You might be wondering why I’m casually writing about murder, but in this case I’m referring to part of my personality.  Back in your teenage years you might recall that desperate desire to just fit in and be normal.  I called that part of myself ‘Normal Tim’ and the bloody annoying prick was just driving me nuts so I had to get rid of him.  Hence the summary execution and no funeral.

The realization that lead to this situation was: I was just never going to be normal so I had to stop trying to be normal.  It was exhausting work for me and pointless in the end.  I’m just too much of a natural non-conformist to play that game.  Unlike everyone else around me I never stopped asking “why” like a two year old.  Why do people pay so money for clothes with funny ‘logos’ on them?  Why can’t someone hang out with both the geeks and cool kids?  Why are we doing geometry proofs when someone has obviously already figured out this works? At the time I annoyed more than a few people with my questions and comments.

Now ironically I paid a fair bit of money to do that same thing.  I attended a meeting last week where I was asked for my feedback afterward.  I replied, “The meeting was a waste of time as process around the meeting has over taken any reason on why you have the meeting.”  Then I proceeded to provides a few examples on what the meeting could be used for and oddly enough I saw nodding heads.

People are aware of bullshit around them, but often don’t bother to give themselves permission to see it.  So I ask questions to common things like:

• Buy the biggest house you can afford.  Why on earth would I do that?  I don’t need that much space (even with two kids and a dog).
• Eating healthy costs more.  Why? Um, are you shopping in the same stores I am?  Cabbage is cheap, so are apples, potatoes and lots of other options like kale.  Healthy doesn’t have to equal expensive, or do you not know what ‘in season’ means?
• With the kids you will need two cars. Why!?!? I barely drive the one I already have and my wife works from home.  Did all the buses and cabs stop running in the city?

Then there is my personal favorite “But you can’t retire before 45!” Why?  I’m not normal, so why shouldn’t my retirement plan assume I’m working until my sixties?  Hello, I haven’t had a ‘normal’ life for most of my adult life.

I’m not saying life has always been easy after getting rid of ‘Normal Tim’, but overall I’m a lot happier just being myself rather than who people think I should be.  So when do you give up on being ‘normal’?

So to field test the idea I decided to spend $100 of my spending cash over the last month on other people and to spend five hours a week on others.  So how did it go?

The cash was fairly easy to track since I really only spent it on two things.  The first was I took a friend out for lunch.  Yet I realized I was getting something as well out of that deal.  So I tried to think of something where I won’t get something for my self at the same time.  Then I had an idea.  My son’s class is raising money for a local spray park as a project.  They collected the recycling from the lunch rooms and used that money as donations.  So I decided to help motivate the kids.  I sent a note to school saying I would match everything they raised for a two week period.  That ended up being $85, so that blew the rest of my budget.

For time I mainly spent my time on my kids.  So when Daddy was asked to play soccer, I said yes (even if I had other things to do).  I played Wii games with them, went to the park, we went to a family dance at the school, played Lego and generally just spent more time with them.  This isn’t to say I never spent time with them at the start of this, but I tried to do more of it regardless of what I wanted to do (the chores waited, or that book I wanted to read waited).  I also attended a parent-teacher school meeting (now called a School Community Council, SCC, which functions similar to the old PTA).

Ok, but did it actually make me happier?  Well let’s put the disclaimer out there that there are MANY factors that got into a person’s mood in a day so while I tried to control the obvious ones I can’t control external factors.  Overall my answer would be a solid: yes it does make you more happy.  I would say my baseline happiness was a 3.5/5 when I started this and now it would be 4.2/5 or a 20% increase.

I have to admit, while I know I had less spending money (actually 50% less) for the last month I didn’t feel any worse about it.  I still get a little surge of joy when remember the note I got back from my son’s teacher saying how excited the kids were about me matching their donations for those two weeks.  Apparently my son was a little hero for his class because of it (which is really ironic, since that some what obvious outcome didn’t occur to me at the time).

