Tommy: Have you ever wished that you could improve your financial situation, maybe you wish you could a little more money, or maybe save some money for a rainy day. If you’re still struggling to do that, don’t worry about it your problems are solved, because my next guest has written a guide with all the answers you need. She’s a personal finace expert, the founder of maxworth.ca, and the guide is called “7 Proven Techniques to Quickly Boost your Financial Well-being.” And on top of that it’s available for the very reasonable price of absolutely free. Get it at her website, maxworth.ca, get a copy for free. Tell me about this guide.
Lama: Well, I wanted to put something together for people who are struggling financially, who feel that they are living in financial chaos. They know they have to do something but it looks like a mountain, they don’t know where to start. What do I really have to do? So this is really a guide that gives you starting points on everything. Like if you do everything in it, you’re going to be in a much better position in a year from now than you are today. So it’s really point pointers on how to do it.
Tommy: Alright let’s look at the various techniques. Technique #1 is to become crystal clear about where you financially stand today. What would that mean?
Lama: Well, again I just mentioned financial chaos. I meet a lot of people that are living in a financial chaos or financial fog if you want to put it that way. The first thing is to really get out of that fog. The reason you do this is by being honest with yourself. Sit down , list all your assets, list all your debts, look at them, look at the interest rates you have. And one of the things you can do with your assets minus your debts is to figure out your net worth. Now I equate net worth to you weight. Let’s say you want to diet, the first thing you do is step on the scale to see where you’re starting. So if you calculate your net worth today, and you recalculate it once a year, it’s not a weekly exercise is really once a year exercise, then you know next year, oh this is what my value was last year, my financial weight, and this is where I am today. Its improved by how much. It gives you an idea to see how much you’re progressing. So this is one of the things you can do, of course knowing your deficit, your monthly deficit, you know you live beyond your means, you know you’re using your line of credit every month, sit down and do the exercise to see how much you are in deficit every month. Are we talking about $100, $500 or $5000. Because depending on that figure you’re going to be able to change your spending habits accordingly. According to how big your deficit is.
Tommy: I love the technique number two. It’s called discover your latte factor. What is the latte factor?
Lama: Well latte factor really comes from, it could be your daily coffee, really this is the example that comes to people’s mind, but really it can also be a lot of other things. I mean I heard you a bit earlier talking about the parking meter, parking meter is a latte factor, you know when you’re spending $2 here, $5 there, and by the way I have a technique for people not to get ripped off like you were mentioning. The way I do is I put a timer on my phone a minute or two before the parking meter expires. I don’t wait for the city to text me fifteen minutes before, I put my own ringer on my phone, and then I know I’m only losing a minute or two. Here’s a trick for you. So but your latte factor can also be the lottery tickets, right you see these lineups at the lottery booth, two dollar a week, five dollars a week, they also add up. Of course there is the eating out, there’s the itunes, you know everybody has an iPhone these days, and it’s so easy to buy buy buy, whether it’s a single that came out or a ringtone that you like, you know anything. So they are really small amounts that you spend, but they add up to quite a bit.
Tommy: I don’t think people really understand that, because it’s only quote two dollars, it’s only three dollars, it’s only four dollars. And since they’ve never added it up, how much it is over a week, a month over a year, it doesn’t seem lik e a lot. But I think if you would add it up you would be stunned.
Lama: That’s right, so when I do the exercise, I do the same example of the parking with one of my clients, we added up her parking meters it was about $50 a month and she had no clue.
Tommy: Right, and $600 came and went, and this is after tax money we’re talking about. It’s called “7 Proven Techniques to Quickly Boost your Financial Well-being” available for free at maxworth.ca. You can download it. You also talked about building an emergency fund. People think yeah that would be a great idea but I can’t make ends meet how could I have an emergency fund. What would you say.
Lama: Yeah, well the thing the emergency fund is, you’re going to hear a lot of experts out there, um, there is even Susie Horner in the US where she goes as far as saying that you have to have eight months of living expenses sitting on the side. Now we know that, let’s say your expenses are $3000, so times eight that is $24 000, sitting on the side doing nothing waiting for an emergency to happen. So people hear this and they are like forget it, it’s not even achievable, how am I going to do this? So they stop before ever starting. So what I say, is to build a mini one. A mini one, just start with $1000 or $2000 that you can keep on the side in case something happens. I read a statistic the other day that said half of Canadians that have a regular paycheck, we’re not talking about people without jobs or who are self employed and with variable incomes, these are people with regular paychecks. In their paychecks were delayed by one week they wouldn’t be able to make it, just one week. That means they have no breathing room. So this mini emergency fund becomes your breathing room, you bank account to breathe a little bit so you’re not so dependent on the day, the exact hour almost you get your paycheck. So aim for $1000, and then once you get there, you’re going to feel better about yourself, and if something comes up and you’re able to cover it with your emergency fund and you’re going to feel better than if you had to cover it with your line of credit.
