Money Listens

Yesterday I wrote about Affluenza, the epidemic of buying everything we want whether we can afford it or not. Yes, the advertising agencies are partly to blame. Everything we see on television or read in a magazine encourages us to buy the latest and greatest because we deserve it and it will make us look, act, and feel great. Last week a major department store had a series of nearly full-page newspaper ads. The ads promised us we would be a “Suburban Legend” if we bought this particular Bar-B-Q grill. Or, if we bought a riding lawn-mower we would be the “Alpha Male” on our street. If you want to be a “Goddess” all you have to do is wear this dress. Give me a break. How do you keep from being manipulated by these ads? You must have an affluenza shot. Each time you are tempted to spend money poke yourself really hard. Ask yourself these questions:

1. Do I already have something like this?
2. Can I borrow one from somebody?
3. Can I wait and buy this another day?

If the answer to any of these questions is yes, don’t buy it. Then go to the bank and put the money you would have spent into your savings account. Then, when your car breaks down, you won’t have to take the riding lawn-mower to work.

My daughter came home from school with a list of non-fiction books. She had to choose one for a paper. Guess which one she picked? (Remember that the apple doesn’t fall far from the tree.) Affluenza: The All-Consuming Epidemic by John De Graaf (Author), David Wann (Author), Thomas H. Naylor (Author).

Affluenza is a clever combination of the words affluence and flu. The authors’ definition is “a painful, contagious, socially transmitted condition of overload, debt, anxiety, and waste resulting from the dogged pursuit of more.” The symptoms of affluenza include communities where people don’t know each other; houses with televisions for every member of the family; and people who, on the surface, have it all but feel depressed and empty. You don’t need medical training to diagnose affluenza, and the statistics are staggering: The average American spends more than $21,000 a year on consumer goods. To emphasize their point, the authors note that each week Americans spend six hours shopping and only 40 minutes playing with their children. And the six hours shopping sounds way too low to me. Of course, I live less than an hour from a 300 store outlet mall.

What really worries me about affluenza is the contagious part. Keeping up with the Jones’ has replaced baseball as American’s pastime. We can recite car models, plasma screen pixels, and designer labels as we once talked about batting averages and home runs. We can’t be content with a Toyota. It has to be the “luxury” vehicle with the LS or the GS attached. It isn’t about transportation, is it? It’s about status. We have no idea what we actually “need.” It’s all about “want.” We’re nauseous when the credit card bill arrives, or when we see how little we have in our retirement fund. But the pain is self-inflicted. We choose to spend money we don’t have. We choose to buy a new car when we could put that money into our IRA. We choose to ignore how much we spend eating out. The good news is there’s a cure for affluenza. And it’s simple. Buy only what you need. That means what is urgent and necessary. And buy the least expensive minimum that will get the job done. Save the rest of your money. Do these two things and you’ll feel better in the morning.

There’s a bumper sticker that says “Born to Shop.” I believe this is true, some people are born to shop. Likewise, some people are natural savers. They’re born frugal. This is a wild guess, but I’d say about 10% of the population are born with the frugal gene. Probably another 10% have the shopping gene. What about the 80% that are somewhere in the middle? Somebody, somewhere, sometime, taught the majority of us how to manage or mismanage our money. Parents, friends, television commercials- take your pick.

If you were lucky, you were taught some good money management skills such as how to budget, how to save, how to plan for your purchases. You learned to say “no,” to prioritize, to choose the most meaningful activities. If you were unlucky, you learned to spend all you made, to shop for fun and recreation, to buy things when you felt “down” and needed a pick-me-up. You learned you “needed” the greatest and best. Whether you could afford something was inconsequential; if your friends had it, you bought it. If you’re in this category, don’t despair. You can teach yourself the habits of good money management and practice them until they become second nature.

How can you teach yourself? There are lots of great books and websites. Taking a class at a community college or Dave Ramsey’s Financial Peace University are great starts. Books and classes can show you how to budget and plan. But you still have to practice what you learn until you develop good money habits. What would happen if instead of just reading about this stuff you actually did this stuff? What if you actually spent less than you earned, lived on a budget, saved and planned for your future? It would be hard work and probably take months if not years to change old habits. But you could do it. You would have no debt, a nice nest egg for retirement, and be in control of your finances.

And everybody would think you were just “Born Frugal.”

Remember spring break growing up? Do you have any snapshots from the beach or lake? When I look at those black and white pictures with the fluted edges (yes, now you know how old I am), I can see back in time. When you take a Financial Snapshot it does the same thing. You are preserving a moment in time so you can look back and remember how things were. You can also see how you’ve grown.

