Friday, September 28, 2012

The Power of Negative Thinking

I will admit that last week was not a stellar week for me. Sunday I set my alarm to wake up early and ended up sleeping through it. So I missed an event that was very important to me. Later on in the afternoon I had to deal with some "crazy family" issues and that got me really down. And on Monday I started a brand new, and particularly stressful, long-term project at work. So along came Tuesday night - my favorite night of the week because I have my pottery class. My opportunity to get my hands dirty and be creative - a necessity for someone whose day is mostly spent in front of a computer doing some type of non-creative accounting activity.

I walked into class that night, grabbed some clay, wedged it and then headed for the wheel. As I began to try to center the clay I realized I couldn't do it for some reason. Feeling frustrated, I called over the teacher and asked for help. Once the clay was centered, I opened up a hole in the middle and tried to coax the clay to become taller to make my soon-to-be mug. But for some reason my technique was completely off that day and I couldn't figure out why. Try as I might, I couldn't get the clay to do what I wanted that night and ended up completely exasperated and leaving class an hour early.

As I drove home that night, I wondered why I had so much difficulty that night. I typically really enjoy these classes regardless of the quality of my clay outputs. It suddenly hit me. I think I walked into class still carrying the negativity from the past few days and it subconsciously reared its ugly head.  Imperfections seemed much more significant and less tolerable that day. It also affected my pottery technique just enough so that I wasn't able to produce my typical results. It's as if the negativity was spewing out of my hands and into the mug itself.

Often negative thoughts can affect your daily life without you even realizing it. Your actions, like the clay I was using, are controlled by you. But when you are channeling negativity into these actions, you will not get the results you expect. And no matter how hard you struggle you may never get where you want to be.

Negativity can especially derail your long-term personal finance goals. It may not be as obvious to you as ending up with a crummy looking mug, but there may be signs to watch out for to prevent sabotaging your financial progress. Do you have a sudden urge to buy, buy, buy? Have you convinced yourself that you have earned a vacation or fancy dinner out? It may be something completely unrelated to money that is affecting your mood and creating the potential for a financial setback. To prevent a money pitfall, consider these tips.

1. Get to know your mood better. Rather than pushing your thoughts to the far reaches of your mind, sit with them for a minute so you can at least have an idea of how you're feeling that day. Once I figured out I was still suffering from happenings earlier in the week, I felt an immediate relief and the negative cloud began to lift.
2. Get to the bottom of the negativity. Before you go out and spend your way to a happier day, try to figure out the cause of your negative thoughts. Fight with your mom last weekend? Guy almost ran into you on the freeway this morning? Stressful day at work?
3. Do something about it! Knowing your negative mood may be sabotaging your goals is just half the battle. Use that awareness to change your course and make positive changes. Rather than perusing the web for a new thing, google around and learn about CD ladders or mutual funds.

Your wallet will thank you for it.

Stay tuned,

Image courtesy of Bill Longshaw /

Tuesday, September 25, 2012

Take Ten Goal Technique

Do you have that list of things you would like to do that you think would be a direct benefit personally? Been meaning to attend a spin class? Has Dave Ramsey's book The Total Money Makeover been sitting unopened on your nightstand for months? Or maybe you just want 30 minutes to sit and meditate?

Most of us are filled with ideas and tasks that we would like to accomplish because we would improve and grow personally. But these same ideas and tasks are generally the first thing to go because of a hectic schedule or just plain life in general. People, especially women, tend to sacrifice certain "wants" in order to make sure the wants and needs of others are fulfilled. Why are we so willing to move these personal benefit items to the bottom of the priority list when ultimately they may lead to a better quality of life in the long run?

1. Selfish and frivolous. Putting our own needs first is often construed as selfish. Society has conditioned us to think that it is a negative thing to try to take care of ourselves every once in a while.
2. No immediate benefit seen.  When you've got work to do, dinner to make and kids to drop off at practice, squeezing in 30 minutes of exercise not only seems impossible but also doesn't appear to result in an immediate benefit for anybody.

