CHAPTER 7

Chart Your Plan

Change is hard. There is no doubt that tearing down old beliefs and habits and rebuilding from the foundation up is a mighty challenge. What makes it even more potentially difficult is that, not only are we going down to the foundation, we are smashing through parts of the foundation that are cracked or crumbling or downright broken. But hey, what else have you got to do on a Tuesday?

You might be asking yourself, about now, why the heck you are doing this deep dive into your money history and your current behaviors. The answer might be sleeping in the next room, or it might be staring you right in the face when you stand in front of the mirror. And, are you ready for this? Consider that future generations will also be positively impacted by the great strides you make in reshaping your beliefs, behaviors, habits, and mindset.

You doubt my statement? Think of how you learned about money, the lessons learned in childhood, and how that shaped your life today. The same held true for your parents and their parents and on and on. We pass on our beliefs to our children, regardless of whether they are positive or not. Do you wish to relegate your children to the same broken beliefs and experiences, or provide them with a healthier, more balanced, and satisfying model for living without the negative influences? By creating a new set of beliefs, you then have the opportunity to create a new future for yourself, your children, and for future generations. It’s a veritable avalanche of good stuff!

Regardless of whether you are the consummate avoider or the constant worrier, or your past beliefs or actions have led you to crisis, you can and must confront and deal with these beliefs and sink them into the circular file like Michael Jordan draining a three. Who we are today doesn’t have to relegate us to a lifetime sentence of misery. We can become the creative force to be something better for ourselves, our loved ones, and future generations.

In this chapter, you will begin to chart the plan for your new financial future. The first stop is your “moment of truth,” kind of like which fork in the road you will take. Next, you will begin to focus on creating your life by design, and the foundational statements on which your new life is built. You will again go back to the numbers because, without financial truth, it’s all just words. Lastly, you will learn to activate the words, numbers, values, and goals to create a pathway for doing.

The Moment of Truth

Life by design is a concept of awareness, acceptance, and the willingness to replace old, broken ideas with more positive ones—you know, like the new billboards you wrote in Chapter 5 and are reading multiple times a day. (You are reading them, right?) This story is a great example of coming to a moment of truth, where a lifetime of guilt and destructive messages come face to face with the possibilities of change.

Ted and Giselle, a couple in their late 50s, are in a financial mess. Their work situation is unstable and they have amassed a massive pile of consumer debt. To put it bluntly, their situation is dire: too much debt, not enough income.

Giselle sits in front of a stack of papers enumerating each and every aspect of their financial woes. She is looking at the numbers. Ted is looking at nothing. The only way I can describe his expression is defeated.

I start the meeting the way I do each new encounter: asking, “How can I help?” What I hear from Ted is a long and self-blaming tale of disaster about how he single-handedly failed his wife and grown children. He places all the responsibility for their hardship on his own head. If there was a club nearby, he would have bludgeoned himself senseless.

After a solid 10 minutes of listening, I interrupt his self-flagellation and ask him to pass me a plastic-wrapped biscotti from the canister on the conference room table. My request baffles him, and he hesitantly complies. I take the biscotti, lean forward and use the biscotti to tap him on each shoulder. Looking him in the eyes I say, “I absolve you of all your sins.”

Confused, he glances over to his wife and then at me. “Now that you have been absolved, are you ready to change your view from dwelling on the past to thinking about the future and possible solutions?”

The meeting dealt with hard truths. Ted was so immersed in his own suffering and the suffering he had put his family through that there was literally no space for him to create a new, more positive reality.

Me: “So, Ted, you have devoted the last 10 minutes of the meeting telling me how terrible you are and all the problems you caused by your habits. I get it. Mistakes have been made. But we are here now and I believe it would be more useful to talk about where we are going rather than where we’ve been. Agreed?”

Ted: “Yes, the weight of the past is debilitating. It would be great to focus on something else. But, honestly, I don’t know where to begin.”

Me: “Super, you don’t have to know. I do; that’s my job. Your job is for you and Giselle to think about: How would your life be different if you were debt-free?”

(long pause)

Giselle: “Wow, imagining having no debt, no calls, no pressure from bill collectors would be like heaven.”

