Already, first off I agree with the “save 10% to become a millionaire”. Conventional wisdom says invest 10% to retire, 15% to retire comfortably and 20% to retire early. It’s right and you don’t need me to post all of the stats that are everywhere. Put the money in equity index funds when you’re young, then add a bond fund as you get older.

However, I disagree with Bach’s second statement, “don’t buy latte’s” (okay, bit of paraphrasing there) because not buying coffee doesn’t set you up for financial freedom. Planning your big purchases does. For example, if you buy a new car like me, you’re silly. You drive them off the lot and they’re worth half of what you just spent. And then look at the cash flying out the door, I spent $340/month paying off my car, so you’d need to make $6,000/year before taxes just to pay off your car. I could buy a latte every day and spend less than half this amount.

The fact is most people need to invest automatically, but they also need to realize that buying a $500,000 house on a ford focus budget doesn’t work. If you don’t plan your big purchases, you’re screwed. So spend less on your house and car, invest automatically and enjoy every day. You’ll be wealthy in no time and you didn’t even have to sacrifice every dinner, latte or movie to do it.

You can check out David Bach’s book if you want to spend money. Or you can re-read the two phrases at the start of the post. Pesonally, I’d read the start of the post and go enjoy the day, it’s better spent enjoying a latte.

Most people can agree that one of the best feelings in the world is driving a car for the very first time. Nothing beats that feeling of pressing your foot on the accelerator and pondering just how fast the car can go. If you live in Canada, you get the joy of winters. Winter brings icy roads for you to slide right into two foot snow banks. Anyone ever have the pleasure of pushing your own car out of a snow bank? I have.

Although the feeling of driving a car for your first time is hard to beat, I find that nothing tops the feeling of owning your first car. The freedom is what captured me. Being able to cruise anywhere you want at any time. Not having to ask your parents to borrow their car anymore. Not having to stare at the gas gauge of your parent’s car wondering if you should fill it up or not.

My first car (as well as my current) is a ‘99 Toyota Tercel. Just over a year ago I paid $6,000 for it. It was originally listed for $7,200, and then was dropped to $6,400. With my brother helping out the negotiations to get the car down to $6,000. I now realize a year later how much of a steal my car really is.

$6,000 bought me a ‘99 Tercel with a few less than 104,000km on it. Keeping in mind that this is a Toyota, with proper care I’m willing to bet I can get this beauty to last until 300,000km. The single most awesome fact about my car is the fuel economy. I’m just like most of you, I drive in rush hour to and from work 5 days a week. Only instead of sitting in the seat of a $60,000 monstrosity of a truck getting 15mpg, I’m going the same speed with a car that was a tenth of the cost, and I’m getting 40mpg+ in the same traffic. Take me out to the highway and I can break 50mpg.

Now there are a few drawbacks of my ride. For example, I have a mere 93 horsepower driving two wheels. That’s right, 93hp for both wheels, not per wheel. My car can hit 140km/h if need be, it just takes some time to get there. With a manual transmission I’m usually in 3^rd gear by the time I’m out of most intersections, and I easily hit 5^th gear many times a day.

However I didn’t have to take out a second mortgage for my car, and I’ve never had the pleasure of spending more than $35 on a full tank of gas that gets me ~600km. The point I’m trying to make is I don’t understand why people put themselves in so much debt just to have a cool ride. Sure I would love to drive a brand spanking new Subaru Impreza WRX. However, I also like having extra cash to buy other stuff. For your next ride, take a look at the fuel efficient side of the market…perhaps you’ll find something enticing.

Within the past 1/3 of a year, I’ve had the pleasure of moving out for the first time.
In a city that has gone through quite the boom, even renting is expensive. I’m fortunate enough to have the financial help of a girlfriend to help make it through the bills however.

We’ve spent a few months fine-tuning our budget that’s proving its worthiness.
I’m on a yearly salary, and my girlfriend does shift work and therefore has varying paychecks. To make it even more exciting, I’m paid semi-monthly whereas she is paid bi-weekly.

To figure out who pays how much of the overall bills, we’ve implemented a percentage system. Over a month, whoever pulls in more money pays more of the bills. It was the fairest system we could devise that wouldn’t lead to arguing over who pays how much of what bill and leave me sleeping on a couch.

