When my wife, Jenn, and I began our budgeting journey, we discovered a magical ingredient for achieving financial success: working together. I want to share the benefits we’ve enjoyed since we started “working together to win with money.”
Benefit #1 – We BOTH know our financial situation.
Before Jenn and I started working together on our finances, there were a lot of episodes of unplanned spending. As a result, we would run short of cash at the end of the month and cover those shortages with credit cards. Because neither or us truly understood where all of our money was going, it led to additional financial mistakes. These would lead to unnecessary stress and frustration.
It also resulted in an average bank account balance of $4.13. Since I am an eternal optimist, I would say, “Hey! At least the balance is positive and not negative!”
We later realized our financial behavior was robbing us of our future hopes, plans, and dreams. In December 2002, we had our IHHE Moment (I Have Had Enough Moment) and said, “ENOUGH,” and stopped spending money in a wild manner. By July 2003, we had formalized our spending into a monthly spending plan (A.K.A. a budget). Ever since then, we have planned each month’s spending.
The result? We have been debt-free (except the house) since February 2004. We have achieved many of our life dreams, and we both know our financial situation.
Keys To Obtaining Benefit #1
- Prepare a written spending plan every single month – visit HERE for a free budget template and check out this post “How Do I Budget?”
- This monthly rhythm will create a natural space for you to have conversation about your finances. Since nearly everything in life costs money, it will allow you to have a conversation about the more important things of life too. This is perhaps the most powerful result of preparing and following a monthly budget.
- If you have a financial mess, it is time to have an IHHE Moment
- This is the moment where you say, “Enough is enough.” It is a definitive moment where the pain of keeping things the same exceeds the pain of changing. This is a vital component of every financial turnaround as it provides energy and passion to help you power through the challenges of changing old financial habits and behavior.
- Take the time to talk with your spouse about your hopes, plans, and dreams – and write them down!
- At least once a year, you should have a focused conversation on your plans hopes and dreams. The dreams you share as well as your individual ones. This can be a wonderful time of hope and challenge that helps you remain committed to positive financial decisions.
Benefit #2 – Improved communication.
When Jenn and I were B-R-O-K-E and constantly spending money we did not have, we really had no idea where our money was going. All we knew was this: it was leaving at a very rapid pace!
By working together to win with money, our communication changed dramatically. I now know when each of my nephews and nieces have a birthday because we send them money. We can’t just magically produce the money we send them every birthday. It must be planned. Through this rhythm of monthly meetings, these gifts are carefully included into our monthly spending plan while also having a wonderful conversation about each beloved family member who is turning another year older.
We also discuss our future plans, hopes, and dreams. We talk about which dreams will be funded now and which ones will need to be funded later. Together we made a decision to fund college education for our three children. We fund that education every single month. In January 2003, we agreed together that this goal was extremely important to us, and we made it a priority.
We both have a desire to travel around the world. As such, we made a decision that most of these travels will be funded in the future, not now. However, we have focused on funding a few trips right away. We typically take a family vacation each summer where we tour several states and visit family. Living in South Carolina, we also love visiting the beach. Because of this, we have made beach trips a priority. These trips are funded monthly because they are included as an expense in our monthly budget. This allows us to pay cash for each trip without any debt following us home. This all happens because of one key reason: we have agreed together to sacrifice other items in order to fund each of these higher priority goals.
Because of our improved communication, we have been able to give more money to causes and people we believe in.
To put it very plainly: there is no possible way we are ever going back to our old way of money (mis)management. Our marriage has been vastly improved by the fact that we are working together to win with our money.
Keys to Obtaining Benefit #2
- Understand each other’s plans, hopes, and dreams.
- Few things are as satisfying as setting a goal and achieving it with the one you love. Have you written down your plans, hopes, and dreams? What about your spouse? How long has it been since you allowed yourself to dream?
