Pay Yourself Second, You Will Come Out Ahead

Everywhere you go there seems to be a line whether you are buying your coffee or tea, getting through airport security, waiting for a table at a restaurant, there is always a line.

 

It may not be as visible, but your money has a line forming for it also. Who is always first in line for it? Why, your favorite uncle, Uncle Sam. Uncle Sam demands to get paid and does what he can to stay #1 in line for his portion. Taxes always come out first in a financial transaction. Uncle Sam demands immediate compensation from a deal. But who is second in line for your money?

 

It depends. For many it is the merchant like the grocery or retail store. For some it is the account that you have agreed to pay second like a settlement, alimony, or a collection payout. I want you to reconsider who should be second in line and if this person is not already there, I want you to put them second in line.

 

I want you to place yourself second in line, after that demanding Uncle.  I want you to be as adamant about being second as Uncle Sam is about being first in line.  And be as adamant about that as Uncle Sam is about being first. I want you to take your position seriously and responsibly by having a plan and manifesting that plan so the money you have for yourself builds and supports the life you want.

 

Think of the 5 S.I.D.E.S. of Money© and determine how you are going to allocate the money you will have by paying yourself second to Saving, Investing, Donating, Earning, and Spending. When the money comes you then are ready to allocate it as you planned to those five S.I.D.E.S. of your financial life.

 

Be fanatical about putting money into those 5 S.I.D.E.S every time you have money pass through your hands-without exception and you will become a steward of your own money. You will come out ahead.

 

Leave a comment on how you make sure you pay yourself second.

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Is the Financial Retirement Model Broken?

A recent article from Motley Fool revealed startling numbers about retirement savings. While ten percent of 55-64 year olds have a nest egg of $730,405 or more, the vast majority have $305,302 or less in their retirement nest egg. The Government Accountability Office released a report last year ( http://www.gao.gov/assets/680/670153.pdf ) which, in part, spoke to the financial status of people ages 55-64. They found that 41% of households had no retirement savings while an additional 20% had up to $100,000 saved.

Rather than lash out at potential consequences to this today, I am going to look at it from another point of view.

We are now looking at the third generation of retiree’s preparedness for retirement and finding it the same as the last two: not enough in savings….by a long shot. Why?

I think this is so because I think that the financial retirement model is primarily geared for three paradigms: the rare individual who saves like crazy, the individual who is lucky in the company they keep (stock grants) and those individuals who either inherit or have a career, winnings, pension, or golden parachute that ensures their financial security.

I am going to go out on a limb and say saving for retirement is not within reach of most people. Our culture, while promoting saving does little to encourage it. Instead, our culture invests a lot of effort to help and guide people to part with their money.

We have tried to “make” and encourage people to save. They are not or cannot do it There is something broken here.

I’m just sayin’. What about you? Leave me a comment on your reaction to this.

The Financial Crisis…in my Head or Did the Alarm Go Off and I Didn’t Hear it?

Oil plummets, stocks plummet. Are we where we were in 2000 and 2008 or is Chicken Little at it again, screaming to anyone who will listen that the sky is falling? Are we there, with another financial meltdown which will take a 2-3 years to recover? I don’t know. I do see the effects of the media shouts. I do note how I react.

Unlike March of 2000, when I took all investments off the table right before the crash, I am still in the market. Unlike Sept of 2008 when analysts and pundits were continuing to assure the public that everything was fine, and I decided to listen to them instead of myself, and only took some money off the table, I listen much more to what I need from my own money.

The inaction I took in 2008 taught me a valuable lesson. Regardless of what analysts think or say that may turn out to be right or wrong, first listen to yourself. In this case, about money and the markets, it was and is today: what do I want from investing? Am I trying to turn $100,000 into $1,000,000 in 10 years? Am I trying to preserve what I have? Am I trying to do both? What do I want from investing? Am I trying to make some “educated bets” knowing only a few, if any, will actually succeed? Why am I investing? This question is not asking for the quick, knee jerk response like “I am investing for retirement.” Because that statement does not have enough substance to it. What retirement? When? On how much? Doing what? For how long? Am I willing to question my advisor’s strategy during tough financial times; questions like: What is your strategy during tough financial times? How do you define tough times? What have you done in the past during tough time? How will we build a strategy for me? How will you monitor it?

