Archive - May, 2006

How a marathon is like personal finances

Well, this weekend I will be running my very first full marathon. That’s right – 26.2 beautiful miles! At least I will be able to run it among the beautiful San Diego streets.

As I have trained for this marathon, I have realized that there are many correlations between this race and personal finances.

1. Both require disciplined focus and regular attention.

  • You will not just get rich because you want to. You will not run 26.2 miles just because you want to.

2. You must train yourself.

  • If you do not train yourself to manage your money, you will struggle. Monthly budgets are not an option. I know you do not like to do them. I also did not like to run 17+ miles at a time training for this race, but it was necessary to be able to make it the entire race.

3. This is not a sprint.

  • I have seen many people (MANY!) that become exuberant about changing their financial situation. They charge into restructuring their lives. I applaud their efforts. I am excited for them. I then see them 3 months later and they are right back doing the bad habits that got them broke in the first place! Why? They wanted to get rich quick. They wanted the result NOW! They forgot how long it took them to get so deeply into debt. In this marathon, if I started out at a dead-sprint I can guarantee you that I would not finish. I must start out with the end in mind. I must understand that a successful race requires commitment and a long-term mindset.

4. Both require a commitment.

  • I have never despised Saturday mornings until training for this race. You see, this is the time I have had to complete my long runs. I have had to run in 40 degree weather with blowing wind and rain for 17 miles. I have had to run in 90 degree weather with high humidity. I have had to run when I had family in town to visit. I have had to run while on vacation. Why did I have to run? I committed to run this race. I committed to complete this race. Just as I have committed my life to Christ, I must complete this race. Just as I have committed my life to my wife in marriage, I must complete this race. In the same way, I must remain committed to my finances. Without commitment, this whole entire effort to have financial success would fail. It is simple math, but it requires full commitment.

5. The end result is worth it!

  • I have lost 18 pounds that I did not even know I could lose by training for this marathon. I am the most fit I have ever been in my entire life. I KNOW that I will cry when I cross the finish line. I am OK with that. I KNOW that I am pumped up over what our financial planning has allowed Jenn and I to accomplish. It is enabling us to be able to do exactly what we were made to do. To accomplish EXACTLY what we were put on Earth to do! Truly, the end result is worth it!

Top 3 Things You Should Do Over Memorial Day Weekend (for your Personal Finances)

1. Spend only what you have budgeted to spend.
2. No budget?!! Budget – and then spend only what you have budgeted to spend.
3. Enjoy the things in life that are free! Family, friends, nature, gardening, and birds are some of the items on my list.

Have a great holiday!

A sign that your financial plan is working!

A friend was so excited to tell me today that they received their real estate property tax bill and it was $100 less than they had saved up for it! There was not one hint of sadness that the bill was large (it is a fact of life). There was just jubilation that they had $100 extra beyond what was needed to cover the bill.

That is a true sign that your financial plan is working!!! I remember the times when the non-monthly bills would roll around. Bills like my auto insurance which I paid quarterly. It was a punishing time to come up with the funds to pay that bill. I remember it well. I do not like the feelings I have when I remember those times. It was not fun. It was certainly not a time for jubilation.

If you are able to have the entire amount of each non-monthly bill saved up by the time the bill actually comes due … yeah … I would say that means you have a financial plan that is working big time! Congratulations!

For those of you who have the less ideal feelings when thinking about those non-monthly big financial setbacks, I challenge you to do this. In your monthly budget (you do have a monthly budget, right?), take the bill amount and divide it by the number of months you have remaining before the bill comes due.

For example, if you have a $400 insurance bill coming due in 5 months, you would divide $400 by 5. This means that you need to save $80 this month and for the next 4 additional months to have the $400 in 5 months. This will really help relieve your financial plan from the “big” hits as it will level out your expenses over each month.

Personal Finance is about so much more than the stock market

If you pull up the personal finance page of USA Today, CNN, or any other major news group the focus is primarily on the stock market. A large chart may indicate the progress of the market through that particular day. It may even show the progress of the stock market through the past week or month. Maybe even over the past year.