- Take time to develop a written spending plan TOGETHER – free budget tools are located HERE
- Let’s face it. Budgeting is not the most exciting task you will undertake on any given day. However, when you realize that your budget, and the process of preparing it together with your spouse, is the critical and vital tool that will maximize every dollar and enable you to achieve the huge plans, hopes, and dreams of your life, you might discover that you suddenly enjoy this process in a way you did not think was possible. You will be spending your time working together to win with money
- Plan your spending EVERY SINGLE MONTH – ensure that you are funding at least one of your dreams at all times
- Have you noticed how fast time goes by? My firstborn was just entering kindergarten and now high school is already in her rear-view mirror! If you do not commit to preparing and following a budget each month, you will seemingly blink and a year (or more) will pass. Mark my words, any month you allow to pass without preparing a plan is a month you did not maximize the impact of your money.
- Become debt free – calculate your Debt Freedom Date HERE and check out this post to learn more about how “You Can Be Debt-Free”
- Have you ever known anyone who said their credit card debt was the reason for their financial success? Probably not. The same can be surely be said for furniture debt, student loan debt, and owing a friend or family member. We all understand that debt is not all created equal. Credit card debt is wildly different from a home mortgage. But consider this thought: What would your life look like if you owed zero debt except your home? What if you were completely debt-free – including your home?
Benefit #3 – Dreams Get Funded!
By working together to win with money, many of our dreams have been funded.
We have had tons of dreams … A new kitchen with granite counter tops, a new master bathroom, paying for our kids’ college education, paying cash for our kids’ first house, giving away $1,000,000, starting a university, living for a year in downtown Chicago, traveling to Australia, Europe, and Asia, owning a 100 acre farm …
Quite frankly, the list of dreams goes on and on. However, because we have talked about them and prioritized them, many of them have been fully funded. In fact, it is my belief that one hundred percent of the above goals will be funded during our lifetime. Why do I believe that? Because we have funded so many of our dreams already! Many of them were dreams we did not think were really possible when we first discussed them. It is amazing what happens when you have a financial plan and work together to win with money.
If we fail to achieve all of our dreams, so be it. It will be a blast knowing we gave our best effort together!
Keys to Obtaining Benefit #3
- Remove all distractions and take the time to have a great conversation about your plans, hopes, and dreams.
- Children are wonderful and beautiful, but there are some conversations that are better without their constant input (or interruption). One of these includes the conversation about your plans, hopes, and dreams. Schedule your conversation so you can ensure a distraction-free environment for this most important of discussions. For example, Jenn and I scheduled a three-day getaway to Charleston, SC to update our plans, hopes, and dreams. It was a wonderful time and we came back with a new perspective and dreams.
- Ask these questions of each other:
- Will these dreams cost money? How much?
- If we continue to manage money the way we are right now, will we be able to achieve these dreams?
- What is your most important dream? How can we start funding it right now?
How Working Together Has Helped Us
Ever since our IHHE Moment back in December 2002, Jenn and I have taken our financial decisions much more seriously. The addition of a budget greatly accelerated our financial success. By February 2004 (just 14 months later), we were debt-free except for our home. We have been able to launch and purchase eight companies, acquire the farm, and invest in rental real estate. At this moment, our oldest daughter is nearing completion of her college journey – with zero debt. We are so grateful for the journey and the blessings we have experienced. It is our mission and goal for you to enjoy the same success. We truly believe it is possible for you to live your own Fully Funded Life! You can do this! We believe in you.
After more than 25 years of managing money, I finally took time to write about the profound impact that one’s plans, hopes, and dreams can have on your financial behavior. I have entitled the book, 20/20 Money: Gaining Clarity for Your Financial Future. Included within this book are 22 Vital Questions you should ask to help discern and fully understand your own plans, hopes, and dreams and just exactly a Fully Funded Life looks like for you. You can learn more and pick up your copy HERE.
It is so critically important for kids to have a sound platform of financial knowledge. Their knowledge of money (or lack of) will impact their spouse, their own children, their mental health, and their entire future. It can also affect you! Many parents are still being asked by their adult children for financial support because their kids never learned and internalized financial education and responsibility. That is why I want to help you learn how to teach your kids about money!
YOU have the primary responsibility for teaching your kids about money!
Who taught you how to manage money?
Think about this question for a moment.
In my own life, I completed kindergarten through high school without taking one class about money management. I then went to college for four years and received a bachelor degree without having one class focused on personal finances. I then went on to graduate school for another three years and received a masters degree – still without a single class about money management.
