So we’re going to play the credit hard ‘price shopping’ trick around here for a while. We’re working aggressively to pay off all of our debts and rather than use a credit counseling service (which others recommend and I don’t have a problem with in principle) we’re going to attempt to just get aggressive about paying things off and attempt to dump this debt for a life of freedom. Right. Freedom is a great concept, but I’m not naive enough to think we’ll get there in two days.

That being said, there’s lots to be free from in the world of finance and I want to set my mind on those goals for the short term and on financial independence in the longer term. I’m reading a book right now (a review will more than likely be forthcoming) called Seven Years to Seven Figures. In the first chapter it has a quote that I really want to share with you my readership:

“[Dale Carnegie] …said that while it is true that most people don’t succeed because they don’t have clearly defind goals, some people fail to make progress because they have too many.”

So we’re trimming down the goals that we have. They’re distractions. They’re the things that illusionists use to keep you from seeing how their tricks work. They cause you to fail to understand what is happening and instead keep you in a suspended state of mediocrity. This requires me to set my goals out in a list and hone them down into the one thing I’m going to focus on. I’m not going to worry about anything but nailing my debt down to zero for the next several months. Like Trent at the Simple Dollar I’m going to restrain myself and live with as few expenditures as possible so that November shines as the first month of focus [that conclusion was independent of Trent's but nearly exact in timing]. This is the first step in the race.

Bang - the gun sounds - I’m off!

I have not done the best job of being a financial manager throughout my adult life. If you’re like me you probably have plenty of excuses, some legit, some are just an attempt to cover character flaws, and others are things you were simply ignorant about. In the end I’ve been thinking about the idea of most important things. Here’s a list that I cam up with, what would you add or change?

Self Discipline

Self discipline is like the super drug of the bunch. There’s really nothing you can do if you’re lacking self discipline. Some suggest things like the automatic millionaire’s principle of automated systems, but the truth of the matter is that those can still be foiled if you don’t have discipline. I lack this sometimes. When my stomach gets in the way, when my greed kicks it up a notch. I really struggle with this at times. Sure, there are other times when I’m dogmatic about things, but not enough to be 100% consistant.

Planning Skills

Lewis & Clark set across the United States with very little information and had to create a map. They had to plan with what little they knew and make up the rest. Good financial management is going to require a little bit of this mindset as well. You have to plan for what you do know, but be prepared to shift courses as needed (more on that later). Planning is like a giant black hole for some. They never feel like they have enough information or their tolerance for risk is so low that they can’t plan anything grandiose because they’re certain that they will fail. So they go back to the drawing board. And again come back looking for more data and then go back to the drawing board. Rinse. Repeat.I tend to take the mindset that I will plan for what I hope tomorrow has, plan for next year, plan for five years and get my focus set in just such a way so that I can adapt as new things arrive on the horizon or show up on the radar - seconds before impact. If you don’t make a plan with what you know you’re not going to get anywhere because you’re lacking the goals you need to succeed.

An Eye for Opportunity

Opportunity knocks just about a hundred times - you need to recognize a good opportunity verses a bad one. I have had opportunities that I have taken and they’ve gone horribly wrong because I didn’t have the instinct to guess right or the discipline to carefully evaluate them. Taking on every opportunity is foolish, ignoring them all is just as dumb. Right now the housing market could be a bad choice, so what else is out there? What investment areas are just unexploited and need your money to grow and leave you living high on the hog?

A United Front

If you’re married then you best be united and not untied. I have mentioned on multiple occasions that my wife really keeps her 100% of the finances on track as much as possible. We make unified decisions. In the Millionaire Mindset it is recorded that wealthy families are not tied to just one of the people in the relationship, its usually both working as a team. For an example of humor and failure read this funny article about a woman who brings only looks into a relationship.

Patience

Patience, with determination, will often bring long term rewards. If your plan is to be a millionaire by some date you need to be focused on success but patient for the fulfillment at a potentially later date. I personally don’t know how I’ve endured some of the things I’ve endured, but money comes and money goes and so I am patient. Had I planned better I’d have probably had a lot less go, but patience is waiting for a good opportunity, waiting for the market to turn around, or waiting to not say anything when someone else is not as well off as you are. Patience is a virtue - do you have patience?

