What a Budget Can Do for You

What a Budget Can Do for You

by | Jan 2, 2024 | Divorce, Finances

What do you think when you hear the word budget? 

Do you think: “Ugh – I know I should do one, but I’m going to discover I can’t spend the way I want,” or, “Budgeting will confirm I don’t make enough money; there’s no way I can afford to live the life I want.” Or perhaps you think you don’t need one, as you’ve always managed just fine. 

What is the thought that is stopping you from budgeting? 

Very few of us proactively plan our spending – many of us spend what we have and only do a budget when we start to notice we are spending more than we bring in and are heading into a financial crisis. 

What if, instead, we proactively planned how to spend our money? 

If we proactively planned our spending, we would have much higher odds of living the life we want instead of being controlled by our money – much like a ping pong ball in a pinball machine, which is how most of the world operates. 

When starting over post-separation, having a spending plan, that is, a budget, allowed me to build the path to my dreams. 

I needed to know where I stood financially, how much money was coming in, and how much would go out. I also needed to understand how and why I spent money. 

At the time of my divorce, I was a stay-at-home mom and had been out of the workforce for five years. I also had a seven-year-old and a four-year-old that I had to care for on a shared parenting basis. In BC, where I live, having a shared parenting arrangement means that each parent must pay child support to their co-parent based on their total income for the most recently ended tax year. I didn’t have any reportable income for the past year, so I agreed that I could have an income of $30,000 imputed to me – this means that I could likely earn $30,000 for the coming year. Imputed income is not actual cash flow coming in, but it did mean that I would receive less child support from my co-parent. 

I had about $1,000 per month coming in for child support, some government benefits ($120 per month) and nothing else. I also had zero cash reserves, but I did have RRSP savings and an accounting designation. 

I also had done my budget – I needed another $1,000 monthly to cover the basics (housing and food). 

I also knew, deep down, that there was no way I was going back to the work I had been doing before I had my children. The hours didn’t work, and it had been slowly destroying my soul as it was not aligned with my values. It would have certainly solved my money problems, though. I had made quite a bit more than the imputed $30,000. 

So, while my budget seemed bleak (it proved I would have to scramble to cover everything), it created a path I could follow, and while I knew I would not be saving anything for a while, I would be living the life I wanted. I would have time to care for my children without worrying about childcare and have enough to cover the basics while creating a life that aligns with me. 

An essential part of the budget process is knowing yourself. 

Knowing yourself and your circumstances opens up an entirely new world. If you know what drives you and what you need in life, your budget will become the empowering tool it is meant to be, a tool to help you make decisions. It is not a set of instructions you have to follow for the rest of your life – just because we put that you get to spend $2000 a year on travel does not mean you can never spend a nickel more. You could take an extra job or cut back somewhere. Your budget allows you to decide where you save and spend your money, and if you know how you like doing this, then your budget combines with this knowledge to make the decisions work for you.

My strong understanding of my cash flow and financial and life circumstances allowed me to stay on my path. I dipped into my RRSP to pay for coaching and sold a few things to give me the extra cash flow I needed to keep afloat. Soon, friends who knew I needed work started giving me the odd accounting job to give me the additional cash flow I needed. At the same time, I built my business to become a collaborative professional supporting people navigating separation, and I then pivoted to become a financial coach. The first accounting gig I got was collections work – this was certainly not something I liked doing, but I knew it was a short-term term gig, and it led me to find other short-term accounting work and introduced me to people and their friends, many of whom would turn up in my life again in my new roles as a financial neutral and then a financial coach. 

Ten years post-separation, I am truly living the life I want, and I’m still budgeting to keep living the life I want. Budgeting is a process that keeps us on the path to living our dreams. 

The Perks of Being Self-Employed

The Perks of Being Self-Employed

by | Dec 20, 2017 | Finances

It’s December 19th

Today, I had planned to go Christmas shopping – it’s getting close to the wire! But it started to slush (you know what this is if you live in Vancouver), and after going for a short walk and getting soaked and cold, I decided to leave Christmas shopping until tomorrow, when it’s supposed to be sunny.

