Imagine you are in a grocery store; you go up and down the aisles filling your cart with various items, a combination of your needs and wants. You get to the checkout and as the items are being run through you realize that you don’t have enough cash to pay for it all; oh yah, in this scenario you actually use cash to pay for things. You are now faced with a choice, you can quickly scan over the items and pick which ones to get rid of, most likely this will be in the ‘wants’ category, or you can pull out the credit card and go into debt for it.This is how we typically live our lives; we make our choices then deal with the consequences afterwards. Considering the average Canadian debt level sits at around 167% of income, it would seem that we are heavily dependent on the debt option to get us through. As a result, debt levels rise and the ‘wants’ suffer. Now imagine that before you entered that grocery store, you knew exactly what you were going to buy and you knew that you would not have enough money to pay for it all outright. Now you have more options, you can be proactive instead of being reactive. You still have the same two options as before:
1. Get rid of some ‘want’ items
2. Go into debt or more likely, further into debt
But now you have new options, like:
3. Choose less expensive versions of the same items
4. Cut back on the quantity of some of those items
The greatest benefit of foresight is choice. Typically, the more you know the more choice you have. The choices we make now greatly affect not only the choices we will have, but the number of choices we will have.
But how, you may ask do I gain this foresight? We are creatures of habit, even our so called “variable” expenses tend to be quite regular. This goes to the very heart of the Life By The Pie™ philosophy; it’s not about spending less, it’s about understanding what you’re spending on and how much. Having that insight gives you the ability to be proactive, it gives you the power of choice. Do I really want ‘this’ now or ‘that’ later. Every dollar you spend is a dollar that can’t be spent on anything else. The typical financial planning mantra is to cut out the ‘variable’ expenses and refocus that money on savings; but we take a broader view. What are you saving for? Is the goal to be able to survive? To get by? We believe that it is possible to have fulfillment in life, both now and into the future. The term “Latte Factor” was coined in reference to the unnecessary fringe expenses people often waste their money on instead of on savings. But if those fringe benefits are what give your life enjoyment, why should they be the first to go? Don’t get me wrong, I’m not advocating that it’s okay to constantly splurge on indulgences; don’t sacrifice tomorrow for today, but you don’t necessarily have to live like a hermit and eat cat food in the hopes of being able to enjoy your life later. It’s about balance; Context and Consequence.
Context: How much of your income goes to supporting the expenses in your life
Consequence: Given the option, how could you redistribute your money; in other words, instead of what you are currently spending your money on, what could you be spending your money on. What are the consequences of your spending choices.
Our goal is to give you the tools to gain insight into your own spending habits, so that you can use that knowledge to gain power over your spending decisions to create the life that best suits you, one that is fulfilling to you.