A thought on “Saving”

If I had a dollar for every time I’ve heard someone say they’d like to save more money, I’d be a rich man. In all my years of teaching, I have never met anyone who wouldn’t like to have more money tucked away in savings.  So why don’t we save?  My students tell me it’s because they can’t save.  They don’t have enough money to save.  There’s never any money left over to save after they have paid all of their bills.  When encouraged to examine these responses more closely however, nearly everyone recognizes that he or she has saved for something at some point in his or her life, and, no matter what his or her income level, has at least one penny left over at the end each week that he or she could potentially be saving.  So, if it’s not that we can’t or we don’t have enough, then why don’t we save?

One of the barriers that often prevents people from saving has to do with a pervasive belief that saving is only worth doing if the amount being saved is a large number.  All humans, whether they are aware of it or not, have in their heads a dollar amount below which money holds no value for them.   A penny, a nickel, a dime, a quarter, even a dollar, although it could be saved isn’t hardly worth it in most people’s minds.  This is especially true of people who feel they must save a lot of money in a relatively short period of time.  Consider retirement, for example.  People who feel inclined to save for retirement typically believe they need to save a large amount of money in a relatively short period of time.  Even as much as a dollar per week in savings, in this particular example, seems to most people insignificant and hardly worth it.  So instead of saving a dollar per week, what do they do? They save nothing, because they don’t see the value in it.

When you are able to see that saving is more about implementing a behavior than it is about any particular dollar amount saved, you can perhaps begin to see value in doing it.  So pick an amount that you believe you can comfortably save over the next day, week, month, or whatever.  A penny, a dollar, ten dollars, twenty-five dollars, it doesn’t matter.  Pick an amount.  Start small.  Work it into your budget as a line item.  Start saving.  Start now.  And keep going.

 

Time Value of Income

Attaching a monetary value to one’s time and energy, particularly in a work situation, is not uncommon.  Most people know how much money they earn per hour.  On several occasions in my life I have taken jobs that paid around $7.50 per hour.   That’s pretty black and white.  1 hour of my time and energy at work was worth $7.50.  On the other hand, salaried positions are slightly less black and white in terms of time value.  My first salaried position paid $28,000 per year.  The value of an hour of time in a salaried position depends on the number of hours worked during a particular year.  If, for example, in my salaried position, I worked 40 hours per week for 50 weeks, I would accrue 2,000 hours per year, and my hourly rate would be about $14 per hour.  In that case, 1 hour of my time and energy at work would be worth $14.  If however, I worked an extra hour per day for the same number of weeks, I would accrue 2,400 hours per year and my hourly rate would drop to $11.66.  In that case, 1 hour of my time and energy at work would be worth $11.66.

As I said, most people, even those who are salaried, have figured out how much money they earn per hour, but just in case you haven’t, or haven’t done it in a while, we’re going to take some time and go through this together.  But then, we are going to take it one step further.  I’m going to ask you to determine your wage by minute.  Most people have never done this exercise. However, the information that we learn by doing the wage by hour and the wage by minute exercise will be very useful in the exercises that will follow.

Please note, some of these figures that you come up with might not be totally accurate, don’t get hung up on that. The information will still be beneficial and the figures will be close enough for our purposes.  I’ll refer back to this exercise and some of the numbers we figure out here in later posts and exercises.

Okay, so here we go.

Wage by hour:

Begin by figuring out how much money you earn per hour.  For the purposes of this exercise, we will only use our “gross earnings.”

• If you earn an hourly wage, like $10 per hour, then this is easy.  Your time value for this exercise will be $10/hour.
• If you are salaried, then we recommend, for simplicity that you divide your yearly salary by 2 and then drop the zeros.  So it looks like this:

Example:

$24,000 per year divided by 2 = $12,000, then drop the last three numbers and you get $12.

Wage by minute:

This is a computation that very few people undertake.  But when we get ready to look at the time value of our  expenses, knowing our wage by minute can actually be very beneficial.

To figure out your Wage by minute, take your hourly wage and divide it by 60:

$10 per hour divided by 60 (minutes) = approx. 17 cents per minute.

 

So hang on to this information.  We’ll use it in some of the upcoming posts!

