Tuesday, October 6, 2015

Financial Freedom is an Envelope Away

( While seemingly off topic, this is a loose transcription of a Finance Course I recently taught at the local Acupuncture School.  Enjoy!)


When I first began working in the finance industry prior to becoming an acupuncturist, I worked with a financial planner whose approach to money management was rooted in the principles of Debtors Anonymous.  Its precepts espouse mindfulness, living on a disciplined budget, incurring no further debt.  Pretty typical for most folks who follow Dave Ramsey or Suzy Ormand's philosophy.  What perhaps separates the DA program from others is the insistence that pleasure and savings must be included in your spending plan, and that as you pay down debt, you don't just roll over the additional cash flow to paying down your next vendor, you in fact spread the wealth to your other categories like vacation, hobbies, savings, educational goals, with an eye to never incurring more debt.  In short, it focuses much more on creating a LIFE as opposed to eliminating debt.  

I have fundamental issues with many of the financial pundits because their focus is on eliminating debt as fast as possible, with not enough attention being given to creating a meaningful budget that can be sustained LONG TERM.  It is almost as if the fact that we have incurred the debt means that we have to wear the proverbial hair shirt and live a Spartan existence devoid of pleasure and beauty until we are debt free and earn the right to have joy in our lives again.  

All work and no play makes Jack a dull boy.
(Remember what happened to Jack Nicholson in The Shining?  Exactly.)



But all work and debt repayment ALSO makes Jack a whim based crazed shopper, leading to impulse purchases and buyer's remorse.  An emergency fund of only $1000 (another Ormand/Ramsey rule) even for a single person is ridiculously small.  (4 tires, a canine UTI, and an unexpected new windshield last year took care of mine last year).  

As a small business owner (firmly steeped in the principles of DA) I didn't know that to begin a business requires capital and that in fact 5 years into my practice I would have over $30K in business start up debt.  Stuff happens, clinics fail or move, cash flow is dicey the first 5-10 years, economic down turns happen.  In fact, I was my own worst enemy in terms of self-flagellation with regard to carrying business debt.  But being steeped in mindfulness in spending, once cash flow was established, those balances were put on automatic payments and basically forgotten about.  I turned my attention to cash flow and creating wealth and in order to do that, I had to include a basic principle that is overlooked by most of financial planners: PAY YOURSELF FIRST.

You are more important than your credit card (or other kinds) of debt.  You, your family, your life.  And in my experience, an eye to wealth creating brings in more wealth.  I had to take my mental focus OFF the debt repayment, and I keep those payments low enough to PAY MYSELF FIRST so that by the time I paid off all my start up debt, I also had a decent amount in savings (which then got used during the downturn in 2009 and 2010, so grateful I had it). 

I didn't start this practice until I had been in practice at least 6 years, and I wish I had done it sooner.  Things are often sporadic in terms of cash flow in a new business, and I tended to squirrel money away in fits and starts rather than in a systematic payment. Things really changed when I started paying myself on the first with an automatic draw into my savings account.  And while it may sound crazy, somehow there was always money remaining at the end of the month even though I took out a chunk for myself and the IRS. This was my first step toward wealth accumulation.

Somewhere in this process, I had the great good fortune to read a book by 
Dr. John Di Martini, noted author and new-age philosopher of sorts, which lifted the emotional charge I had to my business debt years ago and changed everything.  Instead of castigating myself for the CC debt I had engendered starting my business, I needed to reframe how I saw the credit card companies.   These companies (namely Citibank, Chase and MasterCard) were in fact my investors:  they believed in me enough to supply me with the capital I needed to grow my business at a time where no one else would. 

Now you can be cynical about these companies and complain about interest payments, etc. but the fact of the matter is that new business owners do not qualify for business financing through the SBA unless they have been successfully turning a profit for two years and have at least 50K in capitol reserves.  Sorry, but if I had that kind of operating capitol back in the early days, I WOULD NOT NEED THE CREDIT CARDS.

The fact is that Citibank and Chase loaned me that money, and this simple change in perspective allowed me to stop blaming myself and feeling guilt.  I shifted my focus to gratitude that I had been able to have that capitol when I needed it, and gratitude is an incredibly powerful tool in terms of attracting more abundance.   I took advantage of teaser rates and balance transfers as I paid down the balances, but I took my focus OFF the interest I was paying and looked more to creating a sustaining and meaningful budget which supported my life.  Even now that all that is long since paid off, my budget hasn't really changed much in the last 5 years, since my basic needs are being met (I added opera lessons).  Now my attention has turned to long term savings and repayment of student loans.  

