Gails Blog

How worried are you about retirement? I’ve been getting quite a few questions recently from people who are at or approaching retirement and I think there are more than a few things wrong with how people are going about this.

First there are the people who plan to go into retirement with debt. Really? You couldn’t get your consumer debt, your car loan, your mortgage paid off while you were working, so you think you’ll be able to do so when you’re not? Hmmm.

It used to be a Golden Rule to have all your debt paid off by the time you moved into retirement. That included your mortgage. Then people started saying, “Well, I have to live somewhere, so if I have a bit left on my mortgage, what’s the big deal?” I don’t have a big problem with this, assuming you have the retirement income that isn’t gobbled up by your housing costs. But many people don’t. And yet I get letters from people who, instead of trimming their housing costs for retirement, are planning to increase the debt on their homes just when their incomes are falling drastically. They write me because they’re not sure how to manage this. Well, you CAN’T! It simply makes no sense to increase your overhead when your cash flow is shrinking.

Then there are the people who plan to come to a grinding halt on the work-front at some previously chosen date, be it 65 or earlier, simply because they want to stop working. Early retirement is a huge dream for many people. And yet they’ve done very little in the way of asset accumulation or income projection.

Y’all do realize that we’re living longer, right? At the beginning of this year, the Stats Man reported that life expectancy had hit 80.4 years, with chicks eeeking out four years more than dudes. Of course, since you weren’t born in 2005, which is the birth year this report is based on, you may croak a little earlier (or later, depending on your fam’s history). The point I’m trying to make here is that if you retire at 65, you still have 15+ years to feed, clothe and house yourself. If you retire earlier, you put even more of a strain on your savings. So you better do some income projections to see just how long the money will last. And don’t forget to figure in the impact of inflation.

Next there are the people who haven’t, even for a second, considered setting aside some money for the future. They are so busy having a great time right now, that the future… well… it’ll be fine, just fine. Heads up people. While government pensions may be enough for those people in the lowest income bracket, for many others it just will NOT be enough. If you haven’t looked at how much you’ll receive from social security, then you should. And if that doesn’t scaring you into setting aside a little something for the future, I don’t know what will.

Here’s the thing: the earlier you start saving for the future, the less money you have to take out of your cashflow because the longer you put the Magic of Compounding on your side. Start in the 20’s and you can get away with saving as little as 6% of your income. Wait until your 40’s and you’re going to have to sock away 18-20% . Yah, time does make that much of a difference.

You can go into retirement with your eyes closed and your fingers crossed behind your back and hope for the best. Hey, if that’s how you’ve done life so far, you’re probably pretty good at it by now. But if you get there and find you’re subsisting, don’t whine.

Another alternative — some would say a better alternative — would be to take a realistic look at what you may need for retirement, how much you think you’ll have, and what you can do to close the gap if there is one.

And for heaven’s sake, make sure you’re debt free before you get there. Spending your limited resources paying for crap you bought on credit should be the last thing you do.

So, are YOU worried about retirement? Do you even think about it? And what do you think when the idea of coming to the end of work pops into your head? If there are things about retirement you’d like more information on, post your questions on this blog and I’ll get to work on some answers for you.

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I meet a lot of people – and hear from many more – who want to debate the validity of a budget. Second only to life insurance, budgets are the most misunderstood financial tool around. People see them as constraining, like too tight shoes you squeeze your oversized feet into. People seem them as rigid; think full body cast. People see them as impossible, as in, “I’ve made lots of budgets but they never work!”

Worst of all are the people who throw up their arms and sigh, “I can’t… I just can’t.” Hmmm.

So do you have dreams of things you’d like to have, places you’d  like to go, experiences you’d like to… well… experience? If you want to get from here to there, and you’re not rolling in dough, the way to do it is to make a budget. Your budget is a plan; a plan for how you will spend your hard-earned moolah. Without the plan, you’re diving down the road with a blindfold on. And when you run into the ditch, the ooops can take a long time to fix.

So why does living on a budget makes sense?

