Woo hoo!  Par-tay!  This is likely your favorite piece of advice I’ve doled out thus far; glad I could be of service.  Simply put budgets suck! When you think about a budget, if you are like me, you cringe- and then quickly distract yourself with something more enjoyable like… pretty much anything else.  Budgets are restricting, they are claustrophobic, and they are definitely NOT ENJOYABLE!  If you read my blog post last month (Say what…you didn’t?!?  I’m giving away information that clients pay hundreds of dollars for so save yourself some money and take advantage of these freebies! No worries, just click here to read it.) you will know that how you approach something and the terminology that you use to identify it is powerful.​

For example, let’s say I have a work seminar to go to and I don’t want to go, I don’t like the people that are going to be there and I am expecting it to be boring, chances are I will close myself off and I will be miserable the entire time.  Same goes for the reverse, if there is a work event that I am interested in going to, where I think I might learn some new skills, and I’m curious to see what kind of characters will be there to brainstorm and network with, the probability is that I am going to enjoy myself or at very least be amused.  Unfortunately, a budget is akin to that damn work seminar that you are dreading, the one you avoiding and trying to fake an illness to get out of- How odd, I feel a case of bird flu coming on?
​
Because of this deep negative psychological conditioning we all have associated with budgeting, I simply don’t do budgets. Instead, I plan. Just like you might plan your fun/productive/fulfilling/essential social or family engagements on monthly basis I plan my spending on a monthly basis. Once I’ve done my monthly spending plan, I check in with my plan each week just to make sure I haven’t forgotten anything, to make sure I have removed events (spending) that have been cancelled, and to double check that I haven’t overcommitted (spent more than I intended to) in any given area.  Like you, sometimes I will make it to all my social gatherings/dinners/birthday parties/appointments but sometimes I just don’t feel like going or I accidentally overbook myself and have to choose between events.  Your monthly spending plan is exactly the same.  In life you have a finite amount of time that needs to be allocated wisely to manage your schedule.  In your financial life, you have a finite amount of money that needs to be allocated to different areas in order to manage your spending and just like life (and unlike a budget) you have the flexibility and fluidity to change your plans (and your spending) as the month unfolds, or even at the last minute if something changes.  

​For me, doing a spending plan is quite cathartic.  It is 20-30 minutes of personal time I take each month to reflect on my life. It is my time to look ahead and focus on what I hope or anticipate the next month will bring.  How much money will I make? How many birthday presents do I need to buy? Is there anything I really want/need? We often get so busy in our everyday lives that we function on autopilot and miss out/forget about the important things that make up the whole adventure of this journey called life. Sitting down to do my spending plan gives me the time to reflect on my life- as I sit in front of my calendar I ask myself these things…

Where am I going (both literally and figuratively)?
What am I doing?
What are my needs?
What are my wants?
Is next month the same as/similar to this month? Will I make more or less money than I did this month?
Is it a long month? Or a short month?
Are there any birthdays I need to think about…gifts? Dinners? Cards? Events?
Am I traveling anywhere?
Am I out of any toiletries, household supplies etc? Do I need to run any specific errands?
Do I need to transfer money in or out of my savings account?
Do I need to return something I bought? Or research something I want/need to buy?
 
For a couple or a family, it’s a really good way to take some time to specifically think about “us”, time we will spend together as a unit, events we will attend together, things WE need as a unit.  It is an opportunity for inclusion and discussion as a unit.
 
What events do you want to do together as a family?  Movie night? Sporting events?
 Do your kids have birthday parties to go to? Are they having a birthday? 
Do you want to schedule an adult date night?
Are you celebrating an anniversary or milestone? Do you want to buy gifts for one another? Do you want to set spending limits for gift?
 
As you can see, my spending plan is essentially my vision board for the upcoming month. Extremely opposite from a budget wouldn’t you agree? Unlike budgeting, I find creating a spending plan relaxing and fulfilling. I enjoy taking the time to plan and focus on myself and to really remain present and connected to my wants, needs and goals. In the past, budgeting may have felt exhausting, trivial or like a waste of time to you.  Going forward, by creating a spending plan instead, you are taking time to care for yourself, and paying attention to YOUR needs.  If you are like most people you spend most of your time taking care of everyone else’s needs instead of your own- and while you are busy doing that, who is taking care of you?

You may be asking; sounds great but how do I stay focused in order to think about all of these things?  It’s actually pretty easy!  You have heard me repeatedly talk about the key to financial wellness being the act of tracking your spending. Part of the tracking process involves setting up a spending plan template and creating a whole bunch of categories- areas in your life where your money currently gets spent, areas where you would prefer your money to be spent, or areas where you may want to tune in better to become more aware of unconscious spending habits (I call these spending leaks!).  I then use this list of categories to jog my memory, and more often than not, I will see a certain category and go “oh yeah, I need to…”. Then because I allocate money for it on my plan I actually remember do it/pay it/buy it. This works especially well when you are checking in on your plan on a weekly basis to see if my still works with any changes that have been made. Believe it or not, your spending plan can actually pull double duty as a reminder/to do list. Two birds, one stone!  Who doesn’t love that in this age of mutli-tasking?

So, what are you waiting for?  Get started!  Create those categories and start your vision!  If you need help setting up a spending plan, or figuring out how to reach your financial goals, make a free consultation appointment today and I will help you sort it all out.   

Recently a good friend of mine and I were discussing how she was doing towards her vacation savings goal.  As you all know I visit family in Hawaii two to three times a year and she is saving to go with me next spring.  She told me she was doing great, she had almost hit her goal and would likely far outreach it by the travel date.  However, what she said next is such an important lesson for anyone who is trying to save.  She said “It is so much easier to save for the things I really want than it is to save just for the sake of saving.”  At that moment the financial coach in me got really excited because she had fully absorbed a concept that I am always working on with my clients (and she has been an unofficial client for a while now- so yay!).

It’s true, saving for something tangible is far easier than saving just because you should or because I tell you to.  Exponentially, saving for something positive that you want in your life (like a vacation) is far easier than saving for something you hope never happens (like an emergency).  This is why I refuse to use the terms rainy day fund or emergency fund in my practice.  Referring to your savings using these terms invites negativity into your financial subconscious.  Why would you save for something you hope never happens?!? In a rational world you wouldn’t work really hard to propel towards something you don’t want, so why should you be expected to do so in your finances?  Even if you don’t subscribe to the laws of attraction you can likely agree that when you are in a bad mood, bad or annoying things tend to happen and likewise when you are in a good mood, positive things tend to happen.  Regardless, I guarantee that if you are only saving for emergencies, emergencies will tend to happen. It’s that Murphy and his damn laws I tell you!

Another reason I don’t refer to these savings as rainy day funds or emergency funds is that it attaches a subconscious negative stigma to this money.  You may or may not have noticed this yourself, but many times when people have to dip into this account (regardless of how big or how small the balance is) is feels like you are doing something taboo.  It’s almost painful, like you’ve failed in some way, shape or form.  So again, why would you put money into an account where you feel guilty if you ever need to use it?  Are you starting to see how we sabotage our savings before we have even started?  No wonder it is so hard to save for anything other than the things you really want that you know will bring you joy. Last time I checked an emergency does not equal joy. Just sayin.
​
Instead, I want you to start thinking of, and calling, your savings account your FREEDOM FUND!  Remember, this is a separate savings account from your periodic savings- if you need a refresher on PERIODIC SAVINGS click here.  By simply renaming this account you will subconsciously shift your energy from saving for negative reasons into saving for positive reasons- things that you want to attract/invite into your life.