The other odd outcome I found when doing this exercise was I actually got more items done off my procrastination list in the last month even when I had less time available.  I suspect that is because I felt better, so it was easier to get started on some of those items.  Also I recalled people tend to over estimate the amount of time it takes to do tasks you are avoiding, so what I thought would take four hours was done in two hours.  So even with less time per week, I got more done too.  Odd, I know.

Ok, so now with that done, will I keep it up?  Yes I think I will try to give a bit more money away on things I care about that are local.  I suspect if I had donated money to an international charity that I would not have the same degree of happiness.  I won’t see the same impact or result of the gift.  I won’t chain myself to a specific amount each month, but rather just do it when the mood strikes me.

As for time, I actually accepted the co-chair position on the SCC at my son’s school.  So I will be putting in time there for the next year helping out to organize activities for the kids and their parents.  Beyond that I will keep spending a bit more time with my kids, but I won’t track it.

So how do you give away your time or money?

As I come up on my mid-30’s, I seem to be attending fewer and fewer weddings every summer. With fewer weddings to attend, I seem to enjoy the festivities much more. I tend to split my time at these events catching up with friends and family members that I don’t see enough because of a lack of weekends to see everyone. Besides catching up with people, I do dance – well, more jump around for a few hours until I’m exhausted, since I have no idea what I’m doing.

For most weddings, there are three major things that we have to budget for when we get an invitation:

Clothes - I don’t really buy new clothes for a wedding, but my wife uses a wedding invitation in the mail to buy a new “fun” dress. The good thing about most of the dresses she finds is that they are generally (but not always) cheaper than a guy’s tie, which is how the dress is a “justifiable” purchase, since you can’t wear the same dress twice (apparently).

Presents - We used to try to give really cool presents that we put a lot of thought into, and still do. Last summer, we gave a particularly injury-prone friend a super heavy duty first-aid kit, which we thought would be useful and potentially lifesaving, given his injury history. Mostly though, we give cash – it’s less thoughtful, but more useful, and we feel better “paying” for our own dinner.

Travel - Last summer, we had a wedding in Nova Scotia, and decided to drive out, taking a tour up through the Eastern seaboard and the Maritime provinces – taking 4 days to get out there from Ontario and (not well planned) a long 2 days to get back. We know we’re going to be spending money on hotels, gas, meals, maybe some booze (realistically, probably too much booze), and other stuff that we wouldn’t have to buy if we just stayed at home.

We look at going to weddings (now) as a fun weekend activity. It’s nice that people send out invitations months in advance to allow us to budget our summer activities. I don’t really like the idea of huge, expensive weddings (because I can see a number of better things to do with the money that gets spent), but I do have fun at them.

Do you budget for weddings? Do you have a busy summer season ahead of you? Do you ever turn down invitations?

My initial reaction is to be skeptical. Part of the reason is that I inherently dislike any form of incentive that I see as manipulative. As an example, in looking at happiness, we saw that it wasn’t just spending, but meaningful spending that made people happy. Learning, too, should be meaningful, and if we’re asking kids to do work that is pointless or repetitive, it shouldn’t come as a surprise if they don’t value the assigned busywork. The other part of the reason derives from an anecdote that I read in Freakonomics by Steven Levitt. He tells the story of a daycare that begins charging parents for arriving late, only to find that parents begin to arrive late more often, in proportion to their ability to afford the new fee. What they lost was the moral and social expectation that parents arrive on time. If we pay students for good grades, will they devalue learning and fail in proportion to not needing the money?

Michael Sandel, author of What Money Can’t Buy, explains that in America, the thinking that properly applied cash incentives can cure an ailing school system is gaining popularity. He relates a study that found that cash incentives could improve attendance, but not performance on standardized tests. Paying seven year olds $2 per book to read more, in Dallas, did improve reading comprehension. He doesn’t say, though, whether any of those kids grew up hating reading, thinking it was something you would only do if someone paid you enough. Even offering teachers incentives for raising their students’ test score had little effect.

Dan Pink may hold the clue. In his book, Drive, he explains that there are two different types of work that people do: physical tasks or thinking tasks. Physical tasks that can be done quicker or more accurately seem to respond well to rewards and punishments (incentives). Thinking tasks, on the other hand, don’t respond to incentives. In fact, performance might even suffer due to added pressures.