First, a budget lets you see if you are living within your means. Once upon a time, before credit was as common as the cold, people knew whether or not they were living within their means because they either had money left over at the end of the month or they didn’t. With credit cards, lines of credit, and overdraft protection, it is much harder to see that you’re not making ends meet because you can fool yourself into thinking you’ve got it covered. However, if you have a budget and you faithfully plug your numbers in, the budget will tell you the truth.

So a budget gives you control over your money. You set money aside for specific purposes, be it accumulating money for your children’s education, saving for retirement, or building a stash of cash for that trip to Europe you’ve always wanted to take. Often these dreams and aspirations go ignored because by the time you get to the end of the month, the money is all gone.

Wouldn’t it be a relief to have money available to handle emergencies and unanticipated expenses when they crop up? Without a budget, people think of most of their less regular expenses as “unexpected.” Having forgotten about the car insurance bill that comes once a year, they’re shocked and surprised when the bill arrives. With a budget not only would you know when to expect the bill, you’d have set aside 1/12 of the total each month so paying it would be no problemo.

It’s also a lot harder to spend willy-nilly when you’re on a budget because you’ve accounted for where the money is going, down to the last red cent. All my budgets come out to zero at the bottom. If I find a category doesn’t work because there’s not enough in it, then I have to cut from another category to make the budget balance. But every cent is accounted for. No surprises. Course, not everyone is prepared to be a grown up and spend money consciously. Some people like the rush of spending on a whim. They hate budgets. But they’re the people most in need of a budget because they have no self-control.

And if you’re married to one of these people, a budget can be a marriage saver since it will reduce arguments about money. The budget serves as your guide so if you and your partner are having a squirmish over whether or not to buy something, you can always fall back on, “not until we put it in the budget.”

Perhaps the biggest benefit reported by the couples I’ve worked with is the fact that their stress is waaaay reduced and they find that they sleep better! Following a budget means you eliminate unnecessary worrying over money and debt. You’re confident that everything is figured out, and as long as you follow the budget, you’ve created a plan that will get you to where you want to be.

BTW, there’s some work involved in making a budget. If you look under Gail’s Tools on this page, you’ll see Gail’s Guide to Building a Budget. There are a lot of people who have found the Budget Worksheet, but haven’t read the instructions! You’re a bunch of dopes. If you think the budget worksheet and the Magic Jars are going to calculate themselves, you’re more delusional than I imagined a person could be. Wake up! This takes work! Remember this saying:

God helps those who help themselves. 

Are you ready to help yourself? Or are you waiting for someone else to solve your problems for you?

People are always claiming to be serious about becoming debt free, and then out they go and drop $3 on a coffee, $30 on a book, $60 on a new pair of shoes. The little things we spend money on may improve our lives for the time it takes to consume them, but they do nothing for our long-term goals. If you’re serious about becoming debt free, you can do it. But you have to have a plan.

Step One. Put Snowballing to Work. List your consumer debts (not your mortgage unless you’ve done a mortgage consolidation for debt) from most expensive to least expensive, noting your interest cost, your total debt and your minimum payment amount. You might have something that looks like this:

1. Buy-now-pay-later         32%            2100             84
2. Department Store CC        28.8%          700             28
3. Department Store CC        28.8%        1200             48
4. Credit Card                       18.9%        3000            120
5. Credit Card                       14.9%          400              16
6. Student loan                     11.6%      13700            548
7. Car loan                            10%         25,000           650
8. Personal Line of credit        9%         15,000           112
9. Second mortgage/Consol   8%         28,000           212
10. Home Buyer’s Plan              0%         18,000           100
11. Family                                 0%            2,800               0

The idea of the list is to prioritize where you’ll make your payments. You’ll start at the top, with your most expensive debt. (I know some people like to start with their smallest debt, but that’s not efficient.) As that’s paid off, you move to your next most expensive, all the while making the minimum payments on everything else so you stay in good standing with your credit history. Each time you move down the list, you’ll snowball. You’ll add the payment you were making to the most expensive debt you’ve just paid off to the next most expensive that you’re about to tackle.

Step Two. Start today. Like eating smart, exercising and everything else in life that takes discipline, the number one cause of Not Doing It is PROCRASTINATION. You have to wait until your next pay period. You have to wait until you know you have some extra money. You have to wait… and wait… and wait… How’s that working for ya? Any closer to being debt free? Nope? Well then Start Today. 