I can go shopping during the workday because I’m self-employed: one of the perks of being self-employed.

When I sat back down at my desk after deciding to skip the slushy shopping, I thought, “I can do anything I want right now,” as I had already booked the time off in my head.

What have I wanted to do but put off because of more pressing work deadlines?

My own bookkeeping

Yes, I am one of my worst clients. I throw all my receipts in the drawer next to my desk or leave them in my inbox (where most are these days). Ok – I didn’t want to do my bookkeeping if truth be told, but I needed to do this.

I started my business a few years ago, and as that tends to go, it was a slow start, and I only made a little money. I had a business loss during the first year, technically only four months of work as I had started in September.

As a sole proprietor, I hadn’t paid any taxes during the year (no employer to withhold and remit taxes on my behalf), so when it came to filing my taxes, I had to report my pitiful non-earnings, and that was it. I didn’t owe any tax because I hadn’t made any money, and I didn’t get any back because I hadn’t remitted any money. It was slightly anti-climatic.

In my second year of business, I made a profit! Again – I hadn’t remitted any taxes throughout the year as the Canada Revenue Agency only requires self-employed individuals to make tax instalments if they had a balance owing in the previous year of more than $3,000, and I hadn’t.

For the second year, I scraped together some savings to throw into an RRSP, reducing my taxable income, and in the end, I had enough in my savings to pay my tax bill. Phew!

Not quite 9-to-5

I’m in my third full year of business, which has become a full-time job. My hours aren’t nine-to-five, but at least 40 hours weekly.

I’ve been paying enough attention to my billings to know that the “savings” I have accumulated are not savings. It’s my tax bill for 2017. But I still look at the balance in my savings account and get this little happy feeling inside.

Danger…

Sometimes, I start thinking of everything I can spend my savings on, and then you know what that leads to? Yup, spending.

So today, as it is close to the end of the tax year, I decided to see how much of those savings are savings and how much are just taxes I still need to pay.

And what did I discover? Yes, it is tax (I think I’m an excellent accountant – I know intuitively what the tax rates are as I saved the perfect amount).
I saved the perfect amount for my tax bill.

Sigh.

All the little happy feelings I’d been having about my savings drifted away, and all these negative thoughts came crashing in. The main one being:

what’s the point of working harder? I’m no further ahead.”

This led to further negative thoughts about everything I had to sacrifice this year and all the hard work I had done to get me to exactly nowhere.

Yikes!

I really am my own worst client. After wallowing in self-pity for about ten minutes I turned it around.

Grateful

I spent the year precisely doing what I wanted to do.

I had a fantastic year where I saw my business grow to a point where it can support my family and me as we need it this year.

I had a fantastic year where I had time to do what I wanted when I wanted to do it.

I had a fantastic year that gave me more “proof” that I can keep living my life as I want. 

Based on experience, my business will continue to grow to support my increasing needs (two sons entering their teen years, then university years!).

Today’s exercise also gave me further evidence that the thoughts you choose to pay attention to profoundly impact your life.

So yes, pay attention to your finances, as it is essential to have clarity about your situation to help you make choices and decisions, but also to what thoughts are going on in your head.

 Are your thoughts giving you hope to help you move forward? If not, what can you do about that to change things up to get to that point? Is it time for a year-end check-in? 

And perhaps, don’t leave your bookkeeping to December. 

This is Uncomfortable

This is Uncomfortable

by | Feb 3, 2017 | Finances

This is Uncomfortable

Lately, I’ve been thinking about procrastination. Why? Well, I haven’t blogged in a while, and so I’ve been thinking about why this is so. I think I love blogging, but my posting record does not bear this out. My friend and coach raises an eyebrow when I start making all these excuses about why I haven’t blogged. My latest reason is “I’m so busy.”  That is the common justification that I hear again and again from people when something doesn’t happen that was expected to happen. “Busy.” I have joined the busy club (I’m secretly a bit happy about this as I felt like I social outcast when I wasn’t “busy”, but that is another post for another day). The funny thing is, despite how busy I am, I am still powering through a lot of TV shows on Netflix.  So that busy excuse is not true – it appears I procrastinate when it comes to blogging.

