Our ‘Adult Allowance’ System

After FM and I got married back in 2010 we quickly moved to marry our finances as well. We did the typical thing and set up joint bank accounts, automated our bill payments by linking them to our joint accounts, and signed up for a joint credit card so any joint financial purchases – from groceries to vacations, home renovations to entertainment – could all be centralized.

One thing we did differently than many couples that we know however, was to maintain our personal credit cards and set up an ‘adult allowances’ system.

I referenced our ‘adult allowances’ in my recent post about my personal finance guiding principles, but didn’t get into any detail about it, so I figured I’d go over it in a separate post today.

The idea of using the ‘adult allowances’ system came about at the same time as we were taking the steps to combine our finances.

We both agreed long ago that while combining our finances certainly made sense, we’d like to have the ability to pursue our own interests without having any feelings of guilt about how ‘our money’ is being spent.

For example, I collect sports cards and memorabilia, like to attend live sports events, and enjoy drinking craft beers. FM has no interest in these things. FM is an avid reader of fiction books and likes to do crafts such as scrapbooking and sewing, none of which get any attention from me.

These interests come with an expense, of course. But those expenses can vary from interest to interest and from timeframe to timeframe.

To avoid discrepancies in how ‘our money’ is being spent, we decided early in our marriage that it would be easiest to give each of us a set amount of money each month to spend however we see fit, with no need for the other to know what that money is being spent on.

A recent article on Boomer & Echo (one of my favourite personal finance blogs) outlined a similar process, which the author refers to as a “No Questions Asked spending account” that his wife uses for her personal spending use.

Our ‘adult allowances’ follow the same philosophy; we’re free to make purchases on things that are of personal interest, with no questions asked by the other.

And what a great situation it has turned out to be for us!

While I regularly hear friends and coworkers griping or expressing frustration about their significant other’s spending, I can safely say that more than 8 years after we got married and put this system in place, FM and I have never once argued about money and spending on our personal interests has never once put a strain on our marriage.

I attribute this, at least in part, to putting this ‘adult allowance’ system in place from the get-go.

In keeping with the process of implementing the guiding principles for our finances, our allowances are put on autopilot at the beginning of each year.

When developing our cashflow forecast for the coming year each December, I start by figuring our how much we’ll (most likely) need to cover our regular expenses, some debt pre-payments, and some savings for our rainy day account.

FM and I then sit down to review the numbers, settle on a figure for our allowances that we’re comfortable with and plug in that number to finalize the forecast spreadsheet.

Once the number has been determined and the cashflow spreadsheet is complete, we log into our personal bank accounts (which have been linked to our joint account) and set up a monthly transfer of “$X” for the first of each month.

It’s as simple as that.

The amount has varied from year to year since we first implemented the process. Better paying jobs and career advancement has allowed us to increase our allowances some years. Other years we’ve prioritized planned home renovation projects over personal spending and decreased the amount.

And then came the kids and all the expenses associated with raising them!

Needles to say, a pair of babies and the reduced income that comes with maternity leaves has forced us to be flexible and accept the fact that we won’t have as much money to spend on our personal interests at times.

What’s been interesting to me (though in hindsight it really shouldn’t be surprising) is that even as our allowances have decreased in recent years, our personal spending has decreased to an even greater degree. Since we don’t have as much time to pursue our personal interests, we don’t end up spending nearly as much on those interests as we once did.

That flexibility I mentioned will continue to be a key consideration for the foreseeable future as the kids and our family continue to grow.

If you have any questions or comments about our adult allowance system, reach out to me at frugalfatherblog@gmail.com or connect on Twitter, Facebook, or Instagram.

Thanks for reading!

Frugal Father

 

 

 

 

2018 Goals and Objectives

In my last post about my personal finance guiding principles, one of the key items I identified was the importance of setting goals and objectives and tracking my progress against them.

Part of the reason I started this blog was to have an added layer of accountability in place for my personal finances. By putting my views, practices, goals, and objectives out there for anyone in the world to stumble across, it gives me the feeling that there might be more people out there than just me and FM keeping us on track. Whether that’s actually the case or not isn’t especially relevant to me – the feeling that this might be the case is enough to establish that “added layer” for me.