Step Three. Make a budget. If you don’t know where your money is going, you don’t stand a hope in hell of being debt free. You have the tools on this site. Go to the Gail’s Budget Worksheet and make a budget that balances. The amount you put in for debt repayment will equal the total of all your minimum payments.

Step Four. Cut back. Go over your budget with a paring knife and trim out all the non-essentials that are sucking away your money. How much did you come up with? Do it again. Now how much do you have? Do it again. And again. You want that budget to be so tight it squeaks. You’re going to add whatever you’ve squeezed out of your budget to the payment on your most expensive debt. So if you managed to squeeze out another $300 from your budget, you add that $300 to the minimum payment on the first loan on your list.

Step Five. Make a payment. Don’t wait for the due date. If you owe money it’s always due. And the faster you make a payment, the quicker you turn off the interest clock.

Step Six. Every penny counts. Start carrying a notebook around with you, and whenever you save money on something, write it in your notebook. When you get home that night, make a payment of however much you’ve saved that day against the debt that’s at the top of your. Now you’ve put what you saved to good use, as opposed to just spending it on some other crap.

Step Seven. Every penny counts, repeated. Scour your house for all your change. And every time you empty your pockets of change, add it to your change pot. At the end of every month, deposit it to your bank account and then immediately use that money to make a payment against your most expensive debt.

Step Eight. Sell stuff. Have you heard? Less is the new more! Go through your home, room by room, and choose two things you can live without. Have a yard sale, list things on craigslist or eBay, or sell things through a consignment shop. You might not get a lot for whatever you’re selling, but whatever you get is money you won’t have to pay interest on. Apply that money to the debt at the top of your list.

Step Nine. Make More Money. You knew it was only a matter of time before I got here, right? You have no time to waste if you’re in debt. Turn your time into money in whatever ways you can.

Okay, that’s the plan. Now it’s up to you whether you implement it or not. If you choose not to, you can’t whine about being in debt. Nope. You’ve made your bed and now that it’s full of flees, you’ve only the dog in the mirror to blame!

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First off, the Your Story, Getting to Debt Free pages are up and the first story has been posted. And while Emma was quick off the mark with her story, no one else has sent me one since. Get busy people. To get to the page, you can start on my home page or from my blog. The instructions for how to use the pages are in the top right corner under Telling Your Story.

I’ve been getting a lot of questions and comments recently about the need for me to do stuff for single people and parents without partners. I’m just curious as to why people think being single or a sole parent is any different than being partnered. Is it because there’s the perception that there’s loads more money available? What about all those traditional families where there’s only one income earner? No more money, just more mouths to feed.

The reality is that success with money has very little to do with how many people are bringing home the bacon. It’s more about how the money coming in is spent, saved and managed. Whether there’s one income-earner or two, having a budget, prioritizing and keeping track spending, and building a safety net applies. Yes, it can be harder when you are a sole parent and sole provider, but that’s life. Sometimes it sucks. But it isn’t any different from people who are partnered and having a crappy experience, and believe me, there are plenty of those. If you want to make your money work for you, you need a plan. You start with a budget and then you go from there. The budget is the foundation on which you build. Gail’s Budget Worksheet on the site that will let you plan what you do with your money, pour the amounts you should have into the jars and show you your percentages.

Speaking of the budget, people are also always writing me to find out how to apportion the money in their jars. They’ve seen the jars on TV, but haven’t taken the time to explore the website, so don’t know about the budget worksheet. Hey, I’ve provided the tools on the site, now those who need them must use them. So a little initiative, people, please.

Another question I get quite often is about what to do with money left in the jars at the end of the month. Some of those jars are meant to accumulate. Let’s face it, if you have $25 a month for clothes, then it may take a few months before you have enough to buy your kid’s new snowsuit. Ditto transportation, in which you accumulate your car repair money. Grocery money, too, should sit there for a while since there are big cost items (think laundry and cleaning supplies) that have to be replaced on a less frequent basis.  (BTW if you’re eating in restaurants, that’s coming out of the food/personal care jar.) If you have money left over in the entertainment jar, either you’ve budgeted too much, or you’re not having any fun. Fix that. And the Other jar… ah yes, the Other jar. People have no idea what goes into this jar.  It’s everything that’s variable that’s not in the first four jars so it may include kids’ allowances, pets, medical, and banking if you have money allocated in those categories. (I know, the banking money should stay in the bank, but it’s a variable cost and I had to put it somewhere! Just put it back in the bank.)

