Monthly Archives: December 2006

Ringing in New Year with Forgiveness

As we get ready for the New Year, it is common to set goals and resolutions for 2007. Yet, more importantly in getting ready for a New Year of growth and prosperity is to forgive yourself and others for past financial transgressions and mistakes. What is forgotten about when moving towards lofty goals is that past blame, hatred, anger, resentments, etc. will hold us back from reaching our goals.

How does forgiveness play a role? What we sometimes fail to understand is that an incident takes just a blink of an eye and then it is over. Someone may have cheated you, lied to you, or has done other things to you, yet the event itself is already in the past. We are the ones that carry it forward to today in regards to what we think it means about us.

For example, you may have not gotten a large raise or bonus from your boss last year. Thus, you feel unappreciated and may believe that you will never get ahead. Yet, you are going to give this job one last chance. You have your eyes set on a promotion that is set to open up later in the year and make your goal to get that promotion. A few months down the line you finish up an amazing project and pat yourself on the back. You wait and wait for your boss to congratulate you on the project, yet he never comes around. The feeling of being unappreciated from the snub for the raise comes back and you get angry at your boss. The next time he asks you for a favor, you answer back with an sarcastic attitude because you doubt that busting your butt will have any effect when he does not even recognize your work.

Note, the anger for not getting a raise is just boiling under the surface all year round ready to come out when you feel like a victim to your boss again. Your boss may actually have recognized all your hard work and was thinking about promoting you yet could not give you a raise due to his hands being tied and just forgot to say thank you for that project (you were never around when he went to your desk to say thank you). Yet, the sarcasm may have made him think twice about promoting you. Thus, our anger and resentments may have come back to bit you and thus should to be resolved to help you meet your goals.

You may think that this is a one-time situation that happens at work (and the boss is really a jerk). Yet, it can happen even on our budget goals:

For example, you may decide to save an extra $1,000 a year. In the past, something has always comes up that eats away at your savings. However, you are going to give this one last chance because saving up for an emergency fund is important. Even the statement (one last change) may sound angry due to the experience from the past on how life did you wrong. You find yourself moving towards your goal by saving $500 by mid-year. Then, you get in a little fender bender on the free way and need to pay a $500 deductible. I can imagine the words you would use when you got to pay the $500 deductible with the $500 in savings that you had worked so hard on. Yet, the bigger issue is that you just lost momentum to save and can’t get it back because this is how life always treats you (kicks you just as you get ahead). Thus, you give up your goal and spend any extra money that you get because what is the use saving it.

I hope you can see how anger and blame can sabotage your goals just as you are seeing the light at the end of the tunnel. The key is to release the anger and blame towards yourself and others (including life in general) and see that anger and blame aroused by how you reacted towards the event. In any one situation, someone may get angry while someone else may decide not to. The answer to meeting your goals instead of sabotaging it with blame is to decide how to react differently.

In the past, you may have gotten angry at your boss for not appreciating you. Yet, in reality, you are mad because a part of you did not appreciate yourself, first. As I told a client the other day, imagine if you had a Harvard education and someone calls you stupid. If you believe that you are not stupid, the words do not have any effect on you. Yet, if you believe it a little inside you, the words can make you angry at that person. It is important to note that you unconsciously believed at some level first.

What can you do to release the anger and blame? Forgiveness. Some people feel that forgiveness is giving the person permission to have done what they did. Yet, in reality, it only releases you from reliving the emotions (e.g., anger and frustration) from the event. So instead of helping others, you are helping yourself.

There are several forgiveness exercises including one that I wrote about earlier (click here). Other exercises include writing down what you want to forgive on a piece of paper and then burning the paper. Other exercises include writing down what and who you want to forgive every day for at least 7 days. Another exercise is about remembering that the incident is on a moment in time and that it is probably miniscule in the larger picture of life (especially if you believe in an after-life). Thus, it could be a statement like, I am a spiritual being and this event has no lasting impact on me.

Thus, as you start the New Year, take a few moments and think about what you want to forgive, so that it does not impact you in the current year.

3 Key Aspects to Goal Setting

As other bloggers are discussing their goals for 2007, I thought I would add my two cents to how to set financial goals. As a manager setting goals for employees in my prior career, I have some experience of what makes goals successful and why some goals fail. Looking back there are four key areas in goal setting that worked for me:

1) Make Goals Ambitious yet Attainable

I keep on hearing that goals should stretch a person, so they can be all that they can be and have all that they can have. I do not disagree with this; however I disagree with the word stretch. Many time people think that they need to sacrifice to reach these goals, in other words they have to do more with less. When they believe they are pushed too much, they are more likely to quit on the goal, especially at the first sign of failure. Goals are easier to attain when they seem more easily reachable not a stretch where they believe there is a possibility of failing.

Thus, it is important to see yourself reaching the goals that are set. Goals can be ambitious. Yet do not see it as a stretch (with hard work and sacrifice), rather just taking a large step forward to where you want to be. I guess my issue is stretch sounds like a mid-evil torture experience while ambitious sounds like the race to the moon. Which would you rather participate in?

Also, setting stepping stones to attaining an ambitious goal makes attaining a goal easier. By seeing yourself making the milestones (or at least getting close), you refuel your batteries for making the rest of your goal. For example, if you want to save an additional $5,000 in a year set up milestone of $1,250 for each quarter.

2) Make Goals That Are Ease to Memorize

When I first took over as manager, I went over the goals. For many, there must have been at least 15 goals. When I asked the employees how they did, they rambled on about what they did but not about their goals. They had no idea what their goals where except a few who read them before our meeting.

Thus, the key is to have 3 to 5 goals that can be remembered at any time. This way how you live during the year can be in alignment with these goals rather than forgotten about a few weeks after creating them.

