Yesterday, we worked out exactly how the hours you spend at work break down into three areas: your living expenses, your debts, and your dreams. Since this was only a thumbnail sketch, today we’re going to look more carefully at the breakdown in living expenses.
Let’s get started. Take out a sheet of paper and start another list. This time, we’re listing every expense you have in a given year that do not directly relate to your employment. We’re not going to worry about amounts yet, just a list of all of the things that we spend money on in a given month. Here’s a sampling of the expenses that I listed when I did this exercise:
> Rent
> Electricity
> Telephone
> Cable
> Student loans - minimum payment
> Health Insurance
> Car Insurance
> Clothing
> Food
> Entertainment - Books
> Entertainment - Music
Spend some time thinking about this. What do you spend money on each year? House insurance? Christmas gifts? Household items? Car repair? Home decor? Toiletries? Just keep listing things as you think of them. It might be useful to leave this list out somewhere you can see it and add things as you think of them. Don’t worry about amounts yet; we’ll worry about those in a bit.
Now, let’s figure how much you spend on each item in a given year. For the amounts you know on a shorter timeframe, multiply them out. For amounts you don’t know, use some estimation over a shorter timeframe (and estimate on the high side) and multiply it out. The point is to get a rough thumbnail sketch of what you spend in a year on various things. Note that we’re not making any value judgements yet; we’re merely trying to see what’s there.
This will take some time, and during that time, think about each of these expenses a little. Do they bring you joy when you look at them now? Do they really feel essential to your life, or when you think about them, do you feel like you’d be better off if you spent money on the list of goals you created earlier this month?
When you’re done with this list, total up everything. Then calculate 10% of that and add it to the bottom, labeled “incidentals.” Add that into the total. That number is roughly what you spend on your living expenses in a given year. You can divide it by 12 to see how much it is a month, then divide it by 52 to see how much it is in a week.
Now, let’s see how many hours you work in a week just to meet these expenses. Take the weekly amount you just calculated and divide it by your true hourly wage. A typical American usually winds up with a rather large number here.
Spend some time meditating on this - you spend that many hours a week at work just for the expenses you listed. What does that mean? What could you do with your life - with your future - if you trimmed away some of the extra fat? Your debt could be gone - and you could be working towards a better and brighter future for yourself.
Showing posts with label goals. Show all posts
Showing posts with label goals. Show all posts
Thursday, November 20, 2008
Saturday, November 15, 2008
31 Days to Fix Your Finances - Day 4
Yesterday, we developed some very specific plans to achieve aspirations that fit within the context of our personal values. These plans provide the basis for what we should be doing with our money; not only do they guide us towards a goal, but they also serve as a reminder that we’re off track if we do things that oppose the plan.
Now that we have these plans in place, we need to dig into our finances a bit. The first step is to see what income you actually have with which to chase your dreams. This will provide a baseline with which to figure out how we can rebuild our finances.
As before, take out a sheet of paper. Along the top, make a list of each of your employments. For me, I just listed one job (right now, The Simple Dollar is a very involved hobby, not what I would call a "job"). On the right hand side of the paper, write how much you make per year at your job (minus only income taxes - include all benefits, including any employer matching for retirement).
Now, underneath that, make a list of every single extra cost you have specifically because of your job. What does the commute cost? How much does lunch cost if you don’t bring your own lunch from home? What does your work wardrobe cost? What do you spend on going out with coworkers? On small professional gifts for others? On a nicer car or jewelry or other items for "work image"? What about child care? Each of these are expenses related to your job. Just make a list of them; don’t worry about amounts yet.
Here’s my list, if you’d like something to compare it to:
> Child care
> Driving to work - gas
> Driving to work - extra maintenance
> Wardrobe
> Meals
> Gifts
> Office supplies
Now, for each item on your list, figure out how much it costs you per year. First, figure out how many days a year you work (this is useful for the automotive calculations), then figure out how long your daily commute is. Multiply the two together and you get an estimate of the mileage you put on the car. I drive about 5,500 miles a year for work, so that amounts to roughly 400 gallons of gasoline, at $2.50 a pop (on average), which comes out to $1,000. I also figure that I’ll have to spend about half that much on other maintenance (oil changes, filter changes, and increased risk of major problems): $500. Then I look at child care: $5,800. I usually buy about $300-$350 a year worth of extra clothes for work, and I eat out probably once a week with coworkers, so tack on another $780 ($15 a meal, estimated). I also buy gifts for our gift exchanges at work and some of my office supplies, adding up to nearly $100 a year. Obviously, your calculations will be far different.
When you’ve determined annual amounts for each entry, subtract them from your salary. This will be sort of painful, particularly if you work in an office at the $12-$15 an hour range. The amount you’re left with is your true take-home salary for your job for a year. We used the post-tax number because you’re paying for this extra stuff after taxes.