If after six months you have a lot of money left in the jars that you’re simply not going to spend, leave enough of a float in the jars to cover unusual expenses and by all means slap the rest against your debt (first choice) or into your savings. You should also revamp your budget numbers so that they reflect your lower-than-your-thought spending.

If you write me a question and I don’t respond, one reason may be that I’ve answered a similar question before. Check the Your Questions section. Also read the articles and the past blogs. Financial institutions have for years tried to convince me (as their resource) that their clients are pretty simple and must be spoon-fed, which is why so much of their material is basic and light. I’ve tried to convince them that their clients are smart and need more meat. All the people who won’t take the time to do some research on the site are proving me WRONG.

As for all the people who write to ask if I’ll do a private consultation, the answer is still no. It’s a time thing. You might be surprised at the number of people who ask this question. I get 15 or so requests a week. People are desperate for help. I know that y’all are. And I wish I could be everywhere, but I simply can’t. So that’s why I created the site. There are tools available and lots of advice. Now you just have to put your butts in gear.

There are people who want to do what I do and ask how I got into this. It was a very round about process, so I’m afraid I can’t help you there either. The best I can suggest is that you find an institution that you think shares your values, join up, and learn from them.

I’ve had one or two people object to my language, my attitude and my approach to working with people. If you don’t like me, that’s okay. Not everyone will. Just ignore me then. I don’t expect to be everyone’s cup of tea.

And finally, my response to this:

Oprah has had Suze Orman on a couple of times in the last month. She recommends having 6-8 months of living expenses saved up as an emergency fund. You tell people to put $100 a month. Is Suze being extreme?

I often get misquoted because some of the things I say are taken out of context. I, too, believe that you should have a healthy stash of cash available for emergencies. My rule of thumb is to have six months’ worth of Essential Expenses at the ready. I never tell people to put away $100 a month as a rule. However, that’s often where I start my fams off on the show, to get them in the rhythm of saving for emergencies.

People, money management requires that you do more than grab at a snippet here and there. You must make the commitment to learning about how money works and how to make it work for you. And while different “experts” have different amounts or percentages that they use as their rule of thumb, those are less important than the actual planning they are suggesting that you do. So if Suze says eight months and I say six, that’s way less important than the main message, which is “have an emergency fund.” And if Dave Ramsey says pay of your smallest debt first and I say pay off your most expensive debt first, that’s less important than the main message, which is “pay off your ficken debt!”

When you get caught up in the details, arguing one person’s strategy over another’s you’re participating in obfuscation. You’re focusing on the stupid little details so you can avoid the big message. The investment world has long used this device to keep people in the dark, presenting myriad messages that have only served to confuse Joe and Joanna Average about what to do. Don’t get caught up in this.

You have a brain. Use it. Listen to what the experts say, apply it to YOUR life, and make it work for YOU. We speak in generalities because we must. But you’re living your SPECIFIC life, and you should make a plan that works for YOU.

If there’s one thing that makes my fams successful, it’s that they have a plan that’s specific to their individual needs and that they can build on. When I leave, I give them their budgets and debt repayment plans, point them to my website and tell them to keep the thing alive by reviewing it at least a couple of times a year. We change. Our circumstances change. So should our money plans.

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Continued from yesterday’s blog

#6 Expenses Go Up but Spending Doesn’t Go Down. There are the people who buy a home and think they can still eat out six nights a week. There are the people who have kids and still think they can spend $600 on a handbag. There are the people who start their own business and still think a vacation every year is their right. Whenever you make a move that sends your expenses up, but don’t cut back on your discretionary spending, you’re stepping on the road to Debt Hell.

