Thursday, March 27, 2014

Light Your Debt on Fire

My friend Anne did an amazing thing last week: she lit her second mortgage on fire. It was a rite of passage that was the result of four years of persistence, prioritization and stretching out of her comfort zone.

I often weave Anne into my writing. Not because she’s fabulously rich, but because she’s fabulously consistent. And we all know from The Tortoise and The Hare fable who wins the financial race: the tortoise. When I met her, she was already living a life of intentionality. Every year, she would choose five birthday goals: three personal, two professional. With great care, she would set out and achieve them.

When I was curating my first prototype Finance Boot Camp, she was an obvious choice. I needed people in that group who were going to declare with honesty what they needed to do with their finances and then do it. I didn't know many details about her finances at the time. I didn't think she was in misery. But I knew she was like many of us, living a little paycheck to paycheck, not earning as much as she was worth and not prioritizing savings and retirement. And then the inevitable happened: her home needed a new roof. She had no savings. She had boxed herself into a corner. Either forgo the badly needed roof, which isn't really an option, or take out a second mortgage.

She hated doing it. She had long been on a mission to pay off her home, and was closer than many because she bought it in her 20’s and hadn't succumbed to the ever enticing “home equity windfall” that so many had. The thought of more debt was dreadful to her, as was the thought of another monthly bill.

In her words from her Facebook post:
"Five years ago I was stuck in a job I hated, $23K in debt, & barely able to make ends meet. I felt horrible. With the support and skills I learned at Finance Gym, I turned it all around. I'm SO much happier today -- on many levels. If finances are a problem, or you simply want to get better at planning, financial accountability and building toward your dream, please consider It works. The proof is in the burn."
Every person who has ever been in a Finance Boot Camp has a story of financial transformation to tell, and I greatly appreciate that she always calls out Finance Gym as the impetus for her financial turn around. But the truth is, Anne has done all of the heavy lifting. She’s the one who gets the kudos.

If you want Anne’s secret formula to financial success, here it is. With great consistency:

  1. Be honest about your financial facts with yourself and select others,
  2. Be honest about your financial feelings with yourself and select others,
  3. Find cheerleaders to help you along when it gets rough (because it will),
  4. Take courageous action in finding work that you love, and that compensates you at a level worthy of your skills and talents,
  5. With every salary increase or windfall, mindfully allocate it to savings, retirement and debt repayment, and
  6. Be measured about your spending (not frugal, which leads to all or nothing behavior.)
Did I mention consistency? Above all else, the thing that has shifted Anne’s financial reality so dramatically is that she’s made her financial life a little bit better every single month. Over time, it’s added up to all of her debt being paid off (other than her first mortgage) and a substantial amount of money in retirement, savings and reserves. (Yes, that’s three different types of savings.)

Congratulations Anne! You’re an inspiration. I look forward to the ceremony when you light your first mortgage on fire!

- Stacey Powell

Finance Gym offers personal finance coaching in professionally facilitated peer-advisory groups.
Reach your financial goals. Get motivated. Get support. Get results. Are you ready?

Tuesday, March 11, 2014

The Emotional Side of Savings

One of my favorite banking industry slogans is “We, The Savers.” Launched in 2008 by the cutting edge online bank ING Direct (now owned by Capital One), it pokes fun at our nation of non-savers. Three out of every four people in the United States don’t have the recommended six months of expenses saved. One out of every four don’t even have one month of reserves. 

Let me say that one more time. 1 out of 4 don't even have one month of reserves. We know we should, but few of us do.

When we hear these statistics barked from the media, most of us hear them as just that: statistics. We don’t stop to think about how it impacts our lives. Our car breaks down, and we have no personal safety net to get it repaired. That sounds so matter of fact, but if that has ever happened to you, you know that underlying the fact is a deluge of emotion, frustration, shame, annoyance or fear. And the impact comes not just from when we let it happen to ourselves, but we also have to feel some of the brunt of it when it happens to our children, coworkers, and other family and friends. There’s no faster way to a bad day than a sudden expense you were unprepared for.

When I was first tackling my financial issues with my own money mentor, every time I had a “my car broke down” issue (or whatever the issue of the day was), he wouldn't spend a minute talking with me about how to resolve the problem that I didn't have money in savings, and I didn't want to use my credit card. He would only talk about what I was saving, was it enough and how I could save more. Frustrating! I walked away from so many conversations with him completely annoyed, and ashamed because once again, I was in a financial bind.

But then, finally, came the first time that my car suddenly needed a major repair and I had enough in my savings account. It was a revelation. A relief. A moment of "feeling adult." I finally not just logically understood the importance of my savings, but more importantly, I understood the importance from a deep emotional place.

If not having enough causes frustration, shame, annoyance and fear, having enough brings a sense of ease, pride, and safety. What's your emotional experience of your money

- Stacey Powell

Finance Gym offers personal finance coaching in professionally facilitated peer-advisory groups.
Reach your financial goals. Get motivated. Get support. Get results. Are you ready?”