MoneyMinding Monitor

Getting Back on Track When You’ve Been Derailed

by Catherine Novak, based on MoneyMinding’s 12 Simple Steps by Tracy Piercy

Train wrecks.  Derailments.  From where I write this in British Columbia, occasionally our newscasts feature images of a chain of heavy train cars lying on their sides, spilling their contents into a river canyon or a ditch, looking both ungainly and fragile as their small wheels spin helplessly in the air.  It’s never pretty, and clean-up is often difficult.  Is it any wonder that when crises happen in our life, we sometimes talk about being “derailed”?

For long periods of time we chug along the track that’s been set out before us, delivering our goods, sheltering our passengers.  Then, WHAM!  A rockslide on the track, or a cow, or even the “wrong kind of snow” causes us to lose our grip, or get jerked off the rails.  Whether your metaphorical derailment is a physical injury, a relationship breakup, a sudden financial loss, loss of a job, or death of a family member… these are the circumstances that life throws at us, and putting ourselves back on track often takes time and a series of small steps.

Ironically, often the “life crises” are compounded by money crises.  When you can’t work because you are sick or injured, or you are caring for someone else, that can hit you right in the wallet.  So what are the steps you need to take get moving forward again?

The first step, and it’s not an easy one when you are knocked over, is to be grateful for where you are.  Unlike trains, you are a human being, capable of love, appreciation and gratitude even in the most unlikely circumstances.  It might just be “Thank heaven I’m not dead!”  or “I’m so glad I have family members who love me,” or “Well, I’m grateful that this lousy thing is done.  Let’s see what I have left to work with.”  When you know what you are grateful for, take the time to record your thanks – in a notebook, on index cards, or on sticky notes by your bedroom mirror.  Don’t let those items of gratitude slip out of your life.  Recreate your moment of thanks daily.

This is the perfect time to reflect, reassess, and to make new goals that take into account the life event that you have just been through.  When you have your goals, write them down and carry them with you. 

Obviously, these first two steps are much broader in scope than you will find in most financial repair “how-tos”.  But the truth is, financial health is built on a foundation of overall well-being. When you have these first two priorities in place, then you can ask yourself, “What is the next baby step I can take to reach my goal?”  That next step may be to record your daily expenses, so you know where your money is going as well as where it is coming from.  It may be to start putting aside your change, so you can use it later for “guilt-free” purchases.  Do that one next step consistently for 30 days, so it becomes a part of who you are.  If you try to change too much at once, especially when you are already dealing with the larger change of your “derailment”, your new habit may not stick. 

Expect success, at least in this one manageable area of your life.  Taking charge of your money does not have to be a struggle, provided you approach it in a step-by-step fashion.  You may even find it to be one area of calm and control in an otherwise turbulent situation.

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Financial Tricks in Unlikely Places

by Catherine Novak, based on the MoneyMinding 12 Simple Steps by Tracy Piercy, CFP

A career magician named Tony Eng lived in my town of Victoria BC all his life, until he passed away earlier this year. When he died, it was major local news, because so many local families had been entertained and bedazzled by magic tricks, especially his sleight of hand. Tony could perform standing right in front of you and play tricks with handkerchiefs and cards with such dexterity that even though you were right there, you had no idea how he “put one over” on you. And you loved that he tricked you, because he did it with such warmth and love of his craft

Of course, not all trickery is so warm and fuzzy, especially when it involves your money. Now, this isn’t an article about con artists and other charlatans who are deliberately out to separate you from your money against your will. Plenty of articles have been written about those criminals; many consumer organizations, securities commissions and other regulatory organizations have information on how to protect yourself against theft, fraud and shady deals.

The fact is, we can be tricked by people and circumstances that bear no ill will at all towards us. We can be tricked by the nightly news, by a hot tip from our brother-in-law, or even by our own financial statements… if we’re not maintaining the right focus. Trickery happens when your attention is shifted away from the real focus and onto something else that’s eye-catching and flashy. You may think you have your eye on what’s important – in fact, you’re just looking at the carefully-shuffled deck, or the shiny object. And when your attention is diverted in this fashion, you miss what’s important. You’re duped, and the joke is on you.

The biggest “tricks” when it comes to money are the ones we play on ourselves, when we let ourselves get pulled off-track by undue focus on individual factors that don’t take into account our personal “big picture”. Two of these factors are rates of return and advisor fees. These can form a piece of the picture when we are making financial decisions, but to focus only on these “numbers” is to ignore vital information like your investment philosophy, the quality of your investment and when you need to turn that money into income.

