My problems have been as follows:

(1) Low revenue; and

(2) overspending on the small things (books, groceries, DVDs, nights on the town, yada).

The small purchases add up quickly. It meant that my behaviour was no less money-stupid than that of a person who buys an unaffordable car or the latest iPhone. I’ve now had a budget for many months and I’ve been following it religiously. Nevertheless, I have a hard time saving up money for planned spending.

There is one major item I’ve got my eye on: a barbeque. For the first time in my life I am spending the summer in a home that does not have a barbeque. I am definitely feeling the pain because grilling steaks and lounging around with good friends and cold beer is the best thing about having a backyard. A George Foreman Grill just doesn’t deliver the same experience. I want to buy a BBQ as soon as possible in order to get maximum use out of it during the summer. Since I’ve set my mind on owning a barbeque, I’ve come up with a few saving strategies that won’t affect my lifestyle too much, and will help me save up the $150 or so that I will need to make the purchase. Over the next few weeks I will come up with a few strategies for cutting down my spending without cutting down on fun (too much). I’ll end the series when I have the barbeque, and I will assess the success of each step in helping me save the money.

I’m going to start off week one with the easiest strategy, although it’s likely to yield the smallest amount of cash.

Saving Strategy #1 – The Piggy Bank Method

This idea came from a good friend who has been using this trick for years to help save cash for everything from buying Christmas presents to funding family vacations. I was always skeptical about the results, but seeing her success has given me the desire to test it out and assess it for myself. Step one is to live on cash (I already do). Next, I need a piggy bank; I’m going to use a coffee can since I don’t own an actual piggy bank. The rest is simple: spend cash normally, in accordance with my budget, then put every loonie and toonie in the bank at the end of the day, keeping the bills and small change for spending. The pro to this method is that cash will accumulate without being missed too much. It’ll discourage me from popping $2 in a break room machine for a bottle of soda or grabbing a coffee at Timmie’s. But the con is that it just won’t produce much “found” money to contribute to my goal considering I already stick to my budget carefully. If, however, I find this saving strategy works for me, it’s something I can easily continue long after I have the barbeque. Every dollar counts!

Next week I’ll talk about my grocery bill challenge.

Rewind to 8 years ago. I was fresh out of school and already looking forward to my retirement. No I didn’t have a million dollars in the bank, nor any concrete plans to that end. But I was all too ambivalent about my chosen profession, a situation not helped by the fact that the first few years of work in this particular field are absolutely miserable – overworked, underpaid, and stressed out to the max (and that’s according to universal consensus). I became so disenchanted with it that, just one year in, I was on the verge of quitting my profession altogether. I even started researching Masters programs in creative writing, with a misbegotten plan to “follow my passion”. Oh boy!

Thankfully, I stuck it out; I made a couple of lateral moves, jumped organizations, and generally started to take a more proactive approach to finding the right “fit”, career-wise. Eight years later, I can finally say – honestly – that I enjoy my job more days than not. Heck, I’ll go so far as to say that I really, really like it. That statement would have been inconceivable to my 25-year old self. More inconceivable — even to my 30-year old self — is the fact that my thoughts on retirement have undergone a radical shift in direction.

When my husband and I first started talking about our long-term career plans (3 or 4 years ago), I was pretty upfront about my desire to retire as soon as financially possible. We discussed ways that we could make that happen. But, funnily enough, it seemed like every time I would settle on one plan, my thoughts on retirement would go in a different direction.

Personal realization #1: I didn’t necessarily want to retire from work entirely, just from what I was doing at the time.

Personal realization #2: I need structure and discipline in my life; all the more so because I am a lazy person. Indulged to its fullest, however, my laziness spirals into miserable apathy; the key is to indulge it in small doses only.

Personal realization #3: the epiphany that my 50s (and 60s) will be my prime earning years in my current career. Retiring before that time would be grossly imprudent, if not disastrous.

And so, with realization #3, the plan changed – this time, to seeking a job in the allegedly more “work-life balance”-friendly environment of the public sector. Now, before all you public servants throw your union cards at me like shuriken, let me add that my intent is not to suggest that working in public service is a cake-walk. However, based on my conversations with friends and acquaintances who work for the government (at various levels), public service does offer benefits that the private sector typically does not. Better vacation entitlements. Flex days. Predictable hours and little or no uncompensated overtime. All things that could, conceivably, keep me working longer and happier.

