With so many major things broken I am becoming more optimistic.

I believe focus is an incredibly powerful force, and with the focus on money the results we are getting in our world make sense.  What gives me hope is the shift I am seeing with so many people.  Many choosing to spend more money on food to support what they feel is healthier or more responsible food.  Others instead of making more money are taking more time with their family.  As lifestyle, sustainability and contribution to others grow as priorities in so many lives it can only create a better place for the rest of us.

In my life I want to have fun and have family, friends and the community around me better off for my presence.  For me this does not mean I need to be poor, it means the choices I make should be in line with these values as I work towards my goals and raise my family.

Steps I believe help us take control and steer towards the world we want;

1.  Learning and questioning.  Make sure we are informed and ask questions to make sure we understand the issues.

2.  Financial Responsibility.  Having your finances in order allows you freedom to make the right choices and not ones forced onto you by bills and / or debt.

3.  Promote the conversation.  I do not believe conflict is the way to any sustainable solution,   collaboration is where I think we will find power.  Generating the conversation is a great way to include others and mold a solution that everyone can get behind.

4.  Create your focus.  The drive for money and power has lead us to where we are now, by choosing a different focus we can achieve different results.

When creating a cash flow plan, planning your spending using annual numbers makes a huge difference and allows you to easily compare different expenses.  Often little expenses are equal to or greater than larger expenses that you really want (and to often give up on).

Example 1

$3 twice a day at the coffee shop is $2190.  This can buy a nice vacation every year.  It is amazing how often I hear that someone can’t afford to do something they really want, when the truth is they are spending enough money on small things that don’t really matter to them instead.

Example 2

I looked at two sport utility vehicles, one would cost me $60 a tank for 800 km, another was $120 for 400 km.  Each tank is not a big deal, but over a year the prices are estimated at $1560 and $6240.  Now there are many more things to consider when buying a car, but the savings in fuel between these two made my choice easy.  The difference was enough to pay for a trailer behind it.

When comparing these expenses, viewing them as annual totals helps demonstrate the impact that large expenses and small expenses both have on your plan, and by comparing these impacts against your priorities it is much easier to build the life you desire.

To make this step easier take the list of expenses already created in an earlier step and add a column for an annual total.  (If daily *365, if weekly *52, if monthly *12).

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WHAT A BROKEN STATEMENT!!  I gave up fun to make my life work?

Of course my own life didn’t seem to be enough to point out the flaw in this, luckily through conversations with many clients I discovered that one of the fastest ways to fix their money struggles was to reintroduce fun into their lives.

I found when under extreme money pressure fun had almost completely been eliminated, with no money to do much they had compounded the problem by eliminating fun.  Now they could experience the financial stress full time, with little hope to cling onto and nothing short term to look forward to.  Now stuck in a negative place, getting out seemed impossible and the fight was beating them into a worse place.

Fun is important and has a powerful impact on our lives.  Having something to look forward to can have amazing results and is a must when taking on any challenge.  No matter what your challenge is I would argue fun is part of the solution.

This doesn’t mean spending large amounts of time or money you do not have.  It means being creative at bringing the things that are fun back into your life.

The Challenge.

For many clients the solution was simple, although they never seemed to think it was simple at first.  Find a way to do something you enjoy for free.

That’s right, “Find a way to do something you enjoy for free.”

At first stuck in the stress and negativity it seemed impossible  but the results where amazing.

For some it was as simple as going for a walk with friends, picking up a musical instrument or a paint brush, for others it was yoga, auto racing, cycling, sailing, running, skiing, woodwork or travel, and all for free.

And yes, racing cars and sailing yachts was done for free!

It was always simple once they realized they didn’t need to write a cheque.  Some of these hobbies even added money to the finances.  For most they found free ways to enjoy what they love, like walking in nature or playing an instrument.  Others went a little further and volunteered, or got part time jobs in the desired hobby.  Others just mentioned what they wanted to do and opportunities presented themselves.

Sail boats need crew and many are happy to welcome you on board to help out during racing season.

Others got paid positions that came with discounts on products.  Even after buying the gear required for the hobby a little money was left over to help out the finances.

Racing, yoga and a few others where volunteer positions found or created, in exchange for free access.

Some started very simple businesses, that they ensured made a little money.  Since the goal was just to pay for them to create the product it was simple to do.  Then they could sell them at local markets or on eBay.  The other solution for such hobbies was to teach, putting on classes that again had to be profitable (Aiming to break even usually ends up losing money).

The travel was a unique solution, the organised a group trip of people with similar interests.  As a thank you for putting the group together their trip was covered.