When you add it up, it is thirteen years of K-12 PLUS four years of undergraduate study PLUS three years of graduate study. That is twenty years of formal education without a class on money about how to manage money. Of course, I learned skill sets that enabled me to earn a lot of money, but I had no knowledge of what to do with it. I did find that I was really good at one money skill set: spending it.
So from who and how should we learn about money management?
Most of us obtain our financial education primarily from marketers and our parents. For better or worse, this is who educates us about money.
There were great things I learned from my parents, these include:
- The value of hard work
- Work = Get Paid; Don’t Work = Don’t Get Paid
- Compound interest is my friend if I am not paying on debt.
There were also some not-so-great things about money I learned from marketers, such as:
- If you want it now, go ahead and get it!
- I’ll always have a car payment.
- The use of debt can really help me win financially.
The bottom line is this: If we do not educate our children about money, who will? If we abdicate the responsibility to educate our children and we mismanage money ourselves, it should be no surprise when our children make stupid financial decisions and show up asking for our help to bail them out.
How have your parents influenced the way you manage money?
Walk the Talk
“Do as I say. Not as I do.”
I have hated that statement since the first time I heard it. A five-year-old child can see right through this statement. A mental note is made that “Mom does not even believe what she is telling me. That means whatever she just said is not very important.”
If you are a parent, you know you have been trapped before by this. I remember when we told my oldest daughter (when she was around the age of three) that the word “hate” was not a very good word and she should not use it. Of course, the dreadful moment arrived (probably 25 minutes later) when I said, “I HATE the stupid Colts! They can’t win the big game!”
Instantly, my daughter delivers the convicting statement: “DAD! You just said a bad word!”
Wow. It doesn’t get any worse than that. I just hate it when that happens! (pun intended!)
When it comes to personal finances, you have got to walk the talk. Model the way. Demonstrate and educate the steps you are taking to win with money. Share the challenges you are facing.
Here is how Jenn and I are “walking the talk” to teach our kids about money.
- We prepare a written budget every single month. Every. Single. Month. Teachable Moment: You must have a plan before spending any money. (Luke 14:28-30 is a great verse about planning)
- We utilize cash envelopes for the “impulsive” categories such as groceries, dining out, spending money, entertainment, and clothing. Our children clearly understand that money is a limited commodity and when it is gone, well, it’s gone! Teachable Moment: Self-discipline goes a long way toward ensuring success with money.
- We invest money every single month into our retirement plan (SIMPLE IRA for us – may be a 401(k), 403(b), 457, IRA, or Roth IRA for you) and 529 College Savings Plan. We actually show our children the 529 College Savings Plan statement every quarter. I remember showing it to my firstborn when she was four, and she had no idea how to read the number. She would say something like, “Is that more than four dollars?” My answer? “Yes. It is at least FIVE dollars!!!” Teachable Moment: You are so important to me that I am investing in your future (college – which wouldn’t even happen for another 14 years at that time!) AND Proverbs 13:11 is true. When you gather money little by little, it will grow!
- Every time Jenn and I plan our money, we split our money into three large categories – GIVE, SAVE, and SPEND. We use kit put together by Dave Ramsey that helps teach our children this concept. It is called Financial Peace Jr and it includes three envelopes that say “GIVE”, “SAVE”, and “SPEND” Every time our children earn money (No allowances in our house! We promote the “Work = Get Paid; Don’t Work = Don’t Get Paid” concept!), they split the money between the three envelopes. We have taught them that 10% should go into GIVE, 20% into SAVE, and that they can spend the rest. With a plan, of course. Teachable Moment: Life is grand when you are able to GIVE, SAVE, and SPEND!
There is NOTHING better than investing time into your children. The return on investment is so great! By walking what you talk about, you send a crystal clear message that this is extremely important.
Are you “walking” what you are “talking”?
Provide Opportunities for Your Kids to Learn About Money
It is incredibly important that your children are able to apply what they are learning about money. When my oldest was around four years old, she was saving money for her first big purchase – a Care Bear. This purple Care Bear came with a DVD and everything. Can life be any better if one has a purple Care Bear? For my daughter, the answer was clear.
