Tag Archives: financial planning

Your New Financial Reality Plan (or not…)

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Firstly, and arguably most important: The major Bell sponsorship of Mental Health day in January isn’t just a one-day and one-off. It’s just as important today as next week and every day. Taking care of yourself is not an occasion – it’s a process. So, go to letstalk.bell.ca for a lot of tips, insights and practical tools. In addition to that, talk to someone. Being able to talk it through is an incredible tool that doesn’t cost anything, but pays off in measurable ways, because you’re not alone.

When it comes to your finances, there are two different issues: The today actions and the down the road issues that we can talk about another day.

Psychologically we tend to think the good times, good incomes, or investment returns go on forever. They don’t. We also tend to think that, in bad times, they’ll never end – they do. You decide how long this storm is going to last – then make a financial game plan of how to get from here to there with a lot less income and the same bills you’ve always had.

1.. Your entire family has to be involved, in the know, and on board. Your partner is a given, but I would also explain what’s happening in financial terms to your kids in language and information that’s age and maturity appropriate. If you can explain why grandma can’t visit you can certainly explain some basic financial realities in the same way.

2..Stop anything that takes away money on a monthly basis that is optional: Stop your RRSP contributions, children’s education savings, any amount auto transferred to your savings, payroll deductions for investments or retirement plans – everything. For the next few months, you need cash and not a long-term wealth building plan which takes money away from the today storm. Every one of these money-savers are far preferable to any deferrals of your bills – period.

3..Write down your financial priorities: They will be the same for every person: Prescriptions, food, shelter, utilities, basic clothing and transportation. You can look at financial books from the 1950s to someone like Dave Ramsey on about 400 radio stations in the US, and others that’ll all be the same. (I added the prescriptions for obvious reasons). Those are the order of your priorities. Besides these first priorities, write down what those cost you each month. Does whatever income you have now cover these basics? If so, you’re doing well and should give yourself permission to breathe!

Reality stinks right now, but reality is that less income means less money can go towards non-priority payments. You cannot print money, and you are not exempt from the law of gravity or math: $2,00 of income will not cover $4,000 of monthly bills.

4..When the first priorities are paid, if there’s money left over, the decision of what other bills to pay is yours. That’s very subjective and everyone will make very different decisions.

The Money’s All Spent – Now What?

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Now that it’s the week after Christmas I’m reminded of an old Irish Rover Song called: Wasn’t that a party, and then talks about the hangover.

That’s kind of like our financial lives, having just spent over $22 billion on Christmas, mostly with borrowed money, and including lots of presents for ourselves. I know, I know, we work hard, it’s our money, we deserve something, it was on sale, we really needed it, etc. Well, if we were to be honest with ourselves, that’s all nonsense. Broke people can’t afford to buy stuff, and it’s almost always a “want” and not a “need.” That’s how we get to spending over $4.2 billion on impulse purchases in a year, according to one Canadian study. And, to be honest, that number is way low, because it’s the last thing we’ll admit to.

Yes, we work hard, and yes it’s our money. But do you want to keep working hard forever? Freedom 77 doesn’t have the same ring to it as that old commercial campaign of Freedom 55, does it? At some point in time, we do have to get away from the spending party and focus on paying off the hangover and saving something for someday down the road. Intellectually, we know that, but when are we actually going to get around to it is the big question that will change your entire financial life.

Right now, let’s be honest: We spend more time planning our vacation than we do our financial situation. Make 2012 the year that you’ll actually turn that around. Here are a couple of suggestions that are small enough where you’ll do it, but big enough to have a significant impact. Why small steps? Because our sub-conscious mind will revolt against huge goals that seem impossible to reach.

You’re not going to lose 60 lbs, but you can lose a pound a week. You won’t run the marathon this summer, but you can go for a 15 minute walk each day. You also won’t be debt free by February, but you can start on that journey with one step at a time.

Resolve to say no: Whether it’s to yourself when it comes to spending, to your kids, people at work, or anywhere else. It’s the one word that’ll change your financial life.

Take your credit cards out of your wallet: At least for January, leave the cards at home. If you have an emergency, you’re one call away from getting help. But going to the mall or charging this or that isn’t an emergency – honestly.

Set a cash limit: Pick an amount below which you’ll always always pay by cash or debit. The higher the limit, the better – if you make it $50, gas, small grocery purchases, lunch, etc., will all be paid cash. That alone will drastically reduce the charges on your credit card. When we use a credit card we spend 12 to 18% more – period. Whether you pay it in full or not, it’s still a ton of extra spending that isn’t helping.

Stop being financially stupid for 2012: You know exactly what that means. They are different things for all of us, but make the New Year one where you’ll stop doing the top two things that get you further in debt, or don’t grow your savings.

And finally, here’s a great post from Facebook this morning that kind of says it all: Do something today that your future self will thank you for.

Some Financial Resolutions That May Actually Work

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Sometime last summer I shared with you that there are a number of psychic web sites claiming to predict your financial future – yea right. But let me try to predict one or two things that most of us will go through tonight: We will drink too much, eat too much, stay up way too late, get depressed about things from 2009, or the coming year, or make some wild New Years resolutions that don’t have a chance of surviving for more than a week or so.

It’s something that diet plans and fitness clubs count on. We get excited, sign a one or two-year contract, and show up for a month – tops. We’re still paying payments on the contract, but haven’t seen the place in months. When it comes to our finances, I want you to make this year’s resolutions different. I want you to be smart about it, and give yourself a fighting chance of achieving your dreams and goals.

For your financial resolutions, and I hope you make some, they need to include a few things:

They must be YOUR goals. In other words, they cannot be handed down to you by your spouse, or someone else. You cannot make a goal of getting your car or credit cards paid off without agreeing to it with your partner. You’re not Moses. You don’t get to hand a list of things to someone else. It won’t work.

They must be specific. Just a goal of getting your credit cards paid doesn’t work, and you’ll never do it. A specific goal would be to pay off these particular cards, in this order, not charging on them anymore, and cutting them up. THAT is a resolution you’re way more likely to keep.

You need a time-frame: Sometime next year, in the future, down the road – those words don’t get it done. Set a day and a month to make it happen.

Goals must be in writing and tell the world: Achieving your goals is 5 or 10 times more likely if you write them down. And I suggest posting them on the fridge so that they’re in your face every day. You’ll also massively increase your odds if you tell a bunch of people. They’ll hold you accountable, if they care about you, and you’re more likely to be disciplined if you feel that others are watching.

But the big one is that you have to want to want it in the first place. There is no feeling in the world like being debt free. Most of us have never been there, so we really have no idea. But it’s worth it and you’re worth it.

Start by sitting down with your spouse, if you’re married, and agreeing to some financial goals for 2010. And take 10 minutes to do a budget and a list of your debts. No TV, no kids – just you and a piece of paper. That’ll be more than 99% of the world will accomplish.

I wish you a great New Year and may all your financial goals come true for 2010!