Thursday, January 31, 2008
You know who you are inside, but until it's on paper, it's sometimes easy to forget in the moment. Not that you don't know it anymore, but a lapse of judgment is so much easier when you have committed thoughts to paper. Heck, it's easy even when you have committed it to paper! But when you write it down, it's just harder to hide from.
That's why I want you to make a list of your own. I want you to make a list of a handful of things that are important to you and central in the way you want to live your life. These are our Motivations. These are what we want to use the tool that is money to fulfill. You can almost look at these as the opposite of the old reasons that we spent money.
No one can tell you how you ought to live. No one can tell you what your motivations should be or what things you should skimp on verses splurge on. All lifestyles cost something, which is fine. As I've said--money is a tool to get what we want. Before we can get what we want, we need to know the underlying motivations that determine what we want.
You just have to leverage your money to spend it on things, ideals, and values that are important to you. That includes saving it for future spending (such as a house, kid's college, or retirement)
Here's my list of what's important to me and what motivates me:
What's on your list? Try to keep it to 4 to 7 motivators. Just remember, these aren't goals, these are just correct reasons to spend money. On the next blog we will learn how to align our money goals to these values/ideals.
Wednesday, January 30, 2008
If you are in bad debt, ask yourself why you kept purchasing stuff you couldn't afford? If you aren't in bad debt, but always seem to be living paycheck to paycheck, you need to figure out why you don't want to save. What does "Retail Therapy" give you that you couldn't get somewhere else? I know for me after a bad day a pretty skirt or some shinny new shoes make me forget all of my troubles. Sometimes I think it has to do with the ability to make a choice and have it DO something (it's a time when us Chicks can say "I want that" and no one thinks we are being bossy).
The entirety of our personal experiences with money has taught us "money myths". Everyone has their own set. These could be memories, personal vows, or experiences. Maybe you feel like you have to treat yourself to make yourself feel better. Maybe you are trying to fill a void. Maybe you feel like you NEED some item to get through through a difficult day. Maybe you just don't know the difference between a need (dinner) and a want (take-out). Just think about it and think about what exactly we are working with when it comes to why you think you need what you think you need.
Everyone has heard of the phrase "Money is the root of all evil." In popular culture we see all the troubles of the prosta-tots, and Hollywood people. Rich Scrooges without friends or loved ones dominate many children's books. In contrast, the Waltons seem so happy. Unfortunately, many people failed to take home the correct point (you don't need money to be happy) and absorbed the reverse (money makes you unhappy).
Try to think back to your earliest experiences with money. In our culture, money is a taboo topic. Money becomes a dirty thing. Our family didn't talk about it because we were taught that money is an emotional topic and something that you don't talk about. I was pretty lucky that they made us start a savings account and encouraged us to save our allowance for bigger ticket items. But I never heard them talk about their money or budget and was taught to not ask.
What about your experiences? Did your parents ever talk about money? Did they ever fight about it? What did they spend their money on? What did you want to spend your money on? Have your feelings about money changed over the years or do you still feel pretty well the same?
What does money mean to you? Make an effort to notice how you interact with money and what emotions and attitudes you have tied to money.
Tuesday, January 29, 2008
Think about it. You didn't wake up one day and suddenly make loads of financial decisions and then realize the next day that you messed up. It's a gradual process. Knowing where we are at with our money is more than just knowing how much you make, but it's also about knowing how you interact with it and why you do.
To me, many savings and get out of debt programs are like perfume. They give you all these ideas and tools, but mask the underlying problem. Everything smells just fine on the surface but all the same problems are still there. Figuring out the why behind what you spend will greatly increase your chances of long-term success because you'll be able to stop...or at least have an easier time.
Actually, a better comparison might be weight. Eating too much is like spending too much. Being inactive is like never saving. And just like money, it's usually not really about the food, it's about how it makes us feel. I know that every now and then I need a good strong dose of "Retail Therapy"! But just like a food binge, all the happiness goes away when I see how little I managed to save over the month.
Money is an emotional topic. Not because we get all choked up about the pretty shinny quarters and the neat little water mark on the $20. It's an emotional topic because of what it represents and what it can get us and fear over where the lack of it could land us.
