All posts by SeattleMoneyCoach

Is it time to earn more?

Are you earning what you’re really worth? Do you make enough money to live the life that you desire? Or are you “underearning”—consistently making less money then you feel you should or want to be making?

Let’s look at some typical examples of underearning. Many people don’t earn their worth because they do not negotiate their initial salary (men negotiate their salary four times as often as women, by the way! Women more often just take what they are offered….) Some people underearn because they go too many years without asking for a raise. If they are self-employed, they often wait too long to raise their fees. I’ve also noticed that many people who are self-employed set their initial fees too low to begin with.

But there are numerous other ways to underearn. Some underearn by giving their time away in many different guises. Judy, an executive coach, found that she was volunteering excessively for her children’s activities and her church. She was so burned out with her numerous commitments that she didn’t have the time or energy to put into marketing her business. Please don’t misunderstand me. Volunteering is wonderful. But we must ask ourselves, is volunteering in any way hurting our ability to take care of ourselves financially?

Even those who work for a company must “market” themselves in order to earn what they’re worth. You must make sure you are noticed and appreciated for the work you do, so you will be given serious consideration around raise and promotion time. Allowing yourself to be invisible in the workplace may be comfortable, but it is a surefire way to underearn. Mary, an account executive, worked very hard but was often resentful when her less talented co-workers rose about her. She didn’t feel she could “toot her own horn”, but quiet people can be perceived as indecisive, or worst, just not noticed, as Mary discovered time and time again.

Others underearn by chronically underbilling for their services. Kristine, an architect, wanted her clients to feel they were getting a “good deal”. So she consistently billed them for fewer hours then she put in on a job. Sometimes she justified this by telling herself that she should have been able to do more in less time.

The ways that we can underearn are endless. But perhaps the “best” way to underearn is to not know how much you actually need to earn to live your life in the way that you desire. Many people are in a money fog and are unclear about exactly what they spend, and hence what they need to earn. Coming out of the money fog often leads people to re-evaluate their relationship to work and look deeply at what they are earning. (Recently, Karen McCall, the founder of the Financial Recovery Institute, did a four part series in her blog on the subject of “Is your work working for you”? She shares three stories of people who healed their relationship to work and earning money.)

The bottom line is that those who struggle with “underearning” often don’t get paid as much as might be expected, given their education, talents and experience. Underearning is about a pattern. We all go through periods of not making good money, through job setbacks, life circumstances, or the economy. But underearning is about a chronic—often lifelong—behavior. It occurs when you repeatedly undersell yourself.

Keep in mind that underearning is NOT about underachieving. Underearners can achieve great things and be highly respected by their colleagues, and still not be adequately compensated for their work. Another misconception is that underearners simply don’t work enough; again, the opposite is more likely to be true. Underearners are typically intelligent, hardworking people. In fact, many may be putting in long hours at the office, trying to get ahead. Yet, despite their dedication, the pay they receive is not commensurate with their time and effort.

I would encourage you to look back on through your work life and see if you can pinpoint different times you underearned. The beginning of dealing with the pattern of earning less than you need is recognizing it. When you become aware of times throughout your life you’ve undersold yourself, you begin to break denial around the part you play in making less money then you could. The next step is getting clear about how much you need to earn to life the life you deserve and desire.


TIME TO EARN MORE?

If you would like to earn what you’re truly worth and step into greater abundance, please see Mikelann’s Unlock Your Earning Power toolkit.   Identify what has been holding you back, learn the skills to ask for more and start earning at your true potential. For both self-employed and salaried women.


 

5 symptoms of financial “dis-ease” — do you identify?

A few weeks ago I wrote a review of Karen McCall’s new book, Financial Recovery—developing a healthy relationship with money. (Karen is the founder of the Financial Recovery Institute.) I want to share with you five of her “symptoms” of Financial Dis-ease from chapter one of her book, with her permission.

But why the word “Dis-ease”? Karen has come to regard the emotional stress, compromised relationships, and destructive patterns that many people have with money as financial dis-ease. Notice her hyphen. Karen writes that if you are experiencing financial stress and anxiety, you are not at ease. And I agree! Financial dis-ease can erode relationships, limit creativity, tarnish integrity and actually harm your health.

