On a low information diet to preserve your sanity? Here's the scoop.

There are three new laws that have been put in place to address the Coronavirus outbreak in the US: The Coronavirus Preparedness and Response Supplemental Appropriations Act, The Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Response (CARES) Act.

 Please note:  before taking action based on this information, please do your own research, including speaking with your CPA, financial advisor or planner, employer, loan servicer, state unemployment office, and heck, maybe even a priest or shaman.  My goal is to share my best understanding and to be of service.  I hope you find this helpful.

With memories of the 2008 Financial Crisis still fresh in the minds of anyone old enough to be in Congress, the US has taken bold action to try to reduce the impact of the current situation.  Well, they took bold action on the third try, but this article summarizes all three laws.

On February 20th, 2020 the first of a series of U.S. stock market drops began in response to the global pandemic and concerns about the effect the disease would have on economic activity worldwide.

 On March 6th, 2020, the Coronavirus Preparedness and Response Supplemental Appropriations Act became law.  This law included funding for telehealth for Medicare, for vaccine development, for public health funding, and for medical supplies and preparedness.  Additionally, extra funding is allocated for departments and agencies.  This law included disaster loans to be provided to small businesses through the SBA.  More information on the Economic Injury Disaster Loans will be provided in a subsequent post.

 On March 18th, the FFCRA was passed.  Its main features are to provide employees of certain employers with paid sick leave or extended family or medical leave in response to the viral outbreak.  If an employer has fewer than 500 employees, the organization can receive tax credits to offset the cost of paid leave. There is an exemption for employers with fewer than 50 employees where giving paid leave to employees to take care of children would risk the continuation of the business.  For more details, I recommend consulting the Department of Labor website and your employer.

 On March 27th, the CARES Act was signed.  This law provides for loans to corporations, small business loans, household payments, unemployment insurance, tax deferrals and deadline extension, and other funds.  Most of the “goodies” we are interested in are in this act.  My next posts will cover that act.

 Journal questions:

 When in this process do you think our leaders realized the severity of the issue?   When did it start to affect you?

Financial coaching is all about helping people with money trouble get in a better state with money.  For some people that may be about education.  For others, that may be about organization and prioritization.  For most of my clients that also includes a good deal of emotional work, as stress and anxiety do not help us make better decisions.  But when you are trying to help people with their money, one of the main objections we coaches hear is that our potential clients don't have money for coaching.  Let's dig into this.

First, if you are a professional person who lives in a decent house or apartment, has clothes to wear and food to eat, you probably DO have enough money to build financial coaching into your budget.  You may not, however, be able to objectively see the tradeoffs you are making, as you've never questioned the expenses you currently have.  The irony here is that this is exactly where a coach could help you.  In working with a coach, you'll gain a different perspective on what is truly important – having HBO or working with someone to get your finances in line.

If you don't have enough money to hire a financial coach, that's exactly why you need a financial coach.

But what about the unemployed, homeless person who is currently reading this blog on the library computer?  Surely this person doesn't have enough money for coaching.  Sometimes affording what we want is not just a matter of looking at our expenses differently.

To that person I say, ok, this is a legitimate objection. Luckily, you've already found the library, so here are some books I'd recommend to get you started:

1.  Dave Ramsey's Total Money Makeover.  If you are deep in debt, follow Dave's advice.  Ruthlessly cut your spending. Save up $1,000 so that if an emergency hits you don't have to go back into credit card debt to deal with it.  Then pay off all your credit cards.  Once you are done with that, take that money in your monthly budget that you'd been using to pay off credit cards and build up your full emergency fund (I recommend 3 months of expenses for a dual income household, 6 months of expenses for a single income household). Then hit the tax-advantaged employer-matched plan you have at work HARD.

2.  The Millionaire Next Door.  This classic is a bit dated, but it makes the point that the way most people build wealth is a little at a time and by living below their means.   If you spend everything you make plus some on credit cards, you will never be rich.  If you think money is for spending, even a windfall like an inheritance or lottery winnings will disappear.  Live below your means and invest the rest.

3.  The Richest Man in Babylon. 10% of what you make is yours to keep.  We can debate over the percentages, but the idea that some of your earnings should stay yours is gold.

4.  Personal Finance by Garmin & Forgue.  The best all around personal finance textbook I've found, and I've read a lot of personal finance books.

If you do fall in this truly broke category, in addition to reading you should check out local churches, food banks, and non-profits.  Many organizations like these offer or can refer you to financial counseling services or a bankruptcy attorney.

