It’s Your Duty to Educate Your Family About Money

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Money is an insanely sensitive topic, especially when it comes to family. Even now, I don’t let my mom in on my finances. There are things I can justify on my Visa bill that she’d lose her mind over, like the $15 PS4 game I’ll spend 60 hours on. To me, I’m spending $0.25 for each hour of entertainment but to her, I’m throwing money into a pit. I guess we’re both right, depending on what values you grew up with. That’s why most families don’t talk about money. It’s polarizing.

To be fair, my mom raised me to be frugal, but since I was a rebellious teenager, I grew up to be the opposite, eventually plunking my sorry ass into deep debt not once, but twice. These days though, I worry –I– may need to step up to the plate and offer some guidance with the family finances. It hasn’t been a pleasant conversation.

My brother has money. When our dad passed away, life insurance kicked in and made sure he was okay. Mom took control of his finances because he’d never read a personal finance book in his life, and he assumed she knew what she was doing. He was wrong. She locked down a chunk of his money into 1.x% bonds. That doesn’t even keep up with Canadian inflation and is about as dumb as stashing cash in a mattress. Since then, I’ve explained index funds to my brother and why investing in equity is preferable at his age due to the compound gains. This conversation would be impossible with my mother, but I’m trying. She doesn’t take ANY financial risks at all, and suffers for it. Due to stubbornness alone, she’ll most likely stay poor. She also doesn’t believe he needs a credit card, even though he’s 23. Don’t get me started. It’s been infuriating.

Now, this is a HUGE problem for our family. One day, we’ll need to take care of Mom, and our only asset will be the family home, which will hit the market around $550,000 if we ever get around to renovating it. If, in her old age, shit gets squirrelly, that money won’t last long. We may need to sell the house. Potential solutions involve investing NOW with what money we have. Without divulging too many numbers, if my brother invests properly now, he’s looking at $500,000+ by the time he’s 65. Even without the house, he’ll be okay. I will be too, thanks to my 99-year leasehold, BUT HE NEEDS TO INVEST PROPERLY. None of this 1.x% bond crap our mother recommends. We’re also trying to convince her to take in a student because at the moment, she lives in a 4-bedroom townhome alone, which is just about the most wasteful thing I’m currently aware of. Let’s say she has a renter for just one room in the house at $600/month. That’s $7,200/year, and if she invests it all properly, she’ll have $100,000 more in the bank by the time she’s 65. WHY ISN’T SHE DOING THIS? Well, her values don’t allow it. Unless I can change her mind, her belief that family homes are for family only WILL KEEP HER POOR FOREVER. This is terrible because if she’s poor, my brother and I will have to pick up the slack. We’ll have to work harder and longer to take care of the family. Don’t get me wrong; taking care of my mom is a burden I’m happy to bear. I JUST WANT TO TAKE CARE OF HER NOW THROUGH FINANCIAL EDUCATION INSTEAD OF WAITING FOR THE DEBT SHITSTORM TO HIT US WHEN SHE’S 80.

It’s one thing to be financially secure on your own. It’s equally important to make sure your loved ones are financially secure. If your finances are directly affected by someone, GET THEM ON BOARD WITH PERSONAL FINANCE. This blog is a good start. Make sure they understand saving, investment, credit, interest, and retirement. Trust me on this. And if you don’t? Well, you’re gonna be stuck paying for it. Let’s hope that doesn’t happen.

Snowflake Your Debt

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I read a LOT of articles on personal finance and personal development, but for those of you who don’t, I thought I’d share “snowflaking” with you since it ties so well into what this blog is all about. All this time, I’ve been trying to tell you just one less, or get a roommate, or optimize your lifestyle, but without a clear goal in mind! Well, since roughly 75% of Canadians are still in debt, here’s the goal: Get to Zero, ASAP.

I’m in debt too, and snowflaking that away has been one of my main priorities. Simply put, snowflaking is what personal finance nerds call it when you make small, one-time payments towards your debt to kill it off. Came in under budget on your groceries by $20? Snowflake it in! Made $300 selling old crap at your garage sale? Sprinkle that on your highest-interest credit card! Decided you didn’t need a $5 latte today before work? That goes in too! Obviously, none of this works if you’re still accumulating massive amounts of debt, but here’s a strategy for that as well.

