What Have you Already Done?

I recently made a money mistake (more on that later). It wasn’t huge, but I allowed myself to wallow in self-pity and flagellation for a hot minute. Then I remembered some advice I had read recently that I hadn’t yet followed, and I decided now is the time. It was a “productivity hack” and entailed focusing on what you had already successfully accomplished rather than what you had left to do or what you had done wrong.

The premise is simple – by always focusing on your To Do’s, you are never feeling fulfilled and happy and proud of all you have already completed. By always focusing on the future, and what is still to be done, you never take the time to reflect on the past, or pat yourself on the back for what you have accomplished.

Focusing on the future list of goals, or regretting past mistakes, is my go-to tendency. I have an automatic habit of highlighting the one negative thing in a sea of positives. I’m really working to change that internal voice into a more gentler, encouraging version.

So without further ado, and simply to make myself feel better, I bring you a list of my money accomplishments over the past ten years (#humblebrag):

  • Created a workable monthly budget – together! On paper!
  • Read MANY blogs/books on finances
  • Cut up / paid off all credit cards
  • Paid off $40k in debt – car loans, student loans, etc.
  • Paid off $140k mortgage – became completely Debt-Free!
  • Saved 6 months cash emergency fund
  • Saved $5k to replace current car when needed
  • Save and pay cash for every vacation and other variable expenses
  • Create Christmas budget and plan in advance to make homemade gifts each year
  • Paid cash for amazing wedding/ honeymoon
  • Reversed crazy negative net worth to crazy positive net worth!
  • Reduced expenses to live on less than half of our income
  • Max out IRAs every year
  • Max out my 401k too!
  • Purchased term life insurance
  • Created wills and Power of Attorneys
  • Kept good stable job for 5+ years
  • Purchased reliable used car on Craigslist for dirt cheap
  • Canceled cable! Switched to $15/month internet and $10/month Netflix
  • Canceled crazy expensive Verizon and switched to Republic Wireless
  • Canceled all magazine subscriptions and gym membership
  • Canceled crazy expensive car insurance and switched to Progressive
  • Made decision to stay debt-free, never loan money, never co-sign etc.
  • Began giving a tenth of our income to church community!

Sometimes by focusing on how far we’ve already come, we can find more motivation to keep going. What’s on your list of “Done” money items? I bet it’s longer than you think!

The Gift of Desperation

I stumbled upon a new idea this week and it really resonated with me. I heard a recovering alcoholic say that his mental disease had brought him so low that he was given the “gift of desperation”. He said that only when he reached this bottom was he able to completely let go of his need to drink and to turn his life around.

Tony Robbins once said, “Change happens when the pain of staying the same is greater than the pain of change.” This is the same idea.

I feel like the gift of desperation is sometimes needed in finances, as well. You have to feel a pinch, some kind of pain before you will do the hard work of changing your behavior. If it just feels great to go deeper and deeper into debt, and you are able to buy whatever you desire with no consequences, everyone would always continue to do so. But sometimes, there is a moment where you look around and feel buried by the mountain of debt. You feel chained with no choices, and you decide to change something about the way you spend your money.

I remember the exact moment I received the gift of desperation. I had a student loan, a car loan, and a credit card balance. I had a mortgage on a fixer-upper, and a job I hated. My car needed new tires and my tooth had a cavity that needed filled. We were making ends meet, but barely. I thought we were fine – it’s like not we had creditors hounding us. We were skating by with minimum payments on everything and no savings. We had just replaced all the windows in the house with a 12-months same-as-cash loan.

And then, I received a statement in the mail from the window company. I began reading the statement and it said that no payment was due – YET. But it also said that if we were not able to pay the full balance – over $7,000 – by the time the 12 months was up, that the bank would retroactively charge us an insane amount of interest, backdated all the way to the day we bought the windows. The kicker? Nine months had already passed and we had made zero payments. I freaked out. It was a “come to Jesus” moment – there were a lot of tears.

You see, I didn’t know the rules of the game I was playing. And in my fear, I couldn’t see any way that we would be able to make all our minimum debt payments and also pay the balance of this purchase in full in the next three months. I broke down. I got desperate. I began searching for a better way. I talked to my husband. I got some books at the library. I pulled out a calculator. I began looking at our spending, trying to find the things that we could cut to make this work. We spent about $100 on a money class that we took together. We started writing down a plan for spending. We argued about what was important. We got serious. We had a garage sale. We cut a lot of other things out. It was really hard, and it was worth it.