 If you aren't willing to learn the slow way through just reading (and sacrificing all that time your investments could be growing via compound interest) and if things are not so dire that you'd be willing to reach out to local charities, then I would submit the problem is not that you truly can't afford coaching, but that you are unconsciously choosing the things you currently spend money on over coaching.  If you want to do that it's your choice, but until you are willing to INVEST money in yourself and your financial future instead of SPENDING it automatically without awareness, nothing is going to change. 

Are you ready-for-charity broke, or are you making-a-different-choice broke? WHY are you broke, and how will you change that?

Your Net Worth Statement Is.

Many of the people I talk to about money are obsessed with their credit report. And don't get me wrong, credit is important in some instances.  But if you are looking for your grown up money report card, it's not your credit report, it's your net worth statement.

Many people I talk to who are just starting to pay more attention to their money are obsessed with their credit score.  If you've been careless with your money or had a financial setback, it is understandable that your credit score may be low.  But if you are looking for validation that your are on the right track financially, let go of the credit report and get to know the net worth statement.

Don't get me wrong – your credit score can be important.  But remember why the credit report and credit score was invented.  It's not a report card for grown ups meant to tell us how we are doing and the game of adulting.  It was developed for financial institutions to share customer data so they could make better decisions as to who they should extend additional credit to.

So yes, if you are looking to take on more debt, your credit score is important.  If you need to buy a new house or car, your credit score will impact whether or not the lender decides to have you as a client and the rate they choose to charge.  In this scenario, a good credit score can help you make a purchase you want and to pay a bit less for the loan.

Credit score can also be important if you are looking to rent.  Many landlords check applicants' credit scores before deciding to rent to them.  Because the way you do one thing is the way you do everything, understanding your behavior patterns with your other bills help them to understand your likely behavior pattern in paying your rent on time or late. 

If you are job hunting, many employers will check your credit report as a part of their due diligence before hiring you.  In some ways this seems unfair – after all, if you've been out of work and unable to pay your bills, getting the job would automatically improve your credit, right?  However, a really low credit score shows the potential employer a peek behind the curtain into your life.  If your bills aren't getting paid, there are likely other areas of your life that are chaotic as well.  You may not be the trustworthy and slightly boring employee they are looking for.  This becomes especially important if you will be handling money in your new job. 

But unless you are looking to take on debt, rent, or look for a new job, you should be 0% interested in your credit SCORE.  You should, however, look once a year at your credit REPORT. 

Your credit report is the underlying data that banks, credit card processors (like the place I used to work), and other lenders send to the credit bureaus each month to let them know what you've been up to.  This data is the basis for your credit score.  Your credit report data is important for more than just the fact that it contributes to your score, though.  It's also important insight into how your name is being used.  Checking your credit report periodically can be a great way to know if you are a victim of identity theft.

Because every “trade line” (record of debt in your name) shows on the credit report, if someone steals your identity and starts opening credit cards, those new cards will show up on the report.  If this happens, you can then contact the credit bureau to dispute the item, and you can contact the issuing bank to let them know you did not authorize the account to be opened in your name.  You should also contact local law enforcement to file a police report.  It is your responsibility to make sure the data in your name is cleaned up.

In order to check your credit report, you should utilize the site annualcreditreport.com. By law you are entitled to get a free report from each of the 3 credit bureaus once a year.  Therefore, you can check your credit data once every 4 months at no cost to you.  There's no need to pay for an identity monitoring service or to pay to obtain your credit score.  By reviewing your report once every 4 months and challenging any incorrect data, plus paying your bills on time, your credit score should be just fine in the event that you ever need it.

 As I mentioned, your credit score is not your adult/money report card.  It was not designed to show who is good with money and who is not.  In fact, you could have two individuals with the exact same money behavior but quite different credit scores, as being “good with money” is not what is being measured. 

 As an example, my husband's credit score falls in the “excellent”category, and mine falls in the “good” category.  But here's the kicker – my husband hasn't paid a bill since the 90s.  So if “being good with money” were the only criteria, and the person paying bills for him and for me is the same person, we should have the same score, right?  WRONG.

 You see, at our last house the mortgage was in my husband's name.  He was working a day job (in addition to moonlighting for STS), so it was much easier to show regular, normal person income for him.  To make things easy for the bank, we put the house in his name.  Because he has MORE debt and is paying that debt on time, he has shown that he can handle more debt than me in a way the banks like.  You would think having more debt makes him more unable to pay his bills and therefore more of a risk, but that's not how the credit score is calculated.

