How To Choose Your Spending Plan Based On Your Learning Style

August 11, 2017

Just like people, spending plans (a better way to say budgets) come in all shapes, formats, styles, colors and any other distinguishing feature. They can be online, paper and pencil, a spreadsheet, a Word document, envelopes with cash, or multiple online accounts, to name a few. There isn’t really one that’s “better” than the others — the one that is best for you is the one that you stick with.

A good spending plan is one that seems to “get” you. If you have to work hard to get it, chances are you will lose interest after a few weeks and stop using it. Your spending plan may not be the one your coworker or spouse uses, and that’s OK. One way to narrow down the different ways to manage your spending plan is by knowing your learning style.

Discovering your learning style

My wife, like all good teachers, has the ability to adapt what she is teaching to each student’s learning style — different people learn different ways. If you already know your learning style, that’s great! I don’t, so being the lazy blogger that I am, I asked my wife for some good ways to figure out my learning style. She recommended EducationPlanner.org or Learning-Styles-Online. If you don’t already know your own learning style, try one of these — they are quick, less than 15 minutes to complete.

Matching it to your spending plan

Now to match the spending plan with your learning style. Education Planner categorizes people as Visual, Auditory or Tactile, while Learning-Styles uses Visual, Aural, Verbal, Physical, Logical, Social or Solitary.

If your learning style is Visual: Consider a technology based platform that has visual elements. My favorite online platforms include Mint, Every Dollar or You Need a Budget (YNAB), or your bank’s software (assuming it has visual elements like pie charts.)

If your learning style is Tactile, Logical or Solitary: Try spreadsheets — they are very popular especially with those of us who are a little more hands on; our Easy Spending Plan is an example of one.  Your bank or financial institution may also provide a spending plan that works for you. The great news is that the online and bank based software I’ve seen is aware that people learn different ways and allows you to use their platform the way you choose.

If your learning style is Tactile or Physical: Don’t forget the old school way of paying cash as much as possible and keeping receipts (I recommend an accordion file to manage receipts.) Study after study has shown that when we pay in cash, we spend less than when we swipe a card. And despite what my teenager tells me, cash is used by more than just me and drug dealers.

If your learning style is Auditory, Aural, Verbal or Social: Find a partner to work together on your spending plan and talk it out. For privacy, maybe don’t have this conversation in a public place as the folks at the coffee shop don’t need to know your personal business. But having the opportunity to sound it out and socialize could be the missing ticket to budgeting success for you.

For what it’s worth, I scored highest on Visual and lowest on Auditory using Education Planner, while Learning-Styles scored me highest on Physical and Logical and lowest on Aural. (my wife is not surprised to hear that I don’t learn by listening) That is why I use my bank’s online platform, which has graphs and allows me to download into Excel, while I also prefer to pay in cash. I also have a phobia about talking about money in public. If I had found this out before I wrote this blog, maybe it wouldn’t have taken me so long to develop a spending plan…

Once you know your learning style, look at different spending plan tools and find one that seems to get you.  Then comes the hard part: you need to use it. Try it for 3 months and if it is too much work for you, find another one. Don’t quit – keep experimenting until you find one that “gets” you.

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4 Life Lessons I Wish I’d Learned 30 Years Ago

July 14, 2017

The other day I started thinking, “If I could travel back in time, what advice would 55 year-old me give to 25 year-old me?” The list grew and I started to get depressed, so I decided to limit it to two things financial and two things non financial in hopes that you might find some life wisdom in here as well.

Here are the conversations I imagine I’d have with my younger, cockier, less experienced (but oh my, much thinner…) self:

Non financial life stuff

  1. Keep in touch with people who are important to you. In about 20 years your daughter will ask you and your wife (whom you haven’t met yet), “Were all your friends in college so nice?”  The answer is no, you just got rid of the ones that weren’t good for you throughout the years. There will also be some that you regret not keeping in touch with. (There is this thing coming called Facebook which will make this easier.) The bottom line — it’s worth it to keep in touch with the people who are important to you, as they will make life better throughout the years.
  2. Focus on things that you do well and find ways to compensate for things that you don’t do as well.  I would tell Young Steve that spelling will always be a challenge for you, but there is this thing coming called spell check that will help, so don’t waste too much time memorizing words. (Although 2017 spell check still cannot figure out what word I am trying to sspaejkll on occasion.) You will be driven to overcome things you are not very good at and pay less attention to what you are good at, but this is a folly — it should be the opposite. I learned this from a book called “Strengths Finder,” which was published in 2007, and showed me I’d wasted a lot of energy over 20 years trying to “fix” myself rather than focusing on what I already did well. Figure out what your strengths are, what you are really good at and focus your time and energy on improving those. Worry less about your short-comings. (And if possible, write that book yourself in ’05 so you can retire early on the revenues from it!)

