Financial Freak Show

The reality is you only have the opportunity to make so much money during your life. No matter what career path you choose, no matter how much you get paid, not matter what your investments return, no matter what you inherit, no matter how totaly awesome your blog is!…there’s only so much money you’ll have access to during your lifetime.

I was thinking about this the other day when I heard two ladies complaining about their money issues while they were sitting in Starbucks drinking two $4-ish cups of coffee. You can‘t really complain about not having enough for retirement while you’re sucking down eight bucks worth of coffee (well you can but no one will really care). Even worse I went to lunch recently with a friend who was complaining about how he was broke. That’s not the annoying part though; the annoying part was that he was complaining about being broke while we were driving in his $46,000 Lexus GS350.

My point here is that in both of these cases these people were likely thinking more short term than long term or their problems really weren’t as much of a concern as they were saying it was. Either way I’m fine with it, it’s not my money they’re spending. Though this is something I think about from time to time when I’m making spending and saving decisions. Remember you only get so much money into your life. If you don’t believe me ask an older person I’m sure they’ll tell you what they think about it the idea of infinite money. Ask them if they’d take a do-over if they had the chance. Ask them if they would make spending and saving decisions differently if they could.   

So the next time you hit “4-bucks” to grab a mocha or stop by the Lexus dealer to browse think about the fact that you only get so much money between now and the end of this road trip and consider how your decisions today may fit in and affect your life a little further down the road. If you’re okay with it at that point so am I just don’t take me to Starbucks in your new Lexus and complain about how your broke because I likely won’t care too much at that point. Don’t worry though….I’ll still let you buy my coffee

It’s hard to dodge all the input and influence of people around you when you’re itching to drop some cash on a purchase (especially a big purchase). It’s even more difficult to ignore the marketing and sales pitches that come at you constantly telling you what normal people are doing with their money and how crazy you’d be to not take advantage of the same great offers.

Just ask any car dealer or mortgage broker (or sadly enough many politicians) how much they think you can afford and I bet they tell you it’s more than you thought you could. Case-in-point – Cash for Clunkers program and Adjustable rate mortgages. Both of these programs were designed to quickly and painlessly separate the consumer from their hard earned money. Though these deals sound like they’re out there to benefit the consumer that it really depends on if the consumer is signing up for deal that’s truly in their best interest considering their own situation. Cash for Clunkers is especially financially lethal because it has now encouraged over a million people to close their eyes to common sense and invest in a guaranteed depreciating asset while grabbing their share of the 3-billion dollar* government windfall. According to Kiplinger’s Magazine it’s estimated a new car looses an average of 20% of it’s value the day it’s purchased. That means for example a $40,000 Lexus ES300 you purchase on Saturday will only be worth $32,000 on Sunday – and this doesn’t even come close to the 65% loss in value over the next 5 years bringing your value down to a pathetic $14,000. Money guy Dave Ramsey has it right when he says “the worst car accidents happen on the showroom floor.”

I’m all for dropping some cash on your ride but do it because it makes sense for you and your family not because they can’t shut up about it on the news. Remember always, always, always think long term when making financial decisions and if somebody’s telling you it’s too good of a deal to pass up they may be right but make sure you’re the one making that call not them.    

Oh well, at least one good thing came out of this Cash for Clunkers program…there are now a lot less warn out cars on the road polluting our precious environment with their filthy disgusting “Election ’08” bumper stickers.

Members of the Financial Planners Association were asked in survey what monthly expenses are the easiest to cut back on. Not surprising, with 81% of the votes, the answer was “Eating one less dinner out per month.”  True, it does seem pretty easy to cut out only one dinner out over an entire month of spending. To me that barely seems like much of a sacrifice at all. 

The tough part for me was once I sacrificed a dinner, passed up a mocha, or dodged an evening with friends was putting that salvaged dough to good use. Normally the money would stay in our checking account until I managed to blow it on something else and not making any progress financially even though I “sacrificed” my lifestyle in some way. So I came up with a plan to attempt to pick up these scraps and try to take advantage of every little opportunity I could to crawl further out of the gutter.

