Monthly Archives: October 2006

Are You Content, Happy or Disappointed about Your Finances?

Or, just anticipating a better future? These are some of the emotions that children may be experiencing on Halloween. They may anticipate the stash of Halloween candy that they will receive. When they are collecting the candy, they are usually happy and content. Then after they compare what they received to others, they may feel disappointed that they missed the good houses with the big candy bars. These are similar emotions to what you may are feeling about your finances. So, what can we learn about finances by seeing what children go through on Halloween?

The key to a fun Halloween is being happy and content in the holiday itself. In other words, do not get too involved in anticipating the future or disappointed about the past. Unfortunately, children (like adults) tend to live more in the past or the future than enjoying the present. If you ask a teacher what is on children’s minds on the day before and day after Halloween, it is not on school.

There is a saying, the past is history, the future is a fantasy and the present is a gift and thus the reason it is called the present. Yet, how often do we experience the joy of the present moment. If you think about it, as a society, we tend to live our lives 50% thinking about the past, 30% thinking about the future and 20% of the time in the present. Yet, if we really want to enjoy life, the mix would be more like 15% thinking about the past (learning the lessons we need), 15% thinking about the future (goal setting and planning) and 70% in the present.

Many emotions that we feel and thoughts we think are about the past. Even though we feel many emotions such as disappointment, shame, guilt, etc., we should not constantly live our lives based on these emotions. For example, we may be disappointed that we did not get a raise, yet the event is in the past. By living in the past (the disappointment), we lose site of what is needed to be done in the present to get the raise the next time around. We as a society are usually more focused on blaming companies for their greed for not giving raises but increasing prices versus what we can do about it (rather than just passing the cost onto our credit card debt). We are also focused on what we should have done in the past, like going to college or taking the other job opportunity. Then we obsess about what we should have said or done during the day (e.g., if I just have said this instead of that what would have happened). There is a reason why we only have 1 history class a day in school. History is good to learn from, yet there is a point of analysis paralysis.

There are other emotions like fear/worry or anticipation that is based on the future. Note, anticipation is not really an emotion, rather usually a waiting on a better emotional state than you are currently (I will be happy when …). There are times where looking forward is good for setting goals and direction that you want to go in. Yet, if we constantly look forward towards how things are going to get better, we may never get to where we want to go. This is because if we are waiting to be happy, we believe that an outside event is the determinant of whether we are happy or not rather than an internal decision. For others waiting to retire for their peace and joy, they may not end up reaching their retirement due to health condition. For some children, looking forward to Christmas (as the end all be all of getting presents) can lead to disappointment if they do not get what they dreamed off. When we tend to build up a future event, we get disappointed if the event does not measure up to our expectations. Thus, happiness continues to elude us.

Lastly, when you are anticipating the future, you are not participating 100% in the present taking care of business at hand. For myself, I am looking forward to The Ohio State Buckeyes playing Michigan on November 18th. In the excitement, I am reading all that I can about the pre-game analysis. In looking at all the message boards, it is robbing me of time that I could be writing my blog. Some mindless anticipation is fun and a good break, yet sometimes it goes too far in distracting us from what needs to be done in the present.

So where is your energy with your finances?

• In the past

Are you beating yourself up for past mistakes (e.g., credit card debt)?

Are you regretting not investing in a stock or getting a college degree?

Are you thinking about what you should have done?

Are you blaming a company for raising their prices while not giving you a raise or promotion?

• In the future

Are you anticipating your retirement?

Are you worried about sending your children to college?

Are you stressed about how you will pay your mortgage?

Are you wondering when your car will break down next?

• Present

Are you giving 110% effort to work during working hours?

Are you grateful for what you have?

Do you enjoy giving and receiving money?

Are you happy?

If you are relating to more about the past and future, think about switching your attention to the present. In the present is where the “gift” is because love, joy and happiness are only experienced in the here and now. So when you send your children out trick or treating tomorrow, remember that their joy is in that moment.

