Enhance Your Relationship with Money to Live Your Ultimate Life
by David Lester
I Heart Money
by David Lester
Copyright © 2010, 2011 by David Lester
www.iheartmoney.com
www.iheartmoney.ca
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I love working with Dave. He encourages his clients to dream big and provides us with the skills to actually achieve those goals. His detailed approach to finances has taken the mystery out of building wealth and makes it fun. i heart money is not only a guide to managing your finances, it’s a priceless handbook for living your best life.
Ngozi Paul, Actress, Ngozika Productions
Dave has helped me evaluate and refocus my life as well as set and achieve goals both personally and financially. This new perspective has projected me into the next level of living my ultimate life.
Daniel Faria, Director, Clark & Faria
Discovering what you want out of life requires reflection, internal commitment and the right financial foundation. What’s unique about Dave’s approach isn’t just his perfect arsenal of tools that make all this hard work a ton of fun, but his financial acumen that makes your perfect life feasible. Thanks Dave for helping me get here. What an incredible difference!
Lynn Sivec, Strategic Planner
When I hired Dave Lester to help guide me with my business, I had no idea our weekly meetings would be so beneficial in all other aspects of my life.
I’ve run a small, successful business for almost 20 years. I was looking for a smart business coach with financial experience to help motivate me and to help my business move into a bigger and better market.
After each meeting with Dave, I feel inspired, organized, focused and disciplined. I see solutions clearly and feel my goals are attainable. I feel an incredible energy in my professional and personal life.
I can’t say enough good things about Dave. His life is a perfect example of what he teaches. He is a joy to work with!
Wendy Tancock, Wendy Tancock Design
Time and Money are the two things I used to fret over. Investing today for tomorrow’s future is a big responsibility in this crazy economy. Dave enabled me to create a plan and showed me how I can live BIG while still planning and saving for the future. He’s taken all the pain out of the process. I feel free.
Sharon Sehdev, Vice President, Cognition LLP
This book is dedicated to
Elspeth Lynn and Lorraine Tao.
Thank
you both for encouraging
me to do what I love.
I want to thank my family who have contributed so much to this book. My brother Gord helped to edit this book with a minimal amount of grumbling. I also want to thank my mom for teaching me the value of family, and my dad for teaching me the value of integrity.
Let me tell you a love story.
According to my mother, my first word was “Penny.” As a kid I would sit in front of the TV, rolling coins for my papa—for a cut, of course. How many six-year-olds sit through Bugs Bunny rolling coins with a smile from ear to ear? One of my favourite games growing up was to play the Sheriff of Nottingham, where I would go around collecting taxes from all my stuffed animals. It was in the cards at an early age that I would be a Financial Coach.
I love money.
When I get paid, I sometimes check my account in the middle of the night, transfer my set amount into savings, and then sleep well knowing that it is accruing the highest level of savings I can find in the market. I look at my investment portfolio three times a day and get shivers when dividends are paid into my account on a monthly basis.
All this might sound a bit obsessive, but if you ask any high net worth individual they will tell you that they achieved their wealth by respecting their money. Your relationship with money will be one of the longest and most important ones you ever have. It will help you live the life you want to live. It should be like Romeo and Juliet—but without the poisoning and stabbing and weeping.
This book will show you how to “love” your money and finances by utilizing strategies that increase both your self-worth and net worth, while decreasing the feeling of being overwhelmed and confused by financial matters. I will show you how to use simple practices to reduce the stress that money can bring.
TABLE OF CONTENTS
SimplifyYourFinancialLife
MoneyIsPower
Autopilot
Auto-Finance
Auto-Goals
YourPlatonicForms
CHAPTER 2 Live Like You’re Already Rich
How the Rich Become Richer
How the Poor Become Richer
Limiting Beliefs on Money
What Does Rich Look Like?
What Do the Rich Do?
What Rich Looks Like to Sir Richard
CHAPTER 3 Setting Goals for Your Ultimate Life
Dream Big!
Life Status
ValuesExercise
PrioritizeYourLife
PuttingthePlanintoAction!
GoalsCosting
Goals Folder
Keeping Motivated
CHAPTER 4 Budgeting for Your Goals
Budget Box
The Art of Budgeting
Fixed Cost Budgeting
VariableCostBudgeting
Retirement Savings
HowMuchIsEnough?
HigherEducationPlan
Goal Budgeting
Budget Finalization
CHAPTER 5 How to Use Money and Credit
Cash is Back
Everyday Banking
Automatic Bill Payments, Savings, and Cash Withdrawals
Online Banking
Credit Cards
What’s the Points?