A Voracious Reading Habit

Reading with the purpose of education is invaluable. Be ready to read. Right now I have a book on programming, some theology books, and two books on finances going in my rotation. I make time for each. I also read many blogs faithfully every day so that I can manage everything and continue to feed the most valuable asset I have: my mind. Many of the things I’ve mentioned before are growing and fed by my constant attitude of learning. This blog is designed to help me share what I’m learning and I’m hoping it keeps growing because I keep learning.

Self Confidence

Not relying on others for value or esteem will help you endure the times when you go without. I don’t have a large screen TV. I don’t have a Nintendo Wii. We’re not buying those or an iMac (which would be nice for the family over our older HP desktop machine with CRT monitor). Our value is not in our stuff and our stuff doesn’t prove wealth anyway! Self confidence is what lets us live in a neighborhood that isn’t at the high end of the spectrum, but instead in an older, but established neighborhood. We’ve done lots of thinking, but it hasn’t been about what others think of us.

A Marathon Runner’s Mind

A mind that understands the long term reasons to not spend money now so you can spend money later [see: a ton of bricks]. A marathon runner knows that starting off with a sprint will more than likely mean failure, cramps, or injury later on. Instead the marathon runner paces himself or herself so that they can reach their goal and achieve the mile marker achievements. Debt repayment may be one, but you have to endure and be patient and paced. Your first $20,000.00 may be another. As you see the mile markers pass you start to realize you’re closer to the finish line than you are to the starting line (unless you’re running a circuit).

A Communicating Team

Odds are that you are not keeping all of your money in your home and in a secret hole in your back yard. In that case you need to have great, clear communication with your financial companies, as well as with anyone else you’re doing business. Make sure that you make communication a priority. Today I called one of my credit card companies and discussed my interest rate with them. I wanted to make sure I knew what I was getting and what they were charging me. When you trade mutual funds you need to be aware of what the funds are doing and where your fund is heading. Your broker will be able to get that info to you online, or you may need to call certain people to keep up to date on things.

I use wesabe.com because it allows me to manage much of my financial information in one place. Its communication simplified. If you’re not using a tool of some sort to manage your finances you should consider it because its part of the communication process.

An Inexpensive, Enjoyable Hobby

You need to be able to unwind at times in life and its handy if there is a hobby that can let you do so without breaking the bank. My wife can scrapbook with the best of them but much of what she’s got was in gifts. She can spend some money now and it allows her to be creative, relax, enjoy memories and spend relatively little now that she’s got so many tools to use. I have musical instruments, many of which are older or used, but they let me play and have fun. Some people enjoy walking. Some people enjoy window shopping (without cash to blow), and some people enjoy fishing. Whatever your hobby, consider the long term costs and make sure that you give yourself some time to relax because it will help keep your life balanced.

So those are some areas that I think you and I as money managers need to be honed in on. What am I missing? Do you agree with me? I’d like to invite your comments or blog post responses. I’ve got to work on several of these areas, but I think they’re key to my financial success.

All pictures are creative commons and you can click on them to see them on Flickr.com.

One of my favorite lyrics from a band called “Model Engine” are from a song called “Scarred but Smarter”

If its all true
the only time you fail is the last time you try
if I concede defeat will I
be complete in this failure
am I incomplete and a complete failure

As the of the song indicates the ‘failure’ was a lesson learned.  As the title of this post indicates we didn’t quite get our envelope system off the ground.  The failure to complete the process fell completely on my shoulders.  I simply didn’t push through my busy schedule and get things set up like they should have been.  This post contains some lessons learned from my failure so that I don’t do it again and so that you don’t have to go what I went through should you choose to adopt the envelope system for your own household.

Banks Limit ATM Withdrawals - Part of why I didn’t complete my envelope system was the realization that I couldn’t withdraw as much from the ATM as I had planned and therefore my scheduled envelope stuffing wasn’t going to work, but I didn’t take time out from being busy to step into a branch and withdraw the amount we needed to fulfill this role.  There is very little work that can be done from the envelopes if the envelopes are empty.

