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.
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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!
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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?!
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​​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.


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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!
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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.

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!