I know some people who claim to be making $35,000 a year, but when they take their post-tax number and subtract out their job expenses, the number left makes them feel rather worried. It should. Some people even realize that this number takes them down to near the poverty line, and they get quite sick when looking at this number in comparison to other things.
Over the next few days, we’ll take a deeper look at this number and figure out what it really means in terms of your life values.
Now that we have these plans in place, we need to dig into our finances a bit. The first step is to see what income you actually have with which to chase your dreams. This will provide a baseline with which to figure out how we can rebuild our finances.
As before, take out a sheet of paper. Along the top, make a list of each of your employments. For me, I just listed one job (right now, The Simple Dollar is a very involved hobby, not what I would call a "job"). On the right hand side of the paper, write how much you make per year at your job (minus only income taxes - include all benefits, including any employer matching for retirement).
Now, underneath that, make a list of every single extra cost you have specifically because of your job. What does the commute cost? How much does lunch cost if you don’t bring your own lunch from home? What does your work wardrobe cost? What do you spend on going out with coworkers? On small professional gifts for others? On a nicer car or jewelry or other items for "work image"? What about child care? Each of these are expenses related to your job. Just make a list of them; don’t worry about amounts yet.
Here’s my list, if you’d like something to compare it to:
> Child care
> Driving to work - gas
> Driving to work - extra maintenance
> Wardrobe
> Meals
> Gifts
> Office supplies
Now, for each item on your list, figure out how much it costs you per year. First, figure out how many days a year you work (this is useful for the automotive calculations), then figure out how long your daily commute is. Multiply the two together and you get an estimate of the mileage you put on the car. I drive about 5,500 miles a year for work, so that amounts to roughly 400 gallons of gasoline, at $2.50 a pop (on average), which comes out to $1,000. I also figure that I’ll have to spend about half that much on other maintenance (oil changes, filter changes, and increased risk of major problems): $500. Then I look at child care: $5,800. I usually buy about $300-$350 a year worth of extra clothes for work, and I eat out probably once a week with coworkers, so tack on another $780 ($15 a meal, estimated). I also buy gifts for our gift exchanges at work and some of my office supplies, adding up to nearly $100 a year. Obviously, your calculations will be far different.
When you’ve determined annual amounts for each entry, subtract them from your salary. This will be sort of painful, particularly if you work in an office at the $12-$15 an hour range. The amount you’re left with is your true take-home salary for your job for a year. We used the post-tax number because you’re paying for this extra stuff after taxes.
I know some people who claim to be making $35,000 a year, but when they take their post-tax number and subtract out their job expenses, the number left makes them feel rather worried. It should. Some people even realize that this number takes them down to near the poverty line, and they get quite sick when looking at this number in comparison to other things.
Over the next few days, we’ll take a deeper look at this number and figure out what it really means in terms of your life values.
Friday, November 14, 2008
31 Days to Fix Your Finances - Day 3
Yesterday, we made up a list of ten goals that derive directly from our values. Now (and for some of you, finally), we start talking a little bit about numbers.
Let’s get right down to business. Take ten sheets of paper and at the top of each sheet, write each goal you defined yesterday. On each of these sheets, you’re going to define some specific milestones for each of your goals.
For each of the short term goals, I want you to define five specific actions:
> I will do this in the next three days.
> I will do this in the next week.
> I will do this every week.
> I will do this in the next month.
> I will do this in the next six months.
Some of these will be information gathering and have no cost. Others will actually require some investment, usually the one that happens every week.
For example, yesterday I mentioned that one of my short term goals is doubling the value of my son’s 529 college savings plan in the next year. Here’s what my five specific actions look like:
> In the next three days, I will get the balance of my son’s 529 account, along with the data on the annual returns of each of the investment options in the plan.
> In the next week, I will determine how much I need to invest in the coming year to double the account balance and also estimate what the return for the coming year might be.
> Every week, I will invest 2% of what I calculate is needed to double the balance in the coming year.
> In the next month, I will evaluate all of the different funds available for my son’s 529 and choose a fund that I feel is the best match for him.
> In six months, I will check in on the account and see how he’s doing for the year, see how the various funds are doing for the year, and reconsider my investment choices.
Generally, the model outlined above works well: gather information in the next three days, plan a baseline amount you’ll need in the next week, save an appropriate amount every week, investigate the details in the next month, and review things in six months. If you do this, you’ll almost always meet your annual goal.
Now, for each of the long term goals, I want you to define five specific actions:
> I will do this in the next week.
> I will do this in the next month.
> I will do this every month.
> I will do this in the next year.
> I will do this in three years.
