Thursday, March 22, 2018

Why "Give"

The Power of Giving

Julia Wise and her husband, Jeff, typically give 30 to 50 per cent of their income away. One year their charitable donations totaled about $160,000. Julia says it’s a way to help make the world a better place and will help teach her children about the family’s values.  She says, “There’s always someone who needs the money more than I do.”

Do you faithfully carve out a percentage of your income to donate to charities? There are a number of compelling reasons why people do this.  Most would like to see a “better world”.  Sharing the wealth is one way to achieve this. Charitable giving is a very personal and private act of kindness.
Julia states she feels privileged to have acquired a good education which landed her a good job with a good salary.  Her interview on CBC Radio Show “Out in the Open” is fascinating as she addresses the questions and ponders others’ concerns about their extravagant generosity. You can click here and listen to this podcast.

A Different Perspective

A change in our perspectives about the things that really matter was mentioned in a previous blog, When We Have So Much.  Terry Aberhart, CEO of Aberhart Farms Inc. and Sure Growth Technologies Inc. (an agronomic consulting company), shared his experience on a trip to Ethiopia.   I asked you then to imagine going without food, clean water to drink or bathe, and medication to treat a curable ailment.  I believe most would find this unbearable because we have never lived in this kind of environment.

Sometimes role playing isn’t a bad thing when we get too comfortable in our day-to-day lives. I often think about what would happen if my life drastically changed, and I was living in poverty, and looking to the food bank for my daily meal.  What if I had no shoes to wear? What if I had to sleep on a park bench?  These role-playing scenarios sound like a bad dream but there are people who live this daily.

Compelling Reasons

We can empathize with other people who are less fortunate than we are from a health perspective.  Every year, the first weekend in March, the Kinsmen Telemiracle Foundation hosts a 20-hour telethon to raise money for people who require special needs equipment and access to medical treatments. The generosity tugs at your heart strings and brings tears to your eyes as you watch the dollars roll in and the words echo the message, “Which way are we going?”  The only answer is “Higher”.  This year was no exception. The Regina Leader Post headlines Telemiracle Smashes Record with more than $7.1 million in donations.  The sum is an accumulation of both small and large donations.  The largest donation ever was a bequest of $1.5 million from the late Dr. Philip Thacker, Professor Emeritus of the University of Saskatchewan and a Kinsmen member.  Peoples’ compelling stories inspire others to donate and raise money in countless ways.

Philanthropists have their personal reasons for giving. In a rare interview for the magazine, Farming for Tomorrow, Mr. Jimmy Pattison said “The best thing that ever happened to me was that I had no money.”  Today Mr. Pattison is patriarch to one of the country’s largest private companies – the Jim Pattison Group (JPG).  Reading through the article, you learn quickly that he attributes his success to good values, honesty, integrity, and hard work. He has lived and strived through challenges and opportunities which make him grateful for the success he has achieved.  Now he lavishly donates his money primarily to the health-care sector.  The new Children’s Hospital of Saskatchewan in Saskatoon is one of the fortunate recipients of Mr. Pattison’s generosity.  Last May, he presented a donation of $50 million towards the facility.  

The Monetary Incentive

I am not entirely convinced that people donate money primarily to receive tax credits. From a financial perspective, this is certainly an incentive.    Canada Revenue Agency rewards you for your generosity.   If you have taxes owing, your tax credits are like gift certificates to offset your tax bill.  The higher the amount of donations, the greater the tax incentive will be when you file your tax return.   If you are limited to the amount you can donate in any given year, then you might choose to claim your donations together in one year.  You are allowed to carry forward any donations in any of the next five years.

A lower tax rate is applied for donations of $200 and less; and a higher rate for donations over $200 for any given year.  Here is the link to the federal and individual provincial donation tax credits.

Using this donation tax credit calculator is one way to determine your tax credit entitlement for your province of residency.  The following math illustrates the credit for a Saskatchewan resident who has contributed $1,000 in donations.