Budget Myth #3 – Budget is a Restrictive Spending Plan

Many people avoid a budget because they believe that it is too restrictive. They feel guilt any time that they go out and spend money. For those who believe in the law of attraction, they believe that have a budget will limit what they attract in income into their life. And, to a certain point, they are right. Because money is energy, the more we try to constrain money the more we limit its growth.

Yet, this does not mean that you should not have a budget, either. I see a budget as a prosperity plan. It sets the direction of where you go. If you were rehabbing your home with the kitchen being the center piece, you would not go in spend all your money to enhance the family room only to have no money left to design the kitchen the way you want.

It also does not mean that you should spend beyond your means because the effects can be disastrous. Would you plan 25 hours in a 24 hour day? If you did, you would be drained from exhaustion. Just like spending more than you have; you will be drained from being bankrupt.

Yet, to believe that you know exactly what you need when you start they year would require you to be a psychic. A business which is falling behind in meeting production would not rule out all together hiring another worker mid-year just because it was not in the budget. Neither would the business hire the person without knowing the effect on its budget and profits either.

For me, the budget process is more important than the budget itself. The process will determine where your money (energy) is best spent. Many people go through life spending money on items that do not bring them much joy. A house that seemed so perfect when you bought it; may turn into a money pit of constant upkeep and maintenance. You may start thinking that you would have rather had a vacation rather than a house that was outside your means. I have had client who have found that she could cut her food budget to have extra money to buy a meditation chair that she really wanted. She realized that being more peaceful during the day (by meditating in the morning) would bring her more joy in her life than splurging on special foods.

Also, if you are out on your anniversary dinner with you spouse, you may not want to say no to your spouse ordering desert just because you already hit your eating out fund for the month. The $10 you save may cost you a bundle in divorce lawyer fees. Or, it may be easier to cut back on your grocery money than spend an hour on the way home arguing how much you destroyed a perfect evening out. It may also cause you to turn up the thermostat when you do get home because of the frost in the air.

Unfortunately, some families have pushed their budget to the limit by having too many fixed expenses that leave little if any room for flexibility. However, the budget is not the cause of the restriction. It was probably the spending decisions made before seeing how the purchase affected the budget that caused the restrictions felt today.

Because money is energy, it is important that your money work for you to create a more peaceful, joyful and loving energy in your life. Money itself will not do this. Yet, how you use money can. Thus, a budget should not constrict your peace, love and joy but enhance it.

Why Aren’t You Rich? It May Be Your Beliefs.

I keep on hearing stories about how people keep on struggling even after they get hefty raises or they receive a large sum of money. They still continue to believe that if only they get a little bit more money then they will finally be alright. Some believe that it is about the money, yet sometimes it is about their beliefs. It does not matter if they make $20,000 or $50,000 or $80,000, if their belief is that money is a struggle then it will continue to be a struggle. Beliefs are powerful; there is a saying, “whether you believe you can or you believe you can not, you are right.”

One exercise that I use to help explain why some people struggle with money is to have them answer two questions:

• Rich people are?

• I am?

For example,

Rich people are:

• Greedy

• Educated

• Good looking

• Lucky

• Cheat

• Steal

• From rich families

I am:

• Spiritual

• Honest

• Unlucky

• College dropout

• Ugly

• From an under-privileged family

Do not cut this list short. Take some to create your list.

Then notice the differences. For example, some use education as a reason why they are not rich. There is a lot of statistical evidence of how college graduates make more money than those without a college diploma. Thus, people believe that there is no hope to get ahead unless they have a college education and thus many not even try if they have not graduated from college. Yet, there are also many people who never went to college who make 6 figure incomes. Yes, a college diploma is needed to get in the door to many companies. Yet, it has not stopped others from becoming rich because a college degree is not the golden ticket that many suggest. It just gets you in the door. Once in, determination and energy is required to prove that you are a valuable employee. If you do not have a college degree, you need to break down a few doors. Yet, once in, energy and determination can carry you to where you want to go including a 6 figure salary.

Many people may read this article and question how a belief can have so much power determining whether a person is wealthy or not. They will say that this article is all hog wash. Yet, beliefs play a larger part of our experience than people want to believe because beliefs work on many different levels; some levels are obvious while others are not so obvious.

