Michele Woodward

Powerful Coaching. Powerful Results.

budget

More On Money

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Last week’s post Money Changes Everything got a lot of attention. Comments, tweets – many of you wrote me directly to share your own personal fears around money.

I figure I hit a nerve.

Money is a hot button issue for a bunch of reasons, and we talked about some of them during the class. First, money is shrouded in secrecy. Remember when you were a kid? Did you know how much your dad made? Or how much your mom brought in? Did you know what your family’s mortgage payment was? Or how much it cost to load up the station wagon and drive to the Grand Canyon that long, hot summer?

Of course you didn’t.

One doesn’t talk about money.

And how did that set you up to handle your own money? Did you have knowledge, and experience, and a context for your own spending? Your savings? Your investing?

Did secrecy allow you to stand up and ask for money? No, I’m guessing it didn’t. Which is why you often find out too late that you are paid forty percent less than the guy in the cube right next to yours – and you do exactly the same work with the same result.

There’s also a ton of meaning assigned to money. Many of us think, “When I am paid $X, I will have it made.” But when we get paid $X, we still don’t have it made. It’s like the guy who thought plastic surgery would change his life. Truth? He had the same old troubles and worries – he just had a new face.

And we have so many ideas about money – ideas like, “Don’t keep your money in a bank. Banks cheat people like us.” Or, “Stocks and insurance are just for rich people.” Or, “My family has never had two nickels to rub together.”

The conflict comes in when we do have a bank account, stocks, insurance and a savings account. It’s pretty challenging to go up against all those beliefs people you love held dear.

But that’s exactly what you need to do to get your money mindset in order.

I love when people make big discoveries about themselves. That light bulb pops up over their head, there’s a gleam in their eye, they exhale three decades of stress out slowly – it’s a truly wonderful moment.

But there’s a step that comes after discovery. It’s asking yourself, “OK, now I get it. My ideas about banks are really my grandmother’s ideas about banks. What do I want my own idea about banks to be?“

To set yourself free, you have to own your own ideas, born of your own experiences.

So if you want the secrecy to stop, stop it.  Sit down with your kids and go over a budget – with income and expenses.  Tell them there are some things a family shares with each other, and that you trust them enough to share something important.  How do you think that will set them up to be successful, independent, financially secure adults?

Pretty well, I’m thinking.

And meaning?  To tell you the truth, whatever you think you’ll do when you “have it made” – you can do right now. Want to be in a position to give back? Donate blood. Officiate a softball game. Mentor a kid. Want to relax and be less worried about money? Take charge of your finances. Completely understand where you’re spending and decide to do it in a way that brings out the best in you. Want to have stuff you love? Love the stuff you have.

When you take care of your financial health, you will have it made. Because you’ll feel better about yourself and your life.

Which is the whole point.

The Absence Of Perfect – Part 2

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Back in 2007, I wrote about what to do in the Absence Of Perfect. What do you do when the perfect solution you have in mind is just not gonna happen?

You can hold on to your idea of “perfect” or, as I suggest, you can ask yourself, “what’s my best option right now?”

There’s so much uncertainty in life these days, and just like you I’m feeling it. In my perfect world, everyone who wanted a job would have a good one. We’d all make our mortgage payments and guys like Bernie Madoff would be responsible stewards of other people’s money.

Yep, in my perfect world, you and I wouldn’t worry about paying for food, or juggling bills, or managing prescriptions, or getting shingles replaced on the roof because there would always be enough of everything for everyone.

A Michele-ian utopia.

But right now perfect is not happening.

So what’s our best option? Well, we could wallow, which is an oft-chosen yet quite unproductive option, or we could do something. I, as you regular readers can imagine, am taking the “do something” approach:

1. Honoring my priorities — which means mortgage, mortgage, mortgage. It’s my intention to pay it first, and attend to other obligations from there. Prioritizing my mortgage means that I am also watching refinancing opportunities like a hawk, and will jump just as soon as I possibly can. This works for me as I plan to stay in my house indefinitely. Well, at least until my kids can get in-state tuition at one of the great universities in Virginia. Or until the Redskins win another Super Bowl. Didn’t I say “indefinitely”?

2. Take on no new debt — which means no big spending. I’d been considering post-graduate studies, and that is now officially on hold. Here’s my rule of thumb: If I can pay for it fully in cash, or pay it off in three months, I will do it. If not, I’m shoving it to the back burner.

3. Pay down my debt — which may mean that I don’t have as much cash on hand as the so-called experts suggest but when I have less debt, I will have more cash flow, allowing me to build up my cash reserves quickly. Feels right to me.

4. Doing what I can to increase my income — which means I’ve developed some great new programs. I have The Results Club for job seekers with my colleague Christina Brandt — a phenomenally gifted Master Coach — and we’re working together on a useful e-book called Finding a Job 2.0. I’m also working with Pam Slim, an insightful and humorous writer and Master Coach, to launch Kick-Ass Mentoring this week, which will help coaches move from stuck to success. Both of these programs are so good that I get goose bumps. All these efforts will (cross your fingers) bring in revenue and more easily help me attend to numbers 1-3 above.