Stock market information is useful, but is it the most important part of your financial plan? I would beg you to search further.

I believe that the stock market (and the potential progress of an investment) is a result of good personal financial management. While I believe it is absolutely imperative that one have a good method of measuring the progress of their investments, it is more important to have a solid foundation for your personal finances.

Here is what I believe is necessary to have a solid foundation for your personal finances:

  • Husband and Wife both on board
  • Willingness to change as personal financial condition necessitates
  • A working monthly budget that is zero-based and is completed BEFORE the month begins EVERY month
  • A commitment to never do debt again – including cutting up your credit cards!
  • Freedom from life-controlling issues (drug addiction; compulsive gambling; etc.)
  • A written goal sheet detailing your short and long-term goals with dates you plan to achieve them. This is developed with your spouse

If you have these items in place, you have what it takes to win. I have had many people enthusiastically try to change their financial future to no avail because of a failure to have this solid foundation in place.

Are you just looking at the stock market without having a sound financial plan? Focus on putting these parts of your financial foundation in place for the next 90 days. You will realize an improved marriage as a bonus!

I have not given up on you!

For those of you who have yet to put together a plan for your finances … I have not given up on you.

For those of you who started a plan for your finances, but have been unable to follow through … I have not given up on you.

For those of you who despise the idea of budgeting … I have not given up on you.

For those of you who believe I am off of my rocker for spending cash out of envelopes and NOT having a credit card … I have not given up on you.

For those of you who think that you will never pay off your house … I have not given up on you.

For those of you who have a spouse who will not participate in developing a plan for your finances … I have not given up on you.

For those of you who are the spouse who will not participate in developing a plan for your finances … I have not given up on you.

For those of you who believe that you can never have a savings account with 000s in it … I have not given up on you.

For those of you who are up to your eyeballs in debt … I have not given up on you.

I BELIEVE that you can do it! I BELIEVE that your marriage can be strengthened by working together on your financial plan. I BELIEVE that you will be able to give more than you ever dreamed to very worthy causes. I BELIEVE that you can have financial security. I BELIEVE in written plans. I BELIEVE it is your responsibility to develop the plan and follow it! I BELIEVE in you.

I have not given up on you.

Budget time (again)

Well, it is that time of month again. The time of month where the old budget has to be put together for the next 31 days. Once this plan is established, we will utilize our money exactly as stated on the paper. In a sense, we have truly pre-paid our spending on paper. This is our written plan. It is the reason we have dumped so much debt. It is the reason we have financial peace.

When we first started budgeting, it was tough to get it to balance. There were so many expenses that we realized that we did not have a plan for – especially the non-monthly bills like auto insurance and property taxes.

When we budget now, however, it is a pretty quick process. As we go through the month, we are thinking about upcoming expenses and logging it down that the expense needs to be included in next month’s budget. Our average budget session lasts 15 minutes start to finish.

In 36 months of budgeting, we have only had to adjourn a budget discussion 1 time without having completed the budget. How is it that Jenn and I work well together to develop a budget so quickly? We are both engaged and understand that this is the tool that will help keep us accountable to our short and long-term financial goals. By achieving our financial goals, we are positioning ourselves to be able to do exactly what we are made to do – regardless of the income potential of those activities.

So now our new accountability plan is in place and current for the next month. In this plan, we will be giving money away, saving money for retirement and upcoming known expenses, and spending money on great things like FOOD, utilities (yay …), gas (choke :

INCOME – OUTGO = EXACTLY ZERO

Does yours?

It isn’t all about the money.

Money does not satisfy. Money does not make you happy. Money does not guarantee health. Money does not equal great wealth. Money does not save your soul. Money can not buy great friends.

These statements are often said. These statements are hard to understand when you are broke. These statements become clearer as you attain financial prosperity. It becomes quite clear to the wealthy that these statements are clear.

I believe that it is a spiritual issue. WHAT?!!! I said it. I believe that it is a spiritual issue.