• Beliefs affect determination

If a sports team going into a game believed that they could not win the game (especially when the other team scores the first points), the team would be morally defeated. They will have less energy going towards winning the game then going towards “look it is happening (we are losing) again.” Many people give up when they hit the first few bumps in the road because they believe that they can’t do it. Yet, persistence can pay off, if your beliefs do not get in the way first.

• Beliefs affect ability

I was talking to some friends about surgeons the other day. The good surgeons usually have a strong belief in their abilities (some call it ego). The question was raised, would you rather have a surgeon who constantly second guessed himself or a surgeon that instinctively knew what to do? For me when seconds count (e.g., when there is bleeding), I rather have someone who is confident in their beliefs and not second guessing themselves because their first instincts are usually right. A strong belief in your abilities can increase your ability by making you more confident.

• Beliefs affect prayer/attraction

We have heard of “power of prayer” and “law of attraction” and how many have benefited from this. For others, they wonder why their prayers and intentions towards attracting what they want have not been answered. It is important to realize that only 10 percent of our thoughts are conscious thoughts, the rest are unconscious thoughts based on our beliefs. So if we think about what we want only 10 percent of the times and counteract it with negative thoughts and subconscious opposing beliefs remaining 90 percent of the times, what do you think we will attract?

• Beliefs affect what we see

There are millions of pieces of information of which we can only process a small fraction of this information. Our mind process the information that it believes to be important (based on past beliefs on how things work or what we expect to happen). Thus, we do not see what is there now but see what we have seen in the past or expect to see.

• Beliefs affect actions

We take action based on what we believe we see. How many people have quit because they believe that their task was too hard or impossible? Our actions may be counteracting our intent unconsciously. I have met many people say that as soon as they get ahead there is always something that comes up whether it is a trip, car repair or other item. No one consciously sabotages their success. Yet, I have heard too many similar stories. For example, a student who one time saved over $800 only to spend it on a trip that she did not want to go on, just because she did not believe that she was entitled to money. In addition, how many times do people look over their shoulder as things are going good waiting for something to mess them up? Their actions can sabotage their success. Look at how the power of prayer and law of attraction can effect how something always comes up either through their actions or an event that looks like a coincidence (but is it really).

So how do we change our beliefs? The hard part is recognizing the destructive beliefs. We can not fix something that we do not know that it is broken. So ask yourself,

• What do I believe about money?

• Rich people are _____?

• I do not want money because ______?

Do you have a hidden belief that you did not know about? You can also pay attention to what happens in life because what happens can be based on your beliefs. If you see the same outcome over and over again, what belief do you have that may have caused the outcome?

Once you know what you beliefs are, you can change them by:

• Creating a new belief that is the opposite – if you believe rich people are greedy, than believe that they are generous.

• Gather evidence to support the new belief – find examples of rich people who are generous

• Make a new decision about events – if you decided rich people are greedy for not giving as generously as you believe they should, see the gift that they give as a generous gift.

It may take time to change your beliefs. It took you many years to form them, so do not beat yourself up if you fall back to these beliefs from time to time.

For more on beliefs read, Beliefs.

Budget Myth #2 – I Can Not Do a Budget Because I Do Not Know All My Expenses or Income in a Month

I believe the emphasis to track every penny for a budget can be misleading some to think a budget is an exact science. It is not. Some people even suggest not doing a budget because it will never be exact to what happens. Yet, due to the variability of your income or expenses, you many need a budget even more. Two common budget questions are:

What should I do if my income is variable every month?

The key is to average your income for the year, unless you know that variability in your income is all in a specific time period like a year-end bonus where you should budget for that month (e.g., in December). And, if you are concerned that your tips, commissions, bonus may be smaller than you expect, you can be a little conservative (under estimate your income) to be safe. However, having a variable income means that you need to save more and plan batter than most. For example, if your income is higher in winter months than summer, then you should set aside more income in January and February to help you through the slower months of July and August. Thus, you need to plan ahead what expenses you have in July and August to know how you need to set aside.

