SMS 162 – Saving money on groceries

Saving money on groceries

Why you should want to get good at grocery shopping:

  1. You get an opportunity to get this right or wrong every week
  2. It should be your third highest expense
  3. These are life lessons for your children
  4. This is an evolution – what worked when you were single won’t with a family

How to save money on groceries:

  1. Set a realistic budget
  2. Shop from a list and a menu – marketing can be powerful
  3. Separate groceries from other expenses
  4. Shop at least once a week – this can’t be a side project, it requires effort
  5. Never shop while hungry or tired – you decision making will be altered in a compromised state
  6. Avoid value added products – whole foods are healthier and less expensive
  7. Beware of volume discounts – it could change your consumption habits
  8. Beware of chasing sales items (it could be a trap) most stores price match
  9. Buy in season – you need to alter your consumption with the seasons
  10. Consider adopting a plant based diet

SMS 161 – Understanding Risk

Understanding Risk

Risk should be assumed as a means to solving a life problem. You should only assume financial risk to improve your financial situation

Is personality driven, people fall into one of two groups in all aspects of their personal finance lives, risk of doing something or the risk of not doing something.

Risk is relative to you and only you – someone else’s moderate risk could be your extreme risk. Some factors that would influence your specific risk level are:

  • Level of income
  • Debt level
  • Net worth
  • Age

Example:

Action: Buying a house comes with the added risk of assuming the largest debt you will ever have and the risk that you lose your ability to earn income to repay that debt.

In-action: The risk of not buying the incredible wealth building tool that a house is, is that the housing market will continue to inflate and you won’t be able to qualify for the largest debt you will ever have.

When faced with important financial decisions, ask yourself the following (Forbes):

  1. What is the worst-case scenario?
  2. How will my life change and who is impacted by the wrong decision?
  3. What potential remedies are available?
  4. What would have to happen to bring me to a difference decision? In other words, to recognize that the risk is too great for the potential reward.
  5. Who can provide me with more information before I make my decision?
  6. Can I live with the regret regardless of my decision?

Managing risk is really about managing emotion – you are really trying to manage your reaction to possible outcomes:

  1. Perform arisk assessment when faced with a decision
  2. Risk should be calculated and absent of emotion whenever possible.
  3. Risk should be offset with potential rewards
  4. Risk is minimized by not being married to very specific outcomes

Risks you should take:

  1. Getting an education – student debt vs increase in income
  2. Relocating to a city – higher cost of living vs more opportunities
  3. Buying a house – risk of not being able to repay your mortgage as well, the housing market
  4. Investing – risk of losing money vs building wealth

SMS 160 – What is Financial Sacrifice?

What is Financial Sacrifice?

Sacrifices are choices we make not circumstances that are imposed on us.

There is a difference between being in a bad situation from a series of unforeseen and unfortunate events and being in a bad situation from a series of bad decisions and poor planning.

Noun – destruction or surrender of something for the sake of something else

Verb – to suffer loss of, give up, renounce, injure, or destroy especially for an ideal, belief, or end

What is financial sacrifice?

  1. Give up or forego something you want – not need something you need
  2. Doing something you choose to do – not something you have to do
  3. Short-term discomfort for long-term gain – it should be hard and uncomfortable
  4. Necessity is the mother of invention – they are not obvious and have many layers
  5. Sacrifice is not something you do when things goes wrong (that is called crisis management)it’s something you do to insure things in the future will go right.

Why you should make financial sacrifices:

  1. You believe tomorrow will be better than today
  2. If you have lived too much for today and not enough for tomorrow
  3. You want something nobody else has so you have to do something nobody else does
  4. You want more control in your life – independence requires being independent

Three Sacrifices We Must Embrace to Achieve Financial Freedom – Medium.com

 

Sacrifice #1 – Spending

The first sacrifice we have to do is to limit ourselves to a budget and avoid spending all our income. There is no way around it. If your spending habits cannot be controlled, then forget how much you earn. You are going to spend it all anyway.

