Tag Archives: stress

Holidays (Easter) Under Control

I have a seminar that I started delivering two years ago titled “Holidays Under Control.”  The reason why I developed this seminar was because when I was teaching my other programs, people would always start talking about how incredibly stressful the holiday season is and how much more money they spent during the holiday season than at other times of the year.

Well, when people talk about the holiday season, they usually mean from Thanksgiving until the New Year – and that is the time frame on which my seminar primarily focuses.  However, this last weekend, the Easter Bunny made his annual visit.  My wife and I felt compelled to make the basket and fill it with goodies – and our daughter actually expected the Easter Bunny to appear and bring her some goodies.  She didn’t have a list prepared like she did at Christmas, but she had expectations nonetheless.

So, while I don’t typically include the Easter holiday in my seminar, I thought I’d go ahead and look up some statistics on Easter spending in the U.S. According to Statistic Brain (http://www.statisticbrain.com/easter-statistics/), we dropped about $14.6 Billion on Easter this year, of course only $2.6 Billion of that was on candy.  Yeah, $2.6 Billion on candy (turns out that’s 120 million pounds of candy).

So I have three questions for you, my friend:

1. Do you feel compelled to spend money at Easter the same way you do during the fall/winter holidays?

2. Do you feel like there are a lot of expectations around spending during the Easter holiday?

3. Does Easter make the “stress” in your life go up at all?

 

Does Easter stress you out?

Does Easter stress you out?

 

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.

 

The Pain of Paying from Dan Ariely

Here’s a short video from Dan Ariely about how we spend differently depending upon the form of payment we use.  If you are not familiar with Mr. Ariely’s work, you should definitely check him out.

Misbelief

Convenience and “The Tyranny of the Moment”

Often times, our hectic and busy lifestyles lead us to make financial decisions just so we don’t have to think or do any additional work.  It’s called convenience and it’s a big part of our cultural value system.  In fact, huge portions of our economy are based on our “need” for convenience.  Then, as we keep adding in more things to do and more places to see, we “need” more conveniences.

“The Tyranny of the Moment” is the idea that when you are so hectic and crazy in the current moment, you are unable to think about and plan for future moments. In these tyrannical moments, everything feels like an emergency and we begin living our life in a series of firefighting episodes.  And I don’t know about you, but when I’m firefighting, I begin to start using those justifications for the decisions I’m making.

So here’s a quick exercise to take a look at these two concepts:

 

1. Identify three of your most common convenience purchases.

2. Identify a time when you have felt so busy that you made a purchase just to keep things simple.

3. Identify a time when you acted out of alignment with your personal values just because you felt too busy or overwhelmed.

 

Being consistently caught up in “The Tyranny of the Moment” can lead to feeling stressed, anxious and tired, which causes poor decision-making and undermines our willpower.  It also typically leads us to rely heavily on convenient solutions – which are typically more expensive and less healthy for us – as opposed to those perfectly rational decisions. All told, this can be an incredible hindrance to people who are trying to develop economically or even those who are trying to live their lives in accordance with their values.

 

Rational Behavior Education and Your Budget

In the world of economics they have the concept of “Homo Econimicus” or “Economic Human.”   This concept indicates that humans are rational beings that act only in their best self-interest.  This is typically used to explain markets and economic theories but in most circles, especially the academic and professional/political circles, it is a quite predominant perception of how humans act in regards to their personal finances and economics.

Well, a lot of education on how people should behave has a very similar approach.  I call it the theory of “Rational Behavior Education.”  My theory on this is that most education is based on the idea that humans are totally rational and if provided with a good rationale as to why a behavior should be changed, the human will naturally see the benefit of such a change and quickly adapt the new behavior.

Let’s take smoking for instance.  We all know smoking is bad for human bodies.  But most education is focused on discussing the fact that it is bad for us, by telling us all of the negative side effects of smoking.  I was a pretty extreme smoker for over ten years and this is what people would tell me over and over, “Your lungs are black, your breath smells, it costs a lot of money, it makes your teeth yellow, it causes cancer, oh, and you could die.“  Now, I know at one point in time, people did need to be convinced that smoking did harm to their body, but that time is long gone.  We know it.  We have heard it for decades.  We know!  But if we were totally rational humans focused solely on our own best interest, we would see quite clearly that smoking is not good for our body, costs a lot of money, makes us smell (which could prevent potential mating possibilities, maybe), and make our teeth yellow, makes our clothes smell and so on.  We would see all of that and we would stop. But do you see the problem?  Yeah, we’re not rational.  Humans can be rational.  We can be unbelievably rational creatures.  We may be, perhaps, the most rational beings on this planet – maybe anywhere in the universe. But we are not ALWAYS rational.  And educational efforts about behaviors aimed solely at our rationality that neglects to touch on how irrationality and emotion plays a significant role in our behaviors will be minimally effective.

