A New Old Trend

There is a new trend of an old problem I am seeing in my office every week, parents with adult children who are in tough financial situations. We are seeing more twenty something’s being brought into our office at the request or insistence of their parents. Many times these young adults have gotten themselves in a ton of debt with student loans, car loans, credit card loans and debt associated with moving out on their own.  As the parent of two twenty somethings, I feel their pain. We have watched one of our sons make tough financial choices that have had dire economic consequences. I am sure I would have made some of the same mistakes back in the day if credit was as easily available to me then as it is today to them.

As parents, we want to help them or even fix their problems so they don’t have to feel so bad or suffer through such pain. Again, I know how you feel and have bailed out our son several times only to see him continue to make poor decisions and get back into financial troubles. I also have seen many parents bring their adult kids into our office and pay for financial coaching only to see the child go back to their old ways.

As mean and evil as this must sound, as parents we must encourage and equip our kids to make lifestyle changes but not take on their burdens and enable them. They have to want to change because it is good for them and they see the benefit not because we want it for them.  In the short term it is really harder for us to step back and let them feel the full weight of their decisions and the actions that follow them than to step in and fix the problem by writing a check or taking over car payments for them. In the long run, they learn more and change both their attitude and behavior toward debt. There is also a pride a confidence issue that they pick up as they dig their way out of the financial hole they put themselves into. If we step in and circumvent their consequences, they never learn and move on to make even bigger mistakes. We want to through them a life preserver so they can save themselves, not jump in and rescue them and possibly be involved in a double drowning.

Parents love your adult children well. Teach them and inspire them to do thing correctly concerning finances but don’t fix finances for them. It will only delay and magnify the pain they must go through to grow into the adult you raised them to be.    

Normal No More

Recently my wife and I have been asked to share that we are paid off $56,000 and are debt free except for the house in front of the entire congregation at our church. At first we felt uncomfortable in doing so. I mean from the people I see here at Lighthouse our story is not nearly as dramatic. At Lighthouse we have couples who have gone into debt from events like illness, loss of job, death of a family member, addictions, or even those that have been a victim of crime. They have clawed and battled their way back in a much more inspirational way. The truth is most people have not gone into debt in such a way. I know that was not how it happened to us.

A few days later it started to make sense we were normal. If you don’t believe that we were normal these stats can help like 55% of the US population lives paycheck to paycheck, the average student loan debt is 14K or the average car payment today is almost $400 a month.  It was normal to have debt and normal to live paycheck to paycheck. What makes it uncomfortable is that we now have to stand up and tell people that we are weird!

So we are going to do this and we are now excited about it. Not that we have an exciting story to share, we kind of just let the debt happen to us because that’s what we thought was normal. We are excited to reach out to all of those other normal couples and share with them how good it feels to be weird. 

Taking Charge of your own Personal Finances

Today I came across a great quote by the author Jack Canfield and it made me think as I saw all the people protesting on Wall Street with promises of taking it to other cities. The quote is as follows: 

“There is only one person responsible for the quality of the life you live. That person is you. If you want to be successful, you have to take 100 percent responsibility for everything that you experience in your life. This includes the level of your achievement, the results you produce, the quality of your relationships, the state of your health and physical fitness, you income, your debts, your feelings-----Everything!... You have to give up all your excuses.”

I agree with almost everything Jack is saying here with the exception that bad things can and do happen to us that are outside of our control. I think he makes a great point. Why don’t each of us including the people protesting on Wall Street, stop and take responsibility for ourselves. If my economy stinks, I need to work on my economy.

Where do you start to fix your personal economy? Why not start at your own home. Just think of it, if each one of us would take some time, effort and training to work on our own economy and fix our little world at home, what would it look like?

I would start with where I was, if it were me (and it was me back in 1998-1999 when I hit bottom). 

I would take a snapshot of my financial life. First I would write down how much money I would be bringing home. Next, I would write down a budget of my monthly expenses including my rent, insurance, utilities, food, clothing, eating out, medical, car repair and more. I would spend every dollar on paper on purpose before the month started. I would then subtract my total from my estimated budget from my total income coming in the door. This would then give me a number I could use for paying off debt, savings, emergency funding or funding for short and long-term priorities.

Lets say, my cost of living exceeded my income, what then? Time to adjust. I could choose to increase my income (work extra hours or a part time job), tighten up my budget, sell something of value or contact each of my creditors to ask for better rates and lower payments. The choice is mine. There is no bail out program for me or you out there. Wall Street is not my problem or my solution. I need to spend less than I make, that is my problem.  This is a touch choice but it is an option I have. I may not have chosen to loose my job, but I can chose to work 40 hours a week looking for a new one or starting a side business or working evening to help pay the bills.

Personally we did this six years ago. We were over $265,000 in debt including a house, car, camper and consumer debt (credit cards). Over the next 5 years we worked extra, tightened up the budget, sold lots of stuff and paid off all our debt. This included our home

This was such a great feeling but it was only the first step. The next step is what I call the world changer. Once you get your personal economy going in the right direction, and I am not talking about starting after you become totally debt free, start sharing your journey and teaching others.  We have spent the last five years leading small groups through a program called Financial Peace University at our local Church.  If each person would just help three people a year who would help three people a year, who would help three people a year. You know where this ends don’t you?

Over the next decade we could help educate, equip and inspire one street, one neighborhood,  and one city at a time. No longer would we be paying all this interest rates to the big banks owned by wall street, we would be saving money and paying cash and helping local charities.

So if you want to make a statement about the economy to Wall Street, start at home and take care of your own personal economy and then go help a neighbor, relative or friend do the same. It works every time, spend less than you make and you have money to save, give and buy what you want. Lets go punish those big guys on Wall Street by taking responsibility for your own personal finances. 

Back to the Basics

Everyday get get several calls from people asking all kinds of financial advise. Dave should we borrow against our 401K to pay off credit cards, Dave should we refinance our home and use the extra to pay off student  loans, Dave what investments should I start to buy now that I have paid off my student loan after 13 years. This was just today. To each person who ever calls, I ask them "tell me about your monthly budget"? To which without an exception each says, I don't have one but I know what my bills are and I make more that I spend and you only help people who have financial crisis. This is true. I get the to serve people who are behind in their bills usually due to something that happened to them such as a medical situation, a change in job status or some other crisis. I also get to work with the other 55% of America who live paycheck to paycheck who are tired of working and having nothing to show for it after years but debt and stuff. I also get the pleasure to work with people who are doing Ok to well financially but want to do better.

The bottom line is we see it all. Personal finance is pretty simple, save 10%, give away 10% and live on 80%. The simplest thing everyone must do or nothing else matters is to develop a good working monthly budget. Wealth is not about income, there are many bankrupt people who make more than $100,000 a year. Wealth is about paying attention to your money and telling it what to do instead of wondering what happened to it. Each of the three people I talked with today were in debt and wanted help but did not  and did not have a budget. No solid financial plan can bring you success and peace without a written budget. Please visit our website at www.lighthouse-coaching.com to download a free budget worksheet. If you need help implementing the budget stop in for a free 45 minute consultation.