Sometimes you can’t know what you need until you know what you want.

Once you know why you are investing, you can begin to forge a system of how to invest. Let’s say you have $50,000 which you want to grow to $100,000 in 10 years. When you talk to your investment advisor, build a strategy to take you there. As there are no guarantees in the financial markets, be sure to include accountable measures and milestones so you can readjust your portfolio, take “winnings” off the table, and help guide your portfolio to its mark rather than rely the passive ups and downs of the market. Have a strategy to take money off the table in the event a downturn occurs so you feel safe and your money is protected.

Don’t wait for the firefighter to let you know your house is burning. Install an alarm in the house that is set to go off when certain events happen to warn you to do something.

Leave me a note about how you deal with your own financial head talk, especially in financially tough times.

When Roles Are Reversed and the Kids Pay…Cool, Right?!

When asked about what impact their money would have on the lives of their heirs, a recent study found that 65% of the responders said there would be too much focus on material things, 55% said their heirs would not understand the value of money, 52% said their heirs would spend beyond their means, and 50% said that their heirs’ initiative would be ruined by money.  It looks like money does carry emotional baggage with it.

How do you teach your children about money when it can be a source of contention within your own homes or even worse, you hardly talk about it because you and your partners’ views on money are so different?

We use the 5 S.I.D.E.S. of Money© concept (save, invest, donate, earn and spend) to build strong and productive habits with money. Because money comes with so many emotional charges, it is important to know what money means to you. As money is a resource, it is important that there be conversations about the impact to the 5 S.I.D.E.S. of Money© can have in your life.  In learning how you view, succeed at, are challenged by these “sides” you learn a lot about your stories and sustainable behaviors around money.

To illustrate this, here is an example of an exercise a family devised for themselves. The parents were frustrated with their children’s casual view of money. They decided to reverse roles with their children for one night. One evening, the parents told their two children that the next allowance was going to be treated differently. Rather than give an allowance outright for whatever the kids wanted to use it for, this time the allowance was going to be used to treat the family to a night out with dinner and a movie.  “Cool”, the kids thought, until they were reminded their chore money was being used for this.

As their parents explained, this was going to be a “see how the other half lives” experience. “Cool”, the kids again thought as they felt a generous splurge washing over them as they decided where to eat and what movie to see. Cool, right?!

At dinner the children ordered their usual meals. Their parents, instead of ordering their usual fare, decided to order like their children did when the meal was paid for by the parents. In addition to the entrée, the parents each ordered appetizers and dessert.  Once they got to the theater, the parents said they wanted more food and ordered large popcorn, large drinks and extra candy, just like their kids would.

Like their children, the parents did not eat everything. They left most of their entrée on the plate while eating all the dessert. They spilled the drinks at the theater. They tossed some of the candy and popcorn out too…just like their kids. Cool, right?!

Their children were shocked that their parents left food on their plates, food they ordered but didn’t want to eat. The kids couldn’t believe their parents wanted more to eat at the theater. When they saw how much had been spent that evening, the kids were blown away at the total they, the kids had to spend. 

This turned out to be a life lesson for the kids on the value of money to them. It changed their perspective and behaviors with money. Sometimes all it takes is a new perspective. Cool, right?!

Your children want guidance on how to best deal with their own money. Give them experiences with built in lessons for them.

 

How do you teach the 5 S.I.D.E.S. of Money© with your kids?

Thank You for Being Part of My Fulfilling Year

Reflecting

 

Thank you for who you are to me—people of grace and profound commitment to bringing a richer weave to the fabric of life-your own and the world around you.

 

When I reflect on you,

You who have deliberately chosen to direct your lives

Purposefully and with great meaning

I see shimmering stars lighting my path

I see the beauty of persistence and determination in you.

 

As I think of you

I feel the essence of the freedom you feel

When enduring strength and power replace your initial fears and doubt.

I am touched by your commitment to being your best

With your Legacy, your Life and your Money

 

HAPPY HOLIDAYS

We welcome your comments

Are You Allocating Your Money to all 5 S.I.D.E.S.?