EXERCISE: Take a moment to write down the word FREEDOM on the top of a piece of paper.  Do this by hand- numerous academic studies have found that doing exercises like these in your own handwriting reinforces the habits you are trying to create.

Now, thinking about financial freedom specifically and about having a Freedom Fund available to you, what does that/would that mean to you?  Start brainstorming.  There are no right and no wrong answers.
               
Maybe if you had a Freedom Fund you would:
               

• Be able to take a day off if you are sick/ or be able to simply take a personal day
• Look for a better job/ hold out for a better offer
• Start training/school for something you have always wanted to learn/be
• Be able to spend more time with your kids/ family/ hobbies
• Be able to live enjoy life like normal while waiting for that check to come in                                        (Those of you who are self-employed know what I mean)
• Be able to take a vacation

 
Remember when we all agreed it is much easier to save for things that are both tangible and positive?  These THINGS you just wrote down are the tangible reasons for starting your Freedom Fund today. I encourage my clients to tape small pictures of these items onto their credit or debit cards.  When you can see these "freedoms" as material it is easier to stop yourself from purchasing things you don’t need in order to funnel more money into your Freedom Fund!
 
So now comes the hard question I get from clients all the time: How much should I have in my Freedom Fund?
 
Over the years you’ve probably heard conflicting information from many different financial websites, magazines, gurus etc. that you should have between 6-8 months of living expenses set aside.  Although this is a fantastic idea, it might not be a realistic goal for your situation or it may feel like way too overwhelming of an amount to even start.  The average monthly expenses in Los Angeles for those without children are about $5000-7000…that means according to the gurus you would need somewhere between $30,000- $56,000 in this account.  That’s a lot of money and it can easily feel like an insurmountable goal when you can barely save anything to begin with.  As a finance coach who works in the gray area and not just the black and white like said "gurus", my answer to how much you need is slightly different. Ask yourself the following questions….

• What is the longest period of time you have been unemployed? Or waited for a check?
• Knowing your own personality how much time would you give yourself before you would require yourself to make hard, life changing decisions, like selling possessions, getting a roommate, moving, or even taking a low paying job just to make ends meet?

 
For some of you the answer would be 3 months or even less, for some it might be 4 months, 6 months, or even a year.  There’s your answer.  Now, it will obviously take some work to get to your goal and it won’t happen overnight, but now you have a realistic idea of the amount of FREEDOM that this fund will buy you when/if you need it.  So now that you know what the goal is for your Freedom Fund, how do you get started?  Well, besides writing it down, two ways…if you need some guidance, make an appointment with me and we will sit down together to calculate out what your targeted monthly savings should be with your current income and lifestyle, or if you are ready to try on your own, just get started!
 
I know it sounds too simple, but it’s true!  Open up a second savings account, maybe it’s an online account (these Money Market accounts usually have higher interest rates anyway- but definitely avoid any accounts with maintenance fees!  Check bankrate.com for current offers) so it’s one step away from your everyday account and slightly less tempting to “borrow” from.  Then, start with a small monthly auto-transfer.  Maybe it’s $25 a month, maybe $50 or maybe you set it up so that every time a paycheck gets deposited a certain amount automatically gets transferred into your Freedom Fund.  Likely, after a short while you won’t even miss this money anymore. SIDE NOTE: Be sure to revisit this amount and increase it whenever possible.  Before you know it you will have accrued a nice little savings and I promise once you hit a certain amount (every person is different and it’s hard to say what your amount will be, but you will know it when you get there) you will start to get the same amount of pleasure out of saving and watching that total grow than you do out of spending it on things that don’t bring ultimate joy to your life! And... if you ever need to dip into it to buy yourself some freedom for any of the reasons you listed above you can do it guilt free knowing that this is what this savings account is meant to do for you!
 
So here’s to saving for _____ months (only you will know what your number is) of financial FREEDOM and as always if you need a helping hand or have a financial question you need answered, just call Ari!
​

The other day I was driving home from the office when the lotto numbers in the window of the local Chinese food & donut shop caught my eye- after all my years in LA this still weirds me out but I digress.  The super lotto was up to 225 million! Woot woot! Now you may think that someone like me doesn’t play the lotto, after all, I teach people to be smart with their money so why would I waste my money on something like that, right?  Wrong.  I actually do play the lotto, the key is that I budget for it.  In fact, I actually allocate $10 a month into my spending plan to play the lotto however, this is often one of the first places I “steal” from if I have unexpected costs come up.  I do this because other things in my spending plan are more important to me, which means I don’t religiously play every single month.  (For a refresher on how to determine what is and what isn’t important, click here!)  That said, I do play, and I play because I know that I can “waste” this $10 every month and it doesn’t affect my big picture goals or my financial well-being in any way and I play because I would be a great lottery winner.  For me personally, winning the lottery would not mean purchasing a whole bunch of things, for me it would buy the freedom and the time to have a ton of life experiences and to be philanthropic knowing that I will never have to “work” another day in my life.

Most people feel the same way I do…that they would be great lottery winners as well.  But the truth is that most people, perhaps yourself included, would be terrible lottery winners.  In fact, they even made a TV show called “The Lottery Ruined My Life” that caught up with past lottery winners to see what they did with their winnings and how the lottery affected their lives.  Most of them went on a spending or giving sprees without setting any boundaries.  These winners ended up digging themselves a much larger hole than they were already in, building themselves  and their debt up so high that they had much farther to fall than had they never won the lotto at all.

Here are five such cases if you are interested in some side stories. 

Or here is a clip in which a past lottery winner say it was like inheriting a $200 million dollar business and being expected to run it seamlessly overnight. ​As this lottery winner accurately points out, for most people, “winning the lottery is like throwing Miracle Gro on character flaws.”

