Tag Archives: Values

Stop Money Fights With This Simple Solution

This post, “Stop Money Fights With This Simple Solution,” was updated on February 16, 2017.

Over 70 percent of couples report fighting about money over anything else. You can stop money fights by following this one simple recommendation!

Like many people, I lived in the dorms back in my college days. After surviving one semester with The World’s Worst Roommate™, I was fortunate to be granted a housing change. My new roommate, Erik, was everything one could hope for in a roommate: he picked up after himself, showered daily, loved to play table tennis until all hours of the night, and could binge watch TV like a pro.

Among the many shows Erik and I binged on, Married With Children was our favorite. Can you blame us? Ed O’Neill played the role of Al Bundy, a henpecked husband, broke shoe salesman, and father of two, to perfection.

Over 70 percent of couples report fighting about money over anything else. You can stop money fights by following this one simple recommendation.Brief digression: It is a crime that O’Neill never won a Golden Globe for his performance as Al Bundy, though his career has been unquestionably validated by countless nominations and awards for his performance as Jay Pritchett in Modern Family.

In one memorable scene, Al’s wife, Peggy, has just returned home from a lavish shopping spree. Al takes a look at the bills and delivers a typical, priceless line:

I hope one of these bills is for a coffin, because your shopping is killing me.

While MWC was a slapstick, controversial comedy which often crossed the line, this particular money fight between Al and Peggy hit the nail on the head in terms of its value as a social commentary.

Research supports my assertion. According to a Huffington Post article from 2014, a survey showed “that 70 percent of couples argued about money more than household chores, togetherness, sex, snoring and what’s for dinner.” Furthermore, survey records that the focus of 46% of all money fights was “frivolous purchases.”

I suspect that 54% of surveyed couples were not being entirely honest.

Over 70 percent of couples report fighting about money over anything else. You can stop money fights by following this one simple recommendation.
Graph credits to Huffington Post and Money.com

Mission: Stop Money Fights in Marriage

Last fall, I volunteered as a co-facilitator for a popular personal finance course. I have always enjoyed engaging in financial discussions with others, despite the general unwillingness to do so in most people, and serving as a group leader satisfied that urge while also providing a platform to help people and sharpen my own knowledge.

During our session on purchasing, a student in my group shared that she and her husband had previously been through several fights about spending over the years. I braced myself for a plea for advice, but what she said next surprised me.

“We found a solution that has stopped most of our money fights.”

Chatter among the group instantly ceased. Each group member, including me, was eager to learn this couple’s secret to stop money fights?

Solution: The Thirty Day List

In the moments which followed, we learned a lot about this couple’s experiences. Throughout their marriage and subsequent ushering of two children into the world, this couple had fought about many purchases: vehicles, clothing, electronics, and even groceries. Matters were not made any easier when the couple encountered financial hardships. In order to reduce and stop money fights specifically related to purchases, this couple implemented a procedure that they called “The Thirty Day List.”

They outlined the rules as follows:

  1. When considering a purchase over $50, write the item and cost down on the list and date the entry.

  2. Provide a brief rationale regarding the item’s utility and importance.

  3. Revisit the rationale in 30 days. If it still sounds like a good idea at that time, purchase the item.

Naturally, many students (budget nerds) were in favor of this approach, while other students (free spirit spenders) were against the restriction associated with this process. However, as the couple explained how it worked for them, the tone of the room shifted toward acceptance of this uncommon procedure. Some people even expressed hope that use of The List could stop money fights in their marriage.

Why The List Works

Among the benefits of the list which were described that day include the following:

  • The List often prevents unnecessary purchases. Sometimes you don’t buy the item because you realize don’t really need it.
  • The List eliminates susceptibility to high-pressure sales techniques. When a smooth talking salesman is rolling out every tactic in his arsenal to get you to purchase that new refrigerator with built-in social media access, you don’t even have to feel bad saying “no” because you are acting on a matter of principle.
  • The List causes you to wait, and sometimes this nets you a better deal. Patience puts you in a position to negotiate a great price. This extra time also allows you to thoroughly research a product, weigh the pros and cons of the purchase, and make a careful evaluation.
  • Similarly, after waiting 30 days, you retain the willpower to reject a bad deal. What is a few more days? You are in control and have the power to walk away.

Why The List Works

The Thirty Day List works in many situations because it leads to communication. When a couple collaborates to generate a unified position, a meeting of the minds and melding of ideas is often the result. However, this does not always happen quickly.

In such cases, a couple must take a step back and view the possible purchase from a wider perspective. By considering the purpose of the purchase from a variety of perspectives, the tone of communication shifts from one which is adversarial to one which is inclusive of both partners’ values.

Related Posts: See Values and Budgeting Part One and Values and Budgeting Part Two

Finally, the List provides accountability for larger purchases. It provides a framework and protocol which eliminates one partner from “going rogue.”

Downsides to The List

While the Thirty Day List may seem faultless in theory, it can be more difficult to implement in actual practice. After all, we live in a society in which it is easier and (often preferred) to ask for forgiveness after the fact rather than seek permission in advance. Many people would agree that this is a terrible way to act within your marriage or other committed relationship, yet that doesn’t stop some people. If this is your preferred practice, the List won’t work well for you.

The List is also not a good idea when you find yourself in a housing search, especially in a seller’s market. Often times, you will need to be poised to make quick decisions. This shouldn’t be a surprise, however, as when you are in the midst of such a search, you know the rationale and utility for the purchase.

Make the List Work For You

Perhaps the greatest feature of the List is that it can be modified to fit your circumstances. A high school student with a part-time job and an annual income of $1,200 and a married couple with a combined annual income of $500,000 can successfully use the List to their respective advantages. The figures may need to be modified, but at the end of the day, the principles remain the same whether zeros are added or removed.

If thirty days is too cumbersome for you, modify the procedure to fit your needs. You know yourself better than anyone, and using this knowledge is the best course of action when designing a List which will work for you to stop money fights and support wise purchases.

Further Recommended Reading: 

Money and Marriage: How to Talk About Money With Your Spouse

Want To Be Rich? Maintain Great Relationships


Readers, do you have a procedure similar to The List in place to assist when making significant purchases? Do you and your spouse or significant other routinely fight about purchases? What do you do to stop money fights?