 So if you are looking to clean up your credit score as a way to prove that you are adulting with money correctly, you are barking up the wrong tree.  Yes, your credit score can be important, and it is valuable to check your credit reports throughout the year.  But it is not your grown up report card. 

If you are looking to prove you are winning the money game, it's your net worth, not your credit score, that you should be focused on.  But that's a separate post.

 How do you know if you are winning with money?

 What is Blocking Abundance For You?

Coaches are trained to see our clients as naturally resourceful and whole.  I also see my clients as naturally abundant.  My job is to help clients discover what is blocking the natural flow of abundance and help them release that.

Each of us are born in touch with our natural selves.  We are naturally in touch with our inner guidance and clearly know our wants and needs.

It is important that as children we learn the ways of the world and how to get along in society from our parents, teachers, and peers.  But as children we lack the ability to discern which lessons are clearly valuable (such as learning a language) and which are bad data that will cause us problems later. We absorb everything as if has equal value, not understanding that our parents are people who have their own issues.

There are times as children our behavior is inappropriate and needs to be corrected.  But when we get the message that WE OURSELVES are wrong (whether because of what is said to us or because of what we make what is said to us mean about us) we learn to live in a way that violates our ability to connect with who and what we truly are.

By nature we have everything we need to live in financial abundance. Nature always provides.  Most land where people live is fertile and can yield more than enough food to support us.  Most of us have natural interests and talents that can be developed into skills and abilities that allow us to provide value to others.  We can then trade the excess fruits of our labor for those items provided by others that we want or need but do not have the ability or interest to create for ourselves.

 When we are told from an early age that our instincts are wrong, we can develop false beliefs and behaviors that get in the way of our natural abundance.  We might be told that only boys can become surgeons and that our parents don't have enough money to both their male child and female child to college (this happened to a friend of mine).  On a more subtle level, we might pick up the belief that money is a source of self-worth and then spend our adult lives trying to make it as a lawyer because it's a high paying job, even though we hate the work and life we are leading.

 Most of my work as a financial coach is to help clients find the areas where they have picked up unhelpful money beliefs as children, stored those beliefs in the subconscious, and run their lives as if they are true. Since for many of us money is a taboo topic, these incorrect beliefs never come to the surface to be examined.  Through journaling, coaching, therapy, or conversation, we start to examine those beliefs for the first time and, if we choose to, set them aside in favor of beliefs that will help us get to that natural abundance each of us desires.

Even the best parents can only prepare you for the world they are living in while you are a child.  Parents and teachers cannot see into the future to understand the world we will live in as adults.  There is no way that they, with their own issues, could have fully prepared us for this new reality.

Be willing to unlearn the scripts and behaviors you were taught as a child.  A great way to identify these is by noticing where you react without thinking and get into trouble.  Perhaps there's a fight you've had with your spouse about money over and over again.  Is this really a mismatch between unexamined scripts you are each operating from?  Is there a coworker who makes you absolutely nuts?  What are they triggering in you?  Is there a belief or past trauma they are touching on that's causing you to respond with fear or anger instead of with calm rationality?

Our work as adults is to understand that everything that happens to us is being processed through our own cognitive filters.  The more of those we can identify and clear, the more we will be able to respond appropriately and stay in the present rather than acting out unresolved drama of the past.

 Where do you get triggered with regards to money?  Does that tie back to childhood experience or subconscious understandings of the world?

Post updated September 2020.

 Wondering about being a Financial Coach?  You've come to the right place. 

As a Financial Coach I am frequently approached by folks who are interested in becoming financial coaches as well.  I wanted to put all my advice in one easy place for quick reference.  If after reading all this you'd still like to chat, I'd love to have you as a client in one of my programs.  After all, the best way to learn about coaching is to be coached.  In fact, I believe this so much I have a coach right now.

 I grew up in a world where money was taboo, and I learned what I now know about finances through trial and error, reading, getting coached,  and paying a CFP® a sh!t ton of money to help me out.  So when the time came to look for a side hustle, I figured why not pass on what I'd learned?  My clients would get the benefit of what is probably more than $100,000 in investment (not to mention the time) for a few thousand bucks, literally shortcutting what for me has been a twenty year process.

