Who’s in Charge – You Or Your Money? (Or Maybe the Kids?)

Does it seem like every time you take two steps forward you wind up one step behind? Do you think you’re doing “fine” with money, but keep looking and looking for ways to cut back? More to the point: Do you control your money, or does your money control you? If the economy is chipping away at your peace of mind, join me to see what happens when you lose sight of your financial goals-and how to take back your life…and your dreams.

There will be magic–I promise.

Here’s Caroline’s situation in her own words:

“The budget we set up with you 18 months ago doesn’t seem to be working anymore. I just read an article in Parade Magazine about “America’s Thriftiest Families” and I need help! Should we re-do our budget and be living like these folks? I feel like a failure because I can’t get our budget to work. I also feel guilty. We never seem to have enough money! I did the homework you requested and have enclosed one months of receipts, and the ‘cash out challenge’ note book.”

She is not alone. You have no idea how often people tell me that they are cutting back on “fun” or having trouble meeting their expenses these days.

The “B” Word
Unfortunately, many folks view budgets like diets: “deprivation.” But that’s because they don’t have an “authentic budget.” An authentic budget is a gift you give to yourself which doesn’t involve deprivation.

An authentic budget reflects and affirms your priorities, honors your values, and assists you in playing the game of life to win.

Do You Play to Win — or to ‘Not Lose’?
When I was a young girl, my dad and his friends played poker for fun. (My mom never bought that line!) He won a lot. One day, a poker friend asked what his secret was. Everyone got very quiet waiting for his answer. “I play to win, and you play to not lose.” At the time, I realized this was a vital part of my father’s success in life-even though I didn’t know what it really meant. Now, some 40 years later, I think I have some insight.

Playing to win is proactive because all your resources are applied to the task at hand. Playing to “not lose,” on the other hand, is reactive, because you react to what others are doing or not doing. Playing to win trusts in the goodness of the universe while playing to “not lose” means knowing that something will go wrong.

When it comes to the game of life, most folks play to “not lose.” Their relationship with money is one of fear and impending doom. They get so focused on saving pennies that they miss out on the big picture, often losing hundreds-or even thousands-of dollars a month.

To make matters worse, our brains are wired to keep us in the “not lose” mindset. The left brain (the fear center) constantly focuses on negative thoughts like “I’m a failure” or “I feel guilty.” The right brain, on the other hand, sees the big picture and keeps us moving in a positive direction.

The left and right brain need to stay in balance so you can get your finances under control. Some tips for doing that:

Step #1: The big picture. Engage the right hemisphere of your brain! Caroline’s left brain created inaccurate conclusions about the article and that’s why she felt so guilty. The family in the article has different values. They think in “deprivation” mind set. They moved out of NJ to facilitate the “diet” oriented budget. They don’t take vacations, don’t buy treats and-in short, are living a deprived lifestyle that’s totally at odds with Caroline’s commitment to joy and prosperity. The frugal family is also mal-nourishing their children. $3.89 cents to feed a family of 6 noodles and tomato sauce? Need I say more? An authentic budget for them would never be an authentic budget for Caroline.

Step #2: Discernment: With a more balanced “right brain” picture of the thrifty family’s situation, what does your gut tell you about her budget?
Right! Her budget is still off! Are you looking at your budget with a more balanced “right brain” picture?

At this point, don’t fall into the trap of assuaging guilt by 1) rationalizing, 2) justifying, 3) minimizing or 4) defending. (I call these the four horsemen-as in the apocalypse, because they lead to disaster). Now is the time to honestly look at why your budget is off and leave guilt and failure behind so you can make responsible choices for the future. (Responsibility means the ability to respond correctly.)

Let’s revisit her budget: In the homework Caroline provided me, every budget category-with the exception of her mortgage-was off. Some were way off. More about that below.

Step 3#: Gratitude. Give thanks you have the ability to notice you are off. Awareness is the hardest part of any situation. Appreciate that you have the tools and resources to get back on track!

Step #4:Action. With feelings of guilt and failure aside, adjust your budget and your habits. If you add a new expense, what other expenses will you cut back on? If a one-time event has realigned your budget (or a series of one-time events), you still need to make adjustments.

Caroline took my “cash out” challenge, and did her homework- 1 month of receipts so I could diagnose the problem in detail.
Here’s what I found:

Kids and money
Like many families, Caroline is unconscious about spending money on her children. She thought she spent about $200 a month in impulse purchases for them, including the video store ($11 dollars on popcorn and candy?), the pizza place, and the grocery store.

Want to know the real number Caroline spends on “add-ons?” $600 a month! OUCH! Basically anywhere she goes adds an extra 5-10% to the cost. The cash-out challenge revealed that she is an impulse buyer. On almost every occasion, her “normal” spending was kept in check only when she did not have a credit card or checks with her. I know this surprised her, as she did not think she was an impulse buyer! (Statistically, about 50% of our purchases are impulse!).

Teach the Kids About Money
I can’t encourage people enough to empower their children by setting them up for success. Give them each $10 a week. That’s $120 a month for 3. Remind them before leaving the house to bring their own money. Let them buy whatever they want (as long as it’s in line with your values) but ONLY if they have the money.

DO NOT loan them money or fill in the gaps-not even sales tax! Then, when they declare, “I don’t have enough money,” affirm that they may not have enough, but that they certainly could have it next time if they save up their money now.

You’ll all be “richer” for it.

Avoid the Withholding Tax Trap
Caroline set up her withholdings to get money back from the IRS. As I’ve said for years, this is a bad idea. She doesn’t receive interest or benefit from the money that is withheld year-round. Although she’s made a lot of progress reducing her credit card debit, IT WOULD BE GONE BY NOW if she had changed her withholdings and used that money to pay off the debt.

This would leave an additional $500 dollars a month to “get into the game of life.” Add this to the $600 she’s overspending, and she’ll now have an extra $1,100 a month to put toward the life of her dreams.

I told you there would be magic! Here’s my advice, in a nutshell:

Develop your awareness. Change your perception. And what was “possible” is now probable. “Expanding your Money IQ” means being open and aware. We are always responsible. Which means: we have the ability to respond. Our ability to respond depends on our perception, our perception on our thoughts, and our thoughts on our awareness.

Be aware of your “self talk.” Realize the brain is trying to help, but it’s your job to make it work for you.

Karen Monroy has been a mortgage lender and developer for the past 25 years. Karen guides clients to sustainable prosperity by removing the fear and mystery of financing and money.

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