What should I do when I do not know all my expenses?

No one ever knows what there expenses are exactly especially for items like repair bills and utilities. In these situations, use your best guess or be a little conservative. By being conservative, if you are under budget at year end, you have extra money to save versus underestimating you expenses where you could wind up further in debt.

For many, when their car breaks down there is stress and worry where the money is going to come from to repair it. If you do not follow a budget (e.g. live paycheck to paycheck), you are a bit out of luck if you need your car fixed at the end of the month because you may not have enough left to fix your car. You may have an emergency fund that you rely on. Yet, an emergency in my mind is for lose of job or become disabled or have a large unexpected medical bill, not repairs that are a part of living day to day. From my perspective, repairs and upkeep should be a part of the budget. Thus, when your car breaks down, this fund is already allocated for the repaid and thus there is no need to stress about it. And, if a real emergency also comes up at the same time, the emergency fund is not suddenly depleted due to a car repair.

A budget is not a constrictive spending plan. It is a living document. It is about decisions of what you rather have (e.g., emergency fund versus money to eat out, vacation versus a new television). You may find that in the middle of the year, you have a strong desire to take a vacation that you did not plan for. You can review your budget and see if you are willing to trade something (e.g., cut back on eating out or working overtime) to afford the vacation. So, a budget is never fixed in stone. By doing the budget process, you have already reviewed your budget choices and know ahead of time where you can cut back on to make ends meet (e.g., the last wants that you added to your budget can be cut) if your income is below what you expected. Conversely, if you are having a better than expected year (income wise), you know ahead of time where the extra money should be directed to, whether it is saving it for the leaner months or to adding it to the special repair fund or replacing an old appliance that you kept off the initial budget until extra money came in for it.

Do What You Love and the Money Will Follow

We have all heard this cliché before “do what you love and the money will follow”, yet what does it really mean. A teacher working in a private school making less than $30,000 would say “yeah right” “show me the money” while someone like Donald Trump has made billions doing what he loves.

Why does this tired cliché still get so much attention? For me, it works on many different levels. Yet, there are professions where what we love to do is not perceived as being that valuable monetarily, for example the school teacher or the struggling yoga teacher. So, how does this cliché work?

1) If you love what you do, you are more willing to put in overtime for extra money

Many people are physically and mentally exhausted doing a 40 hour work week doing something that they despise. All that they want to do is come home, have a drink and sit down in front of the television. Doing what they despise has put them into a resentful and angry energy level where nothing extra is going to get done. Yet, if you love what you do, it really isn’t work. I remember when I worked on computer programs that it was an intellectual challenge for me. Thus, I did not mind putting in overtime because it was fun and challenging. Another example, a school teacher can work extra hours as a private tutor for extra money.

2) If you love what you do, you are more likely to get promoted

I have said this before, if you had two employees who did the same quality of work, yet one was excited about what he did and the other could wait until 5:00, who would you promote and give a raise to?

3) If you love what you do, you will not want to retire

Many people work their job just waiting for the golden watch at retirement. Thus, they need to save as fast as they can to build their nest egg so they have enough to last in retirement when money is not coming in. However, you see some coaches (college and professional) working in their 70’s (even for those who made their millions already) because they love what they do. Retirement may mean slowing down a bit, yet it is still about doing what they love. Think how less stressful it would be if you did not need to worry if you have enough money saved for retirement because the money never stopped coming in.

More and more people are talking about working during retirement because they will not have enough money to retire on. I would hate to imagine if they are working at something that they do not love when they are in their 70’s.

4) If you love what you do, you will see more opportunities

Opportunities come to those who have their head held high and can see opportunities even on a cloudy/rainy day. For those who are depressed about going to work, they are going to be looking down at the sidewalk wondering how soon 5:00 is going to get here and will not see the same opportunities.