Ted: “I think I could look at my family and not feel like a failure.”

Me: “Great. Sit with that for a minute, let it sink in, and marinate in your hearts and minds. Imagine you are debt-free, you are not getting harassing phone calls, and you are in control of your money life.”

(another four- or five-minute pause)

Ted and Giselle sat there, eyes closed, tears began to flow.

Giselle: “Do you think it’s possible?”

Ted: “It has to be, right? I mean, we cannot go on this way. We have to make this happen.”

Giselle: “There is no other option.”

Ted nodded.

It was a moment of truth, in which no other possibility existed; despite the pain, the change, the denial, the shifts, there was no turning back.

In order to arrive at your moment of truth, you must create such powerful reasons for change that there simply isn’t any better option, even taking into account the pain that will be involved in making changes. Imagine your life without change, without focusing on your true values. What does that look like?

Don’t like pain? Who does? But know that by remaining the same, the pain, while perhaps deferred a bit, will inevitably be disastrous! You can’t hope or wish it away; your life-long broken money mindset is like a slow-growing cancer that will eventually destroy your ability to live your values. Worksheet 7-1 provides you with an opportunity to create some powerful ideas on your money mindset and your values.

WORKSHEET 7-1: HABITS, STAKEHOLDERS, AND YOUR PLAN

It’s time to think, ponder, conceive, and create several statements that are facts:

1.   Create a list that contains the ideas of your newly designed life. For example:

•   I am the happiest when I feel financially secure.

•   I feel great when my habits bring me closer to leading the life I deserve.

•   My family and I work together to save wisely, spend rationally, and give generously.

•   I value peace of mind above “things.”

•   It’s vital that I pass on healthy money beliefs and habits to those I love by setting an example that aligns my values with my actions.

2.   Strengthen your defenses. Unless you have immense willpower, you need help.

Who are the stakeholders who are most vested in these life-changing shifts? Who needs to be considered in building your success (for example, your spouse, partner, parent, child, friend)? Write their names and why they are stakeholders.

3.   Chart your progress.

Put it in writing. Make a graph. Create a chart. Keep a diary. Do whatever it takes to see how you are moving in the right direction.

Here’s an example: If you are paying down debt, make a payment every time you get paid. Keep a spreadsheet or list showing each payment and the shrinking balance.

If you are trying to accumulate, the same strategy applies. Record every addition, no matter how small. Let’s say you have coupons to use for your groceries, and you save $14; that amount should be sent to your goal. The same applies for things like savings when gasoline prices come down, savings from elimination of non-valued expenses (i.e., you eliminate cable TV packages in favor of a less-expensive option). Each small change creates an opportunity to save more or retire debt more quickly. There’s no shame in not having every cable channel or in using coupons or promotional opportunities.

4.   Have accountability: Without accountability, we are prone to fall back to old habits. That’s why there are coaches, trainers, counselors, therapists, and advisors galore.

To whom will you be accountable? With what frequency? (I recommend every week to start for the first six months.)

Sometimes, we resist asking for help, usually because of fear and pride. If you wrestle with the idea of asking for help, especially in the area of personal finance, it is yet another obstacle in your path to living richly in alignment with your true values. At this point, you should be thinking, “Well, if you put it that way, I guess I can reach out and get help where I need it.”

Think about what areas require the most help. If it’s technical (for example, understanding why to take out a 15-year mortgage versus a 30-year, or what your asset allocation should be in your 401(k) plan), there are plenty of resources online, such as the National Endowment of Financial Education (www.NEFE.org), your local Financial Planning Association (www.FPAnet.org), and the National Association of Personal Financial Advisors (www.NAPFA.org). There are books galore, such as Financial Fitness Forever by Paul Merriman and Richard Buck, and local adult education courses. Avoid any book that touts “Easy Steps.” There’s nothing blatantly easy and by presenting it as such demeans those who have very limited financial knowledge. Like learning anything, it takes time and desire.

Note of warning: Avoid the seminars sponsored by Insurance salesmen and stockbrokers (even if they have CFP certifications). These seminars, aka rubber chicken dinners where you go for a free meal, are a cheesy attempt to get unsuspected folks in a room to sell them annuities, life insurance, or other investment schemes.