After a long road on the debt payoff journey, we reached the end. We celebrated – it felt great. And then, we coasted for a bit. We bought a few big ticket items that we had put off – new flooring for the house, a new(er) car, a better computer. We got a bit lazy and didn’t really have any goals besides our regular savings. But then… I began feeling a new type of desperation. I had switched jobs, but this one wasn’t much better. It was still a small cubicle, in which I was held captive all day, and had to report for pointless meetings and fill out meaningless self-assessments. I was feeling hopeless, staring down 30+ more years of working under clueless managers and feeling chained to a life of corporate drudgery. Even the “perks” felt completely arbitrary. A bigger cubicle? A fancier title? A window in my prison? I began searching for a better way.

That’s when I stumbled upon the FIRE movement. I began to see a light at the end of the tunnel, finding a different way forward, outside the regular forty year corporate career path. Giving up the little things that don’t matter for a life of freedom in early retirement became the goal. And that’s the journey we’re on now. We’re totally debt-free and living frugally to squirrel away as much money as possible, to afford an extremely early retirement.

***I do want to include a small caveat that I am not talking about depression. I don’t see any gifts in depression and most times it does not stir you into taking action; in fact it may do just the opposite. Desperation is not depression.

Have you ever been given the gift of desperation?

Personal Finance is Personal

I have a theory about why talking about money is mostly taboo in our society. I feel like it’s kind of like sex, or religion. It’s a very personal issue. How much money we make, and what we spend it on, is highly variable from person to person and sometimes even our self-worth and identity is tied up in it.

Asking the question “What do you do?” helps us to suss out the status of an individual we are just meeting. It would be extremely impolite to ask upon introductions “How much money do you make?” but essentially that is the signal we are searching for.

We also attempt to signal our value by the outward facing purchases we make – the cars we drive, our neighborhood, and our clothes and fashion choices. Most people assume that if you drive a luxury car or carry a Gucci bag, that you are worth a lot of money.

But most of our money choices are hidden. How much we donate to charitable institutions, or how much we save in our retirement funds. These choices make a much larger impact to our bottom line but are completely obscured from the view of bystanders.

There is also a lot of shame tied up in money. People are embarrassed about how much credit card debt they have, or how much they spend feeding bad habits each month. Opening up your income and spending to other people is very vulnerable. And most likely, you do not have the same values and priorities as anyone else. Some people choose professions that are not highly compensated but which they are passionate about. Some people go to McDonald’s everyday. Some people are subscribed to massive multiplayer online role-playing games (like World of Warcraft). Are any of these choices wrong? Of course not. These are just personal priorities.

Personal finance is extremely personal. No one can decide what your spending priorities are but you yourself. I can examine your spending and tell you that you need to cut back, and I can even suggest areas where you can trim. But the decisions are yours to make. If you most highly value travel and I suggest cutting your vacationing expenses, that won’t make sense to you, and you probably wouldn’t stick to that budget anyway. But maybe you are spending a lot more on restaurants than you’d like. If pricey meals aren’t what you value, cut back on restaurant spending and you might not even feel it. This is a cut that will work for you and that you can stick to.

An example: we have a happy, healthy dog. He’s our best buddy. Keeping him happy and healthy is a very high priority for us. However, he’s also extremely fluffy. Keeping him expertly groomed according to his breed was not high on our list, yet out of habit we were spending $80 every six weeks or so to do just that. Now, we couldn’t just let him poof out and eventually get dreadlocks. But one month, instead we shelled out $70 for pet clippers and did it ourselves in the backyard. I’ll be totally honest here. This was a learning experience. The dog looked kind of ridiculous that first time. But each month, we got better and better. We learned to bribe him into holding still with lots of peanut butter. We learned which size to use for his body and which for his ears and little mustache.

This saved a substantial amount of money over the years. And only required the $70 investment in clippers and a bit more time every month or two. (honestly not a lot more time than making appointments, dropping him off and picking him back up from the groomer though)

Now some of you are like “yeah but I don’t have a dog, so that doesn’t apply to me” and I’m here to say THAT’S ENTIRE POINT OF THIS ARTICLE. Personal finance is personal. Maybe you do have a dog or three and they are beautiful purebred show dogs and you would never dream of cutting back on their spa time. Perfectly fine, you do you. Not here to judge. But check your spending – because there is probably something in your budget (or lack thereof) that doesn’t belong there.

What could you give up? What will the budget police have to pry out of your cold dead hands?

You Really Have to Want It

To get out of debt, you have to really want to.

I know that sounds really simple, but its SO true. No one ever just wakes up one morning and is like “Oops – I’m debt free! How did that happen?” It’s really easy to get into debt but you have to create a plan if you want to get out of it.