Some of these will be information gathering and have no cost. Others will actually require some investment, usually the one that happens every month.
For example, yesterday I mentioned that one of my long term goals is completely owning a wonderful house in twenty five years. Here’s what my five specific actions look like:
> In the next week, I will gather information a selection of potential houses that reflect what I plan to buy immediately and what I plan to buy in fifteen years.
> In the next month, I will calculate how much I will have to spend per month on mortgage, insurance, and taxes on the lower-end house, and also calculate how much the nice house will cost in fifteen years.
> Each month, I will save 25% of a mortgage payment for helping me get ahead on payments when I purchase the first home. This will enable me to “trade up” more effectively when the time comes.
> In the next year, I will buy a home that is in the lower house bracket and switch the extra 25% from a savings account to a direct payment on the mortgage.
> In three years, I will sit down and re-evaluate what my “dream home” is like and refactor my plan accordingly.
By doing this, I break down something that seems far-off (a beautiful big house to retire in and for my children and grandchildren to enjoy) into smaller pieces that I can do right now. I also find it useful to find an image that captures a long-term goal and place it in a place that I’ll see regularly. This way, the end goal is always in sight; it’s a constant visual reminder of where I need to go.
Now that you’ve defined these plans, you have specific things that you’re saving for and spending your money on that are in line with your values and goals. Whenever you go to spend money, pause for a second and think about your values, goals, and plans, and ask yourself if that money expenditure is really helping you reach your goals or is really reflecting your values.
You should strongly consider making up a schedule that combines all of your plans together. What will you do in the next week? What will you do every week? What will you do in the next month? What will you do every month? A schedule that keeps you following your plans will help with this.
One week from now, you should have some numbers that will show you what you need to be doing to reach your goals. The amounts might trouble you, but don’t worry. In one week, we’ll take these numbers and use some techniques to carefully evaluate what they really mean - and how you can make them count for more than you think.
Before I did this exercise, I often found that, even though I often realized it wasn’t a good idea to spend, I would still spend money anyway. Why? I didn’t have any sort of concrete plan for what to do with my money, especially not one that was larger than saving for a new gadget or toy. Now, whenever I’m tempted to spend money in a frivolous way, I think about what’s important to me, and it directly connects to a plan for spending my money.
Tomorrow, we’ll start looking at your money.
Let’s get right down to business. Take ten sheets of paper and at the top of each sheet, write each goal you defined yesterday. On each of these sheets, you’re going to define some specific milestones for each of your goals.
For each of the short term goals, I want you to define five specific actions:
> I will do this in the next three days.
> I will do this in the next week.
> I will do this every week.
> I will do this in the next month.
> I will do this in the next six months.
Some of these will be information gathering and have no cost. Others will actually require some investment, usually the one that happens every week.
For example, yesterday I mentioned that one of my short term goals is doubling the value of my son’s 529 college savings plan in the next year. Here’s what my five specific actions look like:
> In the next three days, I will get the balance of my son’s 529 account, along with the data on the annual returns of each of the investment options in the plan.
> In the next week, I will determine how much I need to invest in the coming year to double the account balance and also estimate what the return for the coming year might be.
> Every week, I will invest 2% of what I calculate is needed to double the balance in the coming year.
> In the next month, I will evaluate all of the different funds available for my son’s 529 and choose a fund that I feel is the best match for him.
> In six months, I will check in on the account and see how he’s doing for the year, see how the various funds are doing for the year, and reconsider my investment choices.
Generally, the model outlined above works well: gather information in the next three days, plan a baseline amount you’ll need in the next week, save an appropriate amount every week, investigate the details in the next month, and review things in six months. If you do this, you’ll almost always meet your annual goal.
Now, for each of the long term goals, I want you to define five specific actions:
> I will do this in the next week.
> I will do this in the next month.
> I will do this every month.
> I will do this in the next year.
> I will do this in three years.
Some of these will be information gathering and have no cost. Others will actually require some investment, usually the one that happens every month.
For example, yesterday I mentioned that one of my long term goals is completely owning a wonderful house in twenty five years. Here’s what my five specific actions look like:
> In the next week, I will gather information a selection of potential houses that reflect what I plan to buy immediately and what I plan to buy in fifteen years.
> In the next month, I will calculate how much I will have to spend per month on mortgage, insurance, and taxes on the lower-end house, and also calculate how much the nice house will cost in fifteen years.
> Each month, I will save 25% of a mortgage payment for helping me get ahead on payments when I purchase the first home. This will enable me to “trade up” more effectively when the time comes.
> In the next year, I will buy a home that is in the lower house bracket and switch the extra 25% from a savings account to a direct payment on the mortgage.
> In three years, I will sit down and re-evaluate what my “dream home” is like and refactor my plan accordingly.
