youngandthrifty.ca » saving

What is Cash Flow? Is it Really King?

young — Mon, 14 Nov 2011 15:51:18 +0000

I always hear about how cash flow is king so I decided to dedicate this post to analyze whether cash flow is indeed “king”.

What is Cash Flow?

When defining the fiscal strength of an individual, the most important financial aspect to consider is the cash flow. Cash flow is the movement of money within any given account, of course, a positive cash flow is king. Factors consistently replenish and deplete funds within that account, these include expenses like rent, debt payments etc. and positive factors, like income, rental income, dividend income etc. This movement of funds is typically observed for a set period of time and then this is used to determine whether one has positive cash flow or not. This figure is then represented in a statement of cash flow and can be used to determine the specific factors of an account that are performing well and those that require improvement or adjusting. It sort of works like a budget, but not really.

Types of Cash Flow

There are three primary types of cash flow that are analyzed for the cash flow statement. Each will apply to both businesses and individuals in different ways. The first is operational cash flow. Operational cash flow, as the name implies, results from the money generated by typical operations. This means the production of a good or service for a company or the income generated from a job or side hustlin’ projects for individuals.

The money spent and received on investments is the second type of cash flow. There are many different types of cash flow investments. RRSP’s, stocks and bonds are common sources of investment cash flow for individuals. My utmost favourite is the DIVIDEND. Dividend income is favourably taxed in Canada, so this cash flow means that the tax man won’t get it. Usually, investments will only result in a positive cash flow after an a long time investing money into the dividends…. a loooong time. For example, if you have $1000 invested in dividend stocks and you get 5% return annually, that’s $50 a year. If you continue increasing your investment and shares in that dividend stock, you will continue to accrue dividend income (as long as the company keeps paying it to you of course). My dream (and no doubt many others share this dream as well) is to be able to live off dividend income (or other sorts of passive income) one day. One day!

Financing for individuals means borrowing money from a bank or business in exchange for repaying the original amount along with any added interest. Negative cash flow occurs here and yes, it sucks.

Obviously a positive cash flow is the ideal outcome. This means that incoming funds exceed outgoing costs. Rental income is an example of a positive cash flow. Positive cash flow with rental income will only result after all expenses have been covered. Consistent passive positive cash flow is a sign of financial success and stability (to me anyway) because it is not dependent on you working to generate this (e.g. you could be sipping a pina colada somewhere in Jamaica and still generate income).

A negative cash flow, as the name suggests, is when the expenses of an account exceed its income. This isn’t so good but is really quite common.

How does Someone Generate a Positive Cash Flow?

It takes time and effort to generate a positive cash flow, but the payoff is pretty sweet. Rental income is a common method for achieving a positive cash flow (hopefully this will be generated for me soon!). Dividend income is a great one but it takes time and discipline to NOT sell your dividend stocks for its capital gain (or I suppose in the recent case, loss). Adsense is another good one (if you have a blog, but you do have to write the content in the first place!) There are many different ways to do this and it takes a bit of creativity but is well worth the effort. However, sometimes you want to make sure your cash flow isn’t so high that you’re taxed to the nines come tax time. There are many ways to reduce your income and taxes, especially if you have rental income or other small business income. In addition, I think it’s super important to make sure you have different SOURCES of cash flow. So that if one screws up, you still have the other to rely on.

So I think I answered my own rhetorical question. Cash flow is indeed king!

Readers, any other sources of cash flow? Which one is the cash flow source you are most intrigued with (e.g. rental income, dividend income etc.?)

Save or Invest for Short Term Goals?

young — Mon, 18 Jul 2011 15:02:43 +0000

I got an email the other day from a reader (I kid you not, I didn’t edit this email to make myself feel good– though by the glowing email, it almost sounds like I did! ). I really really heart fan mail- ’nuff said.