You have to be intentional, and focused, and really, really want to. It’s very simple to pay off all your debt, but it’s not EASY. I’ll say that again – its simple – you just take money and you pay it all off and then you don’t get any more. But its difficult – if it were easy, everyone would be debt-free and it wouldn’t require any sacrifice.

Probably one of the most drastic “sacrifices” we made, that actually impacted our quality of life, was to take on roommates in our home. Not impacted negatively – just moderately changed our lives. Over the years we have rented our guest room out to three different people (at different times). These people were all friends or at least acquaintances, and we were relatively sure each of them would not murder us in our sleep. And we ARE alive today to tell about it, so I’d say it worked out well for everyone. But our house is pretty small, so we had to share the one bathroom, kitchen, laundry, and living room.

Friend 1 – A friend I met at work wanted to move out of her parents home. She was also actively seeking employment out of state and so we figured she wouldn’t stay around too long. This was an experiment and it was great. We loved getting rent money in exchange for our guest room and we decided always wearing pants was something we were willing to do. She did move out of state and we parted ways on great terms.

Friend 2 – This was a guy with whom my husband went to high school. Bizarrely, we found him through an ad on Craigslist but when he showed up, it turned out they knew each other, so we felt like it was meant to be. Besides a few late night, rowdy World of Warcraft sessions (lol), he was a great roommate. He got engaged after about 8 months and moved in with his fiancee.

Friend 3 – A good friend, who was living out of state and needed a place to rent to transition back to our neck of the woods. She already had a job and this was perfect for us. She stayed about a year, probably the longest of any of our renters. After she moved out, we wanted to take a roommate break, and go back to wearing no pants around the house.

One thing I will say – having roommates allowed us a huge leap forward in our debt/mortgage payoff goal. $500/month is $6,000 a year that came out of nowhere – for little to no cost on our part. It was the best “side hustle” because it took no time. The only expense was maybe buying a bit more toilet paper and laundry soap. And with the girls, it was nice for me to have a built-in hang out buddy around (extroverts holla!).

I will tell a funny story though – just for you slightly crazy people like me. One day I got home from work and my roommate’s car and my husband’s car were both in the driveway. So I thought – cool, everyone’s home. So I walk in the door and the dog greets me, but no one else is around. I go “Hello, I’m home” and I get no reply. And mind you, this is not a large house. So I look in the living room and bathroom – no one. I go down the hall – my roommate’s door is open and she is not in there. I keep walking down the hall – my bedroom door is closed. That’s weird. And as I’m walking up to the door, my brain tells me – They are in there together. They are having sex in your bed. You’re going to have to commit murder today. How long do people go to jail for homicide? And I hesitate at the door, holding my breath and trying to bask in the time before I knew my husband was sleeping with my best friend.

And I slowly open the door, and the room is dark. My husband is asleep. Alone. He had a migraine. And our roommate? She wasn’t even home, her friend had picked her up to go out.

As I sidle up to my much maligned husband in bed, I whisper “I thought Liz* was in here.” And he mumbles “thoughtless?,” and I let him go back to sleep.

So anyway. If you can swing it, get a roommate. You (probably) won’t regret it.

*Names have been changed to protect the innocent.

Have you ever done anything extreme to save money? Would you consider getting a roommate or taking in a lodger?

Debt Freedom is Peace of Mind

I wandered through life for quite a while, with no savings in the bank, no plan for future purchases, and no real goals (besides vague wishes). I put things on credit in the hopes for some magical future with more cash than I had today. I woke up one day with lots (and LOTS) of debt and no way to pay it off. I wasn’t doing anything out of the ordinary, I was just doing what everyone else was – being an American consumer. I had student loans (like everyone else), I had a car loan. I had less credit card debt than the average person. We had gotten a modest mortgage, and I had a little bill at the dentist office I hadn’t been able to pay off right away. We were doing ok. It’s not like creditors were banging down the door.

But we had no plan, no dreams. My car (that was not really mine, but more the bank’s) needed new tires, and I had no way to pay for them. So they went on the credit card. Next month, and that $400 statement came in the mail. Shit, now what? The house really needed new windows… well that’s $7,000. Ooooh they have an interest free loan? For 12 months no payments!

Life just kept happening to me, and without a plan, I drifted through, getting further and further behind. I lacked intentionality. I spent money on things that were not important to me. Little luxuries that I thought I deserved or that helped me to feel like I fit in.