Financial life stuff

  1. Figure out a spending plan. I know you hate the word budget – it sounds like diet and they both tell you something you cannot do and you hate that. So here is the trick you play on yourself: it’s not a budget, it’s a “spending plan,” where you plan what you want to spend your money on. And you need one ASAP. Rather than beating yourself up for what you wasted your last paycheck on, it is time to think about what you want to spend your next paycheck on. It doesn’t mean you can’t spend money, it means you will be spending money on what is most important to you. For instance, if you want to take that nice sailing trip with your friends next summer ($1,500), that means taking your lunch to work 3 days a week ($10*3*50 weeks =$1,500). 2017 tools that can help do this include Mint.com, everydollar.com, Easy Spending Plan, your bank’s system or any another system/tool/app available. The particular system doesn’t matter; what matters is that you have a way to make sure you are spending your money on what is important to you and that your system gets you and is easy to use.
  2. Set aside 30 minutes a week to think about your finances to make sure you focus your time and money on what is important to you. Right now, your thought process is what is politely described as “inspirational” (also known as scatter brained), but when you find something you like you really dig into it (also known as OCD). If at 25, not married, no kids you cannot find time to take care of your money, you never will find time to do this. Make the time now. Turns out that you are a morning person, the latest you wake up is 6:30 (you used to think Dad was weird when he did the same thing) and that is when your energy is highest, so do it then. Set an appointment every Sunday morning from 7:00 to 7:30 to go over your finances. Look at what you are spending your money on and make sure it matches your spending plan. Make adjustments as necessary. Review your investments to make sure you are taking an appropriate amount of risk. The bottom line — focus your time and money on what is important to you.

Then I thought, “What do I think 85 year-old Steve will want to tell 55 year-old Steve?” Guess what – at this point, I think it would be the same thing. Only time will tell!

 

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Why and How to Have Weekly Money Talks

March 28, 2017

When I first got married, money talks in my home looked something like this: I brought out my spreadsheet and the four other programs I was working on to have a financial summit with my husband. He mentally tuned out the second he saw the first version of the budget and was in another place (I suspect it was at a college football game) by the time the meeting was over. Over the years, I learned to simplify my budgets and my husband brought both his mind and body to the meeting. My colleague Steve offers great insight into how to make couple money meetings work that I wish I knew from the beginning:

I have a confession to make. For over a decade in my professional career, I was the pot calling the kettle black. Almost 20 years ago, I followed the advice of a fellow CFP® professional and started advising clients to schedule a weekly 30 minute money meeting to focus on their finances, but I wasn’t doing these myself. Then about 7 years ago, I started having those meetings with my spouse and guess what? They work.

The basic idea is this. Many of us can go a month or longer and not spend any time thinking about our investments or whether we are spending our money on what is important to us instead of where we have always spent it. We pay our bills but don’t think about our spending plan.

On a side note, I hate the word “budget.” It sounds like “diet” to me. They both are limiting and negative.

A friend of mine told me “Steve, you’re a financial planner. Don’t think of it as a diet. Think of it as an eating plan.”

That works for me. I don’t think of my spending as a budget. I think of it as a spending plan.

The ideal time to have a conversation about money is not when you’re late for work, trying to get the kids off to school and have a deadline that is consuming all of your mental energy – been there done that. The Weekly 30 Minute Money Meeting can either be with yourself or with your partner. The rules are the same:

1.You cannot change the past. It is a waste of time to argue about or beat yourself up about things that have already happened. Learn from your mistakes (we have all made them) so you don’t repeat them in the future.

2. Be thoughtful and focus on the future. With my eating plan, if I choose to have a 1,500 calorie breakfast (which is delicious), I’d better plan on eating a lot of salad with little dressing for the rest of the day. If I choose to spend my future paychecks now (think credit cards), I’d better plan on not spending any other money.

3. Hold yourself accountable. Notice I didn’t say hold your partner accountable. We are adults and need to hold ourselves accountable. If you make a mistake, own it and try hard not to repeat it.

4. Schedule the meetings when your energy is high. I am an early morning person. I wake up at 5:30 am every day no matter the time zone or if it’s a weekend.

The ideal time for me would be 6:00 to 6:30 on Saturday morning. My wife’s response to this suggestion is not fit for publication. We meet from 11:00 to 11:30.

