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June 29

When a Sale is Not a Sale

I have written often that the best guarantee for the creation of long term financial stability is planning each month’s spending in advance, i.e., budgeting (that dirty word). This is a two-step process. First, we sit and plan where our money is going to go for the coming month, and second, we check weekly through the month how well we are sticking to the plan.

One of the obstacles we encounter to successfully staying within the spending limits we have set is the “sale”. We have budgeted X amount of money for the supermarket, let’s say, but in our hike through the store we encounter all kinds of special deals on items we had no intention of buying on this shopping trip. Here is where many of us stumble. How can we resist the two-for-one, or the Pampers at 40 nis instead of 60? The stores know our weaknesses and they place sale items in ways that make it hard to avoid the temptations. If we succumb and as a result spend more than we planned, the “sale” has turned out to have served us poorly, and in place of having made a good deal, we have made a bad deal.  A sale which disrupts our fiscal balance is no bargain, and the interruption to the practice of our good habits far outweighs anything we perceive to have gained from the unplanned purchase.

Here is where our determination and intensity can serve us well. If we are truly committed to our budget, we will not let these offers knock of us the path we have set. How, then, shall we avoid the pitfall of the “sale”? We must tell ourselves that we are going to stick to our spending plan and shopping list, no matter what.  If the item was not on my list, why do I need to buy it just because it’s been reduced? I am stronger than the advertiser. I walk out of the store knowing that I stuck to my guns. I’m a mean, lean shopping machine! Very empowering!

If this is not easy to do for some, I have two practical methods that can help. One, if you really want that sale item, you need to give up something else on your list. The important thing is not to spend more than was budgeted for that shopping trip. Two, you can put in your budget at the start of the month an expense item for sales. If you then encounter a good sale, you can feel free to spend the money because you budgeted for it. And if you don’t spend it because nothing seemed worthwhile, you still have the money. Very empowering!


June 1

Excusers and Doers

For a couple of years recently, while freelancing, I had the opportunity to counsel policemen on budgetary matters. Most policemen do not make a great salary, with the exception of officers, many of whom earn above the Israeli median. All are restricted from earning any income not related to their police work.

One particular client sticks in my memory. He was an officer, taking home about 22,000 nis/mo, a high salary by any Israeli standard. Yet, he had huge debts, amounting to several hundreds of thousands of shekels. I asked him about his spending habits, and the answers he gave me just did not add up to an explanation of how he could have accumulated such financial obligations. Upon further questioning, and in an attempt to explain his situation, he started to lambast “Bibi and Steinitz”.  (Steinitz was Bibi’s finance minister in an earlier government, about 4 years ago.)  He began to scroll an impressive – and totally ridiculous – list of litanies about everything that is wrong economically in this country and how it’s impossible to make ends meet on such a pittance of a salary. My pointing out that his income put him in the top 20% of Israeli earners made no dent in the pattern of his thinking, and he insisted that one simply cannot make ends meet in the dysfunctional Israeli economy run by dysfunctional ministers.

There are two kinds of people on the planet – those who make excuses and those who don’t.

Those who make excuses.
Folks are not born with a talent for making excuses. But over the years they learn how to dissemble. They learn how to blame the weather, parents, a spouse, their teachers, the system, Bibi — pretty much anything that can serve as a deflection from where the malfunction truly rests.

And those who don’t.
Or won’t.
We all have our difficulties and some days we feel like making excuses. We start mumbling and grumbling, but stop before the mumble turns into a tumble. We get the job done.

When we wake up in the morning we get to choose which route to take.  A wise person once said:  both successful and unsuccessful people hate doing what is necessary to reach important and lasting accomplishments. The difference between them, however, is that successful people do it anyway.

(Inspired by a blog from psychotactics.com)

November 16, 2015

Know Thine Own Money Self

If you want to succeed at money, you need to be constantly looking at your own life, your own goals, and your own choices.
When struggling with money issues, the best way to start is with a pointed financial question leading to a truthful and honest answer to that question. Often, the answer will require some research and some reflection about goals and values. In my work with clients I have often seen how an evaluation of spending habits, together with the creation of a goal-oriented program, leads to greater insight and answers to families’ financial dilemmas.
Here are three examples of financial questions to ask yourself. Embracing these questions with honest and complete answers will be of great help in setting a path towards better money management and towards the realization of short to long term goals.
1. What was the last money mistake I made and why did I make it?
Often, this is a spending mistake – you spent money a way that hindsight says you really shouldn’t have. Often, the gravity of the mistake will depend on when you ask yourself this question.  If a sudden expense pops up and you don’t have the means to handle it because the money was recently spent needlessly, your remorse may be significant.
Then there is the question of why you made that mistake. What was the situation that caused you to throw around money in a careless fashion? Was it a family member who exerted pressure? Was it the venue in which you found yourself at that time? Your emotional state?

The discovery and awareness of what caused the mistake will decrease the chances that you will act in the same manner when a similar situation arises.

2. Do I have enough of an emergency fund?
Its purpose is to pay for unexpected expenses, not foreseen in the budget. Examples would be a large auto repair, a dental bill, or an appliance which suddenly dies. If you suddenly need to pay 2,500 nis for dental work, you will use your emergency fund, so as not to break your budget. The lack of such a fund can turn what ought to be a minor bump in the road into a major financial crisis, where you will need to scramble and scrape to pay the unexpected bill (often by having to take a loan).  I recommend maintaining a fund equal to 25% of your monthly income, which ought to be enough to cover almost any emergency.
3. What big expenses do I know are coming in the next year, such as arnona (property taxes), summer camp for the kids or car insurance payments?
Having to pay for car insurance at the beginning of the calendar year is not in the category of emergencies I described in question #2.  This is a known, recurring, yearly obligation. Rather than panicking when the bill arrives, a much better approach is to save monthly and regularly in advance. If you know what your bills were for this and other items over the past years, you should be able to plan for them the next time they come around.
Responsible money planning seeks to remove the element of surprise from our lives. We can achieve this by asking ourselves meaningful questions meant to discover and learn as much as we can of our habits and financial practices and then adopting new habits to apply those lessons.

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