Save Mindlessly, Spend Thoughtfully: Part 2

In the previous blog post I discussed Dan Buettner’s findings on financial well-being from the Blue Zones. His takeaway when it comes to finances is simple: Save Mindlessly, Spend Thoughtfully. It’s best to start by saving and setting up a system to do so automatically before attempting to spend thoughtfully. If you focus on changing your spending before you start to change your savings there may not be enough money left to save.

I find that saving mindlessly is easier than spending thoughtfully. Once you set up a savings system you can forget it. When it comes to spending we make daily decisions on it. Learning to question whether a purchase is in one’s best interest can be exhausting. Thankfully, with practice it will become much easier. This is especially true if you have a budget that prioritizes your values. You also need to allow yourself enough flexibility to avoid feeling deprived.

Figure out your Big Rocks First

In an article entitled The Big Rocks: How to Prioritize Your Life and Time JD Roth discussed his impression of Bob Clyatt’s book Work Less, Live More. Clyatt revisits one of Stephen Covey’s main guidelines: unless you prioritize your values (Big Rocks), small things (Sand) can eat up your energy and time. The same applies when it comes to spending. Imagine your life is a container and you get to decide how to fill it. In my life exercise is a Big Rock while watching TV is Sand. Where I to fill my life with Sand I’d never get to the gym…

When it comes to money the Big Rocks are housing, transportation, savings, etc. Once these are taken care of you can fill in the gaps with Sand. Sand would be discretionary spending on entertainment, new clothing, or whatever else you like. You get to decide what the Big Rocks are for you. Once you do, give them the space they deserve. At the same time without the Sand your container would never fill up: that Sand gives you space to be. As motivated as I am to work on my blog, I also make time for passive entertainment. I never know where inspiration for a blog post can come from.

What if your Big Rocks are Out of Balance?

Say your housing takes 50% of your take home income. That can be very stressful because it does not leave room for fun and savings, unless you made the decision purposefully. Many people adhere to Dave Ramsey’s gazelle philosophy of cutting out all the Sand spending when paying off debt. That did not work for me, but it may work for you.

If you are unhappy with the current percentage of your expense breakdown you can make changes. A budget is a living document because it reflects your current priorities, income, and life stage. Take the time to occasionally re-evaluate your budget to verify that it still fits your life.

However, be wary of perfectionism. No matter how much you tinker with your budget, the real work is out there when you’re making those daily money decisions. Seth Godin discussed how we can get stuck in the details because it’s easier than looking at the big picture.

When I first created a budget I used to spend too much time tracking every penny I spent. Not only did I obsess over whether everything added up, I also judged myself harshly whenever I spent any money on Sand. My current system only focuses on the Rocks. I know what my life costs, so then I figured out a monthly allowance for Sand and the remaining goes to savings.

This helps me avoid the double D’s: debt and deprivation. Since I have an allowance and targeted savings accounts I don’t incur debt. This same allowance gives me flexibility to spend. I no longer agonize over every tiny financial decision; a lot of those decisions are only Sand that round out my life.

Small Expenses do Add Up

When I began the allowance system I took advantage of my natural tendency to hoard money. You may not share this tendency, so it will take some exploring to figure out what works for you. Happiness researchers Sonja Lyubomirksy and Joseph Chancellor point out that spending money on experiences brings about more happiness than buying stuff. After some time I discovered that my favorite things to spend money are on books for friends, any type of live entertainment, and classes. I expect this list to change as I grow older and my life changes.

Small expenses definitely do add up. What are they adding up to in your life? Are they another source of stress or do they add to your well-being? Often I see friends get caught up in trying to change their daily spending habits without taking a look at their large expenses. The effort required to address large expenses, such as downgrading your car or shopping for the best insurance rates, gives more results than deciding to become a hermit and not spend any money on entertainment.

On Being vs On Having

The simple guideline to “Save Mindlessly and Spend Thoughtfully” can put money in its proper place: money is a tool. I often feel society expects me to acquire as much of it as possible. This may be in capitalism’s best interest, but is it in my best interest? How does it affect my community and environment? Does the goal of endless acquisition add to my life?