How to Make the Most of Your Tax Refund

Tax refund: Next to the words “pay day” and “debt free,” these are my two favorite finance-related words. Whether my annual tax refund is a modest sum or a mid-size windfall, I am always happy to see my refund directly-deposited into my checking account. Admittedly, knowing how to make the most of your tax refund can be a daunting task.

Still haven’t submitted your 2016 tax returns? If you have a simple return, such as a 1040-EZ, I recommend completing your simple return with E-File.com today. You can complete your Federal return for FREE and receive free support along the way. And FinanceSuperhero readers can receive a discount on state returns by using this link – $6 Off State Filings With Coupon Code “6OFFSTATE”.

If you’re planning to complete a 1040A or require additional schedules, the team at Liberty Tax has local offices in your area to help you every step of the way. Other tax preparation services come and go, but LibertyTax has been helping people file their taxes the easy way since 1997.

Receiving a tax refund is a great opportunity to improve your financial outlook. Follow these 9 pro tips to make the most of your tax refund in 2017!

The FinanceSuperhero Guide to Making the Most of Your Tax Refund

Assuming you have a tax refund coming your way, you could be on the verge of changing your financial picture.  With great opportunity comes great responsibility! The following advice will help you to make the most of your tax refund and make significant progress on your financial journey. I recommend following the steps in numerical order.

1. Give a Portion of Your Tax Refund to a Charitable Organization

Longtime readers will not be surprised that I am suggesting giving as the first step to make the most of your tax refund. As previously mentioned, Mrs. Superhero and I have placed Giving at the top of our monthly budget. Giving aligns with our values, and helping others provides us with much more satisfaction and enjoyment than buying more stuff or eating delicious food.

I strongly believe that giving 10% is the best way that we can make a charitable contribution prior to reaching financial independence (at which time we will significantly increase our giving). We have always done this, dating back to the time when we faced a mountain of debt, and we continue to do so today, even though we are only a few months away from carrying no debt other than our mortgage.

Why? As I mentioned, we believe helping others is both a calling and the most satisfying use of our money. Giving is also a strong reminder that money is not something to be hoarded out of greed. We want to value money and practice good stewardship, but we also want to remain far removed from the love of money.

Many people reject giving in favor of keeping their money strictly to themselves. Ironically, it is usually these same people who senselessly give their money to big banks and other financiers in the form of outlandish interest payments on cars, boats, and other stuff.

Personally, I would rather give in a meaningful way. Even if you give 1% of your tax refund, you will help others and begin to change the way you view money.

2. Increase Your Savings and/or Emergency Fund

When looking to make the most of your tax return, simply saving money can be a wise choice.
When looking to make the most of your tax return, simply saving money can be a wise choice.

After supporting societal progress by giving, use your tax refund proceeds to improve your liquid savings. Unless you are an extremely high income earner or have a stable passive income stream, you absolutely must have an Emergency Fund. If you do not have one, consider this a full-blown, alarm-sounding crisis that must be addressed immediately! Statistically-speaking, there is close to a 100% chance that you will experience some form of an emergency within the next decade, so be ready!

While I recommend maintaining an Emergency Fund of at least 3-6 months of minimum living expenses, you may also wish to establish an additional Opportunity Fund. I do not specifically recommend amounts or figures for this fund, and you may wish to skip it entirely in favor of moving onto Step 3. However, an Opportunity Fund could allow you to make a fun, somewhat impulsive decision without any accompanying feelings of guilt or regret.

3. Get out of Debt – Once and For All!

After you have given and increased your security via your Emergency Fund, you are fully-prepared to take on the primary barrier standing in the way of Financial Independence: Debt.

The sooner you eliminate your non-mortgage debts, the sooner you free a significant portion of your monthly income and simultaneously gain the freedom to invest in tax-advantaged retirement accounts. Both the Snowball and Avalanche methods are valid means to achieve debt freedom. For the purposes of this post, I am less-concerned with the method you implement to eliminate your debt; just get it done. You may get the push you need if you make the most of your tax refund in this way!

 

4. Invest in Tax-Advantaged Investments

The real fun begins when you no longer have non-mortgage debt. If you are free from the shackles of debt, the next optimal use for your tax refund is to maximize your retirement contributions. For the purposes of this limited space, ensure you are maximizing employer-offered plans, specifically if they offer a match, and then move onto your Roth IRA.

Want to make the most of your tax refund? Opening an IRA or taxable brokerage account with Betterment is a smart way to maximize the impact of your refund.
Betterment returns vs. US Market and Typical Investor Returns (Credit: Betterment)

If you’re looking for an easy to use platform for investing, Fundrise offers real estate investment options with low financial barriers for entry.. Their Tax-Coordinated Portfolio works to maximize your earnings and minimize tax burdens across all types of accounts, including taxable accounts, Roth IRAs, and traditional IRAs. It is simple to sign-up or rollover an account, select a portfolio of ETFs, and be on your way toward earning better returns right away.

Compared to other platforms, the Betterment portfolio is designed to achieve optimal returns at every level of risk. Through diversification, automated rebalancing, better behavior, and lower fees, the Betterment approach to investing can help you generate 2.9% higher returns than a typical DIY investor.

Make the most of your tax refund and start investing with Betterment by signing up today!

5. Contribute to Your Children’s College Funds

If you do not have children, skip ahead to Step 6. If you have children, you need to learn the nuances of the Coverdell ESA (Education Savings Account, also nicknamed the Education IRA) and 429 plan. The ESA has income and contribution limits (currently $2,000 per year), but I recommend you start with the ESA in most circumstances, if eligible.

The important thing to understand is that minimal contributions to these vehicles will place you in a position to send your children to college without the burden of student loans if you begin early.

Related PostEscape From Student Loans: How Two Educators Paid Off $17,831.65 in 54 Days

6. Destroy Your Mortgage Debt

Pause with me for a moment and imagine a life without a mortgage payment. If you can’t image it, check out the FREE E-book, How to Hack Your Mortgage and Save Thousands, written by my friend Andrew at FamilyMoneyPlan. This is the plan he and his wife used to wipe out their $320,000 mortgage in 6 years.

What could you do with an extra $1,000 per month? $2,500? $5,000? I just felt an overwhelming sense of excitement  and peace typing these words. The next time I visit my doctor and have my blood-pressure checked, I am going to visualize the wonders of a mortgage-free life to improve my numbers.

