Chapter 9 – Week 4.
“We can tell our values by looking at our checkbook stubs.”
– Gloria Steinem
Congratulations! You have come a long way. How are you feeling about what you’ve accomplished? I invite you to acknowledge and honor any feelings that have been coming up during the course of your work. You may feel exhausted, overwhelmed, and tentative; or you may feel excited, powerful, and motivated; or you might be experiencing a host of other feelings.
Please know that experiencing a range of feelings is a natural part of this process. You are uncovering areas that have been long lost. Stick with the program here. You are doing great and you are about to come out on the other side.
Let’s go over what you have learned so far:
- You have learned about your personal money blueprint – the messages and beliefs you absorbed about money from childhood and throughout your life.
- You have learned how to measure your financial health by calculating your net worth.
- You have learned the way to take control of your money by calculating your monthly profit or loss.
- You have learned the way to guarantee your future by putting 10 percent of your monthly income into savings every month before you use any of it to pay for your expenses.
You deserve a HUGE acknowledgment for your progress. As financier Wade Cook says, “If you will do what most people won’t do for the next few years, then you can do what most people can’t do for the rest of your life.” So let’s keep moving forward.
How To Become Your Own Financial Manager.
This week you are going to learn how to become your own financial manager. Are you surprised to hear this? Have you always thought that a “financial manager” was someone that you needed to hire – and because of your financial situation – probably would never be able to afford one?
Well, I am here to tell you that the best financial manager that you can ever hire is … YOU.
In a book called The Next Door Millionaires (which is about the unknown millionaires who live among us) a survey revealed that the one single skill that all of the “unknown millionaires” had in common was that they were all great money managers. Managing your money is probably the most important skill you’ll need to learn in order to improve your net worth. I’m not saying that this alone will make you a millionaire, but this skill will certainly make you financially independent and improve your net worth.
Many people hire a “financial advisor” to take care of their money. While it may be true that a financial advisor knows more than you about finance, this person knows NOTHING about YOU as a person. A financial manager is someone who manages your money on a daily basis – and therefore knows your habits, thoughts and feelings concerning money. No one knows these things better than you. Therefore you are the best person for your financial manager position!
That’s right. The best person to manage your finances is you. You see the problem with most standard financial advice is exactly that … it’s standard. In other words, it is not designed to meet our unique needs. As a woman you know that we do not like to be treated as “standard.” We like to be recognized and treated as individuals. We like to express and celebrate our personalities and choose products and services that show us they know who we are and what we want.
The reason why most of the financial advice out there is not working for us is because it is based more on a masculine perspective. The advice comes from a place of looking at a problem and then coming up with an efficient and effective solution that will fit everyone. It is about making life simple and easy. This is great. Who doesn’t want a life that it simple and easy? But the problem with this advice is that it leaves out what we care about most – the personal side. It leaves out the side that acknowledges who we are.
When we try to manage our finances from a “one size fits all” system, it doesn’t work for us. It’s like what happens when we try to follow a standard diet. We start with good intentions, but somehow along the way we fall back into our old habits and ultimately end up feeling like a failure.
Guilt – “I should have done it, but I didn’t.”
Fear – “What will happen now that I didn’t?”
Shame – “I’m so useless I couldn’t even stay on track.”
These destructive emotions spoil our days, our health and our happiness.
So how about something different?
Imagine what it would be like to follow a diet where the first step to achieve your preferred weight was to make a list of all of your favorite foods – and then the second step was to write out a weekly plan where you made sure that you had a portion of all of those foods in your diet.
This is the approach we are going to take with your expenses. We are going to build your financial profile around you.
Most women (actually most people) have never actually devoted time to think about their priorities. Most of us operate on an automatic mode according to what society says is important. If we have taken the time to think about our priorities, we might have found that we don’t spend the time and the money on those things that are ACTUALLY our most important priorities. Sometimes we forget as time passes to re-examine our spending habits to adjust them to what is important for us TODAY (as opposed to last year or even five years ago). Over time, priorities change, interests change, and we change.
The exercises this week are designed to help you become conscious of your spending habits. From there, you will be able to determine what is important to you and what is not.
A Financial Plan That Inspires You.
Your financial plan should be one that inspires, energizes and brightens your life. The key to making this happen is to design a plan that is aligned with your values. This means creating a plan where your expenses match with what is important to you.
For example, say you love to travel but you are spending a large amount of your income on clothes that you wear once or twice a season (or never even take out of your closet!). The immediate gratification of buying the new dress or skirt is nice, but your frustration from not being able to afford the vacation that you really want drags you down.
Can you think of one item that you own that you just simply love? Take a moment and pick something that makes you feel great when you think about it.
For example, I have a special painting that I bought years ago that whenever I think about it, I feel peaceful, grateful and loving. I bought it at a charity auction to support special education programs in the poorest slums of Johannesburg, South Africa. At the time, I didn’t have a lot of money, but buying it was important to me because wanted to support the special education programs – and I loved the painting! Today, years later, whenever I look at the painting, I feel those same feelings of peace, gratitude and love.
Part of the reason many women have a net loss is that their expenses are much too big for their income. For many of us, we have never truly examined what is essential for us and therefore don’t know where to start even when we do want to cut expenses. We end up cutting it in places where it might not be necessary – but then we experience loss and desire for those items (like a craving on a diet).
Once we figure out what we can do without, we have just improved our net worth. The dollar amount might not be enough to solve all of your problems and pay all of your debts, but doing this process will certainly improve your net worth on a monthly basis … and this will then add up over a yearly basis.
Let’s see what this looks like for you.
Exercise One – Identifying What’s Important to You.
Identifying what’s important to you will help you create a financial plan that is designed especially for you. The point of this exercise is to help you align how you spend your money with what really matters to you.