Federal charitable donation tax credit
            $ 30 (15% on the first $200)
            $232 (29% on the remaining $800)
            $262 is their total federal tax credit.

Provincial charitable donation tax credit
            $  22 (11% on the first $200)
            $120 (15% on the remaining $800)
            $142 is their total provincial tax credit

This Saskatchewan resident has a combined federal and provincial tax credit for 2017 of $404 ($262 + $142).

Never Too Small or Too Large

I believe that the majority feel a tug on their hearts to be generous with their money.  No one can make someone do this. We have often heard a child use this phrase, “You can’t make me!”  A small child may refuse to participate in a game or eat their veggies.  But once they have had the experience, they are more willing to experience more of the same.  I associate this with charitable giving or philanthropic giving.  The ultimate payoff is witnessing the benefits of the donations. People find this rewarding and desire to do more good in the world.  Philanthropists are financial helpers willing to promote the welfare of others, “especially by the generous donation of money to good causes which meets basic needs.”
Regardless of the amount of any donation, it’s the contribution that matters. Donations are not limited to size; they are not measured as too small or too large.  In the end, the accumulated dollars create and impact a better world.  Let’s all keep on giving whatever amount we can to a beneficial cause.  

Thursday, March 8, 2018

Long Term Care Insurance: An Overlooked Need

The Reality

Most people love a good reality show but only if it turns out well.  We occasionally watch a clip when an accident occurs and the person escapes grave injury.  They are able to get up and walk away.
Imagine this.

The towering poplar and maple trees’ branches lean over the farm buildings.  When the rain drips down from the leaves, the shingles deteriorate. When the leaves fall and remain on the roof, even more damage occurs. One day, the farmer evaluates the situation.

“A chain saw and ladder will fix this problem,” he thinks.  The ladder is cautiously propped up against the tallest maple tree. After precise calculation, he determines the branch that needs to be cut.  There’s only one problem: he miscalculates and the law of physics prevails. The ladder falls to the north; the chain saw to the south, and the farmer and the ladder bounce onto the ground below. 

“This is going to hurt!” is my husband’s first thought when he comes to terms with what just occurred.  He’s winded and cracks a couple of ribs.  

For me, when reality kicks in, my first thought is, “This could have been much worse!”  

My husband is generally not accident prone. He doesn’t usually get caught in situations like this but sometimes an accident just happens by accident.  That’s reality.

The unknown in his situation is the “what if”. 

Being self-employed and working on your own comes with a disadvantage. You are the sole-proprietor and key operator of your farm business.  You don’t have the privilege to phone your supervisor, tell him you are injured, expect someone to step into your farmer boots, and take over during a lengthy recovery.

The reality is present in any sole proprietorship where there is limited amount of excess cash for medical expenses and hired help.  The value of your business is invested in the assets, the equipment, buildings and land. You can see the assets but cannot and do not want to liquidate them. This is when an injection of insurance money helps fund, at the very least, the health care expenses while one recovers.

The Mistake in Identity

The most common mistake most people make is associating Long Term Care (LTC) Insurance with funding the cost of living in a long-term care facility or nursing home.  But quite frankly, this type of insurance can be beneficial during anyone’s life time.  Many health situations can have a lengthy recovery period.  You may recall someone you know who has been in this situation. Whenever a person is restricted from performing any two daily living activities, they are entitled to make a claim for benefits.  These activities are defined as:
  • Eating
  • Bathing
  • Dressing
  • Toileting (being able to get on and off the toilet and perform personal hygiene functions
  • Transferring (being able to get in and out of bed or a chair without assistance
  • Maintaining continence (being able to control bladder and bowel functions)

Think about it.  Any unexpected debilitating illness or an accident could limit your activity and warrant the need for long-term care insurance at any age.

The Push-back 

I often recognize there’s a “push-back” to insurance.  Fighting your financial battles can be done by carefully evaluating your own personal situation and the associated risks. 

The real questions are:

          How many types of insurance do I need?

          How much can I afford to pay for the coverage?

When you face the decision of funding your health care costs, you can choose to self-fund, share the risk, or transfer the risk.

