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What’s Your Number?

 

There used to be an ad on TV where people walked around carrying a big plastic number which represented how much they needed to save for retirement. It was impactful when thinking about how big the nest egg needs to be in order for each person to feel comfortable. Similarly, I often talk to my clients about their number in terms of how much cash cushion makes them feel that they can breathe easy. The concept of “the number” makes sense on many fronts.

That number represents our safety net, the amount that keeps us secure (as secure as we can feel in a crazy uncertain world), and makes us feel like everything will be alright. My grandparents on both sides of the family have passed away so I have seen behind the privacy veil and I know their numbers.  Those numbers were vastly different as were their lives. One lived on a safety net made of an income stream – Social Security and my grandpa’s pension – and had a very small nest egg beyond that. Life was pretty easy to figure out for them – you have this much per month PERIOD and you best save some of that monthly income because the wolf is not that far from the door. However, there was assurance that the first of the month was just around the corner.

My other grandparents lived a much more abundant life and had a much larger nest egg but no income stream beyond social security. Yes, the pot was bigger but in some ways, the uncertainty was too. The income stream had to come from the investments so those downs of the market made for queasier stomachs.

These days, pensions are going the way of the dinosaur in a lot of industries so we have to focus more on the nest egg of our future than on managing a pension income. Regardless, the biggest driver of any retirement plan is how much money you spend every month. You need a pretty small nest egg if you only spend $1,000 a month. Much more is required at $10,000 a month! That holds true regardless of the income source.

So as you think about your “number,” switch that to a monthly “need” number. What is the least amount of money that you could live on every month? What could you do without in order to make that a tiny number? Go to a “tiny house?” Not sure about that one, but it is interesting to consider. How much do we really need?

If the idea of your “nest egg” number seems daunting, flip back to that monthly need number. That is one place where smaller is definitely better and so much easier to fund!

To your financial success, now and in the future!

I’ve Been Irresponsible

I have heard that type of comment from clients or participants at speaking engagements but most recently it came from a friend telling me about divorce and the financial fallout in the aftermath. Yes, we’ve all been irresponsible at one time or another. We live in a culture that thrives on spending, living in the now, and has a focus on the material world. Yes, my friend, we have been irresponsible, our government has been irresponsible, our world has been irresponsible. And so it is.

So what have you been? What words do you use to describe yourself and your management of your own financial life? If it is more condemning than uplifting, then maybe it is time for a change in approach. When we berate ourselves (or others), we chip away at our confidence and our abilities. We undermine ourselves in the very area where we most need to be confident and self-assured. So the next time you beat yourself up, stop for a moment, and reframe your thoughts.

“I felt irresponsible/out of control/ashamed when I ________________________________. Next time, I can turn that around and feel responsible/in control/proud if I _____________________________.”

Focusing on what you can do, the way you want to act, or how you intend to face a situation that empowers you and sets you up to succeed. From today forward, drop the recriminations and focus on everything you want to be today and let go of what happened yesterday. We all can do better, be “more responsible” with our money, and turn our financial lives into something that we are proud of. Today is the day!

To your financial success!

Where are you in your half-time?

We are past the halfway mark for 2016 and perhaps you are shaking your head in wonder as I am. At halftime, teams gather in the locker room and assess what went well and what has gone awry so I recently sat down to do the same.
To be honest, I am not so thrilled as home improvement projects have gone beyond the home improvement budget at the same time as other large expenses have seemed to pop up. Isn’t that always the way it goes? What’s a gal to do except sharpen up the pencil and see what can be cut back and reworked to get back on track.

The Tana of old would have been more likely to use the old dieter’s refrain, “I’ve already blown it so who cares?!” and go forward letting my savings suffer. But the older and well, just older, Tana is determined to begin a new and still make the budget work with quite a bit less of that and even less of the other.

How about you? How are things looking at your halftime? Are the savings on track? The net worth a bit better? Is your spending where you want it to be? I hope so. I hope the income is better than imagined and the expenses lower but just in case it is not, try, try again. See where you can sharpen up the pencil and make do with what you have for a while until the numbers line up in a way that makes you feel good.

There is an ebb and flow to the seasons and the days and the money and if the flow is going the wrong way, now is the time to shore things up and get back on track. Good luck to all of us in “shore up” mode and to all who are well ahead, good job – keep it up; you are halfway there!
To your financial success.