As you can see, simply adding another 0 or series of zeros to the end of your paycheck or your net worth, be it by winning the lotto or just getting a raise, won’t actually change your financial situation in the long run.  It will definitely make a difference temporarily but if you don’t already have boundaries and control over your money, like knowing where it is going and consciously choosing where and on what your money is being spent, then sure enough you will fall back into the same routines and bad habits that got you to where you are today.  If you can’t manage your current small or medium sums of money, what makes you think you will be able to manage millions more of it?  Right now you are probably thinking, ‘Yeah right! If I win the lotto I will pay off all this nagging debt and leave that stress mess behind!’  Fair enough, but what got you into debt in the first place?  Unless it was an unforeseen medical expense likely it was a bad habit, bad decision or series of both that snowballed, slowly creating your current financial picture. Unless you are prepared to actively work to change your current habits you are setting yourself up to land back in debt but this time it will be exponentially larger since you will have more credit available to you in a higher income bracket. 
​
This is the same reason I don’t like debt consolidation loans and do not recommend them unless someone is working with a financial counselor or money coach.  I have seen this scenario happen over and over again. Imagine you have amassed $15k (which by the way is the average debt load in American households for 2015) and instead of paying those ridiculous credit card interest rates that range anywhere from 14%-25% you decide to get a debt consolidation loan at 6%.  Your intention is to pay off this new loan and to never use your credit cards again.  Like most people you are probably smart enough to know or will be advised by lenders not to cancel your cards because it will drop your credit score.  Keeping them open doesn’t seem like a problem to you since you vow to never use those cards again and you promise to keep them safely tucked away just in case of an absolute 100% emergency.  Let me tell you…there is always an emergency. Life has a way of throwing curve balls and all it takes is that first emergency to “break the seal” and slowly but surely the balance on your credit cards starts to creep up again.  However, this time not only do you have your credit cards to pay off but you also have that consolidation loan.  You now have  twice the debt than you would have had you had simply kept slogging away at those pesky cards.

At this point you might be thinking. Alright already!  Sheesh, I get it. If I win the lotto (get a raise, inherit some money etc, etc) I will simply get someone to manage it for me!  Yes, you absolutely should (just don’t do it like #4 did in the article above!!!) but unless you take an active interest, and actually understand where your money is going and what they are investing in on your behalf it means you are at the mercy of someone else’s decisions.  And how can you be sure they are working towards your best interests and not theirs? Many financial planners do not have a fiduciary relationship with their clients and will invest your money into whatever makes them the highest commissions.  So how do you protect yourself from (ill) advisers, family, and even friends who are happy to take advantage of your new found money?

 Easy, take an active interest in your money today in its current state while it is relatively easy to manage.  Take time to explore your personal money beliefs and set your money boundaries now while the stakes are lower.  This way when you come across the opportunity to add an extra 0 onto the end your paycheck be it through a raise, a gift, investments, or fingers crossed, winning the lotto you will confidently know exactly how to use that money to enrich your life and the lives of those around you without the risk of falling back into bad habits.

If you need a hand figuring out what your personal financial beliefs are, how to manage your money, or what the next step is to keep you moving towards your financial goals, make an free consultation appointment today and I will help you sort it all out.  

Most people assume that working with a money coach means they can kiss any extravagance they currently spend money on goodbye.  Bye bye morning lattes, auf wiedersehen dinners out, adios new clothing, sionara new gadgets, and a fond farewell to…. well, everything. Some clients have even told me that a big hesitation in working with a coach was that they felt by cutting back on these things they would appear cheap to their peers.  Good news!  This is NOT how money coaching actually works. You do not have to give up the things that truly make you happy or the things that fulfill a physical or emotional need in your life.  You only need to give up or cut down on the things that don’t matter.

Recently I came across a little story on the vast interwebs which really encapsulates one aspect of what I try to teach my clients. The blurb (source unknown…if you have any idea where this came from let me know) reads:

Let’s use my personal experience as an example.  Before I became a money coach I always felt compelled to donate money to non-profit organizations that I believed in.  Somehow, even though I was making great money I never seemed to get around to donating.  In looking back, I know the reason I “never got around to donating” was because my money was being diverted to my hot spots instead and I never felt I quite had enough extra to donate.  For me, donating was a low spot- something I wanted to do, something I knew would provide fulfillment in my life, but something that was being steamrolled by my hot spots.
​
By tracking my spending I was able to isolate the fact that if I were to cut down on my clothing expenses I could free up money to shovel into my low spot.  But I like clothing, and as you can imagine from my previous career being surrounded by very expensive clothing day in and day out my taste is expensive. In fact, my favorite brand is Theory.  So the question was, how could I cut down on my clothing spending when the things I like are really expensive?  Well, as a money coach I know that simply going out and buying cheap knockoffs is not going to serve me in the big picture.  Likely the knockoff is not made well, the fabric will be synthetic and not feel good against the skin and chances are I will lose interest in wearing it and simply purchase something else to replace it anyway…bringing me right back to where I started.  Does that mean I A) just don’t buy anything at all because why buy a knockoff if I know it’s a circular pattern or B) go ahead and splurge on the clothes I want and simply continue to ignore the low spot in my life?

Surprise, trick question, the answer is C! This is where I put on my frugal badge and wear it (pun intended) like a champ! Instead of picking A or B, I got creative and found a way around this dilemma.  I now find the things I like from Theory on ebay often for a fraction of the price and still with the tags on.  This is a win-win solution!  I get the exact well-made clothing that I want, clothing that I know will last a long time and get repeated use, and I have now freed up money to donate. I have filled both a want (clothing) and a need (fulfillment from making a donation and a difference) simply by being frugal about how I spend my money and it feels GREAT!

Recently I had a client tell me an incredible story of how being frugal changed their lives.  By tracking their spending this client realized they were spending more money than they thought was reasonable on Perrier.  In wanting to achieve the same result (being able to continue drinking their bubbly water) but by doing it “for less or no money” they decided to invest in a Soda Stream and make it at home.  In the long run this would save them money that could then be diverted towards a low spot in their lives.  But it gets better, in recent months this client had been very sick with kidney stones but when they switched to homemade bubbly water they noticed a vast improvement in their health, all of a sudden they were starting to feel better.  In relaying this connection to the doctor they discovered that the high mineral content in the copious amount of Perrier they had been drinking had been the underlying cause of the kidney stones!  In this instance, being frugal didn’t just save them money, it changed their lives significantly!

Granted not all stories about being frugal are going to be that impressive, or that dramatically life altering. Sometimes being frugal simply means stocking up on items that you use because they are on sale as opposed to buying them one at a time at full price. (Remember buying things you don’t need or don’t already use simply because they are on sale or you have a coupon is not being frugal. Need a refresher? Click here.) It could simply mean trading mediocre meals out for fantastic meals at home (or even mediocre meals at home for that matter).  Sometimes it is renting a movie instead of going out to a movie, or making coffee at home instead of buying a latte.  Figuring out how you can be frugal in the areas that don’t matter to your bigger picture can actually be fun, especially when the payoff is fulfilling something in your life that was constantly out of reach in the past.  Maybe that low spot is a vacation, or a house fund or even making a dent in old debt.
So I challenge you, going forward, how can you meet your financial goals and fill your emotional needs/low spots for less or no money?
​
If you are stuck and need a helping hand to figure out what your hot spots and lows spots really are, if you want to start tracking your money but don’t know how, or if you simply want advice when making a big financial decision, make an appointment today and I will help you sort it all out.

Many of you probably don’t know this but my brother, Aaron Gold, is one of a select handful of professional big wave surfers in the world and I am not only super proud of him but continually impressed by him.  Five years ago he reached a pinnacle level in his career and was invited to surf in the most prestigious big wave competition in the world, The Eddie also known as the The Quicksilver in Memory of Eddie Aikau. 

