Happy Go Money

Spend Smart, Save Right and Enjoy Life

Melissa Leong

• Publisher: ECW Press
• Year: 2019
• ISBN:
  9781773052809
• Topic: Développement personnel
• Subtopic: Finances personnelles

Featured on The Drew Barrymore Show

Can money buy happiness? Maybe, but not like you may think …

The Social 's finance expert gives practical advice on how to spend, budget, invest, and feel good about money

With Happy Go Money, financial expert Melissa Leong cuts through the noise to show you how to get the most delight for your dollar.

Happy Go Money combines happiness psychology and personal finance and distills it into an indispensable starter guide. Each snappy chapter provides practical, easy-to-understand advice on topics such as spending, budgeting, investing, and mindfulness, while weaving in research, interactive exercises, and relatable anecdotes. Frank, funny, and empowering, this primer challenges everyone to revamp their relationship with their money so they can dial down their worries and supersize their joy.

Happiness for Later

Saving strategies and investment savvy that will have you laughing all the way to the bank.

16

Save Right

Here’s a typical morning: I’m late. I’m wrestling clothes onto my toddler in the doorway then launching all of our gear into the backseat of our SUV like it’s a garbage truck. At his school, he’s pulling me down the hallway like I’m a donkey, laden with his backpack, nap-time pillow and blanket, lunch bag, snow suit, etc. Then I’m driving home because I forgot his winter boots for recess, and I’m doing a conference call over speakerphone. I duck into a coffee shop to answer emails and do some writing on deadline, and I’m suddenly aware that I’m wearing a pyjama shirt and jeans. (I need to invest in outfits that will go from day to night to day again.)

I also blurt to myself, “Oh man, I forgot to brush my face today!” which means I forgot to brush my teeth and wash my face. The day is a blur. I pick up the kid and go to the grocery store to shop for dinner.

Now at this point, while my son alternates between wanting to see the lobster tank and whining for a cupcake, I’m supposed to make smart money choices. I’m supposed to walk the bright aisles filled with pick-me-uppers and make good decisions: do I want to save $30 for his college fund or spend $30 on cheese? Just point me to the wine.

It is hard to make the choice to save money on a daily basis. That’s a lot of pressure. Yes, I know, and I’m sure by now you do too, that delaying gratification can boost happiness. It spreads out the happiness. Some happiness now. Some happiness later. The motivated, best version of me knows this and will make the right decisions. But she’s not always around.

We have to make it easier for ourselves to save.

Make it automatic

Saving needs to become a habit. It’s like a muscle. The more you use it, the more it’ll become part of your routine and the easier it will be.

If you need to, start small. We don’t start at the gym with the heaviest dumbbells. Start by saving an innocuous amount. Maybe every time you get a $5 bill, put it in a jar or envelope for your emergency fund or your travel stash or your holiday gift reserve. Start with whatever you can. Ten dollars a week. Twenty-five. If you start with $100 a month, one day, $500 or $1,000 won’t make you as unhappy because your savings muscle will already be well defined. That being said, if you want a Mr. Universe–worthy bank account, it pays to be more aggressive with your savings.

A lot of us default to saving our leftovers. We wait until the end of the month, after money has been sucked away for rent or mortgages or insurance or car payments or debt interest payments, and whatever’s leftover goes toward our longer-term goals.

I liken this to me with a bowl of chips. At the start, I think, “I need to save some of this crunchtastic salty goodness for tomorrow.” Ten minutes later, I’m daubing at crumbs with a moistened index finger.

You need to put aside a handful of chips before you start eating. This sounds like we’re admitting defeat. Like we can’t count on our future selves to be disciplined. But, as I said, saving is hard. For everyone. Most people are not active savers. We have as much eagerness about boosting savings as we do about peeling potatoes or meeting the new girlfriend’s parents.

