If You Don't Do Anything Else in '08 ...

For years now I’ve been working closely with thousands of individuals and families looking to transform not only their finances, but also their lives. The most common feelings expressed go something like this:

“We’ve known for awhile now that we needed to do something to improve our finances, but we can’t figure out a plan that will work”

“No matter how much I make, I never seem to be able to do more than pay the bills”

“If I could just get my spouse to work with me, then we could really make some headway!”

“We really do want to give more, but we can’t meet all our obligations”

I believe at the very core of our inability to truly thrive is this immutable fact of life: you cannot protect someone from him or her self. “You can lead a horse to water, but you can’t make it drink”. If you really want your own way, you’ve got to accept the consequences that may come from doing it your way. Will Rogers summed it up pretty well: “Good judgment comes from experience, and a lot of that comes from bad judgment.” I’ve found the worst thing about making mistakes is not learning from them.

However, we can turn our failures around (often very quickly) when we begin replacing choices that don’t lead to success with ones that do. In other words, you can’t keep doing the same things that lead to failure and expect good results (at least good on a consistent basis). Your makeover will begin with consistently doing small, wise actions over and over. They aren’t complex, but actually simple and repeatable. You’ll find the toughest thing is choosing to do the right thing, regardless of how hard it is. In fact, if you have a few choices before you, you’ll find the right one is usually the hardest to do. Indeed, I find true, lasting change begins with the “buds of choice”. If you do nothing else with your finances in 2008, these are where I’d like to see you focus:

 
Ö Choose to stop using credit cards. There are two common viewpoints with credit cards:

1. Use them for convenience or perks (miles, rebates, gifts, etc).

2. Don’t use them so you can increase your savings rate

Typical credit award programs return, at most, 1-2% of the amount charged on the card. First, if you’re the kind of credit card user who carries a balance, reward cards are not for you. Any benefit you get from a rebate card is swamped by the added interest costs when you carry a balance. Second, even some of the no-fee cash-back cards aren’t a good answer. Most don’t give a full 1% back until you reach certain spending levels. Discover, for example, gives just .25% cash back on your first $1,500 of charges and .5% on the next $1,500, reaching the coveted 1% level only on purchases above $3,000 a year. So you’ll earn a whopping $7.50 on your first $3,000 in charges, then $10 on every $1,000 charged after that. The American Express Costco Cash Rebate Card requires $5,000 in spending before you reach the top 1.5% reward. 

“If you find yourself in a hole, stop digging” – Will Rogers.

I support an alternative view of not using credit cards, even considering the admitted convenience, because of that very fact: they are too convenient! Before Lori and I woke up to the reality about the cost of convenience, we were spending tens of thousands of dollars a year on a cash-back rebate card (and paying the balance monthly). For our “wise” use of “their” money, we’d get about $500 a year “cash-back” (actually a credit on our credit card, isn’t that funny). When we stopped using the card in favor of using real cash for our discretionary spending (groceries, dining out, clothing, entertainment, gifts, miscellaneous household expenses, and our personal mad money), we found we were saving over $500 every month! Basically, we stop spending when the cash runs out for that category, impossible to do with a credit (or debit) card. We’re no Einsteins, but we figured out which we liked better pretty quickly …

Ö    If you’re married, make ’08 the year you decide to get together on your finances. Stop trying to control your spouse’s spending, it won’t happen. No allowances; you need to engage and agree. You’re both adults, so start acting like it. If there’s a lack of trust (or being honorable), work on that issue and don’t deny it. Whatever you do, stop fooling yourself into thinking your problems will just go away. Realize it’s false thinking that you can do well with your money if only one of you is involved in or committed to making the monthly money decisions. The bottom-line is you may need to fix your relationship before you can fix your money problems. Learn how to communicate with each other. Stop being selfish. As you do, then …

 Ö Make a written plan (“budget”) every month before it begins. And agree on it.  Give every dollar a name, and prioritize your spending from most to least important. Did I say every month before it begins …?

Ö  Give more, even if you’re already tithing. “It is possible to give freely and become more wealthy, but those who are stingy will lose everything” - Proverbs 11:24 (NLT)

 Ö     Save more. Begin with a basic $1000 or $2000 emergency fund, then eliminate all your debt, except for your home mortgage. Then once you begin saving for retirement, realize the rate you save is much more important than the return you achieve. Zero saved at an 18% return is still zero!

 Ö     Discover your 4Ps: Personality, Proficiency, Passions, and Purpose. Find out what is changeless about you to create a “mold” to identify and produce your life’s work. Your current work (“job”) should reflect who and what you are; you shouldn’t be contorted to fit your work.  As you discover your calling, be sure to leverage your "fifth P" to Position yourself for success (education, networking, finances, support system, etc).

Read “The Millionaire Mind” by Thomas Stanley. You’ll find that at the core of all self-made millionaires is this: It is better to be good than to look good. There you go. You build wealth from the inside out. You loose wealth (or never have it) from the outside in. 4 out of 5 lottery winners file bankruptcy within five years. A rotten apple that looks good on the outside is still rotten. A small glass of water sitting on the counter with one drop of cyanide in it may kill you if you drink it, even though it looks perfectly safe. 

Shakespeare said, “A man with a toothache cannot be in love”. Get rid of your non-productive distractions. Choose to be excellent, getting at the root of your challenges, so you may pursue the life you really desire. The one that God has desired for you all along, one with “… hope and a future” – Jeremiah 29:11.