This bear had a selling price of around $18, so it took a long time for her to save up for this purchase. Now, this is a large purchase AND it is a Care Bear AND the money would do better in a mutual fund, but how can you have a teachable moment if you don’t let children have some running room?
So the big day arrived! $18 was saved, and it was time to make the purchase. Teachable Moment: If you save diligently, the day will come to make the purchase!
One evening, she and I had a “daddy-daughter date night” (we had one every month). She chose to eat at Ponderosa Steakhouse Buffet because they had unlimited amounts of mac-n-cheese, and then it was time to make the big purchase.
We went to Walmart, picked out the Care Bear and headed to the checkout counter. There was no one in line at the checkout, and she began counting out her money (nickels, dimes, and quarters). By the time she was done counting, we had over ten people standing in line behind us. I was so proud! My daughter had SAVED for this purchase! Teachable Moment For Parents: If you teach your children this stuff early and often, you will have the opportunity to stand back and watch your children win financially in the long run!
Flash forward three years. The Care Bear has now rested comfortably for at least a year at the bottom of the stuffed animal box. You can probably buy the same one at a yard sale for $1. Teachable Moment: It’s OK to buy stuff, but what would have happened to that $18 if you had put it in a mutual fund?
Provide the opportunities for your children to learn about money. It is AWESOME to watch them learn!
What opportunities are you providing your child to learn about money?
Teach the Core Principles!
Anyone who has attended a Financial Learning Experience (our live teaching event) knows the Four Core Principles by heart.
#1: There is POWER when you work TOGETHER on finances.
My children will know how to manage finances. Should they marry one day, my hope is that the example lived out in front of them by Jenn and I will inspire each of them to work together with their spouse to win with money. At most weddings, the minister pronounces that “the two become one.” This applies to finances too!
#2: Avoid the DEBT TRAP.
Bad debt is a wealth-killer. I remember the day one of my children borrowed a dollar from Grandma to buy something at Walmart. I said, “Oh my, you are now in debt! You are in DEBT to Grandma!” She got so upset that she almost cried! This sounds like I am a mean parent. Some would say it is cruel. I say that I am teaching her the realities of money, and that the borrower is indeed slave to the lender. (Proverbs 22:7)
#3: Have a PLAN for your life. This creates the REASON for you to plan your finances!
My children have plans for their lives. Early on, my eldest daughter had clear goals. She wanted to be a veterinarian, move to San Diego, work for the San Diego Zoo, and live in the round hotel. Of course, time has a way of changing plans, but she still has plans, hopes, and dreams. So do my other two children. I am intentionally raising my children to be dreamers and visionaries.
#4: Have FUN managing money TOGETHER!
It is not all about investing every single dollar. It is not all about living in a refrigerator box. The whole reason we all want to win with money is so we can accomplish our God-given plans, hopes, and dreams! I teach this to our children every single day. By the way, forsaking a high-paying corporate job to go to work for a church and moving nine hours away from family is a pretty good way to show my children that God-given dreams can be accomplished. Look at what this movement to help people win with money has accomplished since 2006!
Have you had a conversation about money with your kids this week?
This is a PROCESS, Not a One-Time Conversation
This is not a one-time conversation. Learning is a process. It happens over time. With multiple conversations. With both good and bad attitudes. In different situations. It is intentional.
What Jenn and I have taught our children so far has been intentional. We plan on keeping it that way. As we approach the next decade, we will teach them many more financial and life lessons. We have successfully raised on child to adulthood. The other two are on the way. It is a process. It requires commitment. Ultimately, it will be worth it when we see each child embark on their adult lives with financial confidence and become truly independent. I believe it is one of the greatest blessings any parent can bestow upon their children.
Lessons We Still Want to Teach Our Kids About Money
To wrap up this post, I thought I would share some of the lessons upcoming for our children. Some are new and some are continuations of lessons already in progress.
God is the owner. We are managers.
We are teaching them that everything we have is on loan from God. Luke 16:10 resounds through my head. There is a good potential for our children to be left with a great inheritance (something the Bible says we should do – Proverbs 13:22 shares that “a good man leaves an inheritance for his children’s children.” If we don’t teach them to be great managers, their lives could be ruined by the inheritance.
