Money Listens

I usually have 3 or 4 books around the house that I’m reading. I pick up whatever I feel like at the time. It works best if the books aren’t too similar. Otherwise, I get confused. Last week I read 2 books that seemed about as far apart as 2 books could be, even though they were both “personal finance” books.

Amazon.com has a “Better Together” section. When you’re looking at a book, they offer you a deal on another book along with it.  Sure, it’s a marketing ploy to get you to buy more books, but usually the books work well with one another.  It’s a case of “if you like this book, you’ll also want to read. . .”  I happened to get both these books from the New Books section of the library.  I went to Amazon to read a bit more about one, because I was actually thinking about buying it.  I was surprised to find the two together.

Better Together

It’s not about the money by Brent Kessel

Buy this book with Living Rich by Spending Smart: How to Get More of What You Really Want
by Gregory Karp
today!

Buy Together Today: $28.70

It’s not about the money uses eastern spiritual teachings to explain financial freedom.  (the Dalai Lama meets Dave Ramsey).  The author, Brent Kessel, looks at the relationship between the Buddhist concept of a “wanting mind” and the 61% of Americans who are always thinking about something to buy.  It’s human nature to want, and to want more.  We think “If only I had X, then I would be happy.”  But we don’t use our money on what is really important to us.  We don’t have a plan for how to use our money, so we spend impulsively, and make quick decisions.  Kessel explains the tremendous costs of unconscious financial behaviors and what to do about them.  (Although he’s not too practical on the what-to-do-to-change).

Here’s one example of how costly our spending can be:

You’re saving for college for your kids.  Say your spending is now $3,000 per month and you increase that spending by 3 percent per year (the historical rate of inflation).  But your neighbor, who is more caught by wanting “enough,” upscales her lifestyle to the tune of a 6 percent annual increase in spending.  You will have $457,000 more in 18 years to put toward your child’s education than your neighbor will (assuming you can earn 7 percent in your college savings account).

He warns against making sweeping changes in your finances.  Most people either do too much all at once, or feel paralyzed and do too little.  Balance is important.  Now, here’s the Buddhist part:  Realize that you are, at your deepest core, just fine, even if you never change.

You might be fine, but you’ll still be broke.

The second book is Living Rich by Spending Smart.  When I first picked it up at the library it seemed like a hodgepodge of tips on stretching your dollars.  The first chapter is “Whacking the Worst Offenders,” saving on food, insurance, and telecommunications.  Greg Karp writes a newspaper column, and it shows.  The book reads like his columns on saving money on everything from pets to prescriptions.  But the subtitle is How to Get More of What You Really Want.  Intertwined with clothing and credit cards is his Allentown, Pennsylvania philosophy that you should spend less money on things you don’t care about so you can spend more on what you do care about.  If you get your spending under control, you might find money for something you really want, that you didn’t think you could ever afford.

Each book pleads with you to get the most from your spending.

Each book explains the various “money personalities” and how attitudes and behavior impact spending.

Each book challenges you to answer the question “How can I  use my money on what is really important to me?”

Each book is worth reading on its own, but they really are “Better Together.”

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If you’re like most people, you don’t like Mondays. But Monday is the best day for starting a new habit. Especially the first Monday of a month. There’s a branch of psychology that studies how we problem solve and change our behavior. You can use Mondays to change your old behavior and kick-start a new habit.

Isn’t that a coincidence, today is the first Monday in May. Decide to start a new habit. Pick one that will save you some money. What about cooking dinner at home in May? Not only will it save you money, but it probably will be healthier for you.

To break your old habit of eating out you have to overcome the dreaded path of least resistance (POLR). The POLR is to do what you’ve always done. Studies show that when the POLR is taken away, we become more creative in solving problems.

Imagine it’s dinner time. You’re looking in the fridge and muttering “there’s no food in here, only ingredients.” The POLR is to jump in the car and head out to dinner. Or call Pizza Pronto. But you can’t do this, because you’ve decided to cook at home. You may think “there’s nothing here to eat,” but forced to come up with dinner, you pull out some items, and create something to eat. You may think you can’t, but psychology shows that you can and will be creative and figure out how to get by on what you have. Decide not to take the POLR.

