Philosophy in Money Management

A quick Google® search on ‘Money Management’ reveals the huge industry built around both marketing financial resources and investment products to consumers and in educating people on the various philosophies of managing (mostly) personal wealth and its opposite, debt. There are books, spreadsheets, equations, specific saving tools (RRSPs or other investments), videos, radio programs, television series…all feeding the industry that has been built up around money and wealth.

If the purchase of a book or an hour spent listening to a radio show or watching a television program teaches you something that makes a concrete difference in your behaviour and, at the end of the day, means there is more money in your portfolio for you to spend during retirement or give to others, then by all means read those books or watch those videos. However, all these resources are meant really just to provide details around an existing, healthy approach to money and wealth. Conversely, without a healthy approach to money management, then a full toolkit of tips and tricks cannot serve the same purpose.

I will not get into the details behind appropriate techniques for saving, vehicles in which to place those funds, or approaches to long-term investing. There are entire libraries of thought that are available with information on those topics. Instead, I want to expand on what it means to have a healthy approach to money management, focusing on the basics.

  • Take the long-term approach: Money and managing it is a fundamental part of life and is as basic as any other necessary, daily life skill. It’s not like breathing or eating, but it is one of those fundamental tasks the mastering of which makes life a whole lot easier. I would equate it to cleaning your home, eating well, having a driver’s license (in most places) or working hard at whatever you do. It is not absolutely required that you do any of these in life, but doing all these makes life easier and more fulfilling. If you keep your home clean, eat well, stay healthy and maintain a good career but you manage money poorly means that you have not mastered all the basic life skills. For more information, see
  • Living frugally isn’t a punishment: Everyone should live inexpensively and using luxuries as treats. Of course, as your income flow and money management improve, the definitions of ‘inexpensive’ and ‘treat’ change, but not out of proportion to your ability to afford them. If you earn $50,000 a year, then a $15,000 car would be appropriate to your lifestyle. If you earn $1,000,000 a year, then a $200,000 car might be appropriate to your lifestyle. But in neither case does the car command anywhere near the full annual income.
  •  Live below your income level: This is entirely possible and gives you freedom and wealth. If certain aspects of your lifestyle are forcing your expenses above your income, then question those assumptions. If your mortgage is the culprit, then you have believed it when someone said you ‘need’ that much housing, or in that particular area. Anyone can get a very good, slightly used car from a dealer for $10,000 or so – it is not necessary to drown in car debt. What makes it necessary are assumptions that you have bought into around how you are supposed to live your life.
  • Your income level has a role to play in saving: While the cardinal rule is to live below your income, the hard truth is that people with more income coming in have more money to save. This does NOT mean they are better at managing money, or will have a more comfortable retirement or be able to give more than someone earning less. It just means that the potential is there. If you have a good financial philosophy and solid habits, it would be of huge benefit to you to earn a higher income or avoid any loss of income. Do what you can to avoid divorce for many reasons, among which is the financial impact it will have on your family. Do not limit your income based on loyalty to an employer – make job decisions as if you are a company and you are responsible to your shareholders to maximize revenue, given the associated risks with making any move. Maximize the income flow as any business would, while of course knowing your limits and what is good for you and your family emotionally or time-wise.
  • However, whatever your income level, saving is possible and necessary. I have heard anecdotal stories of people on low incomes who manage things well and retire with multiple investment properties and good rental income flow. I have also heard stories of professionals with high incomes who squander their cash flow to the point where their lifestyle is indistinguishable from the average middle class Canadian household. If your monthly spending is outstripping your income, there are many approaches to gaining control of your life. For one approach, please see
  • By not managing your money well, you are providing great benefit to those businesses on which you spend your money. The salesperson who sold you the car, your wireless provider, your landlord or mortgage company, the clothing stores where your wardrobe came from, are all deriving the benefits of your money. It is just you and your family who are not.

Ultimately, this is about choice…the potential is huge to fully enjoy your income now and in the future.

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