I was recently introduced to a philosopher who addresses this question in Maria Popova’s Brain Pickings newsletter. Popova does a wonderful job of distilling Erich Fromm’s ideas on being in her article The Art of Living: The Great Humanistic Philosopher Erich Fromm On Having vs Being. Fromm states that “The goal of living [is] to grow optimally according to the conditions of human existence and thus to become fully what one potentially is.” When my goal is to be who I am more fully I recognize that I’d rather read than shop.

I encourage you to visit Popova’s article to learn Fromm’s necessary conditions for human flourishing. I walked away from the article feeling inspired and energized. I can see that my focus has moved away from getting money, stuff, status, pleasure, etc. I now focus on integrating myself into a whole person; I believe we all want to be the best version of ourselves. Doing so requires self-reflection and curiosity into what my values are. Once you become aware of your values (or Rocks) it becomes much easier to spend and earn money in a way that reflects them.

I’d love to hear whether you’ve identified the Rocks in your life. Do you make it a point to prioritize them?

Save Mindlessly, Spend Thoughtfully: Part 1

When it comes to money we all hear different messages. Some may say money is the root of all evil. Others may say that you can never have enough of it. Dan Buettner, international renowned speaker and National Geographic fellow, has looked into what part money plays in happiness. In his book, Thrive: Finding Happiness the Blue Zones Way, he sums up the key to happiness in your financial life with this simple statement: Save Mindlessly, Spend Thoughtfully. On the Blue Zones website you can find the following description:

Financial Life

Ed Diener, author of Happiness: Unlocking the Mysteries of Psychological Wealth, says that the key to greater well-being is to have money but not to want it too much. The best long-term strategy for financial affairs puts in place the disciplines and mechanisms that help you save mindlessly and spend thoughtfully.

When it comes to finances take time to remember your goals. Go beyond the things you’d like to have. Imagine what you’d like to feel. When I started my debt payoff journey I felt stressed and guilty whenever I bought any non-essentials. So I began to image the ease I’d feel debt free, and that became my guiding principle. From there I looked at my finances as an opportunity to improve my life rather than a burden. In this post I will discuss what saving mindlessly can look like and in the next what spending thoughtfully means to me.

Save Mindlessly

Saving has been good for my health; I no longer feel the stress of living paycheck to paycheck. Mary Beth Storjohann, CFP outlines the way to step away from this cycle in her article Stop Living Paycheck to Paycheck. A new survey from states that a third of Americans would go into debt if they had an unexpected expense of over $1,000. For years having debt, especially credit card debt, felt like a ball and chain. I didn’t feel like I could build an emergency fund while paying crazy interest rates. At the same time every little emergency dug my hole deeper. In my experience, saving and paying off debt are very similar because they focus on the future. In both instances I need to keep my dream of financial ease at the forefront.

How do you save mindlessly? The same way you do anything mindlessly: by building systems. Systems are habits. Say you have the habit of dropping your loose change into a piggy bank or buying a $5 latte on the way to work. Both are habits, or informal systems.

The easiest way to build systems around saving is to automate as much as possible. If your workplace offers retirement plans start putting money aside through them. You can start with a low number and build yourself up over time. Most banks will let you open targeted savings accounts where you can build an emergency fund worth 3-6 months of living expenses. Or you can save for big ticket items like a car or a vacation.

The point of saving mindlessly is to create grace in your budget. Unexpected expenses are normal. Unfortunately, the amount of the expense cannot be predicted. If you were to have a $5,000 emergency come up, what would you do? Could you pay it from your cash flow, your savings, or would you take on debt? All three are valid options, but focus on which one works towards your overall well-being. Think back on what you have done in emergencies before and decide which experience worked out the best overall.

Where to start?

When it comes to savings my first goal was an emergency fund because I was tired of stressing out every time something in my car needed to be fixed. More than that, I hit a bottom when I could no longer deny that my entire personal finance situation was stressing me out, not just emergencies. I remember the day I paid all the immediate bills and realized we only had $32 for the next two weeks. Fortunately my boyfriend at the time had been saving money for my birthday and we were able to use that for groceries. Otherwise, we would have resorted to more credit card debt. This experience clearly told me my lifestyle was not working.