But eventually, it caught up to me. With no savings, every little thing was a disaster. After a mini-breakdown, I started looking for ways out and began talking with my partner about how we could change what we were doing.

So. We made a plan. We wrote out a monthly spending plan and began paying down our debt. And we did it, we’re debt free now. And it was all worth it. Being debt-free feels REALLY good. Owing nothing to anyone is priceless. It’s peace of mind that you can literally buy.

Here’s what we did. Just a warning, this is pretty simple. I did not say it was EASY, but it is simple. It’s difficult, but it’s worth it.

First, we created a spending plan with a little money factored in for debt payments. At first, we were making the minimum payments on everything, with just a little bit extra to throw at the smallest balance.

We followed the “Debt Snowball” method of repayment, which I highly recommend. It’s simple to figure out and remember. You just pull out all your statements, and make a list of your debts (all of them, credit cards, loans, etc.) and you list the balances in order from smallest to largest. You pay all the minimums on all the debts, but any extra money goes toward paying down the smallest debt. After you pay it off, all the extra money goes towards the next smallest. It’s called a snowball because all the minimum payments keep getting rolled together bigger and bigger until when you are paying off the larger debts, you’ve got a huge monthly amount going toward it. It feels amazing.

So for me, I had a $200 bill at the dentist, I had just put $400 on a credit card for car tires that I couldn’t pay cash for, we had a same-as-cash loan for new windows, two car loans, a big whopper of a student loan, and then the mortgage. That was the list, and it seemed insurmountable.

But you know what? It wasn’t. We did a bunch of crazy things to pay off the debt, and it worked. We didn’t have to go to extreme lengths, but I’m glad we did. We had a garage sale, we curbed our out-of-control restaurant habit, and I stopped going to the mall for entertainment (god Sephora can fuck right out of here). Stayed tuned tomorrow for some of our other nontraditional choices.

The bottom line is being debt-free is peace of mind, and the freedom to choose where to put your money.

What could you do with your money if you had no debt?

Tell Your Money Where to Go (Instead of Wondering Where It Went)

I use a budget. In general, I know how much money I’ve got coming in and going out each month. However, I’ve noticed many of the people in my life do not use a budget, and in fact, really dislike the word budget itself. It has a lot of negative connotations, apparently. I’ve heard many objections to budgeting, things like “it sounds so restrictive”, or “I just want to have fun without worrying about money all the time”, or even “its too complicated for me”.

So, let’s reframe the whole thing. I’m going to call it a Spending Plan. I’m going to encourage you to create a plan for your money, just like you would have a plan if you were building a house, planning a wedding, or tackling any large project. A Spending Plan is not restrictive AT ALL. The boundaries are only your imagination, your values, and your income (which let’s be honest, your income is limited whether you are writing it down or not).

Far from being restricting, I find a Spending Plan to actually bring me much greater freedom and peace of mind! I’ve never had to second guess a purchase – the money was there, it was in my plan. I don’t feel guilty for buying something crazy expensive or impractical – you see, it was in the budget. The vacation is much sweeter when you save up for it in advance, and when you come home with no lingering debt your memories are not tinged with guilt or worry.

A weird side effect of budgeting, at least at the beginning, is especially noticeable if you are in a partnership. When you are making a household budget, you actually have to communicate about things. Negotiate. Compromise. Talk about what’s important to you. A lot may come to light. He thinks HBO is vital. She may want a $200 line item for restaurants. He’s got no interest in curbing his addiction to new video games.

You also get to DREAM together. This is where things get fun. What are your hopes and plans for the future? What does your ideal life look like? Do you want to take an exotic vacation next year? That can go in the budget! Did you always want a vintage tea set, or to ride in a hot air balloon? What’s IMPORTANT to you? What do you value? These questions are huge, and money is really tied up in them. A lot of dreams cannot be reality without a bit of planning and some money. Do you want to have or adopt a child? I hear those little suckers are expensive.

So, for the practicalities. A spending plan is literally telling your money where to go, in advance. It’s a plan for spending your money. If you do not have a plan, you certainly will spend money, but it may not be on the things that you most value. A spending plan in its simplest form is your income and expenses. At the top of a spreadsheet or piece of paper, you list your income, and along the side you list all your anticipated expenses. You subtract all those expenses from the income at the top, and the bottom number should be zero. If it’s less than zero – you’ve got some decisions to make. If it’s more than zero, add more expenses until it is zero.

Now, your income is all the money you’ve got coming in, your salary, child support payments, things of that nature. Your expenses can be things that are fixed, like rent, or categories that fluctuate, like groceries or electricity. Expenses will also be needs (groceries) and wants (restaurants or entertainment). Expenses also include short-term savings like car repairs, long-term retirement savings, and donations to charity.