Oh, I hear you. You government employees, corporate citizens, teachers and other blokes who have steady employment — “How can I make more money? I’m on a salary.” Yes, you are. And you can be like the happy young teacher I met the other day, who is working as a waitress on the weekends, AND creating memorable art-themed birthday parties for kids in her spare time around classes. Quite the go-getter.

The question for you may be, How can you go get? What can you do? I’m telling you — I feel good that I’m doing something. I have a plan. I have priorities. Which is my best option, given that so much is beyond my control.

If you’re freaked out about what’s happening now — if your reality of layoffs and tight budgets doesn’t meet your idea of perfection — then take a little step back and ask yourself, “OK, what’s my best option here?” What can you do?

The best in life coach tips and useful suggestions to help you get the life you want to live.

Looking Back

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Can you believe it’s December? Before we know it, it’ll be January and we’ll have both feet firmly planted in 2009. Yikes.

This is a great time to look back at 2008, and take its measure. How was your year? Think back. Did you make any resolutions — and did you meet ’em?

[uncomfortable silence.]

OK, I hear you. Let’s look back in a different way. Take out a piece of paper. I want you to write down 25 things you accomplished in 2008. I’ll do it, too. Here goes:

1. Took out the trash and recycling every week.

Hey, believe me, that is an accomplishment.

2. Paid off and closed two credit cards.
3. Got my mammogram.
4. Started writing an advice column at BettyConfidential.com.
5. Met, then exceeded, my goals for my coaching practice.
6. Never forgot my kids’ orthodontist appointments.
7. Got my roof fixed.
8. Did more public speaking.
9. Stuck to my budget.
10. Made time for my friends.
11. Volunteered to chair a committee.
12. Went to the dentist twice.
13. Taught more classes.
14. Co-chaired my high school reunion.
15. Re-connected with old friends.
16. Took my kids to a baseball game at the new Nationals Park.
17. Published my book.
18. Held a yard sale.
19. Chaperoned a 6th grade field trip.
20. Got a new stove, fridge, dishwasher and microwave. Fun week.
21. Paid my taxes.
22. Took good risks.
23. Read 47 books.
24. Got national press coverage.
25. Laughed often.

What’s your list like? What does it tell you about your unspoken goals — your real resolutions, if you want to call them that — for 2008? My list reveals that taking care of my own physical and financial health, and the well-being of my kids, was paramount. It appears I also served my goal of being connected — with people, with my community and with myself. How about you? What did you do?

2008 was an up-and-down year for so many of us. You had the money in March to plan for a vacation in December, but now wonder if you can really afford to take it. We had $4 gas in August, and $1.75 gas in November. We’ve had lay-offs, foreclosures and financial melt-downs. Plenty of us have lost loved ones or faced serious illness. It would be easy to say, “Ick! 2008 was horrible!” yet your list may tell a different story.

Even in a difficult year, you did stuff. You made progress. You accomplished. That’s where you need to focus — not on all the up-and-down-ness. Believe it or not, your best 2009 resolutions will spring from the list of what you’ve done this year.

So spend some time cataloguing and acknowledging your accomplishments, and next week we’ll take a look forward and spell out some achievable goals — so you can make 2009 your best year yet.

How To Make A Budget

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Lotsa talk about money these days. Tightening the old belt. Sticking to the old budget. But how can you stick to a budget when you don’t actually have one? Good question, huh?

Financial health is easy — there are just three questions you have to answer: What have you spent in the past? What do you make? How much can you spend in the future?

So, take out three blank pieces of paper. On the top of one, write “Actuals”. On the second piece, write, “Income” and on the third, write “Spending Plan.”

Actuals: To figure out your actual spending, you’ll need to look at the past three months. Take out your past three checking account statements and credit card statements. On the Actuals sheet of paper, make categories: Housing Expense (mortgage/rent; utilities; repairs), Food Expense (groceries; eating out), Transportation expense (car payment; insurance; gas; maintenance), Clothing Expense, and Other. If you have your own, particular big spending category, such as Education or Medical care, go ahead and list those expenses in a category of your own design.

Now, look at your expenses in each category for the last three months — add each up and get an average monthly cost. Write down the average monthly spending by category, and get your total.

Somewhere on this sheet of paper, write down the balance for each credit card you own and note your average monthly payment and the interest rate on every account. Think back to the entire year — did you have any big one-time expenses, like vacations, or orthodonture, or rebuilding a 1965 VW Beetle? Make a note of those expenses, too.

Now, let’s move to Income.

On the Income sheet, write down your monthly income — what you take home after all deductions. If, like me, you have your own business and income fluctuates, make an average of the last three months. If you have a regular income, this part should be easy.

Now, look at the total on your Actuals compared to the total Income.

How does it look?

If your income exceeds your expenses, you’re doing great and can continue to the Spending Plan at your own discretion.