The first step to recovering from this condition is naming it. So here are Karen McCall’s five symptoms of financial “dis-ease” from her book, Financial Recovery. These are excerpted with her permission:

1. Denial
Years ago, I was in complete denial, throwing my bills in a deep, dark wooden bowl, pretending the problem was not growing. Some people have no idea how much money they have, how much they need, or how much they owe. They live in a state of continual vagueness. They don’t know where they are financially and have no idea where they’re heading. They tell themselves that something will come along to make things better.

2. Secrecy and Shame
Many times when we’re struggling with money, we don’t want others to know about it. Perhaps we’re afraid people will judge us for not being able to manage things. Or maybe we don’t want to look as though we’re failing. Sometimes we’re spending in ways that we know are destructive, and we don’t want to admit this to others or ourselves. All of this leads to a vicious cycle of secrecy and shame, with one perpetuating the other. The worst part of living this way is that by trying to hide our problems, we often isolate ourselves from people and resources that could actually be of help. (The more isolated we become, the worse things can get.)

3. Obsession
Many people struggling with money find themselves obsessed with trying to figure out the problem. They run numbers constantly in their heads; they calculate money on the backs of envelopes, trying to figure a way to manage what has become unmanageable. Others spend hours scheming about the things they want to purchase. They’re unable to calm their thoughts, and it disturbs their sleep. No matter what they’re doing, their minds are elsewhere, thinking about money: how they’re going to get it, how they’ll spend it, or how they need to juggle it. Worries about money take up the emotional and mental space that was once devoted to enjoying life and being with loved ones.

4. Lack of Control
When someone has lost control over money behaviors, she may start every day with the best intentions. She promises herself that her spending will change. She goes to Macy’s or Target vowing she’ll buy just one blouse but leaves with four. She intends to pay cash for everything but ends up using her Capital One credit card again and again. Earnest intentions to save money or pay bills on time disappear each month like so much dust in a strong wind. Each day, she makes the promise again: “Today will be different.” But every day ends up just like the one before.

5. Inability to Change Behavior despite Negative Consequences
Faced with the consequences of our money behaviors, we tell ourselves, “Never again.” We never want to have to tell our loved ones that we’re in a financial jam—again. We can’t stand the stress, the worry, the sweat-producing anxiety. We want no more of the shame that results when we have neglected a financial responsibility or broken another promise or told another half-truth. But somehow our old ways of spending, or avoiding, or deceiving, resume despite all the pain we want to avoid. Though we tell ourselves it will be different this time, we soon find ourselves on a worn path—the same path we promised never to walk again.

I share Karen McCall’s five “symptoms” not to depress you but to help give voice to some of the pain you may be experiencing. If you feel these symptoms, know you are not alone. Many are suffering. View these symptoms as signs that something is not working. Because once you identify what is not working, you can decide to make a change. And as Karen McCall writes, the most wonderful news of all is that the healthier your relationship with money becomes, the less likely it is that money will distract you from the things that you value most.

Financial Recovery: developing a healthy relationship with money– The Book

It’s finally here!!! I’ve been waiting for this book for three years. It’s called Financial Recovery—developing a healthy relationship with money, by Karen McCall. Karen is my mentor, colleague and very good friend.  (And she is the founder and director of the Financial Recovery Institute.) She is the one who inspired me to become a money coach. This isn’t her first book, but it is her masterpiece. And it will change how you think and relate to money like no other book, so I wanted to tell you about it.

So many books are full of financial advice, yet when we read them and then struggle implementing all their advice, we just feel worse. But not with Karen’s McCall’s book.  The difference is that she writes about our actual relationship with money. She talks about the emotions of money. She goes into our history with money. Here is an expert who has spent decades in the trenches with real people (I was a client of Karen’s years ago) and understands why people really do what they do with money and how they can change.

What I love the most about her book are all the stories. She shares her own very personal story of struggling with spending and debt. (She shares some of her painful money secrets that people in her life would have been shocked by at the time, if they had known.) And she shares the stories of countless clients she’s helped guide over the years. Suddenly, you feel like you are not alone if you struggle with credit card debt or sometimes you spend too much, or you simply never seem to earn enough.

