TIP 23

PLUG THE MONEY DRAINS

       Money isn’t everything as long as you have enough.

MALCOLM FORBES

The most common mistake I see when coaching people in the area of money is their believing that the quickest and easiest way to solve financial problems is to figure out some way to make more money. This is why people fall for get-rich-quick schemes every day. The problem with thinking like this is that money is not the answer to most problems. A study evaluated lottery winners and the impact winning the lottery had on their lives six months later. The same researchers also studied another group—people who had recently been in accidents that made them paraplegics for the rest of their lives. The study revealed that six months after winning the lottery and six months after becoming a paraplegic, both groups had the same levels of happiness. Proof that winning the lottery will make you just as happy as becoming a paraplegic!

With that in mind, the fastest way to solve your money problems is to get to the root of why you are overspending or in financial trouble in the first place. If you don’t figure this out first, any extra money you make will just get washed down the same old drain. If you plug the drain, any extra money you make will add up quickly and begin working for you.

What are the typical money drains? Curiously enough, having unmet emotional needs is often the hidden source prompting people to overspend. Culturally, we are conditioned by the media that if we need something, we just go out, buy it, and voilà! We’ll feel fine. Unfortunately, this is an illusion. Ads appeal to our emotional needs more than our actual needs. However, the only way to fill an emotional need is to figure out what that need really is and then go get it met. No amount of money will ever be enough to fill your emotional needs. There is just no getting around this one (Tip 43).

Let me give you an example. Linda, a very ambitious, single, advertising executive in Chicago, made plenty of money by most standards. When she started as a coaching client, she had over $19,000 in credit card debt, and every paycheck only paid off the overdraft on her checking account. She lived in a large and beautiful apartment by herself and was paying steep rent. She had expensive tastes and wore designer clothes and shoes, which she justified saying that it was important in her work to look up-to-date for her clients. At age 34, Linda’s only savings were the company retirement plan, which she had recently taken a loan against to reduce one of her high-interest-rate credit cards. She was living on the edge, and it kept her trapped in her job and stressed to the max, always juggling one card to pay off another. She knew she had to do something because she was at the end of her rope. One of the early coaching assignments I gave Linda was to take the Emotional Index Quiz (free at Lifecoach.com) to discover her top four personal and emotional needs. This was a real eye-opener. When she started the coaching program, she had no idea that she was overspending because she had an unmet need to be cherished. Every time she bought something new she felt, for a moment, special. Unfortunately, the spending high was short-lived. Often she never even wore the clothes she bought. It was more about the spending than the having.

Once Linda realized that what she really needed was to feel cherished, she began to think of ways she could feel cherished that wouldn’t cost much money. Her coaching assignment was to find five people who would gladly cherish her and ask them to do one thing a week that would make her feel loved. The very thought of asking people to cherish her made her feel uncomfortable, which just confirmed that it was, in fact, her unmet need (if you don’t feel awkward and uncomfortable asking someone to fulfill one of your needs, it probably isn’t the real need driving your behavior). After some prompting, Linda asked her mother to call her every week and tell her how much she loved her. Then she asked all her siblings to send a postcard once a week saying some way they loved her. The point of this assignment was to overdo it—to so fully and completely satisfy her need to be cherished that it no longer drove her behavior. Don’t worry. You don’t have to do this forever, just six to eight weeks, and you’ll feel your needs disappearing. As Linda started to feel completely loved, she noticed an interesting thing: she could now walk into a store and not feel compelled to buy something. Her insatiable desire to shop was disappearing naturally.

With the need to be cherished satisfied, Linda was now ready to make some lifestyle changes. She agreed to keep a detailed spending log tracking every single purchase down to the penny for one month so she could see where her money was going. She listed all her fixed monthly expenses (rent, electric, gas, groceries, insurance) and added up all of her variable expenses (eating out, buying clothes, getting manicures, etc.). She was shocked to realize that she was spending over $10,000 a year on clothes and shoes. She also saw how little daily expenses were adding up. She easily spent over $10 a day eating lunch out. This was $2,400 a year for lunch! Her morning coffee and bagel seemed insignificant, but they added up to $840 a year. Linda decided to make some small changes to her lifestyle. She took lunch to work, ate breakfast at home, and decided to buy only one or two key pieces of clothing to update her wardrobe each season. Next, she looked for a smaller place to live, but decided she loved her apartment and would rather take in a roommate. She found a roommate who traveled frequently and was happy to split the rent.

By plugging the money drains and keeping a detailed spending log, Linda was now painlessly saving $1,400 a month. She put $1,100 of this toward her debt and the other $300 into a savings account. Linda felt more in control of her life than ever before.

She had another interesting revelation: she had been waiting for a man to come and rescue her and pay off all her debts. Of course, now that she had her debts under control, she started attracting successful men. You are much more likely to attract people if you don’t need them. If you are waiting for your knight in shining armor or rich princess to make your life easy, get your own financial house in order first.