Let’s say you owe $6,000 on a 20% credit card and $4,000 on a 15% credit card. Go to your bank and negotiate the lowest interest you can on a credit line or card, then transfer all your debt to that account! (I’m at 7.69%, which isn’t great, but here’s another low-interest debt strategy you may not have thought of.) With your previous numbers, you’d be paying $1,800/year and making no dent in your debt, but now that you’ve negotiated a better interest on your credit line, you’re probably closer to 9%, HALVING your debt payments to $900/year. That’s just an example, but they’re realistic numbers. You might even be able to do better! Another snowflaking opportunity? Hell, yeah! Whatever your numbers, the sum of your debt is now a very clear Debt Number to attack. You’re no longer allowed to rack up a balance on any of your credit cards, and you are now 100% devoted to snowflaking the fuck out of your credit line until that number is Zero! Simple, right?

Every $100 you knock off your Debt Number is a cause for celebration. I still think of each $100 as a Happiness Unit, and you should game this as much as possible. Every time you save or earn a small slice of cash, snowflake it immediately towards your debt. It may be easier to place it into a savings account first, then transfer it all into your debt at the end of the month if you think that’d be better. This can be a great psychological motivator as well! Try and beat your high score every month!

Think of every snowflake as a small win. Do this often enough that it becomes automatic. Squirrel away your money before you get tempted to spend it. Let’s create a goddamn blizzard.

I’m A Generosity Addict and That’s Not Okay

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I can’t remember which I bought first for her: the PS3 or the PS2.

This was years ago with our friend J. She was an avid gamer, and I was still riding the high of a successful wedding season, so I was feeling generous. I was like an Asian Oprah. (“YOU GET A PLAYSTATION, YOU GET A PLAYSTATION, YOU GET A PLAYSTATION!”) Seriously, I think I’ve gifted six or seven PlayStation consoles to my friends now. I seem to go apeshit every Christmas and it always seems like a good idea at the time, so I do it every year. Well, J dated one of my other friends and we lost her in the breakup. We haven’t seen her in months now, and that investment in our friendship is gone. In the end, the gifts I bought her were just Stuff, and therein lies the problem.

Say it with me: STUFF. IS. MEANINGLESS.

If you’re reading this, I’m sure you already know that, but my generosity addiction didn’t end there. It extended into my dating life too! I once blew $200 on a first date with someone I didn’t even know! WHAT THE HELL WAS WRONG WITH ME? Was I compensating? Probably. WHY DO I ASSOCIATE LITERALLY SACRIFICING MONEY WITH SHOWING AFFECTION OR FRIENDSHIP TO PEOPLE? Well, I’m not opening that door here, but I know some of you reading this know exactly what I’m talking about. Do you buy too many toys for your kid, thinking more action figures directly translate into showing them love? Have you ever bought an expensive concert ticket for a date when you know they’re not even a fan? Do you break the bank for your extended family when, deep down, you know all they really want is to spend more time with you? STOP SUBSTITUTING STUFF FOR ACTUAL LOVE.

For those of you who don’t obsessively read self-development articles, here’s a goddamn truth bomb: People accept love in different ways, and 9 times out of 10, buying them Stuff is the absolute worst way to go about it.

If you’re the type to be overly generous in a way that costs you money, seriously reevaluate how you give to the people you love. Stuff is meaningless. Be generous with your time instead, and spend that time with your friends, family, and romantic partners. Save your money.

They’ll remember the time you watched their favourite movie with them. No one remembers who bought the fucking TV.

Income vs. Outcome

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Impulse spending used to be a huge problem for me. How else could I explain all the weird crap I own? Why do I have pink Docs? Why did I spend $60 on a “Dreamy Trudeau” sweater? WHY DO I HAVE SIX PLAYSTATIONS?!? I’m slowly learning though. With most of these purchases, I didn’t consider the true Outcome of owning them. By the end of this post, I’ll get you thinking about your Income vs. Outcome too.