My first thought was that I might become a CFP® myself, but honestly, I think most Americans need help with the basics – getting out of debt, building an emergency fund, and taking advantage of free money at work to start building investments.  The CFP® was really designed for helping people who were beyond that point.  There are already a lot of people in the “helping the rich get richer” space, so I didn't see much there in the way of need or opportunity.  Plus, the idea of compliance and helping people manage investments did not appeal to me at all.

 I wasn't quite sure what job title went with this idea until I found this article due to the magic of Google and Kitces.  Garrett Philbin does an excellent job of explaining why he became a money coach and what a financial coach does.  Honestly, that article will likely address all your questions, so feel free to jump over to that site and take it from there.

Getting Started

If you are still in the “maybe” stage after reading that article, I'd suggest you join Garrett's Facebook group and the Financial Coach Academy's Facebook group for coaches.  You'll be able to see the questions others are asking and the answers that have been provided.  You'll also get links to lots of other resources, such as books that have been published on money topics.

 If you've done a bit of reading and are still interested, you can become a money coach right now today.  All you need to do is announce “I am a financial coach”.  There's no regulation and no rules to follow (as of now).  However, I wanted to (and I suggest you) go a bit beyond that and have some certifications and training, to prove to both yourself and others that you know what you are doing.  Here's what I invested in:

 1.  The AFC® from AFCPE®.   This is not an extremely well known credential, but for those who are familiar with it, it is well respected.  You will need to pass an exam and document 1,000 hours of work.  This proves that you do in fact know about finances and that you have experience. 

If I ever were to hire an assistant coach, I would require that candidates pass the AFC® exam before I interview them.   The experience will come with time, but there needs to be some sort of objective proof that you know about money before you enter into the field and start talking to people about money.  Each of us have blind areas where we lack personal experience, and passing the AFC® proves you are familiar with even those areas.

If you are networking with Financial Advisors or Financial Planners and they give you attitude about what qualifies you to have thoughts about money, this sort of credential goes a long way toward shutting them up.  I don't find clients much care about specific credentials – they just want to know if you can help them.

2.  Financial Coach Academy (FCA). This is an affiliate link, but my recommendation remains the same whether you use that link or not. 

If you have never done anything entrepreneurial before then FCA is a slam dunk for you.  Just do it.  I, however, was convinced it would be too basic for me, as we'd already started up and successfully run an IT consulting business and a vacation rental business.  I was wrong.  Yes, I had entrepreneurial skills, but I had not started up this sort of business before.  I had a friend who convinced me to go through the class, and it was absolutely worthwhile.   Why reinvent the wheel?  Let someone who has already worked out the kinks show you what they've learned and benefit from that wisdom.  Worth every penny you will spend.

I don't run my coaching practice the same way they suggest in terms of packages and offerings, but it's easier to take a template and tweak it than to start from scratch.

3.  Networking.  Honestly, this could be step 1, but whenever during the getting started process you choose to do it is fine.  In person is best, but if you live in a cabin 50 miles from the next neighbors then online is better than nothing.

 Why do you need to network?  To convince yourself that you are a financial coach, and to practice explaining it to other people.  Most of the people I speak with assume I'm a financial advisor and so will tell me that they like their financial advisor and do not want to have me manage their funds.  People don't know what financial coaches do, so you practicing telling them is a key part of getting started as a new coach.

You may meet potential clients or referral partners from your networking efforts (and I hope you do), but if you do nothing other than nail down what you do so that you believe it and it sounds smooth when you say it, networking will have been worth the time you put in.

4.  Coaching!  This also could be step 1.  Before you spend a lot of time, money, and effort on your business, it would be wise to actually help some people with their money to confirm you do in fact like doing what you are proposing doing.  If you want to do free appointments with beta clients, limit yourself to 3 clients.  Limit how many appointments you do for each client as well, perhaps to 3 appointments.  Don't expect the free people to continue on once you start charging them (although they certainly could, most of them will not, because they will feel they already understand what you do and you have already set the value at $0).

Take some time to think about what kind of coach you want to be, what kind of services you want to offer, and which clients you want to work with.  If you do FCA this will come up, but it will likely take several iterations beyond the initial work you do for you to really have clarity on this.  Sometimes the best way to figure out who your ideal clients are is to work with those who are not your ideal client by accident.

While we are on the topic of ideal clients, if you want to charge for coaching, your ideal client is someone who can and will pay for coaching (spoiler alert).  If you are concerned you may meet people who need help but who can't/won't pay you and you don't want to turn them away empty handed, start making a list of free and affordable resources those folks who can't/won't pay you can access.  Everyone does have the choice to learn this stuff the hard way like you did, and by providing them with a list of non-profits and/or library books you are providing them with more of a jump start than you likely got.

