My Priorities Were Not What I Thought They Were

“Don_t tell me where your priorities are. Show me where you spend your money and I_ll tell you what they are.”-3

It’s time to end Unconbentional.

After two years of posting 4x a month, and one year of posting 2x a month, I’ve said all there is to say. Anything I post now will just be some variation of “don’t buy stuff, invest in index funds, work hard, staying active in retirement will make you richer and happier, et cetera”. There are few places I can go from here that aren’t covered better on another blog. That’s not to say I’m giving up on my journey; I invite you to follow me on Twitter where I’ll provide continuous updates. For now though, it’s time to wrap this blog up with a neat little bow. Expect two more posts, including an update from The Other Ben, and how far he’s come on his FI goals.

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I’ve improved my financial health, but not as much as I thought. My income hasn’t changed significantly, and though I now have heaps of knowledge and theory about saving money, my discipline has been poor. For instance, I once got my monthly alcohol expenses down to $408.94 (which is still an insane number). Last month, it shot back up to more than $900! James Frick is right. I can write about my goals, but am I taking appropriate steps of action? Probably not.

Using last month’s numbers, I still spend $2,733.23/month. (The month before was more, but there was a job loss there, so I’m trying to work with a more stable number.) Back in January 2016, I was spending $3,363.26, so there’s been an 18% improvement! I’m happy to say I’m now putting aside $250/month straight into index funds, and also attacking debt as best I can. The plan now looks roughly like this: I started with about $20,000 invested on my 30th birthday, and I’m adding $250/month forever. With 35 years to grow at 7% before I “retire” at 65, I’m looking at $650,000+ and I’ll still have my 99-year leasehold with over 30 years left on it. Am I maxing out my RSP? No. Am I even maxing out my TFSA? No. But I’ve got a plan, and I still intend on working in some capacity forever. I’m trying my damnedest to make my financial future my priority. (James Frick would say otherwise. $900 on booze, and only $250 on investments? No bueno.) This is why personal finance can be so hard for people. I’ve written 75,000 words about what we should all do financially, but my bad habits have held strong. I have a drinking problem. I’m not as frugal as I think I am. And you know what? I’ll suffer for it.

All things considered, life is good though. I eat and drink what I want, and my housing is stable. That’s pretty okay, and I’m lucky to have that. I hope now to increase my income by allotting more time to my photography business and less time to this blog. Instead of talking about money, I’ll be spending more time earning it. And with that, it’s time for me to sign off. It’s been a great run, and there are two posts left. For some real inspiration, make sure to read our penultimate post. The Other Ben is still a personal finance wizard. Listen to him, not me.

I hope I’ve helped.

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The “Util” and How It Can Help You Save

util

As a personal finance blogger who’s never set foot in an economics classroom, I’m pretty oblivious when it comes to the more academic side of spending. All I see are the spending habits of people around me, ranging from the soon-to-be early retirees to the people who still love shiny stuff. One night, our new roommate “M” was telling me about a new car he intended to buy, and he dropped a term I’d never heard of before.

“I’d drive it lots and get lots of satisfaction out of it, so it’s totally worth it for the utils,” he said.

“The yoo-what?”

“The utils!”

Confused, I plunked myself down in front of Google, typing in “yutil” like an idiot.

“Uh, ‘util’. Like ‘utility’, dude.”

I figured it out eventually. After some struggling, it led me to this:

“The util has no concrete numerical value like an inch or a centimeter. Instead, it’s an arbitrary and subjective – yet convenient – way to assign value to consumer choices and to measure the consumer utility of one choice against another.”

Still confused, I read further.

“Here’s an example. Assume you to the supermarket with $100 to spend, along with a phantom 100 utils – representing 100% of the happiness you expect to garner from all the purchases you make. Two-thirds of your money is spent on necessities – bread, milk, produce and other food staples. Although 67% of the money budgeted for purchases is spent on necessities, the number of utils assigned to those purchases – arbitrarily and subjectively – may only be 40. The remaining 33% of your money is spent on chocolate, ice cream, frozen pizza, soda pop and other unnecessary items. But the utils assigned to these purchases total 60.”

