Maybe it is because for some reason we all feel like we should know what to do with money.  We have this attitude that because we all touch money we should understand it.  We become ashamed when we might have to admit we do not know what w are doing.

This only perpetuates the problem as we rarely hear mistakes so we all think everyone else knows what they are doing with money.  Making us feel even more inferior.

When was the last time you heard someone say “Hey I just lost $5,000 because I bought a stock on advice from the water cooler”, we tend to keep those transactions to our selves.

So in the spirit of helping everyone feel like we are on the same boat, I am sharing with you some of my money mistakes.

1.      Running up credit cards on nothing that really mattered.  Well actually clothes and going out is what mattered!  Which when you are in school and no one has taught you about money management you might not see the down side to this.  I heard that credit card debt is bad, could even tell someone else this, but the practice of saying NO to myself just did not come out.  It was not till I was out of college and making money that I was able to stop using cards and pay them off.

2.      Too much debt on a bad car.   My first car I bought on my own was a lemon of a Pontiac.  Of course being in college I thought I had to have it.  I had to speed up payments so I could sell it.  Luckily I was living at home while working and was able to make big chunky payments!

3.      Our first house we made just about every mistake possible.  Just a few: most expensive house in neighborhood, backed to a busy street, over paid, only looked at it once, did not sleep on the decision, etc.  We let love for a house distract us from the details.

4.      “Bouncing” checks because I forgot about the wait times for checks and transfers.  Every bank has a set number of days they put a hold on your check.  In addition when you transfer between different banks or mutual funds there is also a hold period.  I know this overly well since I worked in banking.  Do you think that stopped me from getting cute and trying to make as much interest as possible based on where my money was?  Only had to make that mistake once, $150 in fees eliminated any interest benefit!

5.      Lost money on a stock that someone gave me a hot tip on.  Luckily this was in college and I had an interest in personal finance early so I only lost about $200.  Learned?  Only invest in what you understand and have done the research on by yourself!

I hope this helps to make you feel like you are not alone.  We are all in this together, we all make mistakes and that is one of the ways in which we learn.  I know I am not done making mistakes.  The key is to learn from your mistake and keep moving forward.

Your turn – do you have a money mistake?  What did you learn from it?

This is a common problem in life where we are all ready to help someone learn something and they don’t want to be part of the learning.  I have tried many times to attempt to teach my husband, Marc, about different aspects of health and fitness.  Usually I hit a brick wall, and come away frustrated that he won’t get as excited about something as I do.  Through the years I have learned to move on and not try to force feed him my ideas.

It is not quite so easy with our children.  Our job is to help prepare them for adult hood, which means at some point we need to motivate them to earn money.  It is not possible to just move on and let them be.

So what are we to do, how do we get them motivated and interested in learning about money?    Following are four suggestions to help you begin to figure out how to motivate your kids.

Create Wants

One of the first things we did when we started Max on his earning money education was to stop purchasing extra toys for him.  I admit we spoiled him a bit, so this was a big change for him.

When explaining to him the chore system we included a conversation about what the money was for and what mommy and daddy were not going to buy anymore.  He understood that if he wanted something outside of birthday and holidays that he needed to save for it.

If your child has no wants and everything is provided for them, they have zero motivation to do any work.  Now you might luck out and get a child who just wants to help and make you happy, but most of us will have children that opt for the playing instead of making money.

I actually witness this with Max on a regular basis.  When he is saving for something he comes home from school wanting to know what chores he can do and even requesting ones not on our current list.  When he has nothing specific or does not really want what he is saving for then he is not that motivated to get chores done.

Tom Stanley, author of the Millionaire Mind, has shown that children that received larger amounts of financial support from their parents as adults actually make less money than others their age that did not receive money.  This included those that were professionals such as CPA’s and lawyers, not just those living off mom and dad.  They had less drive because parts of their wants were being met from a non work source.