I have seen many broke people that are consumed by their lack of money. Some believe that they can out-earn their spending. These people spend an enormous amount of their time working to “get ahead”. In the process, they sacrifice their family relationships and friendships. They tend to become hardened to their world. They want what is theirs.

I have seen financially wealthy persons also become hardened to their world trying to protect what is theirs.

In both cases, I believe that they do not have true peace. They are attempting to put money into a high position in their lives, yet it still will not satisfy.

Money can not truly satisfy the spirit. Money is a means to an end.

So why should I want to help people acquire and keep more money? Why is it important to save? Why is it important to avoid debt? Why is all of this even matter?

It allows you the opportunity to utilize your time to pursue your life’s calling! The very thing you were made to do! The exact thing that sets your soul on fire! The passion igniter in your life!

I have just ONE question:
IF YOU WERE DEBT-FREE AND HAD ZERO PAYMENTS, WHAT WOULD YOU BE ABLE TO ACCOMPLISH WITH YOUR LIFE??????? or to ask another way IF YOU STAY IN DEBT AND HAVE DEBT UP TO YOUR EYEBALLS, WHAT WILL YOU BE PREVENTED FROM ACCOMPLISHING WITH YOUR LIFE????

30 minutes to a financial disaster

Sign observed at car dealership:
“Financing in less than 30 minutes”

Translation:
“Destroy all progress you have made in getting control of your finances in under 30 minutes.”

I do not spend little money. When I spend money, I tend to spend it on larger ticket items. Some specific items include airline tickets, hotel, travel, my RC airplane, and vehicles. Before making the choice to make our finances a priority, I would not confer with Jenn. I would just go buy it. Capital One had my slack. I really did think about the cost of the item, and I usually felt I could pay it off that month. I really felt that my spending was under control. The facts show another story. The facts show a large credit card balance that did not get paid off every month. The facts show that what I felt was NOT fact.

I have worked hard to gain control of my finances. Jenn and I have worked together to get out of debt. It has been more than three years since we made the choice to control our spending. Even so, my old spending buddy (my shadow) creeps in with the evening shadows. “Come on, man! Live a little. You can afford it! You can make the payment. Really, man. Just do it!”

You know what? I do not want “Financing in less than 30 minutes” I do not need their financing. I made the choice a long time ago to never do debt again. It may not be 100% fun to live in my world, but I will tell you this – I’m not broke anymore!

Have you made your choice?

I love Microsoft Money!

How do you manage your finances? In my journey to better manage my finances, I have followed a path that took me from virtually no management at all to detailed management.

I started out by trying to keep a running balance in my head and ensuring that I had a cash buffer in my checking account in case I forgot that I had spent some extra money. That did not work well. I had cash being deposited into my savings account each paycheck, but it immediately moved to my checking account and out of my ownership (I spent it!)

So that was not working, so I migrated to a printed out register. I tracked every single expenditure on this register. This vastly improved my understanding of where our money was going, but it really did not improve our financial situation at all. It just allowed me to understand where the money went. It also helped me out a lot with addition and subtraction skills as I had to write in at least 50 transactions a month and perform the math each time. Yikes! I cannot believe I used the debit card for $1.97 at Home Depot on 11/14/2002 or $5.44 at Wal-Mart on 11/8/2001 or $2.31 at Wal-Mart on 2/27/2000 or $6.04 at Wal-Mart on 11/12/1999.

Well, the printed register and manual bookkeeping really helped me to better understand WHERE our money was going, but it certainly was not helping us keep some of our money. So we migrated to Microsoft Money. Oh baby! This software is sweet! It allows you to understand where all of your money is going. It has custom reports that you can generate to better understand opportunities you have for saving money. Guess what? It did not help us save money. It is the best method we have utilized for management of our finances, but it did not help us save money.

Do you know what helped us save money? Applying the information we were learning about our spending habits. Making changes to our spending habits is what helped us save money. We applied the simple formula of

INCOME – OUTGO = ZERO

OUTGO included Savings. It included saving for known upcoming expenses like life insurance, auto insurance, vacations, and clothing.