 So that's what I'd recommend in terms of prep work.  Pass the AFC® so you have some proof you know about money and practice by offering to help people with money.  Take FCA to get your business set up, and network in person to practice your belief and your explanation of what you do.  That's really all you need to do to get the ball rolling and to start making money.

Frequently Asked Questions

 1.  What I really what to know is, how much money do you make, Lisa?

Wow ok rude.  Didn't we just cover how I grew up in an environment where talking about money was taboo?  But in the interest of full disclosure, I'll answer the question.  The answer is that to date my business has had more in expenses than in revenue.  So I've been losing money.  But there are some things you need to understand here.  My focus has been on getting  my business set up, getting trained to get my skills where I want them to be, getting coached to work through some of my own money drama, and creating my course. A lot of that work (at least the coaching) I likely would have done and paid for whether I started this business or not – but thanks to this business, it's a tax write off.  I didn't have to invest as much as I have, but I wanted to really start from a position of mental strength, and that meant investing in my mind.  I'm also part time, as we still have our IT consulting business going.  I anticipate 2020 will be the year I shift from investing into the business and myself to really working within the business by taking on more one on one clients and launching the course, which will provide mostly passive income once it is created.

For the record yes, I do have current and past paid clients for my coaching. 

That's not really what you are asking though, is it?  What you really want to know is, “if I, the reader, start a business doing financial coaching, will I make enough money?”  If that's your question, you need a better question.  Do some research into what high end coaches make (a lot.  Tony Robbins doesn't work for pennies).  Do some introspection into what you believe your value and worth is.  And shift your thinking from employee mindset to entrepreneurial mindset.  You could invest significant time and money and waste it all.  Or you could end up a multi-millionaire.  The potential for both outcomes exists.  Your thinking will be what drives your results.

2.  I see you recommended the AFC®.  The AFCPE® also offer the FFC®.  Do you recommend that as well?  Not yet.  First, you need to have at least 3 paying multi-session clients, have a fully set up business (business cards, website, legal/government/insurance stuff, beginnings of some sort of marketing practice via networking and/or social media, etc.), and most importantly, you need to have reached a point of frustration with the clients you are working with.  THEN, you need to read the book Co-Active Coaching.  If you read that book and think “heck yeah this is awesome and I need more understanding of how to coach this way” then the FFC® is for you. 

I've found that many people who get into financial coaching are really imagining/offering something more like consulting.  I know I was at first.  The idea is, “hey, I've spent a lot of time figuring out how to handle my money.  Other people might pay me to tell them what to do” and if that's your plan, the FFC®  will just confuse you and slow you down. Don't do it now.

However, what I have learned over time is that people who struggle with money generally don't need more information.  In this day and age, information is freely available thanks to Google.  What the world needs is more wisdom, and that comes from thoughtful self-reflection.  If you decide that is something you want to facilitate for your clients, you are crossing over more into the world of life coaching and way from the world of being the bossy budget person.   Which do you want?

 If you decide you really want to be a mindset coach, then yes, once you are up and running the FFC® will help you develop that coaching mentality and the skills you need to be successful with that sort of work.  The first two days of in person training are truly life changing – although I think the whole 2 year program could probably be done over a three day weekend in terms of content. 

 3.  What other training have you done that has been helpful?

In addition to the AFC®, the FFC®, and Financial Coach Academy, I've taken Leisa Peterson's Mindful Millionaire program, which was helpful in working through some of my own money mindset issues. 

I've also done 4 Theta Healing classes – Basic, Advanced, Dig Deeper, and Manifesting and Abundance.  It is very woo-woo, so if you are a spreadsheets and facts only person, this is not for you.  I've found it to be VERY helpful in rooting out limiting beliefs and changing them instantly, but again, you and the client will have to be open to it, so it's not for everyone.

I'm currently starting training with The Life Coach School.  It is EXTREMELY expensive, but I've been very impressed with the mindset of people who have been through the training.  I think it will be helpful to me as I expand out of just financial coaching and into business coaching.

Hopefully that's lots of helpful information for you.  I wish you the best of luck on your journey toward becoming a Financial Coach and helping the particular clients you resonate with end their financial suffering.

We often think the rich get richer by taking something from people or by doing something to people.  But the truth is, we are lining up to give our money to them.