I would like to start off by thanking you! Your blog is one of the best things that has graced my inbox EVER! Before you, I was drowning in all of the financial lingo, with no clear place to start on my ‘investment journey’. I finally have a starting point for myself with the confidence to know I have the ability to navigate the world of investing.
Anyway, the reason I’m writing is because I have a question about short term goals. Everything I read says you should be in for the long haul, which I will be. But in the mean-time, I have a goal with my partner in about one year. So, here’s the run down. We have a townhouse in construction, which is payed for in full, however we want to save for upgrades in the mean time. We have a high interest TFSA with ING, but I can’t help but feel that I should be doing more with my money. Do you have any advice about short term goals? Are dividend paying stocks an option? I am very new to this, so any advice you have to offer is really appreciated!

So this email begs the question. What do you do for short term goals? First we must decipher what short term goals are.

What are Short Term Goals?

To me, short term goals are any goals you want to save up for that are in the one to three year time horizon. Our dreams are free, but to make them come true, 99.9% of the time, you’ll need some money to make that happen. Some of my short term goals is to save enough money for school, save enough money for my upcoming Thailand trip early next year, and also fund my journey to climb the highest peak in Africa, Mt Kilimanjaro in two years time. As you can see, I am addicted to travel and my goals are purely associated with travel most of the time. I’m sure yours are different. Everyone is an individual and we all have different dreams and goals.

Here are some other examples of short term goals:

a down payment on a car or to even buy a used car with 100% cash
save money for school
travel
kitchen/bath/bedroom/floor etc. renovations to your home
pay off your credit card debt (or other consumer debt)
even a down payment for a home

How to Save Money for Short Term Goals?

You’ll be surprised how saving money here and there can really add up. I have over $2000 in my travel fund now, and I think I started about 6 months ago. Mint.com (remember the budgeting app I reviewed a while back) has a “goals” tab where you can track your progress to see how close you are at achieving your financial goal. It even tells you how ahead or behind you are in saving up for this goal. You just need to “link” the account to Mint.

I would save for the short term goals automatically of course (because I’m such a huge fan), and depending on whether you feel this goal is very important to you, you can save more aggressively for it. For example, pay into your short term goal fund automatically (e.g put in $100 a month), and if you have any extra money you have left over, add some extra cash into your goal fund.

Of course, we need to save the money before we do anything (including investing) with it. Now, onto the important question (and the main point of this post):

Save it or Invest it?

Because short term goals can be so important (the goal is so close that you can taste/feel/touch it) you don’t want to jeopardize the money you have so carefully socked away. Therefore depending on your risk tolerance, it is recommended by most to keep them in fixed income based products.

These are:

Money Market funds- Globe and Mail has a good primer on this. You can access your money quickly and that’s the important part. Interest rates are comparable to high interest savings accounts.
High Interest Savings accounts- ranging anywhere from 1.5% to 2% at the current rates
Guaranteed Income Certificates – remember my “granny panties” post?
Bonds- the kind from our government, not corporate bonds. Though the interest rates are pretty dismal, like 0.65 to 1.39% for Canada Savings Bonds.

Basically, anything safe. I know that you won’t beat inflation with these dismal interest rates, but since the goals are short term, it doesn’t matter that much. Unless you don’t mind that you might not get your principle amount you invested back and unless you’re 100% sure where the market is going (if you have a crystal ball or access to psychic friends who can tell you if the market will go up in the next year), it can be kind of risky to put your money in the stock market. For example, although I invested in dividend investments (SLF.TO) paying me a 4.7% annual dividend yield (paying me about $112 a year) a few months back, I am currently down $250 from my initial investment. That means, by the end of the year, if it stays at the current price (which is highly unlikely and difficult to predict because I don’t have any psychic friends with stock market specialties), I will be down $138 from my initial investment. However, this is okay for me because I don’t need that money right away and I plan to sit back and relax (and maybe pick up some more stocks if it slides down further). Nevertheless, the situation could be reversed and you could be making big money if you got “in” at the right time (for example, my investment in Bell has yielded me with a 25% return $1000+ from my initial investment because I bought it when the markets were slumped). However, of course everyone always thinks we got “in” at the right time, otherwise you wouldn’t have bought the stock in the first place, right? You just never know and if you’re willing to take that risk, then by all means, go ahead!