Giving and saving are top priorities.
This lesson is already in process, but it will continue to be reinforced. There is nothing more satisfying than giving to a worthy cause and saving money for God-given hopes and dreams.
The fundamental business concept of “profit”.
It is amazing how many business owners forget this concept. Our children will know this concept forward and backward!
It is OK to wait to make a purchase.
Bad debt is not worth the immediate gratification. The gratification will go swiftly go away, but the debt will pay a visit monthly.
Learn the most powerful word in the English language – NO!
Already in progress on this lesson. It is so important to have self-control.
One of the greatest gifts you give your child(ren) is the gift of financial confidence. I encourage you to prepare a plan today on how you will intentionally invest in your children’s financial education.
What ideas have you put into practice as a result of this series?
I am passionate about helping others accomplish far more than they ever thought possible with their personal finances. I know that the number one way that folks will win with their personal finances is to have a well-written plan and clearly defined goals. Setting financial goals will help you stick to your budget, and ultimately win with your money!
Step 1: Write Down Your Financial Goals
I once read this Chinese Proverb – “The faintest ink is sharper and longer lasting that the brightest mind.” That is so true! When I write down something, I am much more likely to recall it!
Here are some things that can help stimulate your goal writing.
- My book 20/20 Money is about funding your dreams. It helps you explore what your plans, hopes and dreams are. Then I help you figure out ways to fund your dreams beyond your regular income. Pick up a copy from the IWBNIN store.
- If you use Microsoft Money or Quicken, print out an Income & Spending Report for the past year. What needs changed? What should be continued? What should be done even more?
- Is there something in your finances that is REALLY bothering you? Many people have one thing that really bothers them. What is necessary to make it stop bothering you?
Write down your financial goals. We offer a FREE TOOL to help you do just this! You can download a copy of the Financial Yearly Goals sheet [HERE]. Why not do it right now? You don’t have to wait for the new year. In ten minutes or less, you can have your financial goals written down on paper!
Step 2: Put A Completion Date Next To Each Goal
“Fail to plan. Plan to fail.” A plan is not complete without assigning a completion date next to it. This date will help hold you accountable to yourself!
Here are some questions to ask yourself as you look over the goals you have written down and assign expected completion dates.
- If you are married, are you and your spouse on the same page with these financial goals? If you are not on the same page, this will be VERY difficult!
- Do any goals rely on another to be completed first? (For example, if you are paying off two credit cards – does one need to be paid off before the other?)
- Are the goals mildly realistic? Ridiculous goals tend to demotivate and demoralize. Make sure the goal has a good fighting chance of being accomplished! On the other end of the scale, don’t be too easy. Be sure to stretch yourself some!
- Are any goals higher in priority than others? If so, be sure that they are identified as such!
Step 3: Remember Your Financial Goals
There have been times that I have placed my goals in a drawer. This is NOT good! Here are some tips for ensuring your goals are kept in front of you through the year.
- Schedule a task or reminder on your email or phone calendar that will give you an alarm on the date that the goal is expected to be completed.
- Schedule another that beforehand that’s titled – “Review your Financial Goals.” This is REALLY EFFECTIVE if you actually include your Financial Goals on the reminder. That way, the excuse of “I don’t have my goal list with me” is totally removed!
- Place the goal list in front of you at work or on the refrigerator. Place it somewhere that is very visual and will be seen often!
- Tell others about your goals! That is great accountability!
- Start a blog and share your goals with the world! People like Jonathan at My Money Blog and the lazy man at Lazy Man and Money are sharing their personal financial picture with the world! It makes me wildly uncomfortable to see their net worth, but I can’t stop reading their blog!
Step 4: Establish Accountability
You are doing great! You have written down your goals, established a target completion date for each and set up ways to remind yourself of them. Now comes the really hard part … accomplishing the goals!
I have found that there is nothing so effective as personal accountability to ensure that a goal is accomplished. Who is in your life that you really trust and wants to see you achieve your goals? If you are married, your spouse should certainly hold you accountable! If you are not married, who could you ask to hold you accountable? Married or not, it is very effective to ask those you love and trust the most to hold you accountable.
