When you see the amount you’ve spent I bet you’ll be shocked at how much money goes into these areas. I think that if I can simply save 10% from each category, I can do all kinds of things with the money next year to make my life better.  Maybe it will go towards a creative outlet, a night course, or socked away for retirement.  Those savings can go towards something that would make me happy, or invested to give me peace of mind.  

I never get caught up in guilt when I see what a drunken sailor I’ve been at bars.  Instead, I remember the great times I had spending it with friends. But then I think about how even happier I would be if some of that money went towards an investment or an amazing trip with my family. That will motivate me to hunker down on my spending and encourage me to save more than last year by moving me toward my preferred future.  There is no point tearing out my hair when the money is gone.  I made the right decision at the time to buy that sweater or go away for the weekend, and I will feel good about the money I save next year moving forward.  

Hard nosed budgets never really work for people like me with a strong sense of freedom, but limiting my variable expenses does.  Think of how much you really want to have saved for next year, what trips you want to take, prioritize what you want to buy for yourself, and then look forward to next years budget reconciliation and congratulate yourself on keeping to your plan.  

Next week I’ll show you how to dream big for the new year and back it up with your finances!

Have a fabulous holiday,

Dave

When thinking of what to give someone this year, try to give to their core values.  It’s easy to give socks, sweaters, and DVDs but a value based gift could bring them much more joy. Core values are what motivates us to behave the way we do. With my clients I motivate them to keep pushing for their ultimate life by reminding them of their values when doubts creep in over the long haul.  When we are offended by someone, it is generally because they have countered one of our values and that is why we feel offended.  By living by our values it brings us happiness and happiness is the end goal when buying for someone special.  

When going over your gift list, think about each person’s core values.  Values like Freedom, Creativity, Leadership, Family, Fun, and Adventure are all core values that you can buy gifts to satisfy. You’ll be giving a gift that creates true happiness by giving to core values.  

Have the best holiday season you can,

Dave

There is nothing that drives me crazier than being “Scrooged” on one of my statements.  Over the years I have saved hundreds of dollars just by going over every bank, credit card and bill that comes in.  When my bills and statements arrive in the mail I scrutinize each line item and only file them away when I’m happy each line is correct.  

The great thing about this process is that I never have bills lying all over the place. I can always find them when I need to,  and I’m confident knowing that I never pay more than I want to.  

This week I saved $13.50 in bank charges!  The bank had charged me a $5 charge for an extra transfer in my high interest savings account, even though I hadn’t made one.  On top of that they decided to up the monthly minimum account balance from $1,500 to $2,000 without telling me, and then charged me this month because I only had $1,500 in the account.  I marched right down to the bank and demanded that they reverse the charges and they did.  Now that I know to keep $2,000 in my account moving forward I’ll make sure they never collect an extra dollar from me in bank charges.  I love my money too much to give it to them. 

Cable is the other bill that I always “comb” over.  The cable and telephone companies are the WORST at making their bills super confusing by adding modem leases, security services, digital service fees, and time shifting fees.  What the Rudolph is a “time shifting fee”?  I wish they “time shifted” my bill back to the days when cable was $32!  

They go and deduct promotional credits, savings bundles, etc..  I once had a bill that had service after service added, then deducted, then added over three pages.  The best part was that at the very end of the $100 bill there was a little box reading that I had over $300 in savings and it was my first month having cable!  

The other thing to watch out for is their “sneaky fee increases.”  They continue to raise rates without raising the level of their service or product.  The best way to fight against bill creep is to bundle a bunch of different services.  If you have home telephone, mobile, Internet and cable from one provider you should be able to get a bundle discount.  And don’t forget affiliate companies.  Fido is owned by Rogers so if you have all of your products from Rogers you can add your Fido mobile service as part of the bundle.  

The second way is to threaten to leave.  They’ll transfer you to the “oh crap we’re losing them” department and they have the power to reduce your bill by about 20%.  Tell them in this economic downturn you’re worried about losing your job and they should give you a discount for a year.  

I hope these strategies will save you some good cash and prevent getting bill coal in your stocking each month.  

Happy Holidays,
Dave

Money is that one subject that everyone dances around when dating.  We politely try not to talk directly about it but it is woven into the fabric of our conversation.  Let’s throw it right out there into the middle of the table, by the flowers, and address it shall we?  What are always the two very first questions someone asks on a date?  “What do you do?” and “Where do you live?” Which is the money talk equivalent of  “How much money do you make and how much real estate can you afford?”  Keeping your eye out for money problems will be the first sign of hidden people problems.  Remember money problems have nothing to do with dollars and cents and everything to do with emotions and fears. 

When dating look for someone who respects their money and is in control of it. It is the surest sign that they also respect themselves and are in control of their lives.  Someone doesn’t necessarily have to make gobs and gobs of money.  That isn’t what I’m saying but they should at least be strong in the following areas.  It’ll reflect positively in how they will manage your relationship moving forward. 

Money balance – do they balance their cheque book?  If they make more than they spend and always have money in the bank it shows that the person in mature and confident with themselves.  They don’t need to blow every dollar they make each month.  They live within their means and have cheque book and personal life in balance. 

Savers – do they save or spend like drunken sailors?  If they have money when the month runs out then that is a great sign.  Your potential “Snookums” needs to have a “saver” mentality.It shows that they are responsible, grounded, committed, and planning for the long term. 

Asset lover – do they appreciate big assets?  If your date has proven that they are interested in building assets over the long haul it speaks volumes that they are ambitious and driven.  It shows that they want to increase their financial position and has thought out and implemented a plan to get it.   If the asset is a home it shows that they are interested in “planting roots” which shows stability. 