At this point I asked a close friend for help. She had her own financial house in order and had done very well for herself. She worked with me to figure out how much of my income could be put away. I then created an automatic transfer out of my checking into savings. Once we had $1,000 we began to pay off debt as follows:


  1. Credit cards – finished Dec ‘13
  2. Student loans – finished Feb ‘15
  3. Extra money??? This is when I began saving to replace my car and set up a vacation fund

For four years I have consistently been putting away money for my future well-being. At first I paid off debt, and now I can save for large expenses. Today saving is mindless, I never think about it. Contrast this to before I built this system. Five years ago I was always thinking about saving and paying off debt: I constantly scolded myself for not doing enough of it…

How much should I save?

I don’t remember how much I saved when I started, but it wasn’t much. I didn’t really have a budget so I guessed at what might work and used the book All Your Worth by Elizabeth Warren to find what was feasible. Elizabeth is a US Senator and previously a Harvard Law School professor, you can find a wonderful review of her book at Get Rich Slowly. Also, JD Roth created a worksheet that can help you find out where you stand and where you can start moving towards. Regardless, start with an amount that will not deprive you, while at the same time it must be substantial enough for you to see progress.

Adjust your savings rate whenever your income changes. Adjust it when you reach a goal, either funding your Roth IRA for the year, paying off a debt balance, or going on the vacation you’ve been planning. Adjust it when you become re-energized about reaching a savings goal and want to be more frugal with your discretionary spending. The point is adjust your savings rate. It is YOUR savings rate. It is meant to put your future self in a comfortable place and to allow yourself to be financially confident today. After a few months of consistently saving I felt the psychological benefits. I saw that I could one day be debt free. I then saw I could fully fund my retirement for the year. I now see that I can replace my aging car and go on vacations.

What could go wrong?

You could have an emergency before your emergency fund is fully funded. You could get laid off. There could be a really great sale on shoes, Groupon vacations, or a once in a lifetime concert. You could have a bad day and decide you need retail therapy. It could be Christmas/Hannukah/wedding season. You get the idea…

All of those are valid reasons to stray from the saving system; doing it once will not wipe you out. However, be conscious of whether emergencies/sales/etc are coming up very often. You might be saving too much thus not giving yourself enough room to enjoy your money. One thing I have done is set up a “discretionary spending” savings fund. I put away $200 every month not for savings, but for things like birthdays, weddings, or sales. At first I did not set anything aside for those things. I quickly learned it was almost impossible to have no discretionary spending funds after spending all of my week’s “allowance” on a wedding gift. It left me wondering whether I should be resentful at my friends for getting married or at myself for having a budget. The reality is that I was learning what works for me when it comes to discretionary spending, and I’m still learning about it.

Another possible reason you may be dipping into your savings too often is that the money is too easily accessible. One of the best things about saving for retirement in an IRA is that I cannot access the money for another 30+ years. When it comes to my emergency fund I have it in a spate online bank. When I need money from it I need to look for my password, sign on, initiate a transfer and wait three days before it clears. For me that’s enough of a hassle that I won’t do it unless it’s absolutely necessary.

How do I stick to it?

I have always been a saver, or at the very least I have always thought of myself as one. However, for a long time I dipped into my savings account almost monthly and my paltry emergency fund would not have covered any real emergency. Like I mentioned earlier, after I hit my bottom I talked with a friend about the stress I felt. From there I recognized I had been both oversaving and overspending, thus the mounting credit card debt. She helped me create a more balanced budget; I could not do it on my own just by reading personal finance blogs and books.

After our talk I felt accountable. She never asked me about my finances, but I knew she wanted my best interest and I reached out to her whenever I had any questions, doubts, or concerns. I also focused on the progress. After saving a $1,000 I felt empowered. From there I mapped out how long it would take to pay of each credit card. I focused on the smallest balances to keep myself motivated.

Lastly, be gentle with yourself. Maybe you didn’t grow up with people who modeled financial prudence. Maybe you don’t make enough money to save. Maybe you have someone that always bales you out of financial emergencies so there is no real need to save for them. Regardless, if you want to enjoy more ease in your finances having a mindless saving system is the way to go.

Do you have a system that allows you to save? I’d love to hear what it looks like and how you developed it.