This percentage that goes to bills, we transfer into a joint account. The rest of our paychecks remain in our own accounts. This way when she goes on any mini-shopping sprees, I can’t argue. Likewise, she can’t argue if I suddenly come home with a new video game just because it looked awesome.

We didn’t break our budget into a percentage system like many people might. We’ve calculated how much we anticipate each of our bills to amount to, and then each of us pays our respective total %’s based on the total amount.

For example, we anticipate that our gas, electricity, water, and sewer bill will never top $275/month. During the summer months it’s nowhere near this amount, so the extra amount goes to savings. This amount was calculated after talking too many, many home owners and renters who pay full utilities.

Our HD TV and cable internet run about $105/month. This was calculated from speaking with other individuals who have the same cable package as we were planning on subscribing to.

My girlfriend and I thought it seemed unreasonable to have a land-line when we both have cell-phones. Why pay for what you don’t need right. As a result we budget about $100/month for both of our cell bills. This is usually on par.

Our rent is the largest dent in our budget at a solid $1225/month. As mentioned earlier, in a booming city rent doesn’t come cheap. We opted for a reasonably large duplex a few blocks from downtown which added to the slimmer wallet.

Budgeting for food came with some trial and error. I’m not one to say no to seconds at any meal, and am proud to admit that I have a cupboard dedicated to junk food. We put aside $600/month which is usually spot on.

In an attempt to flee the renting scene and become a home-owner, we’re putting aside $800/month to try and help understand what the term down-payment really means.

A new addition is $30/month for things like renting movies. Being a new proud owner of a 42″ plasma TV, it sounds more enticing to watch a movie in the comfort of your own home versus going out to a movie theatre with a crowd of high school kids.

Although some may view this budget as being too specific, it’s working well for my girlfriend and I. Of this total amount, whom ever pulls in the larger number has the satisfaction of paying more…sounds a lot like your taxes doesn’t it.

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I support the 60% solution which is a great way to split your income. But I think it’s important to hold cash for the 10% of funds that you spend anywhere, anytime.

The problem with today’s spending habits is that it’s too easy to buy. You don’t need cash now, you don’t need to plan, all you have to do is throw them a credit card and poof, that diamond encrusted cellphone is now yours. Instant satisfaction. Instead you should take out your disposable funds once per week in cash. This way you can see how much you have left to spend anytime you look in your wallet.

It also makes it harder to spend. You’ll find that you will run into purchases you want to make only to find you don’t have the money to buy them. But after you go home and sleep on it, you often realize that that new video game was just an impulse. So take cash, spend less, spend smarter and become rich.

What are some of the tips you use to manage your finances? And send us an email if you have a post that you think would be a great addition to livvit.com at – livvitco@livvit.com.

Nice touch: Take pictures of things that might be hard to imagine or that you want gone first, such as the pattern on your china or the color of vinyl on your 50’s art deco dining room set.

1. Kick ass. Aim to be the best in whatever you are doing. I graduated with a business degree and started with a furniture company fixing orders that had gone wrong. It was boring, painful and unfulfilling. But if you do the best you can, you’ll soon be taking over more fulfilling tasks. And oddly enough, more fulfilling roles seem to come with a bigger paycheck.
2. Find the right line of work. My first gig in customer service wasn’t a high paying line of work. So I looked into different areas that were lucrative and interesting. These days health care, sales, finance and tech offer some of the best paying jobs around. But of course, owning your own company is the only way to go if you aspire to be truly wealthy. 
3. Get smarter. The more education you have the more you’re worth to the company. See if they’ll pay for the courses and if not, find a way to pay for it yourself. You’ll have the knowledge for the rest of your life, in fact education is probably the best investment around.
4. Move around. The days of staying with a company for your life are long over. Unfortunately, a 5% raise every year is going to get you nowhere. So look around at other companies and in other departments. You’ll often get your biggest raises by leaving the company you’re with. My first move to a new company came with a 48% raise.
5. Always take on a challenge. If something comes up, say a maternity leave or a tough new project, get in there and offer to help out. You’ll often surprise yourself with your ability to excel and your superiors will take notice.
6. Dress up a month or two before bonus time. The highest turnover rates are after bonuses. Everyone waits for the payout and then leaves for greener pastures. If you dress as though you are going to an interview every now and again it’ll keep managment guessing and hopefully they’ll bump up that ‘ol yearly bonus/raise.
7. Ask for it. Find out what you’re worth in the market by asking around, going to interviews and exploring the web. Once you know, go ask for it. No one’s going to hand you a shiny apple just because you’re swell. You’ll have to ask for it.