Then came personal realization #4: I kinda thrive on stress. Stress can be unhealthy for the body, but it’s also what keeps me motivated and engaged. I have a love-hate relationship with deadlines; as unpleasant as slogging through difficult work in a pressure-cooker environment might be, there is nothing sweeter to me than the sense of accomplishment that comes from knocking it out of the ballpark with time to spare. I’ve been getting better, with age, at managing the physical side-effects of stress, while still using the sense of urgency and importance of the work as a motivating factor. It’s my concession to the future, and my 60-year old self’s well-being.

Now, the place where the ability to manage and harness stress to your advantage can really pay off is the private sector. It’s there, more often than in the public sector, that performance-based compensation can hit the stratosphere. (And, as we know, I am certainly motivated by money — specifically the idea of earning oodles.) Which left the question: can I derive an equal or greater sense of personal satisfaction from the pursuit of interests other than my work and, if so, is that extra satisfaction worth foregoing the additional income that my work could deliver?

Personal realization #5: the answer is ”no”. I am pretty passionate about my non-work interests, and there are many times when I wish I had more time to pursue them. But, as with my laziness, part of their charm is derived from the fact that they are limited to small chunks of time. They are “treats” and as such feel all the sweeter. I’m not sure they would be as engaging if they became too routine or toilsome. And they probably couldn’t replace the sense of accomplishment that I derive from my work, for the simple reason that none of my personal interests result in the creation of anywhere near as much objectively-quantifiable value (which is my benchmark for personal accomplishment).

In the end my retirement plan consists of, well, working as long as I can, and doing everything I can in the interim to ensure that I enjoy said work. Not because I have (or plan to accumulate) liabilities so massive as to require life-long debt-indenture. No, it’s simply because I want to. Keep working, that is.

Chances are high that you are reading this thinking “Man, Adina’s really out to lunch with this one!” The point is not that my way is the right way for everyone. In fact, I would be rather shocked if anyone’s attitude to retirement was the same as mine; it would mean that we had freakishly identical values and goals. The takeaway I am hoping to impart, based on my own experience, is more basic:

1. Don’t be seduced by the retirement ideals of others (including mine), because they may not reflect your values or represent the best means of implementing them. Sure, you might be able to retire at 40, but what difference does it make if you’re less satisfied with your life afterwards?
2. Analyze your values closely. Sometimes you may be surprised by what they are (or are not). Sometimes, they might even be conflicting — in which case you’ll have to think extra hard about how you can resolve the conflict.
3. Don’t be afraid to change the script. Life is not static, nor are you and your values. Hey, when I turn 40, I might decide that the most important thing in my life is lying on a beach in Hawaii.
4. Don’t treat retirement as a “get out of jail free” card. If your current work situation is making you miserable, a healthy response is not to think of ways to retire sooner. Your first response should be to think of ways to improve your current situation. It seems overly simplistic, but so many of us tend to forget that present actions have a much more immediate (and certain) impact that any long-term plan (because, again, such plans are subject to change).
5. Reaching financial independence is crucial, not because it’s a means to early retirement, but because it enables you to follow your retirement plan — whatever it may be — freely and without external pressures. Scotiabank commercials aside, there is a huge difference between working at 65 because you want to, not because you have to.

A person can accumulate a great deal of money, and that stands as a testament to his or her work ethic, intellect, and ability to produce value. Same idea for grades in school (minus the production of value). But such accomplishments don’t merit the assessment that a person is, necessarily, decent. That’s the question of the day: what makes a person a decent human being? (The question here isn’t what makes a person good. That degree of moral character is even tougher to objectively assess and, to many, involves a religious element.)

The lists that popped up in Google’s search results weren’t particularly impressive. Some were just plain awful. Here’s a feeble attempt at a new list:

Love your family and friends unconditionally. Family is the most important social structure. Despite their lack of biological connection, friends are also important. Regrettably, people hurt the ones they love. Sometimes, this devolves into a spiral of hatred or revenge. The only fix is forgiveness, unconditional love, and (where possible) the resolution of issues that led to the pain. It also helps to learn how to…

Say “I’m sorry” sincerely. Take ownership of your actions. It’s easy to take credit for good decisions and actions, but a lot harder to admit to being wrong. The impediment to this is pride; let go of it.

