Monthly Archives: June 2007

Does What I Write About Really Work?

First off, sorry again for taking a few weeks off from blogging. I have been kept from typing and doing much of anything due to have severe pain up and down my arm (from fingers to elbow) probably from typing too much for a book that I am writing. It is not carpel tunnel rather something else that my doctor could not specifically identify. He believes that it is caused by how my arms were resting when typing that somehow pinched a nerve or muscle, so we will see how it goes as I start typing again.

Anyways, a while ago I received a series of comments from a reader questioning the impact of what I write about. I want to take this opportunity to explain why I write the way that I do. In particular, there are probably many people taking a quick glance at what I write about (financial behaviors) wondering how it can help people who is living paycheck to paycheck with little hope of getting ahead. This appears to be where the commenter was coming from when he wrote

Which reminds me, what good is “financial awareness” if you have no money?

It is hard to explain my whole point of view in a short blog which is why I am excited to being closer to submitting my first book to a publisher. My first draft is currently with an editor who has been helping me organize my ideas better. Yet, in a nutshell, my philosophy is based on when we are caught in a struggle (living day-to-day) it may not money that is holding us back rather our thoughts and beliefs about money. For example, I have offered my services free of charge to many people who have been struggling with money and for the most part have not been taken up on the offer. The key is that when we are in the struggle, we lose sight of opportunities and believe that there is no way out (or a single solution that we try over and over again with no substantial results) thus do not take opportunities when they present themselves. Thus, it should not surprise me that my offers have been ignored because people grown to believe that there is no hope. For example, one of the comments that I have seen over and over again, is similar to

I apparently have no marketable skills, no career-related experience, and no money to go back to school to acquire a marketable skill.

We have a tendency to get caught in the belief that college education as being the end all-be all way to get ahead. I am a strong proponent of education. However, there are other ways to get ahead if one path is blocked. For example, I have a friend who went into the military after high school. After his military service, he worked his way up to being a manager for a large grocery store. However, he end up being fired from that job along with a few others and each time settling for lower and lower managerial positions at smaller and smaller stores. And, even these positions dried up for him. He ended up starting a website design business by teaching himself about the web design industry and programs. As some people know, web design is a highly competitive field to crack into because many people are trying to do the same things. Along the way, he and his wife barely made ends especially with two daughters in college. Yet, he was not discouraged. His ability to learn web design ultimately lead him to being hired at a computer software company where he has worked his way up the ranks and has developed skills sets that are highly sought after, making him very valuable to the company. The key is where there is a will there is a way if we open ourselves to opportunities instead of limitations. Thus, sometimes it is not about the money rather our behaviors (for example, our “lack”/”poor me” thinking) that needs to be addressed to get ourselves out of our financial struggle.

I believe that one of the biggest hurdles we face that influences our behaviors is our belief that “doing what we love” needs to come in a specific form. Thus, we get discouraged when we do not see things go exactly as we would like things to be. In asking people what they would do if money and time was no object, I have head millions of ideas such as “opening up a center to help (fill in blank) ”, living on a beach front house or “starting my own business”. What we normally focus on is the form of what we want believing that it will bring us happiness. We then push ourselves to acquire or accomplish these tasks while we minimalize what we are doing now and may never find lasting happiness in our drive for success.

Instead, I ask people to focus on what they want to give or what they want to accomplish (in generality – not specific outcomes). When we focus on what is important the ultimate goal (not specific actions), we leave it up to the universe to provide us the form to do it in. For myself, I enjoy being a teacher and helping people. Yet, for years, I was caught in a consulting job where we helped large companies instead of individual people. I could have been miserable in this position because it was not the form of what I wanted because our focus was on helping corporations instead of where I wanted to focus on in helping people. However, I focused on helping people whether it was in volunteer activities that I did on weekends or it was being a mentor to younger employees at work all while helping corporations in my job. Thus, when I hear people say:

What if what you love requires money up front which you don’t have and cannot get?

I suggest looking at doing what we love to do where we are at. We may not be able to do it 100% in the job we currently have and see what behaviors and thoughts we have that get in the way. We can work in things that we love into our lives and our interactions with people without making major changes in our life. What about if we want to sing and we are caught being a janitor? The key is to understand singing is the form of what we want and focusing on the form (singing) as the source of our happiness will make us miserable. They key is what we get by singing? Do we get to be creative or do we get to bring joy to people through our voice? If it is joy, we can do this no matter what job we have. I have a mailman who always greets me with a smile every time that I see him. I do not know him all that well, yet that one minute interaction with him brightens my day. Thus if giving joy is his mission in life, he does it where he is at. And, being a janitor does not mean that a person can not sing while working or do karaoke after work or perform on weekends. If we see our ability to do what we love controlled by outside influences, we need to shift and to look at our behavior instead of how much money we may have. Just look at the recent winner of Britain’s Got Talent. A mobile phone salesman (Paul Potts) just received a two million dollar recording deal because he did not let his work situation get in the way of his passion for opera. He did not have to quit his job to get noticed, rather do what he loved where he was at. In reality, being a salesman probably helped him win the competition (type of rags to riches story).