In my Facebook live yesterday I showed how money flows from the poor and middle class to the rich, not just from the purchase of goods and services, but perhaps more importantly, in the form of interest.

You see, most of us sell our labor (our time) to the rich at our jobs in exchange for money, which we then mostly give back to other rich people in exchange for goods and services.  Apparently discontented with just giving the rich money for goods and services, we finance them, giving them even more money than we would have if we'd paid cash.  By financing these goods and services, we voluntarily commit to giving even more of our  paycheck to others rather than keeping any of it to buy our freedom.  Imagine how much money you'd have if you weren't paying bills with it!

You see, the rich own (either directly or indirectly) most of the businesses out there.  And so when you willingly give all your money to them each month, you are performing a valuable role in shifting resources from the poor and middle class to the rich.

 If this annoys you, all you have to do is step out of your current role and into their role.  Move from just being a consumer to being a producer.

What value have you created in the world?  Not at your job – the paperwork you signed when you were hired clearly states everything you make on their equipment and with the time they bought are theirs.  But where have you created value that you own?

This is why side hustles are such an important part of becoming rich for many people.  By becoming a producer and bringing value to the world – value you own – you will start to understand how the other side of the game is played.  There's a reason most self-made millionaires are entrepreneurs.  It's not just because they make more money – it's because they get perspective on how money flows and how money is created that few employees (outside of sales or upper level management) get.

The path to financial independence includes tracking your spending.  If you don't feel confident you get a ton of value from what you are trading your money for, then stop.  Keep some of that money for yourself.   The money you stop handing to the rich in exchange for  goods and services can be used to free your future self, both from the obligations you agreed to in the past (debt) and in order to provide for the needs you will have in the future (retirement).

As long as you stay focused on how much you want the goods and services now, you will always be in the trap.  You have to want freedom more  than you want the immediate gratification of trinkets and pleasures.

American society – consumerism – has trained us that getting stuff is the best route to happiness.  But the truth is stuff is a trap.  Stuff depreciates quickly – in fact, it loses almost all its value immediately.  Think about the difference in price between stuff at retail and stuff at a secondhand shop and you will see what a poor use of money stuff really is.

Now, we all need a certain amount of goods and services to get along in the world.  And for some of those goods and services, there are no alternatives to the big providers.  But is that true for all the things you buy?

As you are tracking and reviewing your spending, I'd challenge you to not just cut unnecessary spending, but also to see what of your spending can be redirected to small business.  When you shop locally with a small business, the profit of that business is going to someone who will further circulate a percentage of that money in the community, boosting the prosperity of the region.  When you shop with a small local business, that business owner can hire other local folks to help them do the work, which creates a job in your town.  And you'll be helping that small business owner to meet more modest goals, like educating their children, versus buying a second private jet or whatever the CEO of the larger company in NY or CA is doing.

 I'm not completely opposed to working with big companies – I like the fact that I can go on the Delta website and book a flight to anywhere I want in the world.  But doing better with our money is not just about spending less.  It's about spending more mindfully.  And it's about being a producer and contributing value, not just being a consumer.

 The best kept secret is that over time, you may find production to be more meaningful and enjoyable than consumption ever was.

helplient Case Study:  Savings vs. Debt

When is adding more to savings not the best advice?  When you are earning roughly 1% on savings beyond your emergency fund and paying 20+% on a credit card.  

My client Sam was doing a lot of things right.  He had a good job making good money and was living in an apartment that was well within his means.  He also didn't have a car payment, and he had a huge savings account.  However, he had several credit cards that he was juggling for points or other incentives, and because there were so many of them, he really wasn't able to mentally keep track of what he'd spent from his checking account and across all the cards and so would overspend and roll a balance.

This is the exact scenario banks hope for when they issue credit cards with incentives and other promotions.  Add up everything you pay in interest, and you may be surprised to learn it exceeds the cost of the flight or cash back you received.  While some people do game the system, the credit card company only needs you to get busy and drop the ball once or twice for them to win.  Otherwise they wouldn't offer these types of promotions!  I'm not 100% anti-credit card, but having worked for a credit card processor (and having helped the banks implement programs to make money from their clients), I can tell you they are very savvy at it, so you need to be very careful when playing chess with them.

The client and I worked together to determine what amount of his savings account was his emergency fund, settling on six months worth of his spending since he was single.  He then decided to pay off the credit cards with a portion of the remaining savings.

