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Things My Parents Taught Me about Money (and Life)

Have you ever had one of those moments where you had to admit to yourself that your parents were actually right?  And perhaps beyond that even that they were really smart (or if you’re from Boston like me, “wicked smahht”)?  It’s humbling…I have one of these moments at least once a week if not more often.  And as much as I may hate to admit I might be wrong about something, I’m so grateful that I’ve had my parents to show me the way (financially and otherwise).

As I reflected on what I wanted to write about this week, I’ve been thinking a lot lately about exactly what it was that my parents taught me about money and life that have made such a difference in how I was able to build a strong financial foundation that has afforded me financial freedom and choice in my life. I also thought it might be helpful to share what they taught me so that you could not only learn from what they taught me, but also understand why it’s so important for me to teach others how to plan for their financial futures and use their money efficiently and effectively.

While there were many lessons that my parents taught me, I’ve boiled it down to 3 key lessons that have impacted how I handle my money and to a larger extent, my life.

Lesson #1: Failure to plan on your part does not constitute an emergency on mine.

This phrase was (and still is sometimes!) one of my Dad’s favorites.  Any time I used to try to rush him to do something that I needed quickly (a ride to the mall, a decision about something I wanted to do, etc.), this gem of a statement would pop up.  And while it annoyed me when I was younger, I’ve come to appreciate the importance of looking ahead at where you want to go and establishing a roadmap on how to get there.

From a financial perspective, this lesson also applies.  I’ve had clients in the past who tell me “so-and-so did this” or “so-and-so wouldn’t let me XYZ” and that’s simply putting the power in someone else’s hand when perhaps you didn’t take the time to plan financially in advance on your end.  When you understand your “money map” and know how your money is being used, you can use money as an effective tool to live your life and avoid situations where someone else has control over the decisions that you make.

Plan ahead, and you’ll be less likely to run into an emergency where you’re dependent on someone else!  As I say to my clients all the time, focus on developing your own personal economy and you’ll understand what true freedom and choice is all about!

Lesson #2: Live within your means

This one may seem obvious, and it’s said often by lots of financial experts, yet I find that the true lesson in these words is often missed since they are repeated so often (and people get tired of hearing the same things).  While both of my parents used this phrase and lesson often, since my Mom was in charge of the family finances it was primarily her who taught my sister and I what this really meant, both in word and in reinforced action.

Let me share a story from when I was about 17 or 18 years old.  (PS – My Mom doesn’t remember this story, but I absolutely do because it taught me powerfully about living within my means.)  At this point, I had a license and my parents had given me a credit card that was an extension of one of their cards.  This was as much to learn how to use a credit card responsibly as it was for my parents’ convenience for me to be able to buy certain things on my own that I needed (with their approval in advance).  One day, my mother told me I could buy new basketball sneakers for the upcoming season and I could spend $80.  I headed off to the mall after school that same day and found a pair of sneakers that cost $100.

I rationalized to myself, “what’s another $20? This newer brand and color looks better so I’ll go with the $100 pair.”  Time went by, and a few weeks later my mother showed up at my bedroom door holding her credit card statement and said “do you have $20?”  I looked at her funny and said “yes, I do – why?”  She said “if you want $100 sneakers then you can pay the difference from the $80 I asked you to spend since you work and earn your own money.

Now, this might seem harsh to some of you but I have to tell you it was one of the best lessons my parents ever taught me about money.  It wasn’t about the fact that my parents couldn’t afford the additional $20 (they totally could).  This was a lesson that taught me the importance of planning and sticking to a plan because without one my parents would not be happily and successfully retired in their early 60s with the opportunity to spend several days a week watching their 2 beautiful grandchildren.  Those small $20 differences add up over time when you start to think about the freedom that our daily choices can provide for us, don’t they?

Lesson #3: Always be ahead of the “financial 8-ball”

While my mother didn’t necessarily explicitly teach us this lesson, her financial habits and actions of sitting down each weekend at the kitchen table to pay the bills and attend to financial matters showed us everything we needed to know. Sometimes it was simply writing checks and paying the bills, sometimes it was following up on charges that didn’t make sense (i.e. medical bills, odd charges on monthly bills), or perhaps even transferring money into a savings account.  No matter what she was doing, it usually involved about an hour to 90 minutes of her time and for the most part we never saw her sit down with the checkbook and the bills again until the following weekend.

I use this habit with my clients all the time, and I call it a “money date!”  It’s amazing how impactful and freeing it can be to sit down just once a week and handle all of your financial matters for the week ahead.  You stress less about money knowing that you have set space aside to pay your bills, transfer funds between accounts, and look ahead to make sure you’re always ahead of things that you need to address. 