Note, goals can have several action steps. Thus, instead of lowering credit card interest rates and paying off 2 credit cards, you can have a single goal of improving your credit card debt by $5,000 this year and having it paid off in 3 years. Now, the action steps for this goal can be paying off 2 credit cards and calling credit card companies to lower rates. So what is the difference? Having an ambitious goal of reducing credit card debt in 3 years with a milestone goal of $5,000 this year can have many action steps, some of which you may not know about now. Thus, you may call the credit card company to lower rates and pay off 2 credit cards this year. Yet, instead of thinking you are done with your goals for the year, you may be able to find a 0% interest rate card to transfer some of your other card’s credit balances to this 0% card. Thus, have a few overall goals that cover several smaller action steps that may be added or changed during the year.

3) Make Goals Passionate

Really look at the goals and understand the reason for doing it. If you are doing a goal that someone else (e.g., your spouse) wants you to do yet you really do not want to, then the goal is usually forgotten about a month later. I found when I told my employees their goals were, they usually nodded their head and lost interest in what we were talking about. Thus, differentiate your goals between what you feel you should do and goals you want to do. Then re-look at the goals that you should do and to find out how it can benefit you. The more energy you have for reaching these goals, the easier it is to attain them. And on the flip side, do not arbitrarily set goals for you and your spouse if they do not buy into the goals you are setting.

4) Review Your Goals

It may sound obvious, yet usually forgotten about till year-end, especially when you do not feel that you are meeting them. Many financial bloggers are good at doing this by updating their net worth each month. Goals may not need to be reviewed that frequently yet you should wipe the dust off the goals and review them at least each quarter.

Wishing Everyone a Joyous Holiday Season and a Happy New Year

As Hanukkah ends, Christmas begins and Kwanza is just around the corner, I wanted to use this as an opportunity to look at some of the symbols of the holidays and what they mean to me. Please forgive me in advance if these symbols do not line up exactly with everyone’s beliefs. These are just some random thoughts as I see them from a prosperity perspective:

Hanukkah Candle – The story goes that there was just enough oil for one night, yet the candle burnt bright for eight days. From a prosperity consciousness, this symbolizes how sometimes we fear having enough. Yet, if we have faith, we will have enough to sustain ourselves for as long as we need it.

Star of Bethlehem – The star showed the way for the Wise Men to the baby Jesus. It is also a sign for hope (wishing upon a star). We usually think that darkness covers up our own light. Yet, it is really the light that shines brightly in the dark. So, do you downplay your ability and brilliance in dark times when you need some hope or do you let you light shine. For example, if you see companies as greedy, do you cover up whom you are in the corporate world to fit in (to keep your job) or do you bring love and kindness into the cold corporate environment. Prosperity comes when we bring hope to what seems like a bleak situation.

Santa Claus – The true spirit of giving. People sometimes give to get something in return. Yet, Santa Claus gives without the expectation of receiving anything back (except some milk and cookies). Giving works when there is no attachment to what we expect in return. I had a client who couldn’t understand why he gave so much and got nothing in return. When we give just because we want something back, we are coming from a place of lack. Per the law of attraction, if we believe we have lack, that is what we will attract. So give, for giving sake and not for what you will get in return.

Unity Cup (Kikombe Cha Umoja) – Signifies the strength of the family and community. When people think of prosperity, it is usually about making themselves prosperous. Yet, there is strength in numbers. By making others prosperous, we will become prosperous as well. Yet, when we look out for ourselves, it sets up a weak house that can easily crumble.

May your holiday season be joyful and may the New Year bring you new opportunities for prosperity.

There Has To Be a Better Way

In a comment to my article on “How a good opportunity be a snake oil salesman when the intent is to become rich”, LaserTroly wrote:

I completely agree with your view that just by the force of the energy we put into it, we often attracts what we don’t want.

Emotions so often become a spiral, feeding on themselves and getting stronger. Then when events in our lives reinforce them (when we get what we feared), we believe that those fears were right all along. Our worldview shifts, little by little, until we completely believe these ideas.

But how to get out of this trap?

How do you identify those thoughts and beliefs that are holding you back, when your entire framework for viewing the world seems so familiar, natural and right? How do you separate out the stuff that’s not working from the stuff that is? Then how do you go about changing your programming, given that you inadvertently developed this harmful belief system in the first place? What to embrace and how to do it?

For it to stick, you must really buy into the new belief system – just paying lip service to a set of principles won’t do the trick. How to effect such a deep and lasting change?

I always can count on LaserTroly to ask those deep questions that keep me thinking and are hard to answer easily in a blog article. Yet, here is my attempt to summarize it all:

But how to get out of this trap?

First, this is a personal issue that everyone is responsible for themselves. It is hard, if not impossible, to force someone to change when they believe what that they are on the right path. Second, there over 6 billion people on this earth, thus there are 6 billion paths that people can take to reach where they are meant (or want) to be.

The key for me is to have an open mind, not attached to anything. This allows to me look at other people’s point of view and see the merit behind their beliefs and thoughts. Yet, this is tough to do if we want to be right. If I believe that my way is the only way to enlightenment, then I have trapped myself into a fixed way of being, whether it is right or wrong.

For me, the light bulb went on in talking with a friend at work. I was angry and she gave told me that I could continue to look at the same insurmountable mountain or turn around and see the beautiful meadow. It was my choice. She said this at a point in my life where I was angry and stressed out and I finally said “There Has To Be a Better Way” which opened my eyes to different teachings.

How do you identify those thoughts and beliefs that are holding you back, when your entire framework for viewing the world seems so familiar, natural and right?