To help establish and maintain that added accountability, it’s my intent is to publish my annual goals and objectives with the first post of each calendar year, post updates on my/our progress at the beginning of each quarter (April, July, October), and write an end of year review to close out the calendar.

Despite the fact that this blog didn’t get started until well into the year, I wanted to stick to that plan for 2018 as best I can.

Before I get into what I’m specifically targeting in 2018, I wanted to give a brief overview of the process I follow to arrive at my final list of items.

One of my favourite writers out there is Chris Guillebeau, author of the blog The Art of Non-Conformity, books like The $100 Start Up and Side Hustle, and host of the podcast Side Hustle School.

I first came across Chris’ writing purely by chance – a co-worker had left a few printed copies of his 279 Days to Overnight Success guide sitting next to the printer and the cover caught my attention. I grabbed my print job, went back to my desk, and downloaded 279 Days to read on my lengthy commute home on the train. I’ve been hooked on his writing ever since.

While reading Chris’ blog many years ago, I learned about his process of conducting an annual review and making plans for the coming year. I started loosely following a similar process, taking a few hours over the course of a couple of weeks in December to review how the outgoing year had gone and make plans for the year ahead.

Over the years I’ve refined my version of this process and have arrived at five categories of goals and objectives that I focus my attention on: Family, Finances, Health, Personal, and Professional.

During my “annual review” time, I make lists of what I’d like to accomplish under each of those headings. I then apply the “S.M.A.R.T.” criteria (Specific, Measurable, Achievable, Realistic, Timely/Time Bound) to help weed out things I can’t reasonably expect to accomplish and develop a final list of the top five priorities for each category.

Of course, things can and do change over the course of the year. After putting myself through this process for several years now, I’ve discovered that things can (and will) change and you need to be flexible with your goals.

Some are so easily achieved that it seemed unnecessary to include them as major milestone in the first place. Others require modification due to changing circumstances. Occasionally, some need to be abandoned entirely.

The point though, is to create something of a roadmap that can help keep you on track. I’ve found this to be an extremely helpful process to go through each year and would strongly encourage you to develop a similar system to track your own progress if you aren’t already.

So what did I come up with for 2018?

Well, since the focus of this website is intended to largely be on our finances as parents, I won’t get into details on the other four categories. After all, my goal is to share tips and tricks for keeping costs down and making the most of your money while raising kids. I don’t really expect that you’re here to learn that I want get my weight back down to 170 pounds or accomplish the ambitious goal of reading four books over the course of the year (yes, YEAR – while I’m a big reader of blogs and news, I’m not usually a heavy reader of books).

My list of what I’m aiming to achieve this year in the Financial Category includes the following:

  1. Contribute $2,500 to each child’s RESP.

This will allow us to maximize the grants available from the federal government.

  1. Increase my RRSP contributions by 10%.

Last year I managed to get $5,200 into my RRSP, so this year’s target is $5,720.

  1. Put $2,000 in my TFSA.

I’m prioritizing RRSP contributions until I’ve used up the available space, but want to build this account as something of a personal emergency fund in the event that I need easy access to some cash.

  1. Maintain our mortgage prepayment plan.

We currently pay the maximum of 25% on top of our regular accelerated bi-weekly payments, plus another $100 in lump sum payments on the principle every two weeks.

  1. Reduce discretionary spending by 10% (both personal and joint/family).

We do our best to be frugal, but I’ll be the first to admit that we spend unnecessarily from time to time. There’s always room for improvement!

At the outset of the year I expected some of these goals to be fairly easy to achieve, while others would take a substantial amount of discipline, restraint, and focus to accomplish.

In keeping with my planned schedule, I’ll post a year-end wrap-up outlining my successes, failures, and progress in achieving those goals with my final post of 2018.

In the meantime, feel free to connect with me on Twitter, Facebook, and Instagram for regular updates on my frugal adventures in shopping, investing, saving, and affordable family fun. You can also get in touch by emailing me at frugalfatherblog@gmail.com.

Thanks for reading!

Frugal Father

My Personal Finance Guiding Principles

I’ve always had an interest in money and how to best manage it, going all the way back to when I was a kid.

