Financial Freak Show

This post was inspired by a chat about a friend mentioning cutting out the purchase of a (get this) a CD per month to help ease their financial burden. When I say “CD” I mean the music type not the investment vehicle. Apparently she has a habit of purchasing 1 new CD each month with her first paycheck she receives each month. Her thought was that with this sacrifice and her other sacrifice of cutting morning espressos to a couple times a week will lead to the financial freedom her family is seeking.

I will say this, I am proud of her for making some more “grown up” decisions regarding her finances but I honestly think this is a waste of her time…and I let her know that (I know I seriously need a better opinion filter, but whatever). I told her that I doubt a $15 CD is really hurting her finances at all. I then told her that her newer car, her new couch and her new $2600 bull dog she bought with a cash advance with her credit card were her problem. Cutting CD’s out of the budget is cute but you’d have better luck trying to pick up a turd from the clean end! Seriously though if you think squeezing $50 a month out of your budget you haven’t address the actual problem…..YOU! 

The CD’s aren’t your problem girl. Your lack of planning & your lack of discipline are your problem. If you actually want to change the way you spend money then change the way you spend your money…ALL OF IT. Don’t just change the parts that are easy. Change all the parts that are broken, change the parts that hurt, change the parts that are will truly make a difference. Don’t try to nickel and dime your way out of 20k, 50k, 100k in debt cause we all know you sure as hell didn’t get in 20k, 50k or 100 worth of debt buying CD’s so why do you think this will ever get you out (if you did get in debt buying CD’s get your butt on Craigslist tonight and start selling!) Get out there and get mad, break something…break the habits that got you to this place. If you don’t at least try you will have no one to blame but yourself. True, it may not be only your fault you ended up here but will be your fault if you stay here (especially if you don’t want to be here).

So take a lesson from my friend and stop buying those CD’s if that’s what you need to do. Then take a lesson from Vinny Financio’s real financial world and cut deep into your lifestyle to the point it hurts, stop buying all the other garbage too until you have your stupid messes cleaned up. And then we’ll go drop some cash baby!

In many cases monthly spending just sort of happens. Then at the end of the month you look up and say something like “What the ****! Where did it all our money go” or if things worked out more in your favor it may sound something like “Woohoo! I get paid tomorrow and there’s still money in my account…who’s yo’ daddy now!” Either way this is often a byproduct of us just living our busy lives. So here’s a few steps I recommend to insure you’re yelling “Woohoo” with somebody more often than you’re yelling “What the ****!” at sombody.

Don’t worry this one’s pretty easy I promise.

1. Figure out what you’ve got coming in each month and where the heck it’s all going.
2. Next figure out what you can cut back on (ex. heat, clothing for the kids, food, you know the unnecessary stuff) and what you’re not able to cut back on (ex. booze, smokes, online gambling – you know the important stuff in life) – FYI, that was a joke
3. Begin making some tough decisions and adjust your budget accordingly. Apply the extra money toward your goals– make sure everybody involved comes to agreement on this stuff
4. Come up with a cool way to track you progress. A nifty spread sheet is what I used (but I’m sorta nerdy) Another idea may be to put a big list on the fridge where you can see it everyday and cross things off as you go (ask any kindergarten teacher, this may sound lame but it works!) Use what works best for you and helps keep you on track towards your bigger goals. 

The important thing here is to work on refining your money habits to accomplish the things that really matter to you. Personal finance in many cases is more of a psychological game than a numbers game so play to win. Many of us make enough to accomplish our goals but don’t always behave in ways that allow us to.

 If I’ve got correct goals, and if I keep pursuing them the best way I know how, everything falls into line.  -Dan Dierdorf

To clean up our financial mess the first big step I took was to come together with my wife and get on the same page regarding our money (now doesn’t that sound like a fun discussion?)  From my experience this is often one of the hardest steps to actually accomplish for most couples. In many cases one person takes on the responsibility of the household finances for one reason or another and the other person is sort of along for the ride. Maybe one person likes to be in control, maybe one person doesn’t want the responsibility or the stress, maybe one thinks they’re smarter, or maybe one’s a nerd and gets off on this stuff, or maybe it was never even talked about previously and this is just the way chips hit the table. Either way unless you’re on the same page with your spouse it’s likely your household finances will not be in good order over the long term. Remember the preacher-man said “and now you are one” remember that line? Note what the preacher-man didn’t say…. “and now you are one except for the money part only one of you will need to pay the bills and carry the stress of the finances until death do you part”  (In other words you take care of it until one of you kills the other!)