What does it matter if your advisor fees are 2.5 percent when they pay for expertise that would have cost you more time and money to learn on your own? Why should you lose sleep at night in an investment more volatile than you can stomach just to chase a higher rate of return? Perhaps you can reach your goal with a lower rate of return delivered more consistently.

When it comes to money, your focus should always be on your personal, specific goals. Do you know how much money you will need to live life the way you want to? Do you have a plan to make that money come in each month, now or in the future? If so, make that plan come to life. Getting distracted by scary news about the financial markets won’t help. Spending too much time fussing over management expense ratios is counterproductive. Exhausting yourself searching through newspapers and driving across town to save two bucks with a coupon probably won’t help either.

Now is the time to sit down with a trusted advisor, with your spouse, even just with your list of priorities and ask “What am I doing to secure my income on a monthly basis?” You may decide to reshuffle some priorities. You may find that your portfolio needs rebalancing. You might not take your brother-in-law up on that tip -but then again, you might if it contributes toward your monthly income goals! At least this way, your eyes are open and you are looking at something solid and unchanging.

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Coping with Unexpected Expenses

The best way to cope with unexpected expenses is to be prepared for them in advance! Financial planning is where you put controls in place that help you cope with both the expected and unexpected events in life. Here are my top four tips:

1.  Put systems into place that prepare you for unexpected expenses.  It could be a sum of money set aside as “savings” that you add to each month. Many advisors recommend having 3 months’ earnings set aside for just such a purpose.

2. Understand your risks and to take precautions to minimize them. If you aren’t aware of where your risks are, or haven’t evaluated them recently, sit down with a qualified financial advisor at a reputable firm. Consider all the potential areas of exposure: death, sickness, loss of income, loss of money, old age, unexpected accidents or repairs, and so on.

3.  Where those risks could result in a devastating change to your life, secure your peace of mind with appropriate insurance.  Many people have the basics covered, but what about critical illness, disability, business overhead or long-term care?  There is pet “insurance” too, which can spread the inevitable costs of caring for you pet’s health over time, like a forced savings program.

4.  Look at your sources of income.  Do you have more than one?  How much are you in control of its continuity? Many excellent business ideas have come about because the owner faced a critical expense, and faced it with an idea that brought in more money.  But if you are proactive and think of that money-making idea before an expense takes you “over-budget”, you will be in better shape.  Your secondary sources of income do not have to take a lot of time, either.  Income-producing investments, rental properties, or an idea that can be licensed or that produces royalties all count as alternative sources of income.

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MoneyMinding Launches Its Network

MoneyMinding Network Launch Timely Answer to Personal Money Questions

Victoria BC – MoneyMinding Inc. announced today the launch of its live and online networking component, The MoneyMinding Network.  Designed for both financial industry professionals, and the clients who work with them, it features both educational evenings and an on-line social networking presence.   “I see the MoneyMinding Network as a vital resource in today’s financial climate, where uncertainty and confusion seem to be overshadowing people’s ability to make good financial decisions”, says Tracy Piercy, CFP, MoneyMinding’s founder. “Networking organizations for business development, community service or simply shared interests have been around forever,” continues Piercy “We are doing something new with networking by integrating day-by-day financial education, unconnected to financial product sales.  It’s simply about helping people get better results from their personal finances by asking the right questions and making the right contacts.”   One example of the MoneyMinding Network in action is the Mix ‘n’ Mingle, started earlier this year to offer both education and local networking.  Each Mix ‘n’ Mingle has drawn close to 100 people who gather to listen to some of Victoria’s most knowledgeable financial and property experts. MoneyMinding was developed by Tracy Piercy, a Certified Financial Planner professional, to teach financial education that explores opportunities “without sacrifice or cutting back”.  Since its inception over 3 years ago, MoneyMinding has grown to serve thousands of people across Canada, the USA and around the world.  MoneyMinding also supports its sister organization, The MoneyMinding Foundation, a non-profit dedicated to promoting financial literacy to people who otherwise could not afford it.

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Big Money Could Have Made Big Interest

What would you do if you won 3.6 million dollars?  Would you run out and spend a bunch of it?  Give some of it away?  Take your time and make a decision? 

If you decide to take your time, you’re on the way to a good start - still, I’m puzzled why Maple Ridge BC realtor and lottery winner Peter Dushop chose to take his 3.6 million and stuff it away in a safe deposit box for almost a full year while he pondered his options.