The key is to know how you want to live on this earth. For me, it is the same way that I want my son, who is 18 months, to live (peacefully, happily, joyfully and lovingly). Thus, every other emotion (anger, shame, guilt, fear, etc.) is not the way that I want to be because it blocks how I want to live. When these feelings (anger, shame, guilt, fear, etc.) come up, it can be a learning experience of identifying which thoughts and beliefs are not serving us and thus these thought patterns and beliefs should be looked at to see if we want to change them.

There is a catch also. For each emotion (peace, love, joy, happy, etc) that we want to live by, we need to see if it is real or not. I will define a non-real emotion as one where I need the situation to feel a certain way. To me this is more like an addiction. For example, I can feel good when I have a glass of wine occasionally. Yet, if I can not be happy without it, it is the start of an addiction. An addiction starts, where I may need just one glass to relive the periodic stress of the day in order to be happy and then turns into a situation where I need more of it and need it every day to feel good. The same is true for money. If I need a raise to feel good, it is only temporary (thus not real). A few months after the raise, I probably have forgotten about the raise and need another raise to feel good. Being happy with a raise is not real because it may be covering up a lack of self-worth where I need someone to give me more money to prove that I am good enough. Do not get me wrong, getting a raise is great. Yet, when we use it to feel good about ourselves, it is covering up the issue that we need to fix. The non-real aspect of this is that it only relieved the symptom (wanting) and did not solve the problem (possible self-wroth) only covered it up.

Then how do you go about changing your programming, given that you inadvertently developed this harmful belief system in the first place?

For me, I look at my beliefs and thoughts and see how they are not serving me. By looking at it, I can see how it works. Once I have looked at my beliefs (that create emotions that do not serve me), most of the work had already been done because I can see the trap and know how to get out of it. It is like getting trapped in a ditch. The first few times you get caught in the ditch, it may take a while to find your way out. Yet, once you are aware of the traps, you may slip back into the trap from time to time, yet you know the way out quickly. And, after awhile, you know how to avoid the trap all together. It all starts by looking at the trap and by knowing how it works.

This is where I am different than some prosperity teachings out there that say you only need to think positive thoughts to get what you want. When 80% to 90% of our thoughts are unconscious thoughts, changing only 10% to 20% of our conscious thoughts to be more prosperous is only creating a small wave against the larger tide of unconscious thoughts. For me, it makes more sense to observe the 80% to 90% of our unconscious thoughts, so I can change that pattern instead of just covering them up with conscious thoughts about prosperity. It does not solve the problem that generates our unconscious thoughts. Now, changing 10% to 20% of our thoughts sometimes can change the tide. Yet, many times, when our unconscious thoughts are so ingrained, these thoughts need to be detected and changed to change the tide. The key to uncovering our unconscious thoughts is to look at what happens in our lives (the outcomes).

There are three traps that a friend of mine (Greg Liber) teaches. It is hard to cover them all here, so you can hit the link and find out more about them.

1) Cycle of ExperienceThis is where we keep on experiencing the same things over and over again based on our beliefs. Our beliefs shape the way we see the world. So, it is our beliefs about who we are that can trap us.

Solutions: Change our beliefs that do not serve you or gather evidence to prove our old belief wrong

2) Cycle of ShameThis is where we feel that we are not good enough. Thus, we look outside ourselves to addictions (food, work, alcohol, etc.) to feel better. Yet, in the end those feelings of not being good enough come back stronger because we did not address them.

Solution: This is inner work of knowing who we are, in other words, what makes us magnificent

3) Drama CycleThis is where we feel like a victim of what happens in the outside world. Think about what sells these days, a good drama or a feel good movie? We become addicted to the drama so we can blame others for what is wrong.

Solution: The only solution is to know that you are creating the drama and want something else. Thus, you change your behavior that creates drama. If you insist on changing the world to solve the particular drama, this will only change the channel to a different drama.

How to effect such a deep and lasting change?

There is a saying, “The egos way starts off easy and gets hard. God’s way starts of hard and gets easy”. I have joked with some friends that the path to enlightenment is too hard because I need to keep on looking at myself and figure out what is not working.

When we look at the world to change to make us happy, we are really just temporarily getting rid of our anger, guilt, shame, etc. We get angry at others to make ourselves feel better by pointing the figure at them. It feels good for a short time (egos way, starts off easy). Yet, because the source of the anger, shame, guilt, etc. inside us has not changed, it just comes back in a different form (gets harder because the problem get bigger from being reinforced).

When we look within ourselves to change, it is hard at first because it is a constant process of what thoughts or beliefs are not serving us. It does take work. Yet, I find that it gets easier as I go further down this path because where I use to be angry or upset for days or weeks at a time when I first started this path, now my anger only lasts a few minutes or hours (sometimes a few days).

To keep it going, I surround myself with others who are on similar path to help encourage me and to use as a sounding board when I need to vent. In our discussions, they usually point out what I am overlooking to get myself back on the right path.

As a side note, my blogging may slow down over the next 3 to 6 months, as I put more time into two other projects (writing a book is one and the other I hope to announce in 3-4 months). This is in addition to watching my 18 month old son during the days which keeps me busy. Please be patient during this time, it will be worth the wait if things work out the way that they are starting to unfold.

Is College Education Worth It?

I think that we all know the answer here. It is normally yes. However, we hear stories about college graduates working at a minimum wage jobs with no hope of paying off their school loans and moving back home after college due to the debt. Thus, is going to college really worth having student loans. There are three factors that need to be determined in answering this question:

• Cost of College

• Field of Employment

• Student’s Drive & Determination

The stories of the mountains of debt that college graduates are taking out for going to college just looks at the average cost of college. Yet, there is a vast difference between costs depending where the student goes. Tuition at an in-state college can be as little as $5,000 (typically around $10,000 to $13,000 with room and board included) while tuition to a private college can be $20,000 or more. At first glance, it appears that in-state college tuition can provide more bang for the buck. Yet, there are many factors that can go into this decision:

• Will going to a more prestigious school help in future employment?