Say “thank-you” sincerely, too. Saying please and thank-you is a near-extirpated social grace. It’d be nice if people said these things more often. And for those who are owed a large amount of thanks, back up your words with actions that demonstrate your gratefulness tangibly.

If you can, donate blood. Not everyone is able, which makes it all the more important to do so. Canadian Blood Services could definitely institute more convenient hours and make donations easier for “walk-ins”. But such imperfections don’t negate the importance of their work or the duty of citizens to donate.

Register for organ donation. If you’re in Ontario, the website is BeADonor.ca. I carry the card in my wallet, but I wasn’t sure if I was actually registered. It took me 10 seconds, and my health card, to verify that I am.

Hold doors, or at least hit the automatic door button. (I think this one also ties back to our society’s slow loss of fundamental decency.)

Donate old stuff. If you’re broke enough that you need to sell your old stuff, e.g. books, clothes, and kids’ toys, then you’re poor enough to use the places that give away free stuff. (Mind you, I’m not talking about designer clothes, wedding dresses, or extremely rare nail polishes.) Garage sales are a ton of work for little payoff. Kijiji is a major hassle. Free yourself from clutter and trivial thinking.

Give up your subway seat. I don’t even take a subway seat during rush hour. There’s no point. Somebody who could clearly use it more than me is always around, or will appear at the next stop. Now my daily ride is only a few minutes so it’s not a big deal. Such decency required more discipline, however, when I rode the subway from Scarborough every day.

Honour your contractual commitments. Too many people think it’s OK to avoid fulfilling obligations to do something or pay money. An effective court system may be essential to support free markets, but the economy won’t function if everybody needs to resort to the courts. Be trustworthy and dependable.

This list is a start. You’re welcome to contribute in the comments, and I hope my daughter reads it some day.

I’ve been living with a frozen salary for the past three years. As a result, I’ve been finding myself increasingly constrained financially.  Despite this, I’m working to gather the funds to put my now mold- and water-proofed basement apartment back together. That way I can rent it out for monthly cash flow.

Inspired by various posts from Joe and Sara, I’ve started a project to cut my costs. This includes cleaning up my bank accounts. I talked to a telephone representative at my bank, BMO, in March. She mentioned that I could pay $9.95 a month for 30 transactions. She also said I’d save $2 a month if I opted for e-statements on my chequing account. (I had not yet seen charges for paper statements.) Up to that point, I had not been counting my monthly transactions because my banking life was working seamlessly. I asked questions to make sure there weren’t any penalties or additional fees for making the change. According to her, things would continue as they were. I was only changing the plan to save a few bucks. Change made.

The $9.95 fee was applied to my plan in April. Then I saw a new and unexpected $6 charge appear for ‘excess transactions’. I was angry.

I called BMO again to discuss the charges — which I felt I hadn’t been properly warned about. I noted that I’d literally been charged $15.95 for the month of April — an amount that, besides being unreasonable, was more than the fees I’d been paying before. This totally defeated the whole purpose of converting to the $9.95 plan. I pointed out that I’ve been a lifelong, loyal customer of BMO and that I was sick of being nickled-and-dimed to the point that I’d be looking to move my accounts. The bank has made more than enough money from my money and fees — they don’t need to gouge me.

The telephone rep reversed the $6 in fees. I was promised my home branch would be notified that I wasn’t happy and that I expected to be returned to the old plan. (The rep claimed that my old plan was “no longer available”.) Finally, I was promised that I’d be called to discuss my concerns further.

My home branch gave me a call. I yet again explained what happened and said that it’s not acceptable. I recited my long-term loyalty to BMO and noted that the banks make more than enough money without gouging their customers.

They offered me a stopgap solution. My plan is now the “performance plan” which includes truly unlimited transactions. It costs
$13.95 per month ($1.95 more than the last plan). But they made it a student plan for the first year at just $4 a month. I was also refunded the $9.95 paid for April for “being given incorrect information” and having to deal with the resulting problems. Over the course of the next year, I’ll save almost $120. That’s not a massive amount but, in my book, it makes a difference.