Over the dozen or so years that I’ve been in the working world full-time, I’ve become semi-obsessed with personal finance. The proliferation of online resources and blogs dedicated to the subject have only served to feed this fixation.

By reading as much as I possibly could on the subject (which I still do to this day), I developed something of a system and some guiding principles for my personal finances that I feel have worked out quite well for me.

Similar principles carried over into my management of our family finances and have allowed FM and I to stay on pretty solid financial footing through the major milestones we’ve gone through as a couple including paying for a wedding, buying our first (and second, third, and fourth) vehicles, buying and upgrading our first home, and of course, becoming parents.

These principles have always been important to me, but even more so since I became a dad. Kids are expensive and adjusting to life with a child (and then a second one), has easily been the most significant jolt to our finances since we left home to attend university more than 15 years ago (HOW IS THAT POSSIBLE?!?!).

Since I know I’m not the only one experiencing this kind of adjustment as a new(ish) parent, I figured I’d share a basic overview of the principles and process that I utilize to keep my personal and family finances on track.

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I’ve been absorbed in this idea of financial independence since long before I came across the term and the countless blogs and books dedicated to the subject – I simply didn’t realize there was a phrase for what I had been thinking about.

Financial independence (having more income generating assets than we do expenses) is the overarching goal of our financial journey and it’s what drives all of my decision-making when it comes to our money.

I want to put FM and I in a situation where we’re not entirely dependent on our day jobs in order to get by. I want to work because I want to, not because I have to.

I haven’t calculated a specific date that we’ll achieve this scenario; life is simply too unpredictable to be bothered with that at the moment. There’s the yet to be determined final tally on how many kids we’ll end up having; the inherent unreliability of our careers with layoffs always being a possibility; and the unknowns about our future place (and cost) of residence. These things and more make calculating a definitive date or number of years seem rather pointless at this early stage of parenthood.

In my mind though, I’d like to be in this position by my 55th birthday. That gives me just under 20-years to get us to our position of financial independence. It also gives me a reason to stick to some sort of a plan.

To get us closer to our goal of financial independence I focus on these principles:

  • Accelerate the elimination of debt. FM and I are extremely averse to carrying debt. While we’re comfortable with an affordable mortgage and low-interest loans to purchase vehicles we need for getting to our jobs and carting around our kids and all the stuff that come with them, we’ve always made it a point to pay off debt as quickly as possible. We prioritized paying off our student debts after finishing university, and now accelerate our mortgage and vehicle loan payments by taking advantage of pre-payment opportunities whenever possible (this is less frequent at the moment due to the reduced income that comes with FM being on maternity leave).
  • Follow my 3 Rs of Saving by setting aside as much money as we can for rainy days, retirement, and rewards (i.e. indulgences like vacations, home renovations, and entertainment). More on this in a future article.
  • Maximize our money at every opportunity both in terms of our spending and with our savings and investments. Again, more details about this will be covered in future posts.
  • Create multiple income streams. This is a very minor focus of our efforts at the moment, but something we plan to explore more seriously in the future. Some options we’re either already executing or considering exploring include:
    • savings and investments that produce dividend and distribution payments;
    • selling unwanted items on platforms like eBay, Kijiji, or Facebook Marketplace;
    • utilizing websites like Swagbucks where we can earn points for our already planned online shopping and redeem those points for cash through Paypal;
    • more actively participating in referral programs with websites like RateSupermarket and through our Tangerine bank and credit card accounts;
    • generating money through affiliate income.

To execute these principles, I follow this simple process:

  1. Plan
    • At the end of each year I go through a process of establishing sets of goals and objectives in a variety of categories, including a “Financial” category. These goals and objectives serve as something of a roadmap to help keep us on track throughout the year.
    • I also develop a cashflow forecast for the year so there’s predictability to our daily finances. I do this in place of the more traditional, categorized formal budget. Years of trying that approach taught me that it wasn’t the best approach for me. I create this forecast using years-worth of past spending on our bills, debts, and investments that I’ve been tracking. This ensures that we’re never surprised by the current state of our financial affairs.
  2. Automate
    • At every opportunity, I put our finances on auto-pilot. From bill and loan payments to our investments and ‘adult allowances’, I keep things simple and predictable by automating as many payments as I can. It also helps make that cashflow forecast very easy to generate since I know exactly when money will be going in and out of our accounts.
  3. Monitor and measure
    • The final step is to monitor and measure our progress on a regular basis. I’m tracking things in my cashflow spreadsheets on an almost daily basis and watching the big picture items found in my annual goals and objectives spreadsheets monthly (at a minimum).

