Now-a-days we shop in person, by phone or on-line, and we enjoy spending our money on things we like. There is nothing wrong with enjoying shopping! I tell my clients this all the time, and they always seem surprised that a money coach would say such a thing. Furthermore, I want my clients to enjoy spending their money. Even after they’ve spent it.

And yet so often, this is where it goes wrong. We enjoy spending our money in the moment, (or more often we enjoy anticipating what we’ll buy) but later we regret it. If you regret your shopping afterwards, something is not working. Sometimes this regret is just a “feeling”—guilt, frustration, or feeling more financially foggy. Sometimes it is specific—we know we’ve added to our credit card debt, or not left enough money for other important values in our lives.

Here are seven common signs that your shopping may be problematic:
1. Your shopping has caused you to add to your credit card debt, or caused you to be unable to pay your credit card bill in full
2. Your shopping leaves you without enough money to save each month. You like the idea of funding a safety net, for example, but you never have enough money to make any serious progress.
3. Your home needs some important work or repairs, but there isn’t enough money to fund these projects
4. After you go shopping (in person, by phone or on-line) you feel worse than when you started. You feel depressed or anxious or irritable or guilty or secretive over what you’re bought
5. You feel like you need to work a lot to fund your lifestyle and can’t imagine being able to live on less
6. Financial stress sometimes overcomes you and you have a hard time sleeping. Perhaps you have stomach problems.
7. You long to be able to go back to school or take some creative classes, but feel you can’t afford more personal-development

The first key to dealing with a potential “over-shopping” issue is to stop and identify it. Did you resonate with any of those signs above? Most of us are doing the best we can. We work hard and take care of ourselves and often those around us. We don’t intentionally harm ourselves. But are we harming ourselves with our spending?

Shopping is a common way we relax and take some time to ourselves. It is often vilified, though. Shopping is seen as superficial. However, shopping can be about self-care. It can be about self-expression. It can be about going out and taking some time to yourself, or enjoying a friend. But if it’s causing you a problem (see that list above!) you must name the problem.

The second key is to know how much money you can spend. This may sound simple, and it is a very learnable skill, but most people honestly don’t know how much they can spend. They often spend if today there is enough money in their account. What if you had a plan each month that took care of your needs, including savings, and let you know what you could comfortably enjoy spending? Wow. Guilt free shopping.

The third key is knowing what gives you deep satisfaction, and targeting your money towards these deeper needs and desires. Is it about the clothes? Or do you simply need some time to yourself?

Last week, I was very stressed and overwhelmed. My mother-in-law, whom I was very close to, died. It has been hard… I’ve had very little time to myself and I’ve been crying a lot. I also didn’t have a lot of money. (Shocking—a money coach admits such a thing?) I was completing a home project and it was over budget with too many trips to the plumbing isle at Home Depot. It wasn’t the end of the world, but it did mean I couldn’t go out and spend $500 at Macy’s or Nordstrom! But I felt depleted and the idea of wandering in the mall and buying a “pick-me-up” appealed…

I looked at my money plan and decided I could blow $40 guilt free. Well, that wouldn’t get me far at the mall. Skip the mall. I need less frustration in my life—not more. So I headed to this swanky plant nursery here in Seattle and bought a latte’ and visited the plants. I spent an hour looking at the maples turning colors and enjoying all their artistic container gardens. (I’m a horrid gardener, by the way.) Then I went to the nursery’s yummy home shop that is full of candles and fragrances and little house “nesty” stuff. And I browsed—smelling 50 candles and spraying all the mists and touching all the soaps. I picked out the perfect home fragrance and a lovely bar of soap — a good quality expensive one—and happily headed home.

The point is this—I enjoyed the shopping. But I didn’t put myself in a situation where I would be frustrated (at a mall with forty bucks prone to blowing my plan and then feeling worse). I knew what I could spend. And I knew that deeper down, I was actually grieving. I really wanted some alone time to just walk and I needed to attend to my self care.

This is called “do-no-harm-spending”. Mikelann was not financially harmed during this shopping expedition. In fact, she was helped. (And my home smells great and that soap is amazing.)

On Friday a reporter called me asking for an immediate interview on my thoughts on the new debit card fees. A camera crew was in my office within an hour. Thankfully, I happened to be wearing a good suit that day for a different purpose! Here is the accompanying news story article.

Oh my goodness people are upset! And I don’t blame them. It is now going to cost many of us $3-5 dollars a month to use our debit cards. Yes- that’s right—paying to access our own money…. How did this happen? Well, remember all those federal regulations that went through congress because of all the bad banking practices? This was an unintended consequence.