Here are Karen’s own words, from chapter one:

I’m not implying that money is the most important thing in life, and certainly it’s not more important than the people we hold dear. Interestingly, though, the healthier your relationship with money, the less likely it is that money will distract you from the things you value most. But money, and our relationship with it, is an undeniable force. Ignoring it doesn’t change that. In fact, when we choose to be ostrich like in our relationship with our finances, hiding our heads in the sand, money exerts an even greater, and usually more negative, influence on us. Money colors so many areas of our lives—health, education, lifestyle, career, family, self-image, political influence, and so on. Doesn’t it make sense to have as healthy a relationship with it as possible?

Karen also writes about being caught in the “money life drain” and how she has seen so many people simply try to work harder, only to not have it help their financial problems. She is very direct about addressing feelings of shame and deprivation and how this fuels our financial behavior. And yes, she shows you how to get out of debt and stay out of debt. She also covers how to track and plan your spending- topics that may be unpopular, as I well know from my years of working with people. But she makes a very convincing case how the new financial behaviors she advocates can truly change your life.

By the time the reader gets to the last chapter called “Imagining Sterling Money Behaviors”, you just want to BE that person, and you really feel like it’s possible.

To order Karen’s book click here

Credit Card Debt: Are you bailing water out with a thimble?

My long-time colleague Karen McCall published a fabulous post last week called “Saving Your Way out of Debt”, where she lists ten steps for breaking the vicious debt cycle so many people are caught in. I want to call attention to her second step: Stop the leaks by stabilizing debt.

McCall says that if you’re trying to get out of debt, you first have to stop using your credit cards. Gasp!  Not use a credit card? But she insists this is true, and I know you won’t be surprised that I agree with her. She writes, “This (continuing to use your credit cards if you’re trying to get out of debt) is like sitting in a boat with a grapefruit-sized hole in the side and bailing out the gushing water with a thimble.”

Yikes. What an image.

Indeed, it’s a very apt image. If you owe thousands of dollars to Capitol One, Discover or Macys, your very first step is to stop adding more debt. Of course this part makes sense. But what people underestimate is that it is nearly impossible to keep from adding to your debt load if you continue to use your credit cards. People will rationalize that they can, and indeed, must, use their credit cards. They say they will pay far more than the minimums and get out of debt. Or they will try to pay off in full all the new charges.

How is that working for you?

It IS theoretically possible to get out of debt while still using your credit cards, but it is the slowest and most frustrating way to pay off debt. And I can say that I’ve rarely seen someone pull it off.

Why would you do this to yourself? It is very unkind to you. Why, if you want to get out of debt, would you choose the slowest and most frustrating and cloudy way possible to become debt free? 

It doesn’t matter how smart you are– credit cards foster money fog. You charge things in one month that you pay for in another. And you have old debt and then your new charges. This all creates fog. And credit cards affect both our brains and our emotions. (Remember, people spend 20-30% more when they use a credit card because the money doesn’t feel as real since it is not immediately coming out of their checking account.) The bottom line is that as long as you use a credit card, you will not be forced to find a way to pay for your life with the money you currently have.

As McCall writes, you must first plug the leak—stop using your credit cards– BEFORE you start reducing your debt. You simply can’t get out of debt while you continue to put purchases on your card. You are going in a circle!!! You are paying on your credit card while you are adding to it.

Learning to stabilize- not add more debt—will change your life. If you stabilize your boat and plug that grapefruit-sized hole first, you can start to make amazing and sustainable progress.

Bailing out water with a thimble is very tiring. Really.

The “Vow”- and 7 questions to help you avoid using credit cards

At times I feel like I’ve taken a vow of sorts. And this vow guides me, irritates me and gives me amazing freedom, often all at the same time. This vow, this guiding principle if you will, allows me to live my life without a lot of financial guilt or confusion. It gives me the peace of mind to know I am slowly but surely building my future while living a balanced life in the present moment.

Can you guess what my ‘guiding principle’ is? It is quite simple… I do not debt.

I often find myself out of step with those around me because of this ‘guiding principle’ however; I don’t put things on credit cards, even for a month and I don’t pull from a line of credit. I have not always succeeded, though over the years it has gotten easier– and it has literally shaped my way of thinking.

But like many simple things, it is not always easy. I’m reminded of a friend who was trying to quit drinking and said, “It’s simple to do, and it is so damn hard!”