Julie Aigner-Clark, founder of Baby Einstein, is passionate about art, music and poetry and shared this passion with her daughter. From this passion, she created a multi-million dollar company that touches the lives of millions. Do you think this same opportunity would have come along to someone who did not love what they were doing? And, how many parents had this same idea but did not see the opportunity (behind the cloud of “I can’t do this”). Many parents who had the same idea did not see it as an opportunity rather from how much work it would be to make it happen, and their passion was just not there. As many self-employed person can tell you, you need a lot of energy and enthusiasm to keep you going through the rough times of creating a business, so you better love what you do.

5) If you love what you do, you will attract new opportunities and contacts

In today’s business world, it is about making contacts who can help you down the road. The more people you know, the easier it will be to get to the next level. Think about how many people you can meet on a plane, on a train or at a bar. If you find yourself out of work, maybe the person who was sitting next to you a year ago on a train hires you because he heard you talking about your passion about your job (just happened to be in the same field you were in) and handed you his business card saying if you ever need a job call me. Do you think you would have had the same opportunity if you just complained on how companies are greedy and just want to work you to death? There are reasons why accounting companies and law firms want their employees to volunteer on different boards of not-for-profit companies. One of the reasons is for making contacts with other board members that can possibly be the source of additional business down the road.

This is where the law of energy and money comes in. Everything in the world is energy. Thoughts are energy. Feelings are energy. And finally, energy is the source of creation. A new project does not get off the ground without a lot of energy behind it. Those who have thoughts and feelings that are of a lower energy field (e.g., shame, guilt, fear or anger) are going to have fewer opportunities come their way. Those who have thoughts and feelings of a higher energy field (e.g., joy, love and happiness) will attract and find new contacts and opportunities.

So what energy do you have about your job?

6) If you love what you do, the money is less important

If you talk to a teacher who really loved being in the classroom with children, usually the issue with money is never the first topic of conversation that comes up. The conversation is usually about how bright and brilliant their students are and not about the latest teacher’s contract. In my conversations, where the money topic comes up are with teachers who feel overworked, underpaid and unappreciated. I love teachers and do not want to start a debate about how much or little they are paid. I just want to point out that when you really love what you do, the money becomes less important. If you were an author or speaker who writes/talks about what you love, you would do this if your audience is 1 person or 1,000 people.

So if you hate my job but you need the money to keep food on the table, what do you do? A single answer will not work for each individual’s circumstances, so I do not want to try to answer this. Yet, one thing that everyone can do is look at what you want to give to the world and see how you can do that in your current job. When you see your job as giving a gift to someone else, this usually makes the job more enjoyable. For myself, I enjoyed being a mentor for the younger employees. Thus, in my last job, I made sure I focused on my mentoring responsibilities as much as possible because this gave me some of my greatest joy at work.

When some people hate their jobs, they believe that they need to quit their job. They may decide to open up a yoga studio (if their passion in life is to help people relieve stress in their lives). For some, this may be their path, if that is their inner calling. Yet, what most people overlook is how they can accomplish their life purpose where they currently are at in the corporate world. If you want to relieve stress (or heal others) but see yourself as just a cashier or telemarketer, look at it as how can you bring a smile to someone who is right in front of you. This is where the rubber meets the road; doing what you love where you are at. Your purpose may not need to touch 1,000 people right away, just the person who is standing in front of you right now.

Budget Myth #1 – I do not have any money to do a budget

In reality, when you do not have enough money, this is the best time to do a budget. I have heard many reasons why a budget is not particle until someone gets a raise. I even heard that creating at a budget will cause more sadness and heartbreak when they realize how little that they have. Yet, the reasons for not doing a budget are really resistances. These resistances are stopping people from obtaining their financial dreams and from having peace of mind (financially speaking).

What is seldom understood is why a budget is so important. A budget

• Removes fear from money

Some feel that putting together a budget will create additional fear in where the money is going to come from to pay the bills. Yet, for people living paycheck to paycheck, the fear already exists. Ignoring this fear, only makes the fear grow stronger because we usually imagine the worst outcome. Putting numbers on a piece of paper can show that it is not as bad as you thought and thus relieve some of the fear. The fear can be about what happens if you go bankrupt and losing the house and/or possessions. You may see that this is what is going to happen on unless you start making changes based on the budget in front of you. Yet, if you let fear stop you from make changes (using the budget as the first step towards change), then nothing is going to change.