It also buys me some time to explore how to not pay any bank fees. Here are my two options as I see them:

1. I’ve enquired about BMO Club Sobeys banking. As a current BMO customer, it wouldn’t be too much trouble to switch over. I’m even a Club Sobeys member. The problem is that I’d essentially lose the ability to bank in-person without huge fees.
2. ING offers THRiVE chequing with no fees. I have accounts and my mortgage with them. It’d be a bit more work to switch over, but could be worth it.

My banking life is based largely on the punctuality of my money. I need to know that my life will not be interrupted if I make the switch to BMO Club Sobeys or ING THRiVE chequing. And, in this day-and-age, is it too much to ask for no-fee banking that doesn’t cramp my style?

“What Is Your Mother Worth” is a post by Adina J in which she explains why stupid questions will always have stupid answers.

• Day-care provider. This is often the most demanding, and time-consuming, part of the “job”. That’s doubly true if young kids are involved. It requires physical stamina and endless patience, and it can be monotonous. It’s also not very intellectually demanding, which is why more or less any physically-able adult with a modicum of empathy and sense of responsibility can do it. This supply of “early childhood educators” explains the market wage of under $20,000 a year. Before the age of 5, and barring any child prodigies, kids don’t have extensive educational needs that would require a pedagogic degree on the part of their caretakers. With that said, this aspect of the SAHM role is one that has to be filled by someone whether Mom is at work or not. So the job has an objective, quantifiable value in the larger market-place. The fact that a SAHM might think that her child-minding abilities are better (for her child) than anyone else’s is irrelevant from that perspective and carries no monetary premium.
• Housekeeper. Whether you are a parent or not, you are going to have household chores to do. Let’s assume, for the sake of argument, that a SAHM logs in more cleaning activities than a working person in an average week. Since no one is talking about compensating the latter for their efforts, the SAHM should only be attributed with the positive differential of excess hours.
• Chef. I am sure that some SAHMs are amazing cooks, but I doubt there are many who are Cordon-Bleu trained. We’re talking about grinding up peas or baking chicken fingers here, not preparing Michelin-rated cuisine. Nothing wrong with home cooking, of course; but to refer to this work as being a “Chef” denigrates the actual career a bit. In fact, it’s what adults all over the place do: prepare food to feed themselves. I don’t think anyone expects a cheque in the mail for it.
• Psychologist. I think this means that SAHMs are required to interact with their kids and listen to them. Or maybe just show them kindness and empathy? I’m pretty sure that doing so doesn’t require a Masters degree (whereas actually being a Psychologist, you know, does). Reading a bunch of parenting books doesn’t make one an expert any more than administering Tylenol makes one a doctor; regardless of what mommy bloggers try to tell you.
• Household CEO. This assumes the SAHM’s partner plays no role in the running of the household, but let’s go with it and assume our society has moved to full-out matriarchy. Running a household is about as far from running a multi-million dollar commercial entity as my writing is from Nobel Prize literature. Some of the basic mechanics are the same; but to equate the two is a joke. Given the large number of Canadian households in dire financial states, it’s safe to say that most of them are not run by real business people who are deserving of leadership over a large organization.
• Doing laundry.  We all do it. “Launderess” stopped being a viable career about a half century ago.
• Operating a computer. We’re not counting playing Candy Crush or Pinterest-ing here, right? I mean, seriously. Tim Horton’s workers have to operate computers. Paying your gas bill does not compare with the job description of a computer engineer.
• Facilities manager. No idea what this means. Unless you’re operating a power plant or waste treatment facility in your back yard, this one’s a stretch. Even sticking to stereotypical gender roles, the husband tends to the grass on weekends, unplugs toilets, and changes lighbulbs; should Mom be cutting Dad a cheque for chipping in?
• Janitor. How this is different from housekeeper I don’t know.
• Driver. I’m pretty sure that your kid doesn’t care if you drive to the mall every day, and doesn’t force you to wear a goofy uniform and hat. Plus driving an minivan is more pleasant than driving a bus. As for actual kid-related driving activities, a parent has to do them regardless of whether they stay at home or not.

As ControlYourCash says:

You’re getting married, so presumably you’re an adult now… That means that you should have advanced past the immature belief that instant gratification is the most important thing in the world. For the opportunity to spend a few hours stroking your ego and being the center of attention among your friends and family, you’re committing to spending months if not years paying for the privilege.