In the world of Rational Behavior Education, if we could just teach everyone how to create and manage a budget, a person’ personal financial life would be sunshine and happiness.  But telling people that smoking is bad for them and that they should budget their money is only occasionally, mildly effective.

 

Opportunity Cost

Opportunity Cost is a fancy schmancy term that is usually used in economics classes and it usually is applied to how people use their money.  But I have found that the concept applies equally as well to how we utilize our time, and in fact many people actually grasp the concept better by applying it to time.

The opportunity costs of a particular action are the benefits you could have received by taking an alternative action.  As I mentioned, opportunity cost is usually discussed in terms of money, so here’s what it might look like in an econ book. Imagine that you invest in a stock yielding 3% over the year.  By investing money in the stock, you give up the opportunity to invest in something else like, for instance, a risk-free government bond with a 7% return.  In this example, the opportunity costs are 4% (7% – 3%), the difference in return between the forgone investment and the chosen investment.  Blah, blah, blah – insert lots of additional economics jargon.  What does that mean to you?  Well it means that every time you make a decision to use your time or money one way, you can no longer use it for something else.  The cost is what you spent on the item; the opportunity cost is what you could no longer purchase with those funds. And I know you might be thinking, “Duh! That’s so obvious.” But believe me when I tell you that people often don’t really think about it this way – especially in their day-to-day decision-making.

Now, as I said, opportunity costs are usually discussed in terms of money, but I think the concept can be applied to our time and energy as well.  For example, if I work an 8-hour workday, take 30 minutes for lunch, and commute 30 minutes each way, that adds up to a total time cost of 9.5 hours.  Since that window of time is devoted to and taken up by work, the opportunity cost of working therefore includes everything else I am unable to do during those 9.5 hours.  Spending time with my children, preparing and eating a meal with my family, exercising or recreating with my friends, and watching a favorite television show with a loved one are all examples of the opportunity costs of working.  In order to work, I must give up the time that might otherwise be spent doing and benefitting from something else.  In either case, a choice between two options must be made and the benefits I could have achieved by choosing the alternative option, whether monetary or otherwise, are the opportunity costs.

For some people, this concept has a huge impact on how they see their resources flowing out of their possession. But even if this isn’t a big “Aha” moment, this little concept of opportunity cost, the fact that we have to give up one thing for another can cause us to squirm a little.  Let’s say that I really want that pizza, but I know I’m going to need that $15 for childcare in two days.  But I really want that pizza!  But I know I’m going to need to pay the childcare!  There is conflict, and that conflict leads to some squirming.  And in that squirming we find ourselves dealing with a little problem we discussed earlier.  This is where you might notice that we have Internal Inconsistencies with our time as well as our money.  I might justify what I have to give up by rationalizing my choice, like, “I’m just too tired to cook tonight.” Or maybe some mental bookkeeping, like “I’ll just pay a little less on my credit card bill this month.”

Opportunity Cost is something that is happening every time you make a choice.  It is not something to be eliminated, but rather to be aware  of to help you in your decision-making process.

 

Time Value of Expenses

How much time and energy, in terms of work hours, does it take you to pay for housing, transportation, food, health insurance, car insurance, or entertainment?  Do you know?  If you are like most people, you may have thought about this as it applies to some of your expenses.  Or not. In either case, I have found that when people begin to apply the following exercise to their expenses, they tend to see how or if their expenses are really in alignment with their values in an even deeper way than when they did the receipt exercise.

Here’s an example of how it works.  The other night I took my oldest son out to dinner and to see a movie.  We went to a nice little restaurant.  Not too expensive, but definitely not the “value meal” at the local fast food joint.  The total cost of the meal with tip was around $45.  Movie tickets for the two of us cost $24.  The “Value Package” snack we bought at the theater cost $15.  Total cost for the evening totaled $84.  Now if I’m making $10 per hour and the night out cost $84, then the time cost, in terms of work hours, for the evening out with my son was 8.4 hours.  Well, I know that I work approximately 8 hours each day and so the cost of the evening out was slightly over one of my work days.

In addition to being a good chunk of change, that’s a lot of time and energy. When we pay for rent, mortgage, dinner out, movies, or anything else for that matter, not only does money leave our possession, but so does the time and energy that money represents.  Whenever we spend money, we also spend our time and energy.  And like money, once that time and energy is spent, it cannot be used for anything else.