Tommy: Your messages for personal financial expert Lama Farran, were talking about various myths and technique you can use to boost your financial well being. Tshi texter is saying, a dollar day for a year equals to $365, I stopped buying coffee and started making it at home, it makes such a difference. Well, i don’t know how, where they are buying coffee for a dollar.
Lama: Yeah, even Tim Hortons is going up these days.
Tommy: At many places it’s easily three, four or five dollars if you added a little cake or muffin to go with it. You can get to eighty nine dollars without batting an eyelash.
Lama: The technique that I give my clients, let’s say they are at Tim Horton’s or whatever, if that’s your weak point lets say. Put yourself a limit, let’s say it’s $20 a mont. Let’s say get a gift card, and put $20 on it a month. And when it’s empty it’s empty, that’s it, you’re out of luck wait until next month,
Tommy: Oh, I see and that way you see that if you want to continue, wow I have to buy another one for $20.
Lama: Exactly
Tommy: Wow this is more expensive than I thought. Because you may want to spend twenty, but you may be ending up spending fifty or sixty,
Lama: But if your card only has $20, then you know it. That’s it. You’re done for the month.
Tommy: Now this looks like something very nostalgic, something out of the 50s or 60s Lama. A technique number four, which is to save now buy later.
Lama: Yeah I now, it sound crazy doesn’t it.
Tommy: Yeah, get everything now for free and pay nothing, years from now you’ll have to pay us. So tell me about save now buy later.
Lama: Well it goes against everything that you’re hearing out there which is buy now pay later. The buy now pay later, the thing is that you have to understand that the retailer is not getting the money today. There’s a cost for that. They aren’t doing it because they like you, they are doing it cause it makes them money. So they are hiding the cost inside of it and you’re not even aware of it. So the technique of save now buy later, I love it so much that I bought savenowbuylater.com, to um I’m going to eventually do something with it. Basically you need a couch, the couch is $1200 that’s $100 a month that you’re going to take from your paycheck or your account and put it aside in an account called couch and a year from now you buy it. Versus going to whenever any of these stores, and you buy it today and pay it over the next five years.
Tommy: But people will say that I want the couch today, I can use it now while it’s unpaid for.
Lama: Yes well this is where the instant gratification comes in. You have to differentiate between your needs and your wants. And really if you look into it it’s probably a way most of the time.
Tommy: 7 Proven Techniques to Quickly Boost your Financial Well-being, your questions for personal finance expert Lama Farran, text your question to 514-800. You are very popular Lama, a great text for you this says what she’s saying is absolutely true, I love what you’re saying. We are a minority, I always save for one year and then buy my vacation. Save now buy later, I have no debt. I use my credit card only to get cash back, never pay interest.
Lama: Yeah I completely agree. I use my credit card for exactly the same reason. In twenty years I’ve paid $0 in interest, and I use it to get points. We actually bought a new TV around Christmas time, all with points on the credit card. So, that’s the only reason I use my credit card.
Tommy: Wow, what do you think of this. Uh, my strategy, this is Mark, he says that my strategy when buying something major was to force myself to save double what it would cost. It reinforced delayed gratification, and I still had money after my purchase. A cushion and a forced saving with the rest of the money. Call it a vacation fund, and you’re only spending half of it.
Lama: Yeah, and if you ever go over budget, well then you already have that cushion. That is a great idea but I don’t know how many people have the discipline.
Tommy: I was going to tell you to sit down, but you’re already sitting Lama for this one. Listen to this. My daughter works at Starbucks, she says some people load their cards once a month with $500. Imagine the latte factor.
Lama: Crazy. So the latte factor is more like a mortgage factor at this point.
Tommy: That’s unbelievable. I’m sure a lot of people spend $500 a year, but they don’t ever think it comes to that.
Lama: Let’s see, if the latte is $5, that’s 100 lattes. So yeah. If you add up the.