Warning: Shopping May Lead to Your Garage’s Peril

About every 10 years I get the bright idea to have a garage sale. Every single time that I have given in to this urge, I have sworn up, down and sideways that I will never, EVER have a garage sale again no matter what. Not ever. And yet, all winter, I was in a purge mode to beat all purges. I was ruthless in clearing out cabinets, drawers, and closets. The attic, the basement, and the garage could not escape my keen eye or my burning desire to turn my trash into treasure. The day dawned, my whole family helped me haul and organize and price. My eyes gleamed – this was good stuff! I was ready to make a killing.

As I sat waiting and waiting and waiting for the masses to arrive and begin fighting over the priceless items that I was parting with, I started to mentally calculate the amount of money that all of this stuff had cost at full retail. Jewelry upon jewelry, scarves, cooking gadgets, boxes and boxes of boxes, videos, video systems and games, candles, oh, my heaves, I could have lit up the city with the candles! Stuff, stuff and more stuff. Tens of thousands of dollars of stuff that I sold for, wait for it, $127! Yes, hauling, organizing, and spending a day of my life to make $127. Not to mention the thousands of dollars represented by all of that stuff. That is fractions of pennies on the dollar. I don’t even remember buying some of it; couldn’t recall why I got it or if I even used it. What a waste.

I compare that feeling to the feeling I have when I walk into my remodeled bathroom. The cost of that was probably far less than the accumulated value of all that stuff, but I smile every time I walk in. I am happy every time I shower and don’t worry if water is leaking into the basement. I know that redoing the bathroom added to the value of my house; it is giving me enjoyment many times a day, and its value will last years rather than days or months.
This whole comparison gives me great pause now when I am tempted to toss something into the cart at Target or the clothing store. Is this really going to bring more than a fleeting moment of value to my life? Do I need another necklace, a candle (NO), or a book that I could get at the library? Probably not. Is this thing going to end up at my next garage sale 10 years from now when the garage sale blues have faded?

I hope that I will focus more on spending money on the big things that bring real value to my life and not the little trinkets that drain money and just create more clutter. How about you?

To your financial success!

The Graduate’s Guide to Money = Energy

Last time, I talked about thoughts becoming money. Of course, not every thought becomes money but we can’t get money without thoughts. I thought I would take an excerpt from my book to put it another way.

Excerpt from The Graduate’s Guide to Money
Money is energy, plain and simple. Humans had to create something tangible to represent their energy in order to make it easier to exchange.
Think about the cavemen days when there was no money or gold or anything at all to use as a medium of exchange. The cavemen bartered; one guy wanted something that the other guy had so either he clubbed him over the head and took it, or he started offering up things he owned which could be traded. Maybe somebody had meat and somebody else had berries. The two had to haggle to figure out how many berries would be equal to how much meat. At the very core of that exchange was the fact that one guy exerted effort to kill an animal to get the meat and the other guy exerted effort to pick all of those berries. There are other factors that enhance or detract from how much value is placed on that energy. Things like scarcity, access, and difficulty of obtaining will make the meat or the berries more or less attractive. Since each caveman was different, there was a different value placed on every exchange.

Fast forward a few hundred years, and the energy that was traded was more likely to be physical energy; the energy used to grow vegetables versus the energy used to milk cows. People traded sacks of flour for eggs or milk or a visit to the doctor. The doctor gave not only the energy of examining you but the stored energy of years of studying medicine.
So this isn’t some new-age “think about money and it will show up” philosophy. This is about turning your physical or mental labor into a paycheck. By working, you literally turn your energy—mental or physical—into money. The energy you give exactly equals the money that you earn, assuming, of course, that neither party is taking advantage of the other.

BTW: Volunteering works the same way as your paid labor, only you don’t get paid in money; you get paid with other energy, but that’s a different conversation.

End excerpt

When you think about the energy that you give and the money energy that you receive, is it a fair trade? I should also mention that we don’t always get 100% of our compensation in the form of money. Lots of people put a higher value on serving their fellow man than on financial rewards – all forms of public servants from teachers to stay-at-home parents to fire fighters and police officers and soldiers are not getting paychecks remotely close to the energy or value that they are giving. They are getting a form of energy worth more to them than money energy. Working with awesome people, being recognized, doing something meaningful or fun or invigorating are all part of the package. I guess the better question might be, is your energy equation in balance? Money is not the most important thing but being happy with your energy is. This week consider if your energy equation is in balance. If it is not, what steps are you going to take to bring it into balance?

Please visit www.graduatesguidetomoney.com to learn more!

To your financial (and energetic) success!

Money Mistakes

Last time I talked about the 4 steps to spring clean some of your mental money clutter. One of those steps is to forgive yourself and your spouse, if you have one, for past money mistakes. I also encouraged you to let go of the tendril of regret that accompanies mistakes. Easier said than done, right? Oh, my, regret has long, sticky tendrils that make detaching so tricky. Over the next couple of weeks, I want to talk about money mistakes, how to avoid them, and how to get beyond them when they (inevitably) happen.

