February 8, 2014

HOW TO CHANGE YOUR BEHAVIOR

Dental floss v2 - Flickr 500x390 509495525_e7fff069f7_oAt Insider Advice for Today’s Topsy-Turvy Times (which went well, thanks for asking), participants asked how to change the way they behave. That’s an essential but overlooked aspect of mastering our money — and our lives.

We often know what to do (e.g., payoff credit card debt, stay employable, get insurance). We may even know how (or can ask Google). That doesn’t mean we will do anything.

There’s a big gap between knowing and doing. Three steps make the difference: wanting, starting small and getting help.

Want IT

Those who have a ‘why’ to live, can bear with almost any ‘how’.
— Viktor Frankl, Holocaust survivor

Without a compelling goal, will you invest the effort needed after your initial enthusiasm wanes? You must want — really want — the outcome. That’s the second of the seven habits of highly effective people: begin with the end in mind. A strong why defeats an inconvenient how.

What do you want enough to take action now? Put other items on your bucket list or balk-it list for the future.

Example: I want to improve my general health now to prevent problems later on. I’m not a morning person but selected a 16 week yoga class which meets on Saturday from 7 AM to 9 AM. Today was week six and I’m keeping up.

Start Small

If we take on too much, we’re likely to fail. If we take small actions, they soon become automatic and faster. We can then add more.

Do you remember the transition from a trike to a bike? We already knew how to pedal, brake, turn and ring the bell. Now we learned to balance, first with training wheels and soon without. We had scrapes along the way but our desire to ride a bike helped overcome them. Help from our family and friends did too.

Example: In each yoga class, we repeat what we’ve already learned and are taught new items (theory, demonstration, practice). This understand-watch-do process and gradual pace makes progress easier.

Benjamin Franklin and the 13 Virtues

Benjamin Franklin wanted to cultivate 13 virtues, such as Frugality, Humility and Cleanliness. That’s a lot to remember and manage. It’s easy to deplete our willpower and falter. Ben had a solution. He worked on only one virtue per week, which works out to four times in a year. Doesn’t that look more manageable?

Suppose this is the week for Silence (“Speak not but what may benefit others or yourself; avoid trifling conversation”). That’s not an excuse to abstain from Cleanliness (“Tolerate no uncleanliness in body, cloaths, or habitation”). Instead, you maintain the other virtues at their current levels, which improve with each cycle.

Get Help

It’s very easy to break a habit and much tougher to restore it. Think of exercising. Do you remember Newton’s first law of motion? Objects in motion tend to stay in motion. Objects at rest tend to stay at rest. Changing from motion to rest is easy. Changing from rest to motion is tough. Restarting may be toughest of all because we know we failed (even if we have reasons).

We often need a little push or guidance to keep us in motion.

People are good motivators but people are busy. If you can’t find anyone, consider using apps. You likely have your smartphone near you. Your device can remind you, instruct you and track your progress.

Example: Yoga students sign an agreement to attend classes and practice. We get group instruction and personalized tips. Attendance is marked each time. There’s support and monitoring. In between classes, I use the general purpose Trello app to keep track of the instructions.

Links

PS Small victories build our confidence for bigger challenges.

February 1, 2014

WHY YOU NEED TO READ "THE MOOLALA GUIDE TO ROCKIN’ YOUR RRSP" BY BRUCE SELLERY

Get Bruce Sellery's book on RRSPsDoes the world really need a book about RRSPs? The topic is quite narrow and there's lots of information online with more added during the January-February RRSP season. Here are the five latest from Google News at the time of writing:
  1. So what is the point of RRSPs anyway?
  2. The best strategies for your RRSP and TFSA when money’s tight
  3. Will Malcolm (66) and Catherine (64) run out of RRSP gas?
  4. Borrowing for your RRSP: Here’s how to calculate how much you’ll need
  5. Slap your hand if it dips into the RRSP jar
These three are from Melissa Leong alone:
  1. How RRSPs are like social media (Jan 29, 2014)
  2. For young people, debt might come before RRSPs (Jan 28, 2014)
  3. Should you raid your RRSP to pay debt? (Jan 13, 2014)
Tip: Be sure to see Melissa speak live at Insider Advice for Today’s Topsy-Turvy Times on Feb 6th.

What’s Missing?

The sheer volume of RRSP information quickly overwhelms. The contradictions don’t help. For instance, The Globe and Mail tells you how to borrow for your RRSP and the Toronto Star says don’t borrow. How do you decide?

Consider a unified voice, especially if you want to learn well. A book helps. Bruce Sellery’s Moolala Guide to Rockin' Your RRSP: Start Rockin' in Five Easy Steps (Amazon link) makes an excellent choice.

I first met Bruce at the 2013 Canadian Personal Finance Conference organized by Preet Banerjee and Krystal Yee and then at the 2014 Art of Sales. We’ve exchanged numerous emails in between. Bruce has an engaging personality, high energy and breezy way of communicating the complex. You’ll see that in his book.

Why write a book?

Writing a book takes time and too few read regularly. Since RRSPs are most discussed during January and February, the market seems small. Why not write a book with broader appeal which includes RRSPs as a component?

That seems like a wiser strategy. Bruce already wrote a general book called Moolala: Why Smart People Do Dumb Things with Their Money - and What You Can Do About It. Maybe that's why he decided to specialize this time. This video lets him explain.

Why read it?

A book that’s only about RRSPs would be shorter and (probably) boring. Bruce’s book is about much more.

Bruce asks a simple but powerful question: why are you saving for retirement.

He’s saving for adventure, which includes travel. Unless you know your why, how motivated are you to save? A distant goal must be compelling to move us. Saying you want financial security during retirement may not be enough. That’s vague.  A vacation or new car or home renovation is often much more tempting.

You Participate

Bruce includes many quotes from real people. That's unusual and effective. The book feels interactive and engaging — a workshop, rather than a lecture. Bruce encourages you to write in the book, which makes it more like a workbook (see write a workbook instead of a book). You’re then more likely to act and less likely to lend your copy — more sales!

Myths About Retirement Income

Bruce starts by tackling beliefs about retirement income, which you might share:
  • “The government will cover the basics”
  • “I can’t afford to save for retirement right now”
  • “I’ll just work longer”
  • “My family will provide for me”
  • “My retirement plan is simple: I won’t need much”
  • “My house is my retirement plan”
For more details, read this book excerpt in MoneySense.

Likelihood of disabilityHe only leaves out lotteries, which 34% hope to win. How likely is that? There’s a much greater chance of getting disabled before age 65. The likelihood for a 30 year old nonsmoker is 36% for males and 41% for females. Too few worry about this (use the risk calculator from Manulife yourself).

It’s easy to be optimistic ways that cause financial harm.

Five Steps

Bruce gives five solid steps for retirement financial planning.
  1. Lay the foundation
  2. Determine how much you need
  3. Develop the plan
  4. Take action
  5. Stay engaged
The book guides you through the process. Yes, you can go through the steps yourself. No, you don’t need to know much about RRSPs to start.

Act

Unless you’re one of the few with a secure defined benefit pension plan, you need to take steps to prepare for retirement on your own.

A secure tomorrow requires sacrifices today. We know that but don't always take the steps. Bruce helps you build good habits that can help you for the rest of your lives — even if you win the lottery (and don’t get disabled).

Links

PS Bruce has generously donated autographed copies of the Moolala Guide to Rockin’ Your RRSP for giveaway at the Money 50/50 live event on Feb 6, 2014 — another great reason to attend.

click for event details