So, I do have time to blog. I could do it at night instead of watching the latest episode or Rake (my current addiction). Blogging recharges me, but it is still not happening. Nope – how many weeks has it been? Afraid to look.fgvxxvxmti8-andrew-neel

Why now? I have finally reached the point of discomfort where I have to blog. Yes, being uncomfortable or forced to do something appears to be the only way I’ll do something that is not part of my regular routine or habit.

So I let myself get to the point of discomfort before doing something that I like, and I know is of benefit to me.

Are you the same as me? Do you only start doing something that is good for you when you are forced to or when you get to such a point of discomfort that it is more painful not to do it?

Where do you procrastinate? Exercise? Eating well? Taxes? (I see that last one a lot – please don’t do that to your poor accountant if you have one).

Do you procrastinate when it comes to your finances?

Or more specifically, do you procrastinate on preparing a personal budget (or spending plans as some of us financial people call them because the word “BUDGET” sends some people running in the other direction)?  Spending plan sounds hopeful, and it has the word ‘spending’ in it which some people are attracted to (often the people who don’t like the word budget).

I have been helping quite a few people with their spending plans these days and is part of the reason I’m so busy!

Is the general population suddenly realizing that their financial health is essential and getting proactive? Is that why I’m seeing more people about spending plans?

Nope, I cannot think of any client of mine that has come to me because everything is fantastic in their life and they want to be proactive about their financial health.

The people I am helping are only seeking me out because they have reached the point of discomfort in their lives where it’s harder not to start looking at their spending.

I imagine this is how personal trainers feel. I’m sure many of us finally hit the gym when we get on the scale and realize neither it nor the mirror are lying. Guilty as charged.

So I have been helping more and more people with spending plans.  What I have noticed is that everyone (ok, almost everyone) says – “well, that was pretty simple and straight forward once I started.”

The other thing they say to me is “I feel better – lighter somehow.”

After I’ve gone through a spending plan with someone, I notice that they seem calmer, more relaxed.

So with that in mind, I decided to focus on that observation when attempting to do a blog post today.

And do you know what? That heavy weight I’ve been carrying for the past few weeks is suddenly gone. I do feel lighter.

So now I’m going to challenge you to start looking at your personal finances before it gets uncomfortable and you are forced to do so.

But I realize I can’t just leave you to that with no way to start, so I’m going to tell you something else I learned from a good friend this past week. She has recently lost a lot of weight and has gotten healthy by completely cutting out sugar and dairy from her diet (yeah – that’s not going to happen for me). How did she do this? She started small and changed her eating habits gradually. She cut milk from her coffee first and has spent the past year doing one slight modification to her diet every other week.

So – if you have never done a spending plan for yourself, I’m going to ask you to start small. I want you to see how much you spend on lunch this coming two weeks.  I want you to make an envelope labelled “lunch” and keep it with you for two weeks. I want you to put all your lunch receipts in there (including grocery receipts that have lunch items on them). At the end of the two weeks, add up what you spent on lunch.

Then I want you to do dinner after you’ve finished lunch.

(I know – easy right – budgeting couldn’t be that easy could it?)

Then, you get to choose what you keep track of.

Go get that envelope right now. I challenge you.

Now I’m going to challenge myself.

Because while I was not blogging, my brain wouldn’t let me stop thinking about it and everything that crossed my path became a potential topic. This made it harder for me to start again because I couldn’t make up my mind!

Look for these exciting topics in the coming weeks:

  1. The Divorce Process sucks, why it sucks and how you can do it better.
  2. Living Apart Together (as related to finances)
  3. Agreeing to shared parenting with your Ex and why it’s an excellent choice
  4. More on procrastination because it is tax season
  5. Dating as a single parent (as related to finances – because you know, my clients are not putting it in their budgets but is that realistic? I will discuss)
  6. Being busy

Why Get a marriage Agreement?

by | Dec 14, 2016 | Divorce

a1fmxesw31g-freestocks-orgIt is pretty darn easy to get married. All you need is a license; it only costs $100! Of course, some people have fancy weddings, and yes, they take a lot to organize and can be costly. But you get a choice in doing that.