I decided to stop using credit cards back when I was in debt. I was still paying on the debt that I had already accumulated. Eventually the day came when I was debt free. Relief!! But then I decided to continue not using debt, and this was an even bigger deal.

Many people will tell you how and why you should use credit cards. These articles are often written by the “financially virtuous” (those that expound putting things on credit cards and then paying your bill in full…which, by the way, less than 25% of the population manages to do.) And of course so many commercials from Capital One, Chase, and American Express to MasterCard all tell us that we should buy whatever our heart longs for. We deserve it, after all, and they can help us.

I personally found it very difficult to plan my spending when some things I bought wouldn’t be paid for until the following month. Yes, I could figure out how to do this mechanically, from a budgeting perspective, but it didn’t work well for my brain and it certainly didn’t help me emotionally. I was simply more prone to overspending. (See my post here on how credit cards are bad for your brain)

The bottom line was that by deciding not to use credit cards, I had to figure out how to get my needs and wants met by myself. Wow.

Living like this requires me to ask questions I hadn’t considered much before. Questions like:

* Is there a less expensive alternative that would meet my needs?
* Can I find this same thing for less money somewhere else?
* Do I really want this or is this about something else?
* If this is really about something else, then is there another way I could satisfy the underlying need?
* Does this align with my larger goals?
* If I really want this and I can’t afford this, is there some way I can make more money?
* If I really want this and I can’t afford this, is there something else I’m willing to give up?

For example, I did my annual income and spending plan for 2011- something I teach my clients how to do. And… I couldn’t get it to balance. Yes, I wanted to spend more money than I was bringing in. Sigh. Don’t we all?! I had to take out a large trip. Oh no!!!

Putting vacations and travel expenses on credit cards is one of the most common things I see driving people’s debt. Well, I want to travel too. But I couldn’t afford it. I need to put windows on my house this year. And I want to do some landscaping. And I’m very focused on getting my retirement on track after my divorce. Drat. It would be easier to not have set these goals. Then I could travel. Of course then my house would be cold and I’d lie awake at night worrying about the future. But hey, in the mean time, I could travel—‘cause Lord knows I deserve it, right?!

In the end, will I travel this year? Perhaps. I’m wrestling with those questions up above. I wanted to go to Machu Picchu with my dad’s wife. My ideas so far are to enjoy going away with her to a nearer destination, i.e. less money. One of the underlying needs is to simply spend more time with her, as she’s the coolest woman ever. But I really do want to go to Machu Picchu! Okay, is there something I can give up? I’m eying my front landscaping project and debating if I can scale it down. (Sorry neighbors.) And I am thinking about how to bring in more money. (Years ago when I needed more money, I waitressed a couple evenings a week and more recently, in my past, I’ve picked up extra teaching hours or other things related to my work.)

The point, as I’m sure you can see, is that this “vow” makes me more deliberate, thoughtful and creative. It’s a different way to live my life. I live a life of conscious choice. I have less stress. And yes, there is a trade off. I see people doing some things that I would like to do more of, such as travel. But in the end, I can sleep at night. I know I will not have to work forever, as I am securing my retirement. And when I do spend money, I enjoy spending it, because I know this is something I really want and I can afford it.

That is a very sweet feeling.

Does your childhood last name affect your adult spending? Maybe so.

I’ve always thought of myself as a reasonably patient person. And this patience is a handy thing, when it comes to spending. I can often make myself wait until something goes on sale. I’ve noticed my son is less so, and hope that he will “mature” as time goes on. But now I wonder if I’m giving myself too much credit, and that maybe I am, in part, to blame for his impatience. Why? Because I grew up with a last name that started with “B”. (Barton, if you’re curious.) And I had the audacity to change my last name to Valterra and then saddle my son with it—at the very rear of the alphabet.

According to a new study recently released, dubbed “The Last Name Effect”, if your childhood last name was towards the end of the alphabet, you were usually at the end of the line- the last in line at the cafeteria, the last to get the teachers attention and so on. Therefore, this created frustration and impatience. By the time you got to the front of the line, what you waited for may have been gone. Now, as an adult, you buy what you want as soon as you see it. You worry that what you want will be taken—better get there early. (God forbid it disappear while you are forced to wait!)