Debt free – do they only have healthy debt?  Does your date have baggage aka consumer debt? If you’re date is debt free it means that they don’t have the emotional baggage that comes with the debt.  People overspend because they’re unhappy or trying to keep up with the Joneses and if they are free of credit card or personal debt then you know that they are self-assured.  A lot of people who make tons of money spend tons more money.  This race to always have the best and most of everything when they can’t afford it always leaves people coming last. 

Just after a few dates you’ll be able to tell if someone loves their money or not.  By seeing some of these money problems up front it could be a window to other issues lurching behind the unpaid bill.  If you know your date is cheque book balanced, is a saver, is an asset lover and is bad debt free, you will hopefully save yourself some grief down the road.

When people think of wealth they often think of having millions of dollars in the bank.  However, when people who don’t have money receive millions of dollars through the lottery or inheritance they seem to quickly burn through it.  Lotteries would be better if they paid the winner a huge salary for life instead of one lump sum!  Then the winners could only spend what they get each month. 

True wealth is not just having loads of assets but having the income streams that can come from assets.  That is why my philosophy of money and wealth is making sure that every asset I have pays me the highest level of income it can. 

The common line from financial gurus is that if you invest your money in an RRSP and that money is invested in the market, overtime it will go up and you’ll have a solid asset to retire on. We’ve all heard the line that if we invest $800 a month for 30 years at 8% growth we’ll have $1.2 million bucks and be wealthy! 

Well, what if I can’t get that 8% growth?  The last 8 years of growth were based on really cheap borrowed money and if that party is over how can I expect the market to keep growing at an average 8%?  I can’t. But what I can count on is an investment strategy that pays me streams of income.  That way I can at least count on the extra income if the market doesn’t keep going up. Extra streams of income will also improve your lifestyle now, so you don’t need to wait 30 years.

There are many investment strategies that can be based on streams of income.  One of them is buying monthly income or dividend funds or exchange traded funds (ETFs) in your portfolio.  Make sure that they are set up to buy more units whenever they get paid out. 

Building your own income-based portfolio is a great way to diversify.  After a quarter when your high dividend yielding stocks pay into your account you simply use that money to buy more shares that are also high yielding and high quality.  That way you are getting the market to pay for the porfolio additions.  Once you’ve owned them for a quarter they’ll start paying you so you can buy even more stocks.  In the long run this will really accelerate your growth instead of simply hoping that the market will do it for you.   

Investment properties are another smart stream of income that can pay your mortgage and free up cashflow.  By converting your underutilized basement into a rental apartment you can get your renter to help pay your mortgage.  To really help free up some cashflow look to buy a tri-plex. Rent two of the apartments out and live in the third one.  Work the numbers to see if you can live for free while building equity by paying down the mortgage. 

If you have a cottage, rent it out for one of the three months in the summer to pay for the property taxes, repairs, or the purchase of a new deck.  If you have an extra garage or parking space you’ll be amazed how much extra cash you can get by renting them out. 

Little jobs on the side really help out too.  I’m an extra on TV shows when I have free time. A day sitting backstage drinking coffee pays for my cell phone bill. Or a night of martinis!

I’m sure there are lots of ways that you can increase your income other than just the traditional pay cheque.  Something you do in your spare time can become a business, like for example developing websites, walking dogs, styling clothes or hair, etc., consulting, writing creative copy–make money from your passions!

Continuously bring in new streams of income and see what kind of true wealth it brings you.  Rental properties, high yielding portfolios outside your RRSP, and side businesses can give you the lifestyle now that you hope to have in 30 years.  Wealth really comes from multiple streams of income.

Count right now how many points cards you have  clogging up your wallet? When was the last time you actually went on a free trip or got some sort of reward from them? Have you ever thought how much more money you spend travelling across town to use that store or extra dollars you put on your credit cards to get a few more points?  
 
Due to the fact that I’m always trying to get the best “bang for my buck,” I’ve crunched all of the numbers and my chosen points system is the one that is the longest running. It’s called cash. I can use it to buy luggage, or gift certifcates, or travel on any airlines and my wallet is free of any cards of any kind.  It can be used everywhere and I can even save the tax or get a better price at some places when I use it. I’ve crunched the numbers and using cash for everyday spending saves you money.   
 
I recently tried to redeem two different points systems to get a trip to Calgary. A ticket that would have cost me $371, including tax, to buy with cash would have taken $45,000 worth of spending with one credit card and $25,000 with another card. Then on top of that they would have charged $187 or $114.80 respectively on top of my points for taxes and extra charges. I really don’t see how these point programs add up.  Here is my logic:
 
1. Using cash saves people up to 20% compared to using cards. You simply spend less money when you have to actually plop it down. Using cash puts a ceiling on your spending; if you’re spending virtue is in question–if you’re being naughty with your money–it’s very helpful. What I do is take $400 out of the ABM every Monday and that is my discretionary spending for the week. It has to cover everything from clothing and coffee to eating out for the whole week. If I drop it all on a crazy Monday night bender, then it is gone. I have to wait a week to get another $400 of play money.  
 
2. The average yearly fee for points credit cards is around $120 a year. To build the points to fly to Calgary it would take me two to three years to charge $25,000 on my card, plus two or three years of fees. Remember, the flight only costs $371. Yikes!
 
3. “”Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away.”  – Antoine de Saint-Exupery.  
 
Using a simple money clip is so refreshing. And elegant. Seriously, look through your wallet and see all the tacky crap the retailers get us to carry around. If they were not making money off the card, they wouldn’t offer them, so therefore we’re paying extra to use them.  
 
Cash really is king.  It keeps a ceiling on my spending, simplifies and streamlines my wallet, and gets me a better price on many things.  Now that’s a points system I can love!
 
Dave