This competition takes place once a year at Waimea Bay on Oahu provided that the waves are at least 40 feet high (20 feet by Hawaiian measurements since they measure the back of the wave and not the face) for the duration of the 8 hour competition. Unfortunately, since 2009 the waves simply haven’t been big enough to run it. The holding period for the Eddie begins in early December and runs through the end of February meaning the contest officials can call on the contest at any time giving the surfers 24 hours to get themselves and their teams to the North Shore of Oahu.

Luckily my brother lives on the North Shore of Oahu so getting there is not an issue for him. However, getting there is much more of a challenge for me but I wouldn’t miss this potentially once in a lifetime event for anything in the world.  A last minute trip can be extremely costly, so how did I prepare for something like this financially?

Every January I sit down and do my January spending plan, (a spending plan is like a budget but much more flexible taking into account life’s little surprises and the fact that no two months will be the same) but also my ANNUAL spending plan.  The annual spending plan incorporates not only all my monthly anticipated expenses but all those add-ons that can’t be pigeonholed to one specific month like periodic expenses, savings goals, travel, home repairs etc.  As I thought through my intentions and goals for 2016 I had high hopes that El Nino would bring the waves needed for me to finally witness my brother surf in this amazing competition.  Because of this possibility I made sure to allocate a portion of my income this year towards traveling to Hawaii, and if you’ve read my previous blogs, you will already know I try to make it to Hawaii a few times a year anyway along with some other travel adventures sprinkled in for lasting good measure. So, when I got the call that the Eddie was finally going to happen on Feb 10th, 2016 I was stoked.
 
However, before I make any large financial decisions (and even smaller ones too) I always check in with my monthly spending plan to see what kind of concessions I may need to make later in the month if I want to make something unexpected happen.  Fortunately my February spending plan had a little wiggle room to absorb most of these extra travel costs. I did have to give up those pair of jeans I wanted to buy and a few dinners out along with what I had planned on saving; not including my periodics savings of course) but these things were a small price to pay and the decision was easy. 

So, I jumped on a flight the very next day and as often happens in life, this trip didn’t exactly go as planned.  We got to the beach in the early morning twilight on Feb 1oth ready to watch the amazing surf and by dawn the officials had called it off.  The waves were simply too small and everyone was sent home.  Such a huge bummer.  As quickly as it started, it was over, but I did get to spend time with family which made the trip worthwhile and I came back to LA with a tan which is a bonus!

What I couldn’t predict was what happened next.  On February 22nd, I got another phone call.  It was my brother telling me that the officials were going to try for take two.  The Eddie was on (again!) for Feb 25th, 2016. I hesitated for a moment... could I really reschedule client appointments, arrange for dog care, and get back on a plane just 10 days since my last flight back from Hawaii?!?! It seemed insane to go but I couldn’t dodge the feeling that if I didn’t go I would always regret it.  Again, instead of letting my emotions make my decisions for me (although I never completely ignore them- there are some things in life more important than  money) I consulted my spending plans. Had I simply gone back to my February spending plan the answer would have been an unequivocal NO!! The first trip was barely squeezed out of the February budget, let alone a second one. So I deferred to my annual spending plan, which confirmed the fact that if I stay on track the way I have planned this year, I can definitely afford this trip while sticking to all of my savings and investment goals too. It simply meant that this month I would dip into my savings to cover the added costs, but that I will be able to replenish that amount throughout the year, little by little.  My annual spending plan said YES!! GO!! What the hell are you waiting for?!
​​

​​So I did, I got on a plane the next day and I enjoyed every second of this last trip without any financial guilt or stress because I knew that I had planned on traveling this year and that the cost was already anticipated in my 2016 annual plan. The only caveat is that most of my travel for the year has now already happened in the month of February, which is absolutely fine by me.  I got a front row seat to watch my brother place 10th in the world.  The power and awe of being there in person was something well worth blowing the majority of my yearly travel funds on.


​
As you can see having a working annual spending plan (Where all money going out INCLUDING money being sent to savings, and debt payments = money coming in) allows you the opportunity to say, absolutely 100% yes, to chasing after adventures when they unexpectedly present themselves even when your monthly spending plan discourages it.  My annual spending plan gave me full guilt free permission to chase my brother whilst he chased his waves, an experience I will never forget, and never regret emotionally or financially!
​
If you need a hand figuring out how to create a spending plan, either monthly or annually, what the next step is to keep you moving towards your financial goals, or if you simply need advice before making a big financial decision, make an appointment today and I will help you sort it all out.

Can you really change your spending habits and save money in just seconds?

Yes, you can!

Is it your goal to finally get financially organized in 2016?  Do you want to spend less of your money on things that don’t matter so you have more to spend on the things that do?   Maybe you made a financial new years resolution and don't know how to start?  Then this is the first step you need to take!

It is estimated that American companies will spend about $77 billion (yes, BILLION!) on marketing in 2016 alone.  What are they doing with these billions you ask?  They are strategically capitalizing on your “fear of missing out”, by banking (pun intended!) on the fact that either a good deal, repeated exposure, or an emotional connection will be enough to entice you into buying their product when you hadn’t planned on doing so prior to seeing their ad. 

Granted there is no way to eliminate all advertising from your life, I mean c’mon the Superbowl is around the corner and we all know Budweiser has a special way of making us cry with those damn horse and puppy commercials, but what you can do is limit your temptation to buy things that you haven’t specifically budgeted for in your monthly spending plan.

My guess is that like me you are getting daily emails from the likes of Target, Nordstrom, Groupon, Living Social, Macys, Staples, Home Depot and every other retailer you have ever purchased something from in the last 10 years!  If you want to take control of your spending in 2016, the first step is simply to take the few seconds to actually open those promo/sale emails, scroll to the bottom and click “unsubscribe.”

Right now you are probably saying “but I don’t even read them, I just delete them, so what’s the point?”  Remember that repeated exposure thing I was talking about earlier?  Eventually there will be an email that has just the right subject line to pique your interest or comes at just the right time (like when you are having a bad day and feel like rewarding yourself with something pretty) for you to actually look at it. That’s all it takes for temptation to grab hold and quietly drag you away from your goals.  If you were cutting down on your sugar consumption you sure as heck wouldn’t want daily emails from Dunkin Donuts or Sprinkles, nor would you be browsing pretty pictures of cakes and desserts online.  So if you want to cut back on unnecessary spending the first step is to cut back on unnecessary advertisements.  If you continually find yourself justifying the “window shopping” then it may be time to look a little deeper at your spending patterns to identify the self-sabotaging behaviors that are keeping you stuck in your current financial situation.