I finally understood.

“Hunh, I should probably mention this on my blog,” I said.

“Do it.”

So here we are.

*****

I once tried to justify my PlayStation habit, and it went pretty terribly. At “$7.50/man-hour” for entertainment that included paying for my roommates’ playtime, it was the worst investment I’d ever made. It was bad enough I was investing in screen time; I was blowing thousands on something that didn’t add concrete value to my life. This was – and I realize this now – an awful investment to buy a shitty amount of utils. I know this because it wasn’t even making me particularly happy. I was paying for bragging rights.

Compare that to now. My main hobby now is cooking, and I’m getting quite good at it. For the price of one fancy restaurant entrée, I can whip up dinner for four, and learn cooking skills that will serve me for a lifetime. $30 spent at the grocery store results in a shitload of utils. It gives me pleasure and purpose, I get to entertain guests for a night, and I’m learning. But wait, here’s the real kicker…

Money invested is now my favourite source of utils.

Utils are about spending money to buy overall life satisfaction. Therefore, it’s worth thinking about every purchase in terms of how many utils it gives you. You buy a $20 sweater you know you’re gonna wear 100 times, and that’s 20¢ per wear. Pretty decent. You pay $200 for tickets to “The Book of Mormon” and you get two hours of entertainment that you can’t really access again. With my values, that’s a poor buy for utils. (It may be different for you if you love, lovelove musicals.) When I thought about this more, I realized “buying money” gave me more joy, security, freedom, peace of mind, value, and deep contentment than literally anything else. Pouring money into my TFSA every month is a delight. Investing it and watching it grow is far better. I used to buy video games to fill a virtual progress bar. Now, I choose better utils: I get them from money that will allow me to live the life I want, regardless of what happens in the future.

Investing money may not be your favourite source of utils though. All I ask is you think about the usage of the item you intend to buy. Will that impulse buy Pickle Rick hoodie be hilarious a year from now, or are you gonna wear it just 15 times? Is that beer you’re gonna chug in five minutes worth $9.26? How many utils is an iPhone compared to a flip phone? How many utils is junk food compared to a simple, well-balanced lunch? Will you use that meat smoker weekly, or will it live in your storage room? Will an $18,000 car really give you more utils than a $6,000 car?

We all measure satisfaction differently, but the efficiency with which we use things can be objective. For me, I “buy” money and investments I can use forever. Embrace the util, even if it is a nebulous concept. Anything that gets you thinking about how you spend is good.

Will you use your new purchase enough? Will it make you happier than the money itself? Does it retain value? All this brings us back to the util. It helps you make better choices.

What thing, in your life, gives you the most utils? Tell us in the comments, and share us on Facebook.

Learn Your Net Profit Per Hour, or You Make Less Than You Think You Do

If you_re like us and really only make $10_hour sometimes, that iPhone costs you 100 hours, or two-and-a-half weeks in the office.-2

I’m very fortunate to have built an unconventional wedding photography business. I also work a day job at a liquor store. Having run my own business for 11 years though, I’ve learned to see my regular work life as a business too. In both, there were tons of expenses that chipped away at my bottom line. The same is true for where and how you work, regardless of what job you have. Think you make your hourly wage per hour, and that’s all there is? Think again. Here’s why you make less than you think you do.

Through mostly luck, my wedding photography is a dream job. I now charge $2,995 for a typical 8-hour wedding. When I add on the extra time I put in for prep, delivery, client meetings, driving time, accounting and so on, I’m looking at about a 20-hour investment per client. I have a great second shooter, and I pay a very efficient editor to handle 90% of the post-production. Typically, the editor takes $400, my second shooter takes $400, and there’s $200 or so that goes into other expenses, like batteries, gas, or buying drinks for clients. I walk away from each wedding with about $2,000. I’ve been operating this way for years. It took a $15,000 photography diploma and $30,000 in gear to get to this point, but that’s another story. Right now, my photography business is – in my mind – very effective at turning time into cash. My net profit per hour is $100 on the books, and a little less after accounting for taxes. Read this: “Many times it’s a ‘slap in the face’ when you calculate this number for the first time. We calculated it in a Courage to be Profitable class last week, and the highest net profit per hour was $3.60. The lowest was less than $1.” What gives?