I’m lousy with impulse spending because my photography job has largely destroyed any intelligent relationship I had with money. When I landed a photography booking, it’d usually mean at least $2,000 in the bank, so a $400 PS4 wasn’t a big deal. I started a day job again in the past year though, so my relationship with money became healthier. Instead of using my $2,000/day metric for making purchases, I think of my $13.50/hour at the liquor store. (And that’s really more like $12/hour since I bank my raise.) Now, I always consider my Income and the expected Outcome of my purchases. I’ll give you an example. I may be going a little overboard with quantifying unquantifiables, but bear with me.

Let’s take the $60 Trudeau sweater. I think it’s hilarious, but it’s still just an item of clothing. I wore it about 10 times in the past year. Every time I wore it, some stranger would make a remark about it and we’d banter on a bit, have a laugh, and go about our day. The sweater is also kind of a dated joke, so I expect that to happen less as time goes on. In three years, I’ll probably wear it 30 times. Since I’m calculating for $12/hour from the liquor store after banking my raise, the sweater is essentially costing me 5 Working Hours. Is wearing that sweater 30 times in three years worth 5 hours of stocking, mopping, and talking about wine? Well, I actually enjoy my day job, so I say yes. The answer would be vastly different if I hated that job, but the key thing to note is I’m comparing my Income to my purchase’s Outcome, and deciding whether it’s worth it or not. Even though the sweater ranks among my dumber purchases, I still think it was worth it!

What about a night of moderate drinking at the pub? I went out last night and blew $40 for four hours of drinking with friends. That’s about 3.3 Working Hours. Wait, 3.3 Working Hours for 4 Drinking Hours? That doesn’t seem worth it. Besides, I drink enough that alcohol isn’t the hilarious roller coaster it used to be, and it’s really just something to do while socializing. I could take the alcohol away and probably still have just as good a time! The Outcome wasn’t worth the Income I was putting into it! Well… fuck.

I encourage you to do this mental exercise every time you’re about to make an impulse purchase. Gonna buy a $500 Apple Watch? Is it worth how much you have to work for it? That’s for you to decide. Shelling out $60 for a fancy dinner? Is it worth 3 or 4 hours of Income? Is the Outcome – two hours of eating great food – worth it in your mind? Maybe you’re buying a BBQ. $400 of Income becomes an Outcome of countless summer days gathering with friends making perfect steak after perfect steak. Sounds good to me! Try to always consider your Income versus your expected Outcome with every major purchase. It’s the only intelligent way to spend money.

Hopefully, you’ll find yourself spending a lot less.

Bank Your Raise

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The liquor store doesn’t pay me much. $13/hour is only $26,000/year full-time. Luckily, that gig isn’t my main source of income. No one ever needs a wedding photographer on a Monday though, so I figured I may as well make some extra money on my weekdays.

I got a small $1 raise three months into that job. Starting on September 1, I’ll be banking that raise. I started that job at $12/hour and lived just fine, so I’m dumping that extra $1/hour into my investments. You can bank your raise too. It’s easy: Just compare how much you currently make per hour to what you started at, then multiply the difference by the hours on your paystubs. Throw that into investments ASAP. Here’s some math on how much you’ll save.

On my last paystub, I worked roughly 47 hours over two weeks. If I bank my raise, that’s $47. I get about 25 pay periods per year. That’s setting aside an extra $1,175/year, and that’s at the low end! What if you’ve had a full-time job for years and your raises add up to more like $5? That’s investing $10,000/year into your future! If you have a $50,000 income, that’s about what you’d need to max out your RRSP! If you make banking your raise automatic, and literally use just that step alone, your retirement will become automatic too! Even my paltry $47 per pay period adds up to $43,475 by 65 – AND THAT’S IF I DON’T INVEST IT. Invested the way I normally do, I’m looking at $200,000 JUST BY BANKING MY $1 RAISE.

As usual, run your own numbers. I’m just here to remind you financial security is easy. This is such a simple way to compartmentalize your savings, and mentally set aside money.

You lived perfectly fine when you started your job. Anything extra is just icing on the cake.

On Millennials and Maslow

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Let’s just get this out of the way – I’m a lazy, entitled #millennial, and I’m everything wrong with this generation. Here’s why that’s not so bad. For this story, we’re going back a month to when I stumbled across this article on Maslow’s hierarchy of needs. I hadn’t thought about Maslow since Psychology 11, but remembering what I learned had me thinking for weeks: What do we millennials value, and why do we seem so entitled? WHY DO PEOPLE HATE US?!?

