Chapter 2 is Now Live!
February 23, 2009
Chapter 2 of Following The Goods is all about helping you understand where your money comes from, and being able to use that knowledge to help you with meeting your financial goals. I`m happy to announce that Chapter 2 is now available online for you to read for free. Also, if you haven`t read chapter 1 yet, you should check it out.
Have you bought your copy of Following The Goods? Buy it today!
Tags: What Can Isla Fisher, Joan Cusack, John Goodman, and Krysten Ritter Teach You About Financial Management?
On Sunday night I went and saw Confessions of a Shopaholic, a movie where Rebecca Bloomwood (played by Isla Fisher) takes us through her journey of being a binge-shopper to becoming a financial management guru. While it’s probably not hard to see how this movie has a strong message about financial management from the trailer below, there were a few un-expected tips throughout the movie.
So what are these financial management tips? Well the first one is pretty obvious – you need to be able to figure out the difference between things you need and things you want. In the movie, Isla’s character is constantly plagued with having to decide whether she really needs those new Gucci shoes, or whether she needs to pay rent. Unfortunately for her, she always picks high-fashion over the essentials like rent. It’s not only important to understand this difference, but you also have to know how to get there – how much money can you spend on clothes each week, and how much money do you need to save for food and rent?
Lesson number 2 is that it’s never too early to start teaching your kids about financial management. There is this one scene in the movie where Isla’s parents (John Goodman/Joan Cusack) are standing around with a book on how to teach your children financial management, asking themselves, is it too late? Well, if they need help, it’s never too late, but at the same time, it’s never too early. Parents, start a conversation with your kids today and tell them why they need to understand the difference between something they want and something they need, then teach them how to create a plan to meet their needs and desires. Kids, ask your parents what a budget is, and how you make one, after all, you don’t want to end up 28 and broke, living in your mom’s basement.
Which brings us to our final lesson. There is a scene in the movie where Isla’s character is trying to unfreeze her credit cards from a block of ice so she can go shopping – in order to curb her wild spending habits, she froze her credit cards. This is a great example of the need for balance in life. No matter what you do, whether you like to spend or save, you need to have a balance in life. Learn to save your money, but at the same time, learn when it’s OK to spend it.
Have you bought your copy of Following The Goods? Buy it today!
An interview with the author of Following The Goods, Toronto’s Adam Goodman
I was recently interviewed by my editor, Hailey Eisen, for the website openbooktoronto.com. In the interview, Hailey asked me everything from what inspired me to write Following The Goods, to how important is it to build an online presence for my book, to tips or tricks for aspiring writers.
You can read the entire interview on the Open Book Toronto website, but below is a short excerpt.
Q: What was your inspiration behind writing Following The Goods?
AG: When I was 26-years-old I met a friend in business school who was two years younger than me, but had managed to save over $50,000. In contrast, I had been working my whole life yet I had saved nothing. It was at this point that I clued in to the fact that I was doing something wrong and began my journey to learn all about personal financial management. I read a ton of books and spoke with a lot of people. All of the books I read were written by adults, for adults – there wasn’t really anything out there talking to young people. So, I decided to take my newfound knowledge and share it with the world. It was from here that Following The Goods was born.
Q: How did you decide on the style of your book?
AG: The book is a first-person account of the financial mistakes I made throughout my life and how I learned to rectify these mistakes. Using my personal story, I teach readers about basic financial management principles, offering workbook-style examples that encourage a hands-on approach. There is no point just lecturing young people on why they need to manage their finances — my strategy offers them the tools they need to help take control of their own situations. I also had over 60 illustrations created for the book to help tell my story – after all, a picture is worth a thousand words!
Let me know what you think.
Have you bought your copy of Following The Goods? Buy it today!
Financial Advice for the Current Economy
- Image by DavidDMuir via Flickr
What financial advice would you give in the current economy? Would you tell people to save their money? Would you tell people that today is a buyers market? Maybe you’d tell people that they should do nothing and see what happens, otherwise known as the deer caught in headlights syndrome. Would you give the same advice to a teenager or young adult?
I was recently asked this question, and you know what my response was? My advice for the current economy is the same advice I’d give in a good economy – understanding the basic principles of financial management and implementing them is good no matter what is going on in the economy. It doesn’t matter if the economy is doing well, it doesn’t matter if the economy is doing poor, it doesn’t matter if the economy is flat, what matters is that you understand how to track your spendings, how to set financial goals, how to meet them, and how to think about the future.
Are you stuck where to start? Well, let me break it down for you.
- If you don’t know how much money you make each week, month, or year, figure it out – you need to know how much money you make to make a budget
- Know where your money goes – track your expenses, and see where you are spending your money. Once you start tracking things, you’ll be amazed to see where your money is going – did you know a Starbucks a day costs you over $500 each year?