If the help you need is more in line with psychological counseling, there’s the American Psychological Association (www.APA.org) or National Alliance of Professional Psychology Provisers (www.NAPPP.org). Talk to your physician about a referral to a highly regarded therapist. As I said in the beginning of the book, I am not a therapist, but it seems to me that those who practice cognitive behavior therapy (CBT) might be most aligned to building new and strong habits.

Taking Small Steps to Get Into SHAPE

Each step forward, closer to security, is movement in the direction most important to you, your family, and your values. We call it getting into SHAPE: Savor—Honor—Appreciate—Praise—Exalt all your great work. Maybe this seems silly to you, but the research is clear. People who have positive reinforcement and support are more likely to be successful than those who don’t. So bathe in the Praise, marinate in Appreciation, and soak in the Savoring. It’s necessary and important to feel that each small step has meaning.

Avoid at all costs the “it’s only…” thinking or rationalizing. That attitude minimizes your efforts and renders the dollars as irrelevant, rather than vitally important. Remember: We’re rebuilding habits. The $5 savings may not be the difference between success and failure, but it is a step toward your goal, not a step away.

Begin each discussion, whether internal or verbal, with the following: “Does this action bring me closer to or further away from my goal?”

If the answer is, “Well, it’s only…” or “It doesn’t matter,” ask yourself whether that is true. It may be; but then again, it might not be. Remember: Just because you think something is true, doesn’t make it so. Think of someone being on an eating plan designed to reduce their weight. If eating one cookie is irrelevant to the goal, so be it, as long as it doesn’t devolve into eating a box of cookies that wind up adding weight rather than reducing.

It’s not the one-time treat that will defeat you, it’s the belief that change will happen without having to deal with internal resistance and external forces (you know, the person that waves the jelly doughnut under your nose when you’re being good). You can bend (in fact, that’s good), but understand the difference between bending and breaking—like where you do a gainer in pike position into the dish of brownies.

Your Money Facts

Way back in Chapter 1, you gathered your financial information. Well, it’s time to go back to that worksheet. What you want to do now is reconnect with the numbers. Thus far, you have been walking in a more ethereal landscape; now it’s time to return your attention, perhaps with a more aware mindset, to the numbers that impact your financial life. Remember: As you learn and more ideas begin to crystalize, go back to your mind map and keep fleshing it out. The more detailed the better.

Beginning with, as Stephen Covey says, the end in mind, you know what your ultimate objective looks like. Right? A life by design, structured to align with your desire for security and choices, and centered on the values you hold dearest is the goal. When it comes to your money, there are two main areas to consider: how much you make and how much you spend. Worksheet 7-2 will take another look at your income and whether you have the ability to increase the top line. Then, you will re-examine your expenses and separate out what is fixed, marginally controllable, and completely discretionary so that you spot areas where change is possible. Time to crawl inside the numbers, this time with greater awareness.

WORKSHEET 7-2: SPOTTING OPPORTUNITIES FOR IMPROVEMENTS IN YOUR FINANCES

Answer the following questions and fill in the blanks to get a clear picture of your income and where it’s going. Tip: Use the numbers from worksheets 1-2 and 1-3 where you can to save yourself some time.

1.   How much do you earn?

2.   What are your sources of income?

3.   Can you earn more?

4.   Are you able to supplement your main income with additional earning?

Note: When I talk about income supplementing, I am not talking about “get rich quick” Internet schemes, work at home on Twitter, or other such scams meant to separate you further from your hard-earned scratch. I am talking about a part-time job that will add to the “In” column.

Now let’s go over to that outflow side of the ledger. Remember the work you did way back in Chapter 1 to get a handle on your numbers?

Rather than just listing expenses, think in terms of five different categories:

1.   Fixed costs: rent/mortgage payment, real estate taxes, condo maintenance, etc.

2.   Marginally controllable costs: groceries, utilities, prescriptions, insurance premiums. (These are expenses that can be controlled to a degree based on your ability to make better decisions.)