Let me tell you, as good as I am with my money, I used to be a sucker for a good Groupon (why not try a new activity, right?) until I tallied up the amount of money I had spent on these “good deals” that I have never used.  There was the $99 for 20 exercise classes, the $19 for a rock climbing lesson, the $39 for an annual subscription to the botanic gardens, the $25 for a paint nite event, the $25 for a Match.com 3 month membership (and had I actually redeemed it, it would have come complete with a continued monthly membership fee).  These few things alone total $207.  Let me tell you, these weren’t even things I was looking to buy.  I didn’t wake up that day and think "Gee I need to buy an exercise package".  No, I saw the ad and thought, "hmm, I should be working out, it seems like a good deal, sure I’ll bite".  In hindsight, there are way better things I could have done with that $207.  Things that would have made a difference like putting that towards my RothIRA, or putting it towards the principal on my mortgage, or even simply donating it to a good cause.  The same goes for you.  I’m sure you can think of better ways to use your money rather than wasting it on “good deals” that simply catch your eye at the right time! Maybe use it to pay down those pesky credit cards faster, or save it to use towards something that will actually be of benefit to your life.​
​
The same goes for weekly circulars and coupon deals! Do you think retailers would be sending these out if they didn’t drive their sales up?  However good the deal is, it’s not really a bargain unless you actually need the product. So save yourself the inbox clutter and the temptation, and simply unsubscribe, it only takes a few seconds of your day.  Trust me, down the road when you are in the market to buy something specific, the good deals and the sales will still be out there, all you have to do is look for them and chances are you will save even more by searching and comparing prices rather than simply letting the deal come to you.

As always, if you need a helping hand to figure out what the next step is to keep you moving towards your financial goals,  if you want advice when making a big financial decision, if you need clarity about what it is you truly need to live your life on your terms, or to make sure your money is working hard for you, make an appointment today and I will help you sort it all out.

Imagine a classroom full of small children.  Perhaps you are imagining colorful walls, cubby holes, tiny chairs and tables (omg…how cute!), and all the buzzing activity that goes along with a preschool or an elementary school.  When the teacher in this classroom engages the kids in an activity they are focused, determined, creative, artistic, learning, growing and having fun!  Now imagine that the teacher stops paying attention…or simply leaves the room for a few minutes.  Gasp! You guessed it!  It won’t be long before pandemonium ensues, kids start to wander, someone is writing on the walls, inevitably someone gets hurt and starts crying… welcome to total meltdown mode. (Well maybe it’s not that bad but definitely not the ideal situation! You don’t need to have kids to know what I am talking about!)

Now when the teacher returns, getting these little people focused, happy and harmonious again is going to be even harder than it was in the first place. Adrenaline and anxiety take time to move through these little bodies.  This poor teacher is going to have their hands full.  Perhaps they should have just stayed in the room? Ah, hindsight.

You are probably wondering what I am getting at with this analogy, but trust me I have a point. When it comes to your finances, YOU are the teacher and your money is a classroom full of small children.  If you pay attention to your money, guide it, give it purpose, keep it engaged, it will easily become a happy and fulfilling part of your life.  If you look away (i.e. not looking at bills) or stop paying attention (not knowing exactly where your money is being spent) chaos, pain, and maybe even some crying are inevitable.  And getting back on track one you've started and then looked away is going to be even harder but it must be done.
​
Just like little fingers without a task, your money will find a way to get itself into trouble.  That’s why a spending plan is so important.  Your spending plan is your lesson plan! You would never attempt to teach a group of children without some sort of plan so why would you try to deal with your money without a plan?!    Some people will call it a budget but to me that term has such a restrictive connotation.  I hear budget and immediately think, “Great, there goes any and all fun!”.  But it doesn’t have to be that way.  A budget denotes strict limitations whereas a spending plan is simply an outline of where and how you intend to spend your money.  In order to keep your dollars from getting into mischief like buying things you don’t really need or even want, it is extremely important to set a task (intention) for every dollar coming into your life.  This intention could be to save it, use it to pay down debt, or even to spend it. 

For the most part dollars that have a task to do are well behaved and will do what they are told.  If they act up (begging to be spent on stuff you don’t need), give them a time out, just like you would a small child.  Would you allow a 5 year old to have ice cream just because they are screaming their head off after you said no?  Probably not, a time out would be in order to allow for them to calm down, regroup and start thinking rationally again. So when in doubt, put your money in “time out”, weigh your options (think about how spending this money will affect you in the long term), and give yourself a moment to make some rational decisions.

Having a spending plan in place will not only help you to make those rational decisions but it will also allow for fluidity and changes in life as needed.  Sometimes small children have meltdowns for no logical reason that will inevitably throw off your entire day.  Since you can’t actually strangle these tiny terrors, as a teacher or parent you would need to take a deep breath, regroup, adjust your schedule and get back to the remainder of your regularly scheduled activities as soon as humanly possible.  This should be the same method you use in your financial life.  There will be times where your car has a meltdown or an unexpected bill shows up.  As much as you’d like to strangle your car I’m going to advise against it. Simply allow yourself to take a few deep breaths (you are totally allowed to be pissed off), pull out your spending plan, regroup, make some adjustments and get back to normal life as soon as possible.

If you continue to nurture, encourage, and be patient with your finances like you would a small child I guarantee you that your money will grow into a well rounded, supportive, sustainable, caring and dare I say joyful aspect of your life.

As always, if you want help honing your financial skills, figuring out what it is you truly need, or to make sure your money is working hard for you, make an appointment today and I will help you sort it all out.

P.S. Hats off to all you parents, teachers and tiny human caregivers out there.  You all are AMAZING!
  ​

How many of you just sang along to the tune of Billy Idol’s “Rebel Yell”? If you didn’t … you will now!  Yes, I’m well aware that this is probably going to be stuck in your head for the rest of the day and that is actually a good thing.  Every time it pops in your head it gives you a chance to think about the concept that I’m about to lay down.

Halloween has come and gone, November is here and the holiday consumer season is about to be upon us in full force. 

 As the holidays become more and more materialistic with people wanting to give more impressive and more expensive gifts, I figured now was a good time to introduce the concept of doing more with less (or at least what you already have). That said, I want you to play a little game of fill in the blank.  This holiday season, and throughout the coming year, what do you want more of in your life?  Go ahead, grab a piece of paper.  You may want to reflect on these statements at a later date. Keep listing until you can’t think of anything else, and they don’t have to be holiday related at all.  

If I had more _______________________ then I would ______________________________.

Done? Great! I’m sure you have uttered this statement many times throughout the years and nearly everyone will have some version of more money on their list.  What will be different for each person is what we would do with this extra money.

Let’s take a moment to reflect on the sentences you just created especially the beginning part of the sentence, “If I had”.  These three simple words that we tell ourselves over and over again are a very effective method we use to delude ourselves into believing that our current situation is not our doing.  It is much easier to think that we are a just dealing with the hand that has been dealt us rather than owning the fact that our circumstances are created by our priorities, our choices and our actions or inactions.  “If I had more” subconsciously gives ourselves the permission to remain idle or to postpone making a change until we luck out and “more” appears.

For example you may have said If I had more money then I would be able to work less and spend more time with my family.  What you just said in this statement is that spending time with your family is important to you but that you won’t be able to do it until your circumstances change and you have more money.  To you, more money equals working less, which will then free up your time to spend with your family. As great as this notion sounds, I’m sorry to say that getting more money won’t solve the problem.  The root of the issue is that you are not determined to make spending time with your family a priority today.  What makes you think that you will simply be able to flip a switch in the future when more money appears? If you don’t make spending time with your family a priority now using the money and time that you currently have, simply having more of either will not change your habits.  Remember, to change your future, you need to change your actions today. 