For all my short term goals (my travel fund, filling up my emergency fund), they are in highly liquid accounts where I can get my money quickly with no fuss and no muss. Both of these are in high interest savings accounts. One with ING and one with Manulife.

In a nutshell, for short term goals, I’d say Cash is King.

Readers, what are some of your short term goals and do you personally save or invest for your short term goals?

2011 New Years Personal Finance Resolutions- Halfway Check-In!

young — Mon, 30 May 2011 14:53:40 +0000

Part of blogging about your goals and resolutions means trying (key word, trying!) to keep accountable with them.

So in order to keep accountable, I thought I would share with you how I’m doing so far with my personal finance resolutions for the year 2011 so far. As you know, I blogged about my personal finance goals for this year early in January, and also shared my personal goals. I will share how I’m doing for both.

Max out TFSA to $15000- In January, I’ll have $15,000 of TFSA space because I took out all of my TFSA’s for my down payment. I plan to sell some of my non-registered stocks in order to put money back into my Tax Free Trading Account and top it up with savings.

40% to goal completion: I’m at about $6400 in my TFSA, so I have about $8600 more to go to max out my TFSA. Initially I was thinking of selling my non-registered stocks because I hate keeping track of capital gains when I buy and sell, but I don’t want to interrupt my beautiful dividend paying stocks by selling them and having to pay capital gains. I’ve been slowly selling my non-registered portfolio and moving it into my TFSA. I also put in an $1000 from the tax return I got this year.

Max out RRSP allowed contributions- I set out $200 a month automatically to an RRSP TD e-series and top up the rest before the year ends. I’ll need to make sure I have money for the extra contribution before the end of the year.

100% completed: I have $200 automatic contributions with my TD e-series account. I think I had sold a USD non-registered stock earlier and moved that money to my USD-RRSP anyway, so after the automatic $200 payments, I will be at max contribution.

Replenish my Savings Account- Since my savings account was basically ameliorated from the down payment, I would like save at least 15% a month for this.

50% to goal completion: Although I am saving about 13-14% a month pre-tax, I had to dip into the savings account for some extra renovation costs, like the window treatments. After all the renovations have been done though, things have settled down (thank goodness).

Save $2400 for Travel Fund- I plan to climb the highest peak in Africa in 2012 (before I turn the big 3-0… some people jump out of planes and sky dive…I hike) and will need some cashola for that (not to mention get in shape)…I will try and set aside $200 a month for this travel fund (automatically). I have an ING savings account for that

Goal has been delayed and only at 40% completion: I’m not sure what I was thinking when I thought it would only cost $2400 to travel to Africa and hike Mt Kilimanjaro. I would estimate the costs would be more to the tune of $4000 (including flight, Kilimanjaro, Zanzibar, a safari– c’mon no trip to Africa is complete without a safari, right?). I have about $1700 in this account now, but realized I won’t be going to Africa until 2013 (which is fine, I suppose because I will have a longer time to save some cash). I will have probably turned 30 when I do this hike, but it will make it much more rewarding.

Pay down the Mortgage extra $500/month ($1000 total)- BF and I are going to rent out the basement and plan to use that money to pay down the mortgage and attack the beast principle amount.

Um… BIG FAIL for now. We’re still waiting for some last minute renovations to take place (in terms of upgrading our AMPs to our old house so that we can run two stoves and not have the fuse blow) so have not rented it out yet.

Slowly change most of my equities into dividend paying equities- Currently I have some “play” money in my portfolio with which I invest in growth stocks, but I think I’m going to try and convert most of my portfolio to blue-chip dividend paying equities

Hard to measure this goal. I guess this goal wasn’t SMART I think I have bought some more dividend paying equities this year so far, but I am unsure how many. I think most of the stocks I bought were in my TFSA portfolio.

Write down what I spend my money on daily- I’ve been terrible at remembering to do this last year. I think it’s because I have the Mint app now so I’ve been bad at recording my expenses. I feel like a big hypocrite because I advocate for people to write down what they spend their money on. So to fix this- because I am a visual person, I’m going to use one of those free calenders you get from banks etc. to write down what my expenses are day to day. Then I can compare weekly to see how my spending is, like Krystal does with her spending recaps at GMBMFB.