Well, those were conventional businesses with considerable overhead, taking up space 24 hours a day. I have none of that. Those business students figured out their businesses’ profitability for the first time. You should figure out your profitability too. Here are some numbers from my day job, for easy comparison. In theory, I make $14/hour at the liquor store. In reality, I don’t.

Taxes are obvious, so let’s factor that in. Every day I go to work, I burn gas. Plugging some numbers into this gas calculator meant every day I go to work and back, I lose $2. Okay, not a big deal. What about car maintenance? What about making sure I had the right clothes and shoes for work? I spent $55 on work-appropriate shoes earlier this month. What about all the times I eat out because of work? I get $8 dinners instead of frugally eating in twice a week. Getting even crazier, what about my unbilled hours? Let’s add my commuting time too. Suddenly, my true net profit per hour was closer to $10/hour, and I’m probably forgetting something. This guy ran his numbers from his “$20 an hour” job too, and found it was now “less than $10 an hour”. Read his story.

People sometimes calculate purchases by comparing it directly with their hourly wage. “Oh, I make $20/hour, so this $1,000 iPhone is worth 50 hours of my time.” Nope! If you’re like us and really only make $10/hour sometimes, that new iPhone costs you 100 hours, or two-and-a-half weeks in the office. That $9.26 beer you just bought? Yeah, that’s about an hour. Couldn’t resist seeing “Venom” in theatres with your date and springing for popcorn too? That’s three hours. A new, low-end 4K TV? That’s a 40-hour workweek. After figuring out your net profit per hour, being frugal is the only course of action that makes sense.

Never forget to include the cost of doing business.

A final note: I have $21,000 buzzing away in investments right now with a rough return of 7%, or $1,470/year. Isn’t that kinda like adding 147 hours of day job work to my bottom line? People work, what, 2,000 hours a year? Hunh.

Will you work harder, or let your money work for you?

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For an extreme sport, you could copy those business students and calculate your net profit per hour based on 24 hours instead of just when you work. If you do this, please share. We’re very curious.

Let’s Talk About “Barista FIRE”

Coffee is love

“It’s a concept that can be coined Barista FIRE – not quite FIRE (Financial Independence, Retire Early), but perhaps just a step below it. At Barista FIRE, your lifestyle is almost funded, and all you need to do is to make a few extra thousand dollars every year in order to survive. You can do that pretty much by doing anything, even just working as a barista a few days a week. For people like me, Barista FIRE might be just as good as regular FIRE.”

Barista FIRE draws a lot of flak, and I can understand why. For one, being a barista isn’t the easiest job in the world. With some comparing it to being a line cook, the term itself sounds privileged and disconnected, especially when people sustain their whole lifestyles “working as a barista a few days a week”. Nevertheless, the term has persisted, so let’s talk about it. Barista FIRE is much more reachable than most people realize. Some might even say I’m there already, working part-time at a liquor store and shooting $2,995 weddings on the side. For some background, here’s the breakdown on my current net worth (including the debt). Can someone be Barista FIRE and still have debt? You decide. As a concept, it’s a bit muddy to begin with, so feel free to embrace the malleability of the idea and move goalposts as you please. I certainly have.