Well, I figured it out. Hold on to your butts.

*****

We, as millennials, need to work either smarter or harder than the previous generation, and the reason why comes from how we look at Maslow’s hierarchy. In his iconic pyramid, he illustrates five basic categories of human needs – physiological needs, like food and rest; safety, as in security of employment or property; love, as in human relationships; esteem, like feeling respected; and finally, self-actualization, like doing whatever the fuck you feel like because it makes you happy. It’s important to understand the visual because each category supports the next one. You can’t get self-actualization if you don’t have security, for instance. Actually, you know what? That last sentence was just plain fucking wrong, and it hurt me to type that. Millennials HACKED Maslow, and here’s how.

If you’re in your 20s, when was the actual last time you felt “secure”? You’ve known for years that everything teetered on the brink of disaster, ready to all crash down the moment your workplace decides to restructure or your landlord decides to renovict. Security is a thing of the past, and we all know it. What once were basic securities, like owning a house, is literally impossible now for most of us. We do not have Security.

You know what we DO have though? Adaptability. Our parents were mostly content to dedicate their entire lives to a steady paycheck and pension, but we know WE CAN DO ANYTHING. It’s not like Burger King is paying us a living wage anyway, so we go out there and do what makes us happy for peanuts. WE’RE ACHIEVING SELF-ACTUALIZATION TO EARN THE SAME AMOUNT OF MONEY. That’s what most people don’t get! AND we’re increasing our potential to earn instead of locking ourselves down as a wage slave! This is literally the smartest thing we can do!

Look at the pyramid again. Under Love, we have things like family and relationships. Most of us are delaying starting a family for a variety of reasons. Pessimists say it’s because we have no money, but I, as an optimist, would like to point out most of us just have different goals. I don’t want kids because my life is awesome already! Right at this moment, it’s within my means to just fly to Mexico for a week and not hurt my employment or relationships! Why would I change that AND THROW ANOTHER HUMAN BEING INTO THE MIX so I can feel fulfilled?

Our parents started building the pyramid the way it was supposed to be built in 1943: security first, happiness later. At the time, Maslow’s hierarchy resonated with millions. I’m here to tell you it’s fucking 2016 and Maslow is out of date. Pursue self-actualization now, and figure out a way to make it pay. C’mon, you’re resourceful and have Internet access! You can do it! Just start with a 10-to-2, work your fucking ass off, and you’ll experience something previous generations couldn’t: Creating Your Own Security with Something You Built On Your Own. It’s the best feeling ever.

My first job was as a video store clerk. I think it was less than $10/hour. My mom makes $15/hour, and she figures she’s doing okay. You know what the most I’ve ever made in one day was? $4,484.03, and it was doing something I loved. If $15/hour is okay, I’m banging angels. And what about Ben? I can’t release official numbers, but he learned programming on his own and will see FI by 33. Ben and I saw Maslow’s pyramid, catapulted ourselves to the peak with middle fingers in the air, and we’re building from the top down for a complete pyramid we can be proud of. I encourage you to do the same.

You WILL have to work smarter or harder though. It’s not easy to make a living as an artist, writer, craftsman, or entrepreneur. I’m hoping you’ll pick a job for yourself you’re so passionate about, you’ll ALWAYS itch to be working on it. You’ll probably also need a Day Job. Pretend the hours you grind out in the office are part of your Real Job, giving you enough money to get by until you can get back to your Passion. Ignore the naysayers. They don’t believe in what you’re doing BECAUSE THEY COULDN’T DO IT. Why would you listen to someone who ignored their potential? They’re still at the bottom of the pyramid wondering where the fuck we got our catapult.

As long as you have a roof over your head: self-actualization first, everything else later. The more you know who you are and what you want, the more you’ll come to define yourself instead of letting your job do it for you. Remember to work from the top down. See you in Mexico.

What I Learned About Money from My Parents

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My dad once paid $10,000 to advertise in a Chinese newspaper. I still admire him for that. He risked everything to run his own business as a driving instructor, but in the end, I don’t think he ever made that money back. Most of my family considers him a failure, but I don’t. He actually believed in something. To me, he was an inspiration.