• Acceptance of where you are at

What happens if your situation is worse than you feared? Then, isn’t avoiding the situation better? Sometimes who may know things are bad, but not quite as bad as you thought until you look at the situation. The key is to accept where you are because this is the first step in seeing the situation in black and white. Usually when we accept a situation for what it is, there is a peace of mind that comes with it. When you are unsure of a situation, there is usually fear involved in what the outcome may be. When you know there outcome, there is less fear and you are more willing to move forward towards change by accepting what is.

• Become aware of money leaks

You may think that you are aware of all your spending. Yet, until you verify the amount that you should be saving (or going into debt) each year based on a budget, you will never know. If you were suppose to save $500 based on your planned budget and you ended up not saving anything, you may find that your incidental expenses (or other expenses) may be higher than you initially thought. And, you are not able to find areas to reduce spending, until you really know what you are spending.

• Become a better team with your spouse

Sitting down with a budget, can be a good team building exercise with your spouse. There are a lot of stories about how one spouse is unhappy with their partner’s spending. Sometimes this is due to not having common goals on what you want to achieve and not negotiating a win-win situation to meet your goals. Even if you are dual income couple where you split the bills, unless you have common goals on savings and which next big ticket item to purchase (e.g., replace stove, new television, etc), you will be working against each other instead of with each other.

In addition, working together to review your budget’s progress budget is necessary in order to hold each other accountable for any money leaks, being large spending not including in the budget that was not discussed before the purchase.

• Develop goals

Even if you are spending more than you are making, you need to plan what your goals will be once you have some money. Having goals of where you want to go will put the law of attraction into motion. We attract what we believe we deserve in our lives. If we put down that we want to save for a vacation, that intention is putting your vacation into motion. You may get a call from a long lost friend saying that they are in Hawaii now and would love for you to come down for a visit. Or, you may have a goal of replacing your wardrobe and then you have a friend give you a gift of clothing. You never know what may come your way when you start setting goals of what you want. Word of caution, having goals and desires can be beneficial, yet do not get attached to the outcome because you may want to go to Hawaii but the friend who calls has a house in Florida.

• Avoid shopping sprees when your situation improves

Typically, when new money comes in there is an urge to suppress feelings of being deprived by wanting to go out and enjoy the money. The spending may be on a new pair pants or a night out with the spouse. Then the next day, when they realize that they needed new tires for the car, there is a sense of remorse. By developing goals ahead of time, it is easy to know what should be done when new found money comes in because it has already been discussed and agreed upon. Even if the next goal is a night out, you are not thinking should I have spent the money on new tires during the dinner (and thus not enjoying it).

• Analyze what you truly need

In many situations (maybe not all) there are at least a few wants in a budget whether it is having an occasional night out, having cellular phone or buying pop (or beer) at the grocery store. Having a wants in your budget is fine. Yet, many people have glossed over their budget and just assume that there is nothing to cut. It is important to recognize your pleasures in life and be grateful for them. We would feel deprived if we cut out all our lattes . And, ignoring the wants that are in your budget is just making yourself feel deprived, creating a need to splurge when money comes your way. So, it is important to realize your needs and wants.

• Provide more peace, love and joy

Money does not make us happy. Yet, we can choose to use money to experience things that bring out our peace, love and joy more often. For example, if you enjoy the morning cup of coffee while reading the paper on the way to work, you do not need to cut it out if that is what you truly want. In doing a budget, you should budget your needs first and then budget your wants based on what brings your more peace, love and joy.

What many people do not realize is the peace that they will have if they budget to save for emergencies, retirement and other goals. I had a client say last week that she does not know how it feels to save money, so how does she know if that saving money will bring her peace? I asked how she liked living paycheck to paycheck. Her answer was obviously “not at all” and thus she had her answer as to why savings is so important to her peace of mind.