“For years, simply because of your name, you’ve received inequitable treatment,” says Kurt Carlson, an assistant professor at Georgetown’s McDonough School of Business and a co-author of the paper, which is to be published in the Journal of Consumer Research. “So when you get to exercise control, you seize on opportunity. It’s a coping strategy, and over time it becomes a natural way to respond.”

Conversely, the theory is that those who grow up with a last name towards the front of the alphabet have more patience when it comes to spending. We’re more confident that if the first deal doesn’t work out, no worries—there will be another deal.

Hmmm. Well, as I said, my son is at the very end of the alphabet. In fact, his first name starts with Z, so there’s no way that my son is not at the end. I hadn’t thought a lot about this. Then two weeks ago he stormed into the house after school. I asked him if he handed in his science paper we worked so hard on. “If you hadn’t given me a stupid last name at the end of the alphabet I would have!!!” He was practically yelling. “But the teacher didn’t even get to me today. Now I have to wait until tomorrow!!!” And he stomped off. At the time I chalked this up to his brewing puberty.

But after I read about this study, I now wonder. Does giving my child a last name at the end of the alphabet mean I’m going to raise someone more prone to spending—someone who fears as an adult that he’d better jump on a good deal quick, lest it be gone if he waits? Does always being at the end of the alphabet mean that eventually, with years of having to wait, wait, wait, a person will be so pent-up that they will not be able to master the art of delayed gratification, once it truly matters as an adult?

What is your opinion? Yes, OF COURSE what makes us prone to spend is far more complicated than this. Our spending behavior is the result of our upbringing, our brain chemistry and our current life situation. But do you think your childhood last name impacted you? Do tell! I’m curious.

4 Steps to Calculating Your Life-Energy Number

I’m as human as the next person. Sometimes I want to spend money I shouldn’t. Take clothes, for example. For Christmas, my father gave me some very generous clothing gift certificates. So I hit the after-Christmas sales pretty hard with my friend Sandra. Between the sales and my gift certificates, it was like everything was free! We shut the mall down a couple of nights… Well, when the gift certificates ran out, I kept going.

All of a sudden, I couldn’t stand my clothes and I felt this full blown need to fix my entire wardrobe. As my mentor Karen McCall has always taught me, one of the most dangerous things people do is confuse their needs with their wants. (Click here for Karen’s recent post on this.) The truth was that while I wanted an entire new wardrobe RIGHT NOW, I really only needed some new clothes to fill in some gaps in my closet.

So when dad’s gift certificates ran out, and my own planned clothing money hit its limit (because I did plan to spend some of my money on clothes—but really—I couldn’t spend ALL of my money on clothes!) I finally turned to a money coaching mind trick. I knew I needed to start watching my spending. But the truth was that I wasn’t in the mood to think deeply right in the middle of my shopping expedition with Sandra. So I did a quick “life-energy” calculation on the lovely shoes I was eying at Nordstrom.

I learned about calculating “Life-Energy” years ago from Vicki Robins. (Vicki Robins co-wrote, with Joe Dominguez, the book Your Money or Your Life.) In their seminal book, they discuss at length the idea that we are all trading our life-energy—the hours in our life—for money.  In essence, the question is: How much life-energy does it really take to make a certain amount of money? And is an object/service/experience worth the amount of life-energy you’re going to expend for it?  How much life-energy was I going to spend on those shoes?

Here is how to calculate your life-energy number:

Step one: Let’s assume you make a salary of $72,000 a year. That is your gross salary. But really, you don’t get to keep all of that. So what is your net?  After taxes and deductions, what amount actually gets deposited in your account? Let’s say your net is $5,000 a month.

Step two: What other costs are associated with making that money? Do you have to maintain an expensive wardrobe or drive an expensive car like that Lexus? Do you have to eat out for lunch a lot? Are you so tired at the end of the day you eat dinner out more than you would prefer? Let’s say all those costs add up to an extra $600/month. So really, your “net” of truly available money is $4400. ($5,000-$600= $4400. Still with me?)

Step three: How many hours did you REALLY have to work for this $4,400? If you’re salaried, add up all your hours. I vote that you throw in your commute time as well. You wouldn’t be spending those 45 minutes commuting if you didn’t need to work for money, correct? Some people even like to include the time they need to get ready in the morning. I leave that to you. Let’s assume that you add up the time you commute and the hours you are at work. It equals 55 hours.

