The One-Third Money Rule

Hi! Welcome to The Finance Gym Action Plan for a Better Life with Money video series. My name is Stacey Powell and if you’re ready to not just know better but also do better with your money, you’ve come to the right place.

The last few weeks, we’ve been showing videos on the four letter word “debt” and as I’ve looked at them, I realized, oh my god, they’re really serious. Like, I’m really serious when I’m talking about and telling you to stop using debt in this very serious tone.

Maybe I shouldn’t have been quite so serious. But you know what? It’s a serious issue. But today we’re going to talk about something a little bit more fun around debt and that’s how you can accelerate your debt payments in kind of a fun way.

So one of my very favorite money tips that I ever got and now it’s the favorite money tip that I give, I like to call the one-third rule. Whenever you get extra money, no matter what kind, you divvy it up in thirds. One-third goes toward your debt. One-third goes into savings because we do that equally and then one third goes towards something fun, something that you’ve really wanted, something that you haven’t let yourself buy because you’ve been so busy paying down debt over here.

So whether it’s a tax return, a bonus at work, birthday money, yeah, even birthday money, like if you’re serious about getting out of debt, even birthday money, an inheritance. Now if you get some huge inheritance, I’m not suggesting that you use the one-third, one-third, one-third rule. I’m suggesting that you go talk to a certified financial planner.

But if you get a $5000 inheritance, $10,000, $20,000, even something small, still sit down and think about this one-third, one-third, one-third concept because I think like with everything in life, if we do things in a more balanced approach, it benefits us. It benefits the mission we’re on. I see so many people get their tax refunds every year and use it to pay down debt and then they use their credit cards all year long and then they get another tax refund and they use it. It’s just this ongoing cycle.

What would it look like if you had a tax refund and you had no debt to put it down towards? You can do a one-half rule. Half of it goes towards savings and half of it goes towards fun.

So this is a tip that I’ve seen really accelerate people’s mission to pay off their debt. I’ve seen it accelerate their mission to build their savings and the other great thing about it is that you also kind of remember that when these little pockets of money come up, instead of just immediately shoveling all of that money off here towards paying down debt, it in a way motivates us. So that’s my favorite tip to get yourself out of the four-letter word “debt”.

So, as always, I would love it if you would come join us over at Team Do Better on Facebook. You can sign up for our newsletter over at TheFinanceGym.com. Subscribe to our videos right here and the next time you get some extra unexpected money, sit down and think about where you would like to spread that out to.

Money Management Tips - Are You Frugal or a Spendthrift?

Welcome to The Finance Gym Action Plan for a Better Life with Money Video Series. My name is Stacey Powell and if you’re ready to not just know better but do better, you’ve come to the right place.

Today we’re going to be talking about how we all spend money. Are you frugal or are you a spendthrift? I am always fascinated by the spending decisions that we all make. I have lots of clients over the years that it doesn’t matter what they buy. They’re going to buy the most expensive thing they can possibly afford.

I also have a lot of clients that it doesn’t matter what they buy. They’re going to buy the cheapest or the best deal and just be frugal about all of their spending decisions. Then there are some people right in the middle. It just depends on what they’re buying. Some things are really important to them. So they buy the best. Other things aren’t really so important. So that’s where they go and find the best deal.

I illustrate this on page 81 in the book, if you’re following me along. It’s two shopping carts full of the same six things – a couch, a watch, a TV, a necklace, a vacation and a car. These people over here, they have to have the best of, $311,000 price tag. These people over here, $16,000 price tag. It’s the same six things. When you sit on a couch, maybe it makes a little bit of a difference what kind of couch you’re sitting on. But in the end, you just need a place to sit.

So if you’re buying a $4000 couch or a $300 couch, why are you making that decision? I’m not placing the judgment on either decision. If you can afford a $4000 couch and you’re fully funding your reserves and your retirement and taking care of everything else, then by all means go buy that $4000 couch. But I also know there are a lot of people that buy that $4000 couch on credit and pay for it over many years and then they pay more for it. Why are you making those decisions? So in this video, I’m really just asking you to spend some time thinking about which side you’re on. I’m going to ask you to spend some time writing about some of your spending decisions.

In the book, page 78 and 79, I ask you to talk through your spending habits. There’s a worksheet that has a bunch of questions for you to fill in. You can go to TheFinanceGym.com and in the store, there’s a whole area of free pages of the book and we’re going to put these up there for you to go and download and fill them out even if you don’t have the book. I’m going to help you, so head on over there.

While you’re there, be sure to sign up for the newsletter. You can also go to Facebook and join our Team Do Better group, a great place to talk about your spending habits on there, you can chat with me. And also you can sign up for our video series down below so that you can catch every single one of these as they come out. Now go do some thinking about what kind of spender you are.

