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. 
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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.  

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.
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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!
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