Fessing up to the issues that give us the urge to splurge can be scary, but dealing with them is the only way to figure out why you are in the situation and the only way to figure out how to get out of it. If you are always trying to pay off a purchase you made a long time ago and probably hardly remember anymore, or if you are always spending everything you make, how are you going to reach your goals for the future? And if you want to reach those goals, what's getting in your way?
Knowing the reasons why we overspend or under-save will help us define our goals in Stage Blue by letting us know why we treat money in a certain way. Once we figure that out, we will have a much easier time deciding what our true values are and how to reach goals and make choices aligned with those values.
Money (or a lack of it) doesn't determine who you are! Money is just a tool to get stuff. And at the end of the day, stuff is just stuff. Through out this blog, I am going to keep going back to that point--Money is a Tool To Get What You Want. And we are going to work on using to get what we really want.
When we start dealing with Phase Blue, we will talk more about figuring out what it is that you want. Once you know what you want, you wont feel like you need the high you get from purchasing things, and you'll find it easier to stop buying items you don't really need, but for now, over the next couple of days, each time you buy something, ask yourself why you bought it. Do you really need it? If not, what does it represent? Do you need that latte or do you like the tactile feel of the cup in your hand and the joy of ordering that "Triple Venti Vanilla NonFat Sugar-Free Latte" (my personal favorite).
There's nothing wrong with the occasional splurge, of course, and that's not what I'm saying. Treating ourselves can be very nice every now and then. We just have to limit it. Impulsive is different from Compulsive. If you buy something impulsively you get it because you want it--and this is much easier to stop. If you buy it compulsively you get it because you can't help yourself. Which type are you? Think about what makes you buy impulsively and compulsively.
Monday, January 28, 2008
It's not good.
Seems that us Chicks have a bad rap when it comes to money! People think we blow it all on clothes and makeup. They think we are flighty and don't know how to make informed money choices. Some even think that we just don't care.
Personally, I think that's total crap.
Many of my friends are concerned about money. Maybe we don't state is as directly as some guys. Maybe we are shyer about discussing it, but we definitely care about it! And maybe we like buying clothes and makeup, but I know lots of guys with crazy quantities of techo-gear that they don't need. Techno-gear is way more expensive than makeup. Point being: I don't care what your gender is, you blow money on stuff that you don't need and you have the potential to make both good and poor money decisions.
Fortunately, there is a trend towards incorporating more women into financial management and personal financial planning. The uninformed stereotypes seem to be declining, but all the advice out there for women seems to be mostly trite and trivial. Oprah tells us to stash away $10 each day for a rainy day. Cosmo and other magazines have the occasional article with basic info. If you look at the information geared towards men, it's much more robust and detailed. Their men's magazines talk about mutual funds and investments. One major exception to that is, Ms. Money, a website that I highly recommend to all you Chicks out there. But, seriously, that's about the only high quality women-centric money website.
I understand where the misinformed stereotypes come from. Back in the day women would get married and focus on the home and family while the guy would focus on the job and money. Well, Chicks, it's the 21st century and we are starting careers. Many large cities actually are starting to see young women earing more than young men as a result of our increase in education and drive. Chicks today need to understand as much about their cash as their male colleges and classmates.
According to Mary Farrell, managing director of Paine Webber and author of Mary Farrell's Beyond the Basics,80% of women will be responsible for their own finances at some point in their lives. So obviously, we need to know how to do it!
Come on, Chicks! Let's get to it!
Saturday, January 26, 2008
For payments that you know for the month like your rent or cell phone, multiply by 12. For expensive things that you buy every couple years (new laptop or cell phone or big vacations, for example) divide by the number of years the item is replaced. Some of it is going to be hard because you might not know how much you actually spend. Don't worry. Just come up with an educated guess. Some things like makeup and clothes are going to be hard to fess up to. Others might require a bit of digging (electricity, for example).
Once you have these values calculated, add them all up. This is how much you spend in a given year. How do those numbers make you feel?
Now go find your most recent pay stub and multiply by how many pay stubs you get (typically either 12, 24 or 25). Is your yearly take-home higher or lower than your expenses? Are you surprised? Shocked? Happy?