 

Sacrifice #2 – Income

Financial freedom will for most us come out of 3 vectors: income, savings, and investments. If we want a raise, we will likely have to do a harder job or work more hours.

Sacrifice #3 – Risk

This next sacrifice comes from getting out of a comfort zone. Most of us are happy with the 1% rate on a savings account because we feel the money is safe and will never reduce in value. In other words, we have to take more risks and embrace volatility as part of the journey.

SMS 159 – Plan on a Career Change

Plan for a Career Change

  • We all need work that is out contribution to society. At points in our lives we also need jobs, this is how most of us support our lifestyles.
  •  Victory lap retirement – is a book that everybody should read regardless of your age.
  • Some people are fortunate enough to have their job be their work
  • Financial independence is when you can transition from a full time job to full time work

Job – A job is a regular and official activity that you do, and receive money (a salary) for your activity. It is also called a profession or an occupation. You can have a full-time job (40 hours per week) or a part-time job (around 25 hours per week).

Career – Your career is the total progression of your professional life. It can include many different jobs over the years.

Work – The word work is more general than “job” – whereas “job” is a specific occupation/profession, “work” refers to general efforts and activities done to accomplish a goal. “Work” can be done both inside an official job and outside a job!

Plan for five careers in a lifetime – Financial Times

Why A Career Change at 30 and Beyond Is So Hard – Monday Views

  The career lifecycle

  1. Getting that first opportunity – convince an employer you will be a good employee and that you are knowledgeable in your field
  2. Developing a reputation – become someone who adds real value to an organization, an expert
  3. The cross roads – either burned out or stopped caring, you have had enough
  4. Working  for the money – when you are only in it for the money, this is the beginning of the end

Plan for five careers in a lifetime – Financial Times

Why A Career Change at 30 and Beyond Is So Hard – Monday Views

Challenges of career change

  1. Uncharted territory – lots of risk and struggles, it’s uncomfortable
  2. Education or Training – this will require time & money (a good reason to live below your means)
  3. Compensation – you will definitely earn less money when you start a new career
  4. When the perceived pain of continuing is greater than the perceived pain of changing
  5. Courage to try something different – the longer you wait the hard it will be to overcome

Reasons to change careers

  1. This shit will get old – you won’t be able to do it for 30 years
  2. You create a backup plan – if your second career does not work out
  3. You build a social network – if your second career crosses paths with your first
  4. You choose your first career when you were 17 – what are the chances you were right
  5. Life is not a straight line

Words of wisdom:

When your father and I decided to have kids, we felt it very important to educate each of you with the hopes of NOT putting you on a specific path in life but to give you options, lay a foundation to give you the ability, courage and confidence to explore, to discover who you are and to find your own passion. Don’t let the title of your degree (something you choose when still a teen) keep you in a box or trap you in a mindset of where you “should be”. View it as the appetizer of life, with the main feature to yet to come.

SMS 158 – Your House is not an Investment

Your House is not an Investment

Just because your house appreciates in value does not mean it meets all of the criteria of an investment.

I am not saying real-estate is a bad investment, real-estate that you are not emotionally invested in can be a good investment. The house you live in, by its very nature, is an emotional investment.

Investopedia:

What Is an Investment? An investment is an asset or item acquired with the goal of generating income or appreciation. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or will later be sold at a higher price for a profit.

Why your house is not a true investment:

  1. You are too emotionally invested  – can’t make rational investment decisions
  2. No cash flow mechanism  – an investment that never pays out is not much of an investment, HELOC creates debt
  3. High carrying costs – far too high to be considered a good investment (interest, insurance, taxes, maintenance)
  4. Highly leverages – this incorporates too much risk
  5. Transactions costs  – lower cost options exist, too many hands in the purse
  6. The opportunity costs – lack of diversification, there are better returns on investments

What your house does represent:

  1. A place to live – you can’t live in an index fund
  2. Provides stable living environment for raising a family
  3. A great wealth building tool through forced savings
  4. An opportunity to leverage a purchase that will usually increase in value

Home Repair vs Home Improvement

Home Repair – if it’s broken fix it

Home Improvement – Everyone likes to refer to their home as an investment. If you investment additional money into your house “investment” you should expect and have some reasonable expectation of the return on that additional investment.

