Naked Money

Nine Money Myths & Mistakes #5

Instant Gratification or Bust!

In the same way that saving every extra penny for later is a mistake (i.e. life with no ice cream), spending every dollar as soon as it hits your account on whatever you feel like at the moment is a mistake, too. Although this idea is easy to understand, it can be super hard to say no to what you want right now. My best recommendation on how to deal with this is to get down to the heart of why you just have to have it right now. Think about how you feel when you have the urge to go shopping, how you feel when you’re making a purchase, and how you feel about the purchase a week later. Sometimes spending just happens so fast we don’t even think about it. It sounds simple, but it can be eye-opening to pause for a moment to reflect on your own patterns. 

Here are a couple of ideas to help…

1. If clothing is a big temptation for you, clean out your closet. Make one pile of clothes/shoes/purses that are too worn out to wear and toss them. Make another pile of everything that you haven’t worn in the last twelve months. As you put this pile into a bag for Goodwill, try to add up how much you paid for all of the clothing items that you are now giving away. Take a moment to reflect on whether, looking back, this was the best use of those dollars. Think about why you bought them in the first place. Now clothing isn’t a huge temptation for me, but I’ve still learned a lot about myself and my own spending habits by going through this process. I’ve realized that I sometimes buy things just because they made me feel skinny the day I tried them on (embarrassing but true) or because I was looking for a pick me up on a sad day or because I work hard and I deserve it darn it! Do I really want to be using retail therapy to make myself feel beautiful, important, validated, happy?

2. I know I mentioned it in my last post, but I think that a FUN account can be an awesome tool to help you start to balance instant gratification with longer term financial responsibility. For every dollar that you put into your FUN account, put a dollar into your savings account. Use your FUN account for absolutely anything you want at any time, but honor your savings account as money reserved solely for emergencies, retirement, etc. 

3. If you’re in credit card debt and struggling to get out of it but you’re still using your cards, write down how it feels to be buried in credit card debt and how helpless you might feel about getting out of it. Then, write down how it would feel to be debt free. Wrap this little note around your credit cards and take them out of your wallet. If you’re ever tempted to use them again, read your note. 

I’d love to hear your thoughts on how you’ve dealt with the temptation of instant gratification!

Top Nine Money Myths & Mistakes # 6

Pinch Every Penny For Later (aka “Life With No Ice Cream”)

Believe it or not, I believe that saving every extra penny for the future is a mistake. I know, weird coming from a Certified Financial Planner, but I feel strongly that it is important to have balance in life as well as in your finances. It is important to balance the “now” with the “later” as it relates to your finances.

Managing your finances is sort of like going on a diet, and if your diet is so strict that you can never enjoy ice cream ever again as long as you live, I would bet that the diet doesn’t make it long-term. And if it does, what a boring life!!! Don’t get me wrong, it IS really important to save for the future, but I suggest structuring your finances and your budget to support a balance between saving for later AND fun now. It is important to have a bowl of ice cream from time to time!

I encourage you to set up a FUN Account that is specifically earmarked towards just that- FUN! Set up an automatic savings on a weekly/monthly basis to your FUN account. Enjoy using the funds in your FUN account GUILT FREE on ANYTHING YOU WANT. See? Isn’t saving fun?! This is an awesome way to begin the habit of saving because you get to feel the rewards of your efforts and enjoy them pretty much right away. Developing the habit of saving can be tough, so starting with a FUN account is a good way to get into the habit.

Of course, finances aren’t ALL about the FUN account, so it is important to make sure that you are also saving on a weekly/monthly basis towards your future whether it be into a Cash Reserve, IRA, Roth IRA, 401(k), etc. which depends on your individual situation.

On a personal note, my husband, Ryan, and I really enjoyed using our FUN account to go to a seven course dinner with my family a couple of months ago. We are not generally “seven course meal” type people, but it sure was a fun experience!

Have FUN!!!!!

Top Nine Money Myths & Mistakes # 7

Silence.

Silence is great in a movie theatre but it sucks when it comes to money. I often find that couples have difficulty communicating about money and run into the same frustrations over and over.

What I’ve realized is that there are three main issues when it comes to talking about money:

1. People don’t set intentional time to talk about finances which means that issues are swept under the rug for way too long.

2. It is difficult to come up with the right language to talk about money.

3. One spouse takes over the finances and the other spouse doesn’t feel empowered to participate.

So here are some suggestions from me to you…

1. Monthly Money Meeting: Schedule a meeting every month with your partner to keep the lines of communication open and review your situation. Review your values, your goals, your progress, and your budget. Discuss any financial issues that need to be resolved. Consider going out for a cup of coffee or dessert- it doesn’t have to be torture!

2. As far as language goes, I believe that setting core values as a couple is key to defining what is truly important to you. From there, you can effectively set goals that are in alignment with your values and create a budget to support your progress towards your goals. Walking through these steps helps to provide the language necessary to have productive conversations about money. I will discuss setting your core values as a couple in a future post. I will also discuss goal setting in a future post, but let me give you a quick illustration of how setting goals helps with communication… I recommend that you set goals in levels so that you can work towards shorter term goals while still keeping the big picture in mind. This often helps when one spouse is more detailed and specifically focused and one spouse is more driven by the big picture. Having a set of goals that covers the details and the big picture brings you both onto the same page and helps you to be connected on the same mission. Once your goals are in place, you can have more meaningful conversations about what you’re doing with your money and how it moves you closer to, or further from, your goals.

Much more to come on values, goals and budgets!