If you set up a system where money is automatically transferred from your chequing account into a savings/investment account, you won’t be tempted to spend what isn’t available. I promise that you won’t even notice that it’s gone. Do it biweekly to coincide with payday. Go do it right now. If you already do this, consider bumping up the contribution or setting up another one.

Often, the more you make, the more you spend. So, if you get that much-deserved raise, before you’ve had time to adjust to your new higher income lifestyle, automatically sock that extra money away by upping your savings with the amount of your raise.

If you’re self-employed and automatic saving makes you nervous — what if money comes out during a dry spell and you need that money to cover rent? — try just a small amount. If you’re uncomfortable with this, consider saving a percentage of every cheque that you receive. (You should be doing this anyway because the government is going to be coming for its cut at the end of the year.)

Your automatic savings plan takes money out of your chequing account. And, if you remember from our chat about budgeting, you can also make an automatic transfer of money from your chequing account to your spending account. If there’s money in my spending account, I’m buying the wine and the cheese — and a lobster and cupcake for my kid.

Some for me and some for me

Here’s a way to help you save while you spend. Some banks allow you to round up or set an amount to be added to each debit card transaction. TD Canada Trust has a program called Simply Save. Every time you buy something with your debit card, a set amount from $0.50 to $5 is automatically transferred to your savings account. Meanwhile, Bank of America has Keep the Change, which allows you to round up your purchases to the next dollar and the difference goes into your savings account. A number of spare change investing apps have popped up, including Acorns and Mylo, where the purchases can be rounded up and the difference automatically invested. Set it up, forget about it and accumulate money in a separate account to cover your anniversary dinners or charitable donations.

Nice figure

When it comes to long-term savings, we inevitably ask how much we need to save.

Financial planning company LearnVe$t suggests using the 50/30/20 rule: 50% of your pay should go to essentials (housing, food), 30% should go to lifestyle choices (entertainment, travel) and 20% should go to money priorities (retirement contributions, emergency savings, tackling debt, etc.).

Bleh. I don’t enjoy rules of thumb. Applying general formulas to our savings strategies is as accurate as taking a magazine personality quiz. (If you’re living rent-free with your parents, for example, you can save a lot more than 20% for your money priorities.) Also, sometimes these rules of thumb can become outdated, without us realizing it.

But if you can save 20% of your take-home pay, that’s good. Ten to 15% is good too — it’s much more than the average household is saving. (Households in Canada and the U.S. have been saving less than 6% in recent years.) If you have big, fabulous goals, like early retirement or a year-long trip to fund, then you’ll need to be saving more — at least 50%.

If you heard that everyone could stand to lose exactly 10 pounds to be healthier, you’d call bullshit, look at your own circumstances and estimate a number that works for your life and your plans. How much do we need to save? It depends.

How much should you save in an emergency fund? A minimum of three months’ worth of living expenses or more? Well, it depends. Are you a full-time permanent government employee, or are you a freelance musician?

How much should you save for retirement? Many experts say between 10% and 15% of your earnings, starting in your 20s. But, oh, it really depends. Are you 25 or 45 years old? Do you live in a small town or the big city? Do you have a magical defined contribution pension? When will you leave your job in a blaze of glory? And will you die at 72 or rock it until you’re 102?

Argh. This is why people look for rules of thumb. To make for shorter reading. We’ll get to a number more tailored to your needs soon.

Thinking of how much you’ll need to have saved can be daunting, overwhelming. Establish bite-sized milestones, such as getting to that first $1,000. Figure out how long it will take to get there and do whatever you can to get to that first stepping stone. Achieving those milestones is much more plausible than deciding to save a million bucks for retirement; that feels unfathomable. But we’re builders and we’ll do it one brick at a time. Just focus on the bricks. Or approach it like that cake in the fridge. We know the cake will get eaten. One bite at a time.

The money miracle

It’s been called magical. A miracle. The eighth wonder of the world. You’d think it’s a monkey’s paw that grants monetary wishes or a genuine Nigerian prince who is leaving you an inheritance, but nope, I’m talking about compounding interest.