The thing is, excellent and safe “holding tanks” for money are available for people who want to think things through before they make a big money decision, such as investing a lottery windfall, an inheritance, or even buying a house.  There are high-yield savings accounts, or money market funds which would be perfect for holding your cash until you know better what you want to do with it.  By waiting nearly a year to claim his money, Dushop said “no thank you” to tens of thousands of dollars of interest.  A year ago, money markets were yielding 4.5% annually, and in the last couple of quarters that return has dropped to around 3 percent.  That’s not a lot when you are looking at hundreds of dollars, but when you are talking about $3.5 million, it could have made $100,000 interest or more.  And that is the interest you get for “playing it safe”. 

So?  Doesn’t he have enough already?  He might, though research shows that most lottery winners don’t hold onto their earnings, spending and losing the money until they reach their previous standard of living, usually within 5 years.  If Mr. Dushop spent the year educating himself about money management, he may defy the odds.  I get the feeling though, that he spent the year scared stiff to take any action because it could be “the wrong move”.

That’s a shame, because we need more people with access to money who are unafraid to use it and grow it, enriching their lives and more importantly, the lives of those around them.

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Be Smart When Using Credit Cards for Investing

Question: How many credit cards can you leverage for investing before it damages your credit?

Answer: If only the answer were as simple as a number!  I could say, well, 9 - and you’d be on your way!  In reality, the credit card companies and credit bureaus don’t care whether you are using your cards to buy stereo equipment, or to invest.  But they do care about how you manage your credit. 

Here are the areas to be aware of:

• The effect on your credit score when you fill out a credit application.  Each time a company or financial institution makes an inquiry, it can adversely affect your credit rating.  If you fill out a credit application, be reasonably sure that you will qualify for it.
• The relationship between your outstanding balance and your limit - you should use only 1/3 of your available credit at any time.  Leave lots of room!
• Your frequency of use - it’s better to use a card regularly, which can be as little as once a year.  Keep it somewhat active.
• Overall history of the card and the length of time you’ve had it.  A long credit history with a couple of bumps and snags is better than a short history where you are an unknown quantity.
• Your total debt-to-service ratio; in other words, your debt payments compared to your income. Again, keep this to a maximum of 30%.

If you keep within these guidelines, you can use the credit available to you to fund wonderful income-generating projects, or to take advantage of a terrific opportunity and have a terrific credit score.

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Just “Saving Money” Will Keep You Broke

I actually posted an early version of this just as Tracy was getting fired up about the topic.  Since then we have put more effort into getting this message out, and polished up the message even more.  Please send your comments!

The tax rebate checks under the Bush administration’s economic stimulus plan won’t do any good if people simply put them in the bank. 

Last week, an online article in the Wall Street Journal claimed that we need to save more money – even if the interest on the savings won’t keep up with inflation.  This same article also restated the obvious:  “we live in a culture fueled by spending and credit.” 

This is double talk and misses the whole point of why America is headed for recession.  Wealth is created with credit.  The government knows it, the banks know it, corporations know it and the wealthy know it.  With credit, there is access to money to spend which increases corporate earnings, which increases tax revenue, both of which provide jobs and, therefore more income for workers to spend which continues this profit cycle. 

When you remove access to credit, spending decreases which means earnings drop, which means jobs disappear, which means people stop spending and the problem gets worse and worse.  This downward spiral is the recession the government is trying to thwart with the stimulus checks. 
If you, and everyone else, takes their $600 average family rebate check and sticks it in the bank then no one is buying the products and services you, or your company, sells to earn the money to pay you your salary.  When you lose your monthly income and can’t pay your bills, that is when you end up losing your home and your security. 
If you and everyone else stop spending then there won’t be much left of Corporate America.  People in other cultures have learned to do what North Americans seem to be ‘too afraid’ to do; that is, find ways to earn a living besides going to work for someone to get a paycheck.  Just look at the growth of micro-lending companies in India as people start businesses on even less than what the average American is getting in his or her “stimulus check”. 
If we don’t wake up and learn how to earn an income that pays for the freedoms and luxuries that we’ve bought on credit, then being broke will be the least of our worries – it will be our freedoms we’re losing as emerging, strong foreign companies and banks who already own more than half the U.S. debt move in to take over struggling American ones. 
Saving money is what people do when they are afraid of losing – not when they expect to win.  It comes from the scarcity mentality that keeps people from stepping out and finding ways to earn the income they need to live, the way they want to live.   
North Americans are able to start and run a business of just about any kind using credit.  We can even use that money to invest in a variety of wealth building ventures that others have started – both of which create more income which enables more spending. 
If you had planned to invest your stimulus check in a growth mutual fund or stock, your investment returns would give you about 7% as suggested in the Wall Street Journal article.  On a $600 stimulus check that works out to only $3.50 a month.  However, without spending, those returns would drop because the companies wouldn’t be earning the returns they had in a strong and growing economy. 
For $600, you could buy a bolt of cloth and make dish towels and your profit would be much more than $3.50 a month.  Make cookies, make anything and sell it! Alternately, if you don’t know how to sell what you’d make, then take a course to develop your financial and entrepreneurial skills.   
Please spend the money from your stimulus check, and while you’re doing it, make sure you start learning how you can earn even more money on an ongoing basis. 
And, be sure to pass on this important message!