Almost isn’t good if you’re on the receiving end of a handgrenade or a horseshoe - Almost going to the bank and almost withdrawing the cash almost worked.  If you’re on the receiving end of failure then being so close to safety (the envelope system) isn’t going to help you.  You want to have completed the system setup rather than have bombed out of the system by blowing it.

Debit Cards can at least Track Spending, sort of - The upside of this is that we still came really close with groceries and we can track things using our debit card.  It didn’t work like the envelope system but it did at least show us where we blew it.  I could have started in after the beginning of the month and used the recorded expenditures to help me pick up from the post-first starting point.

I’m a Lazy Bum -  I am not lazy in some areas, but for some reason this simple task of going to the bank and into the bank and getting the money out put my brain into a delayed shift where I could come up with any number of things to do before getting the money out.  I could have gone to the bank on the way to another errand.  I could have withdrawn money several days in a row after my banks regular hours to achieve the same amount withdrawn.  Other options existed by I was simply lazy.

So, now November will be the first envelope system and we’ll get it done because I’m determined to not let this be the last time I try.   Failure is not an option.

I was just thinking about something: Much of my financial goals are based on the idea that I have lots of time until I retire.  Some of them are rational, some of them are just pipe dreams.  I need to let go of the dream mentality and focus in on actual and practical solutions to the goals and the problems that might get in the way.  For example, if I want to become a millionaire before I retire (which will be required for me to retire) I have to make a decision: how much will I save to attempt a guaranteed millionaire goal?

If you make a goal to be a millionaire and you’re starting at 25 with a projected interest rate of 8% it will take you $8,000.00 a year and 31 years to reach that goal.  But if you’re in my shoes and starting later than that you will have to save $20,000.00 for 20 years to reach that number.  The fortunate part is that in ten more years (reaching sixty-five), without adding any more money to it, you will become a 2.3 millionaire.

However, you have to decide that you’re going to reach your goal and that you’re willing to set aside the money required to reach that goal!  You can’t sit around hoping it comes to you - you have to call the shots, execute the plan, and stay focused.  The consequences for my actions are long term - each $5.00 trip to the coffee house, each $20.00 quick lunch for myself and my wife and kids is a cut into that future life I have as a goal.  I need to make those decisions now and follow through.

Everything else is just dreams, dumb luck and tom-foolery.

I have tried to encourage a few young couples to get married who were holding out due to money concerns. Their love was genuine, their relationship was solid, yet their finances had them on edge. Here are ten things that a young couple can do to help prepare for marriage. Some of these are geared towards young in age, and some will be applicable to all couples preparing for marriage.

1. Have Each Person Do An Honest Evaluation of Their Finances - when a couple comes together they need to recognize that they both bring a financial life into their new married life. Marriage is about being one and you’re not going to find that oneness easy in various areas just due to personality differences and personal preference. That being said you need to both evaluate your finances because you need to know what you are bringing to the marriage. Your own knowledge of the scenario is going to be critical because you have to own your victories and failures. Know all of your debts and all of your assets. What student loans do you have? How much did you bring home last year after taxes?

2) Talk About Those Financial Evaluations - After you’ve figured out where each of you stand financially you need to come together and lay down all of your (credit) cards. You need to know where you both stand because those two financial lives will collectively come together into one new financial life that is going to be the sum of the two, or in some cases the debt hole of the two. If a penny pincher and a spender come together the surprises that could be seen after the marriage could be tough. Get this knowledge out in the open now.

3) Figure Out the Expenses That Your Household Will Have - If you both don’t have bills and a monthly expense budget then you will need to discover what your expenses will be as close as possible. Talk to others in your area about electricity costs. Find out how much an apartment or rental property will cost (unless you miraculously have money for a house) and figure out how much utlities will be on average. Be prepared to pay more than your estimates. Those estimates could be higher than you end up paying, but then could also be lower and you don’t want to be unprepared. If living together means a longer drive for one of you then you need to also estimate things like gasoline costs.

4) Figure Out How You will Budget - Read a book such as The Total Money Makeover or another good personal finance book together. Get on the same page about financial planning. Make a budget together that takes into account all of your expenses and expectations. The budget at the back of The Total Money Makeover is pretty thorough and you should find yourself pretty well prepared for your monthly expenses due to that.