I have a friend who holds me accountable to my financial goals. About once a quarter, he contacts me to see how I am progressing toward the goal. I would hate it if he called and I have made no progress! It helps me stay focused!
You may have different people hold you accountable for different goals. For instance I’ve had a person hold me accountable for my stock investment goals and another for my real estate goals.
Why don’t you take some time right now to determine WHO will hold you accountable for each of your written goals?
Step 5: Take Action!!
I have a quote that I say regularly. It came to me after having been caught in one too many horrible, pointless, useless meetings!
“Thoughts and talk without action are mere babble!”
Enough of the planning. Enough of the talking. It is time to make it happen! Nothing moves until it is shoved. Attack the goal.
It is TIME! What can you do right now to achieve one of your financial goals? Perhaps you can start off you can accomplish one this month!
Call and set up the appointment with an investment broker. Go ahead and get the new insurance quotes. Chop up the credit cards. Close the credit card accounts. Sell the truck. Go to the TOOLS page and put together your first-ever INCOME – OUTGO = EXACTLY ZERO budget!
I end this post with a great quote from Will Rogers …
“Even if you’re on the right track, you’ll get run over if you just sit there.”
– Will Rogers
Have you ever been stuck financially? I mean STUCK. Do you feel so stuck that you can’t even gain any traction to get control of your finances?
Perhaps you have no income because you have lost your job. Maybe you are in college and accumulating debt to pay for it. Perhaps your spouse spends money faster than you make it. Or maybe you are just lost when it comes to managing money. It might even be the fact that you have so much unsecured debt that you feel that the creditors should just change the amount owed to a cool $1,000,000 because it might as well be that much! Maybe you are disabled, and can’t figure out what to do to earn more money.
If this is you, this post is for you! In this post, I will be sharing steps you can take to become “unSTUCK”.
I am FIRED UP!
Step One: Why are you stuck financially?
It is important to understand why you are stuck financially. There are some situations that have definite ends to them (college) and other situations that have indefinite ends to them (job loss, disability, and overwhelming debt).
Why are you stuck?
Write it down on paper. Right now. Write “I am stuck financially because … “.
When I encounter situations where I don’t know what to do, I start writing. Writing enables me to put all of my thoughts on paper.
After writing all of my jumbled thoughts down, I set it aside for awhile. After a day or two, I revisit what I have written and identify the repetitive thoughts. This helps me identify the core issue.
Why are you stuck or what caused you to be stuck in the past?
Step Two: Plan what you have!
Now that you have written down the reasons that you are stuck, it is time to prepare a written spending plan.
Yes, a budget. Here is something I have learned – managed money goes farther than money that isn’t managed.
I know that what you have is limited. In some cases, VERY limited. BUT, it is imperative that you plan what you do have.
We offer free budget tools on the I Was Broke. Now I’m Not. website to help you start budgeting.
If you are paid once per month, this is the budget tool for you.
If you are paid multiple times per month (twice/month, bi-weekly, bi-monthly, weekly, etc.), this is the budget tool for you.
If you want to learn how to put together a great budget, you might want to read the “How Do I Budget?” post.
Step Three: Remember the priorities!
When you have an extremely limited amount of funds, it is important to remember the priorities. I have met a lot of people who have been tricked and shamed by credit card companies into paying the credit card bill instead of the house payment.
You have completed step two and planned what you do have, so now the next step is figuring out who gets paid and who does not.
My priorities are:
House payment (or rent), basic utilities, car payment, gasoline, and food. This does NOT include cable, internet, phone, restaurants, fashion clothes, etc.
If money remains after covering the essentials, then it is time to pay for the secured debts. If secured debts are not paid, the creditor has the right to come take the item. They will usually sell it at wholesale and come after the rest from guess who? So I would pay the secured debt next.
Creditors cannot immediately come take something from you so they can be paid later if the money runs out.
This is last on the list. Besides I can have fun for free. Pickup basketball games, watching old movies, etc.
Who is the manager of YOUR money? It should be YOU! Not your creditors! YOU choose where it goes.