These are some tricks to make the most out of your meetings:

  • Put them on your calendar and if you think about something, pull your phone out and add a note to this week’s meeting. That way you don’t forget it.
  • Use the meetings to develop a spending plan. Your spending plan needs to get you, not the other way around. Look at your bank’s online tools, other online tools like Mint, our Easy Spending Plan, a custom made Excel spreadsheet or paper and pencil. Try different ones until you find the one that gets you.
  • Find an item in your spending plan that you buy because you have to but don’t enjoy spending money on and see if you can cut that cost.  Think of auto insurance and electricity. Any money you can free up from those is money you can save or use for something you want.
  • Run a retirement estimator calculator and make sure you are on pace to retire. Update this at least once a year.
  • Run a DebtBlaster calculator and make sure you are paying off your debt as efficiently as possible. Update this every 6 months or when you pay something off.
  • Review your investments at least once a quarter and make sure you are taking an appropriate amount of risk.

As someone who has done this for a while, the benefits of these meetings include reduced financial stress, you and your partner having a plan and fostering honest, direct and sincere conversations about money. Start now. Don’t wait a decade…like some people.

 

 

What Our Planners Would Tell Someone Just Starting Their Career

September 02, 2016

Last week, I wrote about conversations I had with some newly hired recent college graduates. That post was about steps I talked about with them in our one-on-one coaching sessions   (all good stuff, if I must say so myself…and I must!) After I had written that and before it went live on our blog site, one of our other financial planners sent an email to the planning team to ask what advice they’d give someone starting their career today – a “what would you tell your 22 year old self” kind of email. Here are some of the responses from our planning team along with some of my editorial commentary (in italics):

Create a budget. I despise the word “budget.” I prefer “spending plan.” Figure out how much money is coming in and develop a spending plan that comes in well below the cash inflow.

Create a plan to move up or out of your current position in 3 years to stay relevant and in control of your career and salary. Always improve your skill set and fight for your own career. No one else will do it for you.

Start a side business based on your passion to help accelerate your debt payoff, increase savings and fund other financial goals that your salary might not cover. That side business could turn out to be what becomes your full time pursuit and source of greatest wealth in the long term, but you won’t have that chance if you don’t ever start it.

There is no need to show off to your friends because you are the one that landed the new job with cool title. The people with the flashy cars and lifestyle are usually either getting support from family members or are fueling that lifestyle with lots of debt.

Build friendships with those that are financially like-minded and encourage each other. It’s hard to be the only one that orders water instead of drinks almost every time you go out because you are the only one that has a spending plan. Don’t let peer pressure cause you to lose your spending discipline.

Use the same creative mindset you had in college as it pertains to money. If you could figure out a way to have a great weekend and only spend five bucks back in school, why should it change now that there is income. I joke that I had more cash flow when I was a starving college student than when I was a professional financial planner with a great job.

Get on a plan ASAP to pay off any student loans. It definitely needs to be a part of the budget. A time frame for them to be paid off would be best. Don’t just elect deferment or forbearance because it’s an option. Truth.

Set up an intentional savings account, even if it’s just $25 to start. Set up a transfer of at least $25 a paycheck to get in the habit of seeing how painless it is. Then boost it to get to $2,500 within the next year. An emergency fund can prevent the need to tap into credit cards when the car needs brakes and tires.

Don’t take on a deluxe apartment or mortgage until the student loans have been dealt with. They’re a mortgage in their own right. Live way below your means. Americans spend way too much on housing as a rule.

Get the match at work at the very least if you have student loans and try for 10% or more deferral if you don’t have student loans or after they’re under control. Early saving is HUGE in your financial future.

Be thoughtful about what you spend your money on. You work hard for it. Set a 30 minute weekly money meeting with yourself to go over your finances. Whether you’re just starting out or have been in your career for decades, this is just flat out solid advice.

This is a lot of info, but it’s an especially useful list for recent grads just getting started. The decisions they make now will have a huge impact on the rest of their financial life. My daughter is beginning her senior year of college so in less than a year, she’ll be graduating, and I’ll be printing out this blog post and last week’s to help her get her financial life started in the best way possible.

 

 

Building a Strong Financial Foundation

August 02, 2016

One of my favorite things to do is to talk to employees or honestly anyone about their finances. I find that some of the best guidance I give comes from other people. I also get a lot of insight as to why people find themselves constantly in a financial hole.

As I was doing a series of financial consulting appointments, I started to notice a trend in people wanting to make the right financial decision but not in the right order. My mantra to all is to look at building your finances like building a house. If you do not lay the right foundation, your house will crumble at the first sign of stress. For instance, if you start paying off debt with no savings, eventually life is going to happen and you will either have to stop paying on your debt to take care of the emergency or worse, get into even more debt because there was no cash to take care of the expense. Here are some steps to lay down a strong financial foundation:

1. Create and stick with a monthly spending plan. The greatest resource you have to help you achieve your financial goals is your income. If you do not have a written plan for how you are going to spend your income, you may overestimate how much you can spend and have nothing left over for emergencies.

Having a monthly spending plan is an important foundation to your finances because you need to know how much money you really have to use towards goals. It will also give you insight into how much you need in savings and how much you can actually save.Consider using websites like Mint to create a realistic spending plan to account for your spending.