It’s the one-twelfth of the way through the year check-in

Do you remember back to the beginning of this year, a little less than a month ago? It was a fresh new year, and you made some goals, resolutions, or commitments. Or at the very least, you took a big breath and thought to yourself, “ok, this year is the year I’m going to XXXXX.”

Well, you know what? We’re in the last week of January already! We are 1/12 of the way through this fresh new year! Have you started on XXXXX? Are you 1/12 of the way toward that thing you said you’d accomplish this year?

If you’ve already slipped on that commitment that you whispered to yourself, then it’s time to anchor yourself again. We’ve been sending videos out one by one, and maybe you’ve noticed, they’re walking you through The Finance Gym Action Plan for a Better Life with Money. If you want to get yourself back on track, set aside some time today and rewatch some of the videos. Or if you’re really off track, get a cup of coffee, find a quiet place, and listen to them all. It just might be the best investment you could make for your money today.

Read all the blog posts >>

See all the videos >>

And if you ARE tracking on your goals on this 1/12th of the way through the year point, congratulations! You must be proud of yourself. You might want to re-watch a few of the videos too. If you’ve really been working on your money, your context for watching the videos will already be different, so different points will jump out at you. You'll get a deeper, richer understanding of the concepts and practices in the videos. You'll see something completely different this time through because you're different.

3 Tricks for Not Touching Your Savings

Hi! Welcome to the Finance Gym Action Plan for a Better Life with Money Video Series. My name's Stacey Powell, and I'm here to help you and your money get stronger.

Today I'm going to be teaching you how to leave your savings alone.

In the last video, I talked about how many months it would take you to build up to 3 to 6 months of reserves. 3 to 6 months of reserves is kind of the amount that financial professionals recommend that we have set aside for real emergencies, things like job losses.

Well, you build 3 months to 6 months of reserves. In the last video, I was showing how I like to think about it as climbing up a mountain. But the thing happens is that emergencies happen and you kind of slide back down that mountain when you have to dip into them.

And so what I want to teach you is how to dip into your reserves less frequently. For me, oh my gosh, what would be this constant cycle was getting money set aside and then having an emergency. My emergencies were things like a $200 vet bill or a $400 car expense.

I'm actually filming these videos with my daughter in the room who's 21, and she says "Those always seem like emergencies to me." You know what's an emergency is relative, right? Like for me, a $1,000 car repair, that shouldn't be an emergency. I have a car it's going to need repairs. I should have that money set aside and ready to roll. But if I had a $5,000 car repair, well that is an emergency.  That's a lot of money and not standard.

Those are kind of the ranges for somebody at my income level. For somebody at her income level, it's the difference between a $100 car repair and a $500 one. I would absolutely let her dip into her $500, into her reserves for a $500 repair. Cause I'm her accountability partner.

And that's the next thing that I'm going to talk about is some tools that I was taught that I teach other people to use to not get into your reserves except for true emergencies.

Tool #1 - Write out 6 other options that you have to deal with your "emergency" other than getting into your reserves.

Tool #2 - Wait a week. Let yourself sleep on it. Let yourself and your mind kind of work through deciding whether it's really an emergency or not.

Tool #3 - Call your accountability partner. Here's the way this went with me when I was going through this. I had friends I had called and whined and complained and commiserated with; it really wasn't very helpful. I did it to myself. When I started finding friends who I could call and all they would help me talk about was what the solution to the problem was, in a positive way and keep me out of that victim mode, that really changed for me, how many times I would go touch my reserves. And how hard I would try to think of other ways to solve my "emergencies".

So what I challenge you to do is create a rule of 3 for yourself. Find yourself an accountability partner who's going to support you and let them know what your rules around touching your emergency reserves are.

If you'd like support from our community, come join us over at the Facebook group, Team Do Better. And don't forget you can subscribe to these YouTube videos so you'll be sure to catch them when they come out. And you can also join our mailing list over at thefinancegym.com.

Now go out there and SAVE!

Why You Should Have 6 Savings Accounts (Not Just 1)

Hi, welcome to the Finance Gym Action Plan for a better life with money video series. My name's Stacey Powell and I'm here to help you and your money get stronger.

And today we're here to talk about savings. But not just the singular savings, we're here to talk about the 6 different kinds of savings. One of the things that I certainly had a hard time with and I think many people also do is that we think of savings as a singular thing.

We keep it in 1 place and often that's in the "savings" account at our bank. Which is, of course, tied to our overdraft protection. Well, that's not really very useful when you're trying to keep savings as savings and not spend it on a monthly basis.

One of the other things is, we don't really have a structure around our savings. If it's all in one big pot, we don't have things that it is assigned to be for.