Enter the Take Ten Technique. At the end of each workday, after you have completed your work but before you head to the car, take ten minutes to make a plan of attack for tomorrow for all those "want to do" items that you would get some personal benefit from. Include personal, professional and even financial goals. I picked the end of your workday to complete this task because it is the time when you are least likely to be interrupted (people just want to leave), and you can apply your full attention since you have wrapped up your work day. And don't wait until morning to Take Ten because you may feel too rushed to truly devote yourself to the Take Ten thought process.

How is this different than a to-do list? The purpose goes beyond just listing out items you need to complete. Ten Minute Technique is a way to get you to be thoughtful about what exactly it is you would like to accomplish during your days. It also changes your thought pattern so that you start thinking of these items as something that shouldn't be sent to the bottom of the priority list.

1. Make a list of your personal benefit items. Quickly jot down some personal benefit ideas that have been swimming around in your head. Take a class at the gym? What about having a no-spend day?
2. Carve out small time slots. While there may not be a large block of free time available, you might be able to find 10-15 minute increments where you may be able to work in some personal benefit items.  Doctor or DMV appointment coming up? Make sure you download that investing book you've been wanting to read for the past year so you can read while you wait.
3. Pare down your list.  Take Ten isn't about tackling your grocery list or reminding yourself to go to the dry cleaners. It's about being purposeful when planning your day and making sure to include personal benefit tasks in each day. Review your list and make sure you are only including items that you think will benefit you in the long run.
4. Don't overdo it. If you decide that tomorrow you are going to exercise for two hours, write all the than-you letters you never wrote and start that quilt you've been meaning to work on, then you may be setting yourself up for failure. Be okay with adding in one personal benefit item to your next day's schedule - even if it's only for fifteen minutes.

Take Ten forces you to be thoughtful, get it down on paper and make these personal benefits a priority - all behaviors that have proven to help people more successfully accomplish their goals. So why don't you try to Take Ten today?

Stay tuned,

What techniques do you use to ensure that you are fitting in beneficial activities into your schedule - financial or otherwise?

Thursday, September 20, 2012

A Need For Basic Finance Education

Last week my Twitter and Facebook friends read my comment about how apparently college students know the exact number of days Kim Kardashian was married but don't know their student loan interest rate. This statistic came from a video created by iGrad where they conduct "A Financial Literacy Experiment". A very eye-opening six minutes. Other interesting facts that came out of this video include:
  • Less than 40% of students interviewed knew what a "student loan default" meant
  • 80% of students knew how long Kim Kardashian was married (72 days in case you were wondering)
  • 85% of students did not know their credit score
  • Over 90% of students knew Justin Bieber is dating Selena Gomez
With the uproar about skyrocketing college costs and total outstanding student loan debts exceeding the monumental trillion dollar mark, there has been a cry for change from many Americans. Ideas ranging from debt forgiveness to "pay-as-you-earn" plans to re-structuring the way education is provided have been thrown out to attempt to ease this growing crisis.

But let's not forget our responsibility to ourselves to try to understand exactly what we're getting into when we decide (or need) to use student loans to earn a college degree. Maybe we should attempt to change the status quo by expecting our kids (or ourselves) to know what it means to default on a student loan. Is it too much to ask that a student know the interest rates on their loans and credit cards, and also be able to explain the difference between a subsidized and unsubsidized loan? I think not. Do you think their financial choices might change for the better if they had this knowledge? I hope the answer is yes but I honestly can't say for sure. Regardless of the outcome, I don't see a downside to becoming more financially literate.

I am a good example of what not to do. I ended up with $50,000 in undergraduate loans, $30,000 in graduate school loans and six or seven different credit cards during that same time frame. I would have been one of the students in the video who couldn't answer any of the financial questions. All I knew was that the only way I could attend college (at least in my naive little world) was to take out these loans. Could I have attended college without loans? Probably not. Were there better financial options that I could have used? Most definitely.