- Understand this basic formula: Income – Expenses = Savings. Whatever money you don’t spend throughout your daily life will be your savings, and these savings are what let you plan for the future.
- Create financial goals – figure out what you want to buy in the short term (maybe it`s an xbox, a new TV, or some new clothes) and long term (do you want a new car, a condo, a house, a vacation around the world), because our next step is to figure out how to meet these goals.
- Create a budget and stick with it – now that you know where your money is going, and you`ve figured out what your financial goals are, create a budget to meet these goals and stick to it.
- Start thinking about the future – do you know at what age you want to retire? Do you know what the future holds? If you`re like me, chances are you don`t, but that doesn`t mean it`s too early to start thinking about the future. If you start saving even $100 each month for your retirement, and you make use of compound interest, you`ll be amazed how much you can save by the time you want to retire, and who knows, maybe you`ll even be able to retire early.
- Share your knowledge with others – financial management isn`t a topic that is often found at the dinner table, but that doesn`t mean it doesn`t belong there. Start a conversation about managing your money with your parents, with your sisters, with your brothers, with your cousins or even with your friends. Share what you know, and who knows, maybe your family and friends will share some new information with you!
Have you bought your copy of Following The Goods? Buy it today!
Book Launch Party Pictures
On February 5, 2009, we celebrated the official launch of Following The Goods: Financial Management for the Young and Ambitious. The event was held at Kultura Restaurant in Toronto and we had almost 200 people show up!
The event was a huge success. Once again I have to send a big thank you to Toronto’s newest young photographer, Kate LaRue, for coming out to the event and taking some amazing pictures.
And with that, here are the photos from the evening!
How Does Your Spending Compare to Your Neighbours?
Part of an effective budget is tracking how you spend your money, otherwise known as your spending habits. In order to do this, you need to monitor what you spend your money on, whether it`s your monthly rent expense, your daily coffee dose, or that TV you bought six months ago. From here, you need to figure out how much money you spend each week, month, and year, so you can track your spending and make an effective budget (more on this later).
One useful trick to help you figure out if your spending is within reason or way out of wack is to compare your spending patterns with friends. Ask your friends how much they spend on food each week, or how much their monthly housing costs are – you might be surprised to find out their answers
But have you ever wondered what the spending habits of people in other countries are? The New York Times has a very cool tool which will allow you to look at what people in other countries are spending on:
- Clothing & Footwear
- Electronics
- Alcohol & Tobacco
- Household Goods
- Recreation
What`s interesting to note is that Canadians spend on average $200 – $400 per capita on electronics, whereas Americans spend $400 – $1,000 per capita, and Norway spends over $1,000 per capita.
Also of interest is that Canadians spend $400 – $1,000 per capita on clothing and footwear, whereas the Americans, Brisith, French, Italians, Swiss, Swedish, and Germans spend over $1,000 per capita.
You can also check out this NYT article on the same subject.
Personal finance guide born from a once-lavish lifestyle
I’m excited to announce that I have received my first piece of press the day before my very successful book launch. You can read all about the CJN article here.
Book Launch Preview Pictures
Preview pictures from the Feb 5, 2009 book launch party at Kultura Restaurant in Toronto. A big thank you to Toronto’s newest young photographer, Kate LaRue, for coming out to the event and taking some amazing pictures.
Frugality is Not Budgeting
I was recently at brunch talking with a group of friends when one of them started talking about frugality and how it is a good way to save money and keep within your budget. Now I`m not one to say whether frugality is good or bad, it really depends on your situation, your financial goals, and what you want out of life, but I did start thinking about how many people think that frugality = budgeting. In the past, I’ve talked about the cost of a cup of coffee, and I can see how this might lead one to think that frugality is important, but I think it’s really important to be clear – effective budgeting does not mean you need to be frugal.
When creating a budget you need to remember five things:
- Include all of your expenses into your budget, regardless of whether it is a daily coffee fix or rent
- Set a realistic budget – your expenses should not be more than your income
- Remember to pay yourself 10%, and put that money to good use by using compound interest
- Don’t live beyond your means – if you can only afford to go out for dinner once a week, only go out for dinner once a week
- Budgets help you meet financial goals, so if you haven’t set any goals, now would be a good time to do it
At the end of the day, a budget is a tool which will help you save and spend your money, but it’s up to you to decide how you want to do it. Frugality and budgeting are not mutually exclusive, nor are they mutually inclusive; it’s up to you to decide how you want to spend your money. If you enjoy going out for dinner, then go out for dinner, but do it within your budget.