2. Have an emergency savings account. An emergency fund is a foundation to a great financial plan because it makes sure you can take care of the unexpected like paying your mortgage if you suddenly lose your job or replacing your transmission without having to go into debt. I actually label my emergency savings account as “debt free insurance.” I found labeling the account is a constant reminder to my husband and myself that the purpose of it is to protect us from having to use debt to cover emergencies. This also prevents us from getting tempted to use this account for non-emergencies.

If your emergency account is at ground zero, break up your goals. First, shoot for a goal to get $1,000 into the account as soon as possible to cover minor emergencies and then set a goal of at least 3 months of expenses. Consider setting up automatic payroll deductions to reach your goal.

3. Pay off high interest credit card debt. For many that carry high interest credit card debt, they will save more money by paying off the 13-20% interest than they will make in an investment averaging 6-10%. No debt also means that your money can go towards your financial goals and not your creditors’ bottom line.

I had a meeting with a wonderful young woman who was contributing regularly to a Roth IRA but was carrying credit card balances with over 20% interest rates. I told her the best investment she can make is to pay off her credit card. We used the DebtBlaster Calculator to come up with a strategy to pay down her debts. She was surprised that she could pay off her debt in less than ½ the time by paying off her higher interest rate first, adding an extra $100 a month and committing ½ of her average tax refund amount to her debt.

As you look to getting your house in order, make sure you lay a foundation that can withstand the test of financial stress. It may not be fun. However, your foundation will help you withstand the financial crisis that will inevitably come and help make sure that whatever else you build does not buckle at the first sign of financial stress.

 

How To “Budget-Bust Proof” Your Spending Plan

September 01, 2015

Okay, I am going to call this Confession Tuesday. I have spoken to so many people that struggle with creating a budget. I can hear the guilt and even shame in what seems to them like their inability to live within their means. Continue reading “How To “Budget-Bust Proof” Your Spending Plan”

How To Swallow An Elephant

August 25, 2015

How do you swallow an elephant? One bite at a time. The first time I heard this statement my first thought was: “Yuck! Can we come up an analogy that involves eating an over-sized sundae instead of an elephant?” Once I understood the concept, it became my mantra. Whenever something feels overwhelming, especially something that does not seem like fun, I automatically think, “one bite at a time.” Continue reading “How To Swallow An Elephant”

Your 4 Week Financial Check-Up Challenge: Week 2

June 01, 2015

A couple of weeks ago marked the beginning of a Four Week Financial Check-Up Challenge. For some, these “best practice” financial behaviors are a part of the daily routine and you already create world class budgeting spreadsheets and could teach classes on making every dollar count. For others, just the thought of getting financially naked and examining the state of your financial affairs is a bit overwhelming. Continue reading “Your 4 Week Financial Check-Up Challenge: Week 2”

Will You Be A “Boomerang Buyer”?

April 08, 2015

Since 2008, over 14 million homes have been lost to foreclosure. It may have been caused by a job loss, illness, or other heavy financial burden, but whatever the cause, losing a home can feel like a financial defeat….NOT SO! In 2014, roughly 10% of home purchases will be made by homeowners who lost their home to foreclosure or short sale between 2007 and 2013. These new homeowners, affectionately called “boomerang buyers,” did not give up on their desire to own a home and you shouldn’t either. Here are some steps you can take following a home loss to get back in a home of your own: Continue reading “Will You Be A “Boomerang Buyer”?”

How Much Income Will You Really Need During Retirement?

May 19, 2014

We hear a lot in the financial media about the looming retirement crisis in our country and in general, retirement confidence is lacking. Therefore, it comes with no surprise that one of the most frequently asked questions that financial planners receive is “am I on track for retirement?” This is commonly accompanied by this question: How much do I need to save for retirement? Continue reading “How Much Income Will You Really Need During Retirement?”

Save Money With This Quick Two-Minute Drill

January 13, 2014

It is playoff time in the NFL and just four teams are left with a shot at the Super Bowl. (That’s Denver, New England, San Francisco or Seattle just in case you aren’t a fan of pro football or have managed to avoid the fanatics in your life that do care about the proverbial pigskin.) In the spirit of playoff season, I thought that I would accept a challenge from a colleague to put today’s blog post on the clock.  Continue reading “Save Money With This Quick Two-Minute Drill”

7 Ways to Blow Your New Year’s Resolutions

January 06, 2014

Did you make any financial New Year’s resolutions this year?  According to Fidelity, approximately 54% of Americans planned on making one this year. Whether you avoid making New Year’s resolutions or embrace the challenge of making financial changes in the New Year, we all have financial goals that require some attention. Continue reading “7 Ways to Blow Your New Year’s Resolutions”