Organizing Your Personal Finances: Pseudo Minimalism & Budgeting

I know a very rich man that will die with everything he owns still in the bank.  It reminded me of Scrooge McDuck - swimming in his vault of gold and money each morning. For some reason I thought Scrooge's vault of gold meant he too would die alone and with everything he owned still in the bank.  That was until I saw this below clip and my take on Scrooge McDuck took a turn for the best.

Organize your personal finances through budgeting

All of us have general ideas regarding budgeting, even if we never thought about it for too long.  As Scrooge McDuck would say:

  • You have to budget your money so you can see where it is going
  • Save a piece of the pie for yourself
  • Make it grow

While this sounds so simple in theory that it can be accompanied by a snazzy little show tune number, when we first start to think through budgets and building wealth it can quickly become a daunting task. But it doesn't have to be.

The key is to just start.

The pseudo minimalist approach

I have found that with most things in life, the less of something we have the easier it is to actually do something with. So, don't wait until you reach your goal income before you start to save and invest - organize what you have now, however little or grand the number is - because it is all relative anyhow. You will be thankful you organized now than when spending or income grow, as they inevitably do, and your are stuck with a bigger task to organize.

When it comes to the three bullet points above, take a pseudo minimalist approach.

  • You have to budget your money so you can see where it is going
    • Easy does it, start simple.  Start by tracking your money.  Mint.com has a great app for tracking your spending. Start there. Once you see where you money is going, it's easier to say, "Hey wait, I didn't know we were spending $300 a month going out to eat, I'd rather save that for a summer vacation."  Cut back your spending on things that don't matter, say another home decorating treasure, a 20th American girl doll for your daughter and 15 pairs of yoga pants you aren't wearing. Again, it's easier to organize a smaller group of things. Think about the things you really love and make you happy, and the things you buy out of obligation or keeping up appearances. Drop the latter. My motto, I pinch every penny on those items I don't deem as adding value and splurge selectively on things that do.  I'm not a slave to my budget, I am in control.
  • Save a piece of the pie for yourself
    • You simply have to start saving.  There is no way around it. Once you have at minimum 3 months of expenses saved up, even things like your job don't seem so stressful.  You have a safety net at the end of every possible bad situation.  You will clear your mind and finances and find confidence.  Even if just a little, start saving.  When my husband and I started to save, having previously lived paycheck to paycheck, we started out with 1% and increased 1% every paycheck until we reached the average suggested 10%. I know that 1% may sound silly but can add up over time. Let's say 1% of a $1,500 paycheck is only $15 dollars, but with 24 paychecks a year and with adding an additional 1% each pack check (meaning paycheck 1 you save 1%, paycheck 2 you save 2%, paycheck 3 you save 3%, and so forth until you are saving 10% each paycheck) brings you $2,925 saved in 12 months.  Saving any extra income (bonuses, gifts, etc) on top of that gets you there faster.
  • Make it grow 
    • It's common belief that we need to have loads of money before we start investing. Not so. Start now. Modern technology has made that super simple to do with the use of robo-advisors like betterment. Use the same 1% rule above and get going.

The Secret Message Your Checks Are Telling You

I recently read a story about a husband and wife that were going through some hard times and decided to end their marriage. While in anticipation for the divorce, the husband thought it wise to go through his finances to make sure things were taken care of. In the midst of filing old receipts he found an old check that had been written out to the hotel were he and his wife had their honeymoon. As he continued going through his desk he found another old check for the down payment on their first home, then a car payment appeared and finally a check he’d made out to the hospital; the day his daughter was born.

After an emotional moment he’d realized the investment he and his wife had made on their marriage. The checks he wrote were symbols of their story - a list of priorities he and his wife held while married. He picked himself up off the floor and ran to the phone to call his wife. After some awkward explanations of why he was calling he told her what he’d found. Would she find the checks as valuable as he did? Would she work with him to rebuild their marriage?

While some of us may not understand this crisis, the checks or the story of the checks is a common one. What we spend our money on means something; it tells us what we value, how we save and to whom we give. In fact if you want to know someone’s heart, look at their finances. The checks will reveal the truth of what we value. This is why the wife and I have personal  conversations about what we want in life. My wife has always asked me what the plan is. I didn’t understand it for a long time, because to me it was simple. The money came in, we paid the bills we could and the rest we spent.

I didn’t realize what she was really asking. Many times as a family we get “caught in the weeds”, we wake up, rush the kids off to school, run to work, Netflix & Chill- then repeat. Budgets get a bad rap because they often tell us what we can’t or shouldn’t do, so naturally most people hate them.

But if we change that thought from what we can't do to what we will invest in, we can have a bank account that reflects the real us and not just the life happening around us.

1. Create a life plan, OR a family plan.

It’s not that complicated really. Sit down with your spouse and start asking the hard questions. I usually start with something like this. “babe, if you didn’t have a job, and all the money in the world, what would you want to do?” Sounds a little day dreamy but it works. It gets your brain to start thinking of things a little differently. I love this question because it changes from decade to decade.

The hopes and dreams you once had as a child shouldn’t have changed. The day dreams of you being a fire fighter/superhero or a graphic designer/soccer hero should be the dreams that keep you afloat. The only differences I feel should change is the HOW. The how of what you want should change but never the what! [enter] "budget talk" - This is what budgets represent to me, a means to allow me to plan out how super hero fits into my current situation and how much it’ll take to get me there.