If you don’t change your current habits you will quickly find that with more money comes a new set of excuses/delusions to keep you from what you have convinced yourself that you would do. More money often means more time spent shopping, more bills, more time managing the money, more time working to maintain the things the money purchased, not less.  All of these things will find a way to keep you from spending time with your family and perpetuate the cycle of "If I had more money."  Unless you are determined to make what you would do a priority today how can you think it will just magically become a priority tomorrow?

Let me use a real life example.  I used to say If I had more time I would exercise more.  The truth of the matter was that when I did have more time I didn’t actually exercise more.  Why? Because I hadn’t made exercising a priority in my current schedule.  It wasn’t a part of my daily, weekly or even monthly routine.  Exercising truly wasn’t a priority to me even though I tried to delude myself into thinking it was.  In the past my saying “If I had more time” was simply my way of making excuses for not doing something that I knew I should be doing, a way to justify the results I was getting by not working out.  It’s not my fault…it was because of my lack of time…right?!?

The problem with this idea is that it keeps us in a constant state of fantasizing about what the future will be like, what we will do when we get more.  We assume that this new circumstance (the more) is what will make us happy and solve all of our current problems, instead of living in the now and finding a way to meet our needs with what we already have. This is a great reminder of why it is so important to keep ourselves in the present and to practice gratitude by making the best/most efficient use of what we have today!

The good news is that I now exercise about 3 times a week and I feel great, but I had to come at it from a different angle.  I had to ditch the delusional “If I had more” and make the “Then I would” a priority in my current every-day life.  How do you do this?  First, get to the bottom of why you want more.  What are you trying to accomplish? What emotion or outcome are you searching for in your life?  What problem are you trying to solve? Revisit your statements from earlier and see if you can dig deep to figure out what it really is that you are needing?

Stop reading here and see if you can identify what your end goal would be for each of your statements above. Start here:

If I had more ____________ then I would ___________ because I want/need to ____________.

Great!  Now that you are back, here’s how I did it.  My statement went something like this “If I had more time then I would exercise more because I want to feel good about my body.” For me, the problem/emotion I was trying to solve was not “exercising more”, it was that I wanted to feel good about my body and the way my clothes were fitting.  As humans we often try to mask our problems by buying material things to make ourselves feel better.  Had I gone out and simply bought a new wardrobe I may have felt better for a moment but soon enough the feeling of not liking my body would have crept back in, along with the bill for all the new clothes, exacerbating the problem.  So instead of putting a bandaid on the issue I came at it logically and made a list of the small steps I could take that weren’t so overwhelming.  Exercise was simply a broad (and for me overwhelming) solution to my problem.  Had I simply gone to the gym and tried to run on the treadmill for an hour you better believe I would have “magically” gotten so busy that I didn’t have the time to work out. (See how we create our negative circumstances to keep ourselves from getting what we really want.)  Instead, I started with baby steps.  I challenged myself by making small commitments to address my need to feel better about my body and doing them daily even if it was just 1 minute a day.  C’mon, even you can do something for one minute right?!  (NOTE:  I could have chosen to work on my diet or on my self image but exercise felt like the right path for me.)

So, for all of the wants/needs that you were able to decipher from your original statements above make a list of the following:

Today I will ___________________________. Even if it is a simple 5 minute task. Now, put it somewhere where you will see it and make a vow to complete these small tasks before you go to bed tonight. Slowly but surely you will create a new habit.

For me it started with challenging myself to do sit ups and jumping jacks for a total of 5 minutes. (Disclaimer:  Day 1 I wasn’t even able to do 5 minutes straight but instead of giving up I just did 1 minute at a time 5 times that day) Then a couple weeks later it easily became 10 minutes. Then I added jumping rope.  Then I started going to pilates classes, then I added Cardio Barre. Before I knew it I had “found” the time in my current schedule to workout 3 or more days a week and low and behold, when I have more time I actually work out more and it doesn’t feel like a chore, it feels great.  The end result, I love my body right now, my clothes fit better and a side effect is that I don’t have to buy more clothes, ultimately saving me money.

So let’s go back to my hypothetical example of the person who wants to spend more time with their family.  “If I had more money then I would work less and spend more time with my family because I want to participate in their lives.”  The need here is to participate, to connect.  Perhaps their small task is that they ask their husband/wife/son/daughter a question and remain present for the answer.  Perhaps they will read a bedtime story to their child, perhaps they will make walking the dog into a family event instead of a chore.  It is your job to be creative with what you ALREADY HAVE to meet your needs.  When you are determined, things will fall into place.  If a person is adamant about meeting their underlying needs, when they get more money the actions they take will be in line with their needs, and they will make effective choices like hiring a housekeeper to clean, freeing up more time for them to spend with the family since it’s already an ingrained habit. However if the idea of spending time with the family is just a nice notion for a future date,  if they were to get more they would likely just spend more on stuff that fills the void for a fleeting moment.  They will be doing the same thing they have always done yet expecting different results, and we all know that is the definition of insanity.  You see how the cycle of if I had more _______ then ______ will just keep going if you don’t tune into what it is you truly need?

Have you ever noticed that it is a heck of a lot easier to find the resources to support something that is a priority in your life?  It’s way easier and more realistic to take that approach rather than hoping that the resources will create the priority.  If you make spending time with your family a must, you will find the time.  By finding time you will be forced to be more efficient with the time you already have.  By being more efficient with the time you have you will create opportunities to earn more money. And so the cycle begins.

It’s like I always say to my clients, adding a zero on to the end of your paycheck is not going to fix anything unless you address the roadblocks you are having today.  If you are currently spending more than you bring in you will continue to do so.  If you don’t know where your money is going now, how will you know where it is going when you have more?  If you can’t seem to find money to save, or pay down debts today, what makes you think more money will solve it?

This holiday season I want you to give yourself the gift of making full, efficient use of the money, time, and resources you already have, that way when you do find yourself with more, you will know exactly what to do with it to maximize the benefits!

As always, if you want help honing your financial skills, figuring out what it is you truly need, or to make sure your money (and time) is working hard for you, make an appointment today and I will help you sort it all out.

You may have noticed that it has been a little over two months since my last newsletter.  Apart from simple procrastination I was also going through the process of selling my vacation home.  With that sale a few things happened.  First, I had to face some hard financial facts that I knew were coming but I hoped that maybe just maybe they wouldn’t apply to me…after all, I am a financial expert right?  Guess what, these lessons apply to EVERYONE and crossing my fingers and closing my eyes real tight wasn’t going to change the outcome.  I was going to have to face each reality head on and make peace with it one step at a time. 

The second issue was not financial, it was emotional.  You may be thinking I’m about to say I was sad to say goodbye to my beloved vacation home but the truth is I was nostalgic for all of 15 minutes.  The house, which was used mainly as a vacation rental over the past years, had become a time and energy suck along with being an overall giant pain in the a**!  The emotional issue that came along with the sale was a sense of failure.  Here I am teaching people about personal finance and I had to admit to family, friends and clients when they asked me how much I had made off the deal that I had actually lost money. What?!? But Ari, not only are you a personal finance coach but you also have a real estate brokers’ license!!!  Yes, it’s the truth, despite all my financial knowledge and despite my real estate broker’s license there were some lessons I couldn’t have learned anywhere else.  The good thing about the school of hard knocks it that it makes sure you really get hands on lessons. And since I like to practice what I preach, I am going to use this experience to fail forward.  Instead of hiding behind a fake smile, I am going to share my story with you and apply this loss as a real life example to reiterate why I coach you to do things certain ways.  Sometimes the most memorable lessons come in the form of a personalized story from someone close to you about what NOT to do.