Here’s an example: Let’s say you spend $2,000/month, a reasonable amount for pretty comfortable living. Minimum wage in BC is currently $12.65. Three 8-hour shifts a week brings you to $303.60, or $1,214.40/month. The current tax rate in BC for your first $39,676 is 5.06%, so you’re down $61.45/month for $1,152.95. Your investments need to generate $847.05/month to qualify for Barista FIRE, or $10,164.60/year. Assuming you make 7% reliably off US index funds, you’d only need $145,208.58 to achieve that! This is a reasonable assumption of what a Barista FIRE number should look like, and it’s much more attainable than a FIRE number. “A quick bit of math you can do to figure out your FIRE number is to take your annual expenses and multiply by 25.” If you spend $24,000/year for example, your FIRE number is $600,000. At 4.1x less than this FIRE number, our Barista FIRE number has already earned you the freedom to do whatever job you want! I’ve mentioned before that working forever might not be so bad – I hate the idea of someday signing off on work altogether, and just sitting back to consume, consume, consume – so this was like striking gold to me. Barista FIRE was a new milestone, and it was comparatively easy to reach. Naturally, this is all napkin math, but the results are hopeful. With my 99-year leasehold rented to two roommates, I’m currently generating $1,300/month. My day job, a fun liquor store position that keeps me active, pays me $100+/day. If I brought my expenses down to $2,000/month, that might mean I only need to work seven days a month. It’s all a work in progress, but in my mind, I’m nearly at Barista FIRE. For me, I don’t think I can comfortably call myself FIRE-anything while I still have debt, but once that’s gone, all bets are off. With $22,000+ invested in index funds too, I know I’ll be working-for-health, not-money soon. A future post will talk about that too.

Retirement can be boring, so you’re probably gonna want to do something. You too can retire from the grind and work your dream job. Teach piano, run photography workshops, become a freelance proofreader, start an underground dining operation, or walk dogs. Work out your own Barista FIRE number like so: 1) Figure out your monthly expenses. 2) Work out how much you’d earn working your dream job; e.g. $800 from teaching two $100 art lessons every week for four weeks. 3) Subtract item #2 from item #1. 4) The result is how much your investments need to earn monthly for Barista FIRE. Multiply by 12 for an annual figure, if that’s easier. This is now a clear milestone of when you can retire from a job that sucks, and retire to whatever job you want.

Can you do it? Your dream job awaits.

What Getting Fired Can Teach You About FIRE

A fired you isa lot like aFIRE'd you.

I got fired in 2013. There’s not much to say about it – it was the result of a work-inappropriate tweet – but I’ve made my peace with it because I learned so much. In a way, I was granted an accelerated look at what life would be like if I were retired. If you have your doubts, click that link. Two years of barely needing to work changed my outlook on wealth and retirement, and I was only 25 at the time. Even then, I knew FIRE wasn’t all sunshine and rainbows. If your FIRE number is your only goal, financial independence won’t make you happy. Only finding common ground between your values and priorities will. (Sorry for the hokeyness, but it’s true.)

Anyway, it’s 2018 now, and I found myself out of a job again. I wasn’t fired, but being pressured to leave due to an interpersonal conflict is almost worse. I’ve already lined up my next step, but there were a few weeks where I felt listless and unmotivated. After all, putting three years of hard work into a place meant more to me than money! It’s okay though; these things happen. In the end, it even turned into a great learning opportunity!

At first, I’d honestly settled back into my old ways. I ate out to numb the boredom, drank more, and racked up a dumb amount of screen time. This didn’t last long before I started feeling like crap. Suddenly, I remembered I’d written articles about quantifying happiness in one’s pursuits and purchases. It turned out I was just completely lacking in purpose. With no professional obligations for the time being (which was like being retired), I had nothing to do!

In one way, this was horrible. It meant I’d mismanaged my priorities to the point that I didn’t have any, but it also gave me the chance to tackle these problems before achieving FI. (For my numbers and strategy, read this and this. There’s a chance some level of FI could come sooner than I think.) I suddenly saw my retirement, and I didn’t like it. I needed purpose. It turns out I actually need work, at least for now. It’s a value of mine to be productive, so I had to prioritize it. This taught me I might never need full-on FIRE though! Maybe barista FIRE was the target now! More importantly, this also taught me I needed other, better goals. These are all good things to know before becoming financially independent. I’m just a workaholic. What can I do to become more?