Even if you don’t have enough money to pay all of the bills, go ahead and put all of the bills into your spending plan. This is a KEY step! You need to clearly understand how large the gap is between your INCOME and your OUTGO.
I call this gap the “GO GET THIS” gap. That is the next step!
Step Four: Fill the “Go Get This” Gap!
I am sure that some read this as “Go work like crazy and earn more money”. I would certainly not disagree with working more and earning more! It is a GREAT way to fill in the “Go Get This” Gap.
But there are many more ways to fill in the gap! Here are quite a few.
I am a Christ-follower, and I have seen the power of prayer.
If married, ensure that your spouse is on board.
There is POWER when you work TOGETHER on your finances! How do you get a spouse on board could be a year-long series, but it is so necessary. Jenn and I work together because we wrote down all of our earning and spending. When we saw that our OUTGO exceeded our INCOME, we knew that it was a serious issue! One strategy to try is to mail the kids off to Grandma & Grandpa’s (eliminate distractions) and tell your spouse that you want to talk to them about something that you really need them to hear. Something that is really important to you. Very important to you. And then show them your family’s finances planned out on paper. When you write out where you are stuck financially it tends to reduce the emotion towards each other. You have the opportunity to become a unified in your effort!
Govern your business.
If your business is struggling, it might be worth putting some “mileposts” in place. Mileposts are points one month, three months, six months, and twelve months away. An example of a milepost is “If we are at $5,000 sales in three months, we will keep the business. If it is at $3,000, we will keep it open for three more months. If it is less than $3,000, we are going to have to shut down the business.” The hardest thing in the world for an entrepreneur is to close their business. Tough, but necessary sometimes.
Maybe your house payment is eating you alive. Sell the house. It could be time to sell the motorcycle, the boat, the truck, the swing set, the four-wheeler, or the 50″ TV. Whatever you have of value that isn’t a “need” – it may be time to part with to help.
If you’re looking to sell something online check out Episode #106 of the Monday Money Tip Podcast for tips.
Many times you can substantially lower your credit card payment just by calling them! I lowered my cable/internet bill by 75% just for calling! Get rid of the home telephone – you never use it anyway. Use cash envelopes for the categories you tend to spend impulsively (groceries, restaurants, shopping, entertainment, spending money). Call and get a new quote on your homeowner’s/auto insurance.
Chop up the credit cards!
If they are a crutch that keeps trapping you, it is time to chop them up. I chopped up my credit cards December 2002!
Make it a family effort!
There is NOTHING like a unified family. Nothing.
Pay secured debt before unsecured debt.
If you can’t pay everybody, consider paying just the secured debts. Call the unsecured companies and tell them that you will not be able to pay them this month, but that you fully intend to pay them. Tell the truth! There is power when you call someone and ask for help! They may or may not work with you, but when you are in bad shape financially you can’t pay them if you want to!
What are some other ways to fill in the “Go Get This” Gap?
Do you ever get caught in the cycle of “see it, want it, and buy it?” Before you spend you don’t stop to think through your purchase. Now you not only have a new gadget that’s all yours, but you also have a high monthly payment to go with.
It is my hope that this post will help provide you with practical questions to ask before you spend a substantial amount of money. Practical questions that will help you truly understand the enormity of the decision, and help you make the decision that is best for you and your family.
Question 1: “Do I need this?”
This can seem very basic, but as a “spender” I can get caught up in the “I WANT THIS!” moment and never stop to ask, “Do I need this?”
My garage is full of “I WANT THIS!” items that we never use. EVER! This includes a RC Airplane (it’s cool – but I don’t use it), bike (never ride it), tennis rackets (once every three years – not a priority), and many other items.
Pausing to ask, “Do I need this?”, can prevent a lot of poor spending decisions. I’m not saying that I never purchase things that are pure “wants” – I am saying that when I ask the key question, I make much smarter overall decisions.
This question becomes a “gate keeper” of sorts. Something to help prevent impulsive spending. If you are an impulsive spender, and need help to stop check out this post [HERE].
BONUS: Wait overnight before answering the question! It is amazing the clarity that a good night of sleep will bring to a spending decision!
Question 2: “Will this item INCREASE or DECREASE in value?”