International Women’s Day

My office is celebrating International Women’s Day next week and I am very ambivalent about the whole holiday. On one end, it’s nice to be celebrated, on the other, I’m uncertain about what we’re celebrating…

This holiday has been recognized in some fashion as far back as 1907. The United Nations declared it an official holiday in 1975. The movement was initiated by labor parties to improve the working conditions for women. To this day the celebration continues to be focused on women who work outside the home. At one point the holiday was actually known as “International Working Women’s Day”. Throughout the past century the holiday was very heavily celebrated in communist and socialist countries, this makes sense since that type of government extols the virtues of the proletariat. After the fall of the Soviet Union some countries abandoned the practice, although since then many have resumed it.

A part of me feels uncomfortable with “International Women’s Day” because it casts women as oppressed, as victims of society. This may be true for many women across the country and the world, but it does not ring true for me or many of my college-educated friends. Or at least it doesn’t seem to be true. How can we know whether there is economic parity without access to our coworkers’ income? In a Huffington Post article First Lady Michelle Obama says it’s hard to think about salary and remember the pervading wage gap when taking a new job. All I can see is that I am doing much better than my mother was at my age or than my cousins back in Mexico. All I know is that I feel free; I am financially independent of a man, that’s much more than my mom or my grandma had at my age.

This feeling is best described by Virginia Woolf in “A Room of One’s Own” when she describes the freedom she felt after receiving an annual stipend from an inheritance:

“No force in the world can take from me my 500 pounds. Food, house and clothing are mine forever. Therefore not merely do effort and labour cease, but also hatred and bitterness. I need not hate any man; he cannot hurt me. I need not flatter any man; he has nothing to give me. So imperceptibly I found myself adopting a new attitude towards the other half of the human race.”

A Room of One’s Own by Virginia Woolf

When I first read A Room of One’s Own I felt so excited to recognize that I have the freedom Woolf talks about. I felt excited to be part of progress as a woman who was enjoying freedoms that would’ve astonished the women of 100 years ago. I am a single woman in my late twenties, daughter of immigrants with my own apartment and car. I remember reading this passage to my mom with so much pride and happiness. I shared with her that my fridge was not working and that I had the money to buy myself a new one. A few years ago a broken fridge would have been an emergency, but at this time it felt gratifying to see that my well stocked emergency fund was serving its purpose. My mom laughed and agreed, she also suggested I start building myself a vacation fund. I am building a life that combines pleasure, meaning, and using my strengths; according to positive psychologist Tal Ben-Shahar these are the key ingredients for happiness. I do not spend time and energy resenting men or those from more privileged backgrounds than my own. At the same time, I acknowledge how lucky I am to have been born in the US and not in Mexico, where I would have had a lot less opportunities.

Secular Saints Virginia Woolf Candle
Secular Saints Virginia Woolf Candle

Everyone is blessed with self-agency. We can all decide what we focus on, be it inequality or gratitude for what we do have. This is different than complacency or being a doormat. A few months ago I had to go against my nature and repeatedly ask my manager for an overdue performance review along with a salary review. It felt very uncomfortable to have this conversation and respectfully persist. I would not have done it without the encouragement of a very good friend and mentor. My mentor is a woman who has done well for herself in her career in corporate America.

I once complained to her that I had not received a raise in the 18 months I had been in my position. She pointed out that the fact I was not getting a raise was not personal, rather it was a result of me not asking for it and that most companies do not actively try to increase their expenses. Whether it was right or wrong of my company to postpone my performance review was irrelevant. I needed to stand up for myself. Maybe I felt so uncomfortable having this conversation with my boss because I am a woman, but maybe this conversation is difficult for everyone regardless of gender. I am the first one in my family to work at a corporation, so I am very grateful to have met a mentor to help me navigate this area of my life.

In the not too distant past women were much more openly excluded from economic self-sufficiency. In the first chapter of A Room of One’s Own Woolf compares a lavish meal at the men’s college against a meager one at the women’s college where she was to present a lecture. After dinner she points this out to her host who shares with Woolf the difficulties of raising funds for a women’s college. Men are not too interested and most women have no money to give. Especially since married women in the UK were not allowed ownership of their own money until 1870. That is a mere 146 years ago. True, at the rate we’re going we many not reach parity for another 117 years, but today there are countless women like myself enjoying financial self-sufficiency. It is the kind of self-sufficiency that Woolf describes as essential for creativity. It is definitely not perfect, but it’s progress. Just like I take it for granted that a married woman can own her own property I hope to see my daughter, or at least granddaughter, take it for granted that she will earn equal pay for equal work.