• Does a private school offer a better education for certain fields?

• Does making connections in school help later in life (e.g., connection with other Harvard or Yale graduates)?

Part of it is to understand how the cost/benefit ratio works. For each, $10,000 of debt, the annual payment for a 30-year loan at 6.5% interest rate is $766. Based on 35% tax rate, this would require a college graduate to earn an extra $1,200 a year before taxes to payoff the debt (ignoring the tax deduction for student loan interest). Thus, if college student spends $50,000 for a 4-year in-state college tuition, the break even point from an investment perspective is if his salary (with a college degree) is $6,000 or more than he would have received without the degree (note, $6,000 = $1,200 X $50,000 / $10,000). This would be a good investment based the statistics that a college graduate earns $14,000 more than a high school graduate for workers age 25 to 34 and increasing to $23,000 more for workers between age 45 to 54 according to the US Census Bureau. Thus, even though the cost of college is going up, having a college education still appears to provide a good return for the investment to a limit.

This investment may not pay off depending on the circumstances. For example, if you want to be a local school teacher and are deciding to go to an in-state college or an Ivy League college (without scholarships), the extra $80,000 to $100,000 in tuition may not even get the teacher an extra $5,000 in pay (let alone $10,000 or more needed to break even) if your school district bases salaries on tenure and not where the teacher went to school. An Ivy League degree may get a teacher a higher paying job in a private school or help him become Principle down the line; however, the extra cost may not be worth the benefit in a public school system. However, if a college graduate wants to work on Wall Street, the Ivy League degree may put him in good position to get a top-notch Wall Street job where a superior educational background may provide a higher starting salary.

Yet, an Ivy League degree will not make or break a student either. According to a Wall Street Journal article, Ivy League schools only account for 10% of Fortune 500 CEOs. In addition, there are currently more Fortune 500 CEOs from University of Wisconsin than Harvard University. Part of this could be from the size of the schools. Yet, the point is that not being able to afford an elite college education (Ivy League versus in-State University) does not doom a college graduate to a life of middle management either.

This is because what a college graduate does with a college education is more important than the piece of paper itself. Over the years, I have heard people complaining about that their college degree is useless. This is true if they are trying to rest on the laurels of a college degree. A college degree is a piece of the building block to future success. Yet, it really does not do more than get you in the door of a company to show them what you can do. Determination, desire and ability will take you the rest of the way. When I was a manager, I rather hire someone who was passionate about what they were doing and determined to show what he could do than someone who had an impressive educational background that was just looking for a higher salary.

And, not having a college education does not mean you are doomed to a life of poverty either. A friend of mine is passionate about what he does for a living. He started what he does now as a hobby at the age of 8. That hobby lead him to be a highly sought after media consultant even without a college degree. He did not finish college because he was too busy working as a consultant. As I said in Why Aren’t You Rich? It May Be Your Beliefs, a college degree just gets you in the door. What you do with the opportunity will have more of an impact on your future than the piece of paper has.

Thus before going into debt for a college education, ask the following questions:

• Am I passionate about what I want to do?

If that passion is not there, you will have a harder time sizing the opportunity that a college degree provides.

• What is the cost involved in the schools that I want to attend?

Some feel that children should get their education where ever they want to go because a college degree is such a good investment that costs should not be a factor. Yet, an investment is only as good as the actual invstement into it. Having a $100,000 school loan is going to be a burden if a student’s desire is to work in a $25,000 social work position. Yet, a $100,000 school loan is small potatoes if the student’s passion is to be a doctor or lawyer.

• Is there a way that I can try on my profession before going to school (or at least before graduation)?

A friend’s son is taking a year long paramedic program to see how it will be like working in the health care environment. He figured before spending 8 years in medical school and going $100,000 or more into debt, he wants to see what it is like to be doctor by being a paramedic first. In addition, the higher pay for a paramedic versus a fast food employee also helps with his bills.

Sometimes it is impossible for a student to try a profession (e.g., actually perform surgery), yet they can ask to shadow someone in their potential field for a few days during their summer vacation. I remember our Pediatrician having a high school student shadow her during one of our visits. People want to help students get ahead. In addition, making contacts early on can also lead to an intern position later in college.

Lastly, more and more universities are setting up free on-line recordings of their courses. Thus a high school student can listen into some of these courses to make sure that a particular major is what they want to pursue before deciding on their major.

There are no guarantees that even after all this homework that a student may not change their minds on what they want to do with their lives when they grow up. A friend of mine became a lawyer, only to realize a few years after staying home with her daughter that she doesn’t want to go back to the legal profession. Change happens. Yet, the more investigating done upfront, the better prepared a student is in making an informed decision in investing in their future.

How To Regain Power in Your Financial Life

Many people relate having money with having power. Thus, for many, not having money makes them feel powerless. They feel that they are a victim to our economy because:

• They can not get ahead on minimum wage jobs

• They do not have the money to invest to secure their future

• They do not get the breaks that rich people get

• They are constantly looking over their backs for people who only want their money

Yet, power does not come from money. Power is an internal decision to have influence over you life instead of being influence by others (e.g., your boss, marketing ads, government, etc.).

How can people without money take control over their lives when they can only pay the bill collector that is knocking the loudest? Well there is a paradox to money. The less you have, the less power you feel. The more you have, the more power you feel. So, it sounds like a no win situation. As the saying goes, the rich get richer and the poor get poorer. Yet, the key word is “feel”. It is not about money, but how we feel about money. There may be things that you can not change. However, there are things that you can feel better about by taking some action.