Your brain may have just played the sad trombone noise, but my brain popped fireworks.

What exactly is compounding interest, and why is it magical for your bank account? Think of it as interest on interest. It’s interest on your initial principal (your original investment) and then on the accumulated interest. Doesn’t sound like something that deserves a parade, but it is.

Its power is like the Force. Depending on how it is used, the power can be good or evil. It can be your friend or your enemy depending on whether you earn it or you pay it.

For your savings, time can turn compounding interest into your BFF. This friendship grows and grows over the years. It starts as this little baby lizard cradled in the crook of your arm, and then one day it’s a massive dragon able to help you fulfill your destiny and conquer lands. Let’s say you invested $1,000 and it earned 5% in interest last year. Today, you’d be earning interest on $1,050. Now, let’s say you invested $1,000 in the bank and left it to grow for 30 years with a 5% rate of return, compounded annually; even if you never added any more money, you’d have more than $4,300.

Without time, your dragon will not grow to its full potential. (To describe the phenomenon that is compounding interest, I’m using a dragon metaphor. In my news articles, I use gremlins growing in a pool of water; fellow finance author Robert R. Brown uses zombies and horny rabbits — one zombie bites another zombie who bites more; one rabbit bones another rabbit to make 10 more who bone 10 more and so on.)

Dragons, gremlins, zombies and bunnies aside, let’s use the example of two Melissas to illustrate the importance of starting to save as early as possible. Both Melissas have $1,000 a year to invest for a certain period of time. Melissa A starts early, when she’s 20, and stops when she’s 34. Melissa B starts saving at 30 years old (her 20s were for concerts and travel and bottle service and definitely not saving). She puts $1,000 every year into her savings account until she’s 64. Both make 6% annually on their investments. Who ends up with more?

	Melissa A	Melissa B
Age when she started investing	20	30
Age when she stopped investing	34	64
Total amount invested by age 65	$15,000	$35,000
Who wins?	$141,700	$118,000

Melissa B started late but invested more. Melissa A, who stopped saving a few years after her doppelgänger began, comes out on top. That’s the magic of compounding interest over time.

Even if you feel like Melissa B, don’t despair. First, you’re equally as attractive as Melissa A. Second, you can make up for the time lost with some smart strategies. Just don’t wait any longer.

The Rule of 72

I hate math. I said it. I was an honour roll student with braces, big glasses and a poodle perm, but despite the dorky clichés and the dumb-ass racial stereotype about Asians, I shudder at numbers. Mofo will catch me trying to tally something, my face scrunched, my fingers wiggling, and he’ll make fun of my “hand abacus.”

But the rule of 72 is easy math. It’s a shortcut that will tell you approximately how long an investment will take to double.

The formula: 72 / Interest rate = Years it’ll take to double.

If you invest your money at a 6% rate of return, your money will take 12 years to double (72/6 = 12).

If you want to double your money in 10 years, you need a 7.2% rate of return (72/7.2 = 10).

Rate of Return	Rule of 72
2%	36.0
3%	24.0
5%	14.4
7%	10.3
9%	8.0
12%	6.0
25%	2.9

Your Happy Money To-Do List

• Set up an automatic savings plan for any specific goal. Or if you already have one, bump it up.
• Look into any incentives or programs through your bank that might help you save more money.

Money Talks

• What is your biggest impediment to saving?
• What’s the most important thing you want to do with your money in the next five years? Ten years?

17

Make That Money Work

When I took a financial securities course, one of the most painful things I learned was calculating bond values. So, that’s what we’re going to do right now. Just kidding. As I said, math equations are the antipode to my joy.

When we talk about financial smarts, a lot of people assume that means investing savvy. Then they (mostly men) inevitably try to talk to me about bitcoin and stock picks and foreign exchange trading. Sure, understanding the concepts and knowing the lingo helps, but that’s not what determines your money s...