Thus, next time you think that money is keeping you down; I encourage you to become aware of your behavior to see what may be holding you back. All I can say is that anytime someone has worked with me and stayed with becoming more aware of their thoughts and behaviors, they have seen the results. Others however have become discouraged and gave up when I have not given them a top 10 quick fix on how to become a millionaire that is one size fits all. They did not realize that how we think, act and behave has more impact on their finances than knowing just the tools. This is why many people on diets fail when they just focus on the diet and do not become more aware at what is causing them to eat (their behaviors).

If you need help to help identify what is holding you back, drop me an e-mail (pete at myfinancialawareness dot com) and we can chat. I have not let money get in the way of living my passion for helping people. My coaching services have been based on accepting only donations/gifts (and sometimes times nothing at all) solely based on my clients’ choice and/or ability to give back.

Do Not Cut Too Much Fat

In writing my last article (seems like so long ago due to taking a break due to illness and a bum wrist which still leave me typing with one hand), I discussed simplifying our finances by making wise choice about our large expenses. Much of our budget is about choices. Yet, what happens is that we commit ourselves into large expenses and restrict what we can and can not do in the future. If anything does not go our way, we are tied to cutting the little expenses to try to make ends meet (e.g. latte). Many people say that you can become a millionaire by doing this, however there is only so much that we can cut before it can come back to bit us.

There are three things that can happen:

• Cut out too much where we cut our enjoyment of life as well

• Set up a belief that struggle, living paycheck to paycheck and sacrificing, is our reality (no way out); by being caught in a struggle to get by, it is easy to stay trapped and continue that struggle (will discuss this more in a future blog)

• Avoid seeing the potential benefits of our smaller expenses.

I am not advocating that we can go out and spend what we want on little things. Yet, I want to emphasize that looking at our large purchases as a place to reduce costs can be very rewarding if it allows us to keep the little things in our expenses that are more valuable or enjoyable.

We can try to cut the cost of getting a hair cut or eating out at lunch because these are the easy areas to cut. However, this may have detrimental effects on our future income and enjoyment. For example, in my last job, I found spending $5 for lunch every so often was a good expense. Some people may be ready to hang me for saying this. However, sometimes important conversations happen over lunch. Spending ½ hour with my boss away from the office was valuable time that helped me understand how I could be more valuable to him. It also allowed me time with my staff to help me understand their concerns that helped me plan my projects better. Lastly, going out and walking helped my energy level in the afternoon instead of being stuck behind a desk all day. If spending $5 a week helps us get even a 1% raise by understanding the office dynamics better, in my mind, the $250 investment would pay off with a $400 raise for the average salary (which equates to $250 after taxes) and helps us keep our job.

You may think that this is one isolated incident, yet what about getting a hair cut. Why spend $25 for a hair cut at a salon instead of $10 for a cheap barber? I am one who does spend the extra money. For me, the extra $15 that I spend going to a friend who works at a salon is money well spent to get out of the house and relax (part of my morning away from taking care of my son during the week). I could find something else to do. However, in my case, a friend who is helping me with a long-term project goes to the same salon as I do. Thus, because of our busy schedules, it is an easy and convenient time for us to get together and discuss what we are each doing and how we can help each other out as we get our hair cut. Yes, we can schedule another time to meet (such as over lunch or a cup of coffee). Yet, sometimes business deals are done at the strangest places. Point is that we need to sometimes see the incidental expenses as a possible investment in our future (if used appropriately) instead of just an expense to cut.

Now, I know that many people spend money on lunches, hair cuts and other things that can not be in the faintest stretch of the imagination be consider an investment in their future. My point is that sometimes it is our larger expenses which we often ignore that should be the first to cut instead of the smaller expenses. I have written numerous times on Don’t Give Up Your Latte. In these articles, I talk about not cutting out the little pleasures we have in life. If we really enjoy the simple cup of coffee in the morning as we sit reading the paper before work, then we may want to keep it in our budget (if we can afford it) and look elsewhere to cut. Maybe the $3 cup of coffee is more enjoyable than driving an Acura instead of a Honda. Thus, we could cut $1,000 or more from our annual transportation costs and keep the simple pleasures in our life. We may find that we can brew coffee our own for a fraction of the cost or cut back to 2 cups a week at our favorite coffee place. Yet, if we go around cutting out all our small expenses just to get by, we may be doing more harm than good. It is important to understand that if we go to work grumpy because we did not have the morning cup of coffee (due to cutting back to the bone our expenses) can be detrimental. Rather we should look at the bigger picture of what we rather have (e.g., coffee) and look instead at what we think we need (a bigger house or fancier car) as a place to cut.

