I just finished teaching the live Lines In The Sand session of Line Seven: Be Impeccably Fiscally Disciplined to a group of intelligent, capable, and industrious participants. This Line is cringeworthy at best for most people who have taken part in the live course.
We started the day by answering the following nine questions:
- Do you have a budget?
- Do you have a personal financial WHY?
- Do you have a retirement plan?
- Do you have a “slush fund” for emergencies or unexpected expenses?
- Do you reconcile your bank accounts each month?
- Does your family understand your finances?
- Do you teach your children about money?
- Do you have a Will?
- Do you have a revocable living trust?
Surprising or not, the majority of the participants answered every single one of these questions with a resounding “No”. I invite you to take a few minutes to answer these questions for yourself. Some of these questions may not apply to you and your current situation, but if they do, I invite you to start doing what it takes to get to a yes.
It has been my observation that where there is money, there is emotion. At a very you age most people are either taught or through their own observation develop a money mindset. The prevalent feeling associated with money is fear. There is fear of never having enough, fear of losing it all, fear of being judged by how much money one has or doesn’t have and the list goes on.
Let’s go back to those questions and I will share some tips and insights to assist you in getting from the no column to a yes with these inquiries.
Create a New Relationship with Money
- Do you have a budget? If you don’t have a budget, create one. It is important for you to know how much income you have coming in each month and how much money is going out to pay for expenses. Without a budget, you will fail to operate your financial life as if it were a business where you must make a profit at the end of each month or year. And, “having this information in your head” isn’t going to cut it. You must get this information in a format where it is visually available to you 7/24. Once you get your budget in place, refer to it often and make adjustments as needed. There are some wonderful tools that you can use to assist you in getting started. Here are two that I like: youneedabudget.com and www.mint.com
- Do you have a personal financial WHY? Here is mine: To live a simple, joyful, and abundant life free from any limitations related to money. Determining your financial WHY is an opportunity to create great freedom in your life. Until you have clarity and commitment about what the financial goals and requirements are in your life, your desired outcome will elude you. Declaring your financial WHY will help you stay committed to success in the financial domain of your life and it will help you to endure the probable ups and downs you might face along your money journey. Determine what you WHY is, write it down in a place where you will see it daily and then focus on what you must do each day in order to achieve and maintain this WHY.This is a link to a podcast where Lisa Druxman, the founder of Fit4Mom and I have a discussion about how to ensure that you and your family stay financially fit.
- Do you have a retirement plan? This is a must. The first thing that I suggest that you do is find out if your employer offers a 401(k) plan in which you can participate. Often times your employer will match a small percentage of the amount you withhold from your paycheck each pay period. If your employer doesn’t offer a plan, investigate the Roth IRA or the Traditional IRA. Those of you who are self-employed, look into the SEP-IRA option. Discipline yourself to set aside money each month to contribute to a retirement fund regardless of the amount.
- Do you have a “slush fund” for emergencies or unexpected expenses? Once again, this is a must. You never know when you might find yourself needing to replace a household appliance, repair your car, or make an unexpected trip. These events, as small and insignificant as they may sound can cause financial havoc if you are not prepared. I recommend that you have a slush fund equal to at least three to six months of necessary expenses. These expenses include house payments or rent, car payments, insurance payments, food, and utilities and other necessary expenses to cover the basics of living. Once again, put this into your monthly budget. Set aside funds each month that are designated as slush fund dollars.
- Do you reconcile your bank accounts each month? Please do this. Banks make mistakes and these mistakes are not always in your favor. And, they apply fees to your account that can eat away at your balance each month. Reconciliation goes beyond jumping online and checking your balance every few days. Take the time to do a formal review of your accounts. Not only is this a good habit to get into, you can also save yourself some money and potential frustration by staying on top of your accounts.
- Does your family understand your finances? Whether your family consists of you and a spouse or partner or a child or two, it is important that those who are age appropriate have a working understanding of the family finances. This is particularly important for the heads of household. If you are relying on your husband or wife to handle the family finances and you have no idea what the details are, you are setting yourself up for trouble. I have countless stories of women and men who are left completely in the dark when their spouse experiences a serious illness or death and they have no idea what is going on in the financial domain of their life. At the very least you need to create and review your family budget together and commit to sitting down at least once a month to review the family finances.
- Do you teach your children about money? This is important, especially in this day and age when the actual exchange of dollars and cents is a rare occurrence. I suggest that you start teaching your kids about money as soon as four or five years old. You can do a creative project together and devise three different piggy banks. These can be constructed from empty coffee cans, canning jars, baskets, boxes or bags. The idea is to label one for “saving”, one for “spending” and one for “giving”. Whether your kids get money for birthdays or other holidays or an allowance teach them how to divide their earnings into these three different categories. I encourage parents to have their children save their money for an item that they want. This would come from the spend vessel. I also think it is important for children to learn about how to save money for a rainy day as well as to be taught to give a portion of their money to those less fortunate.
- Do you have a Will? Having a will is important because it provides direction during a difficult time by spelling out your wishes especially as it relates to resuscitation and other procedures as it relates to your health. It is important that this document is in place prior to your need it. Once you are sick or in a position where you cannot speak or make decisions for yourself if you don’t have a Will in place others will be making vital health decisions for you. There are several websites that provide forms that can be completed by you. Once you have finalized your will have it witnessed and notarized and then store it in a safe place that can be accessed by you or others when needed. The following link will provide you the top-rated websites to use to create your own will. http://www.topconsumerreviews.com/wills/
- Do you have a revocable living trust? A trust designates how your assets will be divided should you die. You can create a living trust at any adult age and upon your death, this document dictates how your home, bank accounts and investments will be passed on to loved ones or other designated people or entities. This is an especially important document if you have children under the age of 18. Should something happen to you the trust will direct how and by whom you want your children to be cared for. Once again, there are several online resources that you can use to help you create your living trust. The following link will provide you with top-rated websites and more information about what you need to know prior to fashioning your living trust. http://www.topconsumerreviews.com/living-trusts/
A High-value Bonus Tip To Help Improve Your Financial Life
One final piece of advice before I cut you lose to get your financial world in order. Here it is: If you have credit card debt, get it paid off! The first thing I suggest is that you transfer your balances to a card that offers 0% interest. There are many credit card companies who run frequent promotions to move your balances from high interest rate cards to ones with lower or no interest for a period of time. Do your research and determine which card would be best for your circumstances. Start paying these balances down immediately and stop using your card(s). Once you have paid down the balance(s) to zero, make it a habit to pay the entire balance each month moving forward.
Mastering your finances is no different that mastering any other skill in your life. You must practice good budgeting and spending habits every single day. I have always said, “you cannot manage what you do measure.” Do yourself a huge favor and put these simple tips into place now. A year from now you will be glad you did.