Step four: Take 55 hours and multiple by the four weeks in a month. You get 220 hours a month. (Technically, there are 4.3 weeks in a month, for those of you who are really being exact.) So you’ve worked 220 hours to get that $4,400 you have available to spend. Now divide your truly available money by the amount of life-energy you had to expend to get it. $4,400 divided by 220 hours is $20. $20 is your “life-energy” number.

If this was my life-energy number, I would use it this way: If I’m in Nordstrom eyeing that pair of $100 shoes, I simply ask myself: are those shoes worth five hours of my life-energy? (I decided no, by the way.)

If I’m contemplating a $600 weekend getaway down to the Oregon coast, I may ask myself, is this trip worth 30 hours of my life-energy?

Is the afternoon spa outing to Gene Juarez with my friends worth seven hours of my life-energy?

You get the point.

Sometimes the answer is yes, and sometimes it is no. But it puts a wonderfully different perspective on things. It acts as a great break at times and really makes you stop and think. So consider taking a few minutes and calculating your own life energy. Then take the back of a business card and write: “My life-energy = $…”  Keep this card in your wallet and simply pull it out when you’re not sure you should buy something. How many hours of your life (life-energy) are your really expending on a given purchase?

Try it and let me know what you think!

Mikelann’s Crystal Ball

I’ve been looking forward to a certain Saturday morning in late December for a while. Why? Because I want to know if I can put new windows on my house this year. And I want to know if I can afford some extra landscaping help before my backyard turns into a wildlife preserve. (That’s just not my style.) Oh- and I want a lot more clothes this year. And maybe more of those three day weekends, where I actually leave the city. And I think I need more of this and I want more of that…

So  a couple of Saturdays ago, I finally sat down with my magic crystal ball. I was a bit nervous what I would see in the ball. For extra support, I stayed in my pink fluffy bathrobe, grabbed some of those Christmas cookies my mom made and brewed the best cup of coffee. For extra measure, I poured some eggnog in my cup, instead of milk. Then I called up The Crystal Ball and set to work.

(Lights darken, crystal ball begins to glow, getting brighter and brighter, mists swirl in its depth and begin to part, and I lean forward, peering into the future….)

Two hours later, I had all my answers. Well, I had a lot of answers and I wanted time to think. To feel. To journal.  To digest the future I had just seen. This future seemed to have several scenarios and I was going to have to make some choices. (I am reminded of that saying, “You can have anything you want, but you can’t have everything you want.” Rats.) And it’s true that you can’t change what you can’t see. Now I had “seen” it all. Yes, I would need to make some changes to my oh-so-beautiful plans for the year. So I poured another cup of coffee. With eggnog.

Each year I go through this ritual, and I simply can’t imagine living without a crystal ball. The crystal ball is my annual spending plan.  Some call it a “budget”, but I really hate that word and I don’t even let my money coaching clients use it. It’s a PLAN.  My plan. I create a plan every month to guide me through the month. Wow. It’s truly hard for me to imagine not having this monthly guiding light. But every December I take it to the next level and plan the entire year. I do for myself what I help my clients do.

I think about all the things I really want in the coming year, and all of the things I need. (I really need windows. I really want more travel.) I think about the reality of my life and what large expenses will come regardless of my love of them—car repair, my son’s orthodontist bill. I think about my goals and my dreams for the future.

When I work on my annual spending plan, I have to balance all of my needs and wants against the money I have coming in this year. Oh- that part. But there is a fundamental truth to money that doesn’t change: you simply cannot spend more money then you have coming in. Well, you can by using debt or draining your assets, but in the long run, there is great unhappiness and stress down that road.  So when I create my annual plan, I do indeed compare all of my desired (and undesired- let’s be honest here) outgo, with my projected inflow. 

Working with an annual spending plan is where art meets science. For 15 years I’ve helped people feel more in control of their finances, and hence their life.  It’s certainly true that money is not the most important thing. But I find that when people have a clear plan and have a way to actually follow their plan, they think less about money and can then settle down and focus on what is important in their life. I have definitely found this to be the case in my own life. 

