CHAPTER 1
Beginning Your Journey to Overcome Money Misery
Money misery is a condition suffered by too many people in our society. Though I am certain there is no insurance code for this diagnosis, there probably should be. It can come from our internal beliefs, behaviors, and habits, or can be supported from external sources. Money misery can best be defined as feeling frustrated, angry, dissatisfied, confused, or generally lacking in comfort or security around money issues. Not having enough money left over at the end of your paycheck; being burdened by debt that never seems to end; and feeling less successful than your friend, neighbor, colleague, or family member are just a few examples of money misery. In other words, whatever makes you feel insecure, insolvent, or in a cycle of financial constraints is ripe for money misery. You might say, you know it when you feel it.
We are treated every day to “news” of the rich and famous—their opulent lifestyles and the rarified air they breathe. The 1-percenters live an existence that most of us can’t even hope to experience. Yet their antics and possessions are everywhere for our consumption.
These dramatic differences can make us feel like there is a deep separation between “us” and “them.” And it seems that being “them” is way better than being “us.” If that doesn’t lead us right into money misery, I don’t know what does.
Let’s be 100-percent clear: Our money misery does not appear out of thin air. We are either taught that possessions equal satisfaction, or we come to that decision by viewing the world around us and seeing ourselves as lacking. Our desire for success leads us to a neverending loop of want. “He who dies with the most toys wins” is a worthy mantra.
Money misery comes from how we interpret what we see versus who we are—you know, what we consider “normal.” Our idea of normal comes from the messages we learned growing up. Your parents may have grown up poor or wealthy or in another country—and their experiences became their reality. Those experiences formed their belief system about correct thinking and action, which they more than likely passed on to you. After all, through a child’s eye, why would you question what appeared normal?
My grandparents came to this country without money, security, or a job. They figured out how to survive and scraped by with only meager resources. My grandmother would move from apartment building to apartment building during the Depression—wherever she could find a month or two of free rent. That made the difference between starving and surviving.
So of course my father grew up with these lessons firmly implanted in his psyche. His normal was to save, save, save. Never hire someone to do something for you if you could figure out how to do it yourself. His frugality was taken to extremes: His internal “drivers” had him on high ladders, scraping shingles and painting the house, into his 70s. It was stupid to everyone else; to him, there simply was no other option. His money misery came in the form of never feeling comfortable with his resources, because you never know when the next Depression will wipe out everyone.
Money misery has other faces. Measuring yourself against your friends, neighbors, and relatives buys you a ticket into a life of constant competition for first place. There is no comfort in second place—only angst, anxiety, and misery. Overspending and taking on debt out of misplaced guilt is a terrible companion through life. “But I only wanted my kids to have it better than I did!” is just passing on misery to the next generation.
Can we agree that there is more than sufficient money misery around us? Extreme and highly visible wealth possessed by the few stands as a symbol of what everyone wants, which creates a cycle of dissatisfaction and misery. Living as “less than” is not living; it is an existence of pain.
Fortunately, there is a path out. It’s not a 12-step program. (“Hi, I’m Carol and I live in money misery.”) But The Feel Rich Project is about understanding that your beliefs around money and values, in most cases, stem from your childhood and how you see yourself in the world. They set you up for the rest of your life. Without thoughtful, insightful action, you are primed to listen to the shadowy voice that whispers “I want,” “I deserve,” “I need” in order to feel good. You turn to retail therapy to pacify the feeling of not having enough, which invariably turns into yet more misery. The cycle continues.
Some examples: the home-buying spree that led to the real estate bubble bursting and a deep, painful recession. Maybe you bought more house than you could truly afford. Or you tapped into your equity to fund vacations or an over-the-top remodel.
Or maybe you got mired in credit card debt and are walking the razor’s edge of financial insolvency. All it takes is one life surprise—you lose your job, your spouse loses theirs, you welcome a new addition to the family, there’s an unexpected death or divorce—for you to tumble into bankruptcy.
So what’s the solution?
First, understand that financial happiness is not a function of how much money you make. There are many people who earn a modest income, live within their means, and have extremely high levels of satisfaction. There are also many people who earn piles of money and are miserable. The idea is to identify the whys of your feelings around money, and move in the direction of what alleviates pain and increases real satisfaction.