The remainder of the savings he'd earmarked for the down payment on a house.  He was planning to move to California to be with his girlfriend, work there for 5 years, and then move to a lower cost of living area and buy a house valued at roughly $500,000.  He'd heard that 20% was required as a down payment and so believed he needed $100,000 in the bank to purchase his first home.

While it is correct that buyers usually get the best interest rate when they have 20% to put down, we talked about the fact that there are many first time home buyers programs available that require a much smaller down payment.  While the market and the regulatory environment could change between now and 5 years from now, I explained that we had bought and sold multiple houses, and only now, on our 4th house, had we chosen to put 20% down.  That made him feel more comfortable with paying off his credit cards, since he knew there would likely be options down the road even if he did not have $100,000 in savings.

To make tracking simpler, he decided to carry only his debit card and the one credit card with the best incentives, so he could better mentally track how much he was spending in a month.  We also talked about the importance of tracking expenses with an application and not just in his head, either using Quicken (which he uses now, but only once ever few months) or You Need A Budget, which I use, to give visibility as the month is progressing how your money is flowing.

Are you interested in getting control over your money?  Interested in getting on track to buy your first home?  Contact me to learn more about my coaching programs so you can get support in your financial life. 

*Client name and some details have been changed to protect privacy.

In a world of endless financial information, how do we gain some knowledge that is useful in getting our money on track?  I recommend tracking your spending as a first step.

 It's hard to know where to begin in taking control of your money.  There's a ton of financial information available – the stock ticker crawl along the bottom of the TV screen, endless internet articles, boring books with terms that put you to sleep as soon as you get into them.  Where should you begin?

The first step is to gain some awareness as to where your money is going now.  I like (and currently use) You Need a Budget, and I was a Quicken user for many years prior to switching to YNAB last year.  But there's really no special program required.  You should be able to log in to your bank and download past spending into a spreadsheet.  You'll then want to sort those expenses into categories so you can get an idea of where your money goes today.

If you aren't a computer person, you can buy a notepad and write your spending down as you are out and about running errands or at home paying bills.  The main idea is to get a handle on what you are spending so you can do some analysis as to whether or not that's really how you want to be spending.

Why is tracking where your money goes so important?  If you don't pay attention, it can be easy for all your paycheck to flow through your fingers without doing anything toward building your wealth.  Seeing what you've been spending on will help you understand where you can easily make changes.

You probably know what you spend on the big fixed expenses – your mortgage or rent, your car payment, and other similar items.  But there are always variable bills, like that shocker of an August power bill that covers your air conditioning during the hottest month of the year.  There are also non-monthly bills that can turn into nasty surprises if they sneak up on you.  If you can look back over your past year's spending, you'll have a much better idea of what is coming your way this year.

So if you don't make any other moves this week, at least start out by tracking your spending and gaining an understanding of where your money has been going.  That data will form the basis for your spending plan going forward, and will help you identify areas where you want to make changes.

They say knowledge is power, so get to know where your money has been going to gain more power over how your money is flowing out of your account.  That's how you'll start to keep some of that money for your future self so it can build and grow over time.

We think the way to build wealth is to earn first, spend what we “need” to, and then save what's left.  In a world where wages have been stagnant in real terms since the '70s and conspicuous consumption is the norm, that generally means saving nothing at all.

 In fact, for most of us limiting ourselves to just spending everything we make would be progress.  Many Americans spend what we make plus what we have access to with credit.  There's always more to want, despite the fact that science proves past a certain point increasing spending and stuff doesn't bring lasting happiness.  It just keeps you on the hedonic treadmill and in your cubicle.

I would propose the way a lot of people are attempting to save is exactly backwards.  If you save the “extra” money, only the natural savers will have anything to show for their labor.  I view natural savers as interesting little aliens, and I'd love to find some research as to why they do what they do.  But it's not the way I'm wired.  I like travel and experiences and yes, stuff, to a degree.  I'm not a natural saver.

So what's the best way to save if it doesn't come easily to you?  Take your savings right off the top.

For those of you who have access to a work retirement plan, this is exactly what those plans do.  Remember these plans were designed by wealthy people to help people who think the way they do get wealthy.  This is also why they are so awful for most of us, as we were never taught to think that way.  Much easier to ignore the problems of funds and investing and living within your means and just go to Target.  We need some new throw pillows anyway.

If you can fight your spendy nature, though, take advantage of that work retirement plan.  At bare minimum do what you need to do to get the free match.  It's literally like money laying on the floor of your office that you aren't bothering to bend over and pick up.  PICK UP THE FREE MONEY, SARAH.  IT'S FREE.