By doing this, I break down something that seems far-off (a beautiful big house to retire in and for my children and grandchildren to enjoy) into smaller pieces that I can do right now. I also find it useful to find an image that captures a long-term goal and place it in a place that I’ll see regularly. This way, the end goal is always in sight; it’s a constant visual reminder of where I need to go.
Now that you’ve defined these plans, you have specific things that you’re saving for and spending your money on that are in line with your values and goals. Whenever you go to spend money, pause for a second and think about your values, goals, and plans, and ask yourself if that money expenditure is really helping you reach your goals or is really reflecting your values.
You should strongly consider making up a schedule that combines all of your plans together. What will you do in the next week? What will you do every week? What will you do in the next month? What will you do every month? A schedule that keeps you following your plans will help with this.
One week from now, you should have some numbers that will show you what you need to be doing to reach your goals. The amounts might trouble you, but don’t worry. In one week, we’ll take these numbers and use some techniques to carefully evaluate what they really mean - and how you can make them count for more than you think.
Before I did this exercise, I often found that, even though I often realized it wasn’t a good idea to spend, I would still spend money anyway. Why? I didn’t have any sort of concrete plan for what to do with my money, especially not one that was larger than saving for a new gadget or toy. Now, whenever I’m tempted to spend money in a frivolous way, I think about what’s important to me, and it directly connects to a plan for spending my money.
Tomorrow, we’ll start looking at your money.
Thursday, November 13, 2008
31 Days to Fix Your Finances - Day 2
Yesterday, we defined five main values that define our life. These values are what we live for; they drive us to work and generally guide us in how we spend our lives.
Yet so often we find ourselves betraying these values (everyone does this at some point), and it is when we choose to betray these values that we find ourselves in financial trouble instead of in financial stability. We either spend money on things that don’t match or even oppose our values, or we spend money on our values but in a misguided fashion.
Why do we do this? The biggest reason that we spend money out of accord with our values is that we don’t sit down and define our goals. Goals are merely the specific embodiment of our values - tangible milestones that are clear indications of lives lived in tune with our values.
You’re probably thinking to yourself, “I have values and goals already - this is a waste of my time.” Before you log off, I want to ask you one simple question: first, do your goals actually match the values in your life? Let me give you an example. One of my major short term goals is buying a house, something many of you can identify with. This is a goal related to one of my primary values, my family. Thus, I’m buying a house for my family. Understanding this connection lets me clearly define what type of house I’m looking for (it doesn’t need to be shiny and new, but it does need to have space for my son and my future children - a large kitchen, a family room, and four bedrooms are what I seek). Thus, every time I think about the home purchase, I realize that I’m working for my family.
If you can honestly match ever single goal in your life with one of your central values, you’re more well-adjusted than almost everyone in the world. The truth is that we all have central values without any associated goals, goals without any associated values, and goal-value pairings that are really unclear and muddled. People that are financially successful find ways to minimize all of these.
How do they do this? They define all of their goals based directly on their personal values, and they live their lives to meet these goals above everything else. If they go to spend money, they ask themselves whether that money directly leads them to one of their goals. If the answer is no, they don’t spend the money. Thus, when they actually spend money, it doesn’t fill them with guilt. They can immediately see how that money is going to realize their goals, which are fundamentally connected to the values that define their life.
How do we get there? Let’s take an hour, sit down, and define ten goals in our life. If you went through yesterday’s exercise, you will already have a list of the five values that are central to your life. Now, we take these values and use them to define ten concrete goals.First, forget what you believe your goals are right now. You might end up coming back to these goals during this process or you might not. The intent is to define your goals in direct harmony with your core values.
For each value on your list, ask yourself where you want to be in terms of that value in twenty five years. I mentioned that one of my main values is my family (specifically my children), so in twenty five years, I would like to have two college-educated children starting stable lives on their own, and perhaps a third in college.
Now, turn that dream into a goal. For my children to be able to start out their own lives on their own, I want to minimize their college debts and set a good example for their lives. So, my goal is to be able to pay for at least part of their education.
You might be tempted to start writing a plan for that goal right now, but don’t. We’ll get to that later. Right now, we just want to make a list of long-term goals that match your values.For those curious, here are my goals for twenty five years down the road:
Yet so often we find ourselves betraying these values (everyone does this at some point), and it is when we choose to betray these values that we find ourselves in financial trouble instead of in financial stability. We either spend money on things that don’t match or even oppose our values, or we spend money on our values but in a misguided fashion.
Why do we do this? The biggest reason that we spend money out of accord with our values is that we don’t sit down and define our goals. Goals are merely the specific embodiment of our values - tangible milestones that are clear indications of lives lived in tune with our values.