I have counseled dozens of students, friends, and colleagues in what I call the "Come-to-Jesus-talk-about-money-and-finance,"  and professionally lecture on these principles at the graduate level.  What I have discovered is that almost no one is taught sound principles about how to handle money in a powerful and confident manner.  The biggest mistakes I see in working with individuals and families is under-budgeting in areas such as food, household or lack of emergency fund, and many times trying to pay down debt too fast.

When starting a mindfulness approach to budgeting, I have found the following tools helpful:
  1. BUDGET BUDGET BUDGET:   Create a savings and spending plan for yourself which includes categories for every aspect of your life.  Jerry Mundis' book "How to Get out of Debt, Stay out of Debt and Live Prosperously" is one of the best books I have ever read on the principles of DA and creating a spending plan, and you can buy a copy used for $1 at Amazon here. He demonstrates how to create a working savings and spending plan which includes both paying yourself first and disciplined debt repayment.  I include categories like vacation savings, gift savings, beauty products, clothing, emergency, pet, entertainment.
  2. Keep a spending journal.  Yes, until you have this down, write down every single purchase for one month. It can be illuminating.  One of my former students was lucky enough that her parents covered her tuition and rent while she was in school. She had basically no financial aide.  She took out some student loan money near the end of school to help cushion the cost of board exams and licensing, and actually ran out of money before the end of term.  I had her go through three prior months of bank statements and list every single purchase.  She came back shocked that she had spent over $6000 going out and drinking beer, a new surf board, impulse road trips, etc.  A spending journal is essential if you don't know where your money has gone.
  3. CUT UP or freeze your cards in a block of ice. (really) I rarely make impulse purchases with cash.
  4. If you don't have 2-3 months of expenses in savings, PAY YOURSELF FIRST until you do.   Keep your debt payments smaller, and create a cushion.  Once that is established, THEN you can focus on paying down the remainder of the debt.  Sitting in the discomfort of carrying debt is also a crucible of sorts, a means of transformation in itself.  "But what about the interest," you ask.  Fugedaboutit!  At least until you have some savings.  Paying yourself first is more important and sets the stage to avoid future debt. (An exception is if you are over your limit and incurring overance charges.)
  5. LIVE on CASH:  If you have trouble with impulse purchases or going over your budget, consider moving to the envelope method in terms of your personal budget.  On the 1st (or the 15th or whatever your pay period is), consider putting cash in envelopes for each of your categories.  I have used this meethod for years and rarely have issues with it.  If there is a month where I splurged on a pedicure, or dinner out, then it may been to come out of another envelope.  If I don't use the money, I carry it over to the next month.   Folks who have big families with kids and pets  also know that unexpected expenses come up with greater frequency so need to allow for that in their budgets.  
  6. When it all become too much, and paying down that bill looks never ending, like my student loans do at times, I have to remind myself to stay in the moment.  The truth is I have enough to last me until I go to bed tonight;  I have a warm bed to sleep in and a roof over my head, running water.  It's a good day, better than for many people in the world.  I am one of the lucky ones.  
I had to be careful not to let the budget become a tool for rigidity or deprivation.  This is a plan, not a sacred tomb found in a burning bush. I have made big financial mistakes (especially in business, yikes!), and if I learn from them then so much the better.  My financial mistakes ironically are sources of unbridled mirth when my former students do the same thing, and I like to think that the fact that I can laugh about it now (when I wept about this 10 years ago) is healing of a different sort.  We all make these mistakes.  We are ALLOWED TO.  
    Perhaps the biggest difference that I learned in the DA program (as opposed to other types of financial approaches) was that miracles happen when we become clear in our approach to money,  regardless of our spiritual path.  But the miracles I experienced were not rooted in the airy-fairy  "I created my vision board and now it will all manifest effortlessly."  No, these miracles were borne out of hard work, sacrifice, and not a little nail biting.   They say courage is just fear that has said its prayers, well I say AMEN brothers and sisters.  Unexpected windfalls and cash flow happened sometimes in the nick of time, and sometimes things got paid off even sooner than I had budgeted.

    For me, moving to a minimalist lifestyle includes an exploration of what is meaningful to me and creating a life that supports that.  It seems that financial clarity was part of that journey even before I started giving stuff away, so I am curious to see how this may change in the future as I strive to simplify further. 

    Tuesday, July 21, 2015

    And then there were seven.....

    Socks that is.




    I think I understand why a move toward minimalism seems to take a year or so, or at least many months.  I think it is because our senses get refined: the more stuff we unload, the more clearly we see what is around us.  It becomes easier to question "Why am I hanging on to that and what purpose does it serve?"

    My most recent epiphany was in my underwear drawer.  Now in terms of full disclosure, I have had a completely unusable underwear drawer for over a decade (although to put things in perspective, one of my patients asked recently  "You only have one drawer for your delicates?" so maybe not so bad.)

    Ok how many drawers should I have?  

    With a less than 500 sq. foot apartment, drawer space is a premium, but again, since it is an unusable drawer filled to the brim with I don't know what, isn’t it wasted space?  I rarely find socks that match (even though I just washed and matched them – and yes, in the winter I often wear unmatched socks in my boots L).  The good (and boring) undies (you know your favorites) are on top of the ones you never wear (seductive but uncomfortable).

    So as I de-clutter and “de-own” as Josh Becker likes to call it, a come-to-Jesus moment of truth took place with my underwear, a divinely inspired moment of clarity.   I turned it over on the bed like my grandmother used to do when we were kids if it wasn’t tidy enough,  while my dog Piglet looked on with interest, hoping for her chance to steal the socks.

    I took out 7 pairs of socks, one for every day in winter.  I saved a few of pairs of gym/tennis socks since sometimes you do wear more than a pair in a day. One pair of panty hose in black and white.  One slip.  One cami.  Bras in the front.
    (OMG I can FIND them, and who knew I had 5?).

    Out went all the unmatched socks, the silly Christmas socks which I never wear (did I really need 6 pair with various kinds of snowmen?).  Ditto the uncomfortable underwear that promised so much but never actually delivered (you hear me Victoria’s secret?), all the tights and panty hose left over for a corporate life I no longer have. I don’t like to waste things so many of these items stayed regardless of the fact that I live in San Diego where open toed shoes are de rigour 9 months out of the year.  (But I might need them someday…)

    Out went the extra jammies, I kept the newest.  The extra camis, the extra tee shirts and mis-matched workout clothes.  Everything paired down to 2.  My drawers are basically now only half full.

    There is actually a bottom of the drawer visible.

    Now if I don’t do laundry weekly there will be no socks or undies to wear, and putting the clothes away is a pleasure simply because they all fit without me stuffing them in.

    I finally have an underwear drawer that would make Grandma proud.



    Sunday, July 19, 2015

    Buyers Remorse

    Buyers remorse seems to be a common affliction for aspiring minimalists.  As we start to go through the towering heaps, regret for the wasted money is inevitable.  I am no exception.   I have been moving in this direction for a long time, and being mindful about purchases is a long-time habit, so I have been paring down my wardrobe in particular for the last few years.  Insightful advice about purchases, such as "If it's a maybe, it's a no"  have already prevented me from some unnecessary items over the last few years. Likewise, recognizing that if I need something, and buy something on sale which fills the need, but in fact wasn't what I wanted, I tend not to ... (wear it, use it, insert verb here)

    Surprisingly this lesson was inspired by a gift from my sister a few years ago.  In one of her many travels to southern California for work, she brought me a very generous gift.  Someone had gifted her a Coach bag (actually two of them) and she did not like the color of one of them so gave it to me.  I thought she was crazy, it was gorgeous, a perfect color, perfect size.  She was also honest enough to acknowledge that she wasn't going to use it since she had one she liked better.

    Ok can I just say.....  I. Love. This. Bag.  Perfect travel size, goes with all my stuff (or what's left of it), fits all essentials in the plane, really classy for going out.

    And I would never have bought one for myself.  (It's a  COACH, and I am an acupuncturist. Not in the budget). 
    ( I buy bags on clearance from Ross or JC Penney's).

    As I began clearing out my closets over the last few months, again With an eye to rigorous honesty about my stuff, I realized that in the last couple of years since receiving said bag, that I only use a few of them.  My coach bag of course, a few others for every day, one basic black for dress-up.  That was it.  All of the others, nada.  Zip. Zilch.  Zero.  Little to no use.

    (aarrgghh, Melting.  Regret.
    Here starts the buyers remorse, since 10 cheap bags more than makes up for that nice bag).

    Minimalism is not about cheap, not about punishment or going without.  It IS about looking at what adds value to our life and pleasure, and personal freedom.  And exploring how much of my time am I willing to trade for that freedom.