What Does the Future Hold

For many of us it is very difficult to think beyond today.  Each of us has a time perspective that we lean towards when leading our lives.  So if your child is present time oriented they are less likely to be thinking about what they might want down the road.  If your child is a future thinker then they are better able to figure out that they need to work today for tomorrow (these are usually the kids you don’t have a problem motivating).

If you have a present oriented child then help them determine what they might want in the future.  Talk through all the things they might be interested in.  Then help them understand what it is going to take to obtain that.  Walk them through the process so they understand what they need to do.

A great resource for understanding more about time perspectives is The Time Paradox.  This book provides great insight not only into your children but yourself and may help you manage them in other areas of life.

Can You See the List

This might seem small and not worth saying, but make sure your chore chart is always in sight.  If your kids don’t see it they will forget it is there.  Especially if this is a new endeavor, they are not used to selecting a chore and getting paid for it.

Post the list on the refrigerator, in their room or where ever they end up putting all of their stuff.  Remember the old saying – out of sight out of mind.  Let them see the chores.

Remember All Kids are Different

When it comes down to it every kid is different.  What works for one of your kids might not work for another.  You must understand your child and what motivates them.  This is the only way to come up with methods that will work for your child.

When Max was young he was not a great sleeper.  I read every sleep book available, well a lot anyway.  (I can think of three off the top of my head and that was during the hazy I don’t remember much first two years!)  Finally I found a method and opinion that not only worked for me, but also worked for him and everyone else who cared for him.  It was not easy, but by continuing to search out what worked the best I was able to motivate him to sleep.

Figure out what motivates your child, read books on different personalities and parenting approaches.  Eventually you will find the right way to motivate your child that not only works for them, but also works for you.

Don’t feel bad if you do have different approaches for different kids, they are all different.  One of the things I appreciate most about my mother’s parenting style is that she did not compare us and she managed us in different ways.  We never felt just like one of a crowd.

Hopefully now you have some ideas on how to get your child motivated.  Happy Teaching!

More kids and money articles: http://www.takeasmartstep.com

Your turn: Do you have anything that worked for you?  Questions?  Resources that you want to share?

Getting your finances healthy again after you have taken on extra debt is no different.  If you try short cuts to make it less painful, chances are it is not going to accomplish everything you want to in a way that will last.  Like bad dieting you end up with the debt back on and you feel even more deflated than before.  Also like dieting there are benefits besides weight loss that occur when you follow a plan that allows for proper debt reduction.

Benefits of Doing it Right

One of those benefits is that you increase your self esteem. This happens because when you tackle hard tasks and win you get a sense of accomplishment that comes from completing them on your own.  Much like a child establishes self esteem by accomplishing basic tasks on their own; you establish more self esteem by sticking to a budget and being in control of your life!

Another great benefit, the one you were going for, is that you position yourself for greater wealth over your lifetime.  When you take the right steps to control your finances you put yourself in a position to be able to save more which makes it easier to accumulate money.  This leads to wonderful things like being able to splurge when you want to, do more for those who in need and have a secure and fun retirement.

Another benefit is that of improved health.  It has been proven that the more debt you have the higher your chances are for a whole slew of things to occur including: heart attack, migraine, stress, intestinal issues and insomnia.  By taking steps to eliminate the debt in a way that will allow you to maintain the decrease in debt you make yourself healthier for a lifetime (you might even take off some extra weight).

So what is the right plan and how do you get started?  Like losing weight has a tried and true method, so does reducing your debt.  This formula is increase income, reduce expenses and pay extra on your debts.  Following this formula will reduce your debt and because you took the time to do it right and actually worked to develop good money management skills as part of this process you will find it easier to keep the debt off!

Following are four tips to help you get started and keep you going.

The first step is to commit to the process.  Decide that you are ready to make the changes necessary and do the work to really pay off debt for good.  If you are not fully committed to the process you will lack the patience that you need to stick to it when the frustrations come up.   Frustrations will come up; it is not as easy to tackle debt reduction as some may make it out to be, but with a firm commitment your chances of success are greater.  Write down your commitment with yourself and sign it like you would a contract.