Mistakes are a topic that I am an expert in! I have made loads of money mistakes and still have to regroup after I screw up and then think, “Why did I do that? I know better.” Try, try again.

So first – let’s define a money mistake as a money decision that is causing you regret. There can be other money mistakes – subtracting wrong in your checkbook, etc. that are technically not correct but are easily fixed and you move on quickly. For those other mistakes that cause you to cringe when you think of them, let’s exorcise the ghosts of mistakes past with this quick exercise (best done with a pencil and paper but even mentally is better than nothing):

  • What happened?
  • Why do you think that happened? (Here are a few ideas but definitely add your own: not paying attention closely, acting emotionally, ignored good advice, over-rode your own instincts, did not take action when you should have, did not face the truth of the situation)
  • What did you learn as a result of the mistake?
  • As you think back on mistakes you have made in the past, are they more likely due to taking a wrong action or due to inaction?

A mistake does not ever have to stay a mistake if you learn something from it – then it’s just tuition paid! As you think about your mistakes and what you can learn, pay very close attention to that last question. If you can group your past mistakes by “wrong action” and “inaction” what does that tell you? By honing in on your area of weakness or regret, you can better understand where you need to focus going forward so that you can avoid adding to the mistake list.

I will go into the two types of mistakes more deeply next week but during the week consider other areas of your life where you have made mistakes – is it from acting quickly or impulsively or is it from burying your head in the sand? You may see some patterns in other areas of your life. You are not necessarily all in one camp or the other so don’t feel that must pick one or the other but do see what patterns you can find. It is a thought-provoking question, though, so as you move through your week, give it some thought and let some of those past mistakes help guide you to a better financial future.

To your financial success!

4 Steps to Spring Clean Your Emotional Angst with Money

Let me start out today with a question: Did you take some action over this past week to get a new attitude? Did you reframe a fear into an empowerment statement? Did you decide to let go of some past missteps and create a plan to move forward toward your vision? If not, I’ve got some new action steps to help you get beyond some of the emotional and mental money clutter that may be holding you back or weighing you down.

 

  1. Tell the truth – to yourself and your spouse

Now is the time to ‘fess up and get it all out in the open. If there are bills and credit card balances, let’s pull out those statements, log in to those accounts, and face the truth. You can’t get to where you want to go if you don’t know where you are. Admitting to mistakes and short-comings is the first step to healing, redemption, and a new action plan.

  1.  Take responsibility for where you are

As you look at your savings accounts and your debts, you just have to own where you are and what the situation is. Even if the other person did the spending, you did the avoiding, the looking the other way or the abdicating of responsibility.  If you didn’t take an active role, at least monthly, in reviewing and monitoring spending, account balances and debt, you abdicated, avoided or denied.  You are still responsible for your inaction.  If you fell asleep in the backseat, don’t blame him that you woke up in Canada when you wanted to go to Mexico!  Wake up!  Look at the map!  Help navigate!

 

This applies even if you are single. You chose to look the other way when the statements came or when the savings didn’t happen. You chose not to actively make a plan for your financial life and you just “let it happen.” You got in the car and just started driving without a map or destination in mind. That was then, and now you are awake and alert and ready to…..

 

  1.  Forgive

Forgive yourself for mistakes, bad judgment, ignorance, apathy, spending, ignoring, avoiding, materialism, greediness, and other grave financial sins.  Forgive your spouse for all of the above.  To paraphrase Maya Angelo, when you know better, you do better. You may not have paid attention in the past but today is a new day! Now you are ready to turn it around and seize control. You cannot move forward if you are anchored to past mistakes, so LET IT GO!! Forgive and…

 

  1.  Change your perspective  

There is no more blaming – you and your spouse are one economic unit.  You both have equal responsibility for your financial health and well-being.  Instead of seeing your spouse as trying to control you, limit you, or take away from you, view your participation and “frugality” as a gift that you give to the person you love.  There is no greater gift than financial peace-of-mind whether you have a partner or not.  Everyone should be determined to chart their financial course, define their ideal financial life, and create a step-by-step plan to move toward that life.

 

View a spending plan as a framework for helping you get everything that you ever dreamed of and a way of eliminating all of the “trash and trinkets” that are taking away from your big dreams. Start seeing the shiny objects that are vying for your attention (and your money) as obstacles to what you truly want and create a plan to get those things out of your way so that you can focus on the big dreams – a home, travel, financial security – whatever the most important aspects of your life may be. Make a plan to fund the big goals, be willing to save for them, and have the determination to continue to move slowly, step-by-step, month-by-month, little-by-little toward them.
Then What?