What S.I.D.E.S. of money are you favoring? In the second of three levels of our Money Focus program, we ask the question: “What sides of money do you use and which do you favor?”  We ask this so people can determine how they currently attend to what we call The 5 S.I.D.E.S. of Money©. Theses 5 S.I.D.E.S. are:

Saving

Investing

Donating

Earning

Spending

 

Most people find that the sides they use the most are spend and earn. A big drop off occurs before I see either saving or investing as the next sides people attend to with investing and saving last.

 

Where does donating fit? Surprisingly, it is not last. It comes before investing. The World Giving Index found, that as a percentage of population, the U.S. ranked ninth in 2014 among approximately 140 countries. This index found that about 68% of the U.S. population donates money. The Gallup Poll found that as of April 12, 2015, 55% of adults have money invested.   USA Today, in March of 2015, found that 66% of the population saves but 47% reporting that they only have enough to cover living expenses for 90 days or less.

That is important information which illustrates how fragile and tenuous people’s financial lives are.

How do you address money at home so these sides are attended to in ratios that sustain a healthy lifestyle? What S.I.D.E.S. do you attend to and in what percentages?

Research has found that many of the top earners have their money allocated to the 5 S.I.D.E.S but they don’t share healthy stories or teach their children or grandchildren about productive money habits. The next tier of earners, tend to allocate money to earning, investing, spending and donating, with only extra money, when it comes, allocated to saving. They don’t teach their children or grandchildren much about money either.

Below these thresholds, people skew their financial allocations towards spending, earning and donating only if there is extra. Saving is rarely attended to. This oversight can lead to lifestyle upheavals should a disability or loss of income occur.

When children are not exposed to all of these buckets early they tend to give them scant attention as adults. The cycle of poor financial habits is reinforced and passed on to another generation.  You can end this by mindfully allocating your money to each of the 5 S.I.D.E.S. of Money© deliberately, purposefully, and continually.

What S.I.D.E.S of Money© allocation do you exhibit and in what percentages? How is this compromising unforeseen financial challenge such as illness or loss of income?

Tell me how you allocate your finances to the 5 S.I.D.E.S. of Money© and what risks you are subjecting your financial wellbeing to.

 

I would love to hear from you.

Money is Like Food in that….

Have you ever seen someone eat too much? If not you should. Why? Because it will teach you something about money.

Let’s say you are at a restaurant and you see scrumptious item descriptions on the menu? What do you choose? It can be difficult to decide which yummy sounding items to order. Instead, the tendency can be to over order so as not to miss on “a good thing.” Restaurants are aware of this. Some have learned the art of carefully scripted descriptions and titles on their menus to guide our decisions. How do you stop yourself from ordering too much? Once the food is placed in front of you and your dinner companions, how do you know when to stop ordering? It’s interesting that the tendency is to eat more in an animated conversation or environment. Restaurants know this also and cater their environment to create the mood they find most profitable for their patrons. But I digress.

While eating at a restaurant with friends, how do you know when to stop eating? Do you consciously stop before you are full, when you have ingested enough for your body to efficiently use, do you eat until your plate is clear? Food itself does not tell you when to stop. It is up to us. We have to make the decision to stop eating. Without our own guidelines to eating, we rely on the multi- billion dollar industry geared to helping people figure out good food choices-Paleolithic, Atkins, the 3 Hour diet, Vegan, Macrobiotic, Mediterranean, Beverly Hills, Weight Watchers, Jenny Craig, Mayo (Clinic not naise),Protein, Lo Carb, High Fat, and don’t forget the French Women don’t Get Fat diet.

Money has a similar predicament. What is enough? How do you know you have enough? How do you stop from spending money? What are your guidelines around money? Like food, without our own healthy guidelines to money, there is a multi-billion dollar industry built to money from your pocket to someone else’s. And if you don’t have the cash, you need not worry; a credit card or two, or three will do just fine. Do you have a trusted set of guidelines you follow with your money?

It’s no wonder many people have a difficult time with money. They have not assessed value to it other than consuming and paying their necessities. Their money is already allocated to mobile data plans, car payments, vacation funding, technology, mortgages, food, and other must haves. There is nothing else left for things like investing or saving. Of course a little is put away into retirement plans at work. But not enough.