Beyond Hoarding: My experience tracking my spending for a year

I decided to get myself a big ticket item after tracking my expenses for a year. I often feel I spend too much, that I should be saving more money and eating out less, that I can’t afford to travel or go see shows. So I took a suggestion from Barbara Stanny’s Secrets of Six-Figure Women and decided to track my daily spending. I’ve yet to achieve the six-figure income, but Stanny points out that building habits early has big payoff’s in the long run. As I explained in my post What Type of Financial Planner Will I Be? I follow the Balanced Money Formula from Elizabeth Warren’s wonderful personal finance book All Your Worth so I already know where most of my money was going.

Balanced Money Formula
  • 50% Must-Have’s (rent, groceries, phone bill, min debt payments etc)
  • 30% Wants (internet, gym membership, eating out, etc)
  • 20% Savings (retirement savings, debt payments above min, etc)

I focused my tracking on my “Wants” spending, basically on all the non-essentials I could live without if I were to become unemployed. After a year of tracking this I am very happy to report that in 2015 I only spent 18% of my net income on Wants. How do I balance this with the nagging feeling that I’m much too extravagant for having an entire apartment to myself and that it’s ridiculous for me to buy any new clothes given my abhorrence of materialism? By giving myself grace. In order to enjoy my life I remind myself that I can spend money; that hoarding at the expense of enjoyment is not a virtue.

I started off by writing down everything I spend and building a simple tracker on Google docs. I already include internet and my gym membership in my recurrent expenses, for this exercise I was looking at everything I spend in addition to those two things. I had a lot of fun building the tracker because I am a data analyst by trade and I enjoy myself as much working in Excel as I do swing dancing or spending time with friends. My love for numbers is beyond words. After tracking my spending for a few days I began to create categories that reflected what I tended to spend money on.

You can see my main spending categories below with the percentage of the total, and below I’ve listed the smaller ones in order of largest to smallest

40% – Hobbies & Rec
Self-Actualization: Classes on spirituality or other growth related activities
Travel: Includes transportation, lodging, souvenirs, etc
Swing Dancing: …or line dancing, or clubbing, or anything related to dancing including drinks
Toastmasters: Club dues, or events
: Going to shows, comedies, anything related to random hobbies
CFP: Events with the Financial Professionals Association or educational materials

30% – Gifts
Celebrations: Weddings, baby showers, Christmas gifts, etc
Birthday: My birthday or other people’s birthday, includes presents and dinners
Self-Care: I treat myself to a Korean Scrub every once in a while, and tattoos!

24% – Eating Out
Friends: This includes eating out with family and anything outside of work
Coworkers: Eating out during work hours
Treat: Mostly Starbucks runs or anything for my sweet tooth aside from a full meal with friends
Convenience: Anytime I forgot to pack a lunch, or needed a snack on the go

4% – Clothing & Other Stuff
New purchases: This includes thrift shops, shoes, jewelry, etc
Dry cleaning: Includes car washes too, I figured my car falls under stuff maintenance
Repairs: I’m a big proponent of wearing out what I own rather than throwing it out

2% – House Misc
Decorating: Anything extra to redecorate or upgrade my house
Make-Up: Includes getting my eyebrows done and hair-cuts

After a year of faithfully tracking everything I am pleased with what I see and very grateful for the experience. My biggest expenses are in “Hobbies and Recreation” along with “Gifts”, that’s exactly what my Wants money is for! Happiness researchers Sonja Lyubomirksy and Joseph Chancellor point out that spending money on experiences brings about more happiness than buying stuff, and I completely agree1. The first few months I did this I felt uncomfortable with the amount I spent eating out, however, after a closer look I saw that I almost exclusively eat out in the company of others. I really enjoy cooking so I always take lunch to work, which means that when I do eat out it’s because I’ll be sharing a meal with someone, and not because of convenience. Eating with coworkers is not only fun, but it can also be good for my career since I often learn about things going on outside my department and potential opportunities. Eating with friends is extremely enjoyable, and as a single person it’s one of the few times I don’t eat alone. I often invite friends over for a meal at my house because like I mentioned earlier I love cooking, however, given traffic in Southern California it’s easier for us to meet halfway rather than one person trekking across traffic.