5) Figure Out How You Will Jointly Work Out the Actual Execution of Your Budget - Take on responsibility of the budget: together. Don’t let it be one person’s job. Keep each other abreast of the situation as you spend money on various things. Don’t let a surprise happen because of lack of communication or commitment. One person may be in charge of paying the bills, but they don’t let the other person be unaware of those bills and that the checks have been sent!

6) Plan Out Your Savings Goals to Get a House - If you don’t have a house to move into together (which some people do) you will want to make that a savings goal in many cases. If the two of you decide to not get a house - ever - then you can skip this. But I would recommend keeping this on the radar.
7) Plan Out Your Retirement Goals and Needs - How much will you need to retire? How much will you need to invest yearly to meet those retirement goals? You need to have a plan and you should never expect to be lucky and just fall into money. Accidental money is rarely going to fix your financial woes, planning will give you confidence and will allow you to watch your wealth grow.

8 ) Develop an Insurance Plan to Handle Emergencies - You will more than likely want to get life and disability insurance policies on both of you. If you talk to a good insurance agent they will be able to save you a lot of money on insurance policies. Don’t hesitate to shop around and find the best rates. There is nothing wrong with getting the best deal on your insurance as long as the company is reputable and the agents are honest.

9) Plan For Dates - Make dates out together (or even in together to save money) a priority. Don’t let yourself get bogged down in daily busyness. Instead make time for one another, and make money for some special times so that you can maximize that time. You will need this time to take a break from your hectic schedules.

10) Make Your Marriage Your Number One Earthly Priority - Don’t let money, work, family or anything else come between the two of you. I know this isn’t directly about money, but you need to come into your marriage with that as a priority! Don’t let in-laws sway you based on emotion. Don’t let work take away the quality of your marriage. No amount of income will make your marriage solid. Time together and talking together will make your marriage solid. Make your marriage your number one earthly priority.

After you’ve looked at these think about other areas that you can tackle together. Think ahead. Plan ahead. Live as one.

Today is my nine year anniversary.  I’ve been married so long now that its harder to remember being not married.  Sure, you may already be thinking that at thirty I shouldn’t have forgotten the first 21 years of my life, but those older memories are not as fresh as the ones I have with my bride.

Saving money by kissing your wife (or husband) is not as simple as you may think, you’ll have to do it a lot.  You’ll have to kiss your wife (or husband) and mean it.  You’ll have to tell them that you love them all of the time.  And mean it.  You see the best way to be a financial success is to do it together.  Making the choices together will help improve the quality of your relationship because it will require you to think about things and respect one another.  If you run into an area that you don’t agree… sit it out.  Talk about it.  Don’t force a decision.  There are very, very few times when you won’t be able to sit on decisions - but by working through all of the other things with patience and getting to know one another you’re going to be able to hash out the forced decisions much easier.

Kiss your spouse, tell your spouse that you trust them!  Trust is critical to financial well being because you’re a team working together to succeed.  If one of you gets dragged around kicking and screaming eventually it’ll just be a drag to do anything because of all of the screaming.  There is sometimes this myth that marriage is about communication.  It isn’t.  Communication is the result of a mindset change.  You have to change your mind about your partner: you must realize that the two of your are one now.  There aren’t two people there and so since the two of you are one you’ll have to communicate.  But don’t worry about the communication until you’ve both agreed that there is only one of you now due to the marriage.  You’re united like cement and the bond requires that you make unified decisions that are a result of communication.

I love my wife and she and I hope to save lots of money over the years from kissing one another and telling each other we love each other.   Because we made that choice together, we’re communicating together, and we’re saving together.  The golden years have started because they’re years that we’re together and dedicated to one another.  Yeah for unity!

At church on Sunday I began talking with a friend who asked, “Do you know who Dave Ramsey is?”  And thus the conversation developed as we both shared brief stories of how being financially focused for the last (insert time period here) we had both discovered that we could have financial peace, and then that we could also have financial goals that were sound and methodically possible.   The conversation was good because it allowed us to bond at yet another location in our lives.  We didn’t have to discuss numbers, but instead a lifestyle of financial responsibility.