Give myself an B+ for this: I would say I’ve been pretty good at this- I’ve been writing it in my day planner (didn’t end up using a calender)… I’ve been bad at categorizing them into my budget though. The Mint.com app doesn’t do it for me- I find it annoying to split my expenses, and it always tells me that I’m paying for fees, even though the fees are deducted again.

So to summarize, I have a long way to go for some of my 2011 personal finance resolutions, specifically with getting better at budgeting, making sure I save up more money for my savings accounts, and finding a tenant to rent the basement out to so we can start to pay extra towards the mortgage.

Readers, have you done your mid-year resolution check in yet? How did you do? Can you believe that half a year has gone by already? (I certainly can’t!)

Why should you value your retirement accounts?

guest — Wed, 26 Jan 2011 15:45:02 +0000

This guest post comes to us from Jack at Darngoodblogging.com. He usually talks about debt and credit cards on his blog. Thanks Jack for writing this guest post. I don’t know much about US retirement accounts and this has helped shed some light on it for me.

Your future essentially depends on how you handle your present. The more prudent decisions you make now, the better your chances for creating a secure future for yourself and your loved ones. Retirement plans form a very crucial part of your future planning. You definitely wouldn’t want to step into your retirement with scanty funds and looking for cheap debt consolidation or debt settlement services to resolve your debt issues. So, it is absolutely important that you get geared to prepare a proper retirement plan to secure your financial future.

Surviving on your retirement income

Surviving on your retirement income is a matter of real concern. Social Security, company pension plans, and the individual retirement investments are the three main sources available for retirement income.

Under the Social Security Administration, Social Security offers about 40% of the fund you require for a pleasant retirement. And pension plans are becoming rare day by day. Most of the companies that offer pension plans require the plan holder to be an employee with the company for a specific span of time. But unlike earlier, they are no more considered a source of substantial retirement income.

The uncertainty associated with the above sources highlights the need for a proper retirement plan that contains the right mix of investment and savings.

Save substantially for your retirement

Substantial savings is the key to a comfortable post-retirement life. Always remember, if at all you work after your retirement, it should be your choice and not a necessity. Often a lot of retired people are forced to work hard at an old age, simply because their savings are not enough to last them throughout their remaining life. The inflation, soaring costs of commodities, tax obligations, rising medical expenses add to their plight and make their living all the more difficult.

Such costs are expected to rise even more in near future, making the baby boomers’ post- retirement lives all the more expensive. So, to begin with, create a new savings account where you can deposit a certain amount every month as a
part of your retirement plan. Save as much as you can.

Consider long term investment plans

Smart investments are very crucial for a fruitful retirement plan. You can consider reliable retirement plans such as IRS Roth conversion and 401K plan to spice up your retirement planning.

It is very important to understand how your plan works and what benefits you will receive. Keep a track of your retirement accounts so that you can retire peacefully. There are different types of retirement accounts you can choose from and it is best to talk to a financial advisor about which account might be right for you and your situation.

Amongst a number of retirement accounts to choose from, 401(k), 403B and IRA are the most common type that people make use of today. Using Roth IRA can also be very advantageous because it offers great tax advantages. If you are confused with the host of options out there, seek the advice of a certified accountant to help you choose the account that is right for your situation. Remember, retirement is not the end of life; with proper planning, you can rediscover the joy of living!

EDITORS NOTE: I agree that we shouldn’t be relying on the government or pension plans for our retirement. I must admit that it’s hard to think about retirement being so young, but I know it’s necessary. It’s just that other priorities come into play (like kids, a house, saving up for a wedding etc.) I definitely do want to work after retirement (when I retire early, of course) but maybe just once or twice a week and just for fun. Studies have shown that working after retirement can help prolong life (the brain doesn’t get stagnant because you’re constantly working it out).

Readers, what do you think? Do you think about retirement a lot? Would you want to work after retirement?