Start by separating your money reality from your money fantasy. The rest of this chapter will be devoted to several worksheets designed to gather both quantitative (numbers) and qualitative (feelings) information. The purpose is to help you separate your money reality from fantasy. Your numbers are your numbers, and your feelings are yours. The point is to promote your knowledge and understanding. For example, a young couple asked us to help with their planning by reviewing their situation. What we found was a net worth statement in the red caused by a ton of student loans. They both earned a modest income, as they are beginning their careers. Their cash flow, which you will have the opportunity to create later in the chapter, was pretty much at breakeven—meaning they are paying their bills but have very little left over. Their question to us was, “Can we afford to buy a house?” Our job was to explain that buying a house was impossible without a substantial increase in earnings or a miraculous windfall that would pay off their school loans. The fact that they are thinking of buying a home tells us that we need to help them separate their fantasy from their reality.
Distinguishing Your Money Reality From Your Money Fantasy
Fantasy lives in your head. It’s a nice place to visit, but a lousy place to live your financial life. Our view of reality can be skewed by our experiences. Remember: Just because you believe something, doesn’t make it so. For example, if you believe “Money is the key to happiness” or “Money is the root of all evil,” you might want to consider those beliefs by asking yourself why you hold those beliefs. This isn’t about right or wrong; it’s about whether your beliefs support your values. What we want to get to is objective reality; you know the facts.
The following worksheet will help you to capture some of your core beliefs about money. Use the information gained in this worksheet to begin to see and understand your core money beliefs and areas that either support you or create dissatisfaction in your life.
WORKSHEET 1-1: REALITY OR FANTASY?
Capture your core money beliefs by asking yourself some questions and recording your answers. Quick reminder: These answers are yours; they are private, honest, and real. Ask yourself whether your answers are being tainted with guilt, shame, or some other factor that makes you feel bad.
• What do you believe about success? Examples: “I believe success is best displayed by the possessions I own.” “I believe success is about paying my bills and putting money away for the future.”
• What do you believe about people who are wealthy? Examples: “Wealthy people are selfish.” “Wealthy people work harder than those who are not.”
• What do you believe about people who are poor? Examples: “Poor people are satisfied being poor.” “Poor people just don’t work hard.”
• Is there anyone in your life with whom you feel money competition? Why?
• What makes you worry?
• What provides peace and security?
• What lessons did you learn about money from your mother and your father?
• Was there ever a time when money was not a problem? Why was it not? What made it that way? What did you do differently then that made a difference?
Write down your beliefs, and “tag” them to an example in your life and their source.
I believe: that money should be used to show my success.
Example: I bought that new BMW so everyone knows I’m doing really well at work.
Source: My dad always said we needed to look better than Uncle Jim’s family no matter what.
As you work through this, mark your beliefs that are affirming and positive with a star. And note those that create problems or strife in your life with an X.
Ready?
1. I believe:
Example:
Source:
2. I believe:
Source:
3. I believe:
Example:
Source:
4. I believe:
Example:
Source:
5. I believe:
Example:
Source:
6. I believe:
Example:
Source:
7. I believe:
Example:
Source:
8. I believe:
Example:
Source:
9. I believe:
Example:
Source:
Do have more stars or Xs? Do your money beliefs support the life you want, or have they created a foundation of money misery? The idea is to identify those positives and appreciate them as the strengths you possess. It’s what we build on. It is fair to say that for many of us, we tend to underplay our successes and focus on our problems or faults. I’d like to turn that equation upside down. Let’s begin with a deep appreciation for our successes, what we’ve learned, how we’ve grown, and where we are. Spend some time considering those positives and try to move them up in the order of attention. Now for those damned Xs. The fact is, no one is perfect; no one is free of strife, problems, or weaknesses—it is that which makes us oh-so-very human. Those weaknesses are where we want to begin to improve by gaining knowledge, competence, and mastery little by little.
Did you learn anything new about your money beliefs? Now let’s add in some more reality.
Sticking With the Facts
There are certain truths surrounding money that sometimes get washed away, especially if you’re prone to justifying what you wish to be true. Following are some of those truths:
• Your income is your income. It’s typically controlled by factors other than your desire. Winning the lottery, marrying into wealth, or running the table in Las Vegas should not be factored into your income accumulation strategy.
• Your expenses can be fixed or discretionary, controllable or variable. It is your job to set the boundaries on what is realistic in view of your income, your goals, and your ability to survive unexpected challenges, like losing your job or disability.
• Your money problems rarely, if ever, solve themselves. Your debt doesn’t go away because you wish it to (at least without bankruptcy, which is a whole other bag of problems).