But there’s no rule that a couple must blow tens-of-thousands of dollars on their wedding. Weddings can be frugal. Couples can stay committed to building a sound financial footing during, before, and after getting hitched. Take my older brother, Jon, and his now-wife Ashley. They met at University. My brother moved up north to do teacher’s college while Ashley finished her last year of undergrad. He continued to teach while she did her own B.Ed. Does separation make the heart grow fonder? As with any true love, yes. They tied the knot in August of 2011 in a small but nice affair. The picturesque scenery made for awesome photos and good memories. They managed to accomplish all of this on less than $1000.

The venue that they used was the Spirit Rock Conservation Area.

Special thanks go to the good people at the Grey Sauble Conservation Authority. My brother called up to ask about using the park. Not only were they excited to host such an occasion, but they didn’t charge a fee. We all know that Ontario is a beautiful province; this area is particularly beautiful and a great place to visit in the summer.

The wedding ring belonged to our Great Grandmother. I would probably spend most of my wedding’s budget on a few thousand in jewelry, and I know my brother is of a similar “frugal but not cheap” mindset in life. At the time, however, my brother was just finishing the second year in his new career and my sister-in-law had just graduated. They were about to head north for their first year of work together. A sub-$1000 wedding was important to help them meet other short-term goals (e.g. getting a truck) without going into debt. The ring was beautiful and I imagine that my Great Grandma would have been extremely pleased.

In the above picture, on the right, you might recognize the videographer. That’s another way they saved money: we all brought cameras, memory cards, and batteries. Ashley got photos developed at Wal-mart, including these two family favourites:

I see those two pictures often when I visit family members; not to toot my own horn but I think I set up a lot of good shots.

Naturally it was easier because I had beautiful subjects. Speaking of which: Ashley wore a $3000 designer dress, purchased for just $200 at a thrift store.

As a guest at a wedding, my main concern is food. They ordered a cake from the local grocery store. Sure, it wasn’t multi-tier but I swear it tasted better than any wedding cake I’ve ever eaten. Jon picked up some Subway sandwich platters and soda for lunch in the park.

You can see the wedding bouquet in the cake picture. Sure, it looks a bit fake up close, but in the wedding photos it looks lovely; and it only cost $3 at a local discount store. Ashley picked the flowers in the other arrangements set out at the wedding site from her parents’ garden and decorated them with dollar store items.

That night, the party headed to Bruce Peninsula National Park for some spelunking.

I’ve learned a very valuable lesson looking back at this event. A nice wedding doesn’t need to cost five figures. I think that relationships, girded by the commitment of marriage, can actually help people build wealth. A frugal wedding, for a couple not wallowing in debt, is a justifiable expenditure. Such weddings come as close to being investments as consumption ever could.

I never planned on throwing a ‘party’ per se. Recently, however, a good friend of mine spent hundreds of dollars on her child’s first birthday (e.g. renting a hall, getting the event catered, and buying party favours). I helped her carry $70 in purchases from the dollar store during lunch one day. So I reconsidered my position.

I suspect Cat will be really “into” Disney princesses (particularly given her enjoyment of Sleeping Beauty). This gave me an idea for a theme.

I think she’d love this pinata. Which is kind of weird, because Cat doesn’t eat candy. Does anybody have good ideas about pinata candy that a baby could enjoy? My only idea (rice crackers) is boring.

Thanks to capitalism, there are other branded products with themes that match the pinata.

For a present, I am strongly leaning toward “Disneyland Adventures”. It’s an Xbox game that uses Kinect (no controller necessary).

Cat is too young to use it on her own right now, but she might enjoy me playing the game with (for) her. I shouldn’t underestimate her ability to interact with electronics, however, because she’s a smart baby. She already figured out how to scroll through pictures on the BlackBerry 9900 and she stops and smiles at pictures of herself. Extremely cute. Speaking of which:

//Cat//

//Announcements//

As a result of various pressures and commitments, I am going to scale back the blog’s posting schedule. Cat is almost a year (as noted today), and while I’ve enjoyed sharing the world’s most beautiful little girl with TiFi readers, it may be time to end this Friday feature.

I’m planning to move TiFi to a 3-day posting schedule, a la Boomer & Echo: a post on Monday, Wednesday, and Friday. Likely to be me on Monday, Adina on Wednesday, and Sara on Friday.