2. Get excited about dreaming again.

This year my daughter made the summer national team in soccer. Her mother and I were shocked, in a good way but shocked. She’s only been playing soccer for about a year and a half now and she  already wants to play on the women's Olympic team. I love it, she’s got her head in the clouds and her heart in a soccer ball; I’m super jealous. We talk a-lot about what it’s going to take to get her ready for her first game on the women’s US team. Her eyes light up, her ears hone in aaand then daddy says “so we have to budget your time" …what???

I’m always telling her that her road the women’s US team is going to rely on how she choices to spend her time (time is money). Are we going to spend all day gabbing about what, "what's her face" said at school or get our home work & chores done so we can get to soccer practice on time. I think she gets it.

3. Start today, right now.

There’s no motion like forward motion to get things going. I know it sounds cliché, in fact I’m cringing as I write this but there’s really no other way to say it. I realize that number 1 & 2 are the easy parts but this last one here is where the gold medals lie. We can plan and budget to the stars but if we don’t jump, nothing will ever happen.

The man in this story was a great example of these three points if you think about it. He found his dream, the family plan was right there in front of him in the checks he’d written. He’d lost sight of it but found hope in the memories. I can only imagine the excitement he felt remembering the first time he held his daughter in the hospital, the check was just a reminder. Who knows what happened after he spoke to his wife but I’d like to think they talked and found a new excitement about a dream they once had.

Budgets are budgets they can be as complicated as you make them. The key to wielding their magic lies in creating them from a dream.

Confused by Trump and the Stock Market? Combat Risks with Self Education

I sat with co-workers as recent trips to Europe became the topic of conversation. I remember the feeling of somehow not yet feeling that I had arrived, because I hadn't yet made that trip. Yearning the financial freedom that trips to Europe seem to offer, I could only gaze past the cityscape. I could not join in the discussion. After all, I had kids and a mortgage in Johns Creek. A trip like this was not in my immediate future.

Later that same week, water cooler talks about stocks, and family discussions about trust funds turned my mind into mush. I was embarrassed, as I think many of us are, to admit that I was lost amid stock market conversations. I'd stay away from commentary because being in finance, it's assumed that stocks and anything related to money would not only come natural to me, but I'd have mastered them by now.  Instead of lean in, I'd back away. Until I didn't.

Average interest in the Stock Market has increased

Truth is, with the advancement of technology in trading, the market has been more open to "normal" individuals than ever before. And post election, stock market headlines jump out of market and financial specific publications into mainstream media. Once a game for the rich, the average person's interest in the stock market has exploded.

This interest married with technology makes it possible for nearly anybody to own stock. It's because of this, the perfect time to boost your interest and education has approached us.

The stock market is making no sense to investors

If you are still sitting on the fence because you are confused by Trump and the stock market, you are not alone. Non investors  and investors alike are spinning their wheels. Confidence levels swayed by headlines and talk of big risks to come. Delays in financial promises amoung the rumors.

In fact, Google Trump (especially after hitting the 100 days in office the week of April 28th), and you will find numerous articles both in support of and in contrast to a positive Trump effect on the stock market. In fact, I know many voters who voted solely with their portfolios and the Trump effect in mind. With cnbc.com stating that Trump's 100 day report card is "among the best for Republican presidents in the post-WWII era," and marketwatch.com explaining that the "Trump Bump" has less to do with Trump than it may seem -  attributing gains to a pre-election strong market, solid global growth, solid wage growth and inflation pick up - it can become a stinky onion to unravel.

Education is key

Unfortunately, for even those that want to invest in stocks, the stock market is not the most easily understood of systems. And as such, we either make poor decisions or shy away from the very vehicle that can help us find that financial freedom.  Therefore, education is key.

It's important in life and in the stock market to not act too quickly on our emotions. Still some of our most trusted advisors and analyst, do just that. But life and stocks; both are long term games that ignore. the sweeping day to day emotions. In order to think this way,  we have to be educated. We have to know what we are looking at and how we will play the game. Whether you begin your stock market journey with the traditional brokers, or through online robo advisors like Betterment, again, we have to be educated. But where does one start?

 The Intelligent Investor

After searching through several reviews from top financial publications, The Intelligent Investor by Benjamin Graham continued to top the charts.

 The greatest investment advisor of the twentieth century, Benjamin Graham, taught and inspired people worldwide. Graham's philosophy of "value investing" -- which shields investors from substantial error and teaches them to develop long-term strategies -- has made The Intelligent Investor the stock market bible ever since its original publication in 1949.

Over the years, market developments have proven the wisdom of Graham's strategies. While preserving the integrity of Graham's original text, this revised edition includes updated commentary by noted financial journalist Jason Zweig, whose perspective incorporates the realities of today's market, draws parallels between Graham's examples and today's financial headlines, and gives readers a more thorough understanding of how to apply Graham's principles.

Vital and indispensable, this Harper Business Essentials edition of The Intelligent Investor is the most important book you will ever read on how to reach your financial goals.

I'll be going through this book online, if you'd like to join me, please pick up a copy here and I look forward to discussing the book with you in the coming weeks.