Now sometimes, when the line items in the “want” category are all added up, there’s less money in the “coming in” than the “going out”. In this case, priorities have to be set. What’s more important, Netflix or the cable package? Can you spend a bit less on clothes each month, and a bit more on food? Let me say that your plan will be different than anyone else’s, and let me also say that each month, your plan may change. You’re not going to get it perfect at first. It will evolve as you learn what you can drop without feeling pinched, and what you don’t want to sacrifice. If you write down all your expenses and the total income cannot cover them, at least you are aware of that. Awareness is the first step toward making a change, and you should be very proud of yourself for taking this huge leap forward.

The important part is just to write it down, to align your spending with your values, and to put your gold where your heart is. It feels really good.

Now that we have a plan for our money, I NEVER worry about money. I know that we are making decisions that align our most closely held values with our spending.

There are lots of tips for budgeting that I don’t have time for here (got a question? put it in the comments!) but one big hint: put a line item in the budget for cash to blow. That sounds crazy, and maybe it is. But hey, you’re probably going to blow a bit of money here and there, so may as well write it down. It has lots of advantages – you each get a little “free money” with no questions asked. No judgement in a partner’s eyes that you went to Starbucks twice this week. And it keeps things on an even playing field, you each get equal amounts of blow money (money to blow, not money for blow) so everything is fair, and no arguments that she got to spend more this month, no tallying up purchases to prove the other is a spendthrift. If one of you wants to save your money over a few months to purchase something big, go for it. If one of you has a vice that the other doesn’t want included in the budget (cigarettes?) it goes into this category. It’s like a pressure release valve for money arguments.

I do provide financial coaching, so if you have specific questions about setting up a Spending Plan or you are running into problems, shoot me an email or drop a comment below.

How do you feel about Budgets – love them, hate them? Set up your own, and let me know how it goes!

Today I Choose Gratitude

Today I want to talk about gratitude. I’m not talking about saying thank you when someone opens the  door for you (that is just being polite). I’m talking about looking around at your life and truly appreciating all the ways you are blessed. I know this is a cliche, and #blessed sometimes makes me want to puke. But stick with me here.

Sometimes in the course of the day, I’ll find myself focusing on the ONE thing that is currently going wrong in my life. Like, UGH it is such a hassle when your car breaks down, isn’t it? Or I broke my stupid toe, god it hurts every.single.step. Or instead of focusing on the negatives, I’ll start paying more attention to what other people have that I don’t have. Scrolling through Facebook I’ll find myself saying “Didn’t they JUST go on vacation?” or “Yeah but I bet that new car came with a giant loan,” or the worst of the worst and universally applicable: “Must be nice.”

In moments like those, I have made a choice. I have made a choice to be envious, to be snarky, to be unhappy, unsatisfied, and full of self-pity and self-doubt.

The good news is that in the next moment – the VERY next moment – I can make a different choice. I can decide to stop my negative and snarky thought process, and turn inward. I can decide to focus on the things I do have – today. The things that are going marvelous – and boy are there a lot of them. My husband and doggo are wonderful. Great job, lovely family and friends.

If it’s hard for you to do this, don’t worry. It takes practice. Gratitude is a muscle that needs to be developed. It’s just like any other pattern – frugality, exercise, communication. You have to work on it. But when you do – it’s so worth it.

I usually feel pretty crappy after a session of “Oh look at their new boat and gorgeous baby and thriving business. MUST BE NICE.” I feel crappy because I’m stewing in the toxicity. But after a gratitude journaling session, I always feel happier. And no excuses on this – when I say gratitude journaling some people think, “Oh who has an hour to wax poetic about all the joys of their stupid life.” Just NO. I’m talking a quick and dirty list of three things each night that went well, or that I have, or that make me smile. That’s it – jot down the chocolate pastry you had for breakfast, cuddles with your sleepy kiddo, and the funny show on Netflix. And you’re done. And you’re smiling. You can even just run over the list in your head while you’re brushing your teeth or making the bed. Make a habit, just like those little things.

Today I choose gratitude, and this helps me to not be such a grumpypants. And you can start small. You are not homeless. You have a computer and the internet, or at least access to one. You probably have plenty of clothes, and plenty of food. When you walk into a room, can you flip on a light effortlessly, or instantly access cold, clean water? What a miracle. Do you have a job? Are you healthy? What about someone in the world who thinks you’re the best? MUST BE NICE. 😉