You’re probably thinking to yourself, “I have values and goals already - this is a waste of my time.” Before you log off, I want to ask you one simple question: first, do your goals actually match the values in your life? Let me give you an example. One of my major short term goals is buying a house, something many of you can identify with. This is a goal related to one of my primary values, my family. Thus, I’m buying a house for my family. Understanding this connection lets me clearly define what type of house I’m looking for (it doesn’t need to be shiny and new, but it does need to have space for my son and my future children - a large kitchen, a family room, and four bedrooms are what I seek). Thus, every time I think about the home purchase, I realize that I’m working for my family.
If you can honestly match ever single goal in your life with one of your central values, you’re more well-adjusted than almost everyone in the world. The truth is that we all have central values without any associated goals, goals without any associated values, and goal-value pairings that are really unclear and muddled. People that are financially successful find ways to minimize all of these.
How do they do this? They define all of their goals based directly on their personal values, and they live their lives to meet these goals above everything else. If they go to spend money, they ask themselves whether that money directly leads them to one of their goals. If the answer is no, they don’t spend the money. Thus, when they actually spend money, it doesn’t fill them with guilt. They can immediately see how that money is going to realize their goals, which are fundamentally connected to the values that define their life.
How do we get there? Let’s take an hour, sit down, and define ten goals in our life. If you went through yesterday’s exercise, you will already have a list of the five values that are central to your life. Now, we take these values and use them to define ten concrete goals.First, forget what you believe your goals are right now. You might end up coming back to these goals during this process or you might not. The intent is to define your goals in direct harmony with your core values.
For each value on your list, ask yourself where you want to be in terms of that value in twenty five years. I mentioned that one of my main values is my family (specifically my children), so in twenty five years, I would like to have two college-educated children starting stable lives on their own, and perhaps a third in college.
Now, turn that dream into a goal. For my children to be able to start out their own lives on their own, I want to minimize their college debts and set a good example for their lives. So, my goal is to be able to pay for at least part of their education.
You might be tempted to start writing a plan for that goal right now, but don’t. We’ll get to that later. Right now, we just want to make a list of long-term goals that match your values.For those curious, here are my goals for twenty five years down the road:
- I want to be able to pay for a significant part of my child’s college education
- I want to have a fully paid for house big enough for my grandchildren to visit and feel comfortable
- I want to be able to travel the world with my wife
- I want to have three books in print
- I want to be able to live off the interest of my non-retirement investments
Once you’ve made the long term goals, go through your values again and ask yourself where you want to be in terms of that value in one year. Just like before, figure out where you would like to be in relation to that value in one year and don’t worry about defining a plan for that goal.
Again, here are my one year goals:
- I want to double the value of my son’s 529 college savings plan
- I want to buy and move into a house
- I want to select and begin learning a foreign language
- I want to quadruple the readership of The Simple Dollar
- I want to reach $10K in my non-retirement mutual fund account
Now that you have these goals, we’re ready to begin defining some plans … but let’s sleep on it first.
Wednesday, November 12, 2008
31 Days to Fix Your Finances - Day 1
Some of you might have expected that we would start out fixing your finances with a pencil and a calculator. In fact, it will be a few days before we have any need for either of these. Why? Before we can define a plan that works for you, we need to sit down and figure out what really matters in your life.
All of us work hard for a reason. We go into work and come out of work because we want money, right? Money buys us things and allows us to live in this modern world. But what do we mean by “live”? What exactly is this “living” that we are focused on?
The real truth is that we live according to a set of values. We continually perform actions based on values: our values mixed with the values of others. For example, my top value is my family. I want a good, fulfilling life for my wife and my son so that they can easily define and follow their own values.
Every person has a set of between four and six primary values that underline their life (we may have other values, but those values are secondary to the primary ones). Financial problems occur through distortions of those values: we come to believe that some things are vital to these values when they really don’t matter. Generally, this is what advertising seeks to do: it tries to express a core value that some people have and make their product seem essential to achieving that value.
So, our first step is to define exactly what our values are. We are not defining goals here! Goals are specific actions, like “retiring at age fifty five” or “paying for my son’s graduate school.” What we are looking for are values.
At first, this seems pretty difficult, so here’s a procedure that will help you get in the right mindset.First, get calm and relaxed. For me, this usually comes after a nice meal with a glass of wine or a great craft beer. I can clear my mind and think about my life. Do whatever gets you relaxed: have a massage, lay down in bed, or anything that increases your calmness.
Second, be honest. No one has to see this list, so write down what really comes from inside of you. You might write down things like “power” or “excitement” that you might not want to show other people, or you might be tempted to write down “family” because your significant other would expect it - but it’s not really important to you.