For the average family, mortgage interest represents the second-largest expense that they will pay in their entire lifetime. In some cases, total mortgage interest paid on a 30 year mortgage can be approximately 75-80% of total principal, even at today’s advantageous interest rates! Make the most of your tax refund to accomplish progress on an annual basis and you could shave several years off your mortgage, especially if you are already paying extra on principal on a monthly basis.

7. Invest in Non-Retirement Funds and/or Real Estate

If you have made it to Step 7, please allow me to offer my congratulations. With no debt whatsoever, healthy savings, and kids’ college covered, you are poised to generate significant wealth. At this stage, you may have achieved Financial Independence, depending upon your lifestyle.

I recommend using tax refund money to invest in simple index funds at this stage. A modest tax refund sum is enough to get you started with many index funds. Adopt a long-term approach, relax, and watch your money grow.

Similarly, this is the time to invest in real estate, if interested. Becoming a landlord isn’t for everyone, and paying a property manager could eat into your net profit from owning a rental property. However, a rental property can yield some of the highest annual investment returns if managed well and purchased at prices below market value.

Want to make the most of your tax refund? Investing in real estate with Fundrise is an exciting option for investors in 2017.Fortunately, today’s investors can invest in real estate without the hassle of becoming a landlord or hiring a property manager. Fundrise offers real estate investment options with low entry costs.. As of February 2017, they offer three eREITs for new investors: the West Cost eREIT, the Heartland eREIT, and the East Cost eREIT. It is amazing that technology has brought common investors like you and me the opportunity to invest in multi-million dollar buildings half way around the country!

Even if you’re on the fence about real estate investing or just not quite ready to dip your toe in the water, I recommend signing-up with Fundrise today – it is 100% FREE, with no obligation, and in doing so, you’ll position yourself to learn more and possibly avoid wait lists.

8. Improve the Value of Your Primary Home

At this stage, true fun begins. When you are financially well-poised for the future, a tax refund represents an opportunity to both invest and add joy to your life simultaneously. This is the time to make improvements around your home which increase your happiness and feature a high return on investment.

Good Investments: new front door, landscaping, deck or patio, kitchen or bath remodel, walkway lighting

Bad Investments: swimming pools, utility sheds

9. Build Sinking Funds for Bucket List Items

Last, but not least, comes additional saving for specific purchases. If you make it down to Step 9 when determining how to implement your tax refund, you are an authentic Superhero. I recommend establishing separate sinking funds for a variety of priorities, such as vacations, new car purchases, secondary homes, or major home additions.

The purpose of a sinking fund is to plan for future purchases which are far off in the future. At this stage, you do not want to be fooled into getting back into debt or be caught off guard by large, necessary expenses. With a sinking fund, you won’t be financially caught off guard when your house needs a new roof, your furnace fails, or your vehicle sputters and dies.

Are You Ready to Make the Most of Your Tax Refund?

A tax refund is a great opportunity to get ahead in your finances. I am confident that you will not fail to cover all of your bases by following these steps. Depending upon where you are in your journey toward Restoring Order to Your World of Finances, you may wish to skip steps or modify the order. For example, renters may wish to place saving for a home down payment in the Steps.

If you haven’t yet filed your 2016 tax returns, be sure to check out E-File.com or LibertyTax today. Either way, careful consideration of your circumstances will put you on the path to make the most of your tax refund this year!

 

Note: This post was last updated on February 14, 2017.


Readers, did you receive a tax refund this year? Are you currently awaiting a refund? How do you plan to make the most of your tax refund?

20 Budgeting Tips for Singles – A Bachelor’s (or Bachelorette’s) Guide

Last week, the state of Illinois finally passed what I would describe as a “Band-Aid” budget. While politicians largely celebrated this move and patted themselves on the back, their budget does very little to solve the gaping wound that is the state of financial chaos in which Illinois currently finds itself.

As I read the headlines and a few articles, I marveled at the difficulty the legislature faced in passing a budget. As you may or may not know, Illinois recently went an entire fiscal year without a budget. This standoff made previous budget delays (18 days in 1991, multiple delays of several weeks in the 2000s, and the bitter standoffs of recent years) look like small blips on the radar.

While Governor Rauner and Speaker Madigan set aside partisan gridlock long enough to pass a budget, public schools, state universities, and social service agencies are from celebrating. To the detriment of the citizens of Illinois, the finger pointing between Republicans and Democrats will surely resume and intensify in the next months.

Right around the time that Governor Rauner was delivering his press conference regarding the new budget, I sat down to review my planned budget for July 2016. Since September 2009, I have created a unique monthly budget using Gazelle Budget, the online software platform created Dave Ramsey’s team at Ramsey Solutions. That makes 71 unique budgets. It felt good to add yet another accomplishment to the mental list of ways in which I put the state of Illinois to shame.

MY FIRST BUDGET

As I often do when completing a budget, I took a look through the archives to see how Mrs. Superhero and I have come. My trek brought me back to September 2009, the month in which I created my very first budget.

In September 2009, I was a newly-employed, engaged bachelor, living independently for the first time in my life. Less than one week before the new public school year started, I accepted a job offer to teach music about 25 miles away from my university campus. With a week to prepare, I scrambled to locate housing, sign my contract, and prepare for a radical life change.

At the time, I had barely a tiny inkling of how to responsibly manage my money. I had recently read The Total Money Makeover in record speed, but I didn’t know the first thing about budgeting an “adult” paycheck. This was going to be the first time I had ever earned a paycheck which included a comma in the amount field!

After reading about Gazelle Budget (which is being replaced soon by EveryDollar), I purchased an 18 month membership, which included access to all three hours (ad free) of the Dave Ramsey Show podcast, for $89.95. Moments later, I created my first budget.

In all its glory, my very first monthly budget, from September 2009
In all its glory, my very first monthly budget, from September 2009

I began by projecting my total net income for the month, $2,357.29 in total. In that moment, I recall feeling pretty wealthy. I continued by inputting my desired charitable giving ($236 – 10%), rent ($400 – I rented a room in a two-bedroom condo from a friend-of-a-friend), food ($305 – for groceries and restaurants), and my debt obligations ($50 car payment and $200 credit card bill). From that point, I filled out the budget with an estimate of utilities, transportation (gas, car insurance, and routine maintenance), clothing (new work clothes and change for laundry), personal spending (spending money blow money Starbucks fund, books, gifts, hair cut, toiletries, and the Gazelle Budget subscription), and savings (emergency fund and honeymoon fund).