When you take out a loan your are essentially borrowing against future income. Let's say you take out $50,000 in student loans and get a job out of college making $40,000 per year. In essence you have already leveraged (paid out in a way) three years of take home pay (assuming a 4% fixed rate 20 year loan compounded monthly and take home pay equaling 65% of gross salary). And it just gets worse as your student loan balance goes up.

So where is the disconnect in terms of basic finance education? Are parents unaware of the effect of owing large amounts of student loans after graduating? Or should students be held responsible for figuring out how all of this student loan stuff works? Regardless, we owe it to our future selves to realize that if we over-leverage our future income there is no happy ending to this story

Stay tuned,

Do you think a lack of basic finance education is a contributing factor to the student loan madness occurring these days?

Tuesday, September 18, 2012

Financial Change Management or...... Dollars and Change

"It is never too late to be what you might have been" ~ George Eliot

Human beings are generally resistant to change. Remember a few months back when Facebook's new Timeline format was introduced? I have never seen so many angry status updates!! All because the format in which you receive information on your Facebook page (a free service, I might add) would be altered. So why were people so opposed to the new Facebook look? I believe it was mainly because people didn't see any immediate need or purpose for a new way to view status updates. They were completely satisfied with the way things currently worked. Or basically.....if it ain't broke, don't fix it.

Resistance to Financial Change
If a change to Facebook can instill anger in the hearts of many, imagine what a financial overhaul can do to the average American family. The decision to pay off debt rather than take the family vacation or eat out is a HUGE change for many, including myself. It wasn't until Day 93 of our $60,000 debt payoff before I could finally say that "eating in more and spending less is starting to feel more like a habit rather than a sacrifice". Three entire months before I could say I was accepting of our lifestyle change!! Getting rid of cable was even more awkward and uncomfortable, resulting in one night where "Mike and I pretty much sat and stared at each other because we hadn't quite figured out what to do with our time" now that there wasn't a TV to watch. What can you do to minimize the perceived negative impact of financial change on you and your family?

Dollars and Change......Management
What's the first thing you do when you decide to make a significant change to your personal finance habits? Make a budget? Although this may be most people's answer, I say wrong!! Before you even get to the numbers part, you've got to prepare yourself and your family for the major changes ahead. To try to figure out the best way to do this, I have been reading up on the concept of change management - defined by Wikipedia as an "an approach to shifting/transitioning individuals, teams and organizations from a current state to a desired future state". One change management book I found particularly interesting was John Kotter's The Heart of Change. The basic premise of this book is that people are going about implementing change all wrong. Acceptance of change doesn't happen by getting people to think differently. Rather, acceptance comes when you can get people to feel differently. Kotter believes people will change what they do when they are shown a truth that influences their feelings. See, feel, change.

My favorite example of "see, feel change" is the Gloves on the Boardroom Table story in the book (full story here). To summarize: an executive believed that a large amount of money was being wasted because each of the organization's factories handled their own purchases (rather than having a centralized procurement process). He thought that a tremendous amount of savings could be realized by consolidating procurement and put together a "business case" analyzing the issue, but nobody seemed to think it was a problem. So the executive took a different approach and gathered up all 424 different kinds of gloves the different factories purchased and marked each one with the supplier and price charged. He dumped the pile of gloves on the boardroom table in the middle of a senior executive meeting. The executives were speechless at the image before them - so many different gloves, some appearing to be the same glove purchased at vastly different price points. People were suddenly very interested and demanding a change in the procurement process. By creating a compelling physical display (as opposed to a typical Powerpoint presentation that includes a bunch of numbers on spreadsheets), the executive was able to "shock" the senior executives into feeling an urgent need for change.

So how can you create a see, feel, change scenario when it comes to your personal finances?