You don’t get the same choice when you are getting a divorce. It only takes one person to decide that they want out of a marriage. Not so with marriage – you both have to say, “I do.” In divorce, one person can file a claim for a divorce. If the other spouse does not deal with it, it goes to the court, and the judge decides. The court does not always make the best decisions regarding families, so I highly recommend that you try to work it out with your soon-to-be ex-spouse before it gets to the courts.  Court is darn expensive, too – about $ 5,000 a day. That doesn’t include the cost of preparing to get to court. 

I looked up how much it costs to get a divorce, too, and it is cheaper at $80 for a desk-order divorce (if you do all the paperwork yourself).  That said, it is pretty impossible to do all the paperwork yourself.  Here is a list of steps to getting a divorce in BC.  The main sticking point is the Separation Agreement. Yes – that Separation Agreement. Mine was 149 pages long, and each and every one of those pages described something contentious. Oh, except for the signature page, and there were two pages for signatures. So, 147 pages. It’s no wonder it took us a year to get an agreement and felt like a full-time job (and why I refer to our agreement as the “BEAST).”

This is just a start to what you have to have in your agreement in British Columbia:

You have to agree on the date your relationship started. You’d think this would be easy! But I have had clients arguing about this. In one instance, the woman travelled a lot and had a post office box as her address when she first started dating her spouse. She would stay with her boyfriend when she was in town, but she argued that they weren’t living together yet. In other instances, people forget when they moved in together. Depending on the date the relationship started, there can be financial advantages/disadvantages to each person, so this is why it can lead to arguments.

Conversely, you have to agree when the relationship ends (this is usually more tricky). Some people feel the marriage ended years ago, and some still can’t believe it’s over. Again, there can be significant financial consequences depending on what date is decided upon.

You must figure out how to support your children regarding parenting time and money. This took a big chunk of time. A big chunk. Especially if one of the parties is the primary caregiver pre-separation, there is a lot of work to be done to build the trust necessary to start parenting the kids on an equal basis. There is also a lot of learning to be done. For example, did you know that if you have a fifty-fifty parenting arrangement, one parent may still have to pay child support to the other? I’ve explained that in another blog post.

Then, you have to start separating financial assets and debts. You may discover you have assets you didn’t even know about or debt (which is more often the case). In almost every file I’ve worked on, one person had racked up some debt and hadn’t told their spouse. That usually takes some time to sort out.  I just worked on one file where an asset turned up at the last minute. How does that happen? You’d be surprised. Of course – both parties had different ideas about how to treat that asset.

Essentially, a Separation Agreement is an agreement that details every piece of how your life will be going forward. And you have to make this agreement with someone you probably don’t like. It takes time and a lot of emotional energy because you are usually in a pretty dark place when building it.

So

Wouldn’t it be great if you had to have a marriage agreement before you got married? How dumb is our society that allows people to go off and get married with a $100 license (that you can order online) when they are in the happy, blissful state called love? It’s super dumb. I can’t think of a fancier word to call it right now because my brain is fried trying to help clients figure out the numbers to put in their Separation Agreement. And I get to forget about it every day and go to sleep. They don’t.

Our current system allows anyone to get married, but there are so many rules before you can get divorced, and you have to follow them. If you disagree with them, the courts will make you agree.

What if you made your marriage agreement in that happy, blissful state of being soon-to-be married?

Well, it might save your marriage or you from marrying the wrong person.

It would certainly make your divorce a lot easier.  Ask anyone who has gotten a divorce.  I’m sure all divorced people wish they had made a Marriage Agreement. They are convinced, but what is that called? “Preaching to the converted.”

How do we get the word out to those uninitiated to the Divorce Club? Those happy, blissful people who want to get married?

I don’t know. I only ever see the aftermath of those without a marriage agreement. How about you? Can you help spread the word?

Retirement and the Future Fear Focus it Creates

by | Mar 2, 2016 | Finances

photo-1445515277243-2728fc391ecaI recently met someone who has the following strategy. He works on a contract basis for six months and makes good money. He pays off the debt he accumulated when he wasn’t working and then he quits and gradually builds up debt until it gets to be unsustainable and then he goes and works again.

