Money and Values Exercise

 

Please list three things you spent your money on in the last month. Carefully evaluate what values caused you to spend your money this way.

1.                                                                                    Value?

2.                                                                                    Value?

3.                                                                                    Value?

Do these values represent who you want to be?

How do you want to change?

How do you want to remain the same?

    Financial Personalities

If I were to ask you what personality type you were, you might say “outgoing”, “shy”, “serious”, or “silly.” But what would you say if I asked what financial personality type you were? Would you know what to say? Did you know there was even such a thing?

We all deal with money on a very regular basis, and over time, beginning in our childhood and still continuing on today, we develop certain attitudes and feelings about money. This relationship to money helps form your financial personality, which in turn strongly affects you and your family’s financial wellbeing.

Please listen carefully as I explain different financial personality traits, and see if you can find yourself in anything I describe. Understanding your personality will provide insight into how and why you react to money the way you do. With this insight you can better approach your financial weaknesses and strengths.

One financial personality tends to be afraid of addressing financial issues. You could call them the Financial Ostrich. These people don’t think about retirement, building a savings, or creating a will. They are scared of talking about money, so they ignore these important responsibilities.  If you think this is you, I understand how you feel. It is a safety mechanism to avoid things that bring us stress and anxiety. Try to think about small things you can do to help make talking about budgeting, saving, and other “hot topics” less scary to you. Will you feel safer if you do it casually over a nice meal? Do you need to set some guidelines beforehand with a spouse, to prevent arguing or bickering? Be patient with yourself and others while you learn to look at money head-on.

Another type of personality gets easily overwhelmed by all of the financial choices that need to be made. For example, they know saving is good, but they do not know where or how to start. Should they begin with retirement or their child’s college education? Should they focus on the here and now, or the future? Learning to take it one day at a time, knowing that any decision is better than no decision, will help these personality types.

One financial personality is the Procrastinator. These individuals have good intentions, but get easily distracted by other things and fail to make good long-term financial goals. They have a hard time saving, but an easy time spending.

Then there is the Peacock. The peacock is very concerned with how he or she looks to others. They have a hard time making wise financial decisions, and instead spend money on houses, cars, clothes, and electronics, to insure they look good for others. This overspending is a sure way get into financial trouble.

You also might recognize the Compulsive Spender. People react to stress in their lives very differently. Some people overeat, some people drink, and some people spend money. They do not buy items because they need it or want it, but they do it in response to an emotion they are experiencing. Spending money gives them a quick adrenaline rush. They may know it isn’t a good idea, but they rationalize their behavior. If you think this might be you, remember to ask yourself what the real issue is when you are emotionally spending. Also, in the meantime, while you “figure that out”, only spend money that you have. Money that you have budgeted for that purpose. If you spend money you do not have on unplanned splurges, you are only hurting yourself and your family.

                                                              Needs ands Wants   

In the strictest sense, a “need” is something that is a necessity to your survival, this being food, shelter, clothing, medical care—the basics. A want, however, is something you desire.  You may suffer mental anguish if you don’t have it, but you will still survive without.

The difference between needs and wants can sometimes be hard to properly identify in our very prosperous country. In 1998, 97% of “poor” Americans owned a television. In many lesser-privileged countries, less than 30% of the population had access to electricity. Everything is relative. It can be helpful to recognize that advertising and peer pressure can influence your ability to identify and balance true needs and honest wants.

Please look at the list below and identify whether it is a Need or a Want for you, and then rank the items for their level of importance at a 1 thru 3 , 1 being most important, 2 being moderately important, and 3 being less important.

Regularly putting money into a savings account

Regularly putting money into a 3-6 month emergency fund

Paying back all unsecured debt (credit cards) quickly

Paying money for entertainment and recreation

Going on a family vacation

Saving for a down payment on a house

Buying a car

Paying all secured (car, house) debt on time

Starting a retirement fund

Increasing deposits into a retirement fund

                                                                                Goals

A critical part of financial security is setting goals. There are three different types of goals. These are short-term, mid-term, and long-term goals.

Short-term goals usually take two years or less to accomplish. They use less money and might have specific deadlines. A good example is paying small debt in less than six months.

Mid-term goals take two to five years to complete. They might be paying off a larger debt, like a car or going on a fun family vacation.

Long-term goals require some delayed gratification. These are goals you need to work on for a while, five years or more, before you see them come to fruition. They require more self-discipline and dedication. But they ultimately have the greatest rewards. Good examples might be buying a home or having a reliable retirement account.

