Back to School, Back to Reality

Back to School, Back to Reality

Most, if not all, Southern California schools are back in session. The days of school starting after the Labor Day weekend have long passed us by. The reality is that Labor Day is now a break early in the school year, representing one more chance at a weekend trip down the coast or across the desert.

Another reality hits around this time of year. The final tally of those weekend trips, summer vacations, parties, movies and concerts can be overwhelming. What you thought you were going to spend and what you actually did spend represents two very different numbers.

September is a month that brings opportunity to get back on track. What January is for fitness clubs, September is for financial game planning. People need a road map. Not an app for their phone, but a map to guide them through the rest of the year, the next five years and beyond.

If you do have a road map, you must ask yourself, “where is this road taking me?”.

Your Tax Plan is Part of Your Financial Plan

What is it about tax time, more than any other season in the year, that we start taking a hard look at our finances? It doesn’t come in the summer when the kids are all out of school. And it sure doesn’t come at Christmas.

With spring comes daylight savings time and longer days. Parks are filled with kids and more and more families begin to plan trips and summer vacations. But spring can also bring feelings of anxiety, worry, depression and fear.

“I didn’t think we would owe this much. How are we going to afford this tax bill?”

“We make too much money to be this broke. Where is all our money going?”

When reality hits, it takes a toll. I can’t recall meeting a single person who was happy to pay their taxes. But I have met with singles and married couples who agreed to put a plan together and executed that plan. For them to owe taxes, it turned a crisis into an inconvenience.  

A well laid-out plan is successful only when everyone is on board. We will not have success until we commit ourselves. Two people pulling in different directions is financial tug-of-war. There’s always a loser.

When you submit yourself to a plan, blessings will follow. The success might not be immediately apparent, but seeds are being planted to bear fruit in future seasons.

 I took my own family into debt many years ago. A lot of it. I wasn’t just driving the family car off the cliff, it was a semi-truck full of bank notes and maxed out credit cards. I remember when we decided the path we were on wasn’t going to take us to the place we wanted to go. We had to turn back and it took some time.

It was hard. But it was worth it.

What we needed was discipline. Accountability was a big one, too. How could we stay accountable and disciplined to a plan that didn’t exist?

Once we worked out that plan, and stuck with it, those “spring” feelings started to fade away.

How do you start your turnaround?

You need to ask yourself one simple question.

“Am I ready to change my life?”

And if your answer is yes, then your journey can begin today.

Getting Margin Into Our Lives

Look around your neighborhood. Look around your place of work. Take a look when you’re on the road.

What do you see?

Everything seems fine. Nice yards, new outfits, fancy cars. But take a closer look and dig a little deeper. How many neighbors are barely holding on? How many of the vehicles out there have a huge monthly payment dragging right behind them?

Too many people are living paycheck-to-paycheck with no margin in their lives. There have been recent reports that older Americans are dealing with increased debt loads and bankruptcy rates for those 65 and older are the highest on record.

What happens when we find ourselves heading down this path? How can we bring margin back into our lives?

Before any journey begins, we must know where we are going and what we are leaving behind. If we apply this to the personal financial landscape, the departure place would be our current financial situation. Years ago, I needed to come to a place in my life where enough was enough and it was time for a change. But until I got to that point, I didn’t think anything was wrong. My debt level was just fine and it would be magically paid in full someday. Just not today. Or tomorrow. Somehow.

I needed to place my faith and trust in a plan. Something that went beyond treading water. There is nothing worse than thinking I’m doing something but yet not moving, not gaining any ground. Once I decided a change had to be made, I needed to focus on one thing. That was my original problem. I was doing a little of a lot of things, all at the same time. That didn’t work out so well. Saving for a car, paying for daily expenses with credit cards yet trying to pay down the balance at the same time, funding retirement. All these things, but without any positive movement.

Once I decided I was done with using debt, things started to change. Debt robs us of so many things. Our peace, our trust, and even our health. If debt becomes our enemy, then our personal income becomes our ally.

Our first step is to focus on a little margin with that income. What difference would it make to have a rainy day fund in that anticipation that something will happen? It would be huge. Emergencies do happen. Flat tires, unexpected doctor visits, broken refrigerators are just a few examples of a list that could go on and on and on. Any one of these has the potential to be a complete budget-buster. One and done.

That margin, that protection against Murphy’s Law, is the rainy day fund. Consider it self-insurance. How quickly can we save $1,000? For emergencies only. Not for a new TV, a new BBQ, or a new kitchen table. Full-out, full-blown emergencies. That’s what this rainy day fund is for.

This can be the start of the journey. It was for me. It can be for you as well.

Stop holding onto things that are holding you back

Stop holding onto things that are holding you back.

It seems so simple. Why would we keep anything in our lives that leads to a negative outcome? It could be anything that we rationalize over and over, yet we know it’s something we can live without. We all have things in our lives that fall into this category. It could be impulse shopping, a super-sized car loan, or placing everything, and I mean everything, on credit cards. Whatever it may be, we keep it in our lives.

I still get credit card offers in the mail. I do admit to opening the envelope, but only to shred the personal information. Yet from time to time, I take a glance at the APR rates the banks are offering. Zero percent for 12 months. After that, 15% if you have stellar credit, 25% if you’ve got ok credit, and 30% if you’ve got some not-so-great credit history. I only wish the banks would offer these same rates on their savings and money market accounts. Laughable, right? Never gonna happen.

In May, the Federal Reserve released a report that says four in 10 Americans can’t cover a $400 emergency expense. Not without borrowing the cash or selling everything in sight. In addition, the report claims 60% of adults aren’t OK with where their retirement savings are at. And 25% of non-retired adults have no retirement savings at all. Those are grim statistics. Don’t forget that the June rise in interest rates will affect variable rates for mortgages, student loans and credit cards. That means monthly expenses go up, and it will all go to the banks or credit card companies.

Now summer is here. It seems that when it comes to our personal finances, we mentally check out. Gonzo. See ya after Labor Day. Back from vacation and when the kids are back in school. Then we’ll plug back in. But something follows in September the same way January follows December. Credit card statements pour in and the Endless Summer has coming to a crashing halt. 

It happened to me more times than I care to remember. But this summer doesn’t have to end in a summer of debt. What if we decide to let go of the things that are holding us back this summer? What if we decide that enough is enough, and the summer of 2018 was when a line was drawn in the sand? 

What I’ve learned over the years is that everybody has a story. What’s yours? Letting go of things takes courage. Don’t hold back and don’t give up.