Sun Life Financial describes these choices best in this brochure, A Health Conversation featuring Long Term Care Insurance.  

A.  Self-funding means to allocate a portion of existing assets into a “health fund”.  This approach requires discipline and risks underestimating who will need care, when care will begin, how long it will last, and how much it will cost.

B. Share the risk means to self-fund initial care and transfer the risk of a catastrophic need to long term care insurance.

C.  Transfer the risk to insurance means that all risk of an unexpected illness or need for care is transferred to long term care insurance or critical illness insurance if the individual is still in good health.

My Number #1 concern for any aging couple is when their situation changes, where one spouse is required to live in a private care home while the other continues to live in their home.  Essentially, the couple’s total lifestyle costs may have doubled.  They are managing and juggling two homes: the expense of private health care and the expense of home ownership (utility bills, insurance, taxes, and others). They are doing so with the same retirement income they had when they were living under the same roof. 

The Compromise

I totally agree you can’t be fully insured against every risk.  We have many different kinds of insurance: life, disability, property, and medical health insurance.   Now I am inviting you to consider an additional kind of insurance, long-term care insurance.

In every insurance circumstance, you are able to negotiate how much risk you are willing to assume when you self-insure (use your money) and how much premium you can afford when you share the risk with the insurance company.

With long-term care insurance, the task is to tailor your financial need to an affordable premium.  When you choose one option over another, you are able to adjust the cost of the premiums. For example, you can select a minimum number of days, either 90 or 180 days, before you require financial help and are able make a claim.  You can also choose the length of time you want to receive a weekly benefit to be paid, from a minimum of 100 weeks to unlimited.  Your age and health will also have a bearing on the cost of the premiums.  If you are slightly interested in long-term care insurance, make the decision sooner rather than postpone it. Most often, we have a tendency to shrug the decision off with a casual “I’ll-think-about-it.” 
Our Decision   

My husband’s tree incident triggered our decision to get long-term care insurance. When he applied, he chose a five-year benefit period.  We know this will buy us “time” in any catastrophic event to determine whether his health will improve so he could continue to farm or whether he will have to “pack it in and call it quits.” You could say this insurance policy gives us time to make the right decision without any added financial pressure.

The other feature we appreciate is “The return of premium on death benefit”.  No one likes the thought of spending money (or should I say ‘wasting money’) on something they may never benefit from using.  The thought of a death occurring without the opportunity to take advantage of this coverage may cross many peoples’ minds.  For a slightly higher cost, this feature is an add-on which ensures the insurance company will return the premiums if the insured person dies while the policy is in effect. Granted, you personally wouldn’t benefit from the money.  The premium money goes to the estate likened to money sitting in a savings account.

Your Decision

I am a firm believer that good information leads to good decisions. Making the time for a heart-to-heart conversation with your trusted insurance advisor is the only way to receive good information.  If you don’t have an advisor, ask for recommendations from your family and friends. You could interview insurance advisors.  You are like an employer seeking someone to work on your behalf. You must understand the information they are providing to you. You should feel comfortable with their recommendations.  

As a CERTIFIED  FINANCIAL PLANNER® professional, I don’t sell insurance but I do know its importance in a well-constructed financial plan.  Insurance is part of a wealth protection strategy and the premium should never be viewed as an “expense.” I don’t have a preference for any particular insurance company.  They all provide the same kind of products with slightly different features and premiums.  

To learn more about long term care insurance, click this link, to access a guide provided by the Canadian Life and Health Insurance Association (CLHIA).  You may also watch this “Learn and Plan” video produced by Sun Life Financial.  There is no shortage of information, only a shortage of time to sort and sift all of it.  Please make the time to discover the ideal fit for your financial needs.  

Thursday, February 22, 2018

Doing What’s Right Has to Be Right for You

fountain, RRSP, RRSP Loans, Retirement Planning

Good or Bad

No surprise here. February is often associated with Valentines’ Day.  Financial advisors and planners generally look beyond this day to the March 1st deadline which requires clients to make their RRSP contributions.