The process is always the same, if you really want it to include a hobby there is a way.  As long as you are flexible and willing to be creative in your path to achievement.  If you are not able to participant, in my experience it is one of two things;

1. You don’t really want it.
2. You are being inflexible and/or fussy

I have yet to see someone commit to taking this on and not find a way to include fun.

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1.  Banking fees and high interest accounts.  Chequing accounts can be found for free, that’s right no fees (and even no minimum to qualify for no fees).  Cutting fees without losing a service is a great option.  Also if you carry a balance in your accounts, look at the interest rate. No fees and a interest deposit into your account can quickly add up.  Also reducing number of paid accounts if free is not a great option for your situation.

2.  Credit Card, loan and mortgage fees and insurance.  With free credit cards everywhere, if you are paying a fee, make sure it is worth it.  Credit cards can have an annual fees and some mortgages have monthly fees, both digging into your bottom line, often with no real benefit.  Also check for insurance premiums, these can add up quickly and if the insurance is needed there is usually a more cost-effective way to purchase better coverage.  If you are confident you do not pay these fees or insurance premiums, check again, more often than not people are surprised what they find.

3.  Review your bills.  Often by checking your cell phone plan, monthly house hold services such as internet and TV new options are available.  Making this change once can save you money for months to come, but beware of introductory offers that will only increase your costs long-term.  Reducing services that are not used is also a great way to reduce costs.

4.  Review the list of expenses organized by priority made in the last step.  Starting at the bottom look at if you can eliminate this expense, then move up to the next.  Often we have a few expenses that just hang around, even though they no longer have any importance to us.

5.  Reward points.  Using reward points can be a great way to save money, however many spend more chasing points than they are worth.  Many work out to less than a penny, however influence us to purchase things we normally won’t.  Adding even $20 a month to our budget for 20 cents in points doesn’t make sense.

6.  Look for savings on regular purchases.  Many companies offer savings if you look, these can help make things you already purchase easier on the wallet.  An example would be if you register a Starbucks card online many of the coffee options that would be extra are now included.

7.  Managing debt.  No debt is ideal, but for the rest of us where we hold our debt can make a big difference.  Make sure to pay everything on time, keep debt with low-interest rate no fee options.  Consider a variable rate mortgage, if possible pay off deductible debt last (money borrowed to make money can be tax deductible  and most important pay down your debt so you can stop wasting money on interest.

Saving money where it doesn’t take away from your lifestyle is a great way to free up money for other priorities.

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(If you are wondering how this relates to money, don’t worry I will get to that)

The word but shows us a few things.

1. We don’t care.  In some cases the word but is used to cancel everything out said before the word.
2. Point out an excuse.
3. Not acknowledging your priorities.

I would save money, but ….

I would plan my finances, but ….

I would lead an amazing life, but…..

I would be there for you, but….

Although the but may sound reasonable, it almost never is.  If you want to save starting today is the best option, even if this means applying your savings to debt repayment for now.  If you wait to plan your finances how is it ever going to get better.

1.  When but is used to say the previous statement does not matter, it is often missed as we say it.  The result can easily be a negative or hurtful impression left with those around you.

Example;  ” I would help you, but I feel a bit lazy right now.”

Although often not this obvious the impression left is often the same.

2. The second common use of the word “but” is masking excuses.  This is a statement that is something you want, but there is an excuse that likely seems reasonable when you say it allowing you not to accomplish it.

Example;  “I would save money, but I can barely make my bills as it is.”

Not having enough money is a symptom of not planning your spending and not saving, not a reason not to.  This statement creates an excuse that sounds reasonable when said, and is powerful when caught and acknowledged.

3.  The third and often most limiting is when it is used to mask priorities you are unwilling to acknowledge.  This usually shows up as I would do something , but am holding to another choice.  Often this creates limiting negatives that are completely unnecessary.  With these statements it is easy to resolve the issue and move past it once acknowledge.  You can compromise between the two, acknowledge you made the best choice for you and move past it or make a new choice to eliminate the conflict.

Example;  “I would save for retirement, but all my savings money is going to pay for this new car.”

With this example you could; decide that a new car was more important than saving for retirement, buy a less expensive car and use the savings to save for retirement or not have a new car and put all the money towards retirement.  Regardless of the option you choose the word “but” was powerful in pointing out the conflict and allowing you to resolve it and move past the limiting thoughts the conflict it creating for you.

The gift of the word “but” is when you catch yourself using it you can make your self-aware of your hurtful comments, excuses, limitations and take the action to achieve the finances and life you want.

