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I’m sure all of you have figured out that I like to have my money and spend it too.  Here is one of my quick tips for all of those fancy coffee house latte drinkers.  You’ll get to have your lactosious delight and save $30,000 for a boat, trip to France or something awesome in 25 years!

I, like most morning warriors, love my fancy coffee drinks and realistically that is the only calcium I get each and everyday.  On Thursdays, I even order one in riding boots before I tear up to the stable for my lessons. Starbucks has a Misto that is steamed milk and bold drip coffee for $2.45 versus the $4.04 for a grande latte.  That is an whopping $1.59 savings a day!  I have them a least 5 times a week which equals $31.80 a month including tax.  Now investing that extra $31.80 at an average 8% return for 25 years and I’ll have $30,242.66.  I even like the taste of the Misto better since it has more coffee flavour and I drink guilt free because I’m not dropping close to $5 a day on just coffee.  

Plus the thought of the fun and freedom that saved money will bring me in retirement makes me happy.   $30,000 will be able to buy me something wonderful in 25 years.  Maybe my own little coffee shop in Ethiopia where coffee started?  

Now think if you did this with everything you spend money on?  Only a $31.80 month saving rewarded me with $30,000 in the future.  Where else can you save your money but spend it too?  

Keep loving those fuzzy little monies,

Dave

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As you’ve probably already read, 80% of mutual funds under perform the market.  Why would I ever pay up to 2.5% in management fees to under perform anything?  You can really see that they don’t have our best interests in mind.  When the market was correcting huge in 2008 and 2009 did any of the managers go to cash?  Any strategic moves? No way.  The reason for this is that if the market had swung upwards at any point during the correction and they had not participated in it, they would have been fired.  So over the cliff we all went.  As long as the managers stay close to the index, -30 may that be, the safer their jobs were.  

That doesn’t sit well with my love of money, and that is why I manage my own money.  I know at this point you feel queasy at the thought of going through company annual reports, balance sheets, and listening to conference calls, right?  Well it is so much easier than that.  What I do is find a mutual fund or index fund that I believe in and then I copy it and save the management fee.  I, for example, love dividend yield.  I’ll search for the best dividend funds or index funds and then rip off their top holdings for $5 a trade at my discount brokerage.  That way I’m in control of what I do with my dividends.  

There are many options when I’m in control of the dividends.  I could save the dividends up and buy another high yielding stock when I have enough funds to do so.  Which adds diversification to my portfolio for free.  I could also set the dividends up on a drip (dividend reinvestment plan) program.  My dividends would then buy me more stocks every quarter as they got paid out.  This way you naturally buy stocks higher and lower as the market changes over time. The indie term for this is dollar cost averaging. Quarterly I would receive more stocks that the following quarter would buy me even more stocks — and all for free.  This is a great way to accelerate growth over the long run. If I’m having a good month I might even pay myself my very own management fee and have an amazing dinner out with friends or family.  

If you share my love of dividends, look up the top holdings of XDV, the iShares dividend index. This ETF mirrors the 30 top stocks in the Dow Jones Canada Select Dividend Index.  You can grab the list of stocks right off their web site, plus their weightings.  To keep down my trading costs I buy just the top 15 stocks–making up 63% of the index. If you own them you’ll be participating when the index rises–in the last year it went up roughly 36%. You are given each stock’s weighting in the index which I could match, but with such small percentage differences between the top 15 I just buy them in equal weightings. If you did purchase the later you would have a 4.8% yield and some of Canada’s top dividend yielding companies.  When the dividend index is going up I know that I’m participating in the growth, and I have to keep checking back once a quarter or so to see if any of  my 15 have fallen off the list. I then simply make the appropriate trade to match the new top 15.  This is all on top of those sweet sweet dividends that are paying me quarterly.  

Make your own Mutual Funds and pay yourself instead of the managers.  You’ll love your money so much more.  
Dave

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

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