Youngandthrifty’s Mint.com Review

young — Mon, 24 Jan 2011 15:28:16 +0000

If you haven’t been living under a rock, you might have heard of Mint. Mint is this start up company founded in no other than San Francisco (where all the beautiful people and geniuses live) in 2007 and had been bought for $170 million by the huge conglomerate Intuit earlier this year.

Mint.com is a free budgeting tool that was initially untouchable by us Canadians because they didn’t have the Canadian banks in list of banking institutions you could add. This has changed, and I have both the Mint.com log in (you can check your stuff easily online) and the mobile iPhone app (can quickly check transactions, budget etc.)

I’ve been using this Mint.com app and checking online (and receiving their many updates to my email) for about a month or two. Being the opinionated person that I am, I would like to give my two cents on Mint.com based on my own experience with it.

Before Mint.com, I was using an app called PageOnce that I mentioned in my post on the 6 best free apps that will make your personal finance life better. I liked Page Once but I was looking for something more comprehensive, something I could manage my budget with.

This is what the budgeting tool looks like (I found this on photobucket )

Pros of Mint.com:

I like it’s ease of use. Very. Easy. to Use. (If I can do it, you can!)
The website design is very pleasing to the eye. Nice solid colours, soothing lines.. not too busy looking
It’s free and the app for your Smartphone is free too
I love how you can show all your saving accounts, chequing accounts, credit card balances, and investments all in one place (more about investments later- in the cons list)
There is a savings goal tool which encourages you to put your money in a separate account so you won’t be tempted to dip into your savings; this savings goal tool tells you if you are ahead or behind schedule of your goal. This is probably one of my favourite features of the savings tool. You can even select a picture to reflect your goal!
I really like their budgeting tool too- you can keep track of your expenses (and it will be put in automatically based on your labels), because they label everything for you (e.g. if you spent $50 on your cell phone bill, Mint.com automatically categorizes it in the phone bill category, so you can keep track to see if you over spent or not this month.
They notify you by email about big changes e.g. big purchases, so if something is fishy in any of your accounts- including credit card- you’ll know right away

Cons of Mint.com

Possible security breach- you have ALL OF YOUR FINANCIAL INFORMATION PASSWORDS in ONE ACCOUNT. Can be kind of scary. Mint.com maintains that their website is super secure and safe to use. But the security measures they take to protect your information seems kind of ambiguous and vague.
They notify you if you are being charged a bank fee (but my bank fees are immediately credited back to my account), but Mint doesn’t know this and still sends you a notification
Their notifications can get a bit overwhelming and annoying, but thankfully you can change your notification setting
Because it’s free, they get paid from advertisers by asking you to sign up for this FREE banking account, or BETTER investment services than what you have now. I think as long as you stay away from signing up, it’s a useful tool.
One major drawback is that they don’t have every financial institution listed- for some reason, they don’t have QUESTRADE (which is my favourite investment tool and where all my non-registered stocks are at), so I can’t keep track of how much money I have in those accounts.. which tends to negate the point of showing your net worth on one page.
Another drawback is that you can input the asset of house/home and car yourself. You could make up an imaginary number to make yourself feel better and your net worth will appear very inflated with Mint.
One major issue is that they don’t recognize a “joint account”. For example, in my joint account with my boyfriend, the mortgage comes out, but we both pay for half. Mint recognizes it as a full amount and tells me that I am overpaying for my mortgage (which may be a good thing, but it isn’t the case for me). So with Mint, you might be best to amalgamate everything with your partner if you want an accurate depiction of your money (which I don’t plan to do).
Another draw back is sometimes they mislabel things, and then it won’t reflect in your budgeting tool, but this can be easily fixed by relabeling it correctly to reflect your budget labels.

So with all the pros and cons, it’s kind of a mixed bag. I like the budgeting and goal tools, and I like how everything is updated very quickly. The cons are easily worked around though, and I personally like using it. It’s easier to keep track of things, though I wish they would have every financial institution (e.g. Questrade) on their pick list.

A tip if you are planning on signing up for Mint is to make sure you have the CANADIAN institutions, otherwise you’ll be like me and flabbergasted for one week wondering why your password for your credit card or savings account doesn’t work on Mint. So, for example, ING Direct is not just ING Direct, it should be ING Direct CANADA.