 

 

 

Perceptions of Income

I have found that people typically think of income as the money they earn at work.  However, I’d like to challenge you to think of income as any resource that is coming into your possession.  Some of it might be monetary, but sometimes it’s not.  For instance, we definitely want to recognize if we receive income from our work, but we might also receive income from unemployment or from investments and we want to recognize that as income.  Sometimes it comes in the form of cash, but sometimes it takes different forms.  It might come in the form of food stamps, housing assistance or perhaps educational grants and scholarships, or assistance with our health care costs.  It might come in the form of a loan from a relative, a student loan or a second mortgage – I know, you’re thinking this is debt, and it is, but these are also resources that are coming in to your possession.  Income could also be the money you get during the holidays or on your birthday. Or perhaps that $20 your parents sent to you, just because they love you so much.

In addition to the income that we get in the form of money, I’d like for you to think about the resources that come to you in different forms.  Perhaps your grandmother gives you a sweater – is that income?  Or perhaps your friends watch you children while you go to the doctor – is that income?  Maybe your mom made you a dinner and brought it over to your house – is that income?  Maybe your friends took you out to dinner or bought you a drink – is that income?  Maybe, in our traditional way of looking at income, it doesn’t seem like it.  But these are all ways that resources come into your possession and they definitely have value.  We want to recognize those as well.  Sometimes with these non-cash forms of income or “in-kind” income it is hard to put an exact value on them and it is not necessary that the amount be exact, but we should at least give them an estimate.  At the bare minimum we should be cognizant that we are receiving something of value.

Here are some reasons why this is important:

1. It is important to recognize that resources, both cash and non-cash are constantly coming into our possession; WE DO HAVE MONEY – even if it is not as much as we would like to have at this moment.  (So stop saying you don’t have any!)
2. It is important that we don’t DISCOUNT the value of any of the resources that we receive;
3. It is important to recognize that many of our non-cash resources are valuable and again, we don’t want to DISCOUNT the value of those resources.

 

The Perception of Income as “The Solution”

Earning more income can vanquish all of life’s trials and tribulations – true or false?  There is the tendency among many of my students to believe that earning more income can vanquish all of life’s trials and tribulations.  The notion that “when I make a lot of money, my problems will be solved” is an extremely common one. So how do we get more money?  Well, the only two ways that I know of to get more money are to spend less or find additional income.  That’s easy, right?  Wrong.  Why?  Because spending less and finding additional income take additional time and/or energy, and time and energy, like money, fall high on the list of things people would like to have more of, not less.  Ay, there’s the rub!  So the real question then is, how do we get more money without having to expend any additional time and/or energy?  And the answer is…more money is not the answer.  While I do agree that in certain circumstances more income can be beneficial, sometimes money can create more problems than it solves.  If earning more income was a cure-all, then seventy-eight percent of former NFL players wouldn’t be bankrupt or under severe financial stress just two years into retirement.  And the majority of lottery winners wouldn’t be right back where they started financially speaking within five years of winning the lottery. While financial health may begin with an increase in income, it does not guarantee sustained financial health.  Financial health is sustained through the creation and maintenance of assets.

 

 

Creating Perceptions Through Marketing – Part 4 – Turning Wants Into Needs

Successful marketers know that one of the most effective ways to get customers to spend money, time and energy consuming their products and services is to convince the customers that they need a particular product or service.  Most often they accomplish that by either creating a need where one did not exist before, or by turning a want into a need.  For example in 2011, Dove introduced a new deodorant purported to give women “softer, smoother underarms in just five days.” Hinging on the idea that women’s armpits are unattractive, the sales campaign for the product included ads portraying women joyfully cutting the sleeves off their shirts, as if they’d just been liberated from a shameful deformity and survey results asserting that armpit dysmorphia is a pervasive problem plaguing the majority of women worldwide.  By pinpointing a problem that most consumers didn’t even know they had, exacerbating anxiety about the problem, and then selling the cure, Dove’s powerful marketing formula successfully creates a need where one did not exist before.