P.S. Replacing the word but with however or other replacements does not change the impact.

For example my list would start like;

1.  Rent or mortgage

2.  Groceries

3.  Gas (Heat the house)

……………..

57. Cable

58. Magazine Subscriptions

59. House phone

I find by listing in order of priority it helps clarify want you value as you move into the next few steps.  Also almost everyone has things at the bottom of the list that are no longer a priority.

If you are working through this as a couple I would recommend doing this separately, as priorities should not be expected to be the same.  After discussing the lists works out well, as it helps understand what is important to the other as you move forward.  Of course this conversation should not be used to judge, or criticize, but to understand and learn about the other as you move to creating a strong joint financial foundation.

Now I need to go cancel the house phone and a magazine subscription.

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If an income estimate ends up being high it can be a precursor to financial ruin.  For this reason your real take home income is the best number to use.  If your income varies then using a smaller number you can count on is best, bonuses and other extras that are not consistent should also be excluded.

A budget short fall is how our finances fall into ruin  however if you end up with extra money in your account no damage is done and with all your expenses taken care of this money is free to make a direct impact on your lifestyle or net worth.

Again I like to collect these numbers on a spreadsheet as it makes it easier to work with, however having an organized list is what is key.

With the list, you can now total your income and current spending.  How do these numbers look.  Healthy spending should have more money going into your account every month than coming out (and borrowed money can not be used as part of your income to make this work).

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Too often when creating a budget, the numbers are invented and the time is not taken to observe our current spending.  This often is dramatically different from the reality,  making it a much bigger challenge to follow than it ever needed to be.  Taking the time to understand your spending helps create the foundation needed to create a cash flow plan that will support your desired life.

This step is often much shorter than expected, especially for those who choose not to use cash.  With credit cards and debit cards, often by reviewing your statements you can recreate past spending very quickly.

** Self employed, for those who have business expenses, it is important all business related expenses are separated from your personal spending.

Steps to organizing your current spending,

1.  Collect all credit card and bank statements

2.  If any cash income, or expenses that do not show up on the statements, do your best to estimate and list (withdraws on statements are good for the amount of cash used).

3.  Create a cash-flow sheet or excel spreadsheet to help you organize (this makes it easier to work with later).

4.  It is time to organize and list all your spending.  For this step an honest list is best, include all expenses.

5.  Check to make sure you didn’t miss annual or random expenses. A couple commonly  missed expenses are; annual insurance premiums, property tax, family vacations, Christmas and birthdays.

Once you have your real spending it is time to move to the next step.

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We have all asked someone for a simple commitment and gotten the “I’ll try” response.  Instantly it is clear that they have no intention of doing it.  Some time in childhood trying shifts from a full out effort, to a commitment to possible attempt before failing or giving up.  I’ll try becomes a commitment to fail.

Armed with this knowledge our words often give our secrets away, even secrets we have yet to admit to ourselves.  The power of this word is when we start listening to our own words, whether in conversations with others, or the words we choose to express ourselves in our thoughts.  Too often we know we plan to fail, but have yet to realize it.

Armed with the word try we can become much more powerful listeners  hearing not only the words, but start to hear the more discrete details hidden in many simple statements.

Chasing the carrot

I still remember I when I heard someone say this for the first time;

“If I had a little more money I could be as happy as I was when I was broke.”

OK, it wasn’t stated exactly like that, but it is a great summary, and since hearing it, I have heard it over and over again.  The first time I heard it went like,

“Tell me about a fun time in your life.  A time when you where happy?”  I started.

“University, I was beyond broke, my parents didn’t pay my way like the kids now.  I couldn’t even afford a car, but it didn’t seem to matter, we had fun.”

“What would it take to get your life to a happy place like that again?”

“I’ve been working on that.  I think if i can just make about 20% more, I would be there.”

This from someone making a good income.  I am sure they would have said the same thing if asked a few years earlier, and making considerable less.

Why is it that so many feel that more money will bring the happiness, even if they feel the happiest times didn’t always involve money.  If you are looking for more, we will never get there, as more will always be an option.  Happiness and money I do believe are linked until the point you can live a basic life, a life without hunger or lacking safety.  After that I would suggest that happiness is more likely a mind set, an outlook on life or a personal commitment.

I have watched people that have said a small raise would solve all their debt issues more than double their income and with it only increase their debt.  I no longer believe more money will solve the problem, it is only a symptom of the true issue.  Hoping that more money will bring happiness, is mistaking the symptom for the problem.

Find happiness and it will only make it easier to make your financial life work, and what is better than living a happy life.