All of these have helped me double my salary in the last three years. Leave a comment and let us know what you’ve found to be the most effective way to get a raise.

And remember, pursue a business/career that you love, but make sure you don’t devote your life to it. There’s too much in this life to enjoy and you can’t do it if you’re caught up in meetings or in front of a computer for the best years of your life.

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I found this interesting at first because I figured anyone would be happier with a Ferrari. But I guess the long work hours and problems recognizing your firstborn takes a little bit of the happiness away. After all, you have to spend time making money, so you can buy that Ferrari. And as we covered in our 4-Hour Workweek post, time is the most precious currency.

But all of this craziness becomes clearly apparent after reading the four hour workweek. Timothy Ferris wrote this beauty and I have to say I’m fascintated by the idea of working less. After all, if you think money’s hard to come by, try getting the time back you invested in memorizing all the Seinfeld episodes. You’ll quickly realize time is the most important currency we trade in life.

The book follows Timothy’s breakdown after working 15 hours/day on his business and his subsequent realization that there has to be a better way. He uses the 80/20 rule to figure out what he needs to focus on in his work and he quickly realizes that he can work less and get more done. The result is nothing short of amazing. He checks emails once a week, he has a guiness world record in dancing and he’s learned six languages. And most impressive of all – he’s 29 years old.

Another idea brought up in the book that I think everyone should adopt is mini-retirements. We never really know when we’re going to meet our maker so wouldn’t it be nice to have a whole bunch of mini-retirements throughout your life, rather than one big one at the end where the highlight is meatball Tuesday?

I also like how Timothy travels. He doesn’t do the ten day forty country tour to Europe. We’re all guilty of this one, we think quantity over quality and so we see the Lueve, the Eiffel Tower, Rome, the Parthenon, etc. Then we get home and say we’ve been to half of Europe, but all we’ve seen is a few highlights and missed the culture. Timothy instead picks a town or two and stays there the entire time. He relaxes, pursues a mental and physical activity and absorbs the culture. If we travelled like this we wouldn’t need a vacation when we got back from ours.

I think it’s a great read and it really highlights how you can change your life by focusing on what’s important. So take a break, put your feet up and get inspired. Leave a comment if you know anyone who’s achieved freedom by working smarter, or if you’ve already read the book.

But what they won’t tell you is that 90% of your return doesn’t depend on the hundreds of analysts working for them in their ivory towers. It depends on asset allocation. Which means that 90% of your returns does not depend on whether you’re invested in Google or Enron, it matters if you’re invested in domestic, international and developing country equities, treasuries, inflation protected treasuries and real estate (these are the core asset classes).

Now why wouldn’t the financial industry tell you this? They don’t want to lose your money. They want you to keep paying your high performance fees, or high management fees while they build their vacation homes and pools. So what can we do to keep more money in your pocket and out of theirs? Create a mechanized approach to investing.

 What you want to do is to create an asset allocation that fits your situation. If you’re not comfortable researching what is appropriate for you then pay a financial advisor a one time fee to set one up for you. Make sure you get references and don’t let him talk you into fancy approaches. David Swensen, a renown endowment fund manager from Yale, suggests that no asset should take up no more than 30% of your money. The following is a sample portfolio he suggests (although this would not be suitable for really young people or almost retired, it’s a decent set up):

30% Domestic equities
15% International developed country equities
5% International emerging market equities
20% Real Estate
15% US Treasuries
15% US Inflation Protected Treasuries

 Now to achieve this buy index funds. Whether they are mutual index funds or ETF’s will depend on when you are purchasing. I would suggest buying ETF’s when you are rebalancing your portfolio (should be done once per quarter to ensure proper allocation). For your regular purchases an index mutual fund will work better as you don’t have to pay a fee for each transaction.

If you would like to read about asset allocation I would highly suggest Unconventional Success by David Swensen

or The Only Three Questions that Count by Ken Fisher.

They’re both terrific books by investment gurus and they won’t try to tell you that you can pick the next Microsoft. They’ll keep you safe and rich.

 If you have any additional thoughts or tips please leave a comment.

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