verypersonalfinanceblog

Learning to distinguish an RRSP from a TFSA at the advanced age of 35

Month: October, 2011

Priorities

I feel under a lot of pressure right now.

To accomplish more in the same amount of time at my job-job.

To clock more billable hours as a freelancer.

To volunteer in class on a weekly basis in my children’s school.

To put aside as much money as I can a month, and not let impatience for an immediate improvement in my living environment lead me astray, i.e., to IKEA for a quick fix, when what I really want is money in the bank for a down payment, not a new accent pillow to temporarily brighten up the living room.

To continue to practice my newfound financial discipline, but to not be too hard on myself when I make mistakes. This week, I paid in cash for a new bed, not realizing that I had broken one of my newly adopted rules: keep the exorbitant $3500 minimum required by TD Canada Trust to avoid incurring bank fees. For a few short harried hours last Sunday, my account fell $50 below the critical amount. Will I have to pay the fees? I’ve contacted the bank, but it remains to be seen just how hard of a line they are going to draw.

Basically, in the last year, I became more ambitious. I realized that I needed to focus more on my career and learn how to manage my money. But balancing these goals with parenting is occasionally exhausting.

I have been fantasizing about meeting with a career coach, someone who could help me sort out my priorities, so that I can keep them clearly in mind, when things get hectic, as when one child needs a lift to hockey; the other, to figure skating; and, there’s that potential client, waiting for a quote.

You know how they say that you don’t really learn things until you’ve experienced them for yourself. I’ve read a million articles on how how hard it is for mothers of school-aged children to achieve a work-life balance. But it’s as though I’m only just discovering how true this is by striving for it myself. All words of wisdom, welcome.

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How I learned to manage my cash flow

One of the main reasons I got into financial trouble in the first place is that as a freelancer I had a variable income that I didn’t know how to manage. I would think of money as mine as soon as my work on any given project was completed. But sometimes the cheque wouldn’t come for six, eight, ten weeks. Sometimes the cheque wouldn’t come for years, as in the case of one rather major client who unfortunately declared bankruptcy after having hired me for four weeks straight.  An entire month!

I got into the bad habit of happily, naively borrowing from my line of credit for the amount coming to me, secure in the knowledge that I was “owed” money, even if I didn’t quite have it in my possession yet.

This is a very backwards way of doing things.

In other words, don’t try it at home!

Since taking control of my finances, one of my goals has been to learn how to successfully manage my cash flow.

Here are some tips that have helped me so far.

  1. Declare a temporary moratorium on all non-essential spending. This will re-set your financial clock.
  2. Don’t buy anything until you have the cash in hand.
  3. Figure out how much money you need to make, and try to make it. Freelancers often struggle with how much to ask for as pay. This is a good way of figuring it out! What do you need to live and how many hours are there in a day?
  4. Offer incentives to clients who pay early.
  5. Ask for a deposit on large contracts.
  6. Remember that it is possible to pay for some expenses such as insurance or gym membership in instalments, even if this option isn’t advertised. For example, I have a year-long membership at a yoga studio, which translates into the lowest possible amount per month. It’s advertised as being payable  in one lump sum, but I pay for it in monthly instalments. When I renewed recently, the person at the cash couldn’t believe what a good deal I was getting, comparably. Sometimes all you have to do is ask!
What tips have helped you get a handle on your cash flow, freelancers or not?

What a difference a year makes

On Monday, October 4, 2010, I woke up and wrote in my journal:

The other day, in a particularly frugal mood, I decided not to buy Tylenol, even though I needed it, even though I was at the drugstore – a choice I am regretting now after a night of muscle-clenched, tension-filled sleep.

Why was I so tense? Because I was still $2100 in consumer debt, and I didn’t think that I’d be able to see my way out of it before Christmas, in spite of earning more money, spending less, and taking other more extreme measures, such as selling things.

That weekend, my husband A. had sold a stack of our old books for $40. I had tried and failed to sell a $100 Olympic gold coin (I did get one offer: for $80!). I had started to price out our silverware in the hopes of selling it on eBay.

I was impatient. And feeling a little desperate.

On Friday of the same week, I woke up early, after a night of insomnia, checking, as had become my habit, our bank account online. There was an unexpected $3000 in the account. Where had it come from? I was freaked out and worried that this money was not ours, that we would have to pay it back ASAP!

But, it was A’s, a ‘top up’ for his grant. Apparently, he found out about it in June, as did I. But when I think about it, neither of us, in June, understood what his bi-weekly pay was, with or without the ‘top up,’ which explains a lot of our surprise.

After a sleepless night spent reading articles on how to become debt free, I was suddenly, magically there, and then some – with money in the bank and more on its way.

To celebrate, we went out for coffee after dropping the children off at school, and we made plans to go for lunch as well. We paid for our coffees in small change. That was another strategy that we were big on then: we’d found $80 in coins lying around the apartment and were determined to use them.

But going for coffee came with another price: it made us late for our appointment with the counselor who had first urged us to come up with a financial plan.

I urged A. to try the pay parking in the back of the medical building. Big mistake. $13! For two hours. And you have to give them your keys. And A. lost his ticket. After the appointment, we had to wrangle the car keys out of the parking lot attendants. I showed them my keys, my license and my driver’s registration. It got kind of yucky. We didn’t feel very much like having lunch afterwards, but we were determined to do so, after all, we were debt free.

We felt grumpy and bummed about the parking, which aggravated the situation when A. was stopped by the police for making an illegal left turn on our way to our celebratory lunch at the restaurant. Yikes. $154 later, we decided to just go home.

The rest of the day, we felt very glum and sorry for ourselves indeed.

In fact, I don’t think I began to see the humour of the situation until this year.

Now, I like to think that there is a moral to this story, actually, maybe two.

  1. We have to celebrate each step as we take it, and not get too ahead of ourselves.
  2. Being debt-free isn’t quite enough. You also need to have money in the back to fall back on “for those times when you get stopped by the police,” as we like to say in our household, meaning for that bad stuff that you can’t always control for.