** MONEY SENSE – by Graham White **

You can have ANYTHING you want - you just can't have EVERYTHING you want. You can LIVE like a millionaire or you can BE a millionaire.  Which is more important to you?

This is what eludes those who end up in financial difficulty.  Rather than paying themselves first (putting money into savings and investments they don't touch) they purchase EVERYTHING they can afford and then go further, financing what they can't afford!

Here's what they look like:

Mark, 38 years old:  

  • Employment - Works as a professional, earns $65, 000/yr ($5416/mo).  Taxes are $1408/mo.
  • Home - $400,000 in the good part of town, has had a number of custom upgrades and landscaping to make sure it stands out.  The home was purchased with 5% down in order to ensure that they had as much home as they could afford.  Mortgage and property taxes are $2, 455.
  • Vehicle - GMC Envoy, leased for 3 years at $699/mo

Marci, 34 years old:

  • Employment - Also works as a professional, earns $50, 000/yr ($4166/mo).  Taxes are $916/mo
  • Home - has recently refurnished the home with new furniture and appliances.  Everything was purchased on a "Do not pay for 15 months" 24 months ago.  Now the payments are $1300/mo.
  • Vehicle - Audi A4, purchased new last year with payments of $499/mo.

Other Expenses:

  • Dining - Because both are working full-time, they grab a muffin and coffee on the way to work, usually purchase a snack at coffee time and eat at one of the local restaurants for lunch.  Neither are particularly interested in cooking after a day at work, so they eat out or bring home some take-out.  They should have invested in a restaurant where they can eat for free because their total at the end of the month is over $1300!
  • Entertainment & Beauty - Evenings out, new clothes, hair styling, weekend events and elaborate holidays are a must because they work so hard, they deserve it!  Their two annual holidays and entertainment costs work out to $1000+/mo.
  • Other expenses:  Servicing their vehicles, home and cell phones, credit card payments, utilities etc, etc, etc are $700/mo

Now - some quick math:

Combined Incomes:           $ 9 582.00

Combined Expenses:         $10 278.00

Total monthly cashflow:     -$ 696.00

Would it surprise you to know that they have credit debt of over $50,000 that they are only making minimum payments on?  Do you think they're worried about one of them possibly losing their position?  Is it any wonder they feel they can't afford to have children or to save for their retirement?

Now let's take a look at a young family who are self-made millionaires, James and Jenny.

James, 35 years old:  

  • Employment - Works as a professional, earns $55, 000/yr ($4583/mo).  Taxes are $1008/mo.
  • Home - $250,000 in an area of town within walking distance to schools, groceries and other shops.  The home was purchased with 5% down from their RRSP's with a 15 year mortgage.  It was purchased for $150 000 5 years ago, a little run down, but in a solid neighborhood.  Mortgage and property taxes are $1, 355.
  • Vehicle - 1998 Dodge Caravan, paid off.

Jenny, 31 years old:

  • Employment - Works part-time and trades off childcare with another mother who works the other half of the week.  Earns $25, 000/yr ($2083/mo).  Taxes are $333/mo
  • Home - Much of their furniture is the combination of sets they received from their parents over the years.  Their average monthly cost for replacement, repairs and new purchases is about $150/mo.
  • Vehicle - Because both James and Jenny carpool and use the rapid transit system, they only own one vehicle.

Other Expenses:

  • Dining - James and Jenny rarely eat out.  Jenny usually cooks double servings so that on the days she is working she can pull out one of her pre-done meals.  Jenny is attentive to sales and stocks up on items that are heavily discounted and rarely pays full price even for groceries.  Even though they have two young children their monthly grocery bill is only $550/mo.
  • Entertainment & Beauty - Entertainment comes in the form of having friends over and attending their children's events.  Family gatherings and vacations where relatives get together are the norm.  A family friend cuts the families hair every 2 - 3 months, they keep a sensible wardrobe for themselves and shop at high end second hand stores for their children.  Monthly costs here are $500/mo
  • Other expenses:  They have no credit debt, so all they need to cover are vehicle expenses, and utilities - $300/mo

Now - some quick math:

Combined Incomes:           $ 6 666.00

Combined Expenses:          $ 4 196.00

Total monthly cashflow:   +$ 2 470.00 (not including rental property and investment revenue)

They have no credit debt that they are paying off, if they so chose, Jenny could quit working altogether.  They have been investing the difference between their incomes and expenses for the past 15 years into rental properties, stocks and a few business investments.  They are currently developing a business together that they will develop, but others will ultimately run.  

Their combined net worth is just over $2,000,000.00.  They donate 15% of their income to charitable organizations and maximize both their RRSP and RESP contributions.  If they so chose they could actually both quit working and live off their investments and revenue from their rental properties.

Here's the difference:

One couple lives like what they believe millionaires look like.

The other couple lives like millionaires.

Do you want to know who lives like you believe millionaires look like and still doesn't need to work if they choose not to?  People with TENS OF MILLIONS of dollars!  They can afford to spend $500 000/year and not need to dip into their fortune at all.  

One day James and Jenny will reach the $10,000,000 mark, but I doubt they will look much different then they do now with the exception of being more involved in charitable organizations.  They will have spent too many years of living sensibly to suddenly burst out into a spending spree.

If you're looking for millionaires, pass by those who look like Mark and Marci and take a closer look at James and Jenny.

Graham White