Asking this simple question can prevent a lot of poor spending decisions!
Chewing gum goes down in value. So do cars, 4-wheelers, refrigerators, swimming pools, and clothes.
Businesses can go up in value. So can houses, land, antiques, mutual funds, company stocks, bonds, and intellectual property (patents, licenses, etc).
Here is what I KNOW: Not all of your purchases can be for items that increase in value, but if ALL of your purchases go down in value – something ain’t right!
BONUS: Find someone you know who is prospering with their investments. Invite them to lunch (pay for his/her lunch) and ask them to mentor you! They will probably LOVE IT!
Question 3: “Do I have the money to pay CASH for this item?”
I got to write the “I Was Broke” part of my book, I Was Broke. Now I’m Not. (you should buy a copy HERE) by always financing stuff. My car, truck, next truck, engagement ring, wedding ring, honeymoon, credit cards, college student loans, furniture, and many other things were financed because I did not stop and ask myself this key question. I know that the day I started asking this question was THE DAY that my family started winning with money.
If I do not have the cash to pay for it, I’m not buying it UNLESS it is a house or an asset that will increase in value (like a business, rental house, etc). Even then, the answer is still usually “NO!” unless I have all of the money available to pay cash.
Question 4: “Will this purchase generate income for me or take income away?”
What an incredible question to ask – and what a difference it will make in the way you think about money! I used to earn money and then immediately begin pondering which fun item I was going to buy. I rarely (if ever) thought about the fact that I could use the money to buy in to a small business, purchase stocks and mutual funds, start a small business or purchase a rental home.
Even more, I did not truly realize the ACTUAL cost of many of the items I had purchased. I had purchased a new car (my smokin’ hot Chevy Cavalier) and I only thought of the bank loan as my “cost” to purchase. In actuality, I also added the costs of insurance, property taxes, license tags, maintenance, repairs, and additional gasoline consumption. Not to mention the lost potential to make money with what I was currently sinking into all the bills associated with that car.
Before you spend, just stop and ponder the options available to you to use those resources to generate more income for you in the future.
BONUS: Review your budget to see how much your current possessions are costing you on an ongoing basis. There are many purchases that are “gifts that keep on giving.” By looking at things you’ve already purchased, or subscriptions you already have, you can find ways to lower your expenses.
Question 5: “Will this help me achieve my future plans, hopes, and dreams?”
I believe that the number one reason that people fail with their financial plans is a lack of organization and the lack of a plan. One of the best ways to plan your finances is to budget each month. To learn more about budgeting check out this post [HERE]. Budgeting is planning where you spend your money with you long term goals in mind.
Without a longer-term perspective, it becomes extremely easy to fall into the trap of living for the minute, and immediately spending every single dime we earn. As one develops a longer-term perspective, it really helps us recognize that spending all of our money right away will rip our future dreams away from us!
When my family first got started on improving our financial future (Dec 2002), I noticed that we started looking a few months ahead. Now, eighteen years later, my entire perspective has shifted. You see, I want to leave a legacy for my children and community. I want to leave a huge inheritance to my family, church, and others. My wife and I want to give our children a paid-for college education. We want to give them a paid-for house when they graduate. We desire to teach them to manage their finances recognizing that it is not just FOR THEM, it is FOR THEM TO HELP OTHERS!
I’m 46 right now. Statistics say I am over 1/2-way through my life. Time is short. Too short to spend all of our resources on stuff that does not support our plans, hopes, and dreams.
This is also why I wrote the book 20/20 Money. I wanted to walk you through practical steps you can take to not only discover, but fund your God-given purpose. Too often I see people buy into the lie that their big dreams aren’t possible because their income just won’t support it. My book is about helping you move forward to live a Fully Funded Life.
So Before You Spend…
THINK! Think about what this big purchase means. Not just the temporary gratification, but how it will impact you in the long run.
My hope is that by slowing down and asking yourself these questions you will be able to gauge how important a large purchase is to you, and how it will benefit you. You will make fewer, more meaningful purchases. You’ll still get to indulge in some “I wants,” but you’ll notice there will be less times that you spend money on something and wonder later “Why did I buy that?”