Merge your money or separate the accounts – His money & Her money. This takes place, when for one reason or another, when a couple operates their finances separately from each other. In many of the cases where I’ve seen this I’ve noticed it is usually due to one of the people not wanting to bare themselves financially to the other person. They keep their money almost a secret from the other person. According to a USA Today article the FPA’s survey of financial planners nearly 55% of couples hide financial assets from one another. Hmm, I wonder what other secrets they might be keeping. (more…)

When faced with the issue of my personal debts there was really only one way to fix the problem (I’ll put this in bold so nobody misses it). Pay it down then pay it off! We had to spend less money than were was making and pay as much as we could towards the debts. That’s it, it was really that simple, there were no shortcuts here. We’ll there was one other option….don’t do anything at all and let the bankruptcy courts wipe a majority of the debts away, but we didn’t really like that option. Those who stare their challenges in the face have the chance to overcome and win and those who refuse to face, or even worse avoid them altogether, will often continue to struggle until they are forced to face them. In our case we were forced to face it because it was beginning to put up a fight against us (and every month it was getting closer to defeating us). Well we could have ignored it a bit longer but I knew deep down inside the only place that would ultimately lead me was to a life of financial mediocracy. So in my case it was either face it now or face it forever.

Just about everybody I know has faced the issue of debt at some point. There are countless reasons this issue could be brought to the top of someone’s “Crap you should really clean up in your life” list(s). Some of the common causes of this are a job loss, an illness, divorce, or just plain dumb money habits. Some of these are major changes in their financial situation many consider outside of their control. In my case it was all brought to my attention through a publicly humiliating moment involving my new Cadillac and a nearly empty tank of gas in the middle of the night somewhere in Oregon.

No matter how the issue is brought to your attention the first step is always pretty much the same. You must identify the root cause of the problem. In my case I had been spending more money than I had been bringing in. It was really that simple and there was no room for excuses here; this was all my fault and now it was all my responsibility to myself and to my family to clean up the mess.  Step one was now complete I found the cause of the pain – and once again it was me! Once you’ve identified the problem you need to determine where you stand. This step is pretty easy as well. When dealing with money and numbers everything is factual and absolute – the numbers only lie if you allow them to lie. So here is your chance to be a FinancialFreak and stare into face of what many refuse to. Write down how much you owe and who you owe it to – every damn penny! No shortcuts here.  Now add it all up – this part sucks. Now you know where you stand. Are you disgusted with yourself? I know I was the night I finally sat down and took that step. Now that you know where you stand you can devise a plan to properly address the issue and remember “How you do anything is how you do everything” So don’t try any shortcuts here, just stare it in the face and start fighting to resolve the issue. 

What shortcuts have you taken in the past? How did that work for you? Did you learn any lessons? Please feel free to share so that others may avoid the same fate and/or embarrassment!

Some time ago my wife and I were discussing what to do about our finances and what “fixing our finances” actually meant, how intense we should be about the process, and what we were and were not willing to sacrifice to win over the long haul. Ultimately what we came up with was a plan that would sacrifice most everything we could think of to move forward as fast as possible. I know I’m a FinancialFreak. Our reasoning behind sacraficing everything we could was the fact that if we went crazy, became intense and paid off all our debts as quickly as possible, then realized it was not all we dreamed it would be, we could always go back into debt so what did we really have to lose? If we didn’t like our lives after we paid everything off I’m sure somebody out there would give us more money for the right terms! I know this may sound crazy but yes we did have a backdoor out of our crazy idea to get completely out of consumer debt but I guess that’s what it took to really get me going (the option to fail actually motivated me to move forward – weird) I’ve told this to several people that I’ve discussed these ideas with. “Try it and if in six months if you still think I’m crazy you can always go back!”

The funny thing is each time I’ve said this it has taken away almost any excuse they might have to avoid changing their habits. I even considered calling this website “YouCanAlwaysGoBack.com” but decided the name itself opened the door a little too wide for potential failures and excuses right off the bat.

I guess my point with this is what do you have to lose by trying something different? I know that not everybody will agree with what I’ve done but at least I tried something. Most people just sit in their own dirty diaper complaining about the smell. I know you know people like this, you work with them, live with them, have drinks with them, who knows you might even be them!  We know how well what you’ve been doing financially has worked for you up to this point…so maybe it’s time to try something else? If so remember if I’m wrong you can always go back!

So if you can always go back to where you were please comment on what reasons you or others have for not changing things now….and I mean changing them right now!