I’m sure we’ve all, at some point, been less employed than we would’ve liked. I’m glad I got fired once or twice because it helped me learn how I act when I’m suddenly regifted an extra eight hours every day. If you found this post through recently getting fired, here’s my challenge to you: Note down how you feel, what your new motivations are, what you now prioritize, and how fast you start itching to work in some capacity again. After the honeymoon phase of FI when you travel the world for months or buy guinea pig armour just because you can, you often find that an FI’d you is still… you. A fired you is a lot like a FIRE’d you. What do you want when you don’t have to work? Some of us are too busy to find out. Answer that question honestly, and getting fired might be the best thing to ever happen to your retirement.

Stop Stacking Luxuries

finalmoney

Having worked in the retail world a while now, I’ve been run through every sales talk about add-ons and upselling there is. I’ve seen the numbers too. I can’t divulge mine, but consider that your popcorn and drinks “represent some 40 percent of theaters’ profits”, and adding a $9.26 beer to your $15 meal just bumped it up 62%. For those reasons alone, I’m super cautious about stacking my luxuries. I’ll show you what I mean.

I never buy popcorn. I went out for a nacho night with friends recently, split the bill and didn’t order any drinks, and my bill was somehow less than $4. At home, I even try not to snack during a Netflix movie. When buying clothes, I don’t accessorize. When I cook, I garnish as cheaply as I can — (none of my friends appreciate saffron anyway). And you know what? I ended up appreciating each individual luxury more. Here’s why.

When I bought popcorn, I’d annihilate most of it during the previews and endure a 2-hour movie trying to tongue the hard bits out of my teeth. The soda would destroy my fitness goals, and make me have to pee right before the climax of “Don’t Breathe”. The fact I paid for that inconvenience was especially questionable. Why would I pay for something that made me enjoy a luxury — the movie — less? This even happens when I crack a beer during Netflix. At my worst, I wouldn’t even remember how the movie ended a day after. Would I even enjoy the beer? Not really. I was distracted by the movie. With every luxury you stack, each individual luxury is diminished.

There are exceptions, of course. Some people argue wine complements great food, and I don’t disagree. I’ve just always had trouble tasting the finer notes of a 1999 Barolo while my mouth was full with a $25 Keg steak. A great accessory can complete an outfit. It can also cost $9,750 when your Indochino suit was only $579. When you try to cap off a basic luxury with something that makes it ‘more special’, that’s a green light to a salesperson that reads, “This person is here to be stupid with their money.” Your core goods are always cheaper, and upgrading them first is the only thing that makes sense. Even then, you can usually live without an upgrade. I’d rather watch four months of Netflix than spring for popcorn-and-a-movie for two. Heck, I won’t even make popcorn at home. Can you imagine crunching your way through “A Quiet Place”?

Do you stack your luxuries? Why or why not? Tell us in the comments.

What’s Your Net Worth Anyway? (August 2018)

$163,155

I’m fortunate. With a 99-year leasehold valued at $170,000 and a small inheritance I received in 2014 that I’d thrown into index funds, my assets put me well ahead of recommended net worth milestones at 30. Naturally, it’s not as simple as that because I’m also no financial wizard – I’d only stopped accumulating consumer debt recently, and I still have moments of weakness. As it stands, here are the real (and embarrassing) numbers: I owe $13,661 on credit cards and $16,569 to family. I’m $30,230 in debt, and I’m not making fast progress on it. I’m hoping to do a series of net worth posts so you can all keep me accountable. Right now, I need help.

The assets add up nicely. The $170,000 home plus my $22,877 RSP bring me to $192,877. I have $500 exactly in chequing, and my wallet contains… let’s see here… $8, change, and a coupon for free pizza. Here are the milestones I’m working towards.

First, I want my assets to total $200,000. Then, I want my net worth to total $200,000 through debt elimination. I know I keep pushing this back, but my goal is a “debt-free 33”, and I need a good money tribe to keep me moving forward. If you’re on an FI journey too, I’d appreciate the encouragement.

My net worth is $163,155 at 30.

Where are you?