For example, your can call your credit card company about lowering your interest rates. However, if you feel powerless, you will be less inclined to do this. It is the act of calling that you start to regain some of your lost power. However, real power is sustainable (like determination) that does not fade if the person says no. Many times, the first person on the line at a credit card company has the job to say no and only the supervisor can agree to change the interest rate. Sometimes the caller’s credit is so bad that the company can not justify lowering the rate at the given risk. Sometimes the supervisor knows who is reading from a script because someone told them to do it (yet not believing it will work) and knows who is determined (and powerful) to lower their rate anyway possible. Guess who gets the lower rate? Other times, a no is temporary until the caller can prove you are able to pay back the amount (e.g., for those with bad credit rating). So, take power back by taking responsibility. Ask what you can do to get a lower rate. It may be making double payments for 6 months. Get it in writing (with the agreed on plan and rate reduction) and do it.

A key is to feel more powerful by taking action. And, there is a trap because many take action against others (get angry or get revenge). If you feel angry, that is not true power. Anger is about someone hurting you. If you feel that you can be hurt, then you respond in anger to protect yourself. Yet, if you are powerful, you can protect yourself without anger. So instead of getting angry at the credit card company or your boss, get determined to make a change.

There are ways to be more determined in 2007 to control your money situation through action. Many times we fear of what may happen if we mess something up. Yet, many times no decision is worse than making the wrong decision. This is because if you make a decision and it is wrong you can always change your decision later. Yet, if you make no decision, then your 2007 will be just like your 2006.

• Budget

There are many myths about a budget:

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

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

“Budget Myth #3 – Budget is a Restrictive Spending Plan

Yet, a budget is about regaining control over your finances. In one of my first classes, a participant was talking about how she could only pay the creditor that was knocking on her door first. By doing a budget, she became the one in charge of who got paid first. It was a shift in her mentality. By changing how she thought (out of control to in control), she found areas that she could cut back on to have more money to really have what she wanted more (peace of mind of not having creditors constantly calling her).

A budget is not going to be perfect. However, just spending a few hours on it may make you aware of an issue that you did not know about. Plus, it will make you more aware when you do make purchases. Some purchases may sound good in the moment of purchase yet feel terrible when the bill comes in. Having a budget sets up the criteria of what purchases will make you feel good both now and when the bill comes in because purchases are more thoughtful instead of spur of the moment purchases.

• Set up an Emergency Fund

One thing that many people over look is setting up an emergency fund. Many say that they do not have the money to put aside for this. Yet, in reality, you do not have the money not to. Once you fall behind, it is hard to get out of debt. Thus, it is sometimes better to feel a little pinch now than a bigger pinch later.

When I discuss budgets, I talk about analyzing your wants on what gives you the most peace, love and joy and using that as an indicator when deciding what goes in the budget. What many people do not understand is that having an emergency fund is want (and maybe even a necessity). Thus, when considering what wants should be in the budget, think about what would happen if you had a major medical expense or lost your job (or even if the job cut back your hours). An emergency fund usually gets pushed aside because the consequences are not right in front of people to consider. Yet, having an emergency fund in the time of need will give you more peace, love and joy than most of your other wants will.

Many people feel powerless when they lose their jobs or have a medical emergency because the event is something that happened to them. However, you can still be in control (have power over) your finances, by planning ahead and having an emergency fund.

• Contribute to 401(k) or Roth IRA

Stop fearing what you will have in retirement by taking action to put money aside for it. Can’t decide which plan to fund, read Power of 401(k)s and IRAs

• Invest

Some people do not invest because they feel that there are too many unknowns to consider like: which company to invest with, which stock to invest in, how to diversify, how to monitor the performance, etc. There can be a lot of decisions to investing. Yet, the basics for starting to invest are to (i) minimize the fees and (ii) diversity. The rest you can learn along the way and change companies or funds when you learn more.

To diversify, a mutual fund or an ETF (exchange traded fund) is usually the best for a small investor. The only thing to watch out for early on is to not put all your eggs into one sector like oil, technology, etc. because that sector is not well diversified on its own and can be hit hard like technology stocks where in the early 2000 to 2002. So, many suggest investing in the broad market like S&P 500, Russell 1000 (or 3000), international indexes, etc.

To minimize fees, the key is to do a quick research on the fees of the mutual fund or ETF that you invest in. For indexed funds (invested in the broad market), the fees should be less than .75% per year, in some cases fees can be less than .25%. For small investors, mutual funds may be best starting out because the fees to buy ETFs can be $10 to $20 per transaction. On $25 to $100 monthly investment, the fees as a percentage can be significant (10% to 80%). Thus, it is usually best to avoid any upfront fees or backend sales fees when initially investing especially if you may decide to change where you are invested as you learn more.

By taking a few steps and setting up and investment plan, even if it is as low as $25 a month, you are taking control of your future. And, as you start a plan, you may find out that investing is easier than you ever considered.

• Debt Reduction

I am not going to do a whole section on this because there are many things to consider. Yet, if you are in debt (in particular if you are in debt more than just having student loans or a single mortgage), then sit down and have a plan to get out of debt. Oprah had a good series on starting a debt diet plan.

For my two cents, if you are considering whether to use a credit counseling service or not, take the first step on creating your own debt reduction plan (with the exception if you are at the brink of bankruptcy where you need debt counseling immediately). The reason I say this is the more you are in control of your debt plan, the better results you will have. Many people go to a debt counselor and have a plan set up for them. However, a few years later, they are usually in the exact same situation again because they did not learn their lessons about managing their own money. Thus, just consider setting up a debt reduction plan on your own first. Once you have, you can always go to someone for their advice to make it better. Yet, by taking the first steps yourself, you are learning more about taking charge of your own finances than sitting back and letting someone else tell you what to do.