We’re all working on our finances, heading toward our destination. (Hopefully, in the fast lane.) We’re disciplined, we’ve got our route planned. What happens when we hit a roadblock? We’ve all been stuck in a traffic jam, a construction zone, or an accident that really slows our progress. How do we keep going?

That’s when we pull #3 out of our luggage, resourcefulness. Resourcefulness is the ability to find quick and clever ways to solve problems and get past roadblocks. No matter how well we’ve planned, we can’t anticipate every problem. As Yogi Berra said, “Prediction is difficult, especially about the future.”

Don’t panic. Use your resources. Ask your spouse and friends for help. Check out a book or find an Internet site for suggestions. Tweak your plan. You might have to slow down, or even take a detour, but keep on going. Remember Murphy’s Law. Just when you get your emergency fund established, you have a major medical bill that wipes it out. Keep the big picture in mind. That’s the reason you had the fund in the first place. You were able to pay the bill without going further into debt. That’s a good thing!

Seth Godin wrote The Dip– a Little Book that Teaches you when to Quit and when to Stick. His premise is everything starts out fun and exciting, but then you hit a “dip” when things get hard and it’s no longer fun. Sometimes all you need is a new strategy to solve the problem and push past the dip. But sometimes you should quit if the dip isn’t worth the reward at the end. He’s not talking about the long-term strategy here, financial peace is a worthy goal. He’s talking about the tactics you’re using to get there. If something’s not working very well, quit doing it and do something else.

How’s this apply to us? Say you’ve been spending a lot of time on cutting your food spending. You’re making menus, comparison shopping, using coupons, preparing food from scratch. It’s taking an unbelieveable amount of time, and you’re saving about $50 a month. I’m not going to sneeze at $50. That’s a nice round number. But say you have a car you could sell for $18,000. What if you sold it, bought a $3,000 car and had $15,000 to work into your plan? Wouldn’t that rocket you through the dip with much less time and effort?

That’s why we have to keep changing our plans– not our goals, but how we’re going to get there. Don’t feel bad if you try something and it doesn’t work. Feel bad if you don’t quit doing that and replace it with something that does work.

Traveling the road to financial peace is like going somewhere you’ve never been before. The 4 essentials to make your trip more enjoyable are:

• Self-discipline
• Planning
• Resourcefulness
• Relationships

Today, we’ll tackle #2. Planning is everything. Planning is thinking in advance with an eye toward the future. It’s keeping the bigger picture in mind while you decide on your actions. What do I have to do, in what order, to get where I want to be? First, you have to ask yourself some questions:

• What do I want my future to look like?
• How would I feel if I were debt free?
• Would I be less stressed if I had an emergency fund and savings?
• Will a vacation be more fun because I have the cash to pay for it?
• What do I want to do when I have enough money to quit my job? Travel? Spend time with family? Volunteer? Start my own blog?

Spend some time envisioning your future. How does money fit into your future? What will financial peace look like? We must have enough money to pay for the necessities in life– food, shelter, clothing, and transportation. It’s a plus to have a little more money to make life fun. Does there have to be a trade-off between the present and the future? Will you be unhappy now because you can’t spend as much as you are used to spending? No, because much of what you’ve spent in the past hasn’t really brought you satisfaction. And it certainly hasn’t brought you closer to any thoughtful goals.

What are your financial goals for the next year? Set some long-term goals, some big picture goals. Then break those down into short-term goals. Plan how to reach those goals. What do you need to do this week to move you towards your goal? What’s working and what’s not working?

Planning is everything. You have to see it, but then you have to write it down. Begin a list. Embellish it. Reorder it frequently. Be realistic. What means the most? What would make the biggest difference? What do I want to accomplish and what am I willing to change to make it happen? What’s the first thing I need to do? You can’t just make a plan, you have to keep on planning. Planning is everything.

Have you ever packed for a trip and not known where you were going? What do you pack? What if you know the place, but you’ve never been there before? You still aren’t sure what you’ll need. Traveling the road to financial peace is kind of like going somewhere you’ve never been before. Here are 4 essentials that will make your trip speedier and more enjoyable. You don’t have to have them all at once, you can even pick them up as you go along.