As you can see above, my projections for spending (middle column) were not entirely accurate when compared with my actual spending (leftmost column) at the end of the month. In fact, despite projecting a zero-based budget, I spent more money than I earned in September 2009.

This was hardly a Superhero effort.

On the other hand, the percentages of my categorical spending mimicked responsible spending.

Budget Percentages 1

Budget percentages 8-11
Categorical budgeted spending as a percentage of net income, September 2009

THE TROUBLE WITH PROJECTIONS

For the first full month of living on my own, I updated my budget on a daily basis. I kept a stack of receipts for all cash purchases and utilized internet banking to reconcile all other transactions. Yet despite my diligence, I was still brand-new to the process of budgeting.

As you can see below, I overspent considerably on food and personal spending; I had budgeted a combined $572.29, approximately 24% of my net income, but at the end of the month, I had spent a combined $761.58, approximately 32% of net income.

When I broke these spending figures down further, I discovered that I had spent $156.50 at restaurants and $80.77 at Starbucks.

Ouch.

My First Budget - Spending
20 TIPS FOR THE BACHELOR’S OR BACHELORETTE’S BUDGET

I chose to present the above figures for two primary reasons. First, I wanted to prove that it is possible to build and maintain a monthly budget as a single person. Second, I wanted to be fully transparent about my early mistakes.

Yes, creating a budget is not always easy. It isn’t the cool thing to do, especially as a young 20-something fresh out of college. Even at age 30, I can still recall the temptation to throw caution to the wind and live it up. Heck, I almost went out and leased a car!

However, I still recall one of the most powerful motivators for a 20-something single: the desire to prove one’s independence. Creating a budget is one of the best ways to set out to accomplish this goal and appear to be an adult. If you don’t manage your money responsibly, you will surely appear to be a child to you parents and extended family.

To win with money as a bachelor or bachelorette, follow these 20 tips.

20 BUDGETING TIPS FOR SINGLES - TW

1. Share costs with a roommate.

In my case, I avoided spending $1,000 per month for a one-bedroom apartment and spent $400 to rent a home in a two-bedroom condo. By sharing costs in this manner, I avoided spending 40% of my net income on housing costs.

Housing is by far the biggest budget buster for the average bachelor or bachelorette. Spending within this category can be a difference-maker.

2. Gather an accurate picture of your monthly debt obligations.

When you are just starting out, you will feel the temptation to delay examining your debts, particularly if your student loans are still in deferment. Avoiding your debts will not make them go away, so gather this information, including total principal, interest rates, minimum payments, and loan terms for each debt. If you’re unsure or unclear about any debts, contact the appropriate customer service department right away. Also, you should check your credit report; remember, this can be done free of charge once per year with each of the major credit reporting bureaus.

3. Prepare your own meals and cook at home as much as possible.

As a single young adult, preparing your own meals will accomplish two goals: you will save money, and you will not gain weight eating low nutrition/high calorie fast food. As an added bonus, you will be able to host your dates for dinner and impress them with your fine culinary skills. They’ll expect Ramen, and you’ll blow them away with shrimp creole!

Ladies, don’t forget, the way to a man’s heart is through his stomach.

4. Maintain a college lifestyle, at least in terms of spending.

When your first paycheck rolls in, you will immediately experience the temptation to buy everything in sight. If you establish an unreasonable level of spending out of the gate, you will set yourself up for failure. As much as possible, continue to live a college lifestyle (i.e. behave as if you are poor), within reason, of course.

5. Do not go out and buy a new (or new to you) vehicle.

You need to get used to living on a budget first in order to determine what you can or cannot afford in a new vehicle. Don’t allow pride and vanity to influence your decision-making process. If your current vehicle gets you from point A to B, it’s a keeper – at least for a few months.

6. Invest in a decent coffee maker with a timer function and brew your own coffee at home.

I learned this the hard way when at the end of my first budgeted month I had spent $80.77 on coffee on my way to work. I had a decent Mr. Coffee coffeemaker, but it didn’t have a timer feature. If I happened to be running late to work in the morning, I resorted to a quick Starbucks stop, which cost me significant money without adding any perceived value (neither happiness-wise nor nutritionally speaking).

Nothing beats the sweet aroma of morning coffee, especially when you brew it yourself and save money in the process

Mr. Coffee
Nothing beats the aroma of freshly-brewed coffee in the morning – and it saves you money!

7. Stay in.

Fortunately, I did a good job of this. My wife-to-be and I enjoyed cooking dinner at my condo and watching reruns of The Office. I know that many single people will feel the temptation and be pulled into the expensive night life scene, but do so within reason. Invite friends or your significant other back to your place, where food and drinks are cheap.

8. Find affordable dates with Groupon and Restaurant.com . I’m not even sure if Groupon and Restaurant.com existed back when I was a bachelor, but taking advantage of them today is a key part of our dining out experience. With either platform, you can purchase certificates for what is usually a fraction of the value, which allows you to realize significant savings and still enjoy a night out. The most common Restaurant.com offer is $10 for a $25 gift certificate. Check out the Restaurant.com offerings in your area by following the link and entering your zip code.

9. Build an emergency fund as quickly as possible.

As a young single person, building an emergency fund is the definition of adulting. Without an emergency fund, you will face unexpected expenses and be forced to swipe your credit card. Or worse yet, you may have to beg your parents for a loan or a gift.

10. Begin charitable giving right away.

While I have always given 10% to charity and missions organizations, I know this isn’t for everyone. If you’re not a natural giver, start small. Even $1 or $10 per month will benefit worthwhile organizations. If you’re not into structured giving, pay it forward and purchase the coffee or meal for the driver of the vehicle behind you in the drive-thru.

I strongly believe that regular, consistent giving is a key to winning with money. The act of giving teaches you that money is not an asset to be horded, stockpiled, wasted, or worshipped, but a tool to help yourself and others.

11. Strive to create a zero-based budget every month.

Remember, you will fail at this at first. Over and over and over. However, I found comfort in a Dave Ramsey quote during my initial months of struggle with my budget:

Adults devise a plan and stick to it. Children do what feels good. -Dave Ramsey

12. Accept that your budget projections will rarely be perfect.

On a related note, embrace your budget mistakes as they occur. Be willing to adjust your budget several times during the first several months.