So what does all of this boil down to? Having a plan, living within your means and being ahead of the “financial 8-ball” doesn’t just happen without some effort on your part.  In my mind, having a cash flow plan (a.k.a. “budget”) that helps you to be in control of your money is a critical piece of being on a path toward financial freedom and independence.  But here’s the catch – you have to start somewhere, yet many people were never taught and don’t know how to develop a plan that works for their life.

If you’re looking for a place to learn how you can get started on your own path, make sure you take advantage of the FREE CALL this coming Tuesday to get the information you need to move beyond financial overwhelm and stress into a world of financial peace!!

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How to Get Started Building a Financial Plan

If I’ve heard it once (or some version of the following), I’ve heard it 1,000 times: “I don’t like numbers, they scare me.  I can’t seem to sit down and put together a budget even though I know I really should.”

So let me get this straight – you’re scared (which means you’re not thinking as clearly as you’d like to), you think you’re “supposed to” put together a budget (which is like the universal swear word of money), and you are “shoulding” on yourself that it’s an exercise you have to go through (and be tortured it sounds like to me).

C’mon….how about a little compassion for yourself please?  Is it possible for you to see that maybe it doesn’t have to be torturous and if you just had the right tools and information it would be easier?  I’d like to help you shift your perspective to have building a financial plan be a more joyful experience so that you can have the financial freedom, independence and choice that you’re seeking.

The way I see it, there are 3 steps that are required “pre-work” before you ever start looking at numbers to develop your financial plan.

1)      Retire the word budget from your vocabulary – I would say eliminate it, but since other people still use it frequently and we need to be able to recognize the word (I can only educate so many people at a time!), we’ll “retire” it for now.  Why retire the word budget?  Energetically speaking, budget just feels awful. It feels like you’re choking and like if you have a budget you’ll never be able to buy a cute pair of shoes or the newest technological gadget ever again.  Sounds pretty miserable and life-sucking if you ask me, no wonder no one wants to put together a budget! 

Instead of the word budget, I suggest using the phrase “savings and spending plan.”  As one husband reminded me across the kitchen table during a session with his wife one day, “Beth, it’s the same thing, why get caught up in semantics?”  My response? “Well your wife seems to be much more willing to participate in the conversation when we call it a “savings and spending plan” than when we call it a budget, right?”  The husband smiled and said “excellent point.” Sometimes it really is the small tweaks in life that make the difference!

So stop thinking about budgeting as something that weighs you down, and instead start thinking about a “savings and spending plan” as something that is just a financial illustration of how you want your money to move in the world that will help you get from “here” to “there.”

2)      Get really clear on what you want for your life – Before you plan your money, you need to spend a considerable amount of time thinking about what you want for your life.  Money is nothing but a tool to help you move from your present to your future (from “here” to “there” remember?), and without some sort of path to follow money will just exist without purpose.   Unless you tell money where to go it will go just about anywhere it wants to!

Being financially authentic means that you use your money in a way that aligns with what matters to you in your life.  When you’re financially authentic, a financial plan is nothing more than the full expression of what is important to you and all of a sudden the energy around money becomes much less chaotic, and financial decisions are simplified.  You have a road map for your life and your money and it provides you with clear guidance and direction.

In the end, a solid financial foundation and a good financial plan simply requires that you’re intentional, authentic, and proactive with managing your money.  Get clear and get real about your life, and using your money efficiently and effectively will become much easier, I promise.

3)      Set some specific goals with timelines – Now that you’ve gotten some clarity around what you want for your life, it’s time to set some specific goals so that you can then determine whether those goals will require money to support them.  Not all goals need money, although many goals do need some level of financial support at some point in time.  

When setting goals, I encourage people to think about them in 3 different time-based groups – short-term (1 to 3 years); medium-term (3 to 10 years); and long-term (10+ years).  This is important because depending on the goal, it can impact whether or not it’s a goal that needs to be reflected in the current financial plan or whether it can wait to be included in a few years.  Remind yourself when you’re setting your goals to be realistic – saying that you want a Ferrari in a year isn’t likely to be something that you can achieve (unless you randomly hit the lottery, and the lottery isn’t a financial plan it’s a fluke!).

Once you’ve determined which of the goals need money to support them, consider the short-term goals first and state the goals in a very specific and measurable way.  For example, saying “I want to save more money” isn’t very specific, whereas “I want to save $1,200 in the next year to take a vacation in spring 2014” is very specific.  The more specific goal allows you to measure out that you’d like to save $100/month toward that goal ($1,200 total / 12 months), whereas the more general goal doesn’t give you a solid target.

So before you even start to concern yourself with looking at the numbers, take some time to sink deep into your head and your heart to think about what you really want for your life.  Are you happy as you are?  Do you want to set a really big goal that needs financial support (i.e. like starting your own business)?  Do you want to simplify things and live more peacefully and calmly without as much “stuff” cluttering up your life?

The options are endless, it’s simply up to you to choose and design a financial plan to match your life!

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