But what if you don’t have the money for the contribution? Do people consider borrowing money for their RRSP investments?  Curiosity caught up with me. I quickly searched the Internet.    Most articles leaned towards the negative.  Headlines blurted out harsh warnings, “It’s not the smart-money thing to do” and “Why you shouldn’t borrow for your RRSPs.”  

I did. I borrowed money for my RRSP investment.  As a single mom, there wasn’t extra cash to make a lump sum investment.  When you are in your mid-thirties, reality stares at you reminding you the clock is ticking down to your retirement years.  If you don’t start saving, you might not have enough.  I can attest the tax refund certainly helped pay off my loan quicker. 

I agree for the most part on the points made in the articles. But I trust you know yourself best and can demonstrate whether a strategy is the right thing for you.  My rebuttal is, “If the shoe fits, wear it”. When applied to whether to sign up for an RRSP loan, “If the strategy works, use it.”
Sometimes doing what’s right has to be right for you.  When you can’t get into the routine of saving regularly, borrowing the money for an RRSP might be one way to get you started.  First, let’s understand one thing. I am all in favor of an “anti-loan strategy”.  I probably sound hypocritical except for this additional piece of advice: this strategy is only encouraged to eventually wean you from making  RRSP loan payments into making regular RRSP contributions.

The Battle between “If” and “But”   

river bridge RRSP, RRSP Loans, Retirement Planning

Here’s the war-on-words.

If you do this, you achieve success. But when you do that, you will be defeated.

If you borrow the money to invest into an RRSP, you begin saving for your retirement. 

But when you neglect your loan obligations and are unable to make your loan payments, then you have defeated your purpose and destroyed your credit in the process.

If you invest the borrowed money into an RRSP, you save on income taxes and the investment income compounds and the savings grow.

But when you withdraw money from your RRSP savings prior to your actual retirement date, you have lost sight of your retirement goal. 

To win the battle, you have to understand the commitment and consequences before you apply for the RRSP loan.  

An Impressive Balance Sheet

castle forest RRSP, RRSP Loans, Retirement Planning

Borrowing money is the very thing many people are currently doing.  They are willing and able to set money aside for loan payments to buy vehicles and pay for their vacations {among other tangible and intangible things}.  Often loan payments are seen as a form of “forced savings”.  Borrowing money rather than saving is often considered the only way to acquire an asset. If we are willing to borrow, then let’s make a play for an important need. Why not implement this forced savings strategy as a temporary measure to build your RRSP savings?

The ultimate goal is to forge ahead and pay off your loan. When you do, your Balance Sheet will look impressive.  Eventually your Net Worth increases because you will still hold your investment asset once your loan is paid.   

Balance Sheet
RRSP Investment  $1,000
RRSP Loan          $1,000

Net Worth            $       0

Balance Sheet
RRSP Investment  $1,000
RRSP Loan          $1,000

Net Worth            $1,000   

Behind the Scenes

flowers, RRSP, RRSP Loans, Retirement Planning

In essence, we are trying to instill a new habit. When you create room for a loan payment in your budget, the intent is to eventually ditch the loan payment for a regular RRSP contribution.  When you also pay attention to the amount of interest paid on the borrowed money, you will ultimately be driven to avoid using a loan strategy as a means to build your retirement savings.  The overall plan is to kick start your retirement savings.  According to the 2016 Statistics, two-thirds of households are setting aside money for retirement.  The question is whether it is enough.

Your “Why”

Castle, RRSP, RRSP Loans, Retirement Planning

Being aware of your circumstances, limitations and weaknesses, helps you make sound financial decisions that are right for you.  One piece of financial advice, from either this blog or anyone else’s, does not necessarily trump the other.  The financial strategies and advice are designed differently because peoples’ needs are different.  
Borrowing money for an RRSP investment might not be the ideal long-term plan.  The goal is to transition regular loan payments to monthly RRSP contributions.  The underlying motive is to plant a habit of investing a consistent amount of money to replace the income you currently earn. A small sacrifice today means a secure income for the future. 
How can we make this easy for you?  Children often ask the “Why” question. “Why do I have to do this?”  “Because” might be the answer which works for them; however, it might not work for you.  Understanding your “why” will cement your conviction to save when you are tempted to do other things with your money. Definitive SMART goals, whatever they may be, allow you to maintain your focus.
·       I want to work full-time until I am 55 years and then retire.
·       I want to be able to live my retirement dream with an annual income of $60,000.