So there you have it: my blueprint for staying on track financially and working toward my long-desired state of financial independence.

Have I missed anything? Are there things you do that you think I could benefit from? Share your thoughts with me on Twitter, Facebook, and Instagram, or email me at frugalfatherblog@gmail.com.

Frugal Father

Welcome to Frugal Fathering!

In early August of 2016, the single most amazing moment of my life happened: I became a dad to a beautiful baby boy.

On the day my son was born, absolutely everything changed for me. My perspectives and priorities. My well-entrenched schedules and daily routines. My finances and spending habits.

This past spring my wife (aka Frugal Mother, aka FM) and I welcomed a daughter to our family, further impacting how we go about our daily lives.

I had actually intended on starting this blog right around the time my son was born because I figured that was a good time to start chronicling what I had been thinking about putting into this. As I’m sure is the case for many first-time dads though, I drastically underestimated just how time-consuming being a father was going to be!

I’ve always loved to write, but that was something I simply didn’t have make the time for after my son was born (remember that comment above about changing priorities?). So this little project got put on the back-burner. Then eventually it was simply ignored.

A job change late last year seems not only provided me with a great opportunity to advance my career, but it also seems to have reignited my desire to write and got this little personal project back on the rails.

Over the decade or so that I’ve been in the working world full-time, I’ve become semi-obsessed with personal finance. The proliferation of online resources and blogs dedicated to the subject only served to feed this fixation.

By reading as much as I possibly could on the subject (something I still do to this day), I developed something of a system and some guiding principles for my finances that I feel have worked out quite well for me.

It certainly helps that FM and I have always had a pretty good grasp on our finances and have common beliefs about how to handle them. We try to get the most out of our money at every opportunity and limit wasting any of it. We’re frugal (hence the namesake of this blog!), but we’re not cheapskates!

We paid down our student debts as soon as we possibly could after graduating university. We’ve avoided incurring any crippling credit card debt. We bought (far) less house than lenders would have liked for us to believe we could afford. We’ve driven reliable, relatively fuel-efficient vehicles and stay on top of their required maintenance to keep them running as long as possible. And at every opportunity, we’ve put extra money towards our mortgage and any vehicle loans we’ve had along the way.

Many of the things on the list above were relatively simple to accomplish without kids in the picture – it just took a plan and a lot of discipline.

Even with all of that being the case, expanding our family meant that we had to make some pretty significant adjustments to our finances.

I handle the bulk of the money management in our household (I’m a sucker for numbers and spreadsheets) and I’ll admit that keeping ourselves on track with the financial goals FM and I have set for our family was one of my greatest concerns about becoming a parent.

We were on firm financial footing before our son was born, but in the lead-up to his arrival, I frequently found myself worrying about whether or not we’d be able to keep it up with the reduced income of maternity leaves and the increased expenses inherent to raising kids.

I figured I wasn’t the only one out there going through such a thought process, so I thought ‘why not write about it?’

So that’s what I’m here to do: chronicle my experiences with personal finance during one of the most expensive phases of life that many of us will ever encounter: parenthood!

My goal is to share tips and tricks (and learn from yours!) for keeping costs down and making the most of your money as we move through the various stages of raising kids.

Most importantly though, I’m using this as an added element of accountability to stick to those goals and guiding principles I referred to earlier. My plan is to publish annual sets of goals and objectives, and with those out there online for anyone to see, I view this as an added tool for keeping our family on track.

In addition to this website, you can connect with me on Twitter, Facebook, and Instagram for regular updates on my frugal adventures in shopping, investing, saving, and affordable family fun. You can also get in touch by emailing me at frugalfatherblog@gmail.com.

So without further ado, it’s time to hit ‘publish’ and get this blog started! Thanks for joining me on this journey!

Frugal Father