If you have already gone with a debt counselor, take the New Year as an opportunity to review their plan and see if you have any ideas on how to improve it. You may be able to call the credit card companies and see if they can lower your interest rates. Many remember the “No” that they heard about lowering their interest rates in the past and do not try again. Yet as your credit improves, you may find new opportunities

How a good opportunity can be a snake oil salesman when the intent is to become rich

Over the last few weeks, I have heard a few people talking about starting their own business. Part of me wants to encourage them and part of me wants to discourage them. For me, the decision to start a business or not is all about the intent. When I hear that the intent is just to become rich, I start to cringe a bit. This is because when I question them about their intent, many times they believe that it is impossible to become rich while working for a company or they believe that companies are too greedy to share their wealth with their employees. For me, this is a sign that they should reconsider going out to work on their own because their focus is on what they do not want (e.g., being poor) and thus they become more susceptible to get rich quick schemes. We have all heard these pitches “Want to earn 6-figures while working at home?” and wonder why we are working so hard when others are making money so easily.

My feeling is that if there are no a sure fire way to make money without the potential risk of loss. If there was such an opportunity then everyone would do it and thus removing all possibility of making a significant profit. We have all heard in the past that real estate was a sure fire investment. Well ask someone this now who is holding property and can not sell it without a large discount in the asking price. Nothing really has a guarantee except FDIC insured savings accounts and a few other safe investments.

Yet, many people desperate to change their fortune believe that there is a magic business or stock picking software (sold to millions) that can beat the market even though the same advice is given to everyone. However, the law of efficient market says that when there is a large number of buyers and sellers with a low transaction fee, then the market will price the product so that the return will match the risk taken (larger expected return for higher risks). And, even if a business (like blogging or web design) sounds like a great opportunity for a business, there can become enough people doing it that will flood the market and eliminate any profit except for those who have a solid business plan or special niche. Thus, there is really no sure fire way to make a quick profit with no downside risks. Yet, people who desperately want to be rich (e.g., not poor) are suckered into these propositions because they focus on how to get rich while being blinded from seeing the risks.

As I said above, the purpose for going into business is the important indicator to someone’s success because when the focus is on being rich (e.g., not being poor), a person overlooks the risks of the business due to being desperate. In other words, when they want to make money, their gut is fooled when it comes across a snake oil salesman. If their purpose is on what they want to give to the world (a new product, your talent, etc.), they can better listen to advice that their gut provides may warn you of the risks involved. Plus doors just seem to open up when they are doing something for the right reasons.

For me, when I was looking to leave a prior job because I was disenfranchised, I could not seem to find anything even though I had a solid resume. When I became at peace with the job, I actually ran into someone (an ex-boss) at the local food court who offered me a great position (a part-time position for a great salary). Another time, when I invested into a start-up company in order to retire early, I lost my entire investment even though it had been evaluated and recommended by a man who I trusted. I even remember saying that if the investment failed, it would only be a part of a year’s salary (I did not listen to my gut warning me). Later, when I decide to go into business for myself to be more helpful in the daily life of people, strange coincidences started to turn up that brought me clients and opportunities that would have taken my a lifetime to do on my own. Being inspired by what you want to do will open doors while being inspired to run away from where you are (poor to become rich) will close doors. So my advice is to be at peace with where you are at, then you can attract what you want.

In addition, if there is something that you are trying to avoid, it is something that can come back to haunt you. If you are trying to avoid companies that are too greedy, you are denying others from having wealth and at the same time denying yourself the opportunity to have money. In running your own business, you may subconsciously sabotage yourself because if you make money (like “THEM”) then you are being greedy just like “THEM”. Or, you may be complaining about rising health care prices your company is charging you. Yet, it is even harder to find health care insurance on your own (especially with a pre-existing condition). The grass is not always greener on the other side. When I hear people say that you can not make money working for a company, I point out that Jack Welch and others who made a fortune working for a single company for most of their career. I also point them to the average income of a self-employed individual versus average income of someone who works for a company is not as big of a difference as they may think. For each self-made millionaire who started their own business, there are probably 5 to 10 failed businesses and other businesses struggling just to make ends meet. In reality, companies make large profits due to economy of scales (producing in large quantities), something a small business can not do.

So, do I discourage everyone from working on their own? No. I suggest that they find out what they really want to give to the world and start doing that today (even if it is at their current company). If they want to teach, then become a mentor to someone at work. If they want to make people happy, then make their co-workers happy. Then when the right opportunity comes, they will be inspired to do it. When an idea is truly inspired, things will fall in place with a little bit of effort that makes it an easy decision to go out on their own. Yet, if their only goal is to become rich, they may have a harder time succeeding (but not impossible) because their eyes are not open to salesmen with the magic snake oil elixir.

Does Your Spouse Press Your Buttons Because Your Hair Is Purple?

In working with couples about their finances, there are many arguments that arise that are blamed on money. Yet, the argument is not usually about money at all. The argument is usually caused by a prior incident or about other issues such as self-worth.

Sometimes money issue can be linked to an issue of self-worth. For example, men in our society sometimes (typically) see themselves as the provider for the family. When this is threatened (e.g., due to losing a job or due to being self-employed when business slows down), there is sense of not being able to provide for their family. Thus, when their spouse starts to ask questions about bills getting paid, there is resentment and anger that gets built up where the anger is usually released towards the spouse. Even though the issue started with the lack of money to pay the bills, the feelings are about self-worth of being a provider to the family. One may say that the argument is really about the money. However, if the discussion was just about the money, the couple could sit down and have a calm rational conversation about it. Yet, when the self-worth issue (or another issue) comes into the equation then anger, frustration and sadness come up making the conversation more volatile. If the self-worth issue was not an issue, the reaction to asking a spouse asking about money would be similar to saying “your hair is purple”. It would be meaningless and cause no reaction. By seeing the underlying issue such as self-worth, the real issue can be addressed. By focusing on money, the real issue (such as self-worth) is ignored and will come up over and over again and causes arguments. This is why money is sometimes said to be the number one reason for divorce when in reality money is only a symptom of divorce (but not the cause).