Well, for now, I’m still working on my own annual plan. The crystal ball showed me several futures and now I do indeed need to make some decisions. I need to chart the course for this year. That’s the beauty of the crystal ball. It merely shows possible futures and outcomes. It shows me where I will be financially come next December if I do various things. Nothing is set in stone. I get to ultimately decide which path I will go down. Then I can relax and put some time into my hobbies, my family, my friends, my life.

I love the feeling of being in the driver’s seat of my own life.

8 steps to avoiding that holiday spending hangover

Yes, I know it’s only mid-November. But we all know that we’re starting to do some holiday planning.  Last night my sister and new brother-in-law were at my house for their first year wedding anniversary dinner party (I made the perfect pork roast!) and we started talking about exchanging gift lists. She is hosting this year at their new house in Everett. So– we can’t be the only ones with an eye on the holidays…

So here’s a question– Did you wake up last January with a spending hangover? You know what I mean- come January, when all the gifts are opened and the parties are over, the credit card bills begin to arrive.

Sadly, it takes the average American who uses credit cards to finance Christmas six to seven months to pay off the holidays. Who wants to be basking in the summer sunshine while still paying for the gifts you gave your kids, family and friends?

Be it right or wrong, women do a majority of the holiday planning and shopping. I hear many women say “I hate the holidays!” and “I might as well give up trying to pay off these cards- I’ve got to put on Christmas.” “Savings?! Who can save money during the holidays?

Of course, our friends and family would never intentionally want us to jeopardize our financial security, or rack up debts on their behalf, but who ever thinks about it like that? And in the current economy, many people are even more stressed. Some have less money to spend for the holidays and feel overwhelmed at having to buy lots of gifts. But there is hope!

If you want to avoid that January spending hangover, consider this: at the root of post holiday debt is lack of planning. When we don’t do prior planning, we eliminate some of our buying options.

The answer is to create a “holiday spending plan”. I wrote this article last year and people really liked the steps laid out this way. So find 30 minutes, print this article out, grab a cup of coffee, a pencil and a pad of paper, and make sure you can Avoid the Post Holiday Spending Hangover.

8 Step Plan to Avoid the Post Holiday Spending Hangover

Step One: Create your Columns
On a sheet of paper, create three long columns. Label the first column “people”, the middle column “gift ideas” and the last column “amount”.

Step Two: Brainstorm People
Using a pencil, create a list of all the people you are planning on giving a gift to. Don’t put down gift ideas yet. Brainstorm people. One of the biggest problems around holiday gift giving is that we end up gifting a lot more people then we originally thought about. Consider creating three lists: Family, Friends, Service Providers (babysitters etc.)

Step Three: Brainstorm Gift Ideas
Write down gift ideas. You’ve likely already thought of gift ideas for some of the people. And make sure you write down in this column all the gifts you’ve already bought!! Did you pick up gifts over the summer or already start your shopping? Write these gifts down!

Step Four: What will the Gift Cost?
Now it is time to put down amounts of money in the right hand column. Do the best you can. You’ll enter a zero where you’ve already bought the gift you wrote down.

Step Five: Add it Up
Take a deep breath and add it up. This is the total amount you are planning on spending on gifts.

Step Six: Other Holiday Spending
Part of what puts people over the edge during the season is all the extra spending on things besides gifts. Grab another piece of paper and list out the following categories, with room under each category to break it down into smaller items. Write down: Holiday parties, Holiday food, Holiday decorations, Holiday travel, Holiday clothes, Holiday gift wrap/postage. Now go fill in the details. For example, under holiday decorations you may write down a tree, new lights for the tree and a couple of poinsettias.

Step Seven: What will the Other Holiday Items Cost?
Fill in the cost of these other forms of holiday spending. How much will the tree cost? Come up with a number for the new lights, gift wrap and postage. Guess where you have to. A guess is better than leaving it blank.

Step Eight: Totaling it Up and Adjusting
Now add your total gifts and your total “other holiday spending”. How do you feel about the amount? Does this seem like a reasonable amount to spend on the holidays? Really think about this. Can you afford this? Is it worth going into credit card debt to be able to give a gift to everyone you know? What are your other options? If your total plan seems too high, go back and make some adjustments and then re-total. Keep doing this until you feel better about the total.