Have you experienced incentives at work? Were they effective? Should kids in school be bribed to perform?

While I deeply appreciate you bringing innovation to the entirely boring landscape of Canadian investing with the introduction of the Tax Free Savings Accounts (TFSA), I have to say you screwed up with the name.

By using the word ‘savings’ in the title of these accounts you have firmly linked them forever to basic savings accounts.  This has resulted with the majority of Canadian’s only investing in a high interest savings accounts which save them almost no tax.  For example, $5000 at 1.5% interest only produces $75 a year in interest.  At a 40% marginal tax rate, that person has only saved $30 in tax over the ENTIRE year or $2.5o/month.  It’s so tragic of a waste of a tax shelter it makes me almost weep.

While most people would assume this would be a sorry accident I have to almost wonder if the name was intentional in order to ‘save’ the reduction in tax revenue to the government of Canada.  While this is a cynical thought, I admit, I have to believe instead that you were trying to do the right thing and this is but  a tragic mistake.  So before it is too late, might I request you rename the accounts: Tax Free Investing Accounts(TFIA).  Save the people for their own simple conclusions and make this innovation of yours truly great.

After all, won’t it be wonderful to educate the public simply with an example that if you own a dividend paying stock in their TFIA they can have stream of tax free cash for as long as they own it.  Then even when they sell they would then pay no capital gains tax.  So that others may have the joy of knowing they have saved nearly $1500 in tax on a $7500 investment like me.

Thank you for your time and consideration to this modest proposal.

Tim Stobbs

Why do we like to believe that we are somehow the exception to the rule? Almost everyone I know does this in some way.

From the first time I went into debt, I wanted out, and that was over 20 years ago. From the first time I gained extra weight, I wanted to be rid of it. The principles are the same for both. Spend less than you earn, or eat less (calories) than you burn. I listened to the media too much. Everyone promised a way out. Everyone had a way of making it easy, or so they claimed. Over the last 20 years, I think I have tried every budget trick, and weight loss diet in an attempt to change my life. That was the problem though, I changed things (temporarily) but I didn’t change me.

I started thinking more about this recently. I am now managing my money better than I ever have in my life, and for two months now, I have made a change to my eating habits and feel that I am securely on the road to achieving a healthy weight.

There are a few people in my life that have debt problems and are overweight. Over the years, we have tried doing several tricks to get us out of debt and thin. When I started saying no to spending, I was asked about what I was doing, I explained about the concepts or spending less than you earn, and being happier with what I buy. A few people started clipping coupons, but still showed up to work with a take out coffee that sat on their desks and eventually got thrown out. When I started to lose weight, I was asked, and I explained what I was doing. Counting Calories. All of them. Weighing and measuring my portions. Tracking calorie intake and exercise expenditure. I do it all online for free. The others joined me, lost a few pounds, but then what I interpret as their need for special treatment kicked in. “I can’t do this because I have lots of social eating things to go to”, or “This shouldn’t be working because it is too easy, I need to eat –xxx– and I can’t do that on this program”, or “I can’t not spend because I’m (insert life excuse here)”.

I get it. I used to be that way.

I used to believe that simple math wouldn’t work, that somehow, when Saturn aligns with Venus, while soaking in the light of a new moon, if I froze my credit cards in Cabbage Soup while only eating fruit before noon and boiled chicken breasts at night, the universe would implode for just long enough to create a magic bullet that would solve all my problems.

Reality is boring. Repeating the habit day after day can be mind numbing IF THAT IS ALL YOU THINK ABOUT. It took me a while to learn to just set up a system, and let the system work for me. On any given day or week, I can eat X # of calories, and spend Y dollars. That is all. It works, but it required a change in my belief system to make it happen. It is hard to describe what that change was. Maybe it was a shift to concentrate on what made me truly happy instead of the bandaid solutions that I used to employ. Maybe it was disconnecting myself enough from the circus of social expectations to realize who I am and what really matters to me. Maybe it was caring enough about myself and my future to fully comprehend that when I feel rebellious and try to cheat the system, I am truly cheating myself.

