Tea with. . .
|In our inaugural series “Tea with…,” Christina Quinn, author of Wake up or Die Poor, opens up about financial belief systems, opportunity costs, and why tracking your spending is the key to getting out of debt.||
Multiculturism & Money
Christina Quinn talks about the Russian attitude toward money. Click here.
The Zen master’s invitation
Joshu, the Zen master,
asked a new monk in the monastery: “Have I seen you before?”
Joshu then turned to
another monk, “Have I seen you before?”
The managing monk of the
monastery asked Joshu, “How is it you make the same offer of tea to any
disciple, manager are the same for Joshu.
We have things to learn
Art of Tea
FS: How did you come up with the concepts of “Your-CO®” and the CFO? What was your ‘Aha!’ moment?
Ms. Quinn: We were in such bad shape financially when we got married that something had to be done. For starters, everything in our home was financed… the mangy carpet in the living room, the crappy car in the drive way, my engagement ring was on the line of credit. Our second mortgage was at 11.75% and our mortgage was worth more than the house.
Running our home like a business just made good sense to me. Keeping emotions out of financial decision-making and purchases in general turned out to be a really good approach to money management and “Quinn-CO” was born.
After I set up “Quinn-CO,” I think the ‘Aha!’ moment came about three months in. All of a sudden, when we looked at our numbers it became crystal clear where our waste was, the small changes we needed to make to eliminate it, and the “get out of debt” plan sprung into action.
FS: Do people understand that they have fixed expenses and variable expenses?
No, and this is part of the problem.
We all have fixed expenses (mortgage/transport/toiletries) and variable expenses (groceries/ entertainment/ miscellaneous) just like Google, Microsoft, or Joe’s Convenience. We need to plan for expansion (getting married, having babies), and we need to manage change (home and car purchases, job losses, career moves).
Every business in the country considers their revenue valuable. Companies have a Chief Financial Officer (CFO); they track their revenue; they categorize it into cost centres and make purchasing and financing decisions based on simple calculations made with real data.
For most people, our salary is our revenue. We work so hard for our money—why should part of it be labeled "disposable?"
So, that’s the bottom line: we are all, in fact, running a business.
FS: So, you’re a big fan of using spreadsheets to capture all your household financial data?
Ms. Quinn: Absolutely! When you become the CFO of Your-CO®, you start to make your financial decisions based on hard numbers. This is a poignant statement. So many of us make decisions based on marketing: bank marketing, real estate marketing, and advertising marketing. .Buy this…. Own this…. Spread out the payments, and so on.
I believe we need to
make decisions based on real financial data, not marketing.
FS: What’s a “financial belief system,” and why is it important for everyone to have one?
Ms. Quinn: I think everyone already has one, they’re just not aware of it.
That’s why the book is called “Wake Up!” so that we can all get real awareness of what that belief system is and how it impacts our daily spending decisions.
Our belief system may be based on our upbringing. Maybe our parents had a party every pay day and then after a couple more days, we were back to Kraft dinner. This is the “pay cheque to pay cheque” belief system.
Maybe we earn really a good salary and believe we can afford designer coffees, designer hand bags, designer debt. This is the “entitlement” belief system.
Maybe our financial decisions are based upon what the woman in the cubicle next to ours wears or where she lives. This is the “Joneser” belief system.
The key is to figure out
what you believe and where these beliefs originate. Only then
will you have an opportunity to change your perspective and start making
decisions based on a more functional and efficient set of ideals.
FS: What steps did you take to control your husband’s “Black Hole” spending habits?Does he get an allowance?
Ms. Quinn: Allowance…? You crack me up! No, there is no allowance.
This is a great question. It really encapsulates, I think, the misconception of financial management and financial control.
In my mind, financial management has nothing to do with controlling another person or another person’s spending. It is about capturing real financial data and positioning it in a way that the other person can instantly identify waste, luxury, opportunity cost, and everything that goes into daily spending: the daily coffee, the daily cab ride, even the daily interest on the mortgage. Every thing is right there to visualize and scrutinize.
There is no confrontation or power struggles. In the beginning, every month we’d sit down and discuss where we were and what we needed to do moving forward to get us closer to our ultimate goal—financial freedom.
FS: Why is it important to figure out what items actually cost, as opposed to what you pay for them, even if they’re on sale?
Ms. Quinn: Opportunity cost and total cost of ownership are very important concepts in the Quinn-CO method.
Let’s take the cost of a $400 pair of designer jeans on sale for $200. Let’s say Your-CO earns $75K per year. The top thousand dollars or so is taxed at almost 35.4%. This is what I call the luxury tax. You need to earn almost $350 to purchase a $200 designer pair of shoes... $200 X 1.13 [HST]= $226, then $226/.646 [income tax to CRA]= $349.85.
When you understand that Your-CO is really paying $350 of valuable revenue for those jeans, the opportunity costs just start to materialize. That’s the cost of a car payment. That’s the price of three months of dance class for your daughter. That’s four months of yummy lattes or half a mortgage payment.
It’s all about building awareness into our purchasing process. That’s what makes the Quinn-CO method so great. It’s ubiquitous. It’s for everyone. I can’t define costs for people. I can’t tell them, hey, that steak dinner is a luxury or that hockey is a necessity.
You, as the CFO of
Your-CO, need to figure it out for yourself, I’ve just provided the
framework for you to be able to do it.
FS: Can you tell us more about the Statscan 2008 report that said that women spend 30% of their gross income on “stuff?” What other alarming stats should be shared with women?
Ms. Quinn: That stat is alarming because it highlights the need for women to be smarter with their money. We women cannot afford to be careless with our hard-earned salaries.
Here are some more facts published by Stats Canada that explain why: in 2008, women with a university degree had earnings of $62,800 compared with $91,800 for men.
Life expectancy for Canadian men is now 83 years and 86 years for women—and improving. The average monthly CPP retirement pension paid to women who retired in May 2009 was only $391.29, compared with an average $564.23 for men likely because in addition to earning less, we took time off to look after our children and subsequently did not pay as much into CPP.
We earn less, we
live longer, and we are at higher risk of doing so in
poverty. We need to be more diligent. And we are all smart enough
to do it. The time to take control is now.
FS: You were not born into money; tell us some of your personal hardships that you had to overcome.
Ms. Quinn: A child growing up in Flemingdon Park in Toronto has a very different life than one that lives a few minutes west in, say, Leaside or Rosedale. This is just a simple fact of our city.
There is little to be gained in comparisons because each of us truly has the exact same opportunity for education and subsequently, for prosperity.
Looking back now, I
believe that being born into money is much more difficult than coming
from none; you have much more to lose and no inherent understanding of
what it really takes to go without.