Another example that occurs is when a child grows up in our society believing that material objects can provide them prestige and worth. They may see other children with toys and better cloths and envy them because they equate possession with status. Later in life, when a financial struggle occurs, they will feel that their worth is slipping away. Thus, in their discussions about money with their spouse, they may feel needy and start nagging and complaining about why they can not have what others have. They may set up unreasonable expectations of their spouse that when the expectations are not met they become angry and upset. Again, money is the symptom and not the cause. Even if money was plentiful, the underlying issue of self-worth would come up anyways (for example, when someone else questions their parenting ability, their looks or other aspect of themselves). I have had clients say that their self-worth is diminished after having a conversation with their spouse or boss. My response is always, if you really had a strong self-worth, you would not feel worse after talking to anyone because anything they said would be equivalent to them saying your hair is purple. When helping at a summer camp, the instructors would tell the young campers that if a bully called them names, it was them (not the bully) that would attach meaning to what was said. If someone called them 4-eyes, it would be the same as someone calling them a Cadillac unless they gave meaning to what was said. If you knew that you were a great parent, you would not react if someone questioned your parenting abilities rather you would just turn around and walk away believing they did not know what they were talking about. With a strong sense of self-worth, questions about your ability would come across as a uninformed suggestion on what could be done better rather than meaning that you are a bad parent, spouse or provider.

The key is to remember that the source of anger and upset is not usually for the reason that you are getting angry or upset at now. When you get angry or upset, you need to take a step back and think about why those words had an effect on you. By doing this you can realize that it is more about looking inside for the solution to the problem than looking at others to change because even if they change the issue will present itself in another form. One time when I pointed out to a client that his spouse was triggering his lack of self-worth, he chuckled and responded that if it was not her than it was his clients. He realized that even if his wife changed, he still would still have to solve the issue with perceiving that his clients are not respecting him. Thus, it would be easier to look within instead of at them. A key to looking within is to be inquisitiveness. Ask question like why did I react to what they said (or did) or why did my spouse react to what I said. We sometimes get offended when someone gets upset at us for what we said even though we thought the comment was an innocent remark. Yet, until we understand what is going on for them (or ourselves), we only know ½ the story.

For another article on Couples and Money, click here

Overcoming Financial Drama

In writing on the Oprah Debt Diet message, I keep seeing people stuck in financial drama. The latest one is in regards to a person who lost his IT job to a person in India that he trained. He talked about his “righteous indignation and justifiable angst” about people and government not helping the down trodden and about bad management at companies (e.g. Enron). He was looking for new ideas and to understand how people have made it to be a “Have” because the “old” advise of work hard, save more and spend less does not work anymore. Unfortunately, most of the advice that people gave him probably did not sink because he is caught in his financial drama. Yes, I do not know the whole story, so I am making a big assumption based on a gut feel. However, I will use this as a starting point to discuss an important financial lesson about drama.

Drama plays a role in our everyday lives. We especially love watching and reading about dramas. In any drama there are three characters: a hero, a perpetrator and a victim. In our lives, we can play each of these three roles. For example financially, a college graduate can go out on his own to conquer the world (e.g., play the hero and climb the corporate ladder). After a few years, he may be fired. The key question is does he choose the drama of the perpetrator (getting angry at the greedy company for putting money ahead of people) and then the victim (poor me – how will I ever survive in this cruel world) or does he choose to take responsibility for his/her situation. For example,

• Did he set up an emergency fund?

• Did he keep his resume up to date?

• Did he network well (to call in a favor now)?

• Did he keep up with continued education

• Is he sending out resumes?

• Is he willing to do a project for free for a company (a test to show his worth for a full time position)?

• Is he researching the companies he is interviewing with to show them that he is enthusiastic about working for them?

• Is he willing to switch careers if his current occupation has an oversupply or a lackluster demand of workers?

Drama is a trap because if we blame others for our situation, we can not see how to get out of it. In any one situation, there is one person who can change it (us). If we wait for someone else to change it, we could be waiting a long time. Thus, we need to step back and see our responsibility for the situation instead of blaming someone else.

The key is to see when you are feeling trapped in a drama is to ask:

1) Are you angry (are you playing the perpetrator roll)?

2) Are you a victim (e.g., by blaming others)?

3) Are you doing something to win the approval of others (e.g., being the hero)?

If so, you are probably in the drama.

Note, the trap of the hero is if we do not get the approval of others, we can easily slip into the perpetrator role by getting angry at them for not seeing what we are doing for them. For example, we may be volunteering or helping the homeless. After doing all this work, we may have several homeless individuals (hypothetically) begging for another handout and complaining to us how no one is helping them these days. We may get frustrated because they are not taking responsibility to change their situation, angry that we are busting our butts and they are doing nothing. We may also think that we need to work harder for our retirement because so much money is going to ungrateful and lazy people through our taxes. Then we feel trapped in our jobs that we do not like in order to fund our retirement, pay our mortgages and get gouged by taxes. Being frustrated and angry, we may start to pull back our assistance. At which point, we may feel a little guilty because we are not saving anyone. Thus, we go off to find someone else to save while still feeling trapped in a job that we do not like instead of taking action to change our financial situation in order to stop feeling trapped at work.

The key is we are always responsible for our feelings. No one is doing anything to us. We are not trapped by the drama going on around us. We are the creators of our lives and can decide when to step out of the drama to take action to change our own lives instead of playing the hero (or perpetrator and victim role) and trying to change someone else in order for our situation to change.