I know you can’t stand the suspense, so here’s the list:

• Self-discipline
• Planning
• Resourcefulness
• Relationships

Today, we’ll tackle the first one. Self-Discipline is the power to control your actions, impulses, and emotions. If you’re like most people, you don’t think you have much self-discipline. It’s hard to stick with a diet, an exercise plan, or a budget.

If you took a class in psychology you might have learned about the marshmallow study. In the 1960s a Stanford University professor gave a group of 4 year olds one marshmallow. The kids were told he had to run an errand and they could eat the one marshmallow, but if they waited until he got back they would get two marshmallows. The theory was that those children who could wait had self-discipline, the ability to delay gratification and control impulse. Of course, most kids immediately ate the marshmallow. Only about 1/3 of the the kids were able to wait. (I think in the 1960s marshmallows were a much bigger deal than today.) Anyway, the kids were followed through high school. The kids who did not eat the single marshmallow but were able to wait for the two marshmallows were more posititive, self-assured, and well-adjusted. (They also scored better on their SATs). The kids who couldn’t control themselves and immediately ate the one, were more indecisive and distracted. They had poorer study habits. The point of the study was that people who can delay gratification in pursuit of their goals are more successful in life.

I would have aced the marshmallow test, because I’m not particularly fond of them. But I would have inhaled a potato chip. What does this have to do with financial success? You have to control your spending now in order to reach your goals for the future. If you can’t get past the emotional “I want this and I want this now,” you’ll never be able to save any money. The good news is, you can learn self-discipline. How? Practice it. The more often you drive past Starbucks or Sonic without stopping, the easier it gets. You’re setting small goals for yourself, and reaching them, and that makes it easier to set larger goals.

Psychological studies have shown that using your nondominant hand to brush your teeth for two weeks can increase your self-discipline. You force yourself to do something that isn’t what you usually do. Taking a personal finance class is a form of willpower training, too. No one knows exactly why this works. Whatever the reason, consistently doing any activity that requires self-discipline increases willpower — and the ability to delay gratification and control your impulses is one of the keys to financial success.

Self-control. Willpower. Determination with energy. Does that sound like gazelle intensity? Don’t eat all your marshmallows now, save some for later. I don’t think I’ll ever look at marshmallows in quite the same way.

Do you have some big ideas about what to do with your money? Maybe you have a list of goals that looks something like this:

• Get a handle on my finances.
• Save enough to retire comfortably.
• Start a Roth IRA.
• Save enough to pay cash for Christmas presents.

Most of these aren’t goals at all, but dreams. Goals have to be specific and have a time frame. You have to know what you’re going to do and how long it will take. Most of these are more than a mouthful. The trick is to break down a goal into bite-size pieces.

The Baby Steps are a series of goals. Step One is $1,000 in an emergency fund. Simple, right? But hold on a minute. How long will it take to get there? A day, A week, A few months? Where should the emergency fund be? A mayonnaise jar, under the mattress, or in one of those new online savings accounts? Begin where ever you are in the Baby Steps and set a few small goals for that step that you can accomplish in less than 13 weeks. If you are on Step One you might have a bite-size goal of opening a new online savings account. Set whatever time frame you think is realistic. “I will spend 10 minutes a day for 3 days researching various accounts. I will discuss this with my spouse and open the account by next week.”

If you are on Step Two: Pay Off Debt, you could set a goal of putting something for sale onto craigslist.com each week for 13 weeks and using the proceeds to pay off debt.

You can set a goal of spending so many minutes a week on reading a book about finances. If you don’t have much extra time, set goals that don’t take much time. “My eating out budget will be reduced to $fill-in-the-blank$. I will take my lunch to work instead of eating out 3 times each week.” Be realistic. Keep it simple and specific.

Get a spiral notebook and write down your goals, and write down your progress. Keep a running journal of what you discover about savings accounts or cheap meals or what a Foosball table goes for on Ebay.

Celebrate along the way. You can feel good about yourself because you’re really getting a handle on your finances. And that’s always been one of your dreams.