 Once you've recovered from that adjustment to your paycheck, the next step is to do the same thing with your take home pay.  You need to skim some off the top and hide it from yourself.  Check with HR while you are setting yourself up for the payroll deductions for your retirement plan and see if they can split your check between a savings account and a checking account.  If not, once the money hits your account do a transfer – preferably automatic.

How to start?  Paula Pant recommends starting with 1%, and I think that's great advice.  Instead of earn – spend = save, for natural spenders the formula needs to be earn – save = spend.  It's the only way you'll have money set aside for emergencies and the only way you'll be able to build wealth. 

By the way, having money set aside for emergencies is the only way you'll get out of credit card debt.  Also keep in mind that the next recession is right around the corner.  So no matter how tight things are now, it's likely to get tighter at some point in the future.  If that happens, you will look back on the spending you are doing now and wonder where it all went and why you didn't set any of it aside.  Future you needs current you more than Target needs you.  So set aside some of your money right off the top.  Future you says thanks!

Melt down those balances….

The Debt Snowball is famous in personal finance circles – probably primarily for being Dave Ramsey's preferred way of getting people out of debt.  For those who like to play games with numbers, the Debt Avalanche is preferred.  But allow me to introduce the newest contender for the way to pay down your debt – the Debt Meltdown.

First a definition of terms for those who are new.  The Debt Snowball means paying off all of your debts, from smallest to largest, and it works because it allows you to get some quick wins and some momentum.  You make minimum payments on everything and throw and extra money at the smallest one.  As soon as that smallest debt is paid off, you take the extra money, the minimum on that smallest debt that is now paid off, plus the minimum payment on the next to the smallest one and roll all of that money into one payment on the second smallest of your original debts. 

The Debt Avalanche is for those who point out that, all things being equal, you should actually pay less in total dollars if you start with the debt that has the highest interest rate and pay that off first.  If you are a spreadsheet/math/super disciplined person, then this may be the approach for you.  It's definitely the correct approach mathematically, but if you are going to get discouraged and quit while paying off the credit card from he!!, then don't bother.  In either scenario you will pay less in interest than if you just give up and ignore the problem.

II'd like to propose a third way – in which you pick either approach outlined above and add a separate step.  If you are anything like me, as you create a list of all your debts, the minimum balances, the interest rate, and the total due, your system is going to go bananas.  For many people, this could cause them to quit or to push the emotions down and keep going.  I'm going to encourage you to view this as an opportunity to do a bit of research.

Most of what messes us up the most about money is all the nasty limiting beliefs and toxic money scripts we have.  In order to address and get rid of those beliefs (important if we want to stop them from getting in our way), we have to find a way to bring them from the subconscious mind where they have been like apps running in the background up to the conscious mind where we can look at them and deal with them.  As you take inventory of all the debts you have and how much you owe, your thoughts and feelings will start to go wild.

You may hear yourself thinking, “ugh, this is a disaster.  I'll never pay off these debts.  I'm just bad with money.”  You may feel anxiety.  This is actually really valuable information, as this mental chatter is harder to get rid of than the debt itself.  Take the opportunity to capture all of that.

For the thoughts, sometimes just bringing awareness to them is enough to dissolve them.  When my husband and I got married, I just completely abdicated the bill paying to him.  The problem was that he had a very different standard of what was ok.  My standard was to get the bills paid before the due date – his was to get the bill paid before they turn off your lights.  Yikes.

I had been paying my own bills for years.  Why, when we got married, did I suddenly decide I was done with money?  I had a subconscious belief that money is the man's department.  As I remember it (which may not be actually how it happened), my dad earned the money, managed the budget, and paid the bills. 

Now consciously I did not believe this.  I was a career woman.  I had no interest in having kids, being a stay at home mom, babysitting, or otherwise being a traditional wife.  But deep in my brain, the belief lurked, completely without me knowing about it.

For other beliefs, you may need to go from negative, “I'm bad at money” to more neutral, “I can learn any skill.  I can learn about handling money,” to positive, “I am great with handling my finances”.  But move the needle over time so you can improve what you tell yourself about yourself.

So why debt meltdown? Well, if being honest about your debt leads to a meltdown, best to take advantage of all the thoughts and feelings that are going to come up during that meltdown.  Plus, I believe if you can combine internal finance with external finance, you'll get better results faster, melting down that mountain of debt and reducing the chances of it coming back.