These 4 steps are not “one and done.”  It’s not “paint the house;” pfew, that’s done for 5 years.  It’s the laundry; it’s done for today but tomorrow or the next day, sweaty, smelly clothes will reappear. You can’t avoid the truth, the responsibility, the forgiveness, or the change in perspective any more than you can ignore those nasty workout clothes.  If you do, you get the same result – a big smelly mess!

 

Understand that there will be mistakes and missteps so frequently tell the truth, accept responsibility, forgive, and think about the new perspective of embracing opportunities to save for the big, important things and push aside the little distracting things. Keep looking for those tips and tricks to save here and save there and keep revising, reviewing, and revisiting the plan. Old habits die hard so be gentle on yourself and your spouse and try, try again. Changing your financial reality is a process that happens over time. Changing behaviors, habits and attitudes is a process as well. If you keep at it, you will find yourself in a better financial situation with a new money attitude before you know it.

 

Let’s Get Organized!

January has come and gone which means a) the year is racing by, b) most people have already bagged their new year’s resolutions, c) you have gotten a bunch of tax forms in the mail, or d) all of the above?

If you picked “d,” you are a winner! The year is racing by, everybody, except you, has bagged those resolutions, and you do now have a stack of tax forms, or will soon because the mail date is upon us. So, in honor of all those busy beavers who worked so hard to prepare those tax forms, let’s have a quick run-through of what they are, what they mean, and how you can get them all organized now and avoid the April rush.

To help you and your tax accountant prepare that tax return with ease, grab a couple of large envelopes and let’s sort through those forms and add a few other things that you will need.

Label one envelope “Income Items.” In that envelope will go:

  • W-2’s – the form that you received from your employer if you worked as an employee. Take a quick peek and make sure the income number matches what your total salary and bonus is. Does any 401k contribution show up correctly? Do you have questions about any of the information that is shown? If you do or if anything seems amiss, now is the time to contact HR so that you can straighten out any errors.
  • 1099’s – There are a whole slew of potential 1099s that you can get. The most common are 1099-INT or DIV which come from your investment and bank accounts. There is usually also a section with the 1099-B if you sold any securities during the year. 1099-R means that you took money out of an IRA or other retirement account. 1099-G is the form that you will get if you got a state income tax refund in the prior year. 1099-MISC means that you performed contract work for someone and will likely need to include a schedule C for nonemployee income. Be sure to include all 1099s in your income envelope as there are quite a few other varieties – all of which are important.
  • K-1 – these forms come from being a partner. This will show your share of the income, deductions and credits. Be sure to take a good look and make sure that the ownership percentage and other details appear accurate. If you have questions about the information that appears, be sure to contact the managing partner to get details or clarification.
  • Include any other forms or details of income that you received during the year.

If you have your own business, you will want to include a complete financial statement from the business. Label a second envelope “Business” and include all of the details from your business.

  • If you use your car for business, make sure you have a mileage or other log to show the business miles driven, including who you met with (or the activity performed), dates and the mileage to and from. If you didn’t have a great log last year, now is the time to set one up for 2016!

I’m sure you got other forms in the mail that relate to potential deductible expenses as well. Be sure to label another envelope “Deductions” and include all of those things. I’ll go into more details on those items another time, but, for now, set aside a few minutes and get all of the income pieces of your tax return organized. It doesn’t have to be an overwhelming task if you take it piece by piece and knock it out a bit at a time.

We know how fast the year is speeding along, and April will be upon us in the blink of an eye so avoid the stress and get yourself organized now. You’ll be glad that you did.

To our financial (and tax) success!

 

And The Top 10 is…

When I wrote The Graduate’s Guide to Money, I came up with a Top 10 Money Principles list. I wrote about them in the book, and I reference them when I speak with groups so I thought that every now and then, I would sprinkle in one of my Top 10.

In classic David Letterman style, we’ll start with number 10 – Investing: Just do it.

When I speak to groups, whether it is to a women’s group or a group of college students, investing is the topic most frequently brought up by participants. Libraries have been filled with books on investing, and it is downright intimidating to try to dip your toes into that kind of pool. I know because for years, I kept my money nice and safe in interest only investments and missed out on the greatest stock market run in history – oops.

So, when you have money that you don’t plan to use for 10 years or more (like your 401k or IRA if you are a decade or more away from retirement), get it invested. Take 10 minutes a day to read the info on your plan website, chat with the rep from the 401k plan, or schedule an appointment with an advisor, but put together a plan to get your money invested.