My dad wasn’t a very good businessperson. Assuming he spent exactly $10,000 on advertising, and using his old rate of $30/hour, he should’ve done the math and realized it’d take him over 333 hours just to break even on his ads. Generating that many leads turned out to be impossible. He also somehow forgot to factor in gas and overhead. The business was destined to implode. In a family where his siblings earn far more, tensions arose. My grandparents eventually covered his ad costs, but resented him for it. He kept trying, but his health gave out. He eventually stopped working.

One night in 2014, he was admitted to Royal Columbian Hospital with chest pains. I rushed to the hospital and found him. He was very much alive, and was sitting up in bed telling dad jokes to our pastor. Apparently, he’d called him too. I don’t think any of us understood the seriousness of the situation that night. I figured he’d be home soon, and everything would be back to normal. We stayed up, told bad jokes, and just laughed. He was eventually admitted to the high acuity unit. I visited him there the next few days, and found him happy. He’d sing to the nurses and read the Garfield comics I brought for him. He didn’t seem like he had many regrets. Eventually, his aorta ruptured. I wasn’t there. From the last time I saw him alive, I remember two things: He was grinning like an idiot, and I told him I loved him.

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Ironically, my mom puts together advertising materials. She works for a marketing company, and as far as I know, spends most of her time feeding paper into a machine. She believes in a steady job, and not taking risks. I don’t think she’s ever made more than $15/hour. To her, what I’m doing is ludicrous. I’m going down the same destructive path as my dad by owning a business. After all, she’s seen what happened to him. If only he’d had a steady job, right? A steady job brings security, and security is all that matters.

I can’t even fault her for thinking this way. She’s right: I’d probably make more with a full-time job as a retail manager. Would I be happy though? Fuck, no! That’s not me. Like my dad, I need to pursue something that I build on my own. The last thing I want is a job like hers, feeding paper into a machine for peanuts while I make someone else rich. She doesn’t take any risks with money or investments either, so index funds are scary and $15/hour sounds just fine. She can’t understand I’d rather make $400/hour doing what I love on a not-so-frequent basis, and she’d rather see me in a Target or Burger King grinding out full-time hours like her. She’s seen my dad’s business fail, and she doesn’t believe in me. It’s depressing as fuck.

I was able to learn something though. I’d now seen both extremes. My dad risked everything. My mom risks nothing. Well, obviously, the answer that made sense lay in the middle. I could do both.

*****

With my photography business, I’m crazy. I’m all in, all the time. I risk my money, time and sanity to capture the perfect shot, and try to wow my clients always. I give everything. I also work at a liquor store. I really don’t need it to pay my bills, but the added security is nice. Want numbers? In June, photography brought in $3,262. I didn’t even shoot a wedding that month. The side job brought in $1,518. Not bad for added security, right?

My dad taught me to chase my dreams and take risks. It’s paid off. My mom taught me a little bit of grinding at a day job might not be so bad after all, even if I fundamentally believe Smart Work always trumps Hard Work. I figure one hand washes the other, since the more security I have, the more risks I can take. I think I’ve found a good middle ground!

Ultimately, I’ll have to forge my own path. I may not be stoked about it, but I’m still equal parts my dad and my mom. What do you think? Have I struck a perfect balance, or is a normal life and a normal job the way to go? Tell us in the comments, and don’t forget to share.

Everything Actually Costs 10x More

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This one’s a quickie.

If you’re reading this, I’m gonna assume you’re around 30. You’re here because you care about Money and Retirement, but you’re also reading this because you haven’t figured it all out yet. You’re not a Millionaire yet. That’s okay. Neither am I… but I can help you get there more effectively. All you need to remember is the title of this post. Here’s why.

Assuming you’re 30, you’ve got 35 years left before a standard retirement age of 65. Every $1 you put into an investment now, generating 7% interest annually, will turn into – wait for it – $10.68 BY 65! Do you know what that means?!? EVERY $10,000 YOU’RE ABLE TO PUT AWAY NOW IS WORTH $106,765.81 BY RETIREMENT!