UseYourCreditWisely
Getting the Best Rate
Department Store Cards
CHAPTER 6 Investment Portfolios
Open a Discount Brokerage Account
Zero Effort Million Dollar Portfolio
Index Fund Portfolio
MakingYourOwnIndexPortfolio
Building a Portfolio for the New Economy
I (Heart) Options!
SellingCoveredCallstoDouble YourYield
Building Your Positions by Selling Puts
CHAPTER 7 Wealth Equals Income Streams
SupplementingYourIncome
StartYourOwnBusiness
BenefitsofIncorporating
Rethinking Registered Retirement Accounts
Dividends Are the Key to My Heart
DividendRe-investmentPlan (DRIP)Programs
ResearchYourDividendStocks
CHAPTER 8 Mortgages and Investment Loans
Mortgages—A Special Kind of Loan
VariableVs.FixedRate
PayingPropertyTaxes
Investment Loans
Get Creative with Loans
How Much Insurance
What Kind of Insurance
Mortgage Insurance
Disability
Shop Around
Efficient Shopping
Grocery Shopping
ElectrifyYourSavings!
VacationShopping
Always Buy Luxury Cars
Leasing Is for Losers
Get the Market to Pay
Sell Everything Before You Throw It Out
CHAPTER11 Money and Relationships
Dating and Money
SummonYourMoneyMatch
Creating Financial Abundance with YourLifePartner
Financial Coach
Contingency Fund
How Will You Know When You Are Successful?
Financial independence is liberating.
Taking control of your finances allows you to map out your own destiny and achieve all the financial and personal goals you can imagine. If you can dream it, you can achieve it!
Money, however, often causes a great amount of stress in people’s lives. We are bombarded by messages concerning retirement, savings, credit card points, mortgages, credit ratings, etc. Many people turn away from the stress of having to deal with their finances and avoid them at all costs. This negative association with money causes many people to see money as a great inconvenience. Some cultures consider it impolite to publicly discuss personal finances.
I, on the other hand, LOVE money.
Growing up, I wasn’t imprinted with the negative associations that people can have with money. Instead, I am always thinking about what is best for my money, and this attitude has been very profitable for me financially and personally.
It is human nature to avoid things that we do not want to do. This is called procrastination. People put off doing things because they don’t think they know how to do them, or because it seems overwhelming to do them. Sometimes they do things they know how to do first, but then never get around to doing what they should have been doing. Procrastination is often caused by misconceptions or old beliefs learned during childhood that hold us back from our true potential. This book will show you how to slay these personal “gremlins” and live a life based on your core values while being financially sound.
Helping people overcome feelings of being overwhelmed by money problems and motivating people to go after personal goals is what I do best! While working at Merrill Lynch and BMO Financial Group I encountered many clients who all seemed to face the same challenges. They never sat down and thought out a strategy towards their money: how to spend it, how to save it, how to share it. They lived the way most of the population lives. They spent their earnings until the account was empty, charged up their credit cards knowing that another paycheque was on the way, but then never paid off their credit card balances. They spent money when they felt badly about something, or bought something that they could not afford as a way to deal with boredom. They would have all of their equity in their house, make the minimum payments on credit lines and credit cards, lease new cars every few years, and contribute the minimum to their retirement savings, while letting bankers or investment specialists figure out the details. The real problem was that they did not have a personal relationship with their money.
According to Statistics Canada, in 2005 the median credit card balance was $2,400 and the median personal line of credit was $9,000. Both numbers were up from 1999. And they’re almost certainly up again in 2010. On the other hand, the median balance of a registered retirement savings plan (RRSP) in Canada was only $25,000. If you deduct the median debts from the median RRSP balances, we are a nation of people who cannot afford to retire. We really need to work off these debts and save for the future in a substantial way.
This book is intended to show you my philosophies and strategies for saving and growing personal financial wealth. You should know, however, that I am not currently working at a bank or investment brokerage. I have owned and may still own the stocks named in this book.
The examples using specific stocks are meant to demonstrate the investment strategies. They are not endorsements for specific stocks. I do not take responsibility for any of the stocks named in this book, or for the changing realities of the market. You should always do your own research before investing, and you assume all market risk.
So let’s get started. Let’s see what your idea of wealth looks like and make plans to get you there. And remember:
The more you love your money,
the more there will be to love.
Your relationship with money is one of the most important ones you will have in your life, and you should treat it like any other. You should always be respectful, thoughtful, and caring towards your money. You should take interest in its welfare. It should never be treated as a trophy or a dirty little secret. Be interested in your money. Where is it? What is it doing? What colour of underwear is it wearing today?