#7 We Don’t Talk about Money. How can you have an intimate relationship with a partner and then refuse to talk about your money? How weird is that? All the time I hear people say things like:

• “That’s his money. He earned it.”
• “She makes more than me so I don’t have the right to ask questions.”
• “I try to make a budget, but he just won’t have anything to do with it.”
• “She spends money and doesn’t tell me so I never know if I’ll have the money to pay the bills.”
• “He has no self-control. We just fight about money all the time.”
• “She keeps the stuff she buys a secret. I find things with the tags still on them.”

Really? You love each other enough to make a life commitment but aren’t willing to talk about how to manage your money as a team? Perhaps it is because one or both of you don’t want to be help accountable and so long as no one’s watching, you can just do whatever you want. Or maybe you’re self-esteem is bruised because your partner makes more and throws his/her weight around. Whatever the reason, Debt Hell is around the corner. So may be #8.

#8 Divorce. Two people cannot run two separate households as cheaply as they can run one, so if you divorce one or both of you are going to feel a lot poorer. It’s a sad reality that a huge percentage of households are torn apart both emotionally and financially by divorce. And when one partner leaves the other holding the bag, skipping out on financial responsibilities, the outcome is horrible. If you’re going through a divorce, go read the stuff in the Splitsville section.

#9 Gambling. I can’t believe the number of people who piss away their money on games of chance. From the lottery to the slots, from poker to the casinos, people are dumping millions and millions of dollars they could be using to build their own lives into the profits of those who run the Dream Machine. Some people have such serious issues with gambling that they lose their homes. Imagine. Putting your children onto the street because you’re so lazy – or desperate? — you’d rather chase a roulette ball than do a hard day’s work.

#10 Banking on a Windfall. Not unlike the gambler, the person who is banking on a windfall doesn’t want to have to work as hard as it would take to get the life they want. Count all the people who aren’t saving for their retirement in this group. Ditto the people who aren’t putting money away for an emergency. Like magic, money will fall into their laps and they will be able to right all their financial wrongs. Except that most people who benefit from a windfall end up in debt anyway because they never had the discipline and strategies for money management in the first place. More money isn’t the answer. Focus and a plan are.

Going into debt is sometimes a choice. We make the choice when we buy something we can’t afford to pay for, every time we don’t bother to check to see if we have enough money in the bank to get to the end of the month, every time we waste $5. There are life events that can contribute to pushing us into debt, but if we had been managing our money all along – saving some, covering our risks with insurance, being responsible with our money – those life events could have been a lot less painful. Illness, widowhood, divorce all carry big price tags. And that’s why having a BALANCED financial life is so important. Sure you can forgo one leg of your financial plan because you’re trying to make another stronger; giving up saving until your debt is repaid is the classic example. But don’t fool yourself into thinking you’ve got a balanced plan. For like a table with a weak leg, it’ll only take a little pressure in the wrong place to make the whole thing fall down go BUUFF!

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Often when people meet me out and about, they want to talk about the show. The people I meet often fall into one of three categories:

• The “That’s Me You’re Talking About” people who see themselves reflected in the families on my show,
• The “I’m following the Gail Rules now” people who are using the show as a series of lessons to get themselves back in the black, and
• The “How’d they get themselves in such a mess” people who can’t conceive of spending more than they make, or having all that debt.

The people in the first and second group know exactly how they got into a mess. For the people in the third group, here are my Top Ten Ways to Get into Debt  – Part 1, so you don’t end up falling into the trap too.

#1 No Money Management Skills. That’s right, money management is a skill and unfortunately a lot of us are missing it. Each day we fly by the seat of our pants, hoping that things will turn out okay. Some days they do. Many days they don’t and we then run around fire-fighting to stay afloat. If you don’t know how much money you make, how will you know how much money you can spend? If you merrily charge whatever you’re buying on your credit card, but you don’t know how much you have to spend, how will you pay off that credit card when the bill comes in? A lack of money management skills is, perhaps, the biggest predictor of financial failure. All the credit counseling, all the bankruptcies, all the income in the world isn’t going to save your butt if you don’t take the time to figure out how to use what you’ve got to your advantage. There are rules to follow, work to put in, and self-control to be applied. It’s much easier to simply whine, “I can’t” and go happily on shooting yourself in the foot.