I have a problem with being too much of a saver. I love board games and video games which require resource management, but I am constantly beaten by opponents who are willing to expend resources (for example armies in the board game Axis and Allies) while I continue to collect various items. I would much rather not expend a resource, whether it’s trivial like something from a game, or money that could be used to pay down a mortgage.

For an individual looking to accumulate assets as quickly as possible, I don’t think being a “saver” is a terrible quality to have. I think that this facet of my personality is fine for the most part, but there are some things that this doesn’t help with.

I am currently allotted 22 days of vacation each year from my job. I enjoy time off as much as the next person, but I seem to have a hard time spending this “scarce” resource. Over the past few years, I have carried over a few days per year (my company limits the ability to do this, as they attempt to keep a “work-life balance”). I have had to use the days because I needed to take time off to study for the accounting courses I was taking. I guess in the back of my mind, taking a day off to do nothing seems a little wasteful.

Having a scarce number of days available to do things, I feel the need to have to do something – a trip, a project, a golf day, or something else exciting. I do these things rather than just hanging out around home and doing “nothing” (reading, watching movies, cooking), which is what my main goal most of the time.

I realize that this is the most ridiculous “problem” I could really talk about, but it will be interesting to see how I react when it’s time to spend retirement income. I have relatives that have become really miserly post-retirement and seem to become obsessed with ensuring their retirement fund is not spent, to the detriment of any enjoyment they could be having.

I think that the resolution to my stinginess in retirement is to ensure that I budget appropriately and work with the knowledge that I’m fine as long as I stay within that amount…I don’t have to keep saving after I retire. I’m not really sure how I’ll fix the similar problems I have with getting my butt kicked at board games.

Do you over save? Do you think you’ll continue this trend in retirement?

Can money buy happiness? The obvious answer is that no, it can’t. But I’ve recently seen a couple articles that argue. In fact, I remember a financial advisor once explaining that, while money doesn’t buy happiness, it’s one of those things that you’d rather have than not have. I must admit that I’ve never believed there’s honour in being poor.

It has been said that beyond about $70,000 per year of income, more money doesn’t make a person happier. This was first described as the Easterlin paradox, which found that within a country, people who had more income were happier. But between countries, the amount of income didn’t correlate to level of happiness. There are two likely explanations usually given to explain this counter-intuitive finding. One is that we have a satiation point where we have everything that makes us happy. That seems to be equivalent to saying that we run out of ideas on how to spend our money, which doesn’t seem particularly realistic. The other is that we are so busy comparing ourselves to others that we lose sight of how much we really need and we only feel happier in proportion to how much more we have compared to those around us. That’s why it’s interesting that a new study shows that happiness does tend to continue to rise with income.

Of course, that doesn’t prove that the income is the source of the happiness. It could just as easily be true that happy people earn more income, or that the income and the happiness are both the result of another cause. And that’s where Carl Richards suggests that happiness comes from spending money on other people. That’s an interesting idea, because it explains why money and happiness are sometimes related (you need to have money in order to spend it on others), but why people aren’t necessarily happy with more money (spending it on themselves). So it seems that money can buy happiness, but only indirectly, but using it to make other people happy.

Having just celebrated my daughter’s fourth birthday by spending money on a new pet fish, a horseback ride, presents and a family BBQ with her cousins, I’d agree that there’s nothing that would have been a better use of that (relatively small) amount of money. Do you get happiness from spending on yourself? On others? Or have you found a better way to find happiness in spending money?

This simple test is all about self control, which isn’t always about willpower, but rather also about how well can you distract yourself from temptation.  Today and right now is always way more important than next week and obviously WAY, WAY more important than the next 10 years.  So if you find saving for your retirement hard, it could be an issue with your self control.