JL Collins – Why your house is a terrible investment

SMS 157 – Have a Big Why in Life

Have a Really Big Why in Life

When pursing financial independence it’s really hard, you need to have a really big why so when it get hard and you want to quite you will have the reason why to push through.

With a really big why the how-to’s of life get really easy and obvious.

To get to your why you have to ask why 3 times to get to the real answer

What is my big why? I want early financial independence (not because I hate work)

  1. Why do I want financial independence – to have choice and control in my life
  2. Why do I want choice and control – to work at a cause I believe in
  3. Why do I want to work at a cause I believe in – to work at something bigger than myself to help people

Reasons to have a really strong why:

  1. Your battle plan will not survive first contact with the enemy
  2. Life is not a straight line
  3. Your plan is unique to you with an unknown solution
  4. Life can be really hard and at times unfair, don’t be a victim – don’t ask Why me? Ask Why not me?

Strategies for developing a strong why:

  1. Seek out new experiences – doing the same thing hoping for different outcomes is bad idea
  2. Abandon your expectations – this is where disappointment lives
  3. Treat everyone you meet with respect – even if you do not share the same life philosophy
  4. Give Back – don’t be transactional you will repel everybody in your life, you will receive more in life by helping others than helping yourself
  5. Celebrate milestones – celebrate your past accomplishments and your future hope
  6. Let go of the past – this can be your undoing only of you let it, “what-ifs” are about your past, “why-to” is about the future

What’s your BIG WHY?

1. What have you done in the past that felt incredibly fulfilling?

2. When have you been at your absolute best?

3. When have you been at your absolute worst?

4. What anger’s you? or What breaks your heart?

5. Why, why and why?

Reddit Post 1 User: m yTwelfAccount:

I finally realized my “why”

Many posts here urge the community to really consider their “why.”  Why are you pursuing financial independence?  For so long, it’s been easy for me to say, “I hate working.”  But when I shared that with people in real life, I was met with confused looks.  “It doesn’t seem like you hate working,” many people would respond.  And it didn’t feel all the way right to me.  I don’t really hate working.  In my jobs, I have had opportunities to directly help people and improve their lives.  I have changed systems and operations for the better.  I don’t hate that.

What I hate is the performance required.  I hate the charade of working 8.5 hours even when it’s not necessary.  I hate that half hour that has to be unpaid because of lunch.  I hate having to consider the optics of your decision to work a different schedule, take a three week vacation, or having a long lunch.  I hate the endless meetings and documentation required to assure everyone you are, in fact, working.  I hate the contests people have with one another on who is skipping lunch, who is coming in early and staying late, and who can’t take vacation.

It’s bullsh*it.  It’s inefficient.  It’s unnecessary.  And so that is why I want financial independence. To free myself from bullshit.

Reddit Post 2 User: myTwelfAccount:

Funny side note – I ended up in a conversation where I had to explain this to an older woman the other day and you’d have thought I was telling her about Bigfoot or ghosts and aliens. Apparently making good money and living a fancy lifestyle is totally normal but saving the money instead so you don’t have to work- that’s just a f**king fairytale.

SMS 156 – Transition is Hard

On the podcast we always talk about change and moving forward and to do that it usually required change and to get from where you are to where you want to be there is always a transition and its usually uncomfortable and that ok.

Transition can be a very fragile but is very critical to getting to where you want to be in life. This usually requires some kind of behavior modification that will require some form of self-discipline and new habits.

Discipline – the ability to give up immediate pleasures for long-term goals.

Habit – an acquired mode of behavior that becomes involuntary.

You use your discipline to develop habits and you develop your discipline through forced repetition.

You have a limited amounts of discipline to spend each day, so spend it wisely on the things that are important.

 The Dip – you start out with enthusiasm and energy, then thigs get hard, this is the dip. You need to expect the dip anticipate it and have a solution ready to push through the dip to achieve success.