Third, close your eyes and ask yourself what is really important in your life. If nothing comes immediately, don’t worry about it. Think about the moments where you feel most whole and fulfilled and that feeling stays with you, not a temporary, passing feeling.As you discover values, write them down. Just make a list on a sheet of paper. It doesn’t have to be ranked in any way. Once you’ve discovered a value that’s important to you, just add it at the bottom of the list. You’ll know when you are done; don’t worry too much about how many you’ve written down.
If you have more than six values, ask yourself if any of them are the same value. Quite often, if we get above six values on our list, we’ll realize that two of the values are actually the same thing. If they are, just combine them, or cross off one of them.
If you have fewer than four values, think about them some more. Most people have at least four central values in their lives, so spend some more time to make sure you’re not missing anything.Once you have this list, save it. We’ll not only refer to it in later steps, but it will probably be valuable to you. See you tomorrow!
If you need some help getting started, here is a list of thirty values that you might have in your life. Note that this isn’t a list of all possible values, just a selection of some values to help you get started.
All of us work hard for a reason. We go into work and come out of work because we want money, right? Money buys us things and allows us to live in this modern world. But what do we mean by “live”? What exactly is this “living” that we are focused on?
The real truth is that we live according to a set of values. We continually perform actions based on values: our values mixed with the values of others. For example, my top value is my family. I want a good, fulfilling life for my wife and my son so that they can easily define and follow their own values.
Every person has a set of between four and six primary values that underline their life (we may have other values, but those values are secondary to the primary ones). Financial problems occur through distortions of those values: we come to believe that some things are vital to these values when they really don’t matter. Generally, this is what advertising seeks to do: it tries to express a core value that some people have and make their product seem essential to achieving that value.
So, our first step is to define exactly what our values are. We are not defining goals here! Goals are specific actions, like “retiring at age fifty five” or “paying for my son’s graduate school.” What we are looking for are values.
- Friends
- Love
- Freedom
- Truth
At first, this seems pretty difficult, so here’s a procedure that will help you get in the right mindset.First, get calm and relaxed. For me, this usually comes after a nice meal with a glass of wine or a great craft beer. I can clear my mind and think about my life. Do whatever gets you relaxed: have a massage, lay down in bed, or anything that increases your calmness.
Second, be honest. No one has to see this list, so write down what really comes from inside of you. You might write down things like “power” or “excitement” that you might not want to show other people, or you might be tempted to write down “family” because your significant other would expect it - but it’s not really important to you.
Third, close your eyes and ask yourself what is really important in your life. If nothing comes immediately, don’t worry about it. Think about the moments where you feel most whole and fulfilled and that feeling stays with you, not a temporary, passing feeling.As you discover values, write them down. Just make a list on a sheet of paper. It doesn’t have to be ranked in any way. Once you’ve discovered a value that’s important to you, just add it at the bottom of the list. You’ll know when you are done; don’t worry too much about how many you’ve written down.
If you have more than six values, ask yourself if any of them are the same value. Quite often, if we get above six values on our list, we’ll realize that two of the values are actually the same thing. If they are, just combine them, or cross off one of them.
If you have fewer than four values, think about them some more. Most people have at least four central values in their lives, so spend some more time to make sure you’re not missing anything.Once you have this list, save it. We’ll not only refer to it in later steps, but it will probably be valuable to you. See you tomorrow!
If you need some help getting started, here is a list of thirty values that you might have in your life. Note that this isn’t a list of all possible values, just a selection of some values to help you get started.
Adventure - Balance - Beauty - Cleanliness - Confidence
Control - Creativity (music, film, food, etc.) - Education - Excitement - Family
Friends - Freedom - Fulfillment - Fun - Growth
Happiness - Health - Independence - Leadership - Love
Making a difference - Marriage - Peace of mind - Power - Security
Service - Sharing - Spirituality - The environment - Truth
Tuesday, November 11, 2008
31 Days to Fix Your Finances - Welcome
(Editor's Note: Groups of days info are also broken up into Stages as outlined below.)
Stage 1: Figuring Out Your Goals And Values
Day 1: Your Five Main Values
Day 2: Defining Your Goals From Your Values
Day 3: Create A Plan For Each Goal
The underlying challenge that most people have with their finances is that they see money as distinctly separate from the rest of their life. Money is an antagonist, an enemy that keeps you from doing what you want to be doing. The truth is that money is merely a tool, and when you find yourself feeling as though money is an antagonist, it is no different than a person attempting to learn how to use a heavy sword; it’s unwieldy and dangerous.The first step for learning how to integrate money into your life and use it successfully as a tool is to figure out what exactly you wish to build with that tool. Without underlying values, goals, and plans, money is no different than swinging a hammer around without building something. Thus, this first stage is crucial: what exactly is most important to you, and what will it take to adequately support those values?