So if you failed the marshmallow test as a kid are you doomed to not retire early?  No, not exactly.  While I would wager the vast majority of early retirees have excellent self control, the good news is if you practice it and plan around your temptations it is possible to still be a good saver.  How?  Well in no particular order:

1. Pay in Cash for High Temptation Items – Everyone has their weaknesses in spending.  For some it is food, others movies, books , shoes…take your pick.  Now if you put yourself on a cash spending for your problem area you trigger an interesting psychological affect called the pain of paying.  We work hard for a money so giving it up can hurt just a little bit.  Cash is the hardest form of payment, unlike credit cards which often can be a little bit more surreal.  Also it provides a handy way to check how much money you have left in a given month for your vice.
2. Plan for a Lack of Control – So rather than wait to save with what is left over at the end of the month, make an automatic transfer to your savings on payday.  Why?  Because we tend to just deal with what we have in our main bank account, the less there is, the more likely you won’t over spend.
3. Play Mind Games – When saving for something long term it is hard to keep focused, so plan for the lack of focus and plot out rewards along the way.  They don’t have to be huge, just something to keep you head in the game.  For example, if I save $12,000 in my retirement accounts in the next three months I will buy myself a new DVD that I really want.  This is called reward substitution using something right now to keep you on the path for the long haul.
4. Plan a Guilt Trip -  There is nothing like guilt some days to keep you on the path. If your kids, your wife, your friends and half you work place know about a short or medium term goal, there is a lot of social pressure to keep to that goal.  So tell the world your plan (or part of it) and keep yourself accountable.
5. Never Shop When Your Exhausted – Your self control is like a muscle the more you use it during the day the more likely you will have it fail towards the end of a long work out (or day).  So plan your high temptation situations early in the day if possible.  For example, you could do you grocery shopping after breakfast when you are full and in a good mood.

So you might ask, well great, but how do these really work?  Well guess what, I’ve used or am using everyone of those ideas in my own life.  I’m not sure if I would have passed the marshmallow test as a kid, but regardless I’m still on track to do well in life because I learned some self control.   You are not doomed in life due to your birth self control, it can be improved with practice and a few tricks.

How is your self control? Would you have passed the marshmallow test? For fun here are some adults doing the test.

To track my progress I’ve decided to track both my expenses and my investment gains.  So once the investments gains are consistently beating my expenses I’m financially independent and can stop working.  I think my ideal tracking of this would be one full year of investment and spending data, but I don’t have that yet.  So for now I’ll do a trailing six 12 month average on spending and investments for the calendar year.

Investments

Account (Contribution), [+/- Gain or Loss less contributions]

RRSP $33,210 ($100), [+$320]
LIRA $12,480 ($0), [+90]
TFSA $20,630 (+$2900), [+$470]
Pension $71,760 ($973), [+$517]
Wife’s RRSP $38,800 ($0), [+$230]
Wife’s Investment Account $12,830 (-$600), [-$200]
Wife’s TFSA $13,720 ($0), [-$300]
My Investment Account $6,890 ($-300), [+$30]
High Interest Savings Account $1,900 ($0),[$0]

Investment Net Worth $212,220 ($3073 ), [+1196 or 0.6%]

(YTD Contribution: $17,802), [YTD Gain: $11,717 or 6.4%], YTD Avg Monthly Gain $2929

Spending Averages

Last Month $4183

Trailing Last 12 Months (less mortgage payments) $3041

Results

Number of months spending covered by investment gains: 0.96 {Target 1.0 or higher}

Commentary:

So this month I finally fell below my target of 1.0 for the first time this year.  So lesson learned in the short term a massive gain in investments can seriously mislead you to think you are doing better than you are.  I’m glad I’ve kept my expectations down so far, but I’m happy to see the YTD investment gain stay over 5%.

This month our expense took a hit as we had an unusual bill of just over $2000 owing for federal tax.  Which seems like a lot until I looked into it and realized that just about all of this tax owing came from our home based businesses, which then transfer cash to cover their portion.  So while I’ve booked the full expense of this in this summary about $1450 of that was paid for by the business accounts.  Proving again if I keep using the full expense number generated from Mint I will be over estimating what I actually need for the plan.

On the investment side we drained off some extra cash in the investment accounts and contributing more to the TFSA accounts.  I need to look into cashing out the taxable accounts entirely and moving them to TFSA.  There really isn’t a good reason to keep getting the fees in those small trading accounts when they won’t be used much for the next few years.  The plan is to catch up on all our contribution room in our TFSA and RRSP first, which should take about two years.

Any questions?