And so, one of the things that really shifted for me and I've seen shift incredibly for others is thinking about savings, not as one thing but as 6 different kinds.

The first kind, of course, most important emergency reserves. The second one is short term things that are not consistent, but predictable. Things like when your car breaks down or your cat has to go to the vet. Then there's long term things like putting a new roof on your house or saving for a car.

And then 4, 5 and 6 are separate long term savings that I've identified as 4, 5 and 6 because I think they're so important. And that is saving for a home, saving for your kids college education and then the third one is the big one, saving for retirement.

If you flip to page 47 in the book, and if you go to my website if you haven't bought the book I'm going to have up there for you page 47 so you can just take a look at it. You'll see all 6 of these areas with a list of what are these things and what's the purpose behind each one of them. How do you decide how much you should put in each one of these 6 accounts? And some suggestions about where you might keep it.

I want to give this roof as an example to show you how I work with people and how I think through where to put my savings. If I know I have to put a roof on my house sometime in the next 3 to 5 years and that roof is going to cost $15,000. Well, I need to be putting away between $300 to $500 a month, every single month to make that goal. And it better not be in an account tied to my checking.

I like to keep my reserves at Capital One 360. And this is not a sales pitch, this is really where I keep them. And here's why, Capital One lets you name every single savings account its own name. So for my roof account, I can name it something like "roof, dry roof, don't touch". Something funny to remind me when I get tempted to use all that roof money when it starts to grow, that what I really want is a dry roof. Separating out all of your savings like this, I know sounds a little bit overwhelming especially for those of you that are still struggling to put $25 aside.

And I assure you that if you go listen to my last video you'll know that I was once there. That I just couldn't put $25 a month aside. You can do it when you start practicing bit by bit. I promise. And the biggest thing you will get out of it is peace of mind for yourself and your money.

As always I don't want you to do this alone. You can join us over on our Facebook group Team Do Better. Come on in the water is warm. You can also go follow us at thefinancegym.com and join our mailing list or go like us over on Facebook and, of course, subscribe to these YouTube videos. Have a great day!

Free download of page 47 - Making Your Savings Rules

Money and Sex: Normalizing the Conversation

When I was a teenager, I remember closing myself off in my bedroom to listen to Dr. Ruth’s pioneering radio show on sex. No one talked about such things! It was shocking. And somehow, normalizing. There were real people, getting on the phone, asking questions and admitting that they had questions and uncertainties. Wow, me too! I learned a lot from Dr. Ruth and from all of the callers.

Money and sex are a lot alike. No one talks about money. No one wants to admit their uncertainties. Most people feel they should know so much more, that their money situation could be so much better and that they are the only ones. But as with listening to Dr. Ruth, once you spend some time listening to your peers about how they feel about money, you feel some relief. “I’m not the only one.”

As a financial coach, I’ve experienced over and over new clients walking in and before the end of their first session, grabbing the Kleenex box. Talking about your money is cathartic as well as motivating and clarifying. But wow, is it hard and scary. I’m not sure why it is that we’re so fearful. It’s as if something is going to break if we tell someone else how much debt we have, how much we earn or how much we have (or don’t have) set aside for retirement. It’s a shared fear for most of us.

And if telling a financial professional isn’t scary enough, can you imagine what it would be like to tell an entire group? I’ve led countless mastermind groups through the process and it’s always so interesting and inspiring to watch everyone’s financial growth as they first admit to something they don’t know and then share some truth about their finances.  I think it must feel a little like I felt as a teenager, closing my door and listening to people talk about something I never thought I’d get to hear them talk about. I think a lot of people who’ve joined a Finance Boot Camp must think “Wow, me too!”

Here are some of my favorite strategies and resources to help you normalize the money conversation:

• Join a support group: we of course love Finance Gym’s Finance Boot Camps, but Debtors Anonymous is a good option too.
• Take a class: Dave Ramsey’s Financial Peace University groups have been successful for many or look into your local learning center for classes on investing and other financial topics.
• Find someone to talk to: we of course love Creating Answers’ financial coaching, but there are also excellent professionals trained in financial recovery counseling, and CFPs who prioritize money conversations over charts and graphs.
• Set a “Date Night with Your Finances:” ask someone you respect to mentor you by joining you once a month to talk about your money.
• If you’re married, set a “Date Night with Your Finances” with your spouse. Once a month set a date, get out of the house, go somewhere special and talk about your money. Not the nagging “why did you buy this?” conversation, but the supportive “these are my hopes and dreams and fears” conversation.

And if you just can’t bring yourself to talk to other live people then take your radio into your bedroom, shut the door, and listen to a radio show on money.

-Stacey Powell

Finance Gym offers personal finance coaching in professionally facilitated peer-advisory groups. 

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