3.   Completely discretionary: vacations, entertainment etc.

4.   Debt service: credit cards, school loans, etc.

5.   Taxes: federal, state, and local taxes withheld from your salary; estimated taxes paid or balance due from the previous year. (If you received a refund, deduct it from the total of taxes paid.)

Cash Flow
Year
	Monthly	Annually
Inflow:
Sources of Income:
Primary Employment—Gross	$	$
Secondary Employment
Gifs
Other (bonus, etc.)
Total Inflows (A)	$	$
Outflows:
Fixed Expenses:
Mortgage/RE Taxes/Rent	$	$
Maintenance Fees
Other
Other
Total Fixed Expenses (B)	$	$
Marginally Controllable Expenses:
Insurances (deductible/co-insurance)	$	$
Food
Clothing
Utilities (i.e., heat, a/c, water)
Auto expenses including fuel
Medical/Dental
Other
Other
Total Marginally Controllable Exp.(C)	$	$
Debt Service:
Credit card payments	$	$
Auto loan payments
School loans
Other
Other
Total Debt Service (D)	$	$
Taxes:
Federal Withholding Tax + Return liability	$	$
FICA and Medicare

 

State Withholding + Return liability
Other taxes withheld or paid
Total Taxes withheld and paid (E)	$	$
Voluntary Payments:
Retirement Plan contributions	$	$
Charity
Other
Other
Total Voluntary Payments (F)	$	$
Add: B+C+D+E+F	$	$
Subtract from A - Available Balance	$	$
Completely Discretionary Spending:
Entertainment	$	$
Vacations
Lottery Tickets
Cable TV
Other
Other
Other
Total Completely Discretionary	$	$
Surplus (Deficit) (subtract CDS from Available Balance)	$	$

List your monthly outflows under each category. If the amounts vary, use a reasonable estimate. If there are costs that come up annually or seasonally, cut the cost into a monthly amount. Total all four categories to a total monthly outflow amount.

Next: Subtract your income from your expenses. If there’s money left over, otherwise known as a surplus, where is it? Have you captured it, or has it somehow slid through the cracks into unknown expenditure?

If you have a deficit, we’re just going to have to be creative. There are two clear approaches: Throw your hands up and give up, deciding it’s too difficult, too mentally straining, too many obstacles to achieve success. OR you can get creative and take a baby step in the right direction.

Beginning to “Eat the Elephant”: Making Small, Easy Changes

How in the world do you eat an elephant? As the old joke goes: one bite at a time! Yes, my friends, we cannot take your lifelong habits and make them disappear with the blink of an eye. For those of you who have deduced that the Powerball is the best strategy for handling your money misery … as we say in New Jersey, “Fuggedaboudit!”

Here’s a way to start on your new menu of elephant munching: Grab your Cash Flow Worksheet, adjust your lobster bib, and let’s dig in!

Begin with your list of discretionary expenses. Remember: You are focusing on your values, need for security, and peace of mind (think significantly increased pillow factor here).

What can you eliminate?

What costs can you shave back and by how much?

Total those costs and set up an automatic transfer from your checking account to a savings or separate account that you will use for debt elimination, asset accumulation, or another goal that equates with your financial musts.

That was easy, no fuss, no muss, no mass destruction, and very little in the way of pain and suffering. You’ve just made some pretty easy decisions to move closer to your values. In essence you are saying, “I value being debt-free more than I value eating out three times a week.”

Think of it this way: We make choices every day. A lot of our decisions are based on convenience and lack of focus on our values. We employ the “it’s only…” rationalization. Example: Buying paper towels at the organic market, rather than the discount store. We might value the organic produce and fish at the organic market, but paper towels might be significantly more money there than at the discount store. But because you are already at the organic market, we rationalize “it’s only” this amount of money and the cost of gas to drive the 3.7 miles will more than make up for the difference in price. Right? Exactly! Except no—you’re just being lazy.

We do what is convenient rather than what is in our best interest. Internet shopping has aided significantly to the overspending problem. An e-mail appears in your Inbox with all the specials and offers that are exactly what you want, need, and must have. Click—it’s yours.