This is often the time when people consider getting more creative. For example, can you give a family gift instead of gifting everyone in your friend’s family? Can you decide to draw names? I used to give gifts to friends but now we all go out and enjoy a play together. This came out of doing my own first holiday spending plan. I felt a little guilty when I approached them with my idea but discovered they were all relieved.

Remember, part of creating a plan is seeing what will happen before it happens! If you don’t like what you see, take the time to work on your list.

Be prepared to take this sheet of paper, this plan, with you when you shop– fold it up and put it in your purse. The best plan does you no good if you don’t bring it with you. As you spend money, jot down the amounts on your plan. Add up what you’ve spent on a weekly basis, or more if need-be. Where are you?

Trying to stick to a plan, regardless of how successful you are with it, will cut down on impulse buying, which is a major problem during the holidays. Without a plan, people buy more things and spend more money on each item they purchase. The temptations can be overwhelming when you are out shopping.

Also, a plan lets you know when you’ve completed your shopping. It tells you when to stop— if you don’t have a finish line, you are going to keep shopping as long as the stores are open.

Knowing what you want to buy and how much you want to spend, before you leave for the mall, will save you a ton of money. You will finish your shopping earlier and you will have fewer impulse buys.

You owe it to yourself to head off that infamous spending hangover. And don’t forget the best benefit of all: a spending plan cuts down on stress! You can enjoy the holidays like they were meant to be enjoyed.

Happy holidays!

What pulls your trigger? Four reasons you may overspend

Do you ever feel triggered? Do you ever find yourself spending money you didn’t intend, but you do it anyways? Sometimes I feel almost defiant when I’m in this mode. “I know I didn’t plan this. But screw it! I’m buying this!” Usually, it is because I’m triggered.

Over the years, I’ve gotten in touch with my own spending triggers. Knowing them has helped me avoid being triggered in the first place and better able to analyze my own overspending when it does happen. Thinking about triggers also helps us not beat ourselves up so bad. Everyone overspends sometimes. But if you can then think about WHY you spent the way you did, you’re less likely to fall into that trap again. Yes, you can actually use overspending as a personal growth experience!

Here are four kinds of triggers:

Emotional State Trigger: Many of us overspend if we are emotionally triggered. It can be similar with eating. If we just had an awful fight with our husband, we may turn to food to make us feel better or we may spend money to feel better. Sometimes we spend when we are depressed. We feel like buying something to lift our spirits. Sometimes we spend when we are lonely. What about you? In what emotional state are you most likely to overspend? If you name it, you can come up with some alternatives before that feeling hits you. Besides ice cream and the mall, what else would make you feel better?

Situational Trigger: Sometimes it doesn’t matter what emotional state we’re in. We know that when we go shopping with our friend Ellen, we tend to overspend. Or we may notice that whenever we are kid-free, we head to the mall to relax. Some situations just lend themselves to overspending. For me, when I had an entire day to myself with no plans, I could easily overspend. Once I identified this, I was able to stop spending simply because I had no plans! (This was also likely related to my divorce. I suddenly had some weekends without my son and I felt a bit “adrift”. This just goes to show you that many situational triggers have an emotional component to them as well.)

Location Trigger: Some places trigger me, no matter how I’m feeling. Certain places just seem designed to suck money out of my wallet. For me, it is the center isle of Costco, where all those “you never know what will be there/ great values” lurk. I’ve had countless clients report the same thing- the dangers of that alluring isle. I also get triggered at Bed, Bath and Beyond. I walk in there and I just want to spend money. If you are trying to be careful with your spending, it may be best to stay away from certain locations, unless you’ve got a solid plan for how you want to spend your money.

Bio Trigger: People tend to spend more when they are hungry. So if you are hungry, don’t go shopping! Eat first, plain and simple. I’m not saying that you don’t want to go out to lunch when you go out shopping. But if you hit the mall or your errands on an empty stomach, you tend to overspend without thinking through your plan. You get a bit “fuzzy” and power through your shopping, throwing money at things instead of stopping to take care of yourself first.

So what about you? What your triggers? For each of these four areas, can you come up with a personal example? The more you think about this, the less likely you are to blindly overspend.

We all have our triggers. Name yours.