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Our New COO Steps On Board

Zig Hancyk, MoneyMinding’s new Chief Operating Officer had these words to say to MoneyMinding advisors and members gathered at our “international headquarters” Wednesday.

I wanted to be here today to tell you why I have invested in MoneyMinding and why I chose to be Tracy’s business partner. I certainly do not know as much as Tracy does in the area of financial planning but I do know a good business opportunity when I see one. I have been involved in growing successful companies over the last 25 or 30 years and I can say that this one really excites me.

I believe that MoneyMinding has positioned itself well in a market niche that is not well served at the moment. The unique approach of tying personal values and goal setting to sound financial planning techniques is the basis behind MoneyMinding’s Success Principles. MM’s various programs are used by financial planning experts as well as individuals who want to accelerate their wealth and reach their goals. I like to call this “purposeful wealth”.

I chose to be Tracy’s business partner because I trust and believe in her…..which are the most important criteria in my choice. The other is that we have complementary skills that are needed to make MoneyMinding and its stakeholders, shareholders and investors successful.

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Spring Shopping - you can do it with a plan!

The other day, through a great service I subscribe to called PR Leads, a question came in about spring shopping. Has the economic downturn affected our shopping habits, the freelancer wanted to know.  Are we investing in value, holding off on buying, making “trendy” purchases because they are less expensive?  Here is my reply:

 I have already done some guilt free spring shopping this year and bought some terrific clothing and accessories to add to my wardrobe.  My secret is to plan ahead with my shopping and my spending plan, then take cash and look for high value at a big discount.   This time of year, stores frequently pull out last year’s spring inventory from storage and put it on the clearance racks.  In my neighborhood, which has some upscale boutiques, those racks can feature beautiful “investment” pieces for up to 90% off.  These are pieces which don’t lose their value because they are classic, not trendy.   And, if money is tight and the financial spending plan is new, I have also learned how to add pizzazz and versatility to a wardrobe with accessories like necklaces, scarves, belts and funky shoes bought in the clearance department without a big investment so you can take advantage of the trends.  These are techniques that work in both good times and bad – a recession-proof way to maximize your shopping power!

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The Best Credit Cards

With the debt crisis getting a great deal of attention in the United States, we often get sent publicity leads that ask for some expert financial help on credit and debt issues.  Here is one that came from a website geared to newlyweds - I’m posting our answer below.

 I’m looking for a prominent financial expert to guide young newlyweds on choosing the best credit cards (what to look for, rewards, interest rates, etc.).

Choosing a credit card should require the same research and planning as does choosing an investment or making a mortgage decision.  The problem people have with credit is largely because it isn’t part of a strategic plan. 

Credit card debt isn’t bad – it is an excellent tool to recognizing lifestyle choices, and access to credit is a fabulous tool to create wealth or to reach personal goals.   For example, if you are choosing your first card as a newlywed couple, now is the time to take a look at your goals - what are you working toward?   Is it travel?  There are cards that collect travel rewards.  If your goal is a new car, you can get a card that will reward you with a cash rebate when you make your purchase.  If you are building or renovating, you can even get affinity cards for hardware stores. The choices seem limitless. So pick your goal first, and then go shopping for your cards.  Once you have your cards, then develop a strategy to maximize the benefits you receive while creating a spending system that fits your lifestyle. As for interest rates, they matter less when you carry a low balance or none at all, and they are just part of the equation when factoring the return on investment you receive from purchasing on credit.  If you use your credit card for business purchases, what is the income that is being created as a result of that purchase?  And, if you are making a lifestyle purchase, the same applies:  what is the benefit you will receive as a result of the purchase?   Finally, one way to stay in control of your credit use is to ask yourself first how and when you will pay the bill.  How many hours, days or weeks of work will it take to make the money for your purchase?  And of course plan ahead so your credit cards become a strategic part of an overall financial plan.

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