If you are receiving daily e-mails from your favorite site, unsubscribe, turn them off, and stop inviting temptation. It’s like eating an arsenic-laced chocolate chip cookie because, well, it’s on sale and you do love chocolate chip cookies.

There are so many small and easy steps you can take to help you on your quest to live the life of security and financial satisfaction. Each small shift is a conscious decision, rather than being constantly nudged by e-mails, commercials, people you know who want “company” in their habits, newspapers, television, movies, magazines, billboards, you name it. Wherever someone has the opportunity to tempt you, from the Audis prominently displayed in the Ironman movies to the ads on your computer home page. It’s a constant stream of commercially fueled temptation to part you from your money and move your further from your dreams.

Continuing the Meal: Making More Difficult (but Necessary) Changes

I feel you tugging at my sweater, telling me that those discretionary expenses are just not enough to move the needle. Yes, of course, for many people, eating out one less night a week is not going to do it. We need to drill down to the next level. We need to examine the expenses that are marginally discretionary.

This is where some work is necessary. For example, your insurance policies might have very low deductibles and unnecessary benefits. You might have been talked into an expensive whole life insurance policy, or you might be keeping your thermostat too high or too low, depending on your geography and season. Each change results in a potential cost saving benefit. Note: If you change the deductible on your homeowner’s policy from $250 to $2,500, make sure you have that $2,500 reserved in case of a claim. Find an independent agent who can help assess your current policies and where you can make changes that save money without taking imprudent risk.

Activating Your Moment of Truth When Small Changes Aren’t Enough

Okay, you’ve cut back on your discretionary costs and saved money on the controllable costs (where you buy your groceries, clothes, etc.), and you’ve done a spectacular job of capturing the savings and putting them toward your primary goal and it is still not enough. What then? Well, that’s where the moment of truth comes into play.

We all have moments of truth at various times in our lives. Deciding to get married, raise a family, take a job, quit a job—all are moments of truth. If you can find a way to close the gap by working an extra job, by all means, you won’t be the first person on the planet to work a second job, and it might just be temporary until the crisis has passed. You are making huge strides in working toward your definition of success.

But what if it is still not enough? This is where we need to find all the strength and determination we can muster. Not because we happily make these choices, but because they are necessary. You might need to attack the fixed expenses, which means a “structural change.” This means that the fixed expenses need to be altered so that your monthly burden is reduced. A structural change is a nice way of saying you might need to sell your home and move. You might need to rent someplace where the costs are less until you have the financial underpinning to do it comfortably.

There is no shame in having to make these changes. It happens. You’ve heard the expression, “Sometimes you have to take a step backwards to move forward.” But, hey, reality check: You are where you are and more than likely it didn’t happen without your involvement, and it’s not going to improve without your involvement, either.

Sometimes, it is a result of our own less-than-enlightened decisions; other times, it is an offshoot of an uncontrollable situation (e.g., job loss, sickness or death in the family). The real shame is in the constant suffering you experience trying to navigate a situation that is centered on pain. Remember: You didn’t knowingly take on your money mindset (discussed in Chapter 6). You became who you are—your beliefs, behaviors, and habits—as a result of your experience; what you saw through very young eyes. You did not purposefully adopt destructive habits.

But that doesn’t mean you have to carry them on to your dying day and pass them on to your children. It is a choice. It’s just not easy, until you have the time, space, and mindset to create new, more supportive habits. You have to believe that it rises above the level of “it would be nice if…” to “it must happen.” Only then can you begin to creatively shape new possibilities.

You need to activate your creativity and desire to break bad habits, become more mindful of the decisions you make (life by design), keep your focus on your values, and get excited in creating a spectacular life. In Thomas Stanley’s book The Millionaire Next Door, he talks about the successful person who has built a life of financial security. These successful people put greater value in their peace of mind than in the watch on their wrist. They don’t require the trappings to prove their success to anyone. They are secure in the knowledge that they are okay and they will not be sucked into spending money on things that hold little value.

As you commune with your inner artist, know you are creating this work of art for you, your family, your core values, and future generations. Your daily meal of elephant will become tastier and tastier as you get accustomed to the change in diet. Your creativity and flare will add the necessary spices and flavors to make it work.

Bon appetit.