The balance sheet of a company is often referred to as a Financial Snapshot. Rather than showing money and inventory flows, it captures a summary of what’s important. Families and individuals can create one, too, it’s not just for business. A Financial Snapshot is a helpful tool to monitor how well you are progressing toward your financial goals. Dave Ramsey’s Financial Snapshot Form mainly asks yes or no questions, with just a few questions about amounts of money. Here are Dave’s questions:

Do you have a working budget?

Do you pay necessities first?

Have you cut up your credit cards?

Are you living on the envelope system? How many envelopes?

Do you have a baby emergency fund?

How much have you saved during the class?

Are you giving to worthy causes?

Are you using the buddy system?

Are your debts paid?

How much have you paid off during the class?

Do you have a fully funded emergency fund?

How many months of expenses have you saved?

Are you saving for major purchases?

What types of major purchases?

Are you funding your pre-tax savings options?

Did you start saving for college?

Are you paying extra on mortgages?

Are you walking in financial peace?

It’s up to you to decide how often to take a snapshot of your finances. It should be at least monthly, perhaps every 2 or 3 weeks if you are actively seeking to reduce debt and/or save. If some of these questions don’t apply to your situation, for example, you don’t have kids so you don’t need to be funding college, substitute your own questions. Did I balance my checkbook since I received my last statement? Did I accomplish any of my short-term goals?

Each time, compare the snapshot with the last form. Ask yourself, “Am I making progress? Could I go a little faster?” The first time I did this, it was pretty depressing. Some months it can seem like slow going, but it is an excellent accountability tool. Now I can look back and remember what it was like before I had a budget and a plan for my money. Go ahead and complete your Financial Snapshot—are you still smiling?

The Financial Snapshot form can be found in the Financial Peace University Workbook or online from the Member Resource Center at http://www.daveramsey.com/fpumember

No, no, no
Stick to the stuff you know
It is better by far
To keep things as they are
Don’t mess with the flow, no no
Stick to the status quo

This is the chorus to the hit song from Disney’s blockbuster High School Musical. The film was released in January, 2006, and became the most successful Disney Channel Original Movie ever. The film’s soundtrack was the best selling album of 2006. If you haven’t seen it yet, borrow the DVD from your neighbor’s 10 year old. If the kid won’t let you borrow it, watch Stick to the status quo on YouTube.

Everywhere we go we hear “No, no, no, it is better by far to keep things as they are.” I recently read an article in a national financial publication about purchasing a car. The author wrote that there were two ways to buy a car. The first was leasing and the second was a car loan. He proceeded to elaborate the pros and cons of each method. The idea of saving up the money and using cash to obtain a vehicle never even occurred to him. That’s because the status quo is either a lease or a loan.

When it comes to saving the status quo is zippo. In the 1980s Americans saved about 10% of their income. Today it is -.2%. Isn’t that the idea, spend everything you make?

The whole point of High School Musical was to not “Stick to the status quo.” We have to make this decision every day. Maintain the status quo or start on a new choice. What will it be? The status quo is broke. The status quo is debt. The status quo is, well, status. Buy things because of the status that item will give you. Because everyone else is buying one. Because you want one.

Every day with every financial decision, we either have to stick with what everyone else does and with what we’ve always done or make a choice to “mess with the flow.” I hope when you have an opportunity to “mess with the flow,” you’ll do it and make a real change.

Singles make up more than 40% of Americans over the age of 18. (According to the 2000 census). That’s over 80 million people. So why is it so difficult for 80 million people to talk about money. Surely it’s not because they can’t find someone to talk to. Or is it? Let’s face it, most people “talk” about money by either bragging how well their investments are doing or complaining how they don’t have any money. All while showing off their new iPhone or $400 Coach bag.

Singles have to make every decision alone. Am I being wise? Am I too hard on myself? I don’t have anyone to bounce ideas off of. I really don’t want to talk to my parents about this, but who else cares? Probably more people than you think. A good budget will help hold you accountable, but you still need a live person to give you feedback. It might be a friend or neighbor, maybe one of your parent’s friends, an uncle or older relative, or someone at your church who is willing to take a hard look at your spending and saving habits. Don’t be afraid to ask around. You need to find someone who will sit in on your “Budget Committee Meeting” to offer impartial counsel and encouragement.

If you have a child, you feel a tremendous burden. You only have one income, and nobody to fall back on if things get tough.

It is too easy to pay the minimum on credit card balances, buy the pricy new shirt, default on a loan, or make other poor financial decisions– because you can! Stick to your budget and schedule a regular time with someone to hold a “Budget Committee Meeting.”

The advantage to being single is that you don’t have a spender making bad purchases with your money (unless you have a teenager.) Your time is also your own. You may be able to get an extra job to pay off debt or jump-start your emergency fund. Finding someone you can talk about money with won’t be as difficult as you think. If you’re a single parent you will find this book helpful.

