Don Miguel Ruiz

What are your here for?  How do you want to spend your limited time?  If your answer is that you are here to love, to serve others and not to be served, then you already have everything your need to be happy.

Bernie Siegel

The need to make wise choices encompasses every area of our lives.  Since we have time for only a limited amount of stuff, we need to choose wisely what stuff we're going to allow to take up that time.

Elaine St. James

Work miracles with praise.  Appreciation accelerates accomplishment.  People go on to bigger things when they are made to feel that their work is worthwhile.

Wilferd A. Peterson

Tougher Times

It seems that people all over the world are in the midst of tougher times right now.  Food and fuel are more expensive, businesses are cutting jobs to deal with higher costs, people are losing their homes because of things like variable-rate mortgages and lost jobs, and people's simply aren't able to make their money stretch like they used to be able to do.  There are many reasons that have combined to make these times as difficult as they are, but the reasons aren't the most important thing to know right now.  What's important is that we decide just what we're going to do during such times to make our lives fuller and richer, and to avoid being dragged into even tougher times.

First of all, tough times call for tough decisions.  Many people are having to make what they see as the ultimate tough decision, leaving the homes that they've lived in for years to foreclosure.  Before things level out a bit, even more people will feel forced to do the same thing.  But during tough economic times, one of the most important things that we can do is decide to change our spending habits.  We need to look at the money that we spend and what we spend it on, and make decisions as to whether or not we're going to continue to spend money in the same ways.  Some foods that we buy are more expensive than others--perhaps it's time that we pay more attention to sales and to other cuts of meat or to different brands.  Most of us have gotten into the habit of driving almost anywhere we go, even if it isn't far away.  It may be time for us to decide to walk to the store for the milk, saving money on gas and helping our health at the same time.  And should we pack a lunch instead of buying it at work?  Can we make a pot of coffee at work instead of spending $2.50 on a cup somewhere else?

It's important to keep in mind that even if the amount of money we save by one action seems insignificant, when we take many actions to save money then we see a much larger effect.

The decisions that we make in tough times almost always have to do with spending habits that we've developed over the years.  Just because we've developed these habits, though, doesn't mean that they're an integral part of who we are, and it doesn't mean that changing them will make our lives worse or less enjoyable.  It just means that we're looking at a situation and making changes that we feel are important to make.

In addition to making decisions, it's also important that we not lose faith in life and our God.  Life goes on--this is one of the most important and universal principles there is.  Everything that we need in life is within our reach, and it's important that we keep in mind that no matter how bleak things may look, there is still good and hope in the world.  Our perspectives tend to shift with our conditions, and we may be hopeful one day and hopeless the next, even when our situations haven't changed considerably.  It's a well documented fact, though, that the people who weather tough times the best are those who keep positive attitudes and who trust life to take care of them.  Yes, they may lose some things, but the loss of some things isn't cause to lose hope and faith.  They're just things.  We have to keep our focus on the positive sides of our lives, the things that we accomplish and the people we love and who love us, and the opportunities and potential that are still there even if other opportunities seem to have gone away.

We also have to keep in mind that we're still part of larger communities, and that when we make our decisions about spending, we need to keep in mind that the money we do spend is necessary to maintain the community in which we live.  While we may not want to buy lunch out every day, we can't pinch our pennies so strongly that our fingers hurt--that would indicate a lack of faith on our part.  There's a fine line between taking care of our interests and overreacting, and we can cross that line without realizing it.  Perhaps bringing lunch four times a week and buying it once is a compromise that will help you to save money while also still helping a business to survive.  The money we have is a tool with which we can help others, too, if we're careful with it.

All in all, the tougher times provide us with many challenges.  We have choices, though--we can allow those challenges to bring us down if they don't turn out as we want them to, or we can do our best to meet the challenges and then feel at peace with the results, knowing that we have, indeed, done our best to meet them.

For some of us, the challenges will grow into crises, and then we have to deal with them on completely different levels.  But the bottom line of how we come out of it all is in the types of decisions that we make, including the amount of time we consider possible options, and the amount of faith we have that life won't let us down.  It may take some things away from us, but then we have to be open to the idea that losing these things may be best for us after all, in the long run.  Sometimes we may be forced into simplifying our lives through loss, but in the resulting simplicity many people find a newer, fuller life.  It's a difficult thing to consider, but it's always a possibility. 

© 2008 Nightingale-Conant Corporation

I teach a lot on the concept of “financial crashproofing.” Sounds like a good thing given today’s economy, correct? Well, within the laws of financial crashproofing that I teach in my program Protect Your Wealth, I tell my listeners about their absolute worst financial enemy — any guesses before we begin?  You may or may not have guessed it. If you did, it’s a step in the right direction, realizing that your worst financial enemy is you.

In looking at the concept of “your worst financial enemy is you,” the first thing we’re going to look at in the context of financial crashproofing is bringing your wasteful spending habits under control. Simple concept. Hard for some people to do.

