Like A Boss

       Personal finances are like running a business and you’re the boss. If you owned a business and spent every penny you made, your company would be worthless. The same is true with your personal finances; you can't build wealth if you are not keeping a portion of what you take in for yourself. Successful companies have a vision (plan) for the future. They make moves today that will bring impact years later. It’s important to consider that each spending decision you make should contribute to the big picture (success of your business). Successful businesses don't carelessly waste money on frivolous purchases, each spending decision is carefully thought out as a need for continued operations, or may offer a return on investment. For our personal finances, return on investment can mean many things, buts it's not selfish, and ties directly to the big picture. Invest in essential needs including food, electricity, and clothes. But also in relationships with good friends, your marriage, family, and your future. Because the return you receive from those investments is far more valuable than any amount of money. 
         This sounds great, so what do we do first? Well, there is actually something some of us need to do before we can even get started. 

The Step Before Step #1 

          This seems like an assumed part of the process, but we all have friends and family that operate in the “red”. I am not referring to debt at this point, I want to talk about being behind on payments. This can include utilities (gas, electric, water), car payments, and even those overdraft fees applied to our checking accounts. It’s not as uncommon as we think. There are many people that will pay bills month to month and that $27 overdraft fee is just part of their monthly expenses. In 2016 alone, there was $15 billion in overdraft fees paid (CFPB). These late payments can be reported to credit bureaus and lower our credit scores. Our credit score is basically our financial reputation to pay back the money we borrow. Financial institutions use this to determine whether we are qualified to borrow money. This is a perfect example of decisions made today impacting our tomorrow. A low credit score can keep you from purchasing a car, or even getting a mortgage. So before we can even talk about managing your finances, we need to first get our head above water. 

          The first thing to do is simply write down all the bills that are delinquent. Once you have the list in front of you, we need to determine which one to pay up first. This priority is up to you, balance, how late, or any interest incurred. We have options to help us get up to date on our bills, especially if the amount isn’t that much. This will take some discipline on your part to maybe cut back on some monthly spending. I would even recommend eliminating unnecessary bills (Netflix, Cable TV), Oh No! not Netflix. Consider working a second part time job to generate enough income to pay these bills, even if it's temporary. This would be a good use of a tax refund, if you receive any money back use it to get caught up. Financially it’s better not to get money back every year, but we will cover this later. Sometimes negotiation can work out as long as it’s not something you have done several times before. Banks may waive an overdraft fee if you call and ask, or contact the utility company about splitting up your “behind” amount over the remaining bills for the year. Sell some stuff! sell on e-bay, craigslist, Facebook or even go old school and have a garage sale. I mean sell everything you don't really need, if you're not living in it and it doesn't have a pulse, then sell it! Now, take this money and pay those bills to the current billing cycle. This is the step before step one and now we can talk about that nasty little "B" word.

Breaking Point

          I would love to tell you that I had just one moment, a single turning point, or final straw, but I had several. I can remember coming home only a few months into living in the rental house, and getting the mail where I found a gas bill for $250. It’s important that I mention that our gas bills had been around $20 per month up to this point. This gas bill gave me that sinking feeling with only about $40 in my checking account and no money coming till Friday. We both knew that even after getting paid that coming Friday we wouldn’t have enough left to cover it. This moment did have a lesson in it; the gas company has a “budget” plan that was recommended by the nice lady on the phone. It’s funny, but I remember this was one of my first encounters with this word. This is when the gas company estimates your annual gas usage cost and divides it up evenly on a monthly basis. This obviously makes the cost much more predictable and manageable. This “budget plan” is a principle that we will revisit later because we can apply it to so many other areas financially.
          There was another moment when I can really remember feeling like I wasn’t doing things right. My wife’s car at the time had its transmission go out. This was a big deal and it was time sensitive for her getting to work. Fortunately, it was still drivable and we were able to take it to the shop. Now the bad news, it needed to be rebuilt and was going to cost us around $2,000 that we didn’t have. Most guys are going to relate to this, my parents couldn’t lend us the money, credit cards were not an option, however; her dad could lend us the money. Yeah, I borrowed money from my father in law. I didn’t feel like I was doing a great job at supporting my family. I had a wife to take care of, and a child to set an example for.
          We were living in our rental house and in my little world I thought we had two car payments and my motorcycle payment… so maybe 7, or $8,000 in debt? I was slightly wrong, I missed the mark by about $20,000.00 of debt. Yeah, so right around $28,000 of total consumer debt, we were renting so we didn’t have a mortgage at this time. I don’t want to focus on the amounts as if it's a contest on who has more debt, or "if you think that's bad, you should see my debt". I want us to instead focus on the mentality and the principles because they transcend individual circumstances. I was doing what everyone else was doing, but it wasn’t working for me.