Just because you are following a budget doesn’t mean you have to be frugal, and just because you are frugal, doesn’t mean you are following a budget. Living your entire life without enjoying it because you are afraid to spend money will not lead you to happiness. So my question to you is, are you being frugal, or are you following a sound budget to meet your financial goals?
When Did You Start Your Financial Education?
Personal financial management is a topic that sounds scary, but it really isn’t – it’s about understanding where your money goes, and learning how to plan where it should go. The earlier you start your education, the better position you will be to reach your financial goals, thanks primarily to compound interest and financial planning. By starting your financial education early, you’re able to learn good habits to make sure that you carry your financial management skills and tactics well into your adult years.
Unfortunately, this isn’t a topic that is a mandatory part of high-school education even though it should be. A recent study by the University of Manchester found that:
standalone financial education qualifications can dramatically improve individuals knowledge, skills and confidence in financial matters and that long lasting behavioural change can be achieved as a result.
The study also found that:
A specifically designated and substantial qualification is effective in changing young peoples financial behaviour (this contrasts with the Government approach of thinly spreading financial education across the curriculum in a variety of subjects).
Personal financial management education is effective when provided at a time when young people are experiencing the transition towards greater independence and adulthood (this contrasts with the approach of many who believe that early years and a focus on primary school children is appropriate).
Approximately 95% of students reported understanding money matters after taking the course and high levels of knowledge and financial awareness continued to be reported at both the 10 and 22 month follow up periods (FSA research published in July 2008 suggested there was no evidence that other forms of financial education produced lasting improvements).
Students confidence greatly increased e.g. confidence to go to a bank and discuss financial matters, greater confidence in how to research financial options and products and so on
So for the parents out there, the question isn’t “Do I teach my kids about financial management?”, instead it should be “When should I teach my kids about financial management?”.
If you haven’t started the journey yet, maybe you should today.
Additional Reading
Here are a few of the financial management blogs I read everyday:
What blogs do you read?
Budgeting Exercise
Creating a budget is one of the most important things you can do when it comes to personal financial management. Businesses create budgets every year to help decide where money will be spent, where money will come from, and how much money they need to save. Your own finances are no different. If you don’t plan ahead, even for your daily cup of coffee, you’ll end up broke and living in your mom’s basement.
In chapter 5, I talk about the future cost of life – it’s important to understand how much things will cost, and you need to start planning for big purchases as early as possible.
I just saw this post where Stephanie had a project for school that required her to “walk through the steps of buying and financing a house” – a great exercise to help you start thinking about the future cost of life. Through this exercise, Stephanie started to look at how much her student loans will cost her, and has come to the conclusion that it’s going to be expensive, something which she didn’t realize until she looked into how she was going to finance her life post-graduation.
I wanted to put myself on the standard repayment plan right off the bat, and tackle this debt head-on. I wanted to consolidate my loans into one low rate while rates are dropping. But it looks like just to be able to make the minimums, I’ll have to stay on the graduated repayment plan (where the bills start small and get bigger every year) – with payments of $319 (at first).
Trust me, I’m really disappointed by this. I don’t know why I didn’t run the numbers until now, other than the fact that it’s easier to run them now that I’m done taking out new loans. It’s startling to be this close to repayment and suddenly realize that I will have trouble paying the bills.
My employment is uncertain. I’m going to do the best I can with job applications and internship applications over the next few weeks… but I’ve come to realize that I’ll have to do a lot more than that. I can’t afford anything outside of Ramen to eat and car maintenance, since I’ll be needing that to get to a job. I’ll have to start Compacting again.
I’d thought I was out of the woods, but I’m really, really not. Somewhere deep inside my brain, my current Self is kicking my 17-year-old Self in the pants for getting us into this mess!
Student loans and debt are a necessary part of life, and this post isn’t meant to scare you off of getting an education – it’s a good thing, and well worth the investment. Rather, this post is meant to show you how important it is to think about the future cost of life, and create budgets to meet your future financial goals – if you plan to own a house after graduation, you have to start saving for it now, if you plan to pay-off your student loans as soon as possible, you need to make a game plan to achieve it, if you want to go travel the world, you better start saving today.
Regardless of what you want to do in the future, you need to start thinking about what you want, set those goals, and create budgets that will allow you to meet your goals, but don’t forget that while you are making those budgets, you still need to enjoy life (just ask Elie).
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Adam Goodman is the author of Following The Goods Financial Management for the Young and Ambitious. Throughout his life, Adam never took ownership of his financial knowledge and no one ever sat down with him to explain what it meant to plan for his financial future. Luckily, while at business school, Adam finally learned how to be smart about financial management and he is here to share what he has learned along his journey with you.
Adam's past experience includes owning and operating his own consulting firm, as well as working as a Consultant with Deloitte & Touche. Adam is currently in a sales and marketing role in the telecom industry.