Problematic Hurdles

Even before considering a loan strategy, you have to determine whether you would qualify for a loan. Borrowing money can often be equated to jumping hurdles I believe the important question which begs an answer is, “How much of a monthly payment can your income handle?  

Pushing through temptation to strive towards your goal might require a trade off.  You may need to make room for the payment by nitpicking through the details of your spending habits. What can you possibly give up that will help you meet your goal?

The Promise

train Bridge RRSP, RRSP Loans, Retirement Planning
When you embark on the strategy of borrowing money for an RRSP investment, you must pinky swear to make your loan payments on time and never-ever withdraw any money from your RRSP investment until you retire.

This strategy, like any other, is a way to achieve your retirement goal.  Your attitude and commitment determines the most appropriate fit for your financial plan.    When you rationalize borrowing money as a short-lived strategy to secure your retirement, you will meet success.

The real goal is to do something.  When you begin to shift your thinking to “this-must-be-done”, you will discover there are no shortcuts and quick fixes. Remember, you are doing this for your family and you. Once you make the connection, there’ll be a willingness to follow through consistently.  “It’s just the way it has to be because it is right for me.”   

Thursday, February 8, 2018

Who Can You Trust with Your Retirement Income?

Retirement Planning in Canada for the Road Ahead Pension

You keep your commitment. You show up for work with the expectation that in return you will one day receive a comfortable retirement benefit.  You hold up your end of the deal.  But something goes wrong…figuratively (and financially) speaking. Nothing you did caused this.

Types of Pension Plans

People who are fortunate to work for a company that offers a pension plan generally have either a Defined Benefit Plan (DBP) or Defined Contribution Plan (DCP).  The Defined Benefit Plan comes with a promise to pay a retirement income for life based on a specific formula based on a percentage of your income and years of employment.  A Defined Contribution Plan, also referred to as a money purchase plan, is one in which contributions made by both an employer and employee are invested into a pension plan in a similar way investments are made to a personal RRSP (Registered Retirement Savings Plan).   What you see is what you will get at the end of your working years.
Quite often people know they have a pension plan but they are uncertain about the plan’s details. If they do open their annual pension statement, they usually glance only at the breakdown of pension benefit. 

When your pension statement is dropped on your desk or arrives in your mailbox, it’s imperative to look at your statement to understand what you are entitled to receive upon retirement.  You may get to the end of your career only to discover you are not as “rich as you think you are”.

Retirement Planning for the Road Ahead Pension

Are all pension plans equal?

One of the biggest news stories lately has been the financial welfare of defined benefit pension plans.  A Defined Benefit Pension Plan (DBP) promises retirees a lifetime benefit.  They are depending on this steady stream of income in the years when they are no longer able to work.

We don’t often talk about the solvency ratios of pension plans.  When you don’t understand something you assume that if something is wrong, “they” will fix it. 

Here’s the simplified version. The financial terminology for “solvency” is the ability for one to pay their debts.  It is not complicated. If you were to stop doing what you are today, do you have enough cash to pay all your debts?  If you were no longer in business today, would you be able to meet all your debt obligations?  The formula is straightforward:

Assets – Liabilities = Surplus or Deficit

The expectation for Defined Benefit Pension Plans is their ability or inability to fulfill their commitment to pay the promised retirement benefit.  The most overlooked section on a pension statement is the section, Plan Funding, which addresses the financial health of a pension fund.

The Pitfalls Associated with Pension Plans

I read a recent pension statement that didn’t provide the specific details about its solvency ratio.  However, the statement clearly indicated that the plan’s assets would not have been sufficient to cover its liabilities if the plan had been wound up on the last valuation date.