Part 1: Identification.
Take out your notebook and on a fresh page write “An Item I Love” across the top. Then do the following:
- Write down an item that you currently own that you simply L-O-V-E!
- Next, write down the reasons why you have so much love for that.
- Now write down the values that you attach to this.
- Ask yourself: How would I like to have the same feelings I have about this item for everything I own and everything I do? Hint: You can!
- Let’s move onto Part 2.
Part 2 – Categories for your expenses.
When you look at your list of expenses, you’ll realize that you can divide the list into four categories:
- Must Haves
- Nice to Haves
- Debt Repayments.
Let’s look at the details of each category:
Must Haves – Must Haves are those expenses that without them your life would not function. These include things like food, shelter, electricity and water bills.
Nice to Haves – Nice to Haves are those items that you could do without if you had to. These are things like scented candles, plants for your balcony, and a new pair of good-looking boots.
Investments – Investments are those items that you pay for, but you get some kind of return on them. This category includes pensions, stocks, mutual funds, etc.
Debt Repayments – Debt Repayments is money that you pay to repay a debt. This includes things like loan payments, car payments, and mortgages.
Note: Ninety percent of all our lists will be the same. The other 10 percent will be unique to you: It will reflect who you are and what is important to you. Be honest about what is vital to you. Don’t cut back TOO MUCH so you are suffering – but enough so you are not suffering in another way (overspending).
For example, you can give me three square meals a day every day, but if I don’t have a good book to read – life’s not worth living. For this reason, I include books in Must Haves. If I need to cut costs, I can instead borrow books from the library, trade with friends, or go to the used bookstore. Another example is that it’s important for me to go once a year to a meditation camp in order to keep myself sane and in balance in my hectic, busy life. Feeding my mind and spirit is crucial to my well-being – so this camp is a Must Have for me. If I need to cut costs, I can look for one that is free or offers the possibility of attending as a volunteer.
How about you? What do you need to have in your life in order to feel that you are truly living and not just surviving? Take a moment to think about this. You’ll get to highlight these in the next exercise.
Part 3 – Improving your net income.
For this exercise you will need your list of expenses from last week’s assignment and four different colored highlighters. Once you have these ready, do the following:
- Highlight all of your Must Haves in one color.
- Highlight all of your Investments in a second color.
- Highlight your Debt Repayments in a third color.
- The remaining expenses are your Nice to Haves. Don’t highlight these Move to step .
- Take your list of Nice to Haves and go through them one by one. Mark the following items: 1. Items you are paying for, but feel guilty about. 2. Items that are no longer giving you any. Items that are not giving you enough pleasure to make it worthwhile for you to be spending your hard earned money on. For example, are you still paying for the gym membership that you never use? With each item on the list, ask yourself: “Is this item worth more than my future financial security?” Be nice to yourself in this process. If you drop something, and later feel like you can’t live without it – then move it to your Must Haves. Play with this. Don’t get overly serious. Realize that change actually can be FUN! We want to stay as light as possible here.
- When you have examined how you feel about each Nice to Have, make a list of the items you want to drop.
- Take this list and add up the amount of money you will save by dropping these items.
- Congratulations! You have just improved your net income by this amount EVERY month.
Exercise Two – Keeping On Top Of Your Accounts.
If you do not readily remember the information asked for below, please return to your work from the second week of the course (Chapter 7) when you calculated your net worth. Fill in the following information:
I know how much money I have in my checking account.
I have: …………………….
I know how much money I have in my savings account.
I have: …………………….
I know how much debt I have. I owe: …………………….
I know how much money I have invested in a retirement account.
It is: …………………….
I know how much money I have invested in stocks, bonds, and mutual funds.
It is: …………………….
Fill in the following sentence with your name and say it out loud at least once to yourself and at least once to one other person:
I,……………………… am confident in my ability to manage my money and take care of my future.
HOMEWORK – Take Control of Your Money. The “What if?” Game
Now that you have all of your financial information readily available in your notebook, you can play the “What if?” game. This game, like all games, is meant to be FUN. The aim of the game is to give you a chance to play around with some new possibilities that you may have never considered. The more playful you are with this, the more you will start letting go of old patterns keeping you stuck in a place you don’t want to be. Have fun!
As you answer the following questions, add or subtract the corresponding values to fit the various scenarios and see what difference it would make in your financial picture:
- What if I spent more on ……………………. and less on……………………… ? (Try out a few scenarios.)
- What if I spent less on…………………. and more on…..?(Try out a few scenarios.)
- What if I got a raise at work and could make …………………….?
- What if I raised my rates to……………………..?
- What if I reduced my mortgage payments?
- What if I saved one dollar per day?
- What if I de-cluttered my house? What items would I let go of and how much could I get if I sold those items?
- What if I could find a way to make money from my hobby? How much would that add to my monthly net income?
For The Week.
In becoming my own financial manager, I discovered that most things that are worth living for do not cost a lot of money or can be done without costing any money! As T. Harv Eker, author of Secrets of the Millionaire Mind, says, “One of the differences between rich people and poor people is that poor people think ‘you need money to make money,’ while rich people know that ‘you need creativity to make money.’”
So if you want to improve your monthly net profit, start thinking creatively about how you can do the same things that you like to do … without it costing you too much (or better yet, without any cost at all). Be creative and be daring. A great example of someone being creative to reach his goal of having a house is Kyle MacDonald from British Columbia, Canada. He started with a red paper clip and made a series of up-trades for things bigger and better. One year and 14 trades later, he ended with a house in Saskatchewan, Canada!
Finding creative ways to meet your goals will give you confidence that you can truly take control of your money. Feel proud this week that you are doing the work you are doing! Next week we will be looking at your hourly rate and how you can improve upon it.
See you next week!