• Shift from victim mentality to being responsible for the choices you make

When you see you have choices, you see that you have more power and responsibility for the situation then you may have realized. Yes, you may be paid less than you deserve at work, yet how you react to it is even more important to your financial happiness. If you are a victim, there is no reason to change. If you see that you have choices, you can then take action. And, if you are waiting to have money to make your choices, it may be too late. Sometimes we need to make choices in our budget because having more money doesn’t come until we see that we have it already (we get what we have not what we want). In a class, a student once described her money situation as paying her bills based on who was knocking down the door at that time. After doing a budget, she found that she had choices on which bills to pay and found that instead of being constantly behind she could be ahead of the game instead.

• Start small and build up

There is always a mountain of evidence on why you will never be able to get ahead. The key is to start to see life from a place of possibilities instead of a place of being doomed to poverty. You can begin with having $25 deposited in your saving account each month. Once, you prove to yourself that you are able to save even a small amount then the $25 will start to grow. Saving a little bit first proves how much more peaceful and better things can be. Then you can decide whether saving an additional $25 or $50 a month is worth giving up one of your wants. Once you see the belief of not being able to save is just a myth, you find more opportunities of how you can save.

In addition, if you do not believe that you can have money, then you will sabotage situations when you start to have money either by splurging or losing that good paying job. By disproving your old belief, you are more conscious about not sabotaging your success.

There may be a reason or two to not do a budget, yet there are 10 or more reasons why budgeting is so important. So take the first step and do a budget.

Stop Focusing on our Country’s Negative Personal Savings Rate

Now that we are at the end of the 3rd quarter, we are going to start seeing more articles about how dismally Americans are saving. There will be charts and graphs of how the savings rate has dropped dramatically since the 1980s. There will be other articles about how we need to turn this around because we are saving less and less. Yet, the national savings rate is supposed to be decreasing (I will explain why in a second). And, by showing how negative it is, we are just giving an excuse to millions on why they can not save (see no one else is, so I can not either). What we should be focusing on instead are examples of people saving even on $20,000 a year.

First, the personal savings rate looks at income – consumption = savings for the entire country. With more and more people retiring, the consumption portion of the equation is not decreasing that much while income is. Retirees are showing a negative personal savings due to using their pensions and personal savings to consume. Thus, for those who are hoping for a dramatic increase and see a positive number on of these days, it probably will not happen. When approximately 12% of the population is retired (and growing to 20% overtime) who have a negative savings rate, it is hard to offset this unless everyone is saving 10% to 20%.

Second, in showing the dramatic decline, many articles forget to write about the reasons why we have seen a decrease. A main reason was a portion of society felt richer. Many baby boomers got a huge windfall from the stock market (especially those who saved enough already for retirement via the stock market gained the most) and then when the stock market slowed down, the prices for homes started to increase giving people increase in their equity. Thus, those who were financially secured (and unfortunately others who were behind in retirement savings) decided to spend their new found fortune. This did nothing for the income side of the equation because capital gains are ignored while the consumption side of the equation increased thus decreasing overall savings. Now that prices are settling down, hopefully more people are more cautious about spending based on short-term trends in the markets.

Third, we need to be cautious about how we motivate Americans to save. Most of it is based on fear. Yet, if you were in a business where the manager told you that the unit needed to work more. At the same time, the manager is laying off 20 percent of the staff. If he came back and said production dropped 10 percent during this time, what is wrong with you and your good for nothing coworkers, how would you feel? Depressed, sad, angry? How would you feel if you realized you worked 10% more, yet your unit fell behind because 20% of the production staff got fired? We all know negative motivation can work in short-term. Yet, for long-term growth, showing the improvement and building from there usually produces better results. So, why do we treat personal finance any differently? Why do we harp on what is not working versus showing what is working and how others can do the same?

Yes, many families need to save more especially because company-paid pension plans are becoming extinct. Yet, looking at 2005 analysis from Boston College, the working age savings rate is starting to increase which is our goal. So why are we harping on Americans what they can not save with statistics like the personal savings rate that show them losing ground when they are actually starting to turn the corner? Yes, everyone should be looking at their own savings rate to see if it is adequate and not as much on the national rate. Yet, like I said above, by giving a grim picture of what others are not doing (negative savings rate), we are giving excuses to the masses on why they can not save as well instead of focusing on how others are turning the corner (which is something that many bloggers have been doing using themselves as examples – a lesson for others to learn from).