If you have been day dreaming about buying a house, thinking about selling your house or are ridiculously annoyed that you continue to pay so much in rent, then this is the article for you. Granted some of the more technical financial lessons I learned firsthand only apply to second homes/homes used as rentals but the overall sentiment is the same.

LESSON 1: BUYING A HOME IS EXPENSIVE

Those of you who own a home are emphatically shaking your head in agreement right now, aren’t you?  When I bought my first house my step-dad said “Welcome to the home moaners club!” At the time I laughed.  Now I realize, nope, not a joke.  :(

For those of you considering buying a home here is a little snapshot:  Let’s assume you currently rent a 2 bedroom apartment in Los Angeles and you are going to buy a house/condo where the 30 year fixed (meaning the interest rate never changes) mortgage payment is the same as your rent.

MONTHLY ROOF OVER MY HEAD EXPENSES                                                             

Now you are probably thinking well, duh, I will just buy a cheaper house to get all the expenses to be the same as my current rent, utilities and insurance.  Unfortunately, the purchase price I used for this example is very close to the average home price in Los Angeles at $625,000, and also assuming you are putting 20% or $125,000 down, and you have amazing credit and qualify for a 30 year fixed rate of 4% on the $500,000 you intend to finance. In order to keep the cost of owning the same as renting you would have to be super lucky to find a place to buy for around $450k and be ready to put 20% or $90k down.  If you can’t put the 20% down you will have to face the ugly monster called PMI or Private Mortgage Insurance.  Basically your mortgage company takes out an insurance policy (which you pay for) just in case you can’t afford to pay the loan…and it is VERY EXPENSIVE.  Usually about ½% of your mortgage amount.  For a mortgage of $500k you will add about $250 per month to your expenses just for PMI.  I can think of a heck of a lot I’d rather do with that money than pay for an insurance policy.

LESSON 2: OWNING A HOME IS A PAIN IN THE A** (literally) AND EXPENSIVE

Right after I bought the house I currently live in I came home one evening, walked through the front door after a long day at work, I took one step forward and felt my feet slip out from under me.  As I lay there for a second staring at the ceiling trying to figure out what had just happened I noticed a lovely bubble in the ceiling with a single drip or water coming from the center.  I had slipped on a puddle INSIDE my house and had landed flat on my butt!!!!  As a renter I would have called the landlord.  As the homeowner I had to go outside into the rain, find a tarp, pull out the ladder, call a friend to tell them I was getting up on the roof and if they didn’t hear from me in an hour to call 911, and then cover the roof for the time being.  I wish this story ended there but sadly no, it ended a few thousand dollars later with a brand new roof.

As a homeowner stuff like this happens almost every year.  In 2013, it was plumbing issues for approximately $5,000.00, in 2014 it was a new main sewer line for $7,000.00, and just this year a new water heater for $1500.00.  Each of these moments was painful and I wished every single time I could have just call my landlord and gone to see a movie while they took care of it.

LESSON 3: SELLING A HOME IS EXPENSIVE

This is where my hard lessons came from. Let’s say you purchased your home using my example above (REMINDER: $625k purchase price, $125K down, 30 year mortgage at 4%) lived in your house for a few years (let’s say 2 because you need to have lived in your house for at least 2 out of the last 5 years you own it in order to qualify for a tax advantage) and then decide to sell.  

Super exciting! Your Realtor tells you the market has improved and you can now list your house for $673K. (NOTE: How did I get this number?  In 2015 the average increase in property prices in LA was 5.3% and next year is projected to be 2.2%- don’t worry, I did the math for you.)  What you are probably thinking is “Awesome!! I’m going to get my original $125k down payment back plus the $48K in appreciation that has happened over the past few years.  That would be nice, but that’s not gonna happen quite like that.

I’m going to use data from my own sale to help put this all in perspective.  Let’s assume you get an offer for 98% of the asking price (which I did) that means the buyer in this scenario is offering you $659,540.00. Woohoo!  That’s still an additional $34k in your pocket right? Nope. 

Sellers pay the fees associated with selling the property, which includes the industry standard brokers fees of 6% (3% to sellers agent and 3% to buyers agent- negotiable but don’t expect much wiggle room) and  all the other sellers’ fees (escrow, title insurance, reports etc. etc.) which total about 1.5% of the sale price. So what does this mean?  It means $49,465.50 in deductions or in other words, you very well may have a LOSS!  

Here’s an easier way to look at this:

Sales price: $659,540 (here’s to hoping they don’t request repairs or credits towards closing costs)
Real Estate Agent’s Commission: -$39,572.40
Sellers’ Fees: -$9893.10
_________________________________________________________________
Proceeds: $610,074.50 

That would be a great number if we didn’t have to pay off our loan.  The good news is that we have paid the loan down some or we'd be in the hole by $15,000 (proceeds $610,074.50 less loan of $500,000 = $110,074.50, but you put $125k down...eek) but remember you pay mostly interest at the beginning of the loan so you haven’t made a big dent even with your monthly payments over the past two years. 

Loan Payoff: -$482,030.85
________________________________________________________________________
Final proceeds: $128,043.65 

In two years you made $3043.65 on your purchase (remember you had to put $125,000 down to avoid PMI) and this is assuming that property values went up, that your selling costs are average, and that you didn't plunk down thousands in repairs since you bought the place.  

This is exactly what happened to me but in addition to these selling fees I had some repair expenses before the deal would close and since it was a second home I had some other taxes that I had to pay so at the end of the day I lost some money.  Then I started beating myself up even more! (We all need to stop doing this...it doesn't change the outcome of the situation!)  Had I just invested my down payment I would have made money and saved myself the hassle all these years!  Let’s assume instead of putting $125,000 down you had not bought a house and instead invested it and got a very conservative 6% return.  You would have $140,900.00 in the bank.  In economic terms we call that an opportunity cost. The opportunity of owning this home cost you an additional $15,400 in potential earnings. Makes that $3043.65 gain not seem so good huh? Especially after you pay the movers :(

Now that you are probably convinced you never want to own a home, here is the final lesson.

LESSON 4: OWNING A HOME IS AMAZING

If I could choose whether or not to do it all over again, would I?  You bet you’re a** I would. Yes, I took a loss but I had a home in the mountains that I enjoyed and made memories in for 7 years!

There is nothing that tops the sense of security knowing that no one (assuming you pay your mortgage) can kick you out of your home, and there is nothing as exhilarating as deciding to remodel a room so it is just the way YOU want it and taking that first sledgehammer swing. 