Canadian Finance Blog and Money Smarts Blog also give their two cents on Mint.com too, so be sure to check out what they have to say.

No related posts.

3 Easy Financial Resolutions Every Gen Y should follow

young — Mon, 10 Jan 2011 15:43:19 +0000

Enough about my resolutions, lets talk about your possible resolutions. Sorry, I hope you’re not “resolutioned” out, but with a New Year comes new beginnings and fresh starts, so I want to take advantage of this.

Judging from the amount of traffic some of my personal finance blog colleagues received on the first few days of New Years, and how my friends have all been telling me that one of their resolutions this year is to be smarter with their money, I know that people are interested in some financial goals for 2011. Especially us young people.

So I thought I would share some financial goals that I think are an easy and painless (key words- easy and painless!!) way to start being smarter with your money.

Easy New Years Resolutions that Every Twenty Something should follow:

Write down what you spend your money on- if you only do it for a month, that’s fine, but it’s just to get an idea of where you spend your money. It’s sort of like a diagnosis of your money woes. You don’t know where you’re spending your money on, so you need to find out. Keep your receipts. You’ll be surprised at how much little, seemingly unimportant things can really add up (like those daily lattes!).

Make it Automatic- Paying yourself first is BUY FAR the easiest way to save money. You don’t need to think about it, and you will feel “poorer” because there is less money in your main account, so you’ll be less inclined to spend money. It’s like if there is this DELICIOUS looking cake in front of you, asking you to eat it, it’s hard to say no and not have a slice. If that cake wasn’t there tempting you, it’s easier to avoid eating it because it isn’t there. We can’t help it. It’s human nature. Even the most disciplined saver will benefit from making their savings automatic. It really works- sort of like hitting two birds with one stone. Set at least 10% of your pre-tax income to be deducted from your chequing account to a separate more inaccessible account (those online only accounts are good for that! I use ING and Manulife). The current savings rate is about 0.2%, so if you’re saving at least 10%, you’re ahead of the game. You’ll definitely thank yourself for it later. This is how I started… (sorry, I think I am sounding a bit like an infomercial now… but really, I think this is the way to go!).

Make a budget- Budgets are sometimes hard to follow, but they are a good guideline to go by, so you know roughly how much you should be spending on certain categories. Following a budget is easier as you get used to living with one. Squawkfox (a fellow BC, Canada Personal Finance Blogger named by Globe and Mail as #1 PF blogger) has an easy spreadsheet you can download (and it’s free!). Make sure you include debt repayments in this budget.

There you have it. These are three easy resolutions to follow so we can make 2011 the year of being smarter with our money.

Readers, do you have any financial resolutions you find easy and painless that you would like to add?

Don’t Succumb to Lifestyle Inflation

young — Mon, 12 Jul 2010 18:28:00 +0000

photocredit hester_liana

You’ve heard of inflation, it’s the general rise in prices of goods and services over a period of time (according to Wikipedia). Because of inflation, you get less bang for your dollar. It’s like how on Austin Powers, Dr. Evil asked for a MIIIIILLLLLLIOOOON dollars for compensation, but a million dollars is nothing nowadays. Good thing our salaries go up too, in accordance.

Or is it?

I can’t argue that having a larger salary is a bad thing (because of course, it is a good good thing). However, if you get a raise, or if you start earning the big bucks (over $100K a year for example), you have to be careful that lifestyle inflation doesn’t catch up to you.

Lifestyle Inflation (according to moi) is when your lifestyle (your house, your car, your trips, your eating out expenses) catches up and maybe exceeds your salary in order to “keep up with the jones’ ” or to show the world that you are indeed a wealthy individual because of your job and your higher pay.

You may think that some doctors or lawyers must be well-to-do, and they very well may be, but at the same time, they might not be. I was driving to work one day, and saw a lawyer in a fancy car with the license plate “LTG8TR”. He probably was well to do, but he probably also had high expenses to pay. He probably had a lot of debt, too. Mortgage debt, car loans, you name it (if you think I’m being ridiculous by assuming he had a lot of debt, I often think of this when I see people driving fancy cars to make myself feel better- coping mechanism, you can call it).