If you are looking for a good money management tool, I highly recommend you try Microsoft Money! It will NOT allow you to save money, however. You must apply the information the software provides you in order to save money.

Personal Finances are less talked about than sex

Read it for yourself.

When you hear facts like “the number one cause of divorce is disagreement over finances” or “money fights” or “he/she spends all of our money”, you may not think about the fact that personal finances are also less talked about than sex.

You don’t believe me? Let’s think about why this is the case.

1. Personal finances does not require both of you.
2. Personal finances are not as exciting.
3. It is easier to fight when you are TALKING about finances.
4. Finances require the lights be on.

Oh my!

Bottom Line: Stop the childishness. Grow up! Face your finances TOGETHER! When you do, you will start to win TOGETHER. At that point, you can talk a lot about both subjects!

Bankruptcy

I have always viewed bankruptcy as a disinterested party. It is true that bankruptcies have reached all-time highs. There are always huge companies filing for bankruptcy protection (Enron; most of the airlines; most of the suppliers to GM and Ford). Over the past year, a series of circumstances have really opened my eyes to how awful bankruptcy is for all parties involved.

For the creditors owed, they will not receive the money due them! This is HORRIBLE! They extended REAL MONEY to the individual(s) or company with the clear understanding (contract) that the money would be returned. They are now without the money AND now have little to no chance of recovering ANY of the money. What does this do to the company? For many companies and individuals, it could put them in serious financial conditions. In either case, the money needs to be made up elsewhere. Who makes it up? Those buying the products – the prices are increased to cover the losses.

For the individuals declaring bankruptcy, they KNOW that they are sticking their creditors with the debt. It is not something that they are disinterested in. They feel HORRIBLE about it! It impacts their family. It impacts their marriage. It impacts their relationships with their children. Worst of all – many individuals experience a LOSS OF HOPE! Hope is what sets the human spirit on fire! The individuals and companies can also lose the ability to conduct business with preferred providers as they are now blocked out via contracts, extremely high interest rates, or a unwillingness to conduct business with them period.

The sad thing is that most bankruptcies are preventable!!! It does require self-discipline! It does require spending less than is earned! It does mean that the word “NO!” enters our vocabulary.

If you are in desparate financial shape, go see a certified financial planner BEFORE visiting a bankruptcy attorney. You KNOW what the attorney’s recommendation will be.

Are you paying it forward?

You have had success! You have achieved financial peace. Debt is no longer a part of your life or it is rapidly becoming extinct. The house payment is gone or it is close to leaving. All of your other debts are paid off. You have a budget that is working. The retirement fund is growing. The college fund is growing. The daughter’s wedding fund is growing. The new car fund is in place. You have a fully-funded emergency fund.

Congratulations! You are among the few that have been able to tell themselves “No!” often enough to win financially! Great job! Because of this, you have changed your family’s future. Your family will have opportunities that many others have carelessly spent away.

Question for you: Are you paying it forward? Are you helping others learn the lessons you have learned? You have family members that need your help. They do not have the financial knowledge you have. They do not truly understand how to get from a debt-laden situation to a financially peaceful situation. You have friends that need your help. They need help setting up their first budget. They need help buying that first house. Your children need you to teach them how to wisely manage money. Are you teaching them?

Take the challenge – teach someone else about how to effectively manage their personal finances this week!

Are you ready?

So I just got back from the wake of a family member we lost unexpectedly. Fifty years young. Game over.

Do you have a plan? Are you ready? Will those who rely on you be able to continue without you? One HUGE way to ensure that your family can continue on without major life changes is to have term life insurance. It is very affordable. Think about it. If you passed away today, would your family be financially prepared to face the future?

I want my family to be able to focus on the next phase of life without having to worry about how they will make the car payment, credit card payment, house payment, and how they will get by without my income. I have taken care of this by obtaining 20-year level term life insurance equal to about 10X my annual income. It is very cheap. You can check the costs at Zander Insurance. You can either buy through Zander or through your local insurance agent.

Do it today.