Of course, using the same example above, we could break out each expense separately as well.  The meal was $45.  If I divide that by $10 per hour I would see that the meal cost me 4.5 hours of work.  The movie was $24, divided by $10 per hour and I would see that the movie cost me 2.4 hours of work.

To calculate the time value of a particular expense, you take the amount of the expense and divide it by the hourly wage you listed above and you can figure out how many hours it takes to earn that expense.

Now, let’s take a different expense.  Say for example your food costs $250 per month and your hourly wage is $10/hour.  Divide $250 by $10 and you will see that it costs 25 hours of work time.  Of course, I’m using simple round numbers to demonstrate and your numbers might not be so simple and round.  No problem.  You can either do the exercise with your exact numbers using decimal points and all, or you can round up or down.  I’m not looking for perfect calculations – this is not a math class!  I just want you to get a better idea of how much of your work time is devoted to your expenses.

How Much Are We Really Spending

People typically think of rent or mortgages as monthly expenses since, after all, we pay those expenses on a monthly basis.  In actuality though, we are paying for every hour, every minute, every second, EVERY MOMENT, of every day. For example, if a typical month has 31 days and there are 24 hours in each day, then the number of hours in a typical month equals 744.  If my rent costs $1,000 per month, I accrue approximately $1.34 in rent per hour and approximately $32.26 per day.

Calculating rent, or mortgage, utilities, credit card bills, grocery bills, etc. down into an hourly or daily amount might not sound like a lot of fun, and my goal here is not to turn you into a human calculator or to persuade you to spend an exorbitant amount of time calculating every single one of your expenses in this way.  I simply want to raise awareness about how much money is really flowing out of your possession, so often without your awareness or knowledge, at any given hour or on any given day.

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.

 

 

The Perception of Money

A key concept in Meaningful Consumerism and improving your financial health and  is to understand our perceptions of money and how money operates as a component of our financial health.  However, most people who I work with tell me that they don’t have any money, don’t have enough money, can’t save money, don’t know how to budget their money, and/or feel stressed about money.

So before we can really get any deeper into the discussion on financial health, I recommend that we should probably have a little bit better understanding of this term “money.”  So I’d like to ask you…What is Money?

In all my years of teaching, I have never met anyone who wouldn’t like to have more money.  In fact, the vast majority of my students view more money as the ONLY solution to their financial troubles – their golden ticket to being able to stick to a budget, save money for the future, improve their credit, reduce the amount of stress they experience in their daily lives, and to have a good life.  So, what is money?  When I pose this question to one of my classes, the responses I get are typically verbalized with vigor.  Money is power!  Money is status!  Money is opportunity!  Money is evil!  Money is freedom!  Money is worry!  It’s bad, no, it’s good.  It’s paper, it’s electronic.  It’s imaginary.  It’s government conspiracy.  It’s control. It turns out to be a lot of things.

Let’s use our imagination for a moment.  Imagine you had a hammer sitting on a table.  Does the hammer have any use just sitting there on the table, without a human to interact with it?  No.  The hammer can’t get up and start pounding nails into the wall on its own. All it can do is sit there on the table, patiently waiting for a human to pick it up and use it.  On its own, it has no use.  Sitting there on the table, the hammer merely represents the ability to do several things – some good, some not so good. It could put nails in walls, take nails out of walls, knock something loose that was stuck or push something into place.  On the other hand, it could also smash your thumb, knock a hole in a wall, make dents in things, or potentially seriously injure or even kill someone.  The hammer is simply a tool.  You get to determine how to use it and until it is being used it is neither inherently good nor bad.  It just is.

Money is really no different.  If left sitting in the wallet, it will do nothing.  If left sitting in the bank account, it will do nothing.  It might draw some interest, but until it is used, the interest will do nothing too. By itself, money doesn’t do anything, and it doesn’t do anything to us.  It does not move without us “willfully allowing” it to leave our possession, a behavior commonly referred to as spending.  In order for money to leave your possession, you have to willfully allow it to do so – always.

If you have a $10 bill in your pocket, it can represent many possibilities – but it is neither inherently good nor bad, it just is.  If you have $100,000 in the bank, it might mean a lot of different things to you, but until it is being used, it is neither inherently good nor bad, it just is. That $10 or $100,000 can be used to make purchases that will be beneficial, or it can be used to make purchases that are not beneficial. In the same way that you get to determine how to use a hammer or any other tool, you also get to determine how you will use your money.

So, as a reminder, money is simply a tool.  Money might come in many different forms, like paper, coins, or electronic information, but ultimately, it’s still just a tool and we get to decide how to use it.  All of those other things that we think about money, they are just reflections of what money represents to us.  And it is good to know that about ourselves as well.  But we will come back to this point over and over, money is a tool and it is a neutral object that we use.  Money does not use us.