This particular pension plan is a Public Defined Pension Plan. Any shortfall in these types of pension plans has the backing of the government and will be picked up by the taxpayers.  On the other hand, Private Defined Pension Plans do not have this kind of luxury.  If there is a deficiency in their pension plan, no one picks up the pieces to replenish the plan to fund 100% of the promised benefits.  When a business goes bankrupt, the assets are liquidated and are distributed firstly to secured creditors.    Unfortunately, retirees are like an unsecured creditor; they come at the end of the line.  Whatever amount of cash is held in the pension pool is theirs to be divvied up.

The deficiencies (shortfalls) in pension plans have analysts scrutinizing the demise of Sears Canada.  Because their case is recent and unexpected, many want to know what went wrong. The greatest discovery was the extravagant amount of money doled out to the shareholders rather than directed to the pension plan’s deficit. Where do the obligations reside?  Who has a greater entitlement to the company’s retained earnings:  the shareholders who made a sizable investment into the company or the employees who worked for the company to create the profits?

An insightful observation into the status of Defined Benefit Plans is outlined in the report, The Lions Share, Pension Deficient and shareholder payments among Canada’s largest companies. Cole Eisen, David Macdonald, and Chris Roberts identify the need for policy reform to protect the beneficiaries of defined benefit pension plans.   

Their research included this alarming observation:

The recent news that Sears Canada will shutter all remaining stores as a result of its insolvency leaves its DB pension plan with a $267 million funding shortfall on a wind-up basis.  Since 2010, Sears Canada paid back $1.5 billion to shareholders in dividends and share buybacks.  In other words, Sears Canada paid back five-and-a-half times more to its shareholders than it would have cost to entirely erase the deficit in its DB pension plan. As Sears proceeds to liquidate its entire Canadian operations, it will be Canadian retirees who are left to deal with that decision.  Regulators, policymakers, and Canadians will quite rightly ask whether this disaster could have been avoided.  

Equally alarming are comments made by Sears retiree, Ken Eady.   In the Money Sense’s article, What Sears retirees can do about the reduced DB pension, employees were aware of the events that were transpiring in the company.  

Mr. Eady shared, “They sold the assets, took the capital and did not make any meaningful investment in the business, including the pension plan. They let the company drift into a very bad spot and stripped it of many revenue-generating assets. If they had invested in the company, built a new online sales platform or other revenue-generating enterprises, Sears would still be operating and we wouldn’t be talking about this.”

My hearts goes out to these retirees or near-retirees. For many, the clock has run out on their working years.  These veteran employees trusted their employer. They trusted the pension regulators, The Office of the Superintendent of Financial Institutions (OSFI), to watch over their pension funds.  Who failed them?  Knowing there is a deficiency in the pension plan and providing too much leeway to make up the difference are the makings of a disaster. Someone made an incorrect assumption, claiming the company needed time to restructure and then they would rebound. 

I also questioned the role and responsibility of the actuaries.  They advise trustees and companies on the management of their pension schemes. Pension actuaries are on the scene to purposely check the financial health of the Defined Benefit Plan and ensure its viability to withstand the test of time to meet its obligations to plan members.  Their valuation is reported annually or triennially to the Office of the Superintendent of Financial Institutions (OSFI) who supervises federally regulated pension plans.   

With so many checks and balances in place, one would expect an alarm to be sounded during this rigorous process. But obviously, the rules around best practices haven’t been firmly established. The potential problem has been compounded with lower-than-ever-expected interest rates and the longevity of retired employees. The pension fund may have been depleting more rapidly than anticipated.

Looking After Your Retirement Income

The take-away from this unfortunate circumstance is that promises can be broken.  Things can and do go wrong with the financial operations of any business.  If the business has a pension plan, like Sears Canada and others did, there can be detrimental effects to people’s retirement income.  There is minimal comfort in knowing a benefit, even if it is 19% less than originally anticipated, will be forthcoming.  Any reduction will be a severe blow to a retiree living on a fixed income while inflation affects the cost of living expenses. 