Double Edge Sword of Pride

I have been writing a series of articles on feelings around money (shame, fear, desires, etc.) to show how these feelings can have an impact on your money. Pride is usually thought as a feeling of honor and is associated with:

• The few, the proud, the Marines

• Pride of homeownership

• Pride of a job well done

Pride is a feel good energy. Yet, it is sometimes based on a false sense of being better than others or being better than where you came from. This feels good in the moment. Yet because it is based on outside conditions, it can be lost easier than the work it took to get there. And, when it is lost, it feels devastating.

There are many times that we feel pride in our lives, birth of our children, their graduation, paying off the mortgage. Aren’t these good things? They can be. Yet, from a financial perspective, is like a sword. It is a beautiful piece of art that can be hung from the mantel or worn by a soldier with their dress uniform. It looks good during good conditions. Yet, it can be used for destruction as well. One edge of the sword is the destructive force of greed. It is defining who you are by your money, such as “Upper Class” or “Wealthy”. Yet, what will happen if it is all gone tomorrow? Unfortunately, if money defines a person, the results of losing one’s financial identity can be deadly.

The other side of the sword is just as deadly. This side of the sword is a person having pride in shunning wealth and money. “You do not need money to be happy” is their motto. “I do not want to be a slave to capitalism” is another motto. Unfortunately, viewpoint is looking at life from what they do not want (e.g., associating money with greed) instead of what they do want. They glorify meagerness which not only affects their money situation, yet it affects who they are. Sometimes, you need money to spread the message that you came to share with others. Look at Martin Luther King, Mother Teresa and Gandhi; they couldn’t have been who they were fully without attracting money to their cause. It has been said that it took a lot of money to make Gandhi look so meager. Money is just energy. If either of these great leaders cut off money, they would have cut off their energy (and message) that they were spreading to the world. I doubt it. It is fine to say that you do not need to live the first class lifestyle, yet do not take pride of cutting off money either.

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Why I Don’t “Live Below My Means”

I have been reading lately more people talking about living below your means as the key to their financial success. It goes back to the basic financial principle for becoming wealthy; “earn more, spend less and save more”. This is fundamental financial advice. Yet, I have been repulsed by the term “living below your means”.

If I look at my family’s situation, we have relatively basic lifestyle. We live in a house that is approximately 2.5 times our income. We do not go out to eat or to the movies often, especially since our son was born. And, we keep our cars until they have 100,000 miles (basically about 7 to 8 years). Thus, many would say that my wife and I are living below our means. Yet, then why do I cringe when I hear others bragging about “living below their means”?

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When to Commence Your Social Security Benefits

Many retirees have questions on when they should start their Social Security benefits. There are at least four things to consider. First, realize that your Social Security benefit is supposed to be one piece of your total retirement package (including pension plans, 401(k)/403(b) plans and personal savings). Thus, if you are contemplating retiring early and do not have much in regards to non-Social Security benefits, you may want to reconsider your retirement plans.

Second, realize that Social Security benefits are reduced by income from work ($1 for every $2 you earn above the earnings limit) if you start your benefits before your Social Security retirement age. Thus, if you retired early and are strongly considering going back to work, you may want to consider waiting until your Social Security retirement age to commence your benefits because you would not want to be in a situation where you lose benefits due to having too much income from work. Your Social Security retirement age is between 65 years old to 67 years old (65 if born on or before 1938, 67 if born on or after 1960, otherwise somewhere in between depending on year of birth).

Third, understand that Social Security benefits are reduced if you commence your benefit early (by 6-2/3% per year for up to 3 years early and 5% thereafter) and increased if you commence your benefit later than your Social Security retirement age (by 8% per year until age 70 for those who where born in 1943 or later, less if born earlier). Note, it usually does not make sense to delay commencing your benefits beyond age 70 (currently) because the benefits are not increased for delay retirement past this age.

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