If your expenses exceed your income, honey, we’ve got a little work to do. You can either increase your income or reduce your spending. Just a note here — if you’re not doing everything you can right now to maximize your income, you need to start doing so right away. That may mean you have to start taking a different kind of client (those who pay are a good start), or ask for a raise, or take a different job. If you’re working at a discount, you’re not doing yourself any favors.

Let’s look at reducing your spending. On the top of the Spending Plan sheet of paper, make a note of how much you need to trim from your expenses to come into line with your income. Start by transferring the information from Actuals. If possible, break out as much detail as you can in each category — utilities, for instance, would be electric, cable, phone, natural gas/heating oil, water/sewer/trash, etc.

OK, so where is the largest expense you can control? Maybe you can lower your transportation expense by using less gasoline, changing the deductible on your insurance, taking the bus or subway, or washing your own car. You may be able to reduce your food costs by eating out less, buying what you know you’ll eat — which may mean the shopping duties go to the most disciplined person in the house.

Let’s say, for the sake of argument, that you have some cash on hand. Take a look at those credit cards — target the lowest balance with the highest interest rate and pay that sucker off first. Should free up your monthly cash flow.

On the sheet of paper, make a new target for your spending in each category.

You’re not done yet, darlings. Now, the hard part.

Total your projected expenses. Add twenty percent. “But,” you gasp, “If I do that, my budget won’t work!” I know. I’m really, really sorry. You’ll have to go back through and make enough reductions to fund this really important twenty percent — your cushion. This is for when natural gas prices spike to all-time highs. Or your health insurance premium doubles. Or you need a crown. Or you underestimated your real expenses.

If you’re really stoked and ready to play, put another ten percent into savings, ten more into charitable giving and another ten into your investments. Doing so means you may have to re-jigger your spending until you get to a truly workable spending plan.

“Too much trouble” is what some of you are saying. I hear you and know just what you’re saying. Because I was once exactly like you. But while ignorance may be bliss, it doesn’t help when the bill collectors start calling. Take charge of your money, and, believe it or not, you take charge of your life.

$4 Gas

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Almost eighty years ago, Americans saw a dramatic drop in their financial well-being. That October day, as Wall Streeters jumped from windows and banks closed their doors, the United States went from the buoyant ebulliency of the Roaring Twenties to the dire straits of the Depression.

People lost their homes to foreclosure, and their jobs to industry destabilization. There wasn’t enough food, even at the soup kitchens. Farms dried up and blew away.

Those were hard times.

And today, we have gas prices pushing nearly four dollars a gallon where I live. For regular. Food costs are up 35% since the first of the year. Foreclosures are up 650% in a neighboring county. A friend got a new job — working to ease the “out-placement” of over 3,000 white collar workers at a multi-national financial services firm once known as a “safe” place to work.

Airline travel, I’m told, will be more expensive this summer and schedules will be compromised as more and more airlines face financial difficulties. At the same time, AAA suggests we drop the idea of long car trips due to the rising price of fuel. So where are you going for vacation this summer? Your basement bunker, perhaps?

The media bleats and blurts: “Doom!”, “Gloom!”, “More at 6!”

I don’t know how you’re doing, but, frankly, I don’t want any more at 6pm. Focusing on the awful can prevent me from seeing the real — and the wonderful.

So let me suggest a Personal Finance Reality Check. Do these three things, and see if your mood shifts from doom and gloom to something else.

First, sit down with at least the last three statements from your checking account. If, like me, you do online banking and use a software program like Quicken, this work will be a cinch. Look at your grocery spending — has it changed? By how much? Your gasoline expenses? Credit card purchases? Other expenses? Get a handle on how much these have gone up, and keep that percentage in mind when you do the second step.

Second, project your expenses for May. Plug in numbers for gas, groceries and other expenses that reflect the rate of increase you’ve seen in the last three months. So, if you had been spending $200/mo. on gasoline, and you have seen a 35% increase, project a gas expense of $270 for May. Make your expense projection mirror the types of expenses you’ve had for the last three months — dining out, travel, clothing, whatever. Be consistent.

Third, total up your projected May expenses. How’s that number look against your projected income for the month? Running a deficit? Rather than turning to your credit cards for quick relief, go back to your projected expenses list and see where you can make gentle cuts which result in significant savings. For instance, eating out twice a week, rather than four times a week, will save you plenty. Limiting discretionary driving will use less gasoline. Less gas = less cost. If you, like me, often meet with clients in person, perhaps you could shift to more conference call meetings for the time being.

None of these suggestions are exactly brain science. You’ve heard them plenty of times from plenty of people far more famous and wealthy than lil’ old me.

But, here’s the difference. Make these changes in your life not as a punishment, and not from a place of worry or lack — make these changes because you can, and because they are healthy. Embrace the changes. Be joyful about them. Love that you have the innovative thinking and personal power to take this weird economy and use it for your benefit.

You are not powerless to a jittery economy. No, my friends, you can take this time of uncertainty and shift it from the constant water torture of fear of lack that can be paralyzing, into a great awareness and gratitude for what you do have.

Because what you have is the ability to take care of yourself. Don’t let the doom-and-gloomers promising more at six make you forget that.