Money Listens

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.

In a New York Times/CBS News poll, 81 percent of respondents said they believed “things have pretty seriously gotten off on the wrong track.” They were speaking of the economy in general. When it came to individuals, 72% said their personal financial situation was “Good.” But when asked if they were “getting ahead financially,” only 23% said “Yes.” How can you consider your financial situation good if you are NOT getting ahead financially? I would say you’re on the wrong track if you aren’t getting ahead financially.

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.

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.”

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.

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.