It starts with the way you carry your money. Do you keep it all bunched up in your pants or wallet? Do you go commando (not carry any at all)? I fold mine up neatly, the same side up, in a fancy money clip.
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People who respect their money end up with a whole lot more of it.
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Do you waste your money on little things? Do you make sure you get the correct change from a vendor? Do you make sure idle money is making the highest interest rate possible? Do you pick it up on the street if you see it, or walk an extra block to your bank to avoid the service fees charged when using another bank’s ATM? These may seem like small things, but they are all clear indications of how you view money. Simply put, people who respect their money end up with a whole lot more of it.
Debt, on the other hand, is like a tawdry affair that can only harm your relationship with money. Sure, it may seem exciting to use credit to buy things you cannot afford, or things that you don’t even really want, but eventually the debt will catch up with you. That sweater you charged (that didn’t really fit but you bought anyway because it was on sale) may end up costing twice as much because you didn’t pay off the balance on your credit card.
The basic idea of this book is that paying closer attention to money gets you closer to a better life. Every dollar saved on something that I didn’t really want, or need, can be contributed towards something that will truly make me happy. What makes you truly happy? It may be a bigger, better material thing, like a car, a tastier dinner with family, a more desirable vacation, or the security of a more comfortable retirement. Discretionary spending and saving can lead to a freer, more fulfilling, and happier life. A sweater that you never wear sitting at the back of your closet with the tags still on will not get you scuba diving around the Greek islands—but a dividend paying investment might!
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SIMPLIFY YOUR FINANCIAL LIFE
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In life we have a lot of pressures. They come at us via the sensational media, the constant bombardment of advertising that tugs at our insecurities, and from work peers, family, and friends. And then, of course, there are the expectations we place on ourselves. It can all be a bit overwhelming. Being cognizant of these pressures is the first step.
The second step is to jettison as many non-essential parts of our lives as possible. As the French writer, Antoine de Saint Exupéry, writes, “perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away.” A streamlined life is more manageable, less stressful, and happier. Harnessing those lost dollars spent frivolously can make a huge contribution to your retirement, or pay for a summer on the French Riviera.
Think of driving your car. When driving, where you look is where the car heads. The same is true in life—where we keep our focus is the direction our lives go. If our concentration is divided among several areas, or bogged down by items that are not our primary focus, we will not move in the right direction. We will crash into the tree of distraction.
Instead, we want to keep our sights on our primary objectives and this will help us achieve them more quickly. When we concentrate our energies on a defined set of objectives, like a “to do” list, we itemize what we need to achieve, and this makes it seem more doable than a vague list that can seem overwhelming. Purging our list of things that are of secondary importance helps us zone in and concentrate our efforts in a much more powerful and effective way.
I want you to focus on your finances. To truly love something, you need to know it. You should know exactly how much money you have, how much you make, and how much you owe. Look at all your bills and statements. What are your monthly fixed costs, such as rent or insurance, and what are your variable costs, such as eating out? Now, what expenses can you easily live without? What can you take away? How much do you make and how can you make more? The goal is to have a simple financial life.
Money Is Power
I like to think of money as a powerful tool that can help me do and buy all the things that I want. To provide for me the freedom to travel, a sense of achievement when I get better as an equestrian, the feeling of joy when I share amazing dinners with great friends and family. All the things that make me truly happy. It gives me personal power—and it will for you too.
The most sensitive subject that my clients are hesitant to talk about is credit card debt. It is amazing to see how far people will go to avoid talking about it. If you do have credit card debt and it makes you cringe to think about the 18% interest accruing each month, imagine all of the relief and power you will gain back when the cards are paid off. Think what effect the cards have over you right now and how your power would all come flowing back when the debt was gone. What a release that would be!
Power also comes from having a whack of cash in your account. Knowing that you could use the money to travel or support yourself if you lost your job. The money could really help someone out if they needed it or could get you out of a bad relationship if you were in one. Build up a large amount of cash and see how you start to feel. Knowing you have all that cash gives you options. And those options are a source of power.
Be like the wealthy and harness the power of the almighty buck and thrive on that confidence!
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AUTOPILOT
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Another way to simplify our financial lives is to make aspects of it automatic. People are creatures of habit. The most successful people connect their success to positive habits that they perform over and over again. One of the most famous self-help books is Stephen Covey’s The 7 Habits of Highly Successful People. Actions that are done repeatedly are proven to have a substantial effect.
Automatic actions have two great benefits. The first is that any action done repeatedly will have a much greater effect than one done once or infrequently. The second is that when something is done automatically, little effort is needed to sustain it. Effort and energy saved by making your finances automatic can instead be applied to more important goals.
