GUEST POST from Don: Animals Hindering Your Financial Freedom

There is only ONE trick to saving money: Spend less.
Now that we have acknowledged “the Elephant in the room,” let’s move on to HOW.

Maybe you recently read an article about how to save money, as did I, and had this emotional response: “Wholly unsatisfying and totally unhelpful.” When reading an article on personal finances, do you often wonder, “Does this writer have any personal experience or has she just read other articles?” Well, I have experiences both paying off major debts and investing. I found there are several “animals” in the room…the Elephant is not alone. Here is what I discovered about myself and others:

First, “the Dragon in the room…” DEBT.

If you ANY debt besides your home…you cannot really begin on the path to worthwhile savings. I have never met anyone who has built wealth by paying interest. The first step is to create a 1-month emergency fund. With that in place, do EVERYTHING you can to pay off that Dragon. After looking at different programs I found that the overall best is the Dave Ramsey system…pay off the smallest loan first with every penny you can, then use the money you were spending to pay that loan to attack the next one. Why his? Probably more efficient methods exist, but humans become discouraged quickly. His plan keeps YOU on track.

My wife and I were in debt for the majority of my working life. Student loans, car loans, credit cards, medical bills, and mortgages all played a role. In spite of being a one-income family, there is not one loan that we made minimum payments on. We paid off our first new car a year early. Student loans were fully paid years ahead. Most of the debt was “necessary,” but that does not matter. We just wanted OUT. We got out. When we finally paid off our mortgage we felt amazingly free. At random moments my wife or I would suddenly smile and say, “This house is OURS.” We still do.

Face it: if you were GOOD at paying off debt you would have done it already! So find a plan that works and follow it. Slay that “Dragon.” This takes great determination and courage. Then begin to save with the same passion.

Second, “the Pocket Moth…(absent from the room)” BLAME.

I remember an old cartoon that showed a character who had no money. When he turned his pockets inside out to double-check all that flew out was a moth. Lack of money is rarely the issue.

Remember when I said my student loans were paid off early? … we were below the official poverty level during that time. We were eating lots of pasta, rice and beans. No cable TV, subscriptions, or vacations. I went without a new pair of shoes (or any other new clothes) for several years. Lights were turned off when leaving a room. We always had choices. We laid down a goal and we achieved it.

There is no “Pocket Moth” chewing through your finances. YOU are in that room and YOU are chewing through your own finances. Take responsibility.

Third, “the Buffalo in the room.” INSTANT GRATIFICATION.

The Buffalo can be dangerously stubborn. Standing in the field, munching grass, it appears almost tame, but in an instant become murderously aggressive. Buffalo Runners (hunters) in the 1800s knew of this danger. You may think that your own Instant Gratification Buffalo is under control, but it is NOT tame. It takes constant vigilance to curb that beast. We are genetically WIRED to eat to-the-full when we have food in front of us.

One amazing tool to fight that Buffalo: IMAGINATION. Imagine the future with scads of money in the “bank.” So, you love your coffee, your gadgets, the wide range of TV and entertainment options, going out to eat, and beach vacations. You cannot imagine giving up any of them when you have the money to pay for them. That is the problem, you cannot IMAGINE not eating-to-the-full. In fact, it is NORMAL to not imagine. Your neighbors and friends and extended family…all have the same genetic inability to think outside THAT box. Use your “Imagination.” Think through HOW you could do without gratifying your every desire. What could you do instead? If delivery trucks are stopping at your house every week…you have a Buffalo problem.

Fourth, “the Puma in the room.” YOUR PAST.

Like the puma, your past is sneaky. It lurks about and catches you when you are least aware.

LOOK at the FUTURE as being very different from your past…because it is. Humans do not develop future plans because we do not think of ourselves in the future-tense. We are wired to think of ourselves “as-we-have-been.” We believe we will be alive tomorrow, but we cannot SEE ourselves there. To invest in your future you have to open your eyes to SEE a future-self with a different set of needs and abilities. It is an non-natural way of looking at reality.

As a result we become stuck in patterns which used to make sense to us. Our past experiences control the present. For example, several friends in their 50s bought 3 bedroom, two-story homes. Their adult children moved out nearly a decade before. Many could be facing mobility issues as they age. They were buying homes for their younger selves…the house they wanted to buy when they were in their 30’s. They were stuck in their pasts.

In what other PAST-STUCK ways do we live? My grandmother made a seemingly odd statement once: “In my mind I am 20 years younger.” Now that I am retired I know what she meant. Humorously, maybe this is why we love our children so much…we don’t foresee that they will become teenagers 🙂

So, we have to fight genetics to win this battle. However, knowing that means that you CAN overcome how you are programmed.

In a college Psych course we had just learned about personality types. Very revealing! Afterward the professor said,”You cannot blame bad decisions on your personality!” Then he said, “No matter your weaknesses or strengths, you can overcome them by making thoughtful decisions. Your personality does not determine what you can or cannot do. Own your CHOICES, not your personality.” WOW! I can not say it any better.

Finally a positive animal, “the Eagle in the room.” HOW MUCH?

We have explored HOW, now we need to seriously evaluate HOW MUCH? We want this is the keen-sighted Eagle in the room. We need that kind of long-sight ability.

Here there is no surprise. There are three funds almost everyone needs: Emergency, Retirement, Car.

a.) EMERGENCY. Do this first. Build a fund that will get you through 6 months if you lost your jobs. (If you did not have to pay income taxes, put money in savings, or buy that latte..how much would you need?) Rule of thumb: 60% of what you currently earn. Thus, if you earn $100k/yr, that fund would need $30k in it. It will take about 2 years to complete. Then move to saving for Retirement.

b.) RETIREMENT. After creating an Emergency Fund, set aside 15% of your pre-tax income for this. There is no shortcut. High risk investments are not your friends. Steady and slow is the path to wealth that you can retire on.

c.) CAR. Set aside money to buy your next car with CASH. (Let’s be clear, a car lease is basically paying interest on a loan for something that you will never own. That makes it a very bad deal. If you were leasing an apartment would you pay interest on top of your rent?) The initial goal is simply to have a much smaller car loan than you had last time. Imagine driving out of the dealership owing $ZERO. I can tell you, the next week you will still feel GREAT!!!

What animals are cluttering up your room? Determine to deal with each one appropriately.

You WANT to be free of money worries?…what decisions are stopping you?

MORE OF DON’S GREAT GUEST POSTS:

~ The Chicken ~ Finding The Exit ~ Allegheny Blackberries ~ Romantic Sunset At The Beach ~ 
Fun Facts About Carpenter Ants ~ Bad Habits ~ Doing Faith Wrong ~ Quirky! 
~ Ten-Foot Trestle ~ Settling Estates ~Living In High Horse Country ~ The Dying Generation ~

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