13. Share your budget with a friend who is wise with his or her finances.

Accountability is helpful for everyone. It is part of the reason why I write this blog. A good budget is not inflexible.

14. Tell yourself every day that instant-gratification isn’t all that gratifying.

A few days ago, I read that the average person only waits 5 seconds for a web page to open before becoming irritated and moving on. Clearly, we live in a culture which embraces speed and instant results over patience.

You will need to learn to delay your desires in order to maintain a successful budget. Make a plan and stick to it.

15. Don’t worry about investing money right out of the gate.

In the personal finance blogging community, the suggestion to delay investing for retirement is utter blasphemy! However, I believe that there are better uses for your first months of pay. Make sure your budget is in order, build an emergency fund, and take time to research your investment options. When the time comes to invest, look into low-cost options through Betterment and Motif Investing. You will be glad that you waited.

16. Identify your values and be sure that your budget follows them.

If you’re not sure where to start with values-based budgeting, check out my two part series on budgeting with values in mind:

Values and Budgeting – Part One

Values and Budgeting – Part Two

17. Once you’ve identified your values, create written goals that you wish to accomplish.

Writing V-SMART Goals is the best way to accomplish your goals.

18. Be transparent with your friends and family about your budget.

It is OK to explain that you are striving to manage your spending responsibly. In fact, if you keep your budget goals a secret, it will be more difficult to stick to your budget, as co-workers will invite you out for happy hour drinks and apps every Friday. Just be up front and honest.

You can still have a social life on a budget. But be willing to say "no."
You can still have a social life on a budget. But be willing to say “no.”

19. As follow-up to number 18, be willing to say “no.”

If you want to live on a budget and win with money, you will likely hurt people’s feelings from time to time.

20. Avoid making any purchases on impulse.

If you are considering a sizeable purchase, write it down and check back again in thirty days. See my recent piece, The Thirty Day List, for a step-by-step process on delaying purchases.

Note: This piece contains affiliate links. FinanceSuperhero only recommends products designed to save readers money.


Readers, what budget tips do you have for singles?

How to Overcome the Fear of Failure

What would you do if you knew you couldn’t fail?

If you, dear reader, will grant me a moment, I would like to be very blunt at the outset of this article:

I hate the above quote.

I understand that it is a commonly-uttered phrase intended to inspire and motivate people to dream big, take risks, shoot for the stars, and a whole host of additional clichés.

Reality check – everyone fails. All the time.

What if, instead of the above quote, people asked, “What would you do if you knew you could succeed?”

I prefer the turn of phrase above for two reasons. First, it is a question with an affirming, positive slant. Second, it does not erroneously assert that failure and success are somehow mutually-exclusive, as if failure may not be present on the path toward success; instead, it emphasizes that success is always a possibility, despite one’s past failures.

There is a reason the notion of “failing forward” has stuck around in the past decade since John Maxwell wrote Failing Forward: Turning Stepping Mistakes Into Stepping Stones For Success:

The difference between average people and high-achieving people is their perception of and response to failure.

 

If society better-prepared us to expect, even embrace failure, and keep pressing on, what fantastic successes might we experience?

A Modern Case Study

Last week, I read an incredible story about Taylor Rosenthal.

Rosenthal isn’t afraid to fail. The 14-year-old from Opelika, Alabama, is too young, optimistic, and busy to be afraid to fail.

A bright student and average baseball player, Rosenthal is the founder of the start-up company RecMed, which specializes in the deployment of medical supply vending machines.

His idea was basic, yet inspired. Explained Rosenthal,

“Every time I’d travel for a baseball tournament in Alabama, I’d notice that kids would get hurt and parents couldn’t find a band-aid,” he said. “I wanted to solve that.”

His initial thought was to set up a pop-up shop at the tournaments to sell first-aid kits. He tried it and quickly realized it wasn’t the best model.

“We noticed that it would cost too much to pay people minimum wage to sit at tournaments for six hours,” he said. Then the vending machine idea struck.

Rosenthal sketched a design and consulted with his parents, both of whom work in the medical industry.

By December, he had a working prototype and had acquired a patent.

Users pick from two options: prepackaged first-aid kits for dealing with issues like sun burns, cuts, blisters and bee stings (they run from $5.99 to $15.95). You can also buy individual supplies like band-aids, rubber gloves, hydrocortisone wipes and gauze pads, which cost $6 to $20.

Rosenthal hopes to start deploying the machines this fall. He said they make sense at “high-traffic areas for kids” like amusement parks, beaches and stadiums.

He already has an order from Six Flags for 100 machines.

RecMed will make money by selling the machines, which cost $5,500 apiece, and through restocking fees for the supplies. Rosenthal said he’s also open to putting advertising on the machines.

Needless to say, Rosenthal’s first business plan appears to be a wild success. Rest assured, he will probably fail majorly at some point in the future. But for now, he is seizing his opportunity, even turning down a $30 million buyout offer, because he isn’t afraid to fail.

Naturally, Rosenthal’s teacher, Clarida Jones, has taken notice of her star student’s fearlessness. Said Jones,

It has been amazing watching Taylor grow over the past year into this confident and amazing business man. Even with all of his success, he remains humble and ready to help others. He’s just 14. Bill Gates should be worried.

I doubt Mr. Gates is worried, but he undoubtedly should be impressed, as Rosenthal’s entrepreneurial pursuit is representative of the kind of educational outcomes that Gates hoped to procure through his educational reform efforts.

Photo credit to CNN Money
Taylor Rosenthal with the RecMed vending machine. Photo credit to CNN Money

It is easy to criticize Rosenthal’s rejection of a $30 million buyout. After all, he could somewhat lavishly off a very modest one percent annual return on his spoils. I suspect the rejected offer was less about the money and more about the thrill of the chase and youthful naiveté.

On the other hand, it is hard to fault Rosenthal. He can afford to take a big risk at this stage in his life. He does not have mortgage, auto, credit card, and student loan bills. He has not yet been jaded by the financial obligations of adulthood.

Perhaps he does not fear failure because he hasn’t yet been programmed to expect it.

Four Roots of the Fear of Failure

Pause for a moment and compare several of your grandest endeavors with that of Rosenthal. If you are like me, your story is probably much different. Perhaps you were programmed to fear failure, and it held you back in the past. Or worse, fear of failure may be holding you back from new pursuits in the present.