The experience of tracking my spending increased my trust in myself. I learned that I can be trusted with money, that I do not spend carelessly, that I can relax! For others, it may teach them that they spend too much on things they don’t enjoy or that they would like to focus their spending on bigger items. Regardless, tracking your spending for at least 30 days will be a very enlightening experience. If you feel uncomfortable around your spending knowing your patterns will shine a light on possible changes. I follow the Balanced Money Formula because it combats my natural tendency to hoard and deprive myself when it comes to spending money. I believe everyone needs to take a close look at themselves to see what their money style is and figure out a system that will enhance their life. From this experience I learned that I could comfortably afford a lot more extravagances, in fact, it’s changed my definition of what’s outside of my budget.

One of the extravagances I have always been curious about is having a personal trainer. I work out consistently, but only in gym classes or on the treadmill because I am very intimidated by strength training. I had considered getting a personal trainer, but I felt uncomfortable with the thought of paying someone for something I could potentially learn how to do on my own. However, after two years of going to the gym I have still not learned how to use any of the machines and have never stepped close to the bar bells. During this time my stamina and sleep have improved, plus I definitely benefit from the stress management of exercise, but maybe I could be more effective with my time at the gym.

I recently switched gyms and attended their complimentary personal training session. The cost of a personal trainer is comparable with the monthly fee of having a financial planner, and in fact, there are parallels between both professions. Financial planners and personal trainers are motivational coaches with specialized knowledge. Rather than expecting myself to be an expert at everything I can hire someone to teach me new skills and help keep me accountable. After a review of my Balanced Money Budget I’ve included the personal trainer annual cost by reducing the amount I save down to 36% of my net income. I am excited about learning from a personal trainer and deliberately spending money on an experience I thought I could never afford.

Who leads in a Financial Planning relationship?

I recently attended a leadership training that left me wondering what leadership is and how it relates to financial planning. Leaders and managers bring about a new expression of life, leaders are those with the vision, while managers implement. Both of these roles can be filled by one person, or it can rotate within a team. When it comes to financial planning the client is the leader who directs the vision, because he is the one who will truly benefit from it. The financial planner implements steps to get the client’s vision and manages progress. Or at least, that is what the relationship will eventually look like.

Many clients hire a financial planner because they need help with a specific life issue, however, the client often needs to step back and look at the totality of his life. Questions such as “How did this issue come about?” and “What would he like the end-result to be?” can help the client get a better understanding that financial planning can encompass more than what initially brought them in to see a financial planner. For example, say a client comes into an unexpected inheritance and is unsure of how to handle it. There are questions on investing, buying a home, on how much of it to use, all while dealing with the loss of a loved one. How can he go from having all these questions to having a vision? This is where the financial planner gets to lead and share her experience with similar clients. She can simply say, “My goal is for you to feel comfortable and confident in whatever decision you ultimately make so that you can have a clear path to follow.” This clear vision of the client at ease will move the conversations forward. At this point the client can begin to get organized on his priorities while envisioning himself at ease when it comes to his financial life.

In this scenario the financial planner led the client on what the purpose of their relationship is, afterwards it is the client who begins to lead the effort depending on his life circumstances, and there are as many ways to prioritize life as there are people. If the financial planner and client are a good fit it will be comfortable for the financial planner to manage the implementation of the client’s vision, especially when the client trusts his financial planner’s expertise and feels that she has his well-being as his final goal. When they are not a good fit there will be at the very least annoying friction; or at the other extreme a complete stalemate.

The dynamic between leadership and management reminds me that the main goal is balance and that all of us have our penchant for each type. I recently read The Help by Kathryn Stockett and it distinctly showed the importance of both. The story centers on a book being written by Skeeter, a young white woman in Jackon, Mississippi, on the experiences of black maids during the 1960s with the help Abileen, her friend’s maid. Originally the idea of writing about what it’s like to work for whites came from Abileen’s diseased son, and Abileen is the one who recruits other maids, while Skeeter writes the oral interviews and procures the book deal. Who can say who the leader and the manager are in this relationship? Both women are integral because Skeeter would not have been able to convince the maids to talk with her, and Abileen would not have been able to get the book deal, however both women edit the interviews. To me, theirs was the epitome of an effective partnership because they honored each other’s contributions and offered each other encouragement in the face of many obstacles.