If your paycheque upgrades, you should try your very best not to upgrade your expenses too.

I have been getting a small raise every year, but I still budget for it as if it were last year. So the extra $100 every paycheque doesn’t really exist in my budgeting-eyes. It’s best to pretend that you’re “now making X amount of money per year”. Again, it comes down to what your values are- what you really want to spend your money on and what is superfluous.

As we move into our highest paying salary years (our 30′s and 40′s and 50′s), we do get instant lifestyle inflation, be it a home purchase, a baby (they are $$$!), saving for children’s post-secondary education and so on. I think it’s important to get good spending habits now (our 20′s) to carry us forth into later years, when spending loads of money because you have money is easier to do.

Have you resisted the temptation of lifestyle inflation? What have you done for yourself to ensure that you don’t spend more…now that you’re making more?

How Do You Afford Your Rock and Roll Lifestyle?

The Financial Cleanse- Get Rid of Junk

young — Fri, 23 Apr 2010 15:14:42 +0000

Welcome to the final Part of the Financial Cleanse (part III). Guaranteed to detox your financial-bowels to a better and more money-savvy you! (I’m kidding about the guarantee, but I did use these suggestions for a more money-savvy me!)

A cleanse is not a cleanse without getting rid of stuff. My fellow Yakezie, Money Reasons wrote a great post last month about ways to Increase your Savings Delta (love the title because it sounds all scientific and sexy-nerdy). He defines the Savings Delta as:

(Discretionary Income – All Other Expenses) = Savings Delta

So how does one increase this savings delta? Simple. You need to find other sources of income. One of the sources of income Money Reasons mentions is to sell stuff on eBay.

Selling stuff on eBay, Craigslist, or even at your local consignment store are great ways to increase your discretionary income. Hey, one man’s (or woman’s) junk is another man’s (or woman’s) treasure, right?

A few weeks ago, I sold an old leather jacket and a bicycle in the same day! I just took a picture, posted it on Craigslist, got some emails and met up with people and.. boom. Money ($170 to be exact! AND I bought those items used last year for $150 so I actually MADE $20 hah!) in my wallet.

It was so easy. No wonder my boyfriend loves selling his video games on Craigslist. It’s kind of addictive really. Now I’ve been ransacking my home to find other items to sell. Not only does this decrease the clutter around your home (seriously, my place was starting to look eerily similar to an episode of Hoarders) but it also generates some income.

I personally like selling things on Craigslist because you get money right away and you don’t have to pay anyone any commissions for selling it (unlike eBay or a consignment store where the store will take 40-50% of the cut). Though certain items sell better on Craigslist vs eBay vs consignment.

Also, with consignment stores, sometimes the money you receive from selling your items at the shop goes BACK to the consignment store because you see something you like. So you need to try and resist the temptation to buy.

Here’s a brief list to give you some examples to help you start selling your junk:

Items to consider selling on Craigslist:

Your car, bike, bike rack, motorcycle
Video games, iPhones or other cell phones, your cell phone contract
Furniture and other things people look for used
Other “big ticket” items that can’t be mailed
Tickets to events that people want

Items to consider selling on eBay:

Clothes and bags (though usually only popular brands-think Abercrombie, Juicy Couture-seem to work well)
Shoes (though shipping can be a pain- $$$)
Collectible items (like the American doll girl?)
Small items like jewelery and watches

Items to consider selling through a consignment store:

Clothes
Shoes
Bags, wallets, jewelery
Children’s clothes (there seems to be a few children’s consignment stores cropping up here in Vancouver)
Sports items (we have many stores here that sell used bikes, sports clothes, tents, cleats, snowboards, skates etc.)

What do you think? Anything else you think sells well that can be added to the lists above? Which method of getting rid of junk do you personally like to use? Any great stories of selling your junk that you’d like to share?

The Financial Cleanse- Make your Savings Automatic

young — Wed, 21 Apr 2010 16:11:05 +0000

In Part II of the Financial Cleanse, we’ll talk about Making it Automatic.