Simply put, a new rule limits the fees that banks can charge merchants every time a consumer uses a debit card to make a purchase. (These are called “swipe fees”.) They are also capping credit card fees, which is good. The rule, known as the Durbin amendment, is part of the Dodd-Frank financial overhaul law. However, now that the banks can’t collect as much money from merchants, they are trying to make up this lost income from consumers! Hence- debit card fees.

Yes, I am upset about this. But it’s not the $5 bucks a month I’m upset about. It is my fear that people will stop using their debit cards to avoid these fees and turn to their credit cards. And guess what—if you do that, banks will make even more money.

My number one concern is that if consumers switch to using their credit cards even more, they will overspend and drive their credit card debt higher. All the evidence unanimously points to the fact that people spend about 20% more money when they buy things on credit. This is for several reasons. Think of it this way: if I know the money is coming straight out of my checking account, I will think more carefully before I buy the $300 dollar leather boots at Nordstrom. But if I put them on a credit card, well- even with the best intentions of paying it off in full, I’m still more prone to spending the money, since I won’t really have to deal with it until next month.

And the reality is, 50% of consumers don’t pay their cards off in full. So if they start using their credit cards more, they are hurting themselves and simply making the banks even happier.

What else can be done? Well, you can switch to a credit union to avoid the fee. And not all banks are doing debit card fees. Also, some banks will waive the debit card fee if you have a premium account of some kind. Check with your bank.

Yes, it’s always best to shop around, and certainly now may be a time to switch to a credit union or different bank. But carefully weigh this. My own bank is likely going to institute a debit fee this month. However, I’ve been with my bank for 20 years. I may get them to waive it for me. And besides, I receive many perks for being a long time customer. I’m not going to leave a 20 year relationship that has served me well when it came to my mortgage etc.

The bottom line is that you are in far more danger of going into debt and staying in debt when you use your credit card. So while I am not thrilled with my debit card fee, it’s far better than being tempted to overspend. Don’t let anger at your bank lead you down a dangerous road of increased credit card usage.

Whether you earn $50,000 or $150,000, living paycheck to paycheck is extremely frustrating.  Here are five signs that you are stuck in the paycheck to paycheck cycle:

* You are waiting for a paycheck to get deposited before you purchase something
* You are juggling bills—and thinking about “which paycheck” you will pay them out of
* You feel like there is no money at the end of the month
* You tend to think of money in two week increments
* Any unexpected large expense has to go on a credit card

Do any of those sound familiar? When people live paycheck to paycheck, they seldom feel in control financially. And they usually experience various levels of chronic financial stress. It’s often as if they are waiting for the other shoe to drop….  There must be a better way!

As a money coach, I teach my clients a lot of skills to escape this cycle. Often, they go from feeling at the mercy of whatever life throws at them (the other shoe??) to being the one in control of their life.

One technique I teach people is to start building a cushion at the end of the month. What I mean is this: we all know that ideally you want your spending to be under your income. But the goal is NOT to end at zero each month in your bank account! What if you ended with a cushion? A cushion is a buffer, a shock absorber, and a shield to protect you.  And what if you let this cushion slowly grow to the point where it equaled one of your paychecks, or perhaps your mortgage payment?

Let me give you an example. Let’s assume you start the month with $600 in the bank. Of course this is often where the stress starts. You may not be starting with enough money, from a cash flow perspective. Then your math goes like this: If you bring in $5,000 this month, and you plan on spending $5500 this month ($500 more than your income…) guess what—you’ll only end the month with $100. That’s not much of a shock absorber for the coming month. Yikes!

So as odd as it may sound, sometimes we start with the end in mind, and not the beginning. Where do you want to end the month? Just imagine it. How much money would you prefer to end each month with, so you are not waiting for that first paycheck? Believe it or not, you can decide what this number is, and slowly build towards it. Perhaps you would feel a lot calmer if you started each month with $3,000 as your beginning bank balance. Then you wouldn’t be timing all those paychecks!

By starting with the end in mind, it will help you decide how much you can actually spend in a given month to begin building this cushion. It may take a while. But with a specific goal, you may decide to eat out a little less, or skip that Nordstrom’s trip. Less stress is worth a lot. Each month you end with a little more. But after a few months, you are there.

Here is another tip. Once you are ending with your desired “cushion”, what happens if you end with more than that? Take it out of your checking account and place the difference in savings! That savings becomes what you use for all those “unexpected” expenses, or the expected, like the holidays.

Oh my gosh, did I just say “holidays?”

Go back and enjoy the sunshine.

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.

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.

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

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.

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.

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!