Stage 2: Evaluating Your Situation
Day 4: How Much Did You Earn Last Year?
Day 5: How Much Did You Work Last Year?
Day 6: Your True Hourly Wage
Once you’ve figured out what is central in your life, it’s time to take a serious look at what you have to work with. How much do you make, and how much time do you spend making it? This seems like an easy question, but it’s not. How much of your income do you spend maintaining your job, via transportation, career development, clothing, and so forth? And how much time do you spend doing things devoted to your job, such as going to work, coming home from work, attending work-related functions, and so on?When you calculate these new numbers, you might be shocked both at how much time you actually spend working in an average week, as well as how little you actually earn. You can drive this point home especially clearly by calculating a number that we’ll use throughout the month, your true hourly wage. How much do you really make for each hour that you spend devoted to your job? It’s not nearly what you might think, and that alone might shock you into considering some different avenues.
Stage 3: Building Your Own Life Budget, Not Following Someone Else’s Prescription
Day 7: Work For Your Dreams, Not Your Money
Day 8: Breaking Down Your Expenses
Day 9: Cleaning Up Your Expenses
Day 10: Fitting Your Expenses Into The Bigger Picture
Day 11: Dividing Up The Rest and Finishing Our Time Budget
Day 12: A Flexible “Budget” That Reflects Your Reality
Once you’ve taken a hard look at what you actually earn, you can begin to set up the basic framework of how to spend that money that is in line with your personal goals. This isn’t about printing out worksheets and trying to jam your life into the pigeonholes that someone else has created for you; instead, this is about defining how you spend money and working from there.It’s almost unfair to refer to this as “budgeting,” because budgeting carries with it some very bad connotations, much like putting on an uncomfortable suit. This process is much more like going to a tailor, who uses you as the basis to construct a custom suit that fits you. This process will create a custom budget that fits your life with your values and goals as a basis. We’re not talking about restricting you to spending $20 a month on “dining expenses,” but instead creating a structure where you can decide what’s appropriate because you can see how it relates directly to your dreams.
Stage 4: Looking At Your Life, Piece By Piece
Day 13: Pay For Your Dreams First
Day 14: Get Rid Of Debts (Slowly But Surely)
Day 15: Coming In Under Budget and An Emergency Fund
Day 16: Evaluating Your Expenses - Home and Auto Insurance
Day 17: Evaluating Your Expenses - Life Insurance
Day 18: Evaluating Your Expenses - Energy
Day 19: Evaluating Your Expenses - Automobiles
Day 20: Evaluating Your Expenses - Food
Day 21: Evaluating Your Expenses - Housing
Day 22: Evaluating Your Expenses - Monthly Services
Day 23: Evaluating Your Expenses - Bank Fees
Day 24: Evaluating Your Expenses - Entertainment and Hobbies
Day 25: Evaluating Your Expenses - Credit Cards
Once you’ve got a basic budget in place, it’s well worth spending some time carefully evaluating those numbers that represent you and see if there are any places where there is excess fat - and simply trimming it away. Is your electricity bill pretty high? Maybe there are a few simple ways to reduce it. Getting tired of paying that life insurance bill? Maybe you don’t need it at all - or can utilize something less expensive. Getting dinged over and over again with bank charges? Look at what they’re charging and do something about it. Credit card finance charges eating you alive? There are some easy ways to reduce them.We’re looking for ways to trim away fat (things that make you uncomfortable when you look at them) so that the meat (your goals, dreams, and values) have room to thrive. You don’t have to eliminate that daily latte if it brings you joy - just look for the many things you can do without or that you can reduce without significant pain and you’ll have the money to chase your dreams.
Stage 5: Setting The Stage For Lifelong Success
Day 26: Refining Your Budget
Day 27: Keeping Good Records
Day 28: Preparing For The Inevitable
Day 29: Paying Cash
Day 30: Live What You Love
Day 31: Keeping It Up
Now that the complete package is coming together, there are some basic methods for keeping the momentum going. What do you do with the fat you’ve trimmed away? How do you keep track of all of your financial information so that it’s not chaotic and incomprehensible? How do you ensure that you’re not ensnared in loan debt over and over again? How do you keep this good thing going?If you follow this plan and keep these principles in mind, you can easily live your dream. It’s all up to you, and it takes just an hour a day for a month to get things going.
