A Fresh Start
I’m not a big believer in New Year’s resolutions. I’m sure some people are able to sustain the momentum and actually change bad habits. I am a big believer in fresh starts – and this is a great time of year for one!
Some fresh start areas include:
Don’t become a hoarder. Get some balance.
It’s important for us to save money for our golden years – but it’s also important to enjoy yourself along the way.
There was a singles woman in her 40’s who came to visit me. We were talking about finances and trying to come up with a plan to move her finances into a better place while she was going back to school. In our initial discussion she had an “aha”. A light came on about something. She had accepted as truth that sickness debt was everywhere, it was OK. When we talked about retiring without debt she suddenly realized she could very retire without debt after a lifetime of spending more than she made.
This is a problem many have. All my friends are using credit cards, they think, that must mean it’s OK. The TV says it’s OK. Buy now, pay later. It makes sense, doesn’t it? Just a small monthly payment and you can have this wonderful . . . whatever. But the bill feels awful. And the debt keeps piling higher. It becomes a way of life.
How do I know that many have this problem? Social Security says so. They do studies when people retire. Right now, the terrifying statistic is that 85% of people retiring do not have adequate resources. 85%! They simply spent too much, paid too much in taxes and more than they had to for college. They accepted financial lies as truth and sold out their futures for yesterday’s toys
How much will you earn in your lifetime? How much will you keep?
Let me tell you a story. Perhaps I’ve told it to you before? About the richest woman in Syracuse?
Around the turn of the century, there lived a very rich woman named Mary Anne. She was known far and wide for her wealth and her liberality. She was generous to charities, to her family and in her own expenses. Even so, each year her wealth increased more rapidly than she spent it.
Some friends from her younger days came to her and said “Mary Anne, you are more fortunate than we are. You have become the richest woman in Syracuse while we struggle to make ends meet. You wear beautiful clothes, eat at the fine restaurants while we are struggling just to put food on the table. Yet once we were equal. We studied at the same schools with the same teachers. We played the same games and you were never that great at any of it – just average – like us. You are not more honorable or a harder worker or more faithful so far as we can see. Why then would fickle fate single you out to enjoy all the good things in life and ignore us – who deserve as much as you?”
Mary Anne gladly shared her wisdom. “There is one simple truth,” she said “A part of all you earn is yours to keep.” They laughed at first, thinking she was joking. Certainly all they earned was theirs. Then the awful truth dawned – for the first time. All their money went to someone else each month: the banker, Walmart, Wegman’s, taxes, and on and on.
Mary Anne said: “If you want to be more than a worker bee – working to sustain all your service providers – you need a stake. That is the 10% solution. Save 10%. Then feel free to spend the rest as you like. Save it first – before you contract to pay others.”
Is it hard? At first. But it works. As your assets grow you will have two sources of income – your work and your money at work. Billionaire Warren Buffet started investing in 1956 with $100. In 2002 – a terrible year for the markets - his holding company returned a 400 percent profit.
Should I pay off the credit card first or save money first? I can’t begin to tell you how often I’m asked that question!
Sequential thinking keeps many people poor. That’s the kind of thinking that says you have to do this first and then this. Fact is we have to be financial mutli-taskers. And the fact is, unless you have savings to fall back on, you will always have a credit card balance – because life happens and tires are expensive!
How is it that so many Americans end up owing their soul to the company store? You know that old song? “Saint Peter don’t you call me ‘cause I can’t go. I owe my soul to the company store.” Did you really think credit cards were something new? The song is about people signing their life and their freedom away by buying food and stuff on credit. The company store was part of the old coal mining towns – and was usually owned by the mill or mine owner.
Is there really any difference when you are 45, sitting there with $24000 in credit card debt – and you’ve been running a credit card balance since college?
I’ve read story after story about people who started reading the right stuff, changed their attitude and hauled themselves out of debt and into financial prosperity. Why not you? Stop watch TV commercials. Ignore billboards. Don’t read the ads in magazines. Cut yourself off from the “buying signals” we a re barraged with. Go to the website Cheapskate Monthly and read some of the stories about people who were in just as bad shape as you and who paid off every debt and then moved to a black balance sheet.
I’d like to finish up the week with some ideas that can help you get ahead financially in 2004.
Pay yourself first. You can find a way to save money. The 401k is good, but to really get ahead you also need some money that is not locked away until 59½ . Create a bill that you have to pay that actually increases your equity or cash position.
Here are some ideas others have used successfully: