Financial Life Focus

How to clearly navigate your financial life

Looking Back

Does your past support or hurt your financial success?

There seems to be a crush of nostalgia pieces hitting Facebook recently.  Pictures of S&H Greenstamps, Star Trek, The Beatles, hair dryers that my mother used, and school children standing and doing the Pledge of Allegiance; all meant to engender a feeling of connection to the past.  I can still remember the taste of the glue on those stupid stamps-my mother and I pasting them in those little books so she could redeem them for something stupid, like a beach chair or an electric can opener.  I am not one to dwell in the past and don’t really get those who seem to “live” there.  But I do understand the tether that connects us to simpler times; a time before bills, responsibility and the feeling that your own mortality is real.

 That chain that connects us to our past also contains our money memories; those messages that helped shape our thoughts and feelings regarding money.  Some grow up hearing our parents saying things like, “Save for a rainy day” or “A penny saved is a penny earned” or “Money doesn’t grow on trees.”  These messages are positive as they talk about the need to be conscious about saving and spending.  I still walk around the house, like my father, shutting off lights, muttering something about working for the electric company.  Others might have watched as their parents spend money on showy items (cars, homes) while they fought over money and fended off bill collectors.  These actions could leave a very confused message: act like you have money, even if you don’t.

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 If you are not sure about your habits, think about the following:

  1. Do you maintain a reasonable emergency fund of cash?
  2. Do you carry credit card balances routinely?
  3. Are you able to defer gratification by waiting until you have the funds available to buy something?
  4. Are you aware of your spending on discretionary items?
  5. Do you have a risk management plan that covers your needs?
  6. Do you participate in a company retirement plan to the maximum amount possible?
  7. Do you get calls or letters from collection companies?

 Our money messages can support us with great habits or destroy us with negative ones.  If you have money problems that are results of poor habits, you can probably trace them back to your money history.  Most people do not realize the root cause of their money troubles.  It is so ingrained into their psyche that it becomes a part of who they are. But, like someone who battles with weight issues, you must change your habits in order to make positive habits.

Changing habits can be very difficult, especially if you cannot see a good enough reason to do so.  If you make the decision to change a habit consider the following:

  1. What is the benefit of making the change?
  2. Why is it necessary and important to make this change?
  3. What small step can you make to assist you in making the change less painful?
  4. How quickly can I see results?

Try this exercise:

If you have accumulated credit card balances and wish to change your spending habits; close your eyes and imagine how you will feel when you open your statements and see zero balances.  Write down your reaction.

Now that you’ve imagined success, let’s make it meaningful; write why you MUST have no credit card debt and give it a date.  Make your statement meaningful and real.  For example: Being in debt makes me unhappy, removes many options for financial security and hurts myself and my family.  I WILL be debt-free in 16 months.

OK, good work. Now, let’s add the “how” into the mix.  For example, you might write that you will not carry credit cards in your wallet, you will review all your discretionary expenses and look for items to change or eliminate and you will make payments to your credit cards at each pay period.

You’ve envisioned the result you desire, you’ve created the why, how and when. Now you need to monitor your results by watching your balances decrease each month. 

Creating good habits takes time, patience and most of all an unwavering dedication to a preferred outcome.  There simply isn’t an alternative in your mind and heart. These new habits becomes who you are as poor habits are replaced by supportive ones.

The past can bathe us in the warm light of nice and loving memories, but can also be the source of pain in the present.  It’s your job to decide and if necessary-act.  

When I showed my kids the picture of S&H Greenstamps and told them these stamps were earned from grocery store purchases or buying gasoline and how we spent hours licking and sticking for ridiculous rewards. They were astounded that anyone would go through all that mess instead of just redeeming American Express points. 

 

Michael F. Kay, a Certified Financial Planner, practitioner and a CPA, is president of the firm Financial Life Focus.

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