Budget Musings

Archive for June, 2009

According to some research and reported in a new release at Brigham Young University, many of the bankruptcies that seems to be much more prevalent in certain states in the US are more due to local state policies, and not to weird community financial behavior/practices.

That’s good news – we don’t suffer from isolated pockets of financial idiocy. However, the fact remains that bankruptcies are much higher than normal due to the economy (and worsened by some local state policies). Its always the right time to revisit your budget and make sure you’re on track.

No this is not about bonuses or pay raises.

Its about an idea I read about recently to help overcome procrastination. We all know procrastination is evil. It robs us of the benefits of proper prioritization, wastes time and since time is money, procrastination wastes money.

Here’s the idea:

Write down your specific goal with a clear deadline on it on a cue card. Paper clip a $2 bill (or $5 is you are really adventurous). If you complete the task by or before the deadline, you get to take that money and spend it on yourself for a treat. But here’s the kicker… if you don’t complete it by the deadline – tear up the $2 bill and throw it out. Its a token of your wasted time (time=money). The book reports that even the worst procrastinator won’t miss more than 2 deadlines after this.

I suppose the real trick would be actually following through with the self-threat. But if you really do – I’m sure you’d be meeting all sorts of deadlines, increase your productivity, and likely increase your overall net-worth as you accomplish more.

Give it a try and let me know how it works for you!

We are excited to announce that Business Advisory Centre Durham (BACD.ca) has introduced a new tool, “BACD Money Manager” (powered by CalendarBudget), for their clients to categorize and track daily spending, and plan their future transactions. The “BACD Money Manager” is prominently featured on their “Helpful Links” page as a way to help new start-ups and small businesses with their budgeting needs and manage their financial forecasting. It has been very delightful to work with a very energetic group of people that are keen on helping new start-ups and small businesses succeed.

“Entrepreneurs need to watch every penny as their business grows, often at their own expense; we know what its like.”, says Eric Poulin, CEO and Co-founder of CalendarBudget. “Helping other entrepreneurs become successful by managing their money is right up our alley. Reaching then through the BACD only makes sense.”

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CalendarBudget is an online money management tool that helps you organize your money and plan for your future. Plan your finances in a more natural way according to your daily transactions in a calendar view. See your expected account balance displayed in the header for each date.

Business Advisory Centre Durham (BACD) is a not for profit organization?that provides new start-ups and small businesses with up-to-date and relevant business information needed to help them succeed.

The Secret movie hype has died down quite a bit. I came across this video many months ago and watch it from time to time. Its actually pretty effective in getting your mind in the mode of thinking along the lines of “believe it, then receive it”.

Take a look.

Antonio Banderas and Marisa Tomei in a speed dating skit, discussing the economy and emergency funds.

While there is no accurate answer, best guesses put about 10% of our behavior as innate while about 90% of our behavior is learned (in adults). This means that 90% of what we do is a direct result of either conscious thought processes or habit. I suggest that nearly 100% of our financial habits are learned behavior. Let me illustrate with an example. (This is a great story – worth taking the time to read it)

In a famous behavior experiment, 4 guinea pigs we put into a cage.
Each guinea pig had an electrode attached to them. There was a small circle on the floor at the center of the cage and when ever a guinea pig ran over the circle, the other 3 guinea pigs we given an electric shock. At the beginning when the guinea pigs were first put into the cage they sought a way out, and inadvertently scurried over the circle, causing the other 3 guinea pigs to receive an electric shock. It didn’t take long for the guinea pigs to learn the cause. After learning what happened, whenever a mouse would go near the circle, the other 3 guinea pigs would beat on the one.
After a while, one of the guinea pigs was removed and a new guinea pig was introduced into the same environment, but without an electrode attached to it. Of course, when first entering the cage, it scurried about seeking a way out and occasionally would run over the circle, causing the other 3 guinea pigs to receive a shock. The other 3 guinea pigs would then beat on the new guinea pig. After a while, the new guinea pig learn that whenever one of the other got near the circle, you beat on them. But that new guinea pig was not receiving any shock, it just learned from the others that that was how things worked.
After another short while a 2nd new guinea pig was introduced – same situation, no electrode. It too learned after a short while not to walk over the circle and to beat on any other who approached it.
In time, all of the original guinea pigs were replaced with new guinea pigs who did not have any electrodes. These guinea pigs had never received any kind of shock or other kind of punishment (other than from the other guinea pigs) for walking over the circle. But the learned behavior continued, and although none knew why, the circle was forbidden territory and you would get beaten up if you went near it. In actual fact, walking on the circle did nothing at this point, but the guinea pigs had learned to enforce this “rule of cage citizenship”.

We should ask ourselves – how similar are we to these guinea pigs? Do we repeat behavior simply because “thats the way its done”? Do any of the following wealth limiters apply to you?

• continue working in a job you hate because you have to pay your bills
• continue spending money they way you used to even though your income is not the same or inflation is growing
• continue living a wealthy lifestyle once you move out from your parents home, even though you can no longer directly benefit from their incomes
• go on expensive vacations even if you clearly can’t afford it
• eat out more often than your budget (and diet) should permit
• etc…

Don’t be a guinea pig. Wake up to the fact that you don’t need to blindly follow habits and patterns of behavior without good reason. More to the point, examine some of the bad financial behavior you do and determine why you do it. If you end up with “thats just the way its done”, seriously consider putting it on the chopping block or at least modify it to suit your actual needs.