Second you need to do a budget.  I know the dreaded “b” word; unfortunately this is needed to know where your money is going, if there is enough income coming in for expenses and to know how and where to make cuts if needed.  It is kind of like counting calories, not exactly fun but one of the only ways to know if you are over eating or not, what time of day you are over eating, and what your food weakness is.  It helps guide you to the real problems and then you can solve them.

Third you need to stick to the plan.  I realize this might seem like a rather obvious unnecessary piece of advice.  Unfortunately the reality is that it is all too easy to create a budget and plan to pay off debt and then end up not doing it.  So how do you stick with it?  You can make a game of it, such as when you get a certain percentage paid off you get to add back your manicure for a month (as long as that still leaves you living on less than you make).  Another way to stick with it is to remind yourself of why you are doing this, post a picture of what you envision life like when the debt is gone.  It is also easier to stick to your plan when you eliminate temptations.  If your downfall is shoes, do not go to the shoe store.  If your downfall is too many runs to the local coffee store, then spend a little to get an espresso machine and use that instead (it will pay for itself in a couple months).

Finally, revise and repeat the above process.  Your commitment and plan will vary, take the time to regularly update your budget and recommit yourself to the process and it will be easier to stay on task.  Life is not static, so your plan cannot be static.  The plan needs to flow with life.  This way you know you are following the right plan and it will help to keep you motivated to stay with it.

Finally you will reach a point when you lose all that extra debt.  The journey will have been worth the struggle and you will feel better than you can imagine right now.

As parting words I want to share one of my favorite John F. Kennedy quotes, it helps me get through the tough spots in life, just when I am thinking things are too hard.  Even though he is talking about space exploration it can pretty much be applied to every area of life we encounter: “We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win.”

http://financiallyfit.yahoo.com/finance/article-110806-6784-1-five-quick-ways-to-bankrupt-yourself?ywaad=ad0035&nc

 Often it requires you to make small tweaks, such as adding intervals to your cardio, cutting an extra 100 calories from your diet or changing the intensity of weights you are lifting.  Sometimes it is as simple as maintaining what you are doing until your cells reach a new level of efficiency and have adjusted to your new lifestyle.

 Learning about money is no different.  Sometimes we need to make small changes in how we learn and sometimes we just have to stay the course.  So what small changes can you make and how do you stay the course when you feel like you are making no progress?

 When making small changes try the following:

• Try a different teacher.  Often when I am reading a book on health and fitness I become very confused, science is not my strong point.  However what I have found is that as I keep reading more and more books by different authors I eventually find one author that explains what I am reading in a way that works for me.  So if you are struggling with a specific book, pick a new book by a different author.  Struggling with a class?  Get a new teacher.  Eventually you will find an instructor that you can easily understand.
• Try a different way of learning.  We all learn in different ways, in fact there are three well studied ways most of us learn: auditory, visual and physical.  So if you learn by listening and are trying to read books you may be struggling not because you don’t understand the topic but because you are not learning about it in the right way.  If you do learn by listening try instead taking a class, buying the audio book or even reading out loud.  In addition, it has been shown that the more of the methods of learning you apply the faster you will learn the subject.  So if you are trying to learn to budget, read about it, take a class and actively work on your budget.  This will speed up your learning process.

 How to stay the course:

• Believe in yourself – you just need to believe that you can learn about money and eventually it will happen.  If you don’t believe that you can be money fluent then you won’t be!   All of us can do this, and that includes you.
• Adjust how much time you spend on learning.  If you are feeling overwhelmed and ready to stop, adjust how much time you are spending on learning.  Drop to five or ten minutes a day if you need to, but just keep moving forward.  Every little bit will help you; where as not doing anything will definitely keep you where you are.
• Remember why you want to learn about money.  Write yourself a statement about what your goal is and post it somewhere to remind you why you are working so hard.  As many of us will post pictures of what we want our body to look like after a diet, posting your money goal will help to keep you motivated.

