Itâ€™s been a while since Iâ€™ve updated my blog, and I do apologize for that. In case you havenâ€™t noticed, Iâ€™m not exactly a professional blogger (heck, my blog looks amateurish even compared to amateur bloggers), and I work for a living. Things in our sleepy town of Kelowna, BC tend to be very seasonal, and sometimes it catches me by surprise. All of sudden work got busy, and writing things on my little blog became a lesser priority. Life happens, you know.
Recently, Iâ€™ve received an email from one of the readers asking me to describe my philosophy when it comes to money. After coming to terms with the fact that I have a philosophy, I have spent a couple hours of trying to figure out what it is and how I can translate it into text.
Personal Finance Principles of our Household:
1. Money is too important not to pay attention to it
I donâ€™t subscribe to the idea that money isnâ€™t important in life. ” - Oh, you donâ€™t need money, all you need is friends, laughter, and happiness”. Iâ€™ve once tried to pay my rent with laughter, it didnâ€™t work so well.
Sure, life isnâ€™t about making money. But you canâ€™t just ignore all financial issues hoping it will work out somehow at the end. Financial wellbeing is just as important as your physical wellbeing. You go to checkups with doctors; you try to live a healthy lifestyle to avoid health problems down the road. Financial health is just the same way - it requires attention, checkups, and certain efforts.
Money can make things happen and money can solve a lot of problems. Money can make dreams come true, and money can turn nightmare experiences into gentle bumps along the way. At the same time, lack of money can make your life miserable.
2. Owe money to nobody and if you do pay it off yesterday
Thereâ€™s one thing I hate more than I hate zucchini and it is owing money. Unfortunately, I havenâ€™t had the greatest experience with debt. Iâ€™ve borrowed to go to school, Iâ€™ve leased a nice brand new truck, and I racked up a five digit debt on my credit card due to my utter stupidity. In my defense, it was back in the day when I was fresh off the boat and didnâ€™t know how money works.
Debt made my life terrible. Allowing my accounts go into collection didnâ€™t help. Calls from collection agencies made me jump any time my phone rang. Heck, I had nightmares about them showing up at my door and taking me to money jail. It took me a while to pay it off, and I swore to never borrow money again - especially when it comes to stupid consumer debt taken out on things that drastically plummet in value as soon as you buy them.
Weâ€™ve been debt free for years now. The peace of mind that comes with it is invaluable and canâ€™t be compared to the new car smell or feel of some latest gadget. We will never borrow again and from now on will pay cash for everything we buy. If we canâ€™t pay for something with cash, we donâ€™t deserve it.
3. Simple life is awesome and looks are not that important
We donâ€™t live in a mansion but rather modest townhouse. Our car is 20 years old (yes, twenty years). I have only three pairs of pants and thatâ€™s including my suit pants which I wear maybe twice a year. Instead of going to Mexico every year like many other people, we simply visit our families and make short trips around our beautiful province. Our hobbies are cheap and we donâ€™t have an expensive taste when it comes to entertainment. Heck, we donâ€™t even have cable. Instead of focusing on possessing latest and greatest, we try to focus on experiences and living a positive life. As a result, thereâ€™s more money being left over at the end of the month after we pay our expenses and we feel financially secure.
Now, can we handle a large mortgage payment so we could have a nice 4,000 sq. feet house? Yes, we can. We can even finance or lease a recent car with fancy powered windows and butt-warming seats. But that would make us less financially secure by making us less cash flow positive and destroying our safety margin. Do we want to trade in our financial security for butt-warming seats? Not in a million years.
Financial security should always come ahead of looks and possessions. Unfortunately, in our modern society people tend to forget it.
4. Whatâ€™s mine is hers, and whatâ€™s hers is mine
Once in a while I run into people who say things like this:
” - Well, I have my own checking account for my money, and my wife has her personal account too. We split our expenses down the middle, and Iâ€™m saving for retirement with whatâ€™s left over. I donâ€™t really know what my wife is doing with her money; I hope she is saving it as well. She has some debt, but thatâ€™s hers, not mine.”
Jesus, all I can do is shake my head at this point and smile politely. This is complete madness to me. It might be perfectly acceptable for boyfriend/girlfriend situation, but married couple acting this way? Holy macaroni, are you for real?
In our family, we donâ€™t have “my money” and “her money”. We donâ€™t have “my expenses” and “her expenses”. Guess what, all of the expenses are our expenses. All of the income is our income. And all of the debt was our debt. I cannot even comprehend the idea of dividing things into “hers” and “mine” with underwear being the only exception. If you have to divide things and money, youâ€™re not really a family. Donâ€™t want your wife to have your stuff - donâ€™t get married and enjoy your stuff all alone.
5. Without investing money, we will never reach financial independence
It is simply mathematically impossible to reach any level of financial independence if your sole source of income is work. You simply donâ€™t have enough hours in a day and days in a year to save up enough money to reach it. You canâ€™t be the only one working for your money - and Iâ€™m not talking about putting your spouse to work. You have to put your money to work for you.
Money never sleeps, money never rests, and money never gets tired of working. Money will keep working as you take a break for a movie date with your spouse. And given enough time, money will work harder than you and get more work done than you. And this is the point we are trying to reach - where our money makes more than both of us combined because at that point we can choose to work, but donâ€™t have to.