Tommy: That’s not a lot, that’s only two a week.
Lama: That’s a big latte factor right there.
Tommy: Wow. And this one says, I’ve been doing everything that youre guest has been talking about for years and I’m healthy wealthy.
Lama: See this is why everybody should follow these tips, because if you do them, and this is exactly why I’m doing this, is for people to start getting healthy and wealthy.
Tommy: This texter is saying, what percentage, would you suggest putting towards debt when overwhelmed by revolving debt, but coming into a bonus cheque from work. The cheque is only a fraction of the entire debt, so I want to carefully allocate it.
Lama: Well, I don’t, see the thing is when people get bonuses and things like that, I tell them don’t put it all on the debt. Put it maybe 60% on the debt and leave a little bit to build up your mini emergency fund, because I know your emergency fund is earning 1% and your debt is at 10%, but this is the breathing room you need in case something comes up, and that’s going to be there for you so you don’t go back to your line of credit every time something happens in your life. So I would say 60 to 70% of your lump sums that you get that you don’t need in a sense, that you weren’t accounted for, you can use it towards your debt.
Tommy: This texter would like you advice. Suggestions for tackling multiple credit cards more efficiently. I know I shouldn’t have racked them up in the first place.
Lama: well there’s two ways of doing it. So there is a method that he can google, it’s called debt snowball. Now the debt snowball can go two different ways, either you tackle the one wit the smallest balance, regardless of the interest. So this one is more of a psychological way of paying them off, because when you go after the smallest one, you’re going to pay it off faster and you’re going to feel better about yourself. Or there is the one that I usually prefer, is the debt snowball but using the higher interest rate first. So you attack that one, you just do minimum payments and then you move on from one to another.
Tommy: 7 Proven Techniques to Quickly Boost your Financial Well-being, you can find it all available for free, maxworth.ca. Our guest is Lama Farran, I will continue with your text. Text your comments to 514-800. Lama Farran, my guest, she’s put together a terrific guide that you get for free on her website maxworth.ca. 7 Proven Techniques to Quickly Boost your Financial Well-being. Tell me about this one, technique number 5, have regular dates with your money.
Lama: Yeah, isn’t it exciting. Well you are in a relationship with your money. The day you’re born until the day you leave this earth you are in a relationship with your money. Like any other relationship you need to work on it, you need to give it attention. So one of the other things I often see is people literally ignore their money, because it overwhelms them it gives them anxiety. So when you get into the habit of looking at your money business, you get less anxious about it, and it behaves better when you do that. There are some things that you can do on a weekly basis, on a monthly basis. I mentioned earlier for example, calculating your net worth on a yearly basis. So there are things that I explain in more detail that you can do regularly to have a date with your money. And of course, when you are in a real relationship with somebody else they have to be on that date. Both of you sitting down and talking about money.
Tommy: This is intriguing. This texter is saying, Hi Tommy I give myself an allowance of x amount of dollars, I put it in my wallet. Any expenses that need to be paid come from my wallet. Like my grandfather used to say, a dollar saved is a dollar earned. My friends call me cheap, I say frugal.
Lama: Yeah, I would say frugal. Because People again, maybe the friends that are calling him cheap are racking up credit cards and she isn’t. You know cheap is maybe the better way of feeling better about themselves, right, about what they’re doing.
Tommy: Right more a comment on them then on him. This texter Jeff says, I’m 28 I make around $120 000, my wife around $70 000. We spend my salary, and save and invest all of her salary. Is that a good idea?
Lama: That’s great. This is really living within your means, or even below your means, because it;s really when you live below your means that you are able to save and have a good fund for your retirement, or your vacations or whatever your values are.
Tommy: There’s even a bonus technique in this. It’s uncover and understand your journey archetype. Go to the website maxworth.ca to find out about that, you can dowload the copy for free. Tell me about mastering the art of mindful spending.
Lama: Yeah, mindfulness is just being in the present moment when you’re doing something. So when mastering the art of mindful spending is really more being in the moment when you’re about to spend and understanding why you are spending. Right, so ask yourself the question why am I buying this thing? Is it just cause I want to feel better about myself, is it because I had a stressful day at work, did my neighbor buy it?
Tommy: Is it on sale? That’s not a good enough reason?
Lama: I don’t know about that.
Tommy: Lama Farran, founder of maxworth.ca, the website.