The computer and mobile phone industries have been successfully turning wants into needs for decades.  People are really adamant about needing their computers and cell phones.  Remember when internet access used to cost like a hundred dollars a second, when you actually figured out what “Wi-Fi” meant, or when only grown-ups carried a cell phone?  I thought needs were about survival.  “Yeah,” people tell me, “I know.  I need them to survive.”  And they’re not kidding either.  Just try telling someone you’re taking his or her cell phone or computer away for the day and you’ll get one of two responses.  One is, “Oh Hell no, you’re not!”  The other is this unbelievably sad, scared look, that I think is best described as panic, sometimes followed by whimpering and, on occasion, cowering in a corner in the fetal position.  Ok, so we need them.  Why?  Because we’ve been told over and over that we do, we believe that we do, and so we do.

The pervasive message that marketers spend as much as $200 to $400 billion a year on, and bombard consumers over 3,000 times a day with, is, our lives, as they exist right now, are not enough.  We are not successful enough, pretty or attractive enough, or rich enough.  We don’t drive the right car, support the right cause, live in the right neighborhood, or eat the right foods.   We don’t smell right, don’t dress well, and we don’t belong to the right groups.  Our teeth aren’t clean enough, our clothes aren’t clean enough, and our houses aren’t clean enough.  We’re not efficient enough, productive enough, or well enough connected.  We need to work harder, exercise harder, and play harder.  We need to be better friends, better spouses, better parents, and better providers.  We need $1.5 million to retire, we need to take our families on vacations, and we need to pay for our kids’ 155 different activities. We need more money, more money, and more money.  And if we just had a little bit more money, more success, more status, more shoes, whiter teeth, if we just had the right product or service, our life would be nothing but sunshine and happiness, just like all of the excited, smiling people on the billboards and in the television commercials.

Our parents heard it before us, and their parents before them.  Our families are surrounded by it. It’s all around us, all the time. It is a never ending, around the clock message.  We are lacking, we’re not good enough, not yet.  Out with our friends and colleagues, at work, even at our schools and places of worship – we are bombarded by it.  And based on the figures, we’ve marketed the heck out of it, we’ve bought it, and we’ve even gone into debt for it.

 

Creating Perceptions Through Marketing – Part 1

Perhaps you’ve heard this one from David Foster Wallace.  I find it totally amusing.

“There are these two young fish swimming along and they happen to meet an older fish swimming the other way, who nods at them and says “Morning, boys. How’s the water?” And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes “What the hell is water?”

Really quickly, think about what influences you when you are trying to determine your wants and needs?  Is it your biological needs, your family, your friends, the people at work, you spiritual community?  Perhaps it is your ever-growing social network, or perhaps it’s the government?  As I have mentioned already, and as I am sure you already know, our environment and community can have an enormous impact on our ability to change our behaviors or to grow economically.

Today, we’re going to be taking a look at an aspect of our culture that impacts all of our different communities. Marketing!  Over the next couple of posts we’ll dive more deeply into this topic and how it impacts us.

Before we dive right in, I feel that I must preface this section. The point here is not to place any sort of judgment or blame about the environment in which we live or the players involved in creating it.  Nor is it intended to prescribe measures to be taken to change it.  There are plenty of people out there who are infinitely smarter and more qualified than I, who have much better strategies and ideas about how best to change the environment in which we live.  The point of this discussion is merely to describe, as objectively and neutrally as possible, the “water” in which we all “swim” so that perhaps we may all begin to “swim” with a tab bit more awareness.

You, my friend, are being bombarded.  In 1971, the average American was subjected to approximately 560 advertisements a day.  Today, that number is over 3,000.   That’s over 1 million advertisements a year. In his book, “Buy – ology” Martin Lindstrom asserts that “by the time we reach the age of sixty-six, most of us will have seen approximately two million television commercials.  Time-wise, that’s equivalent to watching eight hours of ads seven days a week for six straight years.”

According to the A.C. Nielsen Co., the average American, including children, watches more than 4 hours of TV each day (or 28 hours/week, or 2 months of nonstop TV-watching per year). In a 65-year life, this so-called average person will have spent 9 years staring at a box.