You know, people like to blame other people for their financial troubles.  Oh, it’s the market, or it’s someone else, or my job, or my boss, or whatever.  But the main reason that financial lives crash is fiscal irresponsibility.  The main reason we experience financial problems is our own fault.  We don’t save enough.  We spurge on pointless expenditures; we run up credit card debt; we waste hundreds of thousands of dollars on vices.  We convince ourselves we’ll never get hurt or get old or otherwise be in a position in which we have to use savings, and, consequently, we do not adopt the kind of savings and investing structures that we need.

So keep in mind, your worst financial enemy is you, and we’ve got to change that.  We’ve got to turn that around.  So what I like to use to try to encourage people to save and invest safely is what I call the pyramid financial structure.  And I want to introduce you to that right now.

I call it the pyramid structure because the pyramid is basically the most stable structure on earth.  When you think of a pyramid and how stable it is, with the point at the top and the four lines going down to the four corners, you realize that it’s just a very stable structure.  You look at the pyramids in Egypt for example. They’ve lasted forever; they’re among the only structures of that age that are still standing.  It’s because they’re so solid.

Now I want you to think about your financial future, and saving for your financial future and building up a very positive financial future, as something like a pyramid.  You sit on top, and there are four corners at the bottom that provide you a strong base of support.  Each one of those four corners is a financial account.  And the lines going from you at the top of that pyramid down to the four corners is some sort of direct-deposit mechanism that sends money into each one of these four accounts that are used for four very different kinds of purposes.

The idea here is to have four pools of money, each for a very defined purpose, and to effectively separate yourself from some of your money.  It’s very important to look at them as a kind of legal structure of having different accounts for different purposes because it helps create a disciplined mind.  The structures themselves do nothing, but they really help you structure money in your mind in a way that says, “Okay, certain money is for certain things, and certain other money is for other activities that I’m going to engage in.”  These legal structures make it easier for you to exercise financial discipline.

Now, the four bases of the pyramid, the four accounts that I’m talking about, are as follows:  First is what I call the limited-purpose checking account.  You should put roughly 70% of your money in the limited-purpose checking account.  That’s for day-to-day expenses of the type that we’ll discuss shortly.

Second, we have what’s called the slush fund.  And about 10% of your money, your after-tax dollars, should go into the slush fund.  That is a corner of the pyramid that’s for fun things, vacations, and luxury items. This is not one of those “don’t spend any of your money” techniques.  You should be able to spend about 10% of it doing things you like and enjoy.  But there are some limits.  Some of the “fun things” that you might do are too anti-structural to be part of a crashproofing program, and we’ll try to eliminate those entirely and focus on the things that are really fun and that don’t really dissipate your wealth structure.

Third, you’re going to need to have an untouchable savings account.  Ten percent of the money you earn goes into this corner of the pyramid until you’ve reached a comfortable level of savings, and then you can use it for other things.

Finally, we have the investment clearing-house account. About 10% of your after-tax income goes into that corner of the pyramid as well.  Once you have your savings where it needs to be, then you would up that to about 20%.  You wouldn’t put it in the savings part, but you’d put it into the investing part.  That money you use for stocks and bonds and commodities and other traditional investments that I talk about more in depth in Protect Your Wealth.

So to recap, you have four accounts, the four bases of this pyramid.  The limited-purpose checking account, 70% of your income, which you live on, on a day-to-day basis.  Slush fund, 10%, which is for fun things.  A savings account, 10% for just saving, money basically gathering dust for a rainy day.  And 10% for investments.  If you can establish a structure that reasonably approximates that pyramid structure, you will find you have tremendous financial security, the strongest base of financial security that you can possibly have.  And as I said, you don’t have to diminish your lifestyle to do it.  You can have fun at the same time.

All right, let’s start off now by talking about the first of the four accounts that you need, the limited-purpose checking account.  As I said, put about 70% of your after-tax income going toward everyday expenses.  Now, those expenses that come out of your limited-purpose checking account are home, rent, mortgage, insurance on your home, car expenditures, food expenditures, clothing expenditures, utilities expenditures, child care, and routine entertainment like going out for pizza or to a movie.

The objective is to live on 70% of your income, to have 70% of your income go to those things.  It sounds very difficult to do.  But in fact, I found, and by talking to people and studying this situation very carefully, it really isn’t that hard to do, if you’re just a little bit more careful about the way you spend your money.  Most people waste so much money that if they made a few minor adjustments to their lifestyles, they could actually live on a day-to-day basis on 70% of their income.

Let’s talk about home first.  First, you have to properly purchase and finance your home.  I always tell people to live in a right-sized home.  The objective is to live in a home that you can easily afford and have some equity in that home for a financial emergency if you ever had to sell it, and not too heavy a debt load in case the real estate market crashes, like the downturn it’s currently in. 

You might recall that Texas in the late ’80s and early ’90s had a total real estate collapse in which people had overmortgaged themselves and unfortunately couldn’t even get their mortgage amount out of their house when they sold it.  A lot of people just abandoned their houses and left and were foreclosed upon.  It was a terrible situation. 

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