Some habits can be negative, like smoking, or eating when one is stressed, but it is just as easy to develop positive behaviours that benefit you. It takes only 21 days to make or break a habit.
Try a fun exercise. Every night before you go to bed envision yourself being completely content the next day. Imagine yourself having the best day possible, saying “hi” to people in the street, having a great day at work, and feeling the love from your family. Imagine your intense happiness for 10 minutes before you go to bed each night for 21 days. Simply picture yourself in detail being happy every day. After the 21 days have passed, see if it makes a difference. I bet you’ll catch yourself smiling while walking down the street. It seems simple but it really works. Use this method to improve yourself at work, at sports, or in any of your relationships. This includes your relationship with money.
Auto-Finance
Having your financial life on “autopilot” can build wealth and happiness over time. Savings for personal goals, such as vacations, debt repayment, and retirement savings should all come out automatically when you get paid. Investment payments can also be set up to automatically buy units, which will build up over the long term. Accelerated automatic loan payments will save you thousands of dollars in interest, and free up cash flow once you are out of debt. Your variable (everyday) spending should also be automatic. If you automatically spend only a set amount of money each week, it will help you save towards your goals and retirement. –––––
It becomes easier the more the “main thing” becomes automatic.
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Auto-Goals
You should also “automatically” plan your goals each year. This will keep your ambitions at the top of your mind. Pick a day, like January 1st, and write out your professional, material, and personal goals for the year. What you do over and over again will pay off in the long run. “The main thing,” Stephen Covey says, “is to keep the main thing the main thing.” This advice becomes easier, the more the “main thing” becomes automatic.
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YOUR PLATONIC FORMS
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My brother always makes fun of me for applying Plato’s Theory of Forms to money and shopping, but it works for me and I hope it will work for you too.
Plato believed there are two worlds. There is the perfect world of “Forms,” where there is a perfect bed and a perfect chair (Plato loved furniture for some reason), and a perfect “Form” of everything. There is also the imperfect material world we live in, which is copied from the world of Forms. All chairs on earth are flawed copies of the True Form of the chair, no matter how comfy. All beds are copies of the perfect bed. The role of the philosopher is to work to understand the True Forms behind everything.
So, how does this relate to money or finance? Imagine your perfect life. Imagine your perfect relationship, career, watch, computer, car, vacation, sofa, etc. When you go out and get your perfect life, you will be living the True Form of your life. Imagine having that clarity on everything. Think how easy life would be if you knew exactly what you wanted. Think of how efficient your life would be. Think of the energy you could reapply to finding and acquiring those items, working your ideal job, and living your ideal life.
Ultimately, you are the source of your own True Forms. As Plato’s teacher, Socrates instructs “Know thyself!” Socrates was the very first Life Coach.
When you can clearly see the life you want, you will be more motivated to save money towards that life. So what is that life for you? Can you picture it? Let’s explore your dreams, ambitions, and desires.
2
LIVE
LIKE YOU’RE ALREADY RICH
The best way to be rich is to start thinking and acting like you are already rich. This might sound a tad ridiculous but it works. Wealthy people always make every deal tip in their favour.
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HOW THE RICH BECOME RICHER
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The rich do not borrow money. They lend it. They make sure every one of their assets is returning a profit. They collect fees and commissions instead of paying them. Whenever you are making a transaction think “if I was rich, what would the ideal outcome be?” It would be in your favour old chap.
You sell when everyone is buying and buy when everyone is selling. Never use your own money if you don’t have to and think of how much you can lose before you think of how much you could make. If you truly want to be a millionaire you need to model the actions and decision making of millionaires. Never envy but emulate.
The middle class is middle class because of their monetary behaviours and actions. If you want to jump to the upper-income bracket you need to change your actions to mirror the wealthy. Look at typical middle-income behaviour compared to the wealthy we just mentioned. They spend every dollar they make, borrow heavily, and pay interest instead of collecting it. Banks and brokerages get rich off fees and commissions on the middle income. If you want to become rich, you need to change your behaviours.
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HOW THE POOR BECOME RICHER
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Ah, but changing behaviours is not an easy task. It is, in fact, quite daunting, seemingly overwhelming even, especially until we understand what’s behind the behaviour. Where do we begin? Let’s start with a practical exercise—get it down on paper. Try Exercise 1.
EXERCISE
1
Behaviours that Limit Your Wealth
Take out a piece of paper and write down all the things you will be as a rich person.
Example:
Good with money
Saver
Hoard capital
Savvy and wise
Knowledgeable about markets and business
Always learning Noble Honest
Take out a second piece of paper and write down the behaviours you will not have as a rich person.
