Finance 101 Part 1: A brief history of money, budgets, and why you should care

Thanks for reading my finance 101 series. This post is the first of a series that will give you a foundational understanding of finance. To do so, we’ll cover an array of sub-topics such as accounting, currency, investing, and much more. Let’s start by providing a brief history of money.

Soon after the development of language, homo sapians began bartering items for trade, and the first economy came to exist. Although we don’t know precisely when this happened, we know it happened. Many scholars have tried, but in 1866, the linguistic society of Paris banned the subject because of a lack of empirical evidence.

As you can imagine, bartering items caused problems. For example, let’s say you had a shovel, and you needed some chicken to feed your family. The chicken farmer already has a shovel and therefore, does not want to trade with you. Meanwhile, there’s another family that does want a shovel, but they can only offer fresh apple pies. You could all meet and make a threeway trade but compound this with more people and items, and it becomes unmanageable. China first took a stab at this by casting a smaller version of popular products out of bronze in 1100BC. It wasn’t for another 500 years until a coin based currency came into existence in Lydia. Below is an infographic I shamelessly stole from The Telegraph which outlines the timing of the introduction of money.

Now that we have money, which in turn has a particular gold value, how did do we manage it? In the early days of currency, it was all done by paper using things like ledgers, balance sheets, and income statements. Although these terms have almost completely disappeared from the personal finance world we know today, the reasons they are essential haven’t changed–to determine the health of a financial entity. I deliberately used the term “financial entity” instead of business because as soon as the word “business” is used, you think it doesn’t apply to personal finance, but it does. Yes, companies have much more complex financial requirements, but the basics remain the same. You have to make sure you have more money coming in than going out while keeping this aligned with your own goals. So why are they essential?

As many researchers have said, “if you can’t measure it, it doesn’t exist.” If you’re not measuring where your money is going, it basically doesn’t exist. Whether that means you’re in debt (i.e. there is no money), you don’t know how much you actually have at a given moment, or simply not knowing how much you’re spending at Starbucks every month, it simply doesn’t exist. These tools existed to help people measure their spend, and many of them predate currency themselves. For example, many farmers would keep a ledger of all the gear they had available to trade so they could go into the market to sell without lugging all of the equipment with them. Would you want to carry 50 shovels to work every day?

So we know we have money, which is backed by gold, and we know we need to track it. What’s the best way of doing that? I’m a massive fan of simplicity, we achieve the most success by keeping our movements limited and value maximized. Meaning that we should make it as easy as possible to track spending while still meeting our goals of tracking our spend. Stay tuned for part 2, which will discuss how I do my budgeting and how it’s gotten me out of debt, saving for retirement, and vacationing more than ever before.

What did you think of this post? I’d love your feedback. Please comment below!

How I got $5k for free

In March, I got an offer from Tangerine for an RRSP loan. I was in the process of mentally preparing my taxes since it was that time of the year. I had almost 90k of income for 2018 and had already contributed about $5k to my RRSP. Although, I had the chance to add another $15k via an RRSP loan.

Now, let me preface this by saying this isn’t right for everyone. I had to pay back the loan within 12 months at 1.5% interest, which meant my monthly payments would be $1,268.75. That’s not pocket money for most. Luckily, I had a plan to pay off the balance of the loan before the first month’s payment. Here’s how I did it.

Before acquiring this loan, I was set to get ~$2.5k back as a tax refund. Here’s a breakdown of my calculation using Simple Tax’s calculator.

Adding in the $15k RRSP loan brings my total contributions to $20k and my refund to ~$7.1k.

My refund has a net gain of $4.6k. So using the $7.1k from my tax refund and my own savings, I paid off the RRSP loan. At the end of the day, I was about $4.5k richer. My goal for next year is to max my RRSP without using an RRSP loan.

Have you ever used an RRSP loan? Why or why not?

Why I’ve made this website

Of course, this will be an ever-changing answer. Sitting here in Starbucks, sipping on my tall vanilla steamer with my lemon loaf, I ponder how to articulate all the reasons that have led me here to launch this site. It is no small commitment to start a blog, let alone all the accompanying surprises I have planned for this site. So what’s led to this? For starters, I’ve been helping businesses and individuals with their websites for years, I’ve helped run ad campaigns, put together value propositions for building (and not building) websites, and boasted myself an expert along the way.

It’s more than that, I’ve dreamt of the lifestyle that bloggers often possess. You know the type–writing about food, travel and fitness while enjoying the more beautiful things in life while doing it. As much as I dream that’ll be me, I know it won’t. No–I’ll have my own style with different content. I plan to write about finance, technology and leadership. I’ll naturally gravitate from those topics from time-to-time, but for the most part, those are the three pillars of this website. Why those topics? I’ve learned about finance because as much as I dislike this truth, the world runs on money and I didn’t want to be powerless about this truth. I learned about technology because I genuinely enjoyed games, robotics, engineering, and the combination of all of these. I learned about leadership because I realized you can’t complete anything significant alone. A team is essential to achieve anything of particular importance.

So what will this site be about? That’s too difficult to answer right now accurately. Although I can tell you that you can expect more than just writings. I plan to write books, courses, and even build tools to help you win in today’s competitive world.