#2 Underemployment. Some people are just born lazy, y’know. I’ve worked with more than one person who thinks that earning $14 an hour for 37.5 hours a week is just fine. Bringing home just over $400 a week is fine, if you’re prepared to live on $400 a week. But most people aren’t. They want to buy beer, they want to watch movies, they want to have cell phones and premium cable and everything else their pals have. Sometimes when I tell these people to go Make More Money, they complain that it’ll take away from their Mommy or Daddy jobs. Ya know what? That’s an excuse for not wanting to work harder since many of those same people spend hours a day doing stuff that doesn’t involve their kids. THOSE are the hours you should be spending Making More Money.

#3 Income Goes Down, Spending Doesn’t. People get laid off from work. People get sick. People stay home to raise their children. Their incomes go down, sometimes waaay down, but their spending doesn’t. They use their credit cards, lines of credit and overdraft protection to fill the gap and then say they are surprised to find they are buried in debt. Then they get a consolidation loan or wrap the consumer debt up in their mortgages and go out and do it all over again. Of course, these same people could have built themselves a buffer against changes in their financial circumstance, except for Reason #4.

#4 No Savings. We seem to have developed an aversion to saving. We use the excuse that we can’t get much return on our money right now, so what’s the point. Ha! Talk about JUSTIFICATION! Wow! We’ve watched the savings rate plummet over the past three decades, hitting the negatives. How can that ever be a good thing? Of course, if we were willing to live on a little less now so that we’d have a cushion set aside in case we lost our jobs, we wouldn’t be pushed into Debt Hell quite so quickly. And if, knowing we were going to take time away from work to raise kids or go back to school, we set aside some money to see us through our future plans, we wouldn’t dig ourselves a tunnel to Debt Hell.  And with three to six months’ worth of Essential Emergency Expenses in the bank, getting sick wouldn’t also make up financially ill.

#5 Getting Sick. Some people believe they will never get sick. It’s why people don’t bother to get critical illness insurance, disability insurance, or life insurance. In my mid-40’s I had to deal with the death of my best friend from cancer. She was in her 40s. And before Cookie died, she had years of dealing first with MS and then with breast cancer and finally brain cancer. It was horrible. If she hadn’t had insurance, she would have been totally screwed. As it was, every month was a challenge financially. And believe me, she didn’t need any more aggravation. Of course, you may not be the one to get sick. It may be your partner, at which point you better have some money to help pay for the things (s)he used to do. Or it may be a child or an elderly relatively that causes you to lose time off work.

These are the first five reasons why we go into debt, and they are the most obvious. Tomorrow: Reasons #6 - #10, the less obvious reasons.

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Everyone has regrets, right? There’s all that debt you’ve run up on your credit cards. There’s the effort you DID NOT put in to finish the paper, get the project completed on time, get a promotion. And there’s the laundry, the dusting, the thank-you notes you haven’t gotten around to just yet. So you beat yourself up. You say you should have. You feel rotten. Course, you probably don’t do things any differently the next time, giving you plenty more fodder for Mother Regret to stand over you and berate you: you fool, you simpleton, you dummy!

Here’s a Gail Bulletin: You’re wasting your energy if you’re spending time visiting with Mother Regret! Get over yourself and get on with your life.

But, Gail, all those stupid things I’ve done… shouldn’t I feel like a dope?

Sure you should. If you’ve done dopey things, then you’re justified in calling yourself a dope. But wasting good energy wallowing in regret is counter-productive. After all, the things you are regretting are things past. You can’t do a thing about them. So beating yourself up over your mistakes over and over and over brings you no closer to where you want to be. (Feeling like a dope, on the other hand, will hopefully keep you from making the same mistake again.)

Made some mistakes? Who hasn’t? And why do you think yours are worse than anyone else’s? As Warren Buffet says, “All saints have a past; all sinners have a future.”

The first thing you have to do is stop beating yourself up. Lamenting the mistakes we’ve made doesn’t help us to see ourselves as successful, which is a part of becoming successful. So instead on focusing on all the debt you’ve created, set your eyes on the payments you are making to whittle that debt away.