In addition to the good ol’ day stand-bys of television and radio, we now have computers, the Internet, smart phones, cell phones, tablets and gaming devices.  Our televisions now frequently have 6 million channels and the Internet is open 24/7.  The plethora of places accessible to and frequented by marketers, advertisers and consumers alike is incredible.  And it continues to grow – fast.

Hold on, I know what you are thinking.  “But I record/TIVO most of my shows now and I can just skip over the commercials or I can just change the channel or get up and leave the room when commercials come on.”   Yes, we all use these little tricks in an attempt to escape the seemingly relentless grasp of advertisers, but guess what?  They know that we are skipping commercials and TIVO’ing shows.  They know we turn the channel or leave the room when commercials come on.  They know all of our tricks and they have ways around them.  For every new trick we come up with, they come up with another effective solution.

More to come…

Stress Part 4 – Perceptions

If you have a child, you’ve probably had this conversation:

Child – “BUT I NEEEED IT!!”

You – “You don’t need it.  You just want it.”

Child – (While lying on the floor screaming and in tears) III NNNEEEDDD IIITTT!  I need it!  I need it!  I need it!  NOW!

Ah, the joys of parenthood.  If you don’t have children, please feel free to laugh out loud.  And if you’re planning on having them, then your day is coming!

I need a haircut.  I need to get an oil change.  I need to get my nails done.  I need a drink.  I need a vacation.  I need a new car.  The list could go on and on.  Are these really, as we say, needs?  Or are they wants? If I were to tell you there’s a big difference, you would probably be offended.  Of course you know that, but the fact is that people tend to use these two very different economic terms interchangeably as if they have similar, or even identical meanings.  So what is the difference?  When I ask my students this question, they almost always say that a need is something you can’t survive without.  A need can either be physical and objective, like food, water, clothing, and shelter or psychological and subjective, like security, autonomy, and self-esteem.  A want, on the other hand, is something you desire, but could go without if you had to.  A need is survival based.  A want is not.

Take a moment to jot down five things that you need, and five things that you want.  Easy, right?  Seems like it should be, but people frequently have difficulty with this little exercise.  We’ve usually heard a lot throughout our lives about the concept of want versus need, but rarely have we ever taken the time to sit down and really think about it from a personal standpoint.

Want	Need
1.	1.
2.	2.
3.	3.
4.	4.
5.	5.

Now imagine that you make your living as a hair model and have an upcoming audition for a new Clairol commercial.  You haven’t had a job in some time and landing this gig is absolutely necessary if you are going to maintain your current lifestyle while continuing to pay all of your bills on time.  The audition is in two days and on your way to the salon to get your hair cut and colored, your car breaks down. Without your car you can’t get your hair done.  You need to get your hair done if there’s any chance you’re going to land that audition.  You need your car.  So after you call the salon to reschedule your hair appointment for the next day, you call up your insurance company, get the car towed to the nearest mechanic, and pray that whatever it is can be fixed quickly.  After giving the car a once over, the mechanic informs you that it’s going to take three days to fix the car.  You need to be at that audition.  You need your car sooner than three days.

Using the distinction outlined above, is the word need used accurately in this scenario or should we have used want here instead?  Let’s take a look at what’s being threatened.  Security?  Autonomy?  Self-esteem?  All three seem like likely possibilities.  Are security, autonomy, and self-esteem things that we can survive without?  For most of us, the answer is no.  Not for any length of time anyway.  So if security, autonomy, and self-esteem are necessary for survival and are in fact being threatened by the loss of access to your car, then based on the distinction outlined above, the use of the word need in this scenario is correct.  What if, however, you were able to avoid the threat to security, autonomy, and self-esteem by renting a car, taking the bus, or getting help from a family member or friend?  In that case, the loss of access to your car becomes an inconvenience as opposed to a threat to survival, and use of the word want is more accurate.

 

Earlier, we discussed the role of perception in the initiation of the fight or flight response during episodes of acute or chronic stress.  We determined that a threat to survival, whether actual or perceived, was necessary for the initiation of the fight or flight response and concluded that one way to reduce the harmful psychological and physiological effects of stress and the fight or flight response might be to focus on changing our perceptions of situations that are not truly life threatening.  So how is that related to our current discussion on wants versus needs?