Financial Relief for Single Parents: A Proven Plan for Achieving the Seemingly Impossible by Brenda Armstrong (Paperback - Jan 1, 2007) Brenda Armstrong worked several years with Larry Burkett at Crown Financial Ministries and co-authored the workbook Every Single Cent.

Talking about money and finances is difficult. Especially if you’re married to the person you’re talking to! Why is it so hard to communicate when you’re doing a budget? It’s because you and your spouse don’t agree 100% on everything. What happens when the nerd wants to put the extra $100 in the 401(k) and the free spirit wants it to go into the vacation fund?

One gives in to the other, but isn’t happy about it, and resentment builds.

Or, both stew about it and nothing get done until someone spends the money without the other’s consent. (And wait until he or she finds out!)

Or, stalemate, nothing gets agreed upon or done and somebody ends up sleeping on the couch.

How about really listening to one another? Write down what each wants and why. Why do you want more money for gifts? Is it because you’re afraid what your sister will think if your gift isn’t nice enough? How about if you are upfront and say that we’re trying to save for retirement and are going to give some small home-made gifts this year. List the pros and cons of each item, brainstorm alternatives. Keep this list with your budget and refer to it often. You’ll forget what you already decided and this will keep you from having to rehash and redefine the same issue. Consider the goals and values you both have agreed on. Compromise. You both must own the financial decisions because you both must live within the budget. Make sure your spouse feels understood and appreciated. Try talking for no more than 30 minutes at a time; and never after 10:00 at night. Here are some questions you can ask each other:

1. What’s the important issue here?

2. What are you hoping will happen?

3. How will this help us reach our goals?

4. What is your biggest fear about this?

5. What’s preventing you from …..?

6. What would you be willing to give up or compromise for…..?

Think positively about money. We have goals and managing our money is the way to achieve those goals. There. That wasn’t so difficult after all.

How’s your budget coming along? What’s that? You haven’t been able to agree with your dear spousie about all the categories yet? Welcome to the club. I’m assuming you wrote down your projected expenses, totaled it up, and exceeded your income. So what do you trim? Make the cuts you both can agree on, then take turns suggesting other areas you each could cut. It isn’t magic, it’s effort. If you feel “I’m the one always giving in, always sacrificing,” write that down. This would be a good thing to journal about. Also, write at the bottom of your budget –

By not getting a haircut, Jane just paid off $25 of debt.

By not playing golf, Dick put an extra $25 into savings.

By skipping the vacation category, Jane funneled another $50 in the 401(k).

By ____________ (insert your name here) saved $_____for________.

Then cross out the single name and add both your names. You’ve got to be in this together. Dave Ramsey always says “It’s about ours.” When you married, it went from mine to ours.

This is where a paper budget can be more useful than Quicken. When you make changes on a spreadsheet you forget why and what you did. On paper, you can see the cross-outs. Draw arrows from the category you’re trimming to where you’re putting that money. The idea is to see the positive side of giving up things. When you look in the eating out envelope, instead of feeling deprived because there’s only $25, think “Wow, that $50 we would have spent at Ta Molly’s has gone right to our emergency fund.”

If your spouse still hasn’t “got it,” try using guilt, fear, shame, nagging, and manipulation.

You know, a low budget, you have to work harder. You have to plan well; you don’t have much time to rehearse.
Hector Elizondo

If you don’t know who Hector Elizondo is, you don’t have pre-teen girls. He played the head of the queen’s security in The Princess Diaries. Foodies know him as the father and chef in Tortilla Soup.

What is a low budget? A producer making a low-budget movie doesn’t have a lot of money for extras and special effects. He has to work harder and plan well. The same goes for us. When we try to make our budget as low as possible we have to work at it. Spending money is easy, stretching a dollar is hard work. Planning becomes a necessity. It takes no thought to eat out, buy the first thing you see, or pull out the credit card. You have to plan to have ingredients to cook with, you have to take time researching the best buy, you have to be creative and work with what you have.

Haven’t you seen some big-budget movies that were total flops. Remember Waterworld with Kevin Costner? It cost $150 million in 1995. Many low cost films have been winners. There was a low-budget gangster movie in 1972 that won 4 Oscars. Ever heard of The Godfather?

One of my favorite movies is My Big Fat Greek Wedding, which cost $5 million to make in 2002. Like many low budget films, this movie is about family and relationships. Low cost films explore one or two characters in depth. Usually there’s a serious problem and viewers watch to see how or if it gets resolved. There’s no need for superheros, gimmicks, or gadgets. We are interested in the people and their relationships.

That’s how it is with our low budgets. It’s not the stuff that’s important, it’s our relationships with one another. This week, plan something that involves your friends and family but doesn’t cost anything.