The key steps to stepping out of the drama are:

• Investigate other possible reasons for a situation

• See how you could be responsible for the situation around you

• Forgive those that you are currently blaming

• Take action to change your situation instead of changing others

• Look out for when you are plugged into a situation (feel that you know the answer and feel the need to fix it) because it is the trap of the drama to need to know the ending

• Turn off the news or look at it as just facts instead of what to fear because fear keeps us in the drama

• Practice gratitude

For example, if you are a parent stuck in fear about how to send your children to college and blame government and colleges for not doing more:

• Investigate – see if costs are rising because of the increase demand in students wanting a college education (supply and demand) or see if there has been an increase in private scholarships and grants to offset the lower government assistance

• Take responsibility – you would not be blaming the government if you felt that you had some more college money saved up or showed your child how to get a piece of limited scholarships before it was too late

Forgive – step back and see that the government and schools are just playing their part in this situation (e.g., government is stuck with people wanting less taxes but more assistance for their needs while schools need to improve their infrastructure and pay for higher medical costs)

• Take action – how can you motivate your child to get the additional money he needs or how can you adjust your budget to fit in the higher costs of schooling?

• Look to see if you are plugged in – Do you know the solution? Is it colleges lowering their tuition or government just giving more grants or subsidized loans? If you are locked into one of these or other solutions, you will not see the alternatives to get out of the drama.

• Turn off the news – The news is driving your energy (fear) with stories of how the young are the victims of needing to take out huge loans and then not being able to buy a house due to their debt. Or, see the news just as a fact (neither good nor bad). Children need a larger loan to pay for college and a college degree is still a good investment for the long term even with higher costs.

• Practice gratitude – It is great that we are having more opportunities for learning in our society (e.g., community college, 2-year degrees that can turn into a full 4-year program, internships, online education programs, companies (e.g., UPS) that pay for college degrees for their employees, etc.)

• Lastly, as a friend’s t-shirt says “Save Your Drama, For Your Mama”. We stay stuck in the drama when we just want to talk about it (complain about it) to others. Thus, take a step back and remove the energy from the drama by not continuously talking about it. It is one thing to use someone as a sounding board to learn what is going on and move on. It is another thing to use the situation as a pulpit as to why the world sucks.

One last note, you may be asking if we should fight for what we want or I am suggesting that we should just give up. It is alright to speak for what you want (e.g., more children being able to afford an education). Yet, the key is to:

• Not fight for what you do not want (e.g., stop the increase in cost of education) because when we focus on what we do not want it expands

• Start moving towards what you want because the situation will not change until you change (e.g., what are other ways to make school more affordable? Part-time work, online education, gifts to pay for tuition instead of gifts of iPods, etc.).

For more information on financial drama click here

Is Financial Happiness Relative?

It is the age old question, does money bring happiness? Some studies have shown a link between money and happiness that has been interpreted as money creating happiness. However, there has been some discussion lately, about which came first, the chicken or the egg (in this case money or happiness). In the movie, The Secret, or the book, The Law of Attraction, by Jerry and Esther Hick, they discuss that our happiness attracts abundance (money or other things we want).

How can being happy create additional money? Think of it this way, if you are disgruntle when you go to work, are you really giving all that you have to work? Probably not, and thus will work give you back all that you deserve? Probably not. As, I have said before, why would a company want to promote an unhappy or disgruntle employee? Thus, the happier you are, the more you open yourself up for opportunities and promotions. It is like the saying goes: “Do what you love and the money will follow”. The correlation is “If you do not enjoy what you do, you will more than likely struggle.”

If money does not create happiness, then why do some studies show that money causes happiness? Well it may be because happiness is relative. In a Princeton study on happiness, they compared how individuals rated their overall happiness versus asking how happy they are from moment to moment. They found that those with higher incomes expected to be happier overall and reported a higher overall happiness. Yet, from moment to moment, they were not all that much happier that others with less income. Thus, having money makes people think that they should be happy whether it actually does or does not.

Thus, if you have more money, then you believe that you are happier. Isn’t it interesting that some studies show some that money can bring happiness but only up to $40,000 to $50,000 of income when happiness levels off. Many have pointed out that happiness increase up to a point because money can ease the stress if basic living expenses are taken care of. This has some merit, however the question is what is basic living expenses because it can drastically be different between United States and some other countries in the world. Another alternative to point out is that it can also be because the median family income is approximately $46,000 and happiness levels off around $40,000 to $50,000. Maybe people are comparing themselves to other and feel less happy when they have less? While those making more than the median income feel happier because they are fortunate and thus feel they should be happier. Thus, one may say that money does create happiness. However, it is our beliefs that cause us to be happy (or unhappy) because we are saying “I am happy if I perceive myself doing better than others.” This is shown in a research study that showed people rather earn $50,000 if they lived around others making $40,000 than earn $100,000 if others around them are earning $150,000. It reminds me of stories of workers who is happy with the salary he is earning yet then gets angry when he finds a coworker who is making $5,000 more.

So happiness is not about the event, yet how we interpret the event. Someone can have a great experience and have it ruined by comparing themselves to others. Thus, is happiness relative? Can two people in the exact same situation and one be happy while the other angry and upset based on how each of them looked at the situation? It reminds me of how we see a funeral as a solemn occasion in America, yet for some other countries it is a celebration of one’s life.

We will diminish our happiness, if we compare ourselves to others and feel less than because we have less (whether it is money, vacation, siblings, etc.), happiness. There is only one person to compare you to and this is yourself. You can not find lasting happiness from outside yourself because happiness is all within. If we go outside ourselves to find happiness by, comparing your situation with others, the search will result in having more disappointment than true happiness.