• Money—and managing your cash flow—is active, not passive. You’ll need to take an active role in managing your money life. Blindly handing over responsibility to anyone else or putting it on the “to do later” pile are sure roads to disaster.
• You can’t afford not to get educated about and comfortable with your money. We’re not talking PhD-level here. You don’t need to know everything. You just have to get comfortable with the basics and know when and where to seek out advice. You can’t afford not to make educated decisions.
So what are your money facts? It’s time for the moment of truth when you can see—all in one place—your reality.
Your next task is to get a snapshot of your current cash flow and net worth. You may not be excited about these next worksheets, but if we’re going to take this journey together, this dose of reality is 100-percent mandatory. If you want to figure out where you’re going, it’s best to start by knowing where you are.
A note before you start: This might feel awful, especially if you’re stuck in a less-than-positive position. You might have to take some time to gather the numbers and documents, but it’s here where you need to be spot on with accuracy. But trust me: We’ll get through this. Start with information, honesty, and courage; you are where you are, right? So get to it. It’s the beginning of a very important journey.
WORKSHEET 1-2: YOUR MONEY FACTS (PART 1)
Use this worksheet to assess where you are financially right now: assets, debts, the whole truth.
Net Worth
|
Owner |
Value |
Assets |
|
|
Checking and Savings Accounts |
|
|
Checking Account |
|
$ |
Checking Account |
|
$ |
Savings Account |
|
$ |
Money Market Account |
|
$ |
Brokerage and Investment Accounts (current market value) |
|
|
Individual Account |
|
$ |
Individual Account |
|
$ |
Joint Account |
|
$ |
|
|
|
Retirement Accounts (current market value) |
|
|
IRA |
|
$ |
IRA Rollover |
|
$ |
Roth IRA |
|
$ |
403(b) |
|
$ |
401(k) |
|
$ |
|
|
|
Tax Deferred Accounts (current market value) |
|
|
Annuity |
|
$ |
529 College Savings Plan |
|
$ |
|
|
|
Real Estate (current market value) |
|
|
Primary Residence |
|
$ |
Vacation Residence |
|
$ |
Commercial Real Estate |
|
$ |
|
|
|
Other Assets |
|
|
Business (See note 1.) |
|
$ |
Limited Partnerships |
|
$ |
Trusts |
|
$ |
Total Assets |
|
$ |
|
|
|
Liabilities (current balances owed) |
|
|
Primary Mortgage |
|
$ |
Secondary Mortgage |
|
$ |
Home Equity Loan |
|
$ |
Car Loan |
|
$ |
Student Loans |
|
$ |
Credit Card Debt |
|
$ |
Business Loans |
|
$ |
Total Liabilities |
|
$ |
|
|
|
NET WORTH |
|
$ |
Note 1: Business Value: If you own a business, is it saleable? For example, if you are an independent contractor, you are considered a business, but it might or might not have a value to anyone else. If there is no way to measure value, be very judicious in what number you put down. It’s better to be conservative.
WORKSHEET 1-3: YOUR MONEY FACTS (PART 2)
Detailed Cash Flow
|
Monthly |
Annually |
INCOME |
|
|
Salary |
$ |
$ |
Bonus |
$ |
$ |
Self-Employment |
$ |
$ |
Dividend |
$ |
$ |
Capital Gains |
$ |
$ |
Royalties |
$ |
$ |
Pension |
$ |
$ |
Rental Income |
$ |
$ |
Social Security |
$ |
$ |
Other |
$ |
$ |
|
|
|
TOTAL INCOME |
$ |
$ |
|
|
|
EXPENSES |
|
|
|
Monthly |
Annually |
Housing Expenses |
|
|
Property Taxes |
$ |
$ |
Homeowners’ Insurance |
$ |
$ |
Association/Condo Fees |
$ |
$ |
Home Improvements/Maintenance |
$ |
$ |
$ |
$ |
|
Cleaning Service |
$ |
$ |
Lawn Maintenance |