We all hit plateaus at some point, when you do make some small changes and/or keep moving forward.  You will be glad you did.

Yearly Income – Most planners will recommend targeting a percentage of your income.  While this may work for some you do need to assess how much you really will need.  I recommend instead focus more on how much it actually costs you to live.  If you will continue to spend $50,000 after retirement it makes no sense to plan on $40,000 because of a random percentage.  Know your expenses.

How much of your portfolio can you spend?  Most advisors will tell you that between 4 – 8 % is a good target.  This comes from the fact that on average inflation is 4% a year and growth is 12% if you are in the stock market.  Thus allowing your nest egg to remain fairly un-depleted as you can keep up with inflation and the market will continue to increase or replace your funds.  This is a tough one to make a big generalization.  Why?  Because everyone has a different risk tolerance, spending need and it assumes that you will have the same number of ups as downs, and all of this depends also on your age!  You may want to pick a base line number, such as I will spend 4% of my nest egg a year and anticipate an 8% growth on my stock investment but then be prepared to adjust on a yearly basis depending on what the market is doing, what your needs are.  It is okay to adjust every year if you are paying attention.

Retirement age will have a big impact on how much money you have at retirement.  Why?  The longer you wait the more you can invest, the bigger your social security amount will be and the more time you have to grow your portfolio.  Remember our retirement ages were set when our life span was shorter.  If you can work and enjoy your work push past the 62 – 65 time window of what we have randomly deemed retirement age.  What if you don’t enjoy your work, but still want to keep saving and working?  Redefine what retirement is; rename it to your enjoyment years.  Take a less stressful job (that non-profit really could use your skills), work part time, start a new career (consulting with the old company?) just keep some income coming in and allow your nest egg to keep growing!

How much should I have in my nest egg?  Yet again, not an easy one to generalize.  The ongoing advice is one million dollars.  However, two issues come into play here.  Both of what we have already looked at.  First how much do you need in retirement.  Not the guy down the street or the couple next door – but how much do you need.  This will determine what your nest egg needs to be.  Second, when are you going to retire?  You will need less the longer you work and have actively earned money coming in.  The argument from a generalization stand point is that with inflation what once took a million for retirement now may take closer to three million.  Either way you should focus more on what you need and leave the general arguing to those with little else to do!

Hopefully now your brain is thinking about your retirement and what it will require from you!

Your best option is to invest directly with a mutual fund company.  With no assets mutual funds are a great way to get instant diversification.  In addition most mutual fund companies will waive their minimum opening balance if you sign up for automatic investing.  Automatic investment takes a preset amount out of your checking account every month, just like you might have your electric bill taken out every month.   This will allow you to begin building funds that you can latter use to open a brokerage account or invest with a company that does not waive minimums for automatic investing.  Plus as an added bonus with the automatic investing you will not miss investing during the busiest of times!

 So once you have picked the fund you want to invest in do the following (if you are still working on learning how to pick a mutual fund, start with an index fund, such as the S&P 500 index, so you don’t have to worry about the quality of the managers, this allows you to at least start investing while you learn more about picking out investments):

 Go to the company’s website.

• Select the “open an account” or “invest with us” option (if you want you can click contact us and call a customer service representative to walk you through the process).
• From here is where the sites will begin to differ, most have you download the account application, some have additional steps before this.  Once you get to the downloaded application, download it, or begin the other online registration processes.
• Fill out the forms per the company’s directions (if you need help, call the customer service department – that is why they are there!)
• Mail the application with a check to begin investing and a voided check to get started with automatic investing.

 Congratulations – you are now an independent investor.  See that was not so hard!