In the Automatic Millionaire (by now, you must think I’m in love with David Bach since I mention him non-stop) he talks about making it automatic. You pay your cell phone bill, your rent, your utilities, and then you have some money left over. You spend like usual, and at the end of the month, you have $25 to spare, so you put it away in savings. The next month- same thing, you have $15 to spare, so you put it away in savings.

I used to roll like this and it didn’t work.

I would dip into my savings and take some money out for my trips, and at the end of the day, couldn’t really say how much I was putting away per month. I THOUGHT I had a budget I stuck to…I had AIMED to put away X amount of dollars per month, but looking back at my transactions, this didn’t really happen all the time. I had made excuses like “oh, I just need only a few hundred here, I’ll return that amount next month”. It didn’t happen. It is human nature not to have much will power! The more you tempt yourself to stay away from something, the more you gravitate towards it and succumb to it. Kind of like that chocolate bar that you told yourself you wouldn’t have and ended up eating two..or three. Or that bad-ass boyfriend who treated you poorly, wasn’t returning your calls or texts and you tell yourself you won’t text him again for fear of coming off as a loser-stalker but you did anyway… and came off as a loser-stalker (said scenario isn’t from personal experience, yeahhhhh……..).

Anyways, so why fight it? Since then, I have made it automatic. And it’s really working. I transfer X amount of dollars from my chequing account into my High Interest Savings Account. I haven’t actually set up “pre-authorized deductions” biweekly because I am the type of person who needs to keep some sort of control (in case I need to keep some money in my chequing account, you know). Soooo to fix this problem, I set up “future transactions” and set them up on the day I get paid. I can always change the date or the dollar amount to be transferred. I set up future transactions for about 2-3 months, then repeat.

I would say this is the hands down EASIEST thing you can do to take control of your finances. So start off with $50 a month automatically and work your way up to 10-30% of your gross biweekly paycheck. A budget planner to keep track of where your money’s at (credit accounts, debit accounts, bill payments) doesn’t hurt either- and it’s easy to stick to, if it’s automatic too.

Do you make it automatic? Are you a big fan of automatic savings as much as I am? Please share!

The Financial Cleanse- Write Down What you Spend your Money On

young — Mon, 19 Apr 2010 13:29:12 +0000

Welcome to the Part Series of the Financial Cleanse. Guaranteed to detox your financial-bowels to a better and more money-savvy you! (I’m kidding about the guarantee, but I did use these suggestions for a more money-savvy me!)

Sometimes it can be really hard to cut back on spending. Sometimes you may wonder where the heck the $100 you took out from the ATM went (no, it didn’t go missing, you spent it, remember??). Sometimes you wonder why you don’t have enough money to spend on the things you want to spend it on. There’s a way to fix this. Here’s how:

To lose weight, one suggestion often used is to start off by writing down exactly what you’re eating.

Keeping a diary will help you realize the bad stuff you’re putting into your mouth, and allow you to reflect on when you made that decision and why, thus helping you stop eating that junk food. Kind of like in that show The Last Ten Pounds, where the personal trainers dump a huge bag-full of crumbled muffins and pastries on your kitchen table to make you realize how many muffins and pastries you’re actually consuming.

The same strategy can be applied to purging your expenses. Just try it for a month and see.

Write down EVERYTHING that you spend your money on. Then add these up at the end of the month.

Briefly go through each entry and see whether it was money well-spent or not.

If it wasn’t money well spent (for example, those daily lattes) then think about a way where you can cut down on that spending. Sometimes, our lives go into auto-pilot mode, and you don’t really realize what you’re spending your money on.

I have a notebook that I recorded in since I was 17 of the various items and experiences that I spent money on. Some months I am better at documenting my spending than others. Nowadays you could just input your expenses into your iPhone or iTouch with a free budget calculator app, which makes it 100x easier to track your spending (though it can make it more difficult to find the history). It’s actually quite amusing to glimpse back at what I was spending my money on way back when.

Readers, do you usually record what you spend your money on? Do you find doing this helpful?