$ |
$ |
Snow Removal |
$ |
$ |
Other |
$ |
$ |
Housing Total |
$ |
$ |
Utilities |
|
|
Heat Gas/Oil/Electric |
$ |
$ |
Water/Sewer |
$ |
$ |
Garbage |
$ |
$ |
Cable/Internet/Phone |
$ |
$ |
Alarm/Security |
$ |
$ |
Other |
$ |
$ |
Utilities Total |
$ |
$ |
Transportation |
|
|
Auto Insurance |
$ |
$ |
Gas |
$ |
$ |
Maintenance |
$ |
$ |
Parking/Tolls/E-ZPass |
$ |
$ |
License Fees |
$ |
$ |
Public Transportation |
$ |
$ |
Other |
$ |
$ |
Transportation Total |
$ |
$ |
Medical—Out of Pocket |
$ |
$ |
Medical |
$ |
$ |
$ |
$ |
|
Vision |
$ |
$ |
Prescriptions |
$ |
$ |
Other |
$ |
$ |
Medical Total |
$ |
$ |
Insurance Premiums |
$ |
$ |
Health Insurance |
$ |
$ |
Dental Insurance |
$ |
$ |
Life Insurance |
$ |
$ |
Umbrella/Excess Liability |
$ |
$ |
Disability Insurance |
$ |
$ |
Long-Term Care |
$ |
$ |
Other |
$ |
$ |
Insurance Total |
$ |
$ |
Personal Care |
|
|
Groceries |
$ |
$ |
Hair/Salon |
$ |
$ |
Gym |
$ |
$ |
Clothing |
$ |
$ |
Dry Cleaning |
$ |
$ |
Pet Care |
$ |
$ |
Other |
$ |
$ |
Personal Care Total |
$ |
$ |
Entertainment |
|
|
Restaurants |
$ |
$ |
$ |
$ |
|
Hobbies |
$ |
$ |
Vacation/Travel |
$ |
$ |
Club/Membership Dues |
$ |
$ |
Gifs |
$ |
$ |
Charity |
$ |
$ |
Other (Please list.) |
$ |
$ |
Entertainment Total |
$ |
$ |
Other |
|
|
Cash/ATM Withdrawals |
$ |
$ |
Childcare or Eldercare Expenses |
$ |
$ |
Tuition |
$ |
$ |
Home Office/Business Expenses |
$ |
$ |
Alimony Payments |
$ |
$ |
Child Support Payments |
$ |
$ |
Miscellaneous |
$ |
$ |
Other Total |
$ |
$ |
Liability Payments |
|
|
Mortgage (Principal and Interest) |
$ |
$ |
Auto Loan/Lease Payments |
$ |
$ |
Student Loans |
$ |
$ |
Home Equity |
$ |
$ |
Credit Cards |
$ |
$ |
$ |
$ |
|
Estimated Tax Payments |
|
|
Federal |
$ |
$ |
State |
$ |
$ |
Self-Employment |
$ |
$ |
FICA |
$ |
$ |
Medicare |
$ |
$ |
Other |
$ |
$ |
Tax Payments Total |
$ |
$ |
TOTAL EXPENSES AND TAXES |
$ |
$ |
|
|
|
CASH FLOW SURPLUS/DEFICIT (Total Income – Total Expenses and Taxes) |
$ |
$ |
WORKSHEET 1-4: YOUR MONEY FACTS (PART 3)
Let’s extract some observations from worksheets 1-2 and 1-3 and see what there is to learn from the numbers.
My cash flow is:
_____ Positive (more income is coming in than going out).
_____ Negative (more is going out than coming in).
My discretionary spending is:
_____ Under control (i.e., you have positive cash flow and are saving regularly).
_____ Out of control (i.e., you are spending to the extent of your income or creating debt as a result of your outflow).
_____ Is very manageable.
_____ Is somewhat manageable.
_____ Gives me night terrors.
My income is:
_____ Secure and fixed.
_____ Insecure and fixed.
_____ Secure and variable. (Variable income might be a result of being self-employed.)
_____ Insecure and variable.
I have a good handle on where the money goes each month.
_____ For sure
_____ Uh … nope
I save regularly.
_____ Yes, I do!
_____ I save, just not regularly.
_____ Can’t seem to do it on my income.
My net worth is: (This is pretty subjective. If you believe you should have $1 million by the time you reach your 30th birthday, you might not feel good about your net worth, but take a shot at how you feel about how you are building security.)
_____ Satisfactory for my situation.
_____ Fair, could be better.
_____ Let’s put it this way, it’s not positive.
What percentage of your income is spent on debt other than mortgage?
_____ 0
_____ 5–10%
_____ 11–20%
_____ More than 20%
What percentage of your income is spent on mortgage debt?