Management is sometimes looked down on because it can lack the flair and vision of leadership, however a leader who is unable to stay grounded enough to implement his vision is only a dreamer and will not bring about anything new to add to life. A client who goes to a financial planner will over time develop a vision of what they would like their financial life to look like. The financial planner can offer feedback, but her main job is implementation and especially encouragement, because progress takes time. When there is a good relationship between parties it may not matter as much who is leading, overall it will be a win-win situation.

Evaluating Retirement Planning

My great uncle passed away recently and like death always does, it upset the status quo and created a need to re-evaluate everything for those closest to him. He was my grandmother’s twin and financially dependent on her because as is the custom in Mexico he did not save for his old age. Instead, he simply assumed that either his son or other family members would support him. My grandmother spent $175/month on his living expenses and with that he was able to live comfortably in their parents’ home under the care of his neighbors and his niece. She stopped by his home  every morning after dropping of her kids at school to bring him oatmeal and drop off groceries or run other errands.

It’s amazing to think that an amount as small as the cost of a cross-fit membership could support a grown man. It also explains why so many people retire to live abroad, the cost of living in a developed country, especially in large cities, is out of many people’s reach. Now my grandma has an additional $175 freed up in her cash flow, money that she could easily dissipate without leaving any lasting benefit. Grandma has very limited expenses because she lives with my youngest aunt Monday-Friday, and then spends the weekends at my mom’s place. She has no living expenses and receives a small social security benefit for having worked over 20 years in the US as well as a widow’s pension from Mexico.

In the past she’s overspent and had some issues with credit card debt, so I was a little, tiny bit, preachy when discussing what she could do with the additional money. I suggested she open up a savings account for each of her six great grand-children giving them each $25/month, in ten years they’d each have $3,000 enough for a down-payment on a house in Mexico, or a semester in college. She briefly considered the idea, however, saving for the future is not my grandma’s style. She’d rather buy each of them clothes or toys every month, which maybe is a better decision since she’ll get to enjoy watching them appreciate the gifts.

The point is that my grandmother is a 78-year-old woman who has been making money decisions for much longer than I’ve been around. From what I know, her style has always been to enjoy it now and give away as much as possible. She is generous, in fact she takes pride in providing for her siblings and family members, and at the end of the day she has more than enough for herself. In her position I would act differently and focus more on enjoying my own retirement and leaving a legacy, but I was born 50 years after her and in a different country. I grew up with the ideal of the ambitious, self-made immigrant, while she was taught that being a mother and wife were her ultimate goals. I completely disagree with the way she spends her hard-earned money and I also respect her decisions, we all have different money priorities.

As a future financial planner whenever I think of retirement planning in my family I feel a chill. At some level my parents expect to be cared for by family the way their parents were. Unfortunately, they’ve had far fewer children than my grandparents and they have become accustomed to life in the US. My great-uncle did not drive thus he had no car expenses. His home was paid for, and his main form of entertainment was smoking cigarettes and visiting with neighbors. My parents like buy a new car every few years, travel internationally, and go to the movies; I would definitely not be able to provide that for them on $175/month. When I first learned of retirement planning in college I asked my mom whether she’d started an IRA. She said yes, she’d paid for my brother and I to finish our education. Yikes! I was about to point out that I had gone to college with scholarships and grants, but I saw that an argument like that would only hurt both of us. To this day I still feel a pit in my stomach when I remember that incident.

A couple of years ago I came to terms with the fact that I will not be able to be my parent’s sole source of retirement. In reality, they did not fully expect that of me. They each own property in Mexico and they’ll probably move there and scale back their lifestyle to fit their social security benefits. Who knows, they may decide that visiting with neighbors and taking naps in their 70s is more enjoyable than lugging luggage around in foreign countries. Or, I may decide to have them move in with me. My grandmother’s current arrangement gives her a room in each of her three daughter’s homes and when she needs a break she’ll visit her sisters who live six hours away for a couple of weeks. My dad has a total of six children including my step-siblings, so it’s possible he may get into an arrangement like that of my grandmother’s. My mom owns her home in Mexico and may only need the equivalent of $175/month from my brother and I to supplement social security. Regardless, they’ll be working for years to come.

In a perfect world my parents would be saving for retirement, just like the parents of all my friends. But they’re not. In fact, they think it’s odd that I’m saving for retirement, my dad actually teases me about it. Growing up there were always stark reminders of my immigrant background. Such as my parents thick accent or having an elaborate quinceañera. I took pride and celebrated how much better my life was thanks to their efforts. So far, discussing retirement with them has been the most painful part of assimilating into the US. I’ve disowned their ideas, and although they don’t blame me for it, I still carry a hint of guilt. Thankfully, on the positive side neither of them expect complete leisure in their old age. My grandmother is the de facto baby-sitter for five of her grandchildren. She cooks, does light cleaning, and works the cash register at the family stores. She still works every day, except now her pace is slower. She mostly works as a hobby and to get out of the house for a few hours. During the last couple of years of my great-uncle’s life he staunchly refused medical treatment for everything and anything. I believe this may have been partly because he didn’t want to be a burden on my grandmother, but mostly because he hated hearing doctors nag about his smoking. Who knows what my parents’ old age will look like? Maybe they’ll continue working and refuse medical treatment also. What I do know is that I hope to have them around for as long as possible.

How do I financially flourish?

A Financial Life Planner acts as a sounding board for people who want to experience more ease and balance in their financial life, who want their financial life to work in their favor, rather than against them.

I chose this career because I enjoy working with people and seeing them grow. I chose this career because while getting my own finances in order I learned I love personal finance! More specifically I love being confident about the state of my personal finances, and although many people share this love not everyone is able or willing to look at their finances this closely without outside support. I have friends who love treating their bodies well and can stick to balanced meals and regular exercise easily. I on the other hand have seen a fair number of nutritionists to figure out what works for me and I routinely have to motivate (bribe) myself to work out. We all have our strengths.

My own financial journey

I really grew from the process of getting my own financial life planned out. With the support of a mentor I went from not being sure where my money was going and feeling very guilty whenever I spent anything to a feeling of ease and grace around my money. I currently record every dollar I spend and pat myself on the back for enjoying my money so thoroughly. I moved away from my money hoarding tendencies to a much more balanced life. I use a cash flow budget that gives me space to enjoy the now while taking into account my long term goals. I love to tell people that I give myself a weekly allowance, and that if I wanted to I could literally burn it. All this while saving for retirement, a car, travel, and living comfortably.

It took a lot of work to get from where I was to where I am now. It all started because a friend agreed to take an hour of her time and look at how I was spending my money. She gave me a few quick tips and pointed out that only $21 of my $154 student loan payment was going towards the principal. That shocked me.

In my mind I was financially savvy because I occasionally clipped coupons always ordered the lunch special if available. Moreover, I took pride in the fact that I had paid for my BA with scholarships. After an hour with her I saw that I really had not been paying attention to my finances at all. A few weeks later this was confirmed when I realized that I only had $32 to my name after paying off my credit card bill, because as a rule I did not carry a balance. My monthly budgeting plan was to worry and hope I’d somehow miraculously spend less the following month. This was my bottom; this was when I realized that what I was doing was not working.

From there I began exploring personal finance blogs. I started off with Get Rich Slowly, dabbled a bit in the Mr Money Moustache and Dave Ramsey mindset, and then fell in love with “All Your Worth” by Elizabeth Warren, specifically the elegant simplicity of the “Balanced Money Formula”, which is a way to simplify cash flow.

  • 50% Must Haves: rent, car maintenance/payment, insurance, food, min payments on debt, etc; basically, if I were to become unemployed I’d be able to live on unemployment if my life style only cost 50% of my take home income
  • 30% Wants: gym membership, internet, eating out; basically, anything I could go without where I to become unemployed
  • 20% Savings: payments towards debt above the minimum, retirement savings, travel savings, emergency fund savings; basically, anything that’s meant to be used in the future

I found freedom in having a balanced budget that allowed for miscellaneous life expenses. In order to drop my Must Haves to 50% I cut my cell phone bill to a basic plan and increased the deductible on insurance. After these changes I came in at a comfortable Must Have rate of 53% of my take home pay. I took a hard look at my savings and increased it from 14% to 18%, this left me with a wants budget of 29%. From there I started to relax, I started to feel that my money was my own to spend, rather than money that would be better spent sitting in a bank or paying off debt.

My hope is that as a Financial Life Planner I will support people as they go through their own journey to a healthier financial life.