June 17, 2008 at 10:16 am
A short rant on budgeting.
Everyone could easily have a budget if the idiots at the banks could see past the ends of their noses. For years I have been trying to convince most of the major banks in Canada to allow me to categorize my own spending. If the bank would allow me to do that, then my budget would essentially be a report (just assume 'yesterday's weather'). The bank knows about my cash withdrawals, my cheques, credit and debit purchase amounts, I just need a means to classify them. I wouldn't even care about whether or not I could add upcoming expenses (I've also been trying for years to get the bank to allow me to allocate my money into virtual subaccounts, which would help). Just categorizing past expenditures takes me a long ways towards controlled spending. In fact the majority of the categorization could be done by merchants themselves e.g. direct debits to my natural gas provider belong (surprise, surprise) to the Utilities category. I can't imagine why merchants wouldn't self categorize, but if the wouldn't, one could easily aggregate user entered categories to come up with some canonical classifications after a time. So long as I was able to override default classifications (e.g. a department store purchase could belong to any category or several), it would take no time for me to have a good handle on where everything is going. If you work with several financial institutions, you'd have some work to do, but if you don't, the bank could provide the whole service for you. All it would take is a small bolt on to their existing web apps. Naturally though it would only fly if the greedy b@$t@rd$ didn't charge me a buck every time I opened the page...
June 17, 2008 at 10:35 am
Its depressing to save for retirement. Unless you have a very healthy old-age life and die suddenly from a hemorrhaging stiffened artery, then, ultimately, the pharmaceutical companies and the medical industry in general will be consuming your entire retirement savings, social security income, and the equity in your home and investments.
Its better to be mortgage-free and debt-free. Then fund your kids' college (NOT harvard and similarly priced schools) and be able to pay major home maintenance (like new roof, new ac, new water heater) and a new car without debt.
June 17, 2008 at 11:57 am
This is a very good editorial and I agree, it's a shame that what is arguably one of the most important skills someone should have as an adult isn't taught in school.
I filled the gap by using the amazing power of the Internet to learn as much as I could about money, finance, investing, etc. One of my friends pursued an masters in commerce and I'm the only one he can speak intelligently about this with. I think I spent an hour a day reading things on the Internet for about 3 years.
P/E ratios and stochastics aside, I remember that you can earn about a 8-9% return on investment if you buy a plot of land and grow hardwood trees on it to sell to mills. Pretty safe, high yield investment if you can do it.
June 18, 2008 at 4:07 pm
Great editorial; got me thinking about the future. There is something I'd like to raise. I am the major bread winner for my family. I pay all the bills, mortgage etc. Saving for the future is quite hard when I am the one who has to take time off work to have a baby. I notice that a lot of these budget methods assume that the male will be the major bread winner. I'd like to see some tips for someone in my situation. When I am on maternity leave, if I haven't been able to save up the mortgage repayments, I have to put the mortgage on hold, I don't get any pay (Australia has no legislated paid maternity leave) and therefore no superannuation and have to try to make ends meet on savings and whatever my husband can earn. He has a disability caused by a brain injury.
I have a gorgeous 9 month old girl but it was a real struggle while I was on maternity leave and I had to go back to work when she was 6 months old. We have no savings at the moment and now it will take much longer to build up our savings. We would love more children but financially we aren't very secure. Anyone have any tips for a hard working Aussie mum?
Cheers,
Nicole
Nicole Bowman
Nothing is forever.
June 18, 2008 at 4:31 pm
Great topic! Most folks are moving backwards financially. We see it with today's economy, rising fuel and food costs, increased home forclosures. People have been living above thier means for the last decade while the economy has been good. Most people spend just as much as they make and its apparent when an extra $50.00 per month in gasoline prices makes folks start to panic.
Dave Ramsey is a good resource, so is Robert Kiyosaki. There are many great books on this topic: The Richest Man in Babylon, The 4 Laws of Debt Free Prosperity, Kiyosaki, Ramsey, Proverbs.
I think Bill hit the nail on the head with Proverbs 22:7. The borrower is slave to the lender. Debt is bondage. You've shown how compound interest can work for you. Most people have it working against them instead. It is amazing how much you can get ahead when you start operating on your own money instead of the bank's.
It also helps to have a mentor. I have a mentor who has not worked for 30 years; he's a multi-millionaire (he's had Robert Kiyosaki over to his house). He says that you can either learn how to accumulate wealth or manage debt and most people spend their lives managing debt.
Anyway, off my soapbox. I did not intend this to be so long, but that's my $.02.
June 18, 2008 at 8:02 pm
Ah yes, the mythical 6% interest. Good luck finding a US bank that will give you that kind of low-risk return. CD rates haven't been close to 6% since the start of 2001. You could always look overseas for better returns. Actually, better returns are in abundance in overseas markets. Of course, Uncle Sam will treat you as a possible terrorist if you move money offshore. All right there in the Patriot Act.
James Stover, McDBA
June 18, 2008 at 9:52 pm
It is hard to get 6%, but you can find bonds and diversify to get the return. Granted it's not every year and this past year (and possibly next) might be worse than many others.
There are still funds making money this year. T Rowe's Latin America is up 5.99% fo rthe year. Fidelity's is 8.9%
That being said, $1M in 30 years is still $1M. It might not be worth what a million is today, but it's a lot more than most people have saved.
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