How to master Self Discipline:

  1. Know your weakness – we all have them
  2. Remove temptation – you are not as strong as you think you are
  3. Set goals – realistic and measureable
  4. Measure progress – record keeping is the key, don’t try to do this in your head
  5. Celebrate wins – winning is contagious

Why Transition is so hard:

  1. Uncharted territory – learning is the key, the older you get the harder this becomes
  2. Fear of failure – you are already failing small at something you are trying to correct
  3. Uncomfortable – our emotional brains naturally gravitate toward pleasure

How to make transition easier:

  1. Follow a proven plan – such as a book, youtube, podcast
  2. Bridge the gap – small incremental steps will keep you motivated
  3. Measure your progress – you need to know you are making progress in the right direction
  4. Expect setbacks – failure is your friend, you learn more from your mistakes, and you are probably failing at something already that’s why you are trying to make a change.
  5. Expect it to be hard – if it’s not hard it’s probably not worth doing.

SMS 155 – You’re Not Poor You’re Broke

SMS155 – You’re Not Poor You’re Broke

Poverty – is not about a lack of wealth it is about a lack of opportunity.

Broke – is about an insufficient amount of wealth for a chosen lifestyle.

The problem with not knowing the difference is you either try to solve the wrong problem or worse you become powerless to solving it.

You don’t have to be born into poverty to be poor, circumstances can be your undoing.

Relative poverty vs absolute poverty – relative poverty can be solved much easier than absolute poverty.

Canada’s poverty rate was 9.5% in 2017 (35,000,000 * 0.95= 3,325,000) defined as a family’s ability to afford a “basket of goods”.

Factors that would indicate poverty:

  1. Access to education
  2. Access to housing
  3. Access to savings/investing
  4. Access to the free market

Four simple factors can determine future poverty risk:

  1. Race – visible minority
  2. Education – no access or limited access
  3. Martial Status – single with no support system
  4. Age – a bad start leads to bad places

Factors that would indicate artificial poverty (broke not poor):

  1. Your situation is temporary with a known solution
  2. You have a safety net – family or debt
  3. You have options – choice could solve or improve your situation
  4. You have something to lose

 Reasons you might be broke but think you are poor:

  1. You’re consumed with first world problems
  2. Compare yourself to others
  3. Don’t take ownership
  4. Don’t understand the Maslow Hierarchy of needs

SMS 154 – Your Emotional Brain is in Control

Personal finance is 90% behavior and 10% math – this is a spectrum

We have two brain – the logical brain and the emotional brain

Your emotional brain is in charge and your logical brain is just there for support.

You can gather all the knowledge in the world but if your emotional brain is not onboard it just won’t happen.

If our emotional brain is in charge what is the problem? – We often evaluate our decisions using logic

How to you know you are making an emotional financial decision with bad logic:

  1. Justification mode – “It’s an investment”
  2. Excitement is your emotion – the logic is usually flawed
  3. No decision is an emotional decision – fear is a dangerous emotion
  4. The sacrifice is not obvious – monetary sacrifice followed by the opportunity cost
  5. Your decision reduces the control in your life

If you find yourself making bad or regretful decisions you may need a new approach to keep your emotions from getting the best of you.

10 Tips to help you take control of your emotions (from Psychologytoday.com):

  1. Power Up – be aware of your emotions
  2. Rewind – step back, how did I get here
  3. Fast Forward – play our scenarios to see where it will lead
  4. Zoom in – peel back the layers
  5. Monitor the volume – listen to your inner voice or support system
  6. Adjust the brightness – look at both the positive and negatives
  7. Press Pause – sleep on it
  8. Stop – it’s never too late to stop a bad decision to mitigate the damage
  9. Turn off – time to collect your thoughts
  10. Recharge – make sure you are in good mental state for decision making

Strategies for managing your emotional brain for personal finances:

  1. Acknowledge your emotion – know which emotions are in play, there is always at least one
  2. Put the problem in front of the solution – we often have a solution where no problem exists
  3. Use your support system – people that care about, but are not emotionally in your decision
  4. Write it down or say it out loud – does it still make sense
  5. Have a value system – avoid decisions altogether