If your expenses are higher than your paycheck you are living above your means. If it's only a little below, you are living right at your means. If your expenses are 10% below your take home pay, give yourself a pat on the back. There should be about 10% difference and you should save this 10%.
If you are super cool and at or above 10%, congrats! That's fantastic! You'll still want to do Stage Blue (to set your goals) and advanced parts of Stage Green (building your portfolio).
If you aren't at the 10%, don't worry. Mostly everybody is very far from that. This is what we are going to work on.
This is where my biggest trouble is and the part that I am most looking forward to tackling in Stage Orange. We don't overspend, but we definitely under-save.
Friday, January 25, 2008
I know it's scary, but we need to figure out what we have to work with. Let's just rip the band-aid off and figure out where we are at. First we are just going to look at what we spend our money on. We'll worry about how much money we spend later on.
Take out a sheet of paper and list every expense that you have in a given year. Don't worry about putting numbers next to it yet. Just write down everything that you spend money on. Here's what I had:
Gas (for car)
Household Items and Decor
Maybe you have more or less than me. Don't try to do this all at once. Start the list and then hang it up on your fridge. Each time you think of something new, put it up there. Maybe you spend enough on something that it needs it's own category, like my Starbucks category. Trust me, I drink alot of Starbucks.
Thursday, January 24, 2008
Stage Pink: Where am I? (or figureing out my situation)
Stage Blue: Where do I want to go? (or what are my goals)
Stage Orange: What can I change? (or evaluating my budget)
Stage Green: What can I do to reach my goals? (or setting up for the future)
At first I numbered these stages, but I don't think these stages are the sorts of things that go step by step. I think that stages must be revisited on a regular basis.
Maybe once or twice a year you need to hit up Stage Pink to reevaluate where you are at financially and personally. Also, as life changes, so do goals--so Stage Blue will need to be hit up from time to time as well. A budget needs to have to pull and give so Stage Orange will probably be on my mind frequently. Also, as goals change what needs to occur to reach them will change. Stage Green also might be considered more and more as a portfolio grows.
ChickCents will work these Stages and will give a plan to obtain your personal financial needs. I am going to approch these stages as levels on a spiral going towards financial freedom. Depending on your situation, you might work through the steps in each Stage faster or slower than me. Take your time and have fun!
Wednesday, January 23, 2008
Who's the Chick Behind ChickCents?
My name is Lauren. I'm 25, married and living in Chicago's Andersonville neighborhood.
I am the Director of IT for a smallish company that deals with asset management of Cisco products for Fortune 1000 companies. Actually, my first day for that job is Monday. Between the new job and the new year, I want to get my finances on track.
My husband and I split financial duties. He does the monthly bill payment and I do the long term planning. That being said, we do try to share. We both have a financial software background, but unfortunately the business domain didn't fully hit home :-P. That being said, we both do have a decent understanding of what we ought to do. Now I just want to start following it. (Neither of us work in the financial sector anymore.)
This blog will explore common personal finance issues for young women from my perspective. I'm going to create a plan to get my finances under control. I have researched and spoken with many people to gather advice that I will post here. I hope that seeing me go through the steps will encourage others to do so too.
What's Lauren's status?
For our age, I think that we are a little behind what's recommended, but doing okay. We just bought a condo, but paid 0% down. In the past six months we have managed to pay over and almost have 3% paid off. In December we paid off all our credit cards, but have about $4k left on the car. My hubby has 17k in student loans. I was lucky enough to have a scholarship and live close enough to school so I had zero debt when we met.
I had a week between jobs because the e-commerce company I was working for got hit hard with the low Christmas sales. Luckily I saw the signs and was already looking when my team was let go and managed to get a better job for more money. Things could have gone much worse for me! That made us realize that our goals of aggressively paying down the house and other debts left us in a vulnerable spot with very little in savings (about 5k). We bought a dining room table and have decided to keep the 5k cash cushion so now have a new 1.3k in credit card debt.
We paid for much of our wedding and all of our honeymoon, along with all the closing costs on buying the new place and a move to Chicago (and that whole job loss thing)--all within this past year so I'm not too worried about where we are at, but we need to get a better handle on our finances. With this blog I will go over my general rules that I have been trying to follow, learn some new ones, and start preparing myself for my future.