Rule #29 Talk about money. Ask about money.

"Money, like emotions, is something you must control to keep your life on the right track."

- Natasha Munson

Its funny how people refuse to talk about money.  I never really understood why money got grouped in with religion and politics as things NOT to talk about when at a dinner party.  And by talking about money I don't mean comparing paycheques, bank account balances, or hourly consulting rates.  When I say "talk about money", I mean discussing strategy, risk tolerance, debt management, negotiating tactics and so on.  I believe not talking about money is one of the reasons a lot of people are clueless about money management.  I suspect people are reluctant to talk about money because they don't want to talk about all the stupid things they have done or are doing with their money.   Or, it could be that they feel they're being compared to someone who makes way more or less than them and that makes them uncomfortable.  Maybe its because they don't want to find out they could be doing something better or that they are behind all their peers, as if there is some sort of competition going on.  The fact that few people talk about money is probably one of the reasons many families, singles, seniors, kids and governments all have such poor money management practices.

I for one have always been curious about money strategies, and I've never been afraid of asking questions however basic they may be.  I'm also a big fan of the sharing of ideas and problem-solving techniques, usually over a couple of beer.  When I was in University, I remember learning the most important and practical things about life through discussions at the student pub over cheap beer and poutine dinners.  The interactive discussion is where the magic happens, not the book learnin... and I think that still holds true today in the digital age.  I've managed to connect with a lot of like-minded money-talkers over the years and we have become a sort of financial network that I tap into quite regularly.  If you want to become well versed in a particular topic, it is beneficial to surround yourself with people who are smarter than you or have varying opinions on a subject, and the topic of money is no exception, and don't forget to ask lots and lots of questions.  I always like to talk about the mistakes I have made because I am a big believer in the sharing of ideas, both good and bad, and working through problems with different perspectives.  Making mistakes, or being unhappy with your decisions, is part of the process.  For me, it is not something to hide.

The Last Defence Lounge at the University of Calgary for Poutine and Beer nights.

With regards to finances, I am fairly opinionated on those strategies that work for us and those that do not.   However, I have had some great discussions with other people who have completely different strategies, and who are very happy to learn about what we do, and are keen to share their strategies with me.    Knowing and understanding the various routes to financial independence is the first step to actually getting there.  I try and learn from anyone who will talk with me about money.  One priority of mine is to talk money with our two boys when the time is right.  A lot of kids dont get "the (money) talk" with anybody until they find themselves up to their eyeballs in debt.  And while its never too late to learn about money management, it does sting less if you learn good money management earlier in life.

Some topics that might be worth discussing with other people when the topic of money comes up: Investment styles, debt reduction strategies, how to get the right mortgage and whether to pay it down or not, how to define and limit risk, alternative and multiple income streams.  It may also make sense to contact persons you know who have good money practices or have done well for themselves financially, and ask them for some advice.  My experience has been that if you are serious and genuine in your questions, most people are pretty open about talking about their money strategies.

Rule #21 Chart your Progress!

I know people who procrastinate starting to save or pay down debt because they believe there is no way they will get out of debt or save enough to be financially independent.  Its like they feel like there is no way to chip away at the task because completing it seems so daunting.  The task seems so great or that saving a couple thousand dollars a year seems so difficult yet insignificant in the big scheme of things, that they simply don't get engaged with their own finances.  We have found that charting our progress is a great motivator for us as it shows progress right away.  Yep, you're going to have to learn some basic spreadsheet skills, but you wont need an engineering degree here... just a friend with entry level Excel should be enough.  If this simple Geologist can figure it out, you can too.  Charting your progress lays out in visual form where we are, and what our financial trend is. From an investment standpoint, we are mainly focused on our assets cash-flow and not its market value, so this makes it super easy to keep track of because we don't need to track our portfolio's current value, but simply the dividend income.  This eliminates the hand-wringing that happens when the market corrects and the TV talking heads are all doom and gloom.  Seeing our investment cash-flow go up and our debt go down month to month or year to year reinforces visually that we are on the right track.  It also encourages us to steepen the slope by adding additional funds and boost our progress.

I used to make projection forecasts where I would make assumptions about how much we could save etc into the future... but I stopped doing that because I almost felt like we had accomplished something when really all I was doing was just fiddling with numbers in a spreadsheet.  Plotting month to month in real time as you do it is proof of accomplishment.  It doesn't take all that much time once you get the spreadsheet set up and running.  Just open it up on the same day every month (we use the first of each month) and tally up any increases/decreases from the previous month.  Post the charts on the fridge so there is a constant reminder that you are going in the right direction.  You can also see where you fell off the wagon a month here or there...