I consider the following to be the Four Roots of the Fear of Failure:

1. We fear getting started

Mark Twain said, “The secret of getting ahead is getting started.” It is a shame that Twain did not also share the secret of getting started!

As an entrepreneur, emulation of others is always an effective way to start.

For example, I followed other bloggers’ work extensively for months before beginning FinanceSuperhero. My goal was to observe the writing qualities that kept thousands of daily readers coming back to their websites on a weekly basis. I even studied the guides on how to start a blog written by FinancialSamurai and Mr. Money Mustache before launching my own blog.

Despite a reliable framework to follow, I felt a bit uneasy, at times, throughout the process. However, I was reminded of an important principle in the process: What we fear rarely, if ever, comes to pass; at the same time, if we do not start, we will never know what might have been.

2. We fear that failure is fatal.

It is normal to fear making a mistake, as mistakes will certainly happen. Yet despite that nagging inner dialogue, the repercussions of our mistakes are rarely fatal.

Billionaire Mark Cuban is a great illustration of this principle. In the early 1980s, the soon-to-be-billionaire was fired from his position as a salesperson for Your Business Software, a local Dallas retailer. Why? He was reportedly meeting with a client to develop new business instead of opening the store.

The road that followed was long and winding, but Cuban’s mistake would not define him.

3. We fear what others may think of us if we fail.

I must confess that I am very guilty of this from time to time. However, by simply being mindful of this trend in my own life, I am able to remain focused upon my own values and act on them rather than out of fear of what others may think. Besides, can any of us really purport to know what others think?

At every step of the way, someone will criticize your decisions and urge you to go in a different direction. Courage stems from the conviction to hold fast to your chosen path.

4. We fear the path of struggle and difficulty.

Just as assuredly as you will experience your share of failures, problems will arise. The key to overcoming them is learning to embrace challenges and view them as opportunities.

It is easy for me to say this. My natural personality leads me to chase challenges and run head on into difficulty. I feel most alive when toiling through adversity.

If you are naturally prone to fear difficulties, you’re not alone. But you can begin to ease your fear by taking a series of small steps.

How to Defeat Your Fears

In my experience, fear is like a boisterous middle school bully. It is threatening on the surface, yet it fades quickly when confronted by direct action.

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Conclusion

No article on overcoming the fear of failure – whether it be personal, career, or financial failure – could be complete without referencing perhaps the best-known quote on fear. In his inaugural address in 1933, President Franklin D. Roosevelt spoke the following immortal words:

So, first of all, let me assert my firm belief that the only thing we have to fear is…fear itself — nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.

If you fear failure, heed the timeless advice of FDR: advance!

Notes and Disclaimer: The links contained within this article are affiliate links. FinanceSuperhero only recommends quality protects which will serve to help you improve your financial position.

All investments feature risks. You should consult a qualified professional before entering into any investments that you may not understand.

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Readers, how have you learned to overcome fear of failure? Have your past failures been the launching board for your greatest successes?

The Power and Importance of Written Financial Goals

People believe that their circumstances dictate their actions. They don’t realize that they can begin to dictate their circumstances by taking a single step in the right direction.

In my recent series on Values and Budgeting (Part One and Part Two), I highlighted a progression toward writing what I have coined V-SMART Goals. As a review, V-SMART Goals are

Values-based, Specific, Measurable, Attainable, Realistic, and Time-Oriented

When I wrote this post, my natural assumption was that a majority of the population implemented SMART Goals or general goal-setting practices in some capacity. A bit of research showed that my assumptions were quite naïve.

The Shocking Statistics About Goals

In the book What They Don’t Teach You at Harvard Business School, author Mark McCormack cites interviews performed with new graduates from the Harvard MBA program in 1979 and 1989, respectively. Full disclosure: The above link is an affiliate link. I have not yet read this book in its entirety, but it is on my reading list. However, the statistics contained in the book are alarming.

In 1979, interviewers determined that:

-84% of adults had no specific goals
-13% of adults had specific goals that were not written down

-3% of adults had specific, written goals

When this cohort was interviewed again in 1989, the results showed were predictable:

-The 13% group had, on average, earned twice as much as the 84% group who had not established goals
-The 3% group who had written goals, on average, earned ten times as much as the other 97%, collectively speaking.

Impact of Goals is Not Limited to Income

While the results above should not surprise us, they left me with unanswered questions.

-In 1989, which group, on average, had the highest net worth?

-In 1989, which group had the highest percentage of written monthly budgets?

-In 1989, did the 3% cohort create and monitor written goals for other areas of their lives?

Without having access to the interviewees, we cannot ascertain the answers to these questions. However, I feel the answers are not likely in doubt.

In my own life, I have seen that greater organization and goal setting in one area can easily spread like wildfire into other life areas.  When I got my act together, financially-speaking, and set written goals, I suddenly became highly aware of other areas in my life in which I needed to establish written goals and hatch plans to achieve them.

For example, as a new graduate who had just entered the workforce, I established a written budget and soon realized that I needed a similar plan to improve my physical fitness. I began running with a friend, signed-up for a half-marathon and later a marathon, and trained according to an established plan. Without realizing it, I had created a SMART Goal for my race training, even though aspects of the goal were unwritten (For shame!).

When I got my act together, financially-speaking, and set written goals, I suddenly became highly aware of other areas in my life in which I needed to establish written goals and hatch plans to achieve them.

The Power of Written Financial Goals

I strongly feel that the power of written financial goals cannot be overstated. One my favorite talk radio hosts, Dave Ramsey, often says, “If you aim at nothing, you will hit it every time.” By definition, having no established goals is aiming at nothing.

In order to adhere to the Superhero Value of Maximization, you must strive to make every single penny work hard for you, and this begins with written goals. As mentioned previously, I prefer to think of my dollars and cents as employees. If I do not direct them, they will not be maximized. Furthermore, this is the one time in which I am a huge advocate for micromanagement! You should be reviewing your finances with a fine-toothed comb on a regular basis.

When you established Values-Based, Measurable, Attainable, Realistic, and Time-Oriented Goals, you are poised for a high probability of success. Additionally, you are only one step removed from being able to share your goals with others, who in turn will be able to hold you accountable. Even the simple act of posting your written goals in a prominent place in your home, such as your refrigerator or bathroom mirror, can simultaneously serve as both a means of keeping your goals at the forefront of your mind and providing accountability.