The first key (pun intended) to owning a home successfully is knowing the REAL cost (all that junk I just explained in lessons 1-3) as opposed to the idealistic perception we tend to have, like a house that never has any problems! Secondly, you should only buy if you know this is a place you will be staying in for a long time.  Long enough for the property values to increase substantially.  And lastly the most important thing both emotionally and financially is to be prepared, be ready with your down payment when you buy, be ready for the costs when you sell and be ready for the expensive stuff that life throws at you in between!

Need help figuring out how to save a down payment for a home or how much you can really afford (not what the mortgage bankers tell you)? Make an appointment today and I will help you sort it all out.

Ok, so that headline might be mildly deceptive…

I’m not giving you permission to run out to the mall for an impromptu spending spree so put your wallet down, but did you know that there are 3 types of savings accounts that we should all have and that one of them is meant to be spent? Today I’m going to tell you all about that kind of savings. 

When clients start working with me we often begin by focusing on a type of savings we call PERIODIC SAVINGS.  (NOTE: I recommend this being the savings account tied to your checking for easy access.  Other savings accounts, like an emergency fund, or retirement savings should go into a separate account, like an online savings that is harder to access.) Periodic Savings is a savings account for expenses that come up periodically as opposed to monthly.  They could be things you know are coming because they come up every few months (like union dues, tuition payments or quarterly taxes), every 6 months (like car insurance premiums or property taxes) or yearly (like a birthday or your Amazon prime membership- surprise there’s $100 auto-charged to your account that you probably forgot all about!).  They can also be expenses that you anticipate but that have more fluidity surrounding them about when you will need the money (like new brakes for a car, i.e. your mechanic mentioned you are due for brakes in the next 3 months, or maybe a repair around the house that is looming, i.e. your washing machine is making that weird noise again).

Here’s what happens when you don’t have a special savings account for your periodic expenses. If you are like most people you either try to squeeze the money out of somewhere (you know what I am talking about!), or you end up reaching for that credit card you swore you were never going to use, or even worse skipping the payment/expense altogether.  Let’s use quarterly taxes as an example and assume you owe Uncle Sam $500 in anticipated taxes every 3 months.  Likely when that bill is due you have an oh, sh*t! moment and have to decide do I... A) pay it and eat nothing but ramen for the rest of the month and hitchhike to work, B) skip the payment and try to make a double payment plus the fines next time, or C) put it on the credit card and eventually (we all know how that goes right?!?) pay it off.  Personally none of those options sound very good to me so I am going to provide you with a fourth option.  Option D) pull it from your periodic savings, pay the bill and then continue on your merry way. 

Sounds pretty great right? 

Here are the 3 steps you need to take that will keep you on your merry way.

STEP 1. Know your periodic expenses.  How can you decide how much you need to save ahead of time if you don’t think about the expense until the bill is sitting in front of you demanding to be paid?  Here’s how...  

• Create a quick spreadsheet with the following headers across the top (see image below). Expense-Jan-Feb-March etc all the way to Dec and lastly, one for Total. 
• List all the periodic expenses you can think of in the first column. Spend some time thinking about all the things you wish you had been prepared for last year.
• Put the amount associated with each expense in the appropriate month(s) column.  
• Add up each month to see how much “extra” cash (above and beyond your normal monthly spending) you will need for any given month.  Some months might be zero and some might be quite heavy.
•  Add up the entire year to see how much “extra” cash you need each year beyond just your average monthly expenses.

Here’s an example:

STEP 2. Decide how much you need to save every month to avoid options A, B, & C above!

That sounds easy enough and it might be as simple as taking the yearly total of all periodic expenses and dividing by 12 to figure out how much you need to save every month.  If we use our example above it would be $566 each month. ($6791.91 ÷ 12 = $565.99).

However, (yes, there’s always a however) let’s pretend we are currently in the month of February.  As you can see from our chart above, April is a big month with $2107.91 due for property taxes and our annual Amazon Prime renewal.  Even if we were to save the $566 we just calculated during the months of February, March and April we would still be short by $1085.91.  Yikes!  Wait, how did you get that math? 

Let’s take a closer look at the totals we need for the first few months of the year.

Since we are pretending it is February and we intend to save $566 this month, we can't forget to factor in that we need $211 of that savings to use towards union dues (February's periodic expense), leaving us with $355 in the savings account.  Then in March we will add another $566 to our savings and have a total of $921 in the bank.  But wait, car insurance is due in March so we will need to pull $465 out for that meaning we will be left with only $456 in savings.  Now April rolls around and once we get our paycheck we add our monthly $566 to the savings for a total of $1022.  The issue is that $1022 is nowhere near the $2107.91 we need in April. Oh sh*t, right?

So, instead of just dividing the entire yearly amount by 12 like we first did, we are going to have to do a little creative math. 

Again, let's pretend we are currently in the month of February. The good news is that we’ve already managed to cover the January expenses and they won’t roll around again until next year, phew!  Now we just need to tackle the next 3 months!  If we total up all the expenses that occur between February-April we are looking at $2783.91.  Since all of this needs to be accomplished in 3 months lets divide that total by 3.

                                                                       2783.91 ÷ 3 = $927.97   


Yikes, that’s a lot to save each month!  These next few months are going to be rough but the good news is that after that it is smooth sailing ahead.  C'mon, you can do anything for a few months especially knowing that the alternative is ramen and hitchhiking!

Now we just need to figure out the rest of the year…

With Jan-April out of the picture the expenses for the rest of the year add up to $3908.00. If we divide that by the 8 months we have left to save (May-Dec) then we only need to save $488.50  per month.  However, if you can challenge yourself to save the $566 we talked about earlier then you will be in fantastic shape when next April rolls around again! Or if you can challenge yourself to save above and beyond the $566 (maybe round it up to $600) you will be well on your way to starting your emergency savings fund!


STEP 3. Figure out how you are going to “find” the money to save!

THIS IS THE HARDEST STEP OF ALL! This is the step that will probably put some hair on your chest.  It’s time to take a good, HONEST, look at your spending.  It may feel uncomfortable but sometimes the things that do us the most good feel terrible at first, like sit ups or salad in my case.

Are there places in your spending you can scale back?  Probably.  You may not want to do it but if you don’t make sacrifices your financial situation is going to stay exactly the same... and you wouldn’t be reading this if you were content where you are. (If you haven’t already done so, read this article for some ideas on how to cut costs without making sacrifices.) In fact, if you start tracking (writing down) where your money is actually being spent versus where you think it is being spent, I’m sure you will find that you are leaking money on things that you won’t miss at all. I personally tend to leak money on magazines that I never end up reading. Maybe you leak money at Starbucks and can make coffee at home. Maybe you spend more money than you realized on going out to dinner just to hang with friends?  Perhaps have a pot luck bbq instead or a make your own pizza night.  Coming up with creative ways to cut back can actually be fun!

If it comes down to it, another way to find extra cash is to figure out a way to bring in more money?  Raise your rates?  Ask for a raise? Work overtime? Have a yard sale? Start an Etsy store?  Here’s your chance to be creative and think outside the box! Who knows, you might just come up with the next big idea!

As with most new habits it takes about 4o days to really cement them into place but you can absolutely do it.  Just keep at it, and as always, if you need that extra helping hand I am here for you.  All you need to do is reach out!

Cheers!