Stage 1: Figuring Out Your Goals And Values
Day 1: Your Five Main Values
Day 2: Defining Your Goals From Your Values
Day 3: Create A Plan For Each Goal
The underlying challenge that most people have with their finances is that they see money as distinctly separate from the rest of their life. Money is an antagonist, an enemy that keeps you from doing what you want to be doing. The truth is that money is merely a tool, and when you find yourself feeling as though money is an antagonist, it is no different than a person attempting to learn how to use a heavy sword; it’s unwieldy and dangerous.The first step for learning how to integrate money into your life and use it successfully as a tool is to figure out what exactly you wish to build with that tool. Without underlying values, goals, and plans, money is no different than swinging a hammer around without building something. Thus, this first stage is crucial: what exactly is most important to you, and what will it take to adequately support those values?
Stage 2: Evaluating Your Situation
Day 4: How Much Did You Earn Last Year?
Day 5: How Much Did You Work Last Year?
Day 6: Your True Hourly Wage
Once you’ve figured out what is central in your life, it’s time to take a serious look at what you have to work with. How much do you make, and how much time do you spend making it? This seems like an easy question, but it’s not. How much of your income do you spend maintaining your job, via transportation, career development, clothing, and so forth? And how much time do you spend doing things devoted to your job, such as going to work, coming home from work, attending work-related functions, and so on?When you calculate these new numbers, you might be shocked both at how much time you actually spend working in an average week, as well as how little you actually earn. You can drive this point home especially clearly by calculating a number that we’ll use throughout the month, your true hourly wage. How much do you really make for each hour that you spend devoted to your job? It’s not nearly what you might think, and that alone might shock you into considering some different avenues.
Stage 3: Building Your Own Life Budget, Not Following Someone Else’s Prescription
Day 7: Work For Your Dreams, Not Your Money
Day 8: Breaking Down Your Expenses
Day 9: Cleaning Up Your Expenses
Day 10: Fitting Your Expenses Into The Bigger Picture
Day 11: Dividing Up The Rest and Finishing Our Time Budget
Day 12: A Flexible “Budget” That Reflects Your Reality
Once you’ve taken a hard look at what you actually earn, you can begin to set up the basic framework of how to spend that money that is in line with your personal goals. This isn’t about printing out worksheets and trying to jam your life into the pigeonholes that someone else has created for you; instead, this is about defining how you spend money and working from there.It’s almost unfair to refer to this as “budgeting,” because budgeting carries with it some very bad connotations, much like putting on an uncomfortable suit. This process is much more like going to a tailor, who uses you as the basis to construct a custom suit that fits you. This process will create a custom budget that fits your life with your values and goals as a basis. We’re not talking about restricting you to spending $20 a month on “dining expenses,” but instead creating a structure where you can decide what’s appropriate because you can see how it relates directly to your dreams.
Stage 4: Looking At Your Life, Piece By Piece
Day 13: Pay For Your Dreams First
Day 14: Get Rid Of Debts (Slowly But Surely)
Day 15: Coming In Under Budget and An Emergency Fund
Day 16: Evaluating Your Expenses - Home and Auto Insurance
Day 17: Evaluating Your Expenses - Life Insurance
Day 18: Evaluating Your Expenses - Energy
Day 19: Evaluating Your Expenses - Automobiles
Day 20: Evaluating Your Expenses - Food
Day 21: Evaluating Your Expenses - Housing
Day 22: Evaluating Your Expenses - Monthly Services
Day 23: Evaluating Your Expenses - Bank Fees
Day 24: Evaluating Your Expenses - Entertainment and Hobbies
Day 25: Evaluating Your Expenses - Credit Cards
Once you’ve got a basic budget in place, it’s well worth spending some time carefully evaluating those numbers that represent you and see if there are any places where there is excess fat - and simply trimming it away. Is your electricity bill pretty high? Maybe there are a few simple ways to reduce it. Getting tired of paying that life insurance bill? Maybe you don’t need it at all - or can utilize something less expensive. Getting dinged over and over again with bank charges? Look at what they’re charging and do something about it. Credit card finance charges eating you alive? There are some easy ways to reduce them.We’re looking for ways to trim away fat (things that make you uncomfortable when you look at them) so that the meat (your goals, dreams, and values) have room to thrive. You don’t have to eliminate that daily latte if it brings you joy - just look for the many things you can do without or that you can reduce without significant pain and you’ll have the money to chase your dreams.
Stage 5: Setting The Stage For Lifelong Success
Day 26: Refining Your Budget
Day 27: Keeping Good Records
Day 28: Preparing For The Inevitable
Day 29: Paying Cash
Day 30: Live What You Love
Day 31: Keeping It Up
Now that the complete package is coming together, there are some basic methods for keeping the momentum going. What do you do with the fat you’ve trimmed away? How do you keep track of all of your financial information so that it’s not chaotic and incomprehensible? How do you ensure that you’re not ensnared in loan debt over and over again? How do you keep this good thing going?If you follow this plan and keep these principles in mind, you can easily live your dream. It’s all up to you, and it takes just an hour a day for a month to get things going.
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