 

If needs are things that we can’t survive without, then any time a threat to one’s needs is present, whether physical or psychological, actual or perceived, the result will be acute or chronic stress.  Any time we convince ourselves that we need something, whether we actually need it or not, we place ourselves at greater risk for suffering higher levels of stress in the event that something threatens our ability to meet that need.  When you consider how often people use the terms need and want interchangeably, as if they have similar, or even identical meanings, this initially seemingly small and insignificant human tendency, now has some pretty serious implications.  Might it behoove us all to pay a bit more attention to the stress we may be inadvertently adding to our lives by thoughtlessly mis-classifying our wants as needs?

 

 

 

External Barriers to Change – Stress Part 3

Since the chemicals released in the body during the fight or flight response are the primary culprits in much of the psychological and physiological damage associated with stress, let’s have a closer look at the situations which typically cause this type of response.  The fight or flight response is triggered in circumstances of both acute and chronic stress, in response to a stressor that (1) is a real OR perceived attack, harm, or threat to survival, and (2) is perceived as being beyond the control of the person experiencing the stressor.   Well that’s interesting.  Perception seems to be a key ingredient to whether or not the fight or flight response is triggered.  So then, what is perception?  Well, according to dictionary.com perception is the result or product of becoming aware of, knowing or identifying by means of the senses.  Ok, then my next logical question is, is it possible to change perceptions?  Of course I always ask this question to my students and to this day I haven’t found anyone who does not believe that perceptions can change.  So if perception, specifically perception of threat and lack of control, is necessary for the initiation of the fight or flight response, then doesn’t it make sense that if we practice changing the way we perceive stressful situations that are not truly life threatening and focusing on the areas where we do have control, we can begin to reduce the amount psychological and physiological damage associated with stress?  Change your perceptions and take back some control.  Simple.  Not easy.

Next steps – How do we change perception or take back control…?

How Your People and Places Impact Your Change

Your environment includes the places, climates, energies and moods that make up your cultural and social settings.  I live in a safe little suburban town with relatively stable home prices, good schools, and easy access to groceries, libraries, recreational activities, cultural events, etc.  That is all part of my environment.  I live in Colorado, a state high in altitude, with an arid climate that can impact water resources and lead to wildfires, whose economy seems to be rebounding from the downturn.  That is also part of my environment.  I am a citizen of the United States, a country still recovering from recession, with a relatively stable political climate and consumer driven economy.  Again, that’s part of my environment.  You get the picture.

Your community includes the friends, family, colleagues, and acquaintances with whom you live, worship, socialize, recreate and/or work.  I live with my wife and three kids, socialize and recreate with several of my neighbors, have family in neighboring communities, and colleagues all across the Front Range.  That is all part of my community.

Environment and community can have a significant impact on our stability, safety, security, and opportunity.  Because they heavily influence what we think, feel, perceive, believe, and ultimately how we act and react, they also heavily influence our ability to make changes in our lives. I like to think of this environment and community as the soil that each of us, the seeds, are planted in.  Nutrient rich, robust soil typically yields hearty, prolific plants while nutrient poor, depleted soil yields feeble, barren ones.

A former client of mine, Sally, for example, lived in the same city as a lot of her friends from college.  As single women, they had all had similarly paying jobs and liked to hang out together during their free time doing things they all enjoyed and could all afford.  One by one, Sally and the rest of her posse settled down and got married.  Unfortunately for Sally, most of her friends married “up” financially.  Sally married right where she was.  Over time Sally’s friends began socializing more and more frequently at sophisticated, pricier venues in lieu of the old swingin’ singles day’s standbys.  As her community changed around her, Sally, who didn’t want to lose her friends, tried desperately to keep up even though she couldn’t afford to and eventually found herself with massive amounts of debt and in financial distress.  Sally’s environment and community had become a huge disadvantage in terms of financial growth.

For our purposes, I will define three significant community tendencies that can get in the way of our attempts at change.

First, as we noted above in our justifications, we often use “social proof,” which is “well, everyone else is doing it.”  In this case, we give ourselves a little latitude in our efforts and perhaps don’t stick totally to our new change.