    As a small business owner, I have already been doing that for years, specifically the idea of time for money.   Since I am in solo practice with limited staff, there is a physical limit to the number of clients I can see per day, per hour.  How many patients per hour does it take to pay for that purchase, and is it worth it?  More often than not, my time was more valuable to me than going to that store on a crowded weekend to save $15.  So I have been headed here for a while.  However, we get into habits, or go unconscious in certain areas of our life, or get seduced by pithy advertising campaigns that promise so much and rarely deliver.  I am no exception.  That next great thing in fact did not change my life.

    So what did I do with this realization?   (squirm)  

    I gave most of the bags to friends, and donated the rest.  Most of these were brand new, rarely if ever used.  The look on the face of the folks at Goodwill was utter shock.  Who gives away that kind of nice stuff?

    My shame has been mitigated by their pleasure, knowing someone will use them with joy.  
    And hopefully I won't jump down that rabbit hole again.  

    Buy one thing of value, use it with gratitude until it wears out.  Replace with one. 
    Lather.  Rinse.  Repeat.

    Thank you "Auntie" Kiki for a timeless lesson.  

    Stuff and Nonsense



    Apropos of nothing, first let me say that I LOVE this ad.  The Kona Brewing ad campaign  isn’t just clever, (they get people like me to giggle even though I don’t drink beer)  it is downright brilliant and a call to mindfulness.  Why not make 1 hour sad hour and the rest 23 happy?  Genius.

    For all its cuteness, this ad begs attention to some more fundamental questions:

    What is it all for?
    How much do I really need?
    What is the meaning of life?

    Maybe not in so many terms, but it manages to at least get you thinking.  How much of our freedom are we sacrificing to our stuff, our pursuit of stuff (physical stuff, emotional stuff, existential stuff like love, security, health) and our organizing of our stuff?  And what is the price for that freedom? 

    My students and some of my patients, know I am exploring the concepts of minimalism as part of an ongoing inner dialog about the meaning of life, my purpose here, where can I find balance (or is there balance?)  This is due, in part, to treating some incredibly sick people in the clinic, and a peri-menopausal hormone-induced existential crises.

    Recently inspired by swapping out some old furniture and the opportunity to repaint and de-clutter, in the last 12 weeks, I have been “moving without moving” as I like to call it.  And while I have not taken the “pack-your-entire apartment-and-only-keep-what you need for 30 days, donate the rest”  plunge as aspiring minimalists espouse, I am giving every single thing in my life a level of scrutiny not even encountered in my last move across country  (Did I REALLY pay someone to move this from New York? What was I THINKING?).

    As I strive for rigorous honesty in my possessions inventory, it is amazing the mind-tape which proclaims that I might need this someday,  frequently referred to as the "just-in-case" items.  When preparing to donate several hundred dollars of beautiful clothing which I have not used or worn in a decade (I no longer work in the finance industry or at a major university), the voice loudly insists that I may need that sweater in case global warming changes the ocean currents, plunging us into a new ice age (I live in San Diego).  Likewise the sleeping-bag-with-arms inspired coat that was my outerwear when I lived in the big apple.  I am learning that it is important to give this voice a platform instead of suppressing it.  It is a protective voice born of deprivation, stress, years of not getting basic needs met.  In short, it is trying to keep me safe.

    The problem with these inner voices is that we seldom question the truth in our running dialog. 

    Moving toward a minimalist lifestyle seems to be, for me at any rate, part of being mindful.  I frequently remind my patients that not everything we believe is the truth (this usually in response to some health practice they have been following which does them no benefit and wastes time and/or money). Likewise, not everything I think about stuff and security is true.

    What are the essentials?

    So many of the minimalist-inspired blog talk is about a return to basics or exploring what is essential for them.  Again, those values are individual and should not be judged.  The idea is to do-away with things (stuff) that interferes with those essentials.  Hmmmm…
    Essentials in  my life that are important and give value and meaning to my life, and these are in no particular order:

    Meaningful work
    Personal growth
    Friends
    Family
    MUSIC
    Spiritual path
    Exercise
    Quiet
    TRAVEL
    Writing
    Teaching
    Maintenance of health – body, mind, spirit
    Financial clarity

    Note that work is only part of this long list and yet it takes up 90% of my time, and has for the last 17 years, leaving precious little leftover for the rest.  Interesting that lots of “things” isn't part of the list, neither is home ownership at this point.  


    In reading the wonderful essays from Josh and Ryan on “The Minimalists.com”, both of them had “soul-sucking” jobs at which they both excelled leaving them with little to no time for the rest of their lives along with mountains of personal debt (in spite of 6-figure salaries).  

    As an acupuncturist  I don't make a lot of money, so living within my means has been a long-time habit.  But can I do better?  Can I pare things down further to allow more freedom for what is important to me?

    Let's see.....