Example:
I spend more than I make
I owe money
Have credit card debt
No investments or growing assets
Unknowledgeable and poor with money
Now, strike a line through all of the behaviours you will no longer practice and tear up the sheet of paper. You are now going to think like a rich person, behave like a rich person, and thus live like a rich person. It is never too late to be rich. Why not start right this second? Throw the scraps of ripped up paper out and let them symbolize this moment of your transformation to being a rich person.
Write out what you are going to be as a rich person once a day for 21 days.
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LIMITING BELIEFS ON MONEY
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Limiting behaviours keep us stuck in middle classdom. To generate true love for money and break the old ways you need to recognize what is holding you back. These behaviours could stem from your childhood or what you learned from your peers. There are many limiting beliefs and misconceptions about money and the evil that it can bring, such as if you get money you’ll have to find new friends, or that money is hard to make, or that money comes and then goes so why bother to make it? All of these beliefs keep us stagnant and prevent us from enjoying the true advantages of money. Money is a means to an end that can satisfy many of our core values like family, freedom, and adventure.
Once you have identified any limiting beliefs you might have about money, it is time to change them into enabling beliefs. Ask yourself the following questions:
• What do I gain from having this belief?
• What do I lose from having this belief?
• Why do I hang onto this belief?
• What could I have if I lost this belief?
You should now know whether the limiting belief is holding you back or not. If it is, you will need to transform it to an empowering belief. Try Exercise 2 to find that empowerment.
Exercise
2
Turning Limitations into Empowerment
Write down your limiting belief on a piece of paper.
Example: “I’ll have to make new friends if I become rich.”
Now cross out this sentence and write after it 25 times:
I deserve to be rich
I am worthy of being rich
I will be rich
I must be rich
I shall be rich
Rich is good
Do this as many times as you need to until you no longer associate with the limiting belief.
I’ve enabled myself to be independently wealthy at a young age by accepting my empowering belief that “If I love money it will love me back.”
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WHAT DOES RICH LOOK LIKE?
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Absolutely anyone can have tons of money. Money never judges you by the clothes you wear or what social economic class you grew up in. You could have wretched shoes and it still wouldn’t care. Money doesn’t discriminate. You just have to keep an open mind and say “yes please” and take a second helping when money comes to you. I have known wonderful rich people and quite horrible ones too. The common theme among them is that they’ll take money when it comes their way.
You need to decide what rich will look like to you. Many people amass huge fortunes but are never happy. From the get go be sure to decide what rich means to you. It could mean having enough money so you won’t have to worry. Or rich could mean having the interest from the interest of the interest on your money cover your chosen lifestyle. Ask yourself what amount you want and then what that amount will give you.
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WHAT DO THE RICH DO?
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Remember that for the rich, money always makes money. Anyone who loves money knows the rule of compounding interest—$10 at 9% interest will double every 8 years. Money that pays you money and then pays more money adds up really quickly. The more money you have compounding, the more money you will make.
Know where you are financially so you can see where you are going. Take time once a week to track your total assets minus your liabilities. Taking a closer look at your budget will give you an idea where you can stop the bleeding. If you are hemorrhaging in a certain area, plug it so that you are always making more money than you are spending.
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Remember that for the rich, money always makes money.
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What Rich Looks Like to Sir Richard
Sir Richard Branson is a great guy. He went from being a young, middle-class English dude to being a huge entrepreneur, being knighted and changing industries—the world even. I read his autobiography a few years back and the one thing that stuck with me was his philosophy on growing his business. I found it so intriguing that I use it for my own stock trading and business development. I think it’ll help you too.
Richard was in a bit of a pickle. He had sold Virgin Music to concentrate on Virgin Atlantic Airways, and British Airways was right on his back. His planes had become a bit older and he wanted to keep his superior customer experience advantage by adding the new flat-screen TVs to each chair, which BA didn’t have. He went to the bank to try to borrow a huge amount—I don’t remember, let’s say a $200-million loan—to upgrade the planes. The bank’s reply? “Computer says no.”
We all know that Sir Richard doesn’t stop at anything or take no for an answer, so he went back and asked for a loan for $1 billion to buy entirely new planes! At that point “Computer says yes.” He got his loan and grew his company.
My main point is that we need to emulate the wealthy. The traditional approach to debt is to cut all spending and pay it down, while living on cat food and playing scrabble for ten years. That is what all of the financial guru’s will tell you. Sir Richard wouldn’t do that. He would ask himself, “How can I get those TVs and come out ahead again?” So ask yourself, “How can I pay off my debt and still live my life?”