The second tendency that can impact our behaviors is “social contagion”.  As you can probably imagine from the term, like a contagious disease that spreads, our behaviors – whether they be positive behaviors or negative behaviors – can spread to other people or can be caught from other people.  Excessive eating, increased drinking or even just being in a bad mood can spread through social networks causing the people in proximity to behave similarly to those around them.

And the third tendency is similar to our own internal justifications, but it happens when your friends or family help you to justify your behaviors.  I call this “group justification” and it happens quite frequently.  For example, let’s say you go to Starbucks with a friend and on the way there you explain that you’re on a diet and have been trying to eat healthier lately but that this week you’ve been feeling especially stressed out, there is a strong likelihood that your friend will actually encourage you to get a “special treat” at Starbucks and then help you to justify the behavior as stress relief, an outlet, or something that will make you feel better.  And it doesn’t have to be your best friend either.  People who don’t even know you very well will chime in and tell you that it is okay to “let off a little steam” by eating something decadent after a particularly stressful week, even though you’re on a diet and have been trying to eat healthier lately.

Obviously, there’s a flip side to these potential barriers that we want to recognize.  If the community and environment that you are in is supportive, that can be a tremendously beneficial asset.

So, take a moment and see if you can identify in your life some places where your people and places hinder your change efforts. Or, perhaps you can identify how they are helpful!

Justifications

As mentioned in the last post, Internal consistency is restored and maintained through denial when we refuse to recognize or acknowledge that an inconsistency exists.  It is restored through justifications when we defend, excuse or uphold an inconsistent choice or behavior with a reason or explanation.

Justification, the more common of the two responses, comes in several different forms.  Here are some of the most common forms of justification:

1. Rationalization whereby our friends, our acquaintances, or we ourselves offer logical explanations to defend contradictory actions and beliefs in an attempt to restore internal consistency. An example would be, “I’m stressed, I need to blow off some steam so I’m going out tonight!”
2. Moral Licensing happens when we reward ourselves with something that is not in alignment with our values.  For example, “I worked out super hard at the gym today, so I’ll have two deserts.”  Or the other way around, “I’ll eat this cake now because I can work it off at the gym later.”
3. Social Proof is when you justify your behavior by telling yourself or others that it is okay because everyone else is doing it.  Basically, all holidays are evidence of social proof.  It’s also a favorite of teenagers.
4. Arbitrary Resource Devaluation.“It was only…”  If you’ve ever uttered these words to describe a purchasing decision, you have participated in what I call Arbitrary Resource Devaluation . In this situation, an individual intentionally devalues the their resource, time, money or energy in order to make a behavior feel okay.  For example, with money, this can be used for small amounts, like, “yeah, it was only 50 cents.” Or we can do it with larger purchases through comparison, like, “Well it was only $200, but at the other store is was $250.”  If you are compulsively drawn to clearance events, you may be participating in ARD frequently.
5. Future Self –  Often we like to rely on our “future selves” to get us off the hook for today.  For instance, we might allow ourselves to make a purchase today, but tell ourselves that tomorrow or next week we will be more steadfast in our choices and besides, we get paid in a couple of weeks anyway – and I’ll probably get a bonus at work. Our future selves are almost always superhumans that do not have the same weaknesses that we are having today.
6. Mental bookkeeping–We frequently keep track of how we spend our money, time and energy in our head, which is a very dangerous way to manage our resources, but it is quite common.  So here’s what happens, again, using money as an example.  First, we attempt to manage our finances on the fly.  To do so, we often will move funds around in our heads, figuring out when out the next paycheck will arrive and how we can massage our finances to make everything work out.  While nothing has really changed outside of our heads, we feel better about our finances in our heads.  Now if this is just a way to manage finances, it will end there.  However, sometimes there is a second step where we will create all of this mental work in order to figure out how to squeeze and additional expense into the mix.  By figuring it all out in our head, it gives us the courage to move forward with our spending decisions.

These different types of justifications are things that everybody in our culture does.  I still do it all the time. The point of discussing them is not to say that you should try to get rid of them, or to say that they are bad.  But at the least, you can be aware of the fact that you are making a justification for the behavior.  The awareness alone can be very powerful.

So, what are some of your favorite justifications?