It was pretty simple. If I “sacrificed” something, no matter how small, I would note how much money I saved from our budget. Once I get back home I would immediately access our checking account online and make a payment to our next debt in the same amount I just saved myself from spending. In some cases this was this was as small as skipping a $4 iced mocha or as large as us passing on the opportunity to spend a $100 night out with friends. No matter how small the sacrifice was I would transfer the money immediately towards the debts. Yes, this was far from a life changing debt elimination plan but when we added this to what we were already putting towards our the debts it all added up to more progress at the end of the month. Not to mention the motivation that came with making progress almost daily. I also recently used my Micro Paymentality habit and wrote about my Sick Day Bonus Pay. I figure I only have to skip those Starbucks mochas 32500 more times and I can afford my new car!

So have you tried this style of making payments? How did it work out for you?

Sunday evening I was thinking I needed to get to work on another post. While jumping around the internet looking up some info for a future post I stumbled across a Netflix popup. I was now officially distracted. Once I wa sin my Netflix account I found myself plugging my laptop into my TV a pressing play on a “Watch Instantly” program called Cocaine Cowboys and threw myself onto the couch to become immersed for the next two hours in the life of Miami’s 1980’s big time, big money, real life cocaine dealers.

Two hours later the lady I live with (aka. my wife) came home and with a smirk asked how my writing was going.  I then told her how I had killed two full hours just hanging out on the couch. That’s when it hit me…my evening sounded like that Kenny Chesney song

 So I’ll just sit right here, have another beer in Mexico do my best to waste another day

-Kenny Chesney

I realized I wasted an entire evening when I should have been writing. Looking back it seem this happened because I began something without a reasonable plan in place. I was easily distracted since I started without any direction right from the beginning. This is what many people do financially everyday. Normal people rarely move forward financially with any real plan, strategy or focus. They look up and realize they’re in debt with no emergency fund and no viable strategy for anything different in the future. As a FinancialFreak you should devise and follow a plan to win financially, which is sadly not the norm (thats why were freaks – we’re not normal). True there will be many corrections and adjustments to the plan along the way but at least your not just along for the ride your instead driving the bus.

 So next time you get the urge to sit on the couch waiting to see what low fat recipe Oprah’s pimping this week or which stars can’t dance or who’s getting thrown off the island. Here are a couple ideas of things you could do instead….

Evaluate your financial position – create a personal balance sheet (what you have minus what you owe – third grade math I think even you can pull that off!)

Create a monthly spending plan for you household (again third grade math)

Write down you financial goals; 1yr, 5yr, 20yr etc.

Devise a plan to realistically accomplish your goals  

Maybe even take a few minutes to discuss your thoughts about the household finances with your significant other

Read something - improve some aspect of your life you feel needs attention (work, relationship, or maybe visit some older post on this site – you just might learn something….or not)

Then again maybe I’ll just sit right here and have another beer….

What advice do you have for those that struggle to keep their focus for the long-haul? What do you do to keep yourself on task?

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…)

Only 17 weeks until Christmas!

Just in case nobody told you, Christmas will be in December this year and since people seem to forget this they also seem to forget to plan for it EVERY stinking year. I thought this would be a good time to send everybody an early reminder. It seems every year Christmas sneaks up on those that are unprepared and end up paying for it for months in the form of bloated credit card payments. So as a well prepared FinancialFreak get up right now and go get yourself an envelope (a little white one if you’re like me or one of those big brown ones if you’re already filthy stinking rich) and write on it in big easy to read letters “XMAS 12-25-09” Next plan out what you’re going to spend and begin to stuff the envelope with the appropriate amount of cash over the next couple months. Once Black Friday arrives (or Cyber Monday for you crowd-dodging faceless Internet shoppers like me) spend it all away guilt free.

Now remember (here comes the tough love part!) when the envelope is empty the shopping is done. If you happen to run out of money before you have bought for everybody on your list this is your fault and you should now be shammed! So at this point you get to make them a nice hand written card that says “Sorry I’m a cheapskate this year but I’m finally getting my financial act together! Next year I will better plan for my holiday budget.”  If they can’t appreciate that consider putting them on next year’s naughty list. I now that sucks but do you really want to be making credit card payments for this Christmas next July? If you said “yes” to that please feel free leave my website. (To exit now click the little “X” in the upper right corner of your screen)

Though if you were an over achieving FinancialFreak and managed to have something left over please remember your fellow FinancialFreak here. I like blue and wear a large….oh, and Cadillac’s are a man’s best friend.

How do you plan to stick to your Christmas Budget this year?