3. Finances are a team sport. This doesn’t mean that you and your partner both play the same role, but it is important that you are both involved. Often times, one of you is naturally more detailed and organized- this might be the right person to manage the day to day budget. One of you might be more inclined to look at the big picture 10 years from now- this might be the right person to take the lead with retirement planning. Even if one of you handles the bulk of the financial duties, it is critical that you are both informed. 

I hope that helps!

Top Nine Money Myths & Mistakes # 8

Don’t use money to fill other needs.

It sounds simple, but there is a lot to this one… Let’s take a step back for a minute and look at just what money IS and IS NOT. Money, in and of itself, isn’t really anything but a unit of measure by which we exchange work for food at the most basic level. The way we use money, however, can often be a magnifier of other things going on in our lives. Have you ever seen an older guy in a fast red car and thought that it had mid-life crisis written all over it? I know I have PLENTY of times here in Del Mar, CA. Oy vey! The truth is that the way we use money is most often a reflection of what is going on inside of us.

Have you ever read “The Picture of Dorian Gray”? In it the lead character makes a sort of deal with the devil so that a portrait of himself reflects the true condition of his soul instead of him so that he can stay young and handsome. Well, it might be a bit of a stretch, but I think that the way we use money is our personal portrait that reflects the truth about what’s going on inside of us. People often use money and material things to make themselves feel better, more valuable, more worthwhile, more successful… In reality, we’re using money to fill other needs to combat our feelings of ineptitude, unworthiness, low self-esteem, etc.

So what can we do about it? Most of this stuff happens subconsciously so we aren’t even aware that we are using money to fill other needs in our lives. I suggest that you take some time to reflect on the following questions to bring some of your subconscious feelings to the surface. If you’re sharing your finances with a significant other, I suggest that you each answer the questions separately and then share your answers with one another.

1. Money often functions as a conduit for feelings such as safety, security, significance, self-worth, success, failure, shame, fear… When you think about money, what thoughts and feelings come to mind?

2. What purpose/role does money play in your life? What purpose/role would you like it to play in your life?

3. How do you interact with money?

Alright, that’s it for today! I’d love to hear from you if you have any comments or questions!

Top Nine Money Myths & Mistakes #9

Don’t try to be a hero in the stock market!

This is a pitfall that I see people fall into all too often. (Men fall into this trap more often than women, sorry guys!) You believe that you can beat the market with a tip from a website or a stock recommendation from a golf buddy. Warning! Don’t do it! The truth is, your are WAY more likely to lose than you are to win big. It’s so tempting to think that you can double or triple your money in a short period of time, but it just doesn’t work. I often see people tempted by this trap because they are trying to make up for lost time or shortcut the amount they have to save for the future. The way to truly win in the market is to invest consistently in a diversified portfolio, but we’ll get to that in a future post.

Now, if you happen to be someone who really enjoys researching and trading stocks, options, etc., and you’ll just explode if you don’t get to buy and sell some things, then I fully support the idea of having a small account that is specifically set aside for your picks. Consider setting up a small account that is purely for having fun with investing. This is an account that IS NOT earmarked towards any of your goals. DO NOT use your retirement money for hot stocks! Think of it the way my husband thinks of his “music gear bank” … money doesn’t go into the gear bank and money doesn’t come out of it, but if he sells a guitar, he can use those funds for another guitar, or an amp, or any other music gear.  

A Couple Quick Budgeting Tips

Happy Monday! Here are a couple of budgeting tips to help you with your monthly spending…

1. Negotiate Your Rent: If you are currently a renter, consider negotiating your rent upon renewal of your lease agreement. Having a vacancy costs the leasing company money because they have to ready the apartment for new renters, go through the hassle of finding new renters, and go without rental income until the new renters are in. Because of this, it is in their best interest to keep you! I have negotiated my rent several times and I have had it successfully lowered (or, not raised) every time.

2. Use Gift Cards to Budget: If you have a Starbucks habit, an iTunes habit, or any other habit where little purchases add up at the end of the month, consider buying a gift card and loading it with your budgeted amount at the beginning of each month. For example, if you are aiming to spend no more than $25 per month at Starbucks, buy yourself a gift card for $25. As the month goes on, enjoy using that gift card guilt-free while it lasts. When the gift card is depleted, it’s time to wait until next month for your next latte. I have found that using gift cards this way helps you to enjoy your latte a bit more knowing that you’re within your budget! Plus, it’s always more fun to use a gift card than a debit card!

Let’s Get Started!

As I look forward to my 30^th birthday next month, I am inspired to take a step that I’ve been contemplating and working towards for a few years now… I am excited to share with you a thought or two about the connection between money, what’s important to you, and how to get from where you are to where you want to be. I suppose this is a “how-to” blog of sorts, but I’m not the type to tell you what to do, but rather, I hope to guide you on a path towards getting in touch with what’s truly important to you (and your hunny, if applicable), decide where you want to be and help you with the everyday tools to get there. I’ve had the pleasure of working as a financial advisor since age 23 helping clients figure out where they want to be and then helping them work towards their vision. I know, when I say “vision” you might think that I’m a bit out there, but I assure you that my feet are both firmly planted in the real world in which we all function every day. I’ve also had the opportunity to lead several workshops for individuals and couples in their 20s and 30s which has been such a blast. They key to all of this money stuff, I believe, is to start by taking a step back and reflecting on where you’ve been, where you are, what’s important to you, and where you want to be. Then you’re ready to use tools like a budget, investments, and all of that good stuff to help you on your path.