Generate a sense of urgency. Rather than getting the family to think differently, get them to feel differently about money and how it affects them. Rather than appealing to their intellect or logically trying to convince them that a financial change is needed, appeal to their emotions. Because just like exercise and eating healthy, we all already know we should be doing it but we often still don't. By appealing to their emotions, you may be able to bridge the gap between "should" and "want to".

Create a dynamic example. Maybe a bank statement or Excel spreadsheet isn't the way to get people to want to change their money habits. There might be a better and more dynamic way, like Gloves on the Boardroom Table, where you get your family to say "Oh wow, we've got to do something about our finances right now!". When you can see, touch or hear something it becomes more tangible and real.

Walk the Walk. As the leader of this financial change initiative, it is your responsibility to lead by example. If you fold on Wednesday night and take the family out for burritos because you are too tired to cook, you are sending the message that this kind of behavior is all right.If you aren't fully committed to your financial goals, don't expect any more from your family.

I'm not saying any of this will be easy but it's critical to achieving your family's financial goals. Give it a shot!

Stay tuned,

Creating that "see, feel, change" sense of urgency for your family is imperative if you want to meet your long-term financial goals. What kinds of dynamic examples have you used that helped convince your family that a financial change was urgently needed?

Thursday, September 13, 2012

Financial Update - September 2012

I have a lot of catching up to do since my blog hiatus. My first order of business is to provide an update on my financial progress. After all, how can you determine the amount of progress you have made without having something to compare against?

Even though I wasn't writing about it, we were still plugging away at our finances these past months. As I mentioned in my 2012 Goals, we decided to switch our focus in 2012 to saving rather then continuing to pay off debt. While I'm still not convinced this was the right decision, I consider it an experiment in financial philosophy. Compared to our financial update from September of 2011, we have increased our net worth by about $81,000. Most of that increase is due to general savings, an increase in our retirement contributions and fairly decent earnings in our retirement account. Currently our total assets have topped $200,000. Not too shabby!!

What really stands out in this update is not our increase in net worth, but how little our

Tuesday, September 11, 2012

I'm Baaaaaaaaaccckkkkk!!!!!

Conquered Avalanche Lake Trail - Glacier National Park

Is anyone out there? Remember me? (It's ok if you say no because I can't hear you)

So I have been on hiatus from my personal finance blog for almost exactly 9 months. When I wrote my last post in December 2011, I had successfully paid off $60,000 in debt and had built up a significant following on my blog. So what happened? Let's just say I am the Michael Jordan of blogging. Well, maybe not exactly like MJ. Ok, maybe just in my head.
  1. Achieved a major goal, now what? After achieving my goal of paying off $60,000 in one year, I found myself floundering and wondering what my next big goal should be. I was also a little exhausted - it was hard work! Also, my Jekyll & Hyde personality has me either putting 110% into my vision or sitting on the couch doing nothing but still stressing about the fact that I don't have a vision. And I was fully enjoying the couch towards the end. After Jordan's 3-peat, he retired abruptly from the Bulls - maybe he wasn't sure of his continuing vision. What else does you strive for after all that? Or are you just plain tired of striving?
  2. Self-induced pressure. Now that I was getting more readers and attending Financial Blogger Conferences, I felt this overwhelming need to monetize and make a huge side business out of my blog. Something that started as a hobby and creative outlet suddenly became a stress-filled burden. I have a habit of doing this to myself and then ending up quitting something I once really enjoyed. I have no one to blame for that but myself. But I'm also the person who can fix it.
  3. Health before all. I was also dealing with some pretty major health issues at the time I quit writing. Sometimes you just have to cut back on your obligations and work on surviving. Financial health never trumps physical or mental health.
There are clearly some lessons learned within these three statements. Maybe I'll write about it one of these days. But I don't particularly think my situation is unique. Most of you might identify with at least one, if not all, of these statements when it comes to dealing with life's struggles. More important than what I've learned is..........
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