Before you all jump on me saying 7% annually is unrealistic, I’m obviously talking about index funds that sometimes go up, and sometimes go down. The idea is that 7% is the average growth over a number of years, and you’re not gonna be dumb enough to cash out your index funds entirely right after a crash like 2008. When you decide to cash out, you’ll already be swimming in hundreds of thousands, so you can wait a little bit for the market to recover. You only need to withdraw enough to live on anyway, which should only be about $100/day for maximum happiness! Even that’s kind of extravagant.

For me personally, the US index fund I invested in has gone up 8.2% in the past 10 years. My MER is oddly high (and I’m gonna look into that), but even after factoring that in, my projection for 10-year growth is still about 7%. I’m not just telling you what to do! I’m also doing it!

Just remember: Spending $1 today is costing you $10 in the future. Save it, and invest it. And if you suddenly come across a windfall of $100,000, put it aside so you can become a Millionaire through no effort at all.

$1 + Time = $10.

Simple, right? Even a millennial like you can do it.

Veblen Goods and Conspicuous Consumption

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In 1899, an American economist named Thorstein Veblen wrote a book called “The Theory of the Leisure Class”. In it, he describes the phenomenon of Conspicuous Consumption, and explains how trying to earn social status through material goods can make for poor buying decisions. This idea became so prominent that modern economists now refer to luxury items as Veblen goods. Basically, Veblen goods are average items marketed at a high price point to prey on The Rich, and The Rich fall for it every damn time. Demand actually increases as the price increases. Examples include Hermes handbags, any Rolls Royce vehicle, and artwork by Christopher Wool. Seriously, have you seen that guy’s “art”? It makes me angry every time (so I guess he must be doing SOMETHING right).

Now that you know this, you can probably sell your Rolex and start ignoring Michelin stars. The entire luxury goods market is aimed at insecure people who have money, but little faith in their social status. They need to SHOW they have money. Think of it as a tax they pay to impress people. What really boggles my mind is there’s zero financial gain from having luxury goods. I suppose you could theoretically say driving a Maserati Quattroporte when you’re a real estate agent could help land higher-level sales, but by then, YOU’VE ALREADY SPENT $115,825. For the other 99.9% of us, expensive cars are bullshit when you can get from A to B in a decent $4,500 commuter car. You’ll rarely hit 100 MPH on city roads anyway, and if you do, enjoy your traffic tickets. I say it’s lose-lose. Had you invested your $115,825 at 35 and let it sit until 65 at 5%, you’d have HALF A MILLION. One shitty luxury decision can ruin your retirement.

So am I saying you should have ZERO luxury goods? No, not exactly. I’m just saying you should look at a product’s practicality before its brand name. Don’t spend $1,200 on a handbag that does the same job as a 0.1¢ plastic bag. Don’t buy a 1961 Cheval Blanc just because you saw it in a movie when you like Barefoot. Don’t spend $500 at a ritzy restaurant and walk away hungry. There’s spending on things that are worth it, and then there are Veblen goods. I actually smirk a bit when I see people showing off their expensive cars now. In many cases, I know they’re financing them, and I can’t help but picture them stuck in traffic behind a Smart car while cyclists blissfully pass them in the bike lane. Everyone these days seems to own a luxury car, but how many can escape 40 hours a week making someone else rich?

Once you pay that much money for something, you also start to lose leverage when you’re dissatisfied. I dined at a two-Michelin-star restaurant in Paris once, and dropped $600+ for the privilege. My fish was unevenly cooked, my sommelier was oddly passive-aggressive, and they deliberately seated me in a corner away from their more opulent clientele. I could’ve complained, but what’s the point? I’m sure their staff regarded me as a commoner anyway, looking to milk an upper class establishment for all they were worth. It’s a different kind of club up there, and it’s not worth trying to get in. I’m still not sure why I tried.

Finally, Veblen goods are particularly dangerous to the faux riche, and I willingly admit I fall into that category. At my current level of Debt, I shouldn’t be buying ANYTHING except basics, but here we are. I have an Apple computer, bottles of $400 Bordeaux in my cellar, and enough PlayStations to run an arcade. That’s why, right now, I pledge to spend only $100/month on material goods. I’ll roll that limit forward if I have any left over, but that means only blowing $600 on material goods between now and Christmas. Bug me and make sure I post updates. With some luck, maybe I can be Rich for real.