It is really quite easy now with the multitude of index mutual funds and broad market mutual funds. Don’t know what a mutual fund is – check out Investopedia.com. Want to see information about a stock or mutual fund? Try finance.yahoo.com. This site is free. Enter the name or symbol of the investment and you can get all kinds of information. You can see a chart of the price over time. You can compare it to indices, and you can link to all kinds of information – analyst opinions, price estimates, or key statistics among other things.

If you want to invest just a bit on a regular basis, you can use Computershare to buy U.S. companies in a dividend reinvestment plan. There are all kinds of ways to get going but get going. Do some research. Read some magazines. Talk to someone in the know. You want your money to be working for you and especially in this interest rate environment, you need more than interest only.

Interestingly, I wrote the preceding in early January prior to the market volatility that we have seen since January 5th (and really experienced this week with a 3.7% drop in the S&P 500 on Wednesday.) This is the environment where most investors want to “run out of the store” because the sale is happening so fast and furiously. However, that volatility is your friend if you don’t panic and you remember: you haven’t lost anything if you don’t sell! Prices go up and they go down – all day, every business day. Some days they go up or down a little and some days they go up or down a lot. The key to unemotional investing is to realize that everything is temporary, the market moves in cycles, and over long periods of time, the markets historically go up.

Generally speaking, down days are better days for buying than for selling. Up days are better days for selling than for buying. (Remember the old “buy low, sell high” rule?) Whether those principles apply to the individual securities that you hold is impossible to say, but generally speaking, when you invest in mutual funds and broad-based index funds, the risk of everything going to zero is low. If the S&P 500 goes to zero, I think we are facing bigger issues than how much money we lost – it might really be the zombie apocalypse! Can individual stocks go to zero? Yep. They can and do, unfortunately, so heed grandma’s advice about not putting all of the eggs in one basket.

The bottom line – a principle is a principle because it nearly always applies so the post that I wrote in early January still applies: Investing: Just Do It.

To your financial (and investing) success!

Think Small

I know, I know – the saying is “think big,” but I am coming to believe that it is the small things that will make the

biggest difference in our lives. I always talk about “5 bucks matters whether it is draining out of your wallet,

paying down your debt or building up your savings,” but I wasn’t really, truly applying that philosophy to all

aspects of my life. Five calories matter. Five minutes of mediation or prayer matters. Five push-ups matter.

Before Thanksgiving, I asked you to start preparing for 2016. I asked you to think about goals and about things

that you want to be different next year. If you have done that, perhaps you are creating your goals, identifying

your action steps, preparing yourself for success, and identifying challenges to your success. Awesome – keep

preparing. To help you achieve big goals, plan for small actions, take small steps, do little things but do them

daily.

I am the queen of the grand gesture. I can easily get excited, make plans, buy equipment, block out hours and do

something grandiose one or two times. Consistency is what is hard for me because I am so quickly caught up in

the next new idea or big plan and it is nearly impossible to maintain the “big bang.” For me to succeed at

something, I have to take turtle steps. I talked about Martha Beck’s turtle steps in part II of Creating Better

Money Stories: A turtle step is an action that is so ridiculously easy as to be laughable. It is such a little nothing of

a thing that it hardly seems like it would matter, but it does! It really, really matters because it helps overcome

the hardest part – starting!

Make your action steps be turtle steps so that you know you will do it. It’s so easy, why not? Then come up with

another turtle step for tomorrow. Consistent turtle steps will move you faster and further than thinking that you

are going to “block out 6 hours to tackle this.” Ha! That is never going to happen for so many reasons.

As you make you plan for 2016, identify the turtle steps that can help you creep your way to accomplishing big

goals. In the book, The Compound Effect, Darren Hardy talks about the power of compounding the impact by

doing small things consistently. That compounding can be positive or negative. Take the example of spending

just $4/day on coffee versus saving $4 per day: “The real cost of a four-dollar-a-day coffee habit over 20 years is

$51,833.79. That’s the power of the Compound Effect.”1 So, the difference between spending that $4/day and

putting that $4/day into your savings account is really $103,667.58!

Think of the difference between cutting out 125 calories per day and adding 125 calories – it’s a 67 lb difference

after 31 months.2 There are so many examples of little things which when done consistently create massive

impact. The critical part of that is done consistently. What will you do consistently in 2016 that will inch you

toward success?

“Be faithful in small things because it is in them that your strength lies.”

Mother Teresa

1 Hardy, Darren, The Compound Effect, 2010 by Success Media, page 41.

2Hardy, Darren, The Compound Effect, 2010 by Success Media, page 13.

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