Quality guest posts are, as always, welcomed — I particularly love when regular visitors become passionate about a topic and want to share their knowledge, e.g. VI’s excellent series on Bitcoin that ended yesterday. I will continue to provide revisions that display your stories faithfully and in the best light, and most likely slot them into a Tuesday or Thursday.

I’m sincerely sorry to anybody disappointed by this move. My decision has nothing to do with a lack of visitorship or engagement; TF has awesome readers. The reality is that time is just a limited resource.

Today’s guest post, “Bitcoins: Revolution or Bunk? Part 4” comes from Value Indexer. VI writes about enjoying wealth in all its forms at Simply Rich Life, and about index fund ideas and research at Value Indexer.

In the first three parts of this series, we’ve seen that Bitcoin is a new kind of currency, learned about its infrastructure and its unique advantages. Even though it is different from any other money in the way it is created, validated, and used, it is familiar insofar as it has similarities to cash and electronic payments. Bitcoins offer the “best of both worlds” when it comes to low transaction costs and rendering obsolete the maligned bankster class. Everything’s great, right? No — Bitcoins have hidden risks, many of them directly related the advantages we discussed last week.

There are five broad categories for the types of risks inherent to the Bitcoin system:

1. The potential for direct theft
2. Other security issues
3. Technological threats
4. Systemic economic problems
5. Unknown risks

1. Theft

Anyone who gets access to your wallet information (through your computer or an online wallet site) can send your money to themselves, irreversibly. Remember that Bitcoin transactions are permanent. And make no mistake: theft has happened, including on a large scale. There are probably many cases that we don’t know about.

2. (in)Security

(a) The rules are flexible. If someone had control of more than 50% of the Bitcoin network, they could do just about anything. This doesn’t simply include erasing transactions (which would be bad enough). They could also change any of Bitcoin’s peer-to-peer protocol, e.g. increase the maximum number of Bitcoins that can be created. Although many of these changes are supposed to be impossible, anyone who could overpower the rest of the network could force everyone to follow along. Many people add their computers to “mining pools” where one person with central control divides the work and rewards of running part of the Bitcoin system. The largest mining pool currently has around 40% of the power, so if it joined forces with the next largest mining pool, they could take control.

(b) While authority over Bitcoin is supposedly decentralized, hidden authority exists and has been used. In March there was a software bug that caused two separate Bitcoin economies to co-exist for a short time. During that time, one person managed to spend about $10,000 twice. Within hours, a few key players in the Bitcoin market agreed on a solution that would preserve as many transactions as possible. Once the major mining pools put enough power behind this decision, they forced everyone to follow the new rules or have their wallets ignored. This scenario sounds a lot like a central bank stepping in to save the system which is supposed to be antithetical to Bitcoin’s raison d’être. This same type of authority could be used for evil.

3. Technological

(a) The entire Bitcoin network runs on the same software. If someone finds a bug in that software that allows them to attack it, the whole network will be affected. In any software it is all but inevitable that bugs like this will come up eventually. If other people created their own Bitcoin software that participated in the network, it would have slight differences and would not likely be affected by the same bugs — just like a Mac is not affected by a PC virus. But the developers of the current protocol’s software admit that such differences would render the network unstable. The problem in March where there were two separate economies for a few hours happened because of a minor update in the software that everyone already uses. That’s scary.

(b) New hardware could crush current computing power and, therefore, the system. Obviously, there’s little risk of an average person or group of people being able to buy new supercomputers that could out-perform the Bitcoin network. But what about a malevolent central bank with access to a quantum computer? Massive leaps in computing power will surely abound during the coming century. Can we count on the owners of such next-step technology to always be scrupulous and respectful of the Bitcoin network?

(c) Today’s strong cryptography could be weak tomorrow. Bitcoin uses the strongest security that we know of, at the moment. That’s good, but such security mechanisms can have flaws that are revealed decades into the future. Heck, nobody solved Fermat’s Last Theorem for over three-and-a-half-centuries, but somebody eventually did. A genius might find a simpler formula that allows him to produce the same results as the entire Bitcoin network. Or somebody might find a formula that lets them guess private keys and make fake transactions. In such an event, the Bitcoin system’s trust infrastructure would break down. Everyone thinks the math is safe. Until it isn’t.