_____ 0
_____ 1–10%
_____ 11–25%
_____ 26–35%
_____ 36–50%
_____ More than 50%
Based on my numbers: (Remember: This is a solo assessment, so try to keep your thoughts about anyone else’s situation out of it. Your feeling is important, and you will only muddy the waters if you compare yourself to your imagination of your brother’s, neighbor’s, colleague’s, or friend’s financial situation.)
_____ I feel pretty darn good.
_____ I am moderately satisfied.
_____ Help! I need to turn this ship around.
Over the next chapters we will explore more fully these concepts and ideas. I want you to have a baseline of quantitative information on your numbers and qualitative data about how you feel about those numbers to begin to work toward improving the areas that add to your life’s satisfaction.
Using the Knowledge and Information You’ve Gained
What you have here now is a quantitative and qualitative understanding of your money. The numbers are vitally important, but without understanding where your messages, beliefs, and behaviors come from, you are rowing with one oar. You may want forward progress, but trust me: You’ll be going around in a circle.
Your history and belief structure can create the bedrock of sanity and satisfaction or a wickedly unstable foundation that will crumble (typically with you still inside).
You want to look at yourself and how you can make changes—even small ones—to replace broken ideas with strong successful ones. It is not an overnight solution, nor will your transition be flawless. There will be bumps. There will be mistakes. But in the end, you can bring yourself a sense of peace and satisfaction. Just stick with the process I show you in this book to take one step at a time. I’ll be right here with you.
Preparing Yourself to Transform Money Misery Into Satisfaction
Crossing over from money misery to satisfaction can be a minefield. You need to be prepared to not only do your work, but to jump four possible barricades:
• Misery is your “normal.” Think about what you do in your daily routine without giving it a thought: whether you put your left shoe on before your right, the hand in which you hold your toothbrush. You do what you do because it has become your “normal.” If you spend first and think second, it is because you’ve become conditioned to do so. Buying on impulse, deferring savings and avoiding tightening your financial belt is following the most comfortable path of existence. What you’re really doing is deferring pain. You know intellectually that you’ll have to deal with this issue at some point. The question is: How far down the road can you kick that can? You may be deluded by magical thinking—hoping you’ll fill-in-the-blank: win the lottery, receive a big inheritance, find a bag of money, or get an inside stock tip (acting upon which is illegal).
• Judgment of your peers sucks. The fear of being judged by others is a killer (more on this in Chapter 2). It impacts your life from the moment you first start learning to be self-conscious about the reactions of those around you. It guides what you eat and drink, the clothes you wear, and just about every aspect of your thinking. It becomes all about fitting in with your community, your peers, and your family. It’s about that primal part of the brain that needs to dominate or control the environment. And though that might have been really important in caveman days, but when you’re searching for peace and satisfaction today? Not so much.
• You defer making tradeoffs. Until your situation is dire, it’s human nature to do nothing. You can’t feel future pain, so deferral seems like the best idea. After all, no one likes pain (unless you swing that way, in which case, I’m not judging). Pain avoidance is a big seller in our society. Think of it as self-medicating on overconsumption. But it’s a deferral technique that inevitably brings an even bigger pain bill when avoidance no longer works.
• Your financial literacy is lacking. Financial literacy is a huge problem. Our schools don’t have the time or resources to teach it, most parents don’t have the knowledge or the interest, and the financial services industry is a mishmash that can do more harm than good. But there are oases of hope and help. Organizations like the the National Association of Personal Financial Advisors (NAPFA), the Financial Planning Association (FPA), the National Endowment for Financial Education (NEFE), 360 Degrees of Financial Literacy, and the Institute of Financial Literacy have resources to help build a path to a different, more rational, and more satisfying reality.
Transforming money misery into life satisfaction is a journey—not only of financial improvement, but also of self-discovery and awareness. Have you ever experienced a time when you asked yourself, “Why do I think that way?” or “Why do I act that way?” or “Why do I make the decisions I do?” These questions require a degree of courage to ask, and more so, to answer with real awareness. It isn’t especially difficult once you transcend the wall of fear that surrounds you and keeps you from peering into difficult corners. What beliefs might you kick over by uncovering some knowledge?
The reality is, you are not to blame for what you learned, observed, and adopted as normal in your upbringing. But you are responsible if you allow broken beliefs and behaviors to continue once you become aware. Because with that awareness comes the responsibility to adopt better habits and teach valuable lessons to future generations. You have a choice whether you want the cycle of money misery to continue in your life and into that of your children.