One of the most important rules in personal finance is that you should live within your means. Sure you might be stretching to invest or start a business but, generally speaking, people who specialize in this sort of thing (which is not me) will tell you that it's probably a good idea to spend less than you make.

The same is, of course, true in business. Businesses generally try to make more money than they spend. Similar to what might happen in personal finance, there are instances where a company might decide to forgo current cash flow for future cash flow. i.e. Invest in future growth. But at some point, not making any money needs to stop and the company will need to post a profit.

All of this probably sounds dreadfully obvious, but I often think of this very simple principle whenever I hear someone talking about something that should be done, but isn't being done. Developers should be using triple glazed windows in all of their projects. The government needs to build a new subway line from here to over here. And the list goes on.

There's no question that triple glazed windows will perform better than double glazed windows. And there's no question that a subway right outside of my single family home would be pretty darn convenient for my personal needs. But all of these things, unfortunately, cost money. They are expenses. And unless the revenues are there to support them, they, funny enough, tend not to happen.

The same is true in personal finance. I should have a yacht in the Mediterranean. Why? Because having a yacht in the Mediterranean is typically better than not having a yacht in the Mediterranean. Sadly, the top line of my income statement tells me to, instead, focus my attention on the Toronto Island Ferry Docks.

Update: One of our engineers has advised me that triple glazing is not always better from a noise control standpoint. Laminated and heavier glass typically performs better from this perspective.

Analytics firm, App Annie, has just published its annual The State of Mobile report. As you might expect, our phones continue to consume more of our time, attention, and money. Last year, there were over 204 billion app downloads across the world. Global mobile advertising hit $190 billion and, by the end of this year, it is forecasted to reach $240 billion. By 2023, the mobile industry is expected to contribute some $4.8 trillion to global GDP.

Compared to 2 years ago, the world is spending, on average, 35% more time on their phones. See above chart. Mobile-first countries such as Indonesia and Brazil spend even more time on mobile as they skipped over the PC era that was seen in more mature markets. But globally, all of us are doing more on our phones -- everything from managing our investments to consuming media (TikTok had an explosive 2019).

Financial app usage increased significantly last year. Above are the top "breakout finance apps" of the year. PC Financial (the financial services brand of Loblaw) saw the greatest year-over-year growth in downloads but, since it only launched last year, it was starting from a base of 0. Fintech apps, which grew even faster than traditional banking apps, demonstrate that the big banks probably need to step up their mobile game.

Young people do, of course, spend more time on mobile. Generation Z (those born between 1997 to 2012) had 60% more sessions per user in top apps than older demographics. But as of the end of last year, Generation Z is believed to have surpassed Millennials as the largest generational cohort in the world at about 32% of the population. So this wave is going to continue to come.

If you'd like to download a fully copy of App Annie's mobile report, click here. You'll need to enter your email address. But there's a lot of interesting data in the report. You can almost ignore that it's specifically about mobile and think of it as an overview of where the world is heading.

Charts: App Annie

BlackRock CEO, Larry Fink, published his annual letter to CEOs this week and the title -- which I am reusing here -- should give you an indication of the tone. The focus is squarely on climate change. Larry argues that, sooner than perhaps most people think, climate change is going to cause a "significant reallocation of capital."

Below are a few excerpts from his letter. If you remember the first post that I published this year, you may remember that Larry is not alone in this prediction. Already 2020 is shaping up to be a year where more of us seem to be turning our attention to climate change. I would encourage you to read the full letter over here.

Will cities, for example, be able to afford their infrastructure needs as climate risk reshapes the market for municipal bonds? What will happen to the 30-year mortgage – a key building block of finance – if lenders can’t estimate the impact of climate risk over such a long timeline, and if there is no viable market for flood or fire insurance in impacted areas? What happens to inflation, and in turn interest rates, if the cost of food climbs from drought and flooding? How can we model economic growth if emerging markets see their productivity decline due to extreme heat and other climate impacts?

These questions are driving a profound reassessment of risk and asset values. And because capital markets pull future risk forward, we will see changes in capital allocation more quickly than we see changes to the climate itself. In the near future – and sooner than most anticipate – there will be a significant reallocation of capital.

Over the 40 years of my career in finance, I have witnessed a number of financial crises and challenges – the inflation spikes of the 1970s and early 1980s, the Asian currency crisis in 1997, the dot-com bubble, and the global financial crisis. Even when these episodes lasted for many years, they were all, in the broad scheme of things, short-term in nature. Climate change is different. Even if only a fraction of the projected impacts is realized, this is a much more structural, long-term crisis. Companies, investors, and governments must prepare for a significant reallocation of capital.

Photo by Chris Barbalis on Unsplash