4. Economic

(a) Nobody knows how the Bitcoin economy will behave — remember, it’s a currency with planned deflation. We have economic theories that cover similar situations. But Bitcoin is a new type of currency and the way people use it won’t be the same. For example, the limited supply of Bitcoins suggests that there will be hoarding. That’s what happens in traditional deflationary situations — people know their dollar will be worth more tomorrow, so they intertemporally substitute to keep money. People don’t even need to spend their Bitcoins, so why would they? Then again, since everyone knows ahead of time how many Bitcoins there are, deflation may be slow, predictable and, thus, irrelevant. We just don’t know yet.

(b) Bitcoin is a currency that, thus far, has shown an extraordinary amount of volatility. This is because it’s also a commodity that people are buying for pure speculation. A functioning market, however, needs a reasonably stable currency to facilitate exchange. In the last six months, the currency has experienced hyperdeflation and then hyperinflation.

(c) The incentive to support the network will disappear. As discussed, a large base of computing power is necessary to keep Bitcoin secure. This is easy to incentivize — the computers that support the network, in doing so, mine (create) Bitcoins for their owners. But the number of new Bitcoins produced is constantly dropping. Those new, “mined” Bitcoins are the main reason that people add computers to the network. Most transactions include a small fee, but that isn’t enough to pay for the electricity needed to run the network, let alone the computers themselves. When the last Bitcoin is mined, why will computer owners continue committing their capital to the system? Will fees have to increase? These are unanswered questions.

(d) New currencies could be introduced to compete. There’s no dictator forcing people to use Bitcoin. Someone could create a similar system with better rules, or just a separate Bitcoin economy, that might eventually become more popular. This would reduce the uniqueness of Bitcoin and, likely, its value. A significantly better system could even render Bitcoins worthless.

5. Unknown Risks

When everyone agrees something will never happen, it is more likely to happen because nobody is guarding against the risk. As highlighted above, it’s not only hard to establish the potential impact of certain risks but it’s almost impossible to know which systemic risks pose an actual hazard.

In short, be careful.

Bitcoin is becoming increasingly popular. But “popularity” doesn’t mean “proven” or guarantee a stable currency going forward. It’s an interesting idea, but the risks — especially extended over long time periods — are large. Bitcoin’s greatest accomplishment may simply be opening the door to a new way of thinking about currencies, which in turn allows something better to come along.

“Savings Account Rehab” is a post by Adina J in which she confesses her secret addiction.

My name is Adina, and I used to have an addiction: my savings account.

OK, maybe “addicted” is the wrong term. Let’s try again. I am psychologically dependent on the concept of security as represented by the balance of my savings account. Doesn’t quite have the same ring, does it? Let’s go with “addicted” then.

I can blame my addiction, at least partially, on genetics or nurture. My grandmother was a level 1 hoarder. She amassed a variety of somewhat arbitrary household products (towels were a favourite) and cash in hidden caches around her house. Presumably this was to deal with her concern about possible future destitution. (I mean, you can never have too many towels. Or money in hand, preferably in foreign currencies, especially when the alternative is a communist country’s currency stored in a state-owned bank.) The fear of “rainy days” was instilled in me at an early age, and has never entirely left me. But instead of hoarding towels and cash around my house, I have a savings account.

I don’t want to horrify TiFi’s readers, particularly those who are more militant about building wealth, but at one time my savings account held more than half my entire net worth. More recently, it held around $40,000. Imagine that for a moment: $40,000 sitting there, accumulating 1%-or-so in interest, slowly losing its value to inflation. And, yet, there it sat until last year when I finally transferred about half of it into index funds in my TFSA. Part of the remainder got transferred into my husband’s TFSA a couple of months ago. Not counting money earmarked for our 2014 TFSA contributions and our 2013 mortgage pre-payment, we currently have a much less gawk-worthy 10% of our net worth sitting in cash. A higher percentage than many would recommend, but infinitely more reasonable than in the past.

Why hadn’t I done this before? Because I needed to go to savings account rehab first.