 5.  It is Sexy!  Yes I said sexy, hear me out.  When you understand a complex topic you are more confident.  Confidence adds to your sexy status – big time!  So learn more, increase your confidence and be sexier.

 4.  Be the life of the party.  When you can join into multiple conversations and actually have an intelligent comment then more people will want to talk with you.  Money and the markets is a big topic at parties, so learn more about your money and you will have more interesting things to say.  Making you the life of the party!

 3. Only you are looking out for your best interests.  We would love to think that our advisors, friends and family are out for our best interests, but unfortunately that is not always the case.  Many things can get in the way of that commitment to what is best for you including family and friends trying to unconsciously keep you where you are, others not understanding what they are talking about and ultimately most people are not being focused on understanding your situation exactly.  Just remember only you can look after your best interests.  (A great article to help open your eyes from Smart Money Magazine: http://www.smartmoney.com/investing/stocks/lpl-financial-the-giant-behind-your-local-broker/)

 2. It’s your money.  Only you can take full responsibility for it.  Even if you delegate everything you still need to be able to understand where your money is, why that is good for you and when you may need to pull it from an investment.  If your advisor loses your money it is still your responsibility if you did not understand what he or she was doing.  You cannot delegate responsibility.  If they were doing something that was wrong for your portfolio and you did not say stop – you are responsible.

 1. When your money is fine you can change the world.  Money can get in the way of you achieving your dreams.  It is stressful and draining if it is not properly cared for.  When your money is healthy and you don’t have to stress about paying bills, college, retirement or any other money issue you can focus on your passions and making this world a better place.

 So go on, learn about your money and change the world, be the life of the party and sexy!  It really is up to you!

So by now you are wondering exactly what this has to do with personal finance, other than reducing the extreme costs of my migraine medicine.  Personal finance has a trigger of its own that can cause bad decisions, is with us all the time but most of us do not acknowledge that it has an impact on us.  This trigger is your emotions. 

Just based on the fact that personal finance is well – personal means that your emotions, whether you realize it or not, have an impact on the decisions you make with your money.  This happens with both small and big decisions.  When I have had a rough day and still have to face the prospect of putting a meal on the table many times my emotions take over and I choose to do take out or even go out when I know that I may have already gone through my dining out budget, but my emotions take over and I can see no other option.  This is an emotional decision that impacted my finances.  Pile a bunch of these together and they can slowly start to wreck havoc on your money!

The big financial decisions impacted by emotion can be even more detrimental to your finances.  Buying a car is one of those big purchases that has lots of emotion swirling around.  You may be pushed by a need to drive a better car than a relative or coworker, maybe you are sick of repairs or you just feel you need a new one because you graduated college or hit some other big milestone.  So instead of figuring out exactly how much you can afford, or saving for a few months and paying cash (which is what I recommend) you run out and buy the first shiny new car you like.  This can throw your finances off for years if the payment pushes you over budget, the interest rate is too high or you just bought the wrong car.

So how do you stay aware of and control your emotions when you are making money decisions?  I recommend four steps to be aware of when you are dealing with money.

First, allow yourself extra time to make a decision.  This is especially important the bigger the decision is.  During this time do what feels right to you in order to position yourself best to make a good decision.  I myself use this time to evaluate the decisions from a pro and con basis, ask for advice if I need another opinion (or three or four more opinions),  and pray.  Do what feels right to you; just don’t rush into the decisions as this is when stress and other emotions can really trump logic.  It is okay to say I need more time.

Second, ask yourself why you are doing something.  This is a great question to get to the heart of what emotion might be dominating your decision making process.  Sometimes it takes asking many whys before you arrive at the true problem.  Keep drilling down and you can uncover some interesting motivators that help you understand the emotions behind a decision.   

Third, monitor your physical reaction to events.  Your body is a great indicator that something is wrong or you are being emotionally driven.  If my heart is racing when making a decision I know to stop, calm down and figure out what is really at the source of this reaction.  It can also be a sudden mood change that triggers an alert that you might be deciding with your emotions.  Be aware of what your subconscious is trying to tell you through your body.