The good thing about having financially focused friends is that they’re going to understand when you don’t go out to eat.  They’re going to understand when you don’t drop ten grand on a Disney cruise vacation and instead they embrace a frugal lifestyle and understand your long term goals to become independently wealthy independent of the lottery.  They’re also great friends to get together with because as both of you discover areas to be frugal you’re more than likely going to be sharing those ideas to help each other achieve your goals faster or more efficiently!  You can’t beat that opportunity.

The other area that folks need to consider is that when you have friends that are like minded it may help you to relax in other areas and grow a deeper friendship.  A deeper friendship that will stand the test of time, finances and the sucking sound of instant gratification, pop culture and gadgetitis.

One of the best ways to block identity theft according to the Discover Card mailing I got is to pay them $12.99 a month (sure glad I could keep the penny out of the thirteen dollars).  However, I’ve got another theory: dump the cards.  Once I pay off this credit card I’m going to dump it.  Gone.  I’m hoping, like Dave Ramsey, to have a credit score of 0 (zero, zilch, nada, nothing).  I’d rather pay with cash.

I’d love to seem them steal the identity of George Washington, Thomas Jefferson or Benjamin Franklin [I actually know a guy named Benjamin Franklin, so technically I guess they could take his ID, but it wouldn't be the guy with his face on money - at least yet].  If you pay Discover $12.99 a month for a year you will have spent $155.88.  That would be enough money to go have a nice dinner with my wife.  That would be enough money to sock away for 20 years in a moderate investment (returning 8%) and get $8,430.59 saved up.  If you could get more interest and save longer you’d really have something.  Say for example that you got 12% interest for 30 years: $46,803.36.  You know that Discover/Novus is going to be using your money for investing while you don’t have an ID theft issue.
I’m going to side with me making money and not risking identity theft by using cash on the off chance that my children want an inheritance.

My five year old told me that she was richer than her friend. Rich. I asked her why she thought she was rich and she told me that she had lots and lots of money. Of course her valuation of the various coins she has is probably not right. Each coin counts as one coin - and so if she has four hundred coins then she has four hundred. Not dollars, not cents, just four hundred. I then proceeded to explain to her that wealth is evaluated differently based upon different assets. I have a relative that some would describe as ‘land wealthy’ because the estimated value of his land might be a high dollar amount. I have a friend who has lots of possessions that are worth a lot of money all together.

My daughter’s estimation of being rich and my desire to some day have accumulated some wealth are very, very different scales but the discussion reminds me of the need to teach her about money and personal finance. If she can start out her life with a better sense of financial stability and a plan for her future financial goals she’ll be rich. Not as much, or maybe more, than her friends but hopefully she’ll be able to teach them a thing or two and they can teach her a thing or two as well. Educating my daughters about faith, finances and most importantly my love for them are things I strive every day to do.

Today I called back a younger guy whom I have discipled in the past at a church I used to attend in Texas.  He asked, “Randy, what do you think about mutual funds?”  And that started off a long 109 minutes of conversation about finances.  A really, really good conversation that was full of his questions and my past mistakes.  You see I wanted to warn a younger person about the mistakes I’d made and give him the chance to be well grounded from the get-go.  The few things I want to communicate about include debt, investing with interest, and planning for the future.

Debt

I warned the young man about the dangers of debt and how debt steels your money from you in the future even if the present you gets something with instant gratification.  I also warned him that a good emergency fund could help reduce the chances of you needing to be in debt due to an emergency.  Debt being what it is he got the idea to ask me if he were to get married should they try to live on one income and save the other.  I told him that’s exactly the idea!  Save up money for the future needs you’ll have as well as the opportunities that you will to invest.

Investing with Interesting

We spent some time with him asking me about various investing opportunities and what the long term gain would be.  We started with the lower investment returns such as 5% so that he could see that even a lower return can build up over time.  Then we moved onto evaluating what higher interest rates would bring.  He was excited to think that even if he didn’t have huge amounts of money to put into things in the near term that long term his wealth could grow.

Planning for the Future

I suggested that he figure out what future goals he have and save up for a good house down payment, save up cash to buy (used) cars ahead of time.  By looking at the future and planning for it this young man can be way ahead of most of the people his age no matter their income.  He’ll be prepared.  Retirement won’t be a mystery, it’ll be a plan.  All of the elements that distract the indebted individual will just not be part of his life.
What would you warn younger people?