While you can’t do anything about your mistakes made, you can learn from them. If you couldn’t resist making purchases because your credit card was sitting cozily in your wallet, then accept that you have no self-control and leave the credit card at home.

Making a list of your regrets, with notes on strategies not to repeat those mistakes, can be a great way to shut Mother Regret up! Grab a pad and pencil and jot down the things you regret.  Now take all the new things you’re going to do and transfer them to your Strategies for Success List. Burn the Regrets List.

Many people regret the things in their lives that they never did. My mother always said, “It isn’t the things we do in life that bring the most regret, it’s the things we never did. So do it all.” I took her advice and regret very little. There are things that hurt, things that I wish had come out differently, but I don’t regret them. They were lesson I learned and grew from.

If you have things you wish you had done, it’s time to make The Mother of All To Do Lists so you don’t end up with Mother Regret whispering your failings, your chicken-heartedness, your procrastination in your ear. Write them down and then get busy doing them. It isn’t too late; not until you’re dead!

As you move forward, stay focused on today. Looking too far into the future can be intimidating. Looking over your shoulder at where you’ve been is just navel-gazing. Be in the present. What are you going to do today, and keep doing every today, to make the life you want?

This may mean swapping some bad habits you’ve had for some better ones. If you’ve habitually used the bank machine as a wallet, racking up wicked bank charges every month, then today you will start planning how you spend your money. This month you will go to the bank machine only once a week – or twice a month – whatever works for you. And you’ll only carry as much money as you plan to spend, so you can’t use it all up on a whim.

Addicted to eating out? Today you’ll make lunch. Addicted to shopping? Start using a Wish List and only buying what’s on the list.

Today’s the day to wipe clean the slate and begin the rest of your life. Will you allow Mother Regret to make you miserable? Or will you take control of the rest of your life and do only those things that keep you in the zone – the place you want to be?

FYI: The new Getting To Debt Free page is up. Look at the top right side of the blog for a link. Or you can get to it from my home page. Emma’s Story is the first up. She was pretty quick off the mark because JD and I only got it all finished last night at about 6 p.m. Please note that if you post a response to the instructional first blog from me, it will be deleted. You must use the process described to get your story on the site. Thanks, and enjoy!

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If you’re watching the markets dip and dive, pirouette and plummet, you might be feeling a little queasy.  Not a surprise, really, since most people who have invested money have very little idea how the various investments work. Sure, they know what the salesperson told them, but they don’t understand the really deep stuff. And so, when the markets start to take a tumble, panic is the name of the game.

If you’re an Iceberg Investor – you buy investments based on what you can see above the water, but have not a clue about the stuff below the surface. Most of us are Iceberg Investors. We buy based on what we hear in the news, from our friends, from our advisors. But we don’t fundamentally understand the investments and what’s in ‘em.

Sadly, there are a lot of salespeople out there who also don’t understand what’s in the investments they are selling. They have an idea. They know it probably good. They want to stay on the right side of their boss. But they couldn’t explain to you what it is, how it works, or what’ll affect it. And they probably aren’t buying it.

Panic only hurts the panicked. Regardless of what you bought, and why, here are several reasons why you don’t want to make like a chicken with its head cut off.

Ever hear the phrase, “Buy low and sell high”? Then you know now is not the time to sell since everyone else is dumping their investments and this would be Buy Low Time. Below the Surface Investors get nervous when the market is at an All Time High. Hey, that probably means DOWN is the next place to go, right? But when the market is off its peak, it’s pretty reasonable to assume that there some UP room.

The next very best reason to not sell is that nothing happens until you do. That’s right. As long as you’re holding the investment, it could go up again and then you’d have no (or less) loss. You don’t actually lose a cent until you execute your sell order and turn your panic into loss. So don’t.

Active trading is also a sure way to decrease your investments’ performance. Remember your investment objectives? They should have been long-term in nature (because no body is supposed to be in the market with an investment horizon of less than 10 years.)  Why change your strategy now? Market timing doesn’t work… all the experts say so. And time in the market trumps market timing every time. So relax. Stay focused on your objectives.

