Four years ago our finances were a mess! How do you compare?
I time traveled this week! I didn’t even have to try to climb into a DeLorean to do it (which is good because I’m a LOT taller than Michael J. Fox). Instead, I met with a couple for financial coaching session and it was like traveling back 4 years in time and looking in a mirror. My clients were in the same financial position that my husband and I had been in years before. This was a smart couple, doing a great job raising their children, adding value to their community and working hard, but they had negative traction on their finances. They were feeling like they would have a student loan until they died. In short, they were really discouraged.
That was us too, four years ago. We never had much money in either the checking or savings account, and we had lots of debt. We would spend most of the money in the checking account each month to pay for our lifestyle (auto debit for mortgage, utilities, car payments, cable, cell phone), and would use credit cards to fund the rest of our lifestyle (dining out, shopping, entertainment, travel). Then at the end of the month when it was time to pay the credit card bill I would have a mini-heart attack realizing that the remainder in the checking account was not going to pay off the whole of the credit card charges for the month. I would pay off as much as I could, often wiping our checking account out, and rationalize how we would ‘catch up’ later. Of course, we never could seem to catch up! We would use the home equity line of credit to cover the deficit every few months, and hope for a tax refund to bail us out in April. Having debt was stressful and causing a lot of tension in our relationship (sometime I’ll have to write about “The Fight of ’06” (aka “You need to sell that stupid BMW, now”).
Does this pattern sound familiar to anyone??
Our life got much easier once our forgotten great great great Aunt Hilda died and left us a huge inheritance. All we had to do to get our 10 million dollars was spend the weekend in her spooky haunted mansion…..
Hehehe. We didn’t win the lottery. Or get an inheritance or even a raise in the paycheck. What happened is that we learned some great things that helped us to change our behavior!
Common Sense, Dollars & Cents
So how did we change our behavior? We had to stop overspending, learn to say “no” to ourselves, create a budget and then live on that budget. We made a written plan (a kind of flowchart) that we used to help us stay focused on paying off our debt. Where did we get the money to pay off the debt? We sold a few things, but we mostly created a margin between income and spending and that amount went into creating an emergency fund and paying off our huge debt. The end result is that we paid off $110k!!! (See these links for info on selling stuff and ideas to make extra money)
If our method sounds pretty simple and common-sense-like that’s because it is! If we really did have a wealthy great great great Aunt Hilda, this would have been the kind of advice she would have given us.
The knowledge and information for financial wellness is out there, readily available, even without Hilda. There are lots of websites and books that have plans and advice on how to do what we did. The book that most impacted me in this area was The Total Money Makeover, by Dave Ramsey. It’s an easy to read book with step by step general instructions. We took a class, Financial Peace University, which is based on this book.
As a Financial Coach, my job is to help people develop specific plans that take into account their story, their situation, their finances, and their personality and filter it through my objective financial observations and training. It’s hard for you to be objective about your own mess - you have too many emotions, rationalizations, and distractions to see it all clearly. And if you don’t have a plan that is specifically designed for you, it is easy to fizzle out on your own after a few months of following an ill-fitting budget.
This week’s coaching appointment was a lot of fun. It made me feel good to be able to help my clients visualize their spending plan and get into great detail on tracking their spending to be sure to stay on target with their budget. I loved being able to look into their eyes and honestly say “You can do this!”. I was able to share my own struggles and give them hope - because I had been exactly where they were now.
We plan on seeing each other periodically to discuss their progress, fine tune their budget and tweak their plan. Like a physical trainer who motivates you to train harder to get stronger, I’m a Financial Fitness trainer, keeping my clients inspired and heading towards financial wellness!
How is your financial wellness?