          The difference between our financial situation in my world vs. the actual reality was staggering. I was very comfortable going day to day with the way I thought our finances were, but when we started, this is what they looked like in comparison. 

          The one on the left is why I was feeling so good, and the right one... well, we needed help.. and soon.

          This was not an easy thing to accept at the moment, but I needed to remember that at least now the work can begin. I want to encourage you (and your partner) to dismiss blame during this process, it's irrelevant because the damage is done. Remain solution focused and let's get down to business! 

          

Let's Get Personal

        I grew up in a small town in northwest Ohio, where we experience all four seasons within a week. My parents were not college graduates with fancy careers. I have an older sister, and we are different in every possible way. I am task oriented and unsympathetic; my sister is the people-oriented nurturing type.  We got along pretty well, all siblings have their quarrels but we had fun with the neighborhood kids. Growing up in a small neighborhood with some really close friends was one of my fonder memories.

We resided in a 1,400 square foot home, in town, on about an acre of land. My father was a milkman for a local dairy, driving truck and delivering milk to stores around town. I remember him working long hours and not returning home till later in the evenings. When my father returned home from work, spending time with him was difficult because of his frustration and being exhausted from work. This was always a struggle for my father emotionally, working long hours, and sacrificing time with his family just to make ends meet. My dad really encouraged me to do well in school, and attend college to be able to have more time with my family. My mother held several jobs throughout my childhood. My mother has been a babysitter, retail associate, and a cook for one of the area Headstart schools. Headstart is a government funded school program for lower-income families. So, I was actually raised by a lunch lady and the milkman. My father was the teacher and my mother was my best friend.

My parents have always been my biggest support system and worked hard to provide for us. My father is the one that encouraged me to approach my finances differently. Dad was taught by his father to work hard in life, but saving for retirement and other financial priorities were not discussed. My parents were also living the pay-to-pay cycle and it wasn’t until my late teenage years that my dad started learning about managing his money. Once it started to “click” for him, and he could see the principles working, he started talking to me in an attempt to encourage me. Initially, I was reluctant and just said, “Yeah dad”, “I get it”, and he thought I was listening. I knew that what he said was true and that I should follow his instruction, but like so many others I just wanted to keep doing things my way.

Looking back now, of course, I wish it would have clicked sooner, but it took years. I have to admire his persistence, as he continued to share stories about people he knew or read about. There were all these great tales of debt free, dual-income couples that lived off only one income and saved the other. Wow, in that moment I could never have imagined being able to do that. My wife and I were barely able to pay the bills we had with every penny of our income. In time I would realize that this “fairy tale” wasn’t as impossible as I thought. The desire to change and fix my finances would stem from my Breaking Point.

25-50-$25,000

Let's start where my financial journey began, I was 25 years old, 50 pounds overweight and buried in $25,000 of debt.  I was married in August of 2008 and had our first child the very next year! Big changes in our lives, well besides what we were doing financially. The system remained the same, pay bills one week to the next and try to find the money we needed to raise our son.

Time is the only thing that moves past you without being noticed. I blinked my eyes; 2 years had gone by…no changes. My son was now 2 years old, we were broke, just able to pay bills and live in our cheap rental house.  The words savings account, 529 plans, and investing were not in our vocabulary. Instead, our plan included credit cards, overtime, and loans to acquire the financial resources we needed just to get by. I was working to make money, not for me and my family but instead, I was making money for the cable company, Visa credit cards, bank loans, and a motorcycle I couldn’t afford.  I was working for a paycheck but I never had any money left.  I knew I needed a major change and it wasn’t going to be easy.

I was going to stop working for my money, and start putting my money to work.