Why Some People Continue Without Written Goals

Over the years, I have heard people share many reasons for their lack of written goals. Frankly, I am not a fan of any of them. I find it is easy to make excuses, and I hate when I catch myself doing it. Here are a few of the common reasons/excuses I often hear:

They don’t think about goals. Why? They spend too much time on social media, TV, and other major time wasting activities.

They don’t know how to write goals. They must learn the V-SMART Goal writing process.

They have given up. They believe their circumstances dictate their actions. They don’t realize that they can begin to dictate their circumstances by taking a single step in the right direction.

Financial Goals for Everyone

To get started with written financial goals, I believe everyone should pause for a moment and visualize what they would like their financial landscape to look like next week, in 3-6 months, in one year, and in 3-5 years. By beginning with the end in mind, we can create goals that will serve to motivate and inspire. After jotting down some notes, you are equipped to begin writing goals in the categories below.

Note: Brief, vague examples are provided in parentheses; these examples may not fit your circumstances. They should be modified to align with your visions and expanded to meet V-SMART specifications based upon your specific circumstances.

Short-term: (reduce your weekly spending, renegotiate television/internet contracts with service provider)

Intermediate/Mid-range goals: (pay off debt, establish a 3-6 month emergency fund, save for a home down payment)

Long-term – (purchase a rental property with at least a 20% down payment, create multiple streams of passive income, reach a net worth of $1 million, retire early!)


Readers, do you maintain written financial goals? Do they follow the V-SMART recommendations? What barriers are preventing you from establishing written goals? How have written goals boosted your achievement in the past? Share one current financial goal in the comments section below!

Values and Budgeting – Part Two

In my previous post , I proposed that because change is inevitable, we should do anything and everything within our power to take action to create positive changes, thereby pursuing continual growth. In order to effectively pursue this growth, a wise Superhero should create goals. Before we unpack these ideas further in relation to our personal finances, I want to make some important distinctions.


 
Goals Are Empty Without a Foundation of Values

If you think you are motivated by goals and achievement, you are wrong. “But I have achieved a lot in my life,” you say. Congratulations! I want you to achieve all of your goals. I certainly want to achieve all of my own goals. However, the goal itself is not the driving force, as we saw when reflecting upon the rapid rise of a young phenom named Michael Jordan. Values are the driving force for meaningful goals. Show me a significant goal, and I will point out the values that underpin the goal.

Side note: It is possible to achieve a significant goal that is not underpinned by one of your highest values. For example, I could set a goal to complete a triathlon in 2017. Do I think I could complete this goal? Absolutely. Do I have any interest? No. Why? While I value Health and Personal Wellness, the driving value that leads me to exercise is Leisure, believe it or not. Swimming and biking are not nearly as leisurely to me as is running -I know, feel free to groan. However, I think we all can agree I am pretty likely to phone it on the triathlon and end up running a marathon instead.

Discover Your Values

Now that we have seen the importance of our values in relationship to our financial goals, allow me to present a few simple questions which are designed to help you quickly identify your values. All of the following questions are related to the concept of Purpose. Think of Purpose as the reason you wake up in the morning.

  • What or whom do you live for?
  • What activities and experiences provide you with deep fulfillment?
  • How do you best contribute to the world?
  • What kind of legacy do you wish to leave?

Honest and in-depth answers to these questions should point you clearly to  your Purpose and, subsequently, a set of easily identifiable values. Alternatively, values may point to purpose, depending upon how your line of thinking.

Think of Purpose as the reason you wake up in the morning.


 
A Non-Financial Example of Values and Purpose

During a European college band tour in 2005, I met a Pastor in a small Austrian town who clearly understood his life’s purpose, identified his values, and adhered to them by his actions. As he told me his story, I was fascinated by the seemingly-disconnected details of his remarkable life. This was a man who had grown up in the US, yet here he was, complete with a southern drawl and Colonel Sanders beard, leading a flourishing congregation in a picturesque town nestled between snow-capped mountains. Curious, I asked him how he had been called to his position. His response, which puzzled me for years, is much clearer today in light of my understanding of the principles of purpose and connected values:

“Called? I wasn’t called. I had to go.”

This was a man who knew his purpose and acted upon it. I believe he was compelled to do so. He left his comfort zone in order to fulfill his purpose, and at the intersection of purpose, values, and action, he found fulfillment.

What Happens When We Discover Our Values and Purpose?

Like the Pastor above, when we discover our values and purpose, we will naturally shift toward spending the majority of our time and energy on impactful activities. Hint: Highly-successful people do not watch 6 hours of television and compulsively check their Facebook feeds every fifteen minutes. Successful people allow their purpose and values to drive their actions.

Your Financial Values

Armed with knowledge of your personal values, now let us answer the following adapted questions:

What is your primary reason for earning money?

What use of your money do you find most fulfilling?

How do you best contribute to your financial well-being?

What kind of financial legacy do you wish to leave?

I believe the answers to these questions will show you your Financial Values. Here is an example, which utilizes my brief answers to the above questions:

What is your primary reason for earning money?

Living well in the present and the future.

What use of your money do you find most fulfilling?

Giving to others.

How do you best contribute to your financial well-being?

Carefully managing my family’s income to ensure it aligns with your goals and values.

What kind of financial legacy do you wish to leave?

I wish to change my family tree and have an impact that is several generations deep without breeding a sense of entitlement in my children and grandchildren.

Did you notice any themes? My financial values are Moderation, Giving, Stewardship, Order, and Dependability. I craft each monthly budget with these values in mind.

How to Start Values-Based Budgeting

I strongly believe that getting on board with a values-based budgeting approach can be the boost you need to reinvigorate your financial pursuits, expand your horizons, and achieve your dreams. Here are a few examples of how this approach has revolutionized my own budgeting process in the past few months:

  • Mrs. Superhero and I discovered that our spending on restaurants and expensive dinners was far out of alignment with our values. Yes, we value time for relaxation, and spending money on a night out certainly provides that. However, we realized we were not gaining additional relaxation benefits from dining at a local five-star steakhouse versus spending $20 at Red Robin. This freed up a significant percentage of our budget, which we re-dedicated toward toward saving and reducing debt.
  • I am strongly considering reducing or eliminating my cable TV package. Intellectually, I grasp the enormous benefits just waiting to be realized when and if I pull the trigger on this change. For me, cutting the cord will be equivalent to what many people experience when they cut up a credit card they have had for decades. It will be painful, but I am starting to realize I value my financial independence far more than the ability to access hundreds of channels. As a sports fanatic, I will, however, need to ensure that I have alternate systems in place prior to cutting the cord.
  • Mrs. Superhero works extremely hard in her day job as a music teacher and as a self-made entrepreneur with her music lesson studio. After discussing her values, she and I have decided to reinvest more of her income in needed items for the studio in the near future, such as tablets, method books, and an accounting service.