Finally, be aware that you cannot remove emotion from your financial decisions, and in my opinion you should not try to completely remove them as this leads to heartless decisions.  However you do need to know how your emotions are impacting your decision, so if necessary you can rein them in.  Know what is driving you from all angles and then make an educated decision.

Emotions drive many of our financial decisions.  Take the time to stop and understand what these emotions and decisions do together and your finances will thank you.

This is especially true in finance where there are so many different opinions on what is right and there may not be just one answer.  Like dieting you have many different camps that have different approaches that work.  It is your job to figure out if the diet you are considering is something that you can stick to, you believe will work and is actually something that is good for you.  You might be able to stick with the all grapefruit diet and you may have read enough for you to think it would work, but that does not make it good for you.  It is hard to get all the nutrients that your body needs to function from one food.  Financial advice is the same, you might think you can stick to it and you have heard enough good information that you believe the approach would work, but how do you know that it is good for your entire financial situation?

Here are five steps that you can use to help you figure out if what you are hearing is good for you and will actually help you with complete financial health.

First, remember that most of the places that you get your financial information from are trying to sell you something.  In fact most of those talk finance shows (especially on the local weekend shows) are actually a marketing tool for the person doing the show.  They pay the radio station and come up with all the material in order to attract clients to their practice; they do this because it creates the illusion of qualified expert status.  You don’t need to completely count them out as an option for learning you can continue to use them to learn as sometimes you can get good information (especially if the person is passionate about teaching and approaches the show that way), but always keep in mind that they are giving you a sales pitch.

Second, if the person giving you information is using all scare tactics to get you to do something – run!  The doom and gloom approach is attempting to scare you into frantically doing something without stopping to do a logic check, it is all emotionally driven.  It is easy in the financial world to throw statistics around to try and worry people into action, but in with those hopefully valid statistics there should also be good quality information to discuss why and how this affects you.  The show that I ended up screaming at (if only they could hear me) did the scare tactic approach.  For a full half hour they repeated the same the sky is falling argument, but NEVER told you what they do differently or backed up their talk with logic.  What they did say was “call us today to set up your review”, they are scaring you to their office so you will sign on the dotted line while still scared.  If they truly cared about your finances they would have explained on air what they do and how it is different.

Third, you need to take responsibility for your own education.  This means that instead of believing everything that is presented to you, you need to take the information and verify it.  Listen to that radio show and then go do more research on what they were discussing.  Learn both side of what an annuity is, look for both the pros and the cons.  Prepare as if you were going to debate both sides. (Tips on getting the bad side – Google whatever you are researching and the word “bad” or “stay away”, and don’t look at page one results as those tend to be from the sales people, hit page 3 and you begin to find other information.) Only you are truly concerned about your money, so only you can give yourself enough information to protect you.  You can definitely have advisors and teachers, but do not take them for their word, or let them have complete control.  You are the manager of your money, learn about it.

 Fourth, learn to have healthy pessimism.  When learning about money reminds yourself of our number one task in determining if it is good financial information- they are trying to sell you something.  Ask yourself “what are they not telling me”, “what is the worst that could happen if I do this” or other questions that get you to evaluate the whole picture.  While it is not always good to be a pessimist, our financial world that has evolved where scammers and salespeople are everywhere, you to take a defensive position to protect yourself. 

 Fifth, give yourself time.  Being educated about personal finance is not something you learn overnight.  Do not rush into decisions before you know all that you need to in order to make an educated decision.  Time gives you the ability to learn and to take emotion out of the situation.  It is okay if your money sits in a savings account while you learn, it is okay to take a few weeks to learn about different money market accounts, just give yourself time!

Ultimately when learning new information you need to listen, evaluate and make your own decision.  This will help you become more secure in your financial knowledge and help you avoid bad financial decisions!