What are your financial aspirations?

Are there new things you want? What do you want to spend your money on? Does it seem like there is an ever-growing list of things you would like to have, or do? Some aspirations are not tangible items like a flat screen TV, but instead they are intangible like paying off all credit cards and living only on what you make. Financial goals are not only about buying things, but about creating security for your family. Some of you may have recently declared bankruptcy.  I recommend embracing this decision and making the most of it. Use this time in your life as a season for learning and growth. A time to evaluate where you are at, and where you want to be.

Three of the most common financial goals are the following:

1.  Paying for an education—If you have recently declared bankruptcy, you need not worry about being able to receive a student loan. Senators Patty Murray (D-WA) and Christopher J. Dodd (D-CT) introduced the Preventing Student Loan Discrimination Act (S. 3141) on June 17, 2008. This prevents lenders from discriminating against anyone with a bankruptcy in their credit history. Obtaining an education is a very valuable investment and something to consider when planning for greater security for you family.

2.  Buying a home, and

3.  Saving for retirement

Now, I want you to write your goals. Keep your values in mind. If you can only think of a few, that is fine. After you are finished writing your goals, write down an approximate monetary value next to these aspirations.

Goal 1.                                     Value:                                                    Target Date: 

         

Goal 2.                                     Value:                                                    Target Date:      

    

Goal 3.                                     Value:                                                    Target Date:           

Personal Story

Amanda is a 28-year-old stay-at-home mom who tries very hard to not spend money she doesn’t have. She only shops the sales at grocery stores, frequents garage sales regularly, and quenches her shopping fix by going to thrift stores regularly. If you look at her spending, you will see very small increments from $1 to $10.

Amanda is confident that she is financially wise, but is frustrated with her situation because she feels like she cannot afford to pay for her son’s preschool or save up for special items like a family vacation to the coast. 

After writing down a monthly budget and her financial goals, she was able to see that if she didn’t go to her favorite thrift shops, and saved these little expenditures, she would be able to save approximately $100 a month.

This amount in turn was enough for her to take her son to preschool twice a week and take her family on a vacation 9 months later.

The moral of the story: Small expenses add up fast. If you think about how you want to use your money before you spend it, you’d be surprised at what you can do with it.

Once you have finished writing down your goals, we will work together in turning each aspiration into a specific, measurable, and viable goal.

                                                                Goals Continued

Let’s start with your first goal. Is it specific? Or is it a general desire? An example of a general desire is “I need to cut down on my monthly expenses”. How can we make this good goal more specific? How about “I will not buy coffee at Starbucks and only drink break room coffee.” Turning your goals into specific plans will help you make them happen.

Now, is this goal measurable? Or, how are you going to measure the results of the action? Identify by what percent you will cut your expenses, and determine an acceptable time frame. For example: I will not buy coffee at Starbuck and only drink break room coffee for the next three months. Because I am spending (insert amount) a month at Starbucks, then I will be saving (insert amount) and (insert %) every month.

Lastly, the goal needs to be viable and realistic. If you make a goal that isn’t likely to be met, you will only feel frustrated and disappointed.

Now that your goals are specific, measurable, and viable, you have greater success at making them happen.

We are now at the place where we figure out a spending plan. A spending plan is a valuable tool you can use to reach your financial goals. It will help you manage the cash that flows in and out of your life.

Please get out your monthly income and expense paperwork, a blank piece of paper to use as your practice budget sheet and a calculator. If you need to, you can use a calculator on your computer.

                                                              Starting Your Spending Plan

Creating a solid financial plan is necessary in order to successfully achieve your financial goals for your family. It will help you avoid repeating past mistakes, know where your money is going, live within your means, and improve communication about money with your family.

Before we start your spending plan, it is helpful to assess where you are at financially. A great way to do this is by determining your net worth. 

You, as a person, are ultimately worth very much, regardless of how much money you have or owe. Please envision the popular Master Card commercials that put an amount on several items, and then end by labeling something, usually family or memories, as “priceless.” This is who you are. You may not have the kind of money you thought you would at your age, or you may be in a financial situation that causes you embarrassment, but it is very important to understand that you, as a person, are priceless. And that you have the power to learn new things and change for the better.

As you follow the instructions and determine your net worth, please keep this in mind. Please, do not be discouraged. Chose to concentrate on the future, on your goals, and the hopefulness of your ability to make things happen.