Many Canadians keep their meager savings in, well, savings accounts and GICs. Some of them do it because they don’t know any better. For many, it’s a decision rooted in a perverse form of risk aversion (as Garth Turner says, such cash hoarders fail to consider the risk of needing to eat cat food in retirement because they stuffed all their money in the Orange Guy’s shorts). For me, it went beyond that: a savings account represented security in the short term, a measure of protection against life’s unforeseen calamities. I was so attached to this idea of security that the thought of actually withdrawing money from my savings account made me feel (literally) queasy. So much so that, for a while, I opened a number of subsidiary “spending” accounts for things that I knew I had to save for and then actually, well, spend on (e.g. vacations, house repair, car maintenance, etc.). In doing so, I hoped to avoid violating the sanctity of my cash stockpile and the sinking feeling that accompanied any withdrawal.

But, eventually, it hit me: I was a hoarder. A money hoarder — one small step above stashing cash under my mattress.

Looking back, I realize now that failing to recognize my problem and deal with it sooner was the fundamental money mistake of my 20s, and the reason my net worth is not higher today. Don’t get me wrong; it’s hard to really screw up your finances when you’re an inveterate saver. But it’s easy to stagnate when you’re only playing defense. Sadly, even a mediocre net worth puts you ahead of most of your peers when you’re in your 20s and 30s, and so this mediocrity becomes comfortable. Don’t settle for merely above-average when the average is pathetic.

How did I break my savings account addiction?

First, I started paying attention to what reasonable PF-ers everywhere were saying. I learned to ignore my appalled reaction to the idea of ”eliminating” my large cash reserves. Hearing the message of “risk / return” repeated often enough helped to break down my long-standing indoctrination. At the same time, I started to take proper stock of our progress in net worth growth, and realized that we would have to become more strategic in our approach to reach our goals. Merely being good savers wasn’t going to take us to the goal-line (financial independence in advance of retirement). After setting my new cash management and investing strategies, I started taking incremental steps toward aligning reality with my plan: I moved small chunks of savings from cash to investments every so often. On each occasion, the sky didn’t fall. Eventually I whittled down the savings account to its current balance over the course of three years, all the while directing new savings into more productive investment vehicles. (A more recent turn-of-events has been the movement of my invested savings to lower-cost index funds.)

Others have said this better and more often than me, but here goes: there is no room for emotions in finance. With that goal in mind, the first step is to recognize the fact that emotions probably do play a role in your financial decisions — even the decisions that aren’t patently terrible. The second, and infinitely harder, step is to start taking active (rational) control over those finances.

Living with other people can have a variety of impacts on one’s finances. My financial situation, and the reasons I need roommates, aren’t typical. I currently pay all of the utilities in exchange for the master bedroom and ensuite bathroom. This includes: heat, hydro, water and internet. The usage of those utilities with roomies will increase, so I’ll need to adjust my budget. Thankfully I’ve been padding the amount I budget for these bills quite a bit, and thus don’t expect the financial impact of two new bodies to be crippling by any stretch. Due to the financial wiggle room I afforded myself in the past, I’ve decided that I will only need to increase my budget for bills by $50, because I was already over-budgeting by about $50 anyway. Included in this increase is $10 a month to purchase a bigger package of internet bandwidth. I’ve still left myself with extra room in my budget, because I don’t want to be caught off-guard and can always re-assess the situation in a few months.

I was worried that this increase would have to come out of my savings or debt repayment amounts (I simply can’t tighten my spending budget more). Luckily, a couple of fortunate events should save me from having to make any cuts. I recently finished a freelance project that will bring in a large chunk of money. This cash is already earmarked for 40% save, 40% debt repayment, 20% better tools for future projects. But if I keep it in the bank for a month (something I now have the discipline to do) I am due for a raise in a couple of weeks. That raise will more than cover the increased expenses and I won’t have to be concerned about a modest increase in my utilities.

I don’t want to make having roommates sound like a net detriment, however. Even with the added expense, I am still living far better and much cheaper than I would be able to if I were renting on my own. For that extra $50 I am also getting the benefit of having people around to share some of the responsibilities that come with living in a large home. There will be fewer rooms that I will have to clean regularly. We can share the costs of various household items. Plus, we can reduce our individual workloads in the kitchen by taking turns cooking and washing dishes. They’ve already fed me barbecue twice so I may actually be a little bit indebted this early in the game. Also, my neighourhood isn’t the best, so I’ll feel more comfortable living with extra, trustworthy people. At the end of the day, the three of us will be living the good life and saving money at the same time. That’s worth fifty bucks to me.