His money strategy makes me a little nervous. Ok, it makes me a lot nervous  He’s still fairly young, but I can’t help but wonder what will happen when he gets to a point where he doesn’t have the energy to do these intensive spurts of work. Not to mention, what if something happens to him and he can’t work or he can’t just pick up and find well paid work? Yes, I have a worry gene. This person does not appear to. I wonder if it will kick in for him and what age that will happen if it does?

He argues he likes to live life as it comes and he certainly is living in the “Now” which is a popular thing to try to do these days.

On the flip side, he clearly sees work as only a source of funds and does not appear to get any other value out of his contract jobs.  He puts in his time to make money and then gets out as quick as he can. I wonder how he perceives those six months when he is working flat out. I bet it is a bit of a struggle for him and that those six months feel a bit like a jail sentence.

I am also curious as to what will happen as he get closer and closer to retirement age.  Will he panic? Will he live in denial and just keep doing what he is doing?

Generally, as people get older they seem to get more anxious about retirement. I’ve noticed that most people tend to have a negative outlook towards retirement. Especially those that do not have any savings. I have not met too many people that imagine the wonderful life that they will be living when they retire. Instead they seem to think that they will not have enough money to maintain a comfortable standard of living.

And, instead of investigating what they need to do to maintain a comfortable standard of living in retirement, they worry. Worrying does not provide more clarity about retirement. Worrying may feel like you’re doing something, but you’re not really. You’re just sacrificing your current happiness to the worry about some uncertain future.

These fears of the future are powerful and can leave you feeling trapped. They can make your life take on a terrible hue. Instead of enjoying your present life, you are living somewhere in an unhappy future. They can also lead you to make decisions that are not the best for you.

For example, you may take on work that you are not suited for. This may be sustainable in the short term, but what if you have to keep working at this type of work after retirement age because you didn’t save quite enough money? This is what my client appears to be doing. He will continue to work these six month contracts for money and money only. What if he found something he enjoyed doing and decided he didn’t want to stop after six months? What if he enjoyed it so much, he wanted it in his life after he retires?

Here’s another decision people often make. They use their home as their retirement plan. They build a life and community in a neighbourhood and then completely change their lives when they sell their home and move somewhere cheaper. This may work for some, but as we get older, we lose some ability to make big changes. It is hard to pick up and start over completely somewhere new when you’ve already had one big change (retirement).

What if instead of procrastinating the planning or living in denial, you started thinking about your retirement right now and you thought about it with hope?

These are the steps I would take:

  1. I would assess what my financial standing is today.
  2. I would assess the amount of cash inflows I need as of today to cover my cash outflows as of today.
  3. Then I would look to what is missing in my life and what is going well in my life.
  4. I would think about what I still want in my future life and then I would project what my cash inflows and outflows will be when I am older and not able to work as much.
  5. I will project how much money I will have when that day comes and if it is not enough, I will try to find a source of extra funds or I will figure out what can go now and cut my spending.
  6. My new sources of cash inflows will tie into what I need in my life. I will try to find work that I enjoy and can sustain and I will get rid of spending that does not contribute to my well being.

I will start doing this self reflection at least once a year and try to bring sustainability to my life. I don’t want the type of retirement where I quit everything I have been building cold turkey. I am building a life that I want to enjoy while I’m living it. Why would I suddenly change everything when I retire?  You may be surprised that there are certain parts of work that you actually need in your life: connection to others, contributing to society, personal growth and yes, of course money.

There are people out there that are already doing this. In fact, it seems many people do this. My grandparents continued to work into their 80s because they loved it. Aren’t those the people that you know that seem to live forever?

So what can you do if you are getting older and you are starting to worry about retirement?

Start looking at your life now. What can you start doing that has potential cash inflows for a long time? What can you get rid of that you don’t really need that is costing you money?

Then you can stop worrying about how horrible your life is going to be and you can start planning how you want your life to look.

It is never too late to do this.