If you are relying too heavily on your pension plan to provide income in your retirement, the simple answer is “Don’t”.  In CBC’s news article, Sears Case Shows the Risk of DBP for Employees, personal financial experts say there is a risk with this kind of dependency.  I couldn’t agree more. 

Retirement Planning for the Road Ahead Pension

The outcome is your lack of control over your future.  You are allowing someone else to drive your destiny. When your pension statement appears, make the time to understand your pension plan and its projections. If necessary, speak to a CERTIFIED FINANCIAL PLANNER® professional to make sense of your retirement plans.  What you see on paper today might not be what you get in a pension benefit tomorrow. 

Thursday, January 25, 2018

Can You Do This?

I am not sure I could do it unless I was locked in my house.  The temptation to shop would be even greater when you live near a shopping centre.   To spend no money for a period of thirty days is a bold challenge to undertake.    

Watching the CTV News, I was intrigued by Donna Lee Criss and her 30-Day Apocalypse Challenge Her challenge is to spend absolutely no money other than pay the monthly bills and purchase gas for her vehicle.  She plans to make do with the ingredients she has in her home and, if necessary, barter and accept goodwill from others. The challenge is an opportunity to reflect on her spending habits. 

The challenge would provide the opportunity for us to focus on what we all have rather than what we don’t have.  Most would agree our cupboards, fridges, and freezers do not portray Mother Hubbard’s in the favorite nurse rhyme. Recall Mother Hubbard’s cupboards were bare.    Ours certainly are not. Yet how often has have our spouses or children said, “There’s nothing to eat in the house”?   An Apocalypse 30-Day Challenge might change everyone’s perspective and create an epiphany for us.

Donna Lee Criss’ Apocalypse Challenge resembles a similar yet different challenge related to food. I tried to curb my uncontrollable eating habits with the Sacred Heart Diet-Soup Base 7 Day Plan. You could eat all the soup you wanted for the week. On specific days, you were allowed to eat fruit and raw vegetables along with the occasional teasers, a baked potato and steak.  You were never hungry on the Sacred Heart Diet but you eventually became tired of eating the soup.  If I was given the option, I would rename this diet, “The Gratitude Diet”.  After a week with limited food options,  I was grateful for even a morsel of chocolate cake rather than none.  The elimination of having anything and everything I wanted gave me a new perspective on“having some is better than none”.   
The theory is we all have a tendency to feel deprived when we are told, You can’t do something, can’t buy something, or can’t eat something.”  An impulsive urge or craving automatically triggers us to want to do the exact opposite.  We naturally want to do that, to buy that, to eat thatthe very thing they said, “you couldn’t, you shouldn’t, you mustn’t!” 

Here’s the revelation:  Deprivation leads to gratification.

Anytime we are deprived of something even for a test period, we develop a deeper sense of gratitude for it.  If you have watched a child receive a toy after it has been taken away for a stretch of time, they have a new sense of gratitude for the old toy.  As adults, we are no different than children.   The realization that you can resume your normal activity, like shopping or eating, means doing so in moderation and with a keen awareness. We want to foster sound control measures.  The challenge was a “discovery process” to uncover our soft spots.   This process also allows us to set or reset our motives. Gauging our spending habits is critical before they get out of control and cause serious harm.  Imagine barely recovering from our Christmas purchases then jumping all over “January Blowout Sales” .

I would tread cautiously about a test period lasting for thirty days. This is a long time to be banned from spending money on anything.  My concern is that the experiment might trigger a reverse effect, an overspending frenzy to make up for “lost time”.  You might  sway yourself to believe you deserve to be pampered for your month of good behavior.      

The true reward comes when you focus on what’s really important in terms of your wants and needs.   The reality is one day you may not have the choice to cut back on your spending. You may find that your retirement income simply cannot sustain a costly lifestyle and changes will be inevitable.  The reality is we need to be good custodians of our money. There is nothing quite like a challenge, even for seven days,  to align your spending priorities with your current income.