To get started, ask yourself the following questions:

  • How can my values influence my goals and my budget?

Make a list of your values and keep them near by as you assemble your budget.

  • How do my recent actions misalign with my values?

Track your spending actions for one week (or better, one month) and connect them with your associated values. If they do not align, you have discovered an opportunity to improve your budget.

  • How do my recent actions align with my values?

Continue to implement these steps to stay on track.

  • What false values are indicated by the patterns of my actions?

For example, am I spending too much money on restaurants, clothing, or miscellaneous categories, all at the expense of other goals?

 

Build on SMART Goals to Achieve Success

When you have built a successful budget that have been able to adhere to for several months, you are on track to achieve your goals. If you discover that you are not sticking to your budget, I have one final recommendation.

Most people today are familiar with the concept of SMART Goals. Smart goals are intended to be Specific, Measurable, Attainable, Realistic, and Time-Oriented. I would like to propose a simple addition to this concept.

You guessed it: Values.


 
Introducing the V-SMART Goal: Values-based, Specific, Measurable, Attainable, Realistic, and Time-Oriented

I believe that the creation of V-SMART Goals can be the jolt that you may need to finally establish goals and retain the momentum and desire to fully accomplish them. Allow me to provide a simple example:

SMART Goal: I will pay off $5,000 of debt on my MasterCard prior to July 1, 2016, by limiting my discretionary spending in the areas of Clothing and Entertainment.

V-SMART Goal: In order to align with my values of Stewardship and Financial Independence, I will pay off $5,000 of debt on my MasterCard prior to July 1, 2016, by limiting my discretionary spending in the areas of Clothing and Entertainment.

Just by making a simple distinction like you read above and keeping values at the forefront of your mind, I am confident you will increase your success. The consideration of values has added a new depth and breadth to financial planning and budgeting for me and Mrs. Superhero. It is supporting faster achievement of our goals.

To bring this post to its conclusion, I would like to leave you with a profound reminder from Henry David Thoreau:

What you get by achieving your goals is not as important as what you become by achieving your goals.

Values and Budgeting – Part One

Author John Maxwell is famous for countless best-selling books. He is considered America’s Expert On Leadership. I feel that title sells him short, as Maxwell also knows a thing or two about finances. While I have many favorite Maxwell-isms memorized, the following quote may be my favorite:

Change is inevitable. Growth is optional.

Why? I appreciate it for its simplicity. I appreciate it for its truth. And I appreciate its implications upon my finances.

To me, it is a call to action. I cannot halt change, whether it be in my personal life, career, or finances, no matter how much I may wish I could. But I can choose my response to change. I can choose to pursue growth.

But how?

A Growth Mindset Starts with Values

Many people choose to pursue growth by establishing goals and then striving to achieve them.  They develop plans, identify benchmarks to track progress, and dive in head first. While this is admirable and certainly better than wandering through life aimlessly, I believe this approach narrowly misses the mark. It reduces growth into a destination at which one may arrive rather than as a continual process.

In order to properly frame the pursuit of growth, I believe one must view it through the lens of values.

Values – Actionable But Not Achievable

Why are values the key to the proper pursuit of growth? Values articulate what is most important to a person. When a person has identified her values, she has realized the foundational reasons for the pursuit of growth. These are the reasons a person might provide when asked why they are so vigorously pursuing growth in a particular area. Goals alone do not serve to provide these foundational reasons.

For example, suppose Susan has identified a goal: to make the varsity basketball team. Again, the reasons “why?” could be a number of reasons. Perhaps Susan is motivated by competition. Perhaps friendships are a driving force. Or maybe she is seeking to follow in the footsteps of her older sister. At any rate, an end date is embedded within this goal. At the end of tryouts, Susan will have either achieved her goal or failed. Further growth will be halted as her motivation dissipates.

Now, suppose instead Susan has identified a set of values to support her pursuit of the aforementioned goal. Susan understands that Contribution, Fitness, and Achievement are the key values supporting the goal.  With these values underpinning her goal of making the basketball team, Susan is on the pathway toward continual growth. Her goal is not the sole motivating force, as the values drive and underpin the goal.

If you’re not buying my philosophy or nodding your head in agreement at this point, pause with me and consider the case of Michael Jordan. Maybe you’ve heard of him. Now, contrary to popular legend, Jordan was not cut from his high school varsity basketball team as a sophomore; he simply was placed on the jayvee roster. However, that fact is immaterial to our discussion. Had Jordan been solely motivated by a goal -to make the varsity basketball team- rather than values -such as self-worth, achievement, and challenge- he may have decided to turn away from the face of failure and focus on baseball. As you know, Jordan was driven to make the varsity team the following year. Of course, the rest is history. A commitment to his personal values made Michael Jordan the most-recognizable and arguably most-successful athlete of his time.

While goals are achievable, values are only actionable (but not achievable) in nature. Let me provide an additional example. I may set a goal to lose five pounds. When I achieve the goal, I have arrived. By arriving, momentum and motivation are halted. (This is why many people experience the “yo-yo” effect when pursuing weight loss.) When I identify Health as a value, I cannot “arrive.” I must continually seek to live out my desires to be healthy. Values sustain ongoing growth, while goals unsupported by values do not. This ongoing momentum – the drive to keep bettering oneself- is near to the heart of growth.

Aligning Values and Finances

If we accept the notion that change is inevitable, we would be wise to strive to make the best of it by choosing to pursue growth in everything we do, including our personal finances. Yes, to most effectively pursue growth, we should establish goals, but only after careful consideration is given to values. In my next post, we will outline how to identify values and implement a value-driven plan which will lead to the achievement of your financial goals.

In short, our process will become:

Identify values. Take action. Create positive change.


 

Readers, what are your goals? What are your values? Are they aligned? How do you strive to keep your goals fresh and at the forefront of your personal financial pursuits? Share your thoughts and questions in the comments section below.