If the market feels riskier than it ever has, it’s your imagination. In reality, the most risky time to get into the market is when there hasn’t been a correction for a long time and everyone believes there’s no where to go but up. That kind of “unbridled enthusiasm” is a sure signal that things are about to change. It’s time to take the emotion out of the investing. Never mind what your gut is telling you about risk. It’s wrong. It’s just emotion. Invest with your head.

And do your homework. When you buy the shares of a company, don’t do it based on past performance since you’ve already missed out on that growth. Instead, buy companies that you understand and like as a consumer. If you don’t want to put in the work, look for “passive portfolios”… you can head over to Canadian Capitalist to learn more about them.

And for heaven’s sake, don’t listen to the “market makers.” As Warren Buffet says, “Wall Street is the only place that people ride to in a Rolls-Royce to get advice from those who take the subway.” Let’s face it, all those guys giving out the free advice wouldn’t need JOBS if they were really as smart about investing as people would like to believe they are.

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A few people have suggested I set up a page where you can post your successes, strategies and progress as you move toward financial independence. If y’all are interested in this, I’ll ask my webmaster to make it so. But I don’t want to put JD to all that effort if it’s just going to languish. So I need at least 100 votes of “yes” (only post if you are saying “yes”) before I’ll proceed.  Now it’s up to YOU!

TTFN

I went to a Pampered Chef at-home party recently and bought some new kitchen stuff. Did I need it? Not particularly since I have a well-stocked kitchen. But the products are good and I enjoyed the company. I drop a couple hundred bucks and made some new friends.

A few days later, the woman who was selling the stuff at the party, the party host and I got together again, this time to cook. I had been bragging about my cooking skills and describing a couple of the things I’m mad about right now and they were intrigued. We agreed to get together to cook. I’d do the shopping and we’d split the bill three ways. So that’s what we did.  I taught them to make my curried coconut and squash soup and portabella mushroom sandwiches, we chatted and laughed, and ate lunch for about $4 a piece right there in Catherine’s kitchen. 

I got to thinking about it some. Why are we turning shopping into a social event? Whatever happened to hanging out, cooking together, shooting the breeze?

We seem to be able to turn everything into a reason to spend money. Book club becomes a “meal out with the girls” in a nice restaurant. Entertainment becomes “going to a movie” and not even talking to each other. And the direct sales party is a resounding success both in terms of sales dollars and socializing.

We all know Avon. Getting together to play with make-up is a great way to spend an evening. So what if you drop $50? You’d have spent that going to dinner or a movie, and you got that great make-up to take home. Mary Kay is such a big hit that all over North American there are women driving pink Caddies, the reward for being a Big Seller.

Tupperware was one of the originals into the home-shopping game, turning plastic into gold. Discovery Toys offered educational playthings for aspiring moms and dads. And Herbal Life promised health. Scrapping booking is another direct sales money-maker. So are all the at-home fashion parties where you can buy business wear or new naughty knickers while sipping wine, nibbling nibblies and laughing. According to the Direct Selling Association in the U.S., there are almost 14 million people working in the industry making sales of $29.7 billion (in 2006).

So, are we spending money simply because we’re lonely and think we need to spend money to be with friends? Are we substituting spending for being?

It’s a reasonable question. I’m not knocking direct sales, believe me. If you can make money working on your own terms, I say go for it. I’m just wondering about all the people who go to the parties and buy stuff (they feel obligated, no doubt, by the food they’ve eaten and the wine they’ve drunk) just to have a night out.

And what are the less consumer-focused ways we can gather with our pals, meet new people and have a great time?

When I set up my new home, I think I’ll start a cooking party. No, people won’t have to buy anything. Instead, I’ll invite a few friends over to cook together, and they each can bring another friend to widen the group. Maybe once every three months to start. We can share our favorite recipes and learn from each other, laugh our heads off and have a great time, and stick some food in the freezer for when we get home from work and can’t work up the energy to cook.

There are dozens of ways we can get together with friends that don’t cost money. The original book club idea, the children’s toy swap, the DVD exchange (watch a movie, eat some popcorn and swap previously watched DVDs)). So how do you do it?

BTW: I’m all for direct sales as a career choice if you’re looking for a way to grow your income. Want more info? Head over here.  It’s a U.S. site with tons of info on various direct sales alternatives. 

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