What can be done to transform this cycle of consuming? Fortunately we know that our mind works best when it has a system to follow consistently and diligently. Try this two part exercise: the next time you purchase groceries use a credit card and note your reaction to your transaction. Do you look at the total? Do you look at the price of any of your food items? If so, which ones? When you buy groceries again, pay in cash. What is your reaction to the transaction now? Did you pay more attention to the total? How did you feel letting go of your money and handing it to someone else? Note the different reactions you had in buying your food with a card and with cash. Which made you more aware of a loss of money? For most, using the credit card is more removed and has a less emotional feeling of ownership and loss while using cash can produce feelings of doubt about the purchase or loss of something you owned.

Becoming more aware of your spending habits is a great first step to creating a framework around your money.

Tell me what you discovered in doing the exercise I mentioned. I would love to hear from you.

Control the 5 S.I.D.E.S.© of Your Money

If I asked you what the purpose of your money was, what would you say?

 

I find that when I do ask that question, it is met with an abrupt silence or a quick what do you mean? My money is for me to do with as I want. And what is it you want to do with it? I ask. Give me the things I want. And as I ask them what they want, there response is usually fairly vague or focused merely on spending.

 

Money is a tool, a tool to benefit our lives. This tool benefits the areas of our lives I call The 5 S.I.D.E.S.© of Money: spending, investing, donating, earning and saving.

 

To help your money become a tool to benefit you, you must conscientiously apply and know how you will allocate your money to these five sides.”   You must control your money or you will be at risk of having your emotions drive your use of money.                                                                                                  

 

Are you in control over your 5 S.I.D.E.S.© of Money. Tell me what gets in the way for you. Tell me what works for you in this framework. I would love to read your comment.                                                                                        

Money Phrases You Can Take to Your Bank

For this blog I want to share with you seven pithy quotes on money for you to reflect on. As you read each one think about its relevance to your life

Money:

  1. It can take a lifetime to build and a year to lose
  2. It’s easier to make money than it is to keep it
  3. The secret to keeping your money is knowing what yours is for
  4. You make good choices because of the heroes, models, mentors and experiences who guide your thinking in the proper way
  5. Money without meaning is like candy without a wrapper. It’s too easy to devour without restraint.
  6. This year, money and I will be friends, and not part company as easily and as often as last year.
  7. Commitment is a promise and pledge to something. Make your commitment to the purpose for your money that strong.

Which statement got you to think about your money in a more profound way? Which statement made you reconsider an aspect to your money that is not in alignment with your intention with that money?

I find that #5 is a zinger for me today as I can find myself easily justifying an expense I don’t need but act upon. I like the reminder that #7 gives me to have a pledge with my money and to honor that pledge.

Leave me your comments. I’d like to hear what caught your attention.

If Having Money is Fraught with Peril, There is Only One Thing You Can Do

Money, although a great tool, is rife with peril. Why is that? For the most part, how you grow up around money will greatly affect how you deal with money as an adult. If you did not learn much about money, and most people don’t, you will probably still be somewhat out of control with your own money by spending too much or even saving too much. What is your first memory of money? What did you do with the money you received as a child?  Who influenced your early behaviors around money?  How are you impacting your own children’s life with their money?

It’s important to form a family culture around money so that money has a purpose and relevance to all members of the family. Children, for the most part merely see the outcomes of money. They don’t understand its’ value. It’s important to help them understand and develop the purpose of their money as well as understand the purpose of the family money, and be able to distinguish between the purposes of each.

Your children need to understand how you, their parents view the family money. They need to know how the family money is different and separate from their own individual money. Have them allocate their money into the 5 S.I.D.E.S, of Money© (save, invest, donate, earn and spend). If they start this early, they will continue to foster this behavior as an adult because they will have gained experience, consequences and outcomes which they build upon throughout their lives.

Children need to be part of conversations around money so they feel that money is part of their life rather than something that is given or withheld from them. If your children are part of healthy discussions around money, they will understand the meaning of money and build that meaning into their own lives.

  • Learn what formed your own habits and behaviors around money.
  • Discover what is influencing your children’s habits around money.
  • Become proactive on sharing the topic of money as conversation and as experience so that money conversations and decisions are part of the family culture.
  • Allocate money into the 5 S.I.D.E.S, of Money©

Make money another regular topic of conversation and money will no longer be fraught with peril. Instead, it will become a great resource both for your family’s purpose and for each individual’s objectives.

Leave a comment. How is the meaning of money talked about in your home?  I’d love to hear from you.