Another nice thing about charting your progress is that after you've been doing it for 4-5 years you can see how far you've come by doing look-backs.  Assuming that you stay on track and have good financial habits, you will also see the power of compounding right before your eyes because the slope of the lines will naturally steepen as exponential growth takes effect from year to year.  You can also feel momentum building, that will act as further motivation and encouragement for you to keep on saving/investing/paying down debt.... and to us that feels pretty darn good.

So... go and embrace your inner engineer and break out the spreadsheets. Not just for nerdy math and science geeks anymore.  

Rule #13 Take Accountability. Stop Whining! Go Read a Book already.

"You will get what you want, when you stop making

excuses on why you don’t have it."  - Unknown

Rule 13 is part rant, part rule.

A lot of people are lazy about money. They'd rather watch The Simpsons or Mad Men than figure out a way to make their lives better.  Thats fine with me but there is one nagging thing that I can't stand about many of these folks.... I've had it with their whining!  "My life is lousy, I can't get ahead, The Man is keeping me down, There is no way out!"  This is pure bullshit.  There are many things most people can do, but will they actually do it?  In many cases, no.

Jim Rohn is credited with saying "Poor people have big TVs, Rich people have big Libraries." I love this saying. I think it epitomizes a major problem in society these days.  Its not that people don't know what to do with their money to make their lives better, its that the don't want to know, and that they would rather spend their free time doing things that rot their brain instead of making their life better through gaining knowledge.  There are plenty of free resources on the web or at the library to educate ones self in basic money management or investing, but the it seems people don't seek them out.  My iPod is full of e-books and audiobooks on economics, time management, and finances.  Its also full of more light-hearted stuff just so you know.  I think part of this attitude is due to the fact that many people do not want to make the sacrifices needed to get ahead, so the bury their head or make excuses for not opening a book or asking for help.  Financial Success does not come quickly and generally does not come easily.  It also doesn't happen if you lack the knowledge and rely on dumb luck to help you make it through life.  80% of North American millionaires are self-made, and they got there because of knowledge, and hard work, not because they are any more special than you or I, or because they had rich parents.  They didn't buy into the mantra that someone else should make their life better.  They had the ambition to learn what it took and then went for it.

I'm not suggesting you need to manage your investments yourself or go start a business, or that you shouldnt get help to set up a proper portfolio or debt management plan, just that you need to be engaged with your own money and take steps to make your life better financially.  There is loads and loads of free knowledge out there waiting for you to learn it.  If you need help learning something, ask for help.  If you don't understand what company stock is, Google it.  Don't just sit there saying "My financial IQ sucks so I am screwed!"

Here are some books I recommend if you are looking to get acquainted with saving and investing money, or understanding how the economy works:
Stop Working by Derek Foster
The Cashflow Quadrant by Robert Kiyosaki
The Millionaire Next Door by Thomas Stanley and William Danko
Naked Economics by Charles Wheelan and Burton Malkiel

None of the books are a financial silver bullet, but they will get you thinking about money, if you aren't already doing that, its a good start.  I like all of these books because they are easy to read and they take the jargon out of finances, economics and investing.  I have either found them at the library or borrowed them from friends for free.  I'd start with Stanley and Danko first if you are just starting to think about money.  Happy reading.

Rule #9 Spousal Financial Compatibility is VERY Important.

"It takes two to make a marriage a success 

and only one to make it a failure." - Herbert Samuel

There is a married couple in our circle of friends who are definitely NOT financially compatible, and their marriage has almost ended in divorce a few times. They both have reasonably good paying employment, but he is a spender and she is a saver.  It has caused a lot of friction between the two of them.  Both of their credit ratings were shot because he didn't pay the family bills on time.  She basically had to take complete control over the couple's finances to make sure they didn't end up in the poor house, and now he resents her for controlling all of the money.  It certainly is not a great situation.

It's pretty important to find a life-partner who shares the same values as you do with respect to money.  This may sound like something your Uncle Jack says to you, and then you brush him off as some old fart who doesn't know what he's talking about.... Old People... What do they know about love anyway?  The fact is, whether you like it or not, finances will play a huge part of the day-to-day operations of a household, and you better make sure that you are both on the same page or it can kill the mood (if you know what I mean).

Money issues is one of the top 5 reasons couples split up, so it's pretty important.  If one of you is a saver and the other is a spender, and there is no agreed upon financial plan in place, it can be really hard for a couple to be pointed in the same direction to achieve your financial goals.  We look at OUR relationship as being similar to jointly owning a business called Fraser Holdings.  We both do what's right for the 'business' so our family can become more financially stable and meet our long-term needs.  Most people would never enter a business relationship with someone who spends the company money like a drunken sailor, so why do people not make sure they are in alignment when getting hitched or shacking up?