Give Me Almost Nothing

With the holidays fast approaching I thought I would take a moment here to discuss something that has ensured I don’t get moody for years.  It’s a very simple thing to do and extremely effective. All I do is:  I expect to get almost nothing for the holidays in the way of gifts.

Granted in past experience I still do get gifts from people (so on that front I’m wrong every year), but I don’t ever make any preconceptions on what those will be.  Thus saving me from the ordeal of having too much emotion invested into an object I may or may not get.  I go through the holiday season generally happy and content with anything from a pair of socks to a box of chocolates.  I’ve grown up enough to realize that the love people have for me isn’t determined by how expensive a gift is, but rather the fact they bothered to give a gift at all.

Perhaps a good example here is my sister-in-law that doesn’t particularly have a lot of money to spend on gifts always manages the find the most thoughtful gifts that I’ve seen.  She has managed to make more people cry or gasp at Christmas than I know and on a fraction of my spending budget.

On the flip side of this I also don’t bother giving gifts to every minor person that has any involvement in my life.  I don’t know who delivers the weekly fliers to my house, so the idea of getting a paper boy a gift is a insane to my point of view.  Expanding that forwards I also don’t bother giving co-workers a gift, or anyone whom I buy services from (like the babysitter).

This isn’t to say I’m a cheap bastard, but rather I look at individual relationships and do something appropriate to recognize that person based on if they are a close friend or not.  I have many friends and acquaintances that I know, but I certainty don’t feel I know them that well to give a gift.  My little rule of thumb to even consider this is based on the fact I should be able to tell you if the person in question has kids or not and their names and ages.  Or if they are single, I should be able to give a fairly good summary of their past (born there, went to school here and the name of their last ex).  Granted the rules are fairly generic, but you have to pick your own line in the sand that works for you.

So how do you limit your expectations of others or your spending on gifts at Christmas?

Less Room for Error

This is a guest post by Dave, who is also looking to retire no later than 45, but unlike Tim has no kids and doesn’t want any. Dave is from Ontario and is working towards his CGA certification.

I read an amusing post written by a personal trainer a little while ago, entitled F%&$arounditis (there is a bit of strong language in it, but I would recommend it highly to anyone interested in physical fitness).  In the article, the writer attacks a lot of the commonly held conventions having to do with physical fitness and makes such points as “F%&$arounditis is a behavioral disorder characterized by a mediocre physique and complete lack of progress, despite significant amounts of time spent in the gym.” As well as  The onset of symptoms typically occurs in young adulthood and may go undiagnosed for a lifetime. Diagnosis is set by a professional and based on observed behaviors and physique progress.” He continues on, stating that unless you are seeing measurable gains in strength over the long-term – you’re essentially wasting your time.

To a certain extent, the same kind of premise can be applied to an early retirement plan.  People outside of the “Early Retirement Community” can be seen as the individuals who keep going to the gym and achieving nothing at the end of the day – by spending almost exactly what they’re bringing in, they are no better or worse at the end of the year.  An individual with a goal of retiring early is shooting for the big gains similar to weight lifters who increase their squat, bench press and deadlift by 100% over a year or two.

The earlier an individual wants to retire the less “messing” around they are able to afford.  For someone who wants to retire in 5 years (like Jacob from Early Retirement Extreme), there is little leeway,  you need to save around 80% of your pay and cut your living expenses significantly in comparison to even the most frugal individual.   With a larger window of 15 years (like my own) the savings rate is lower, and the annual budget is probably higher, allowing for some “messing” around (like a vacation to the Dominican, which I am going on in 12 days).

Someone on an early retirement stream, much like the individual at the gym looking for strength gains will methodically track their progress and stick with the long-term plan.  People on an early retirement plan may track their spending to the penny, have a very specific budget and a very strict savings plan.  Contrast this type of planning to someone not involved in early retirement – generally, these people don’t know where their money has gone at the end of the month, they just know it’s all gone.

Do you have a plan that you methodically track and stay with to achieve your financial goals?  How about with your personal fitness – do you have a plan to get into or stay in shape?


Fantasy Stock Investing

This is a guest post by Robert, who lives in Calgary and works as a financial advisor retired at 34. He is married, has three kids.  Robert and his wife then plan to return to school and become teachers, eventually living and working overseas.

I just found out that Junior Achievement leads half-day classroom instruction to teach young people financial literacy in school. I volunteered to participate, and I learned that for grades 9 and 10, they run an Investment Strategies Program. I asked to hear more about the program, while I was in their offices for training.

The woman from JA told us a bit more about the investment simulation. It is six weeks long, and it begins with a financial professional teaching the students about investing. After that, they have access to real time stock market information, they have the ability to place fantasy trades with $100,000 (and up to $50,000 margin), and they have six weeks to try and win.

Apparently, the JA staff are running the competition amongst themselves currently. Our trainer had started out doing well, but the market has turned south. They can’t see each other’s portfolios during the competition, but they will compare and contrast at the end of the contest period. That aspect would be a part of the formal teaching in the schools. She was able to tell us what strategy the woman who is currently in first place has followed: she has neglected her account and allowed it to sit in cash, collecting 2.5% interest. (I’m not sure where they’ve found an interest rate that high for a period of just six weeks.)

As we looked through her account, it was obvious that she hadn’t followed any particular strategy. The stock market data they had access to comprised the NYSE and the Nasdaq. She had opted for mostly Canadian companies and other familiar names, choosing mostly oil & gas producers and big banks. I was particularly interested in how she decided to split the money between the 25-30 companies she owned. Basically, she just bought 100 or 200 shares of each name, regardless of price. Her biggest regret was RIM, which had fallen from $17.25 to $16.50. One of the other attendees consoled her, explaining that she had paid $72 for RIM, using real money.

There are two main problems with encouraging young people to play the fantasy stock market in this way. First, they need to understand what stocks are, why people buy them and, most importantly, what various strategies work. Second, a period of six weeks is far too short to be able to draw useful conclusions from the experience. This is my main criticism. Stock movements over periods of less than 3 – 5 years tend to simply reflect the overall movement of the market. After three years (sometime longer), the market value of a stock can be expected to better reflect its intrinsic value.

I don’t mean to discourage teaching financial and investment knowledge to young people. I will certainly take my feedback to those responsible for the program. But the comments are valid for many people who are just starting to invest, and who may decide, after a bad experience of a few weeks or a couple months, that investing is just not for them.

When have you decided to call it quits after a short period? Have you ever been rewarded for patience through market ups and downs?