There is fat to be trimmed from small expenses. Yet, if we cut too much without forethought, it may have a harmful effect. It is sometimes better to look at our bigger expenses instead of the smaller expenses that look easier to cut.

Posting Delay

Sorry for the lack of posts the last few weeks. A list of things have popped up for me, including a trip to Florida, my son getting sick when we got back and now I injured my wrist where I can only type with one hand. It will be a few more days before I can get back to typing again instead of pecking with one finger.

Simplifying Our Finances – Expenses

Typically, when we think about expenses, we commonly look for the little expenses that add up over time, like a cup of coffee or the fees for cable/satellite television or even using coupons for food. This is because these are usually the expenses that we can easily cut. Most of our other expenses are tied up in our home, our car or other things that we need to get by. We find it difficult to cut back on expenses for our home and car because these are usually fixed amounts. Thus, we look for our variable expenses whether it is eating out for lunch or going to a cheaper barber. Yet, there is only so much that we can cut.

In looking at the expenses that we can control, we need to be aware about

1) Distinguishing between a need and want

A need is something that we need to sustain a productive life (food, water, shelter, clothing, etc.). A want is everything else. Yet, a need can be confusing because shelter can either be a 500 square foot apartment or a 3,000 square foot home with granite counters. Now, based on the criteria that a need is something that sustains life, only a small portion of the 3,000 square foot home is really a need. Most of it is a want.

2) Understanding where we can have the most impact

To understand this we need to look at where we spend our money on. The typical consumer spends (per Consumer Expenditure Survey 2005):

Category
Allocation
Housing
33%
Transportation
18%
Food
13%
Insurance, Social Security & Pension
11%
Health Care
6%
Entertainment
5%
Clothing
4%
Education
2%
All Other
8%

We see that most of our expenses are on housing and transportation. Our belief is that there is little in these areas that we can cut because we need it. And, to an extent, we are right. However, it is not because we can not cut these areas, rather we do not believe that we can cut these areas. Thus our belief becomes a reality.

We look at our car and house as a type of status symbols of what we have achieved. Thus, it is hard to cut these expenses, not only because we have already signed the contracts, but also because we have put our worth into what we have. If we need to scale down from a 3,000 square foot home down to a 1,500 square foot home, it appears to be a blow to people’s pride unless they know their real worth is not in a home rather in who we are. Even if we can see our real worth is not in what we have, getting out of these contracts usually takes money as well (e.g., for a home we have agent commissions and moving expenses).

Thus, instead of making one decision to cut our expenses by looking at our largest expenses, we make hundreds of decisions on little expenses to try to make ends to meet. To simplify our expenses, we should look at our major purchases before we make them because this is where we can have the most impact. When we make these purchases, we are not only obligating ourselves to making the payments for that purchase but also obligating ourselves for many other future expenses as well where our decision can impact many other decisions as well.

For example, when purchasing a house:
• Insurance payment for the house
• Property taxes
• Utility costs for the home
• Repairs/upkeep of home
• Furnishing of home (unless you are willing to have a room with no furniture)
• Lawn maintenance
• Transportation costs to work

For purchasing an automobile:
• Insurance
• Future gas payments (depending on MPG)
• Maintenance (including money for premium tires for trucks and SUVs)
• Parking (you are not going to park an expensive car out in a $2 run down parking lot)

Thus, as you can see, one purchase can have a large impact on our future financial health. We can even say this when deciding to have children. One event ties us to future expenses that should be considered. Yes, we can control to a certain extent some of the cost factors for owning after we make the purchase. We can keep our houses heated only at 62 degrees instead of 70 degrees in the winter or cooled to 78 degrees instead of 72 degrees in the summer to save money, yet this is only an adjustment to the expense that we signed on for when we bought the house to heat/cool a larger home instead of a smaller apartment. Our finances become hard to adjust down the road when we do realize all the future purchases we commit ourselves to when we buy a car or automobile.

We complicate our finances when we limit our choices. We look at things like shelter, transportation and food as needs that can not be cut. However, we overlook this when we make the purchase believing we can afford to stretch our budget to have the car and house that we want. When we over-commit our budget on our larger purchases (transportation and shelter), we are left scrambling over little things to make ends meet. Instead of making one large adjustment to make ends meet, we are left making hundred of little decisions to trim as much fat as we can. In the scramble we become tired trying to keep our head above water, not realizing we tied the anchor to our ankle when making our larger purchases. To simplify our finances, we need to see that we have the key to the anchor that is weighing us down. Having a reasonable mortgage and car payment is one thing. Having a mortgage and car payment along with all the other expenses like gas and insurance and maintenance that drowns us is another.