Financial Fitness
In this Podcast, we cover everyday real-world scenarios applicable to all of us in our day-to-day journey toward financial freedom. of course, that looks different for all of us, but the basic principles remain the same - Be Smart, Be Intentional and Be Different! The last one is my favorite, but it is the hardest for many to master. There are so many distractions in our world telling us to do what feels right and go with the flow, but in the end that won't get you where you want to go. Here we will go on a journey together, and cover every day topics that we all face, in an effort to uncover the truth from the lies, and move ever closer to the goal of financial freedom!
Financial Fitness
S2:Ep5 - Your Budget is NOT Your Bank Account
Challenge time………starting today…….interact with your budget and don't be afraid to make as many changes and updates as you need to, but remember that you guardrails are your income for the period that you are budgeting. A simple way to get started is to make next month's budget with this month's income, and keep using that pattern until you have your emergency fund in place. This will give you a little extra cushion, and you will never have to worry that your account is going to run out. Then find a coach and build a plan to achieve higher levels of financial fitness. If you're starting out, get a coach…you need one, and it's better than guessing yourself into financial ruin……if you don't know where to start, you will find a link to my coaching page in the show notes. I would be honored to work with you once, or as many times as it takes to help you build a plan and build the confidence you need to build wealth and keep it!
Raymond House Financial Coaching
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Welcome Back! This is Financial Fitness, and I am your host Donald Raymond.
As obvious as it may seem, this topic ended up with a dedicated episode……this has been a very lively topic recently for me as a coach, and even though everyone seems to agree that the budget and the bank account are NOT the same thing…..there is plenty of healthy debate about why the balances never match, and how to make them match….and if they don't match then I am afraid of over drawing the account.
Because of this, I decided that it was a Back To Basics guideline that I could try and unpack today in 20 mins or less. Now don't worry if you find some of this a little TOO different…it is different, and that's because the goal of this podcast is to BE Different!!!!
There is far too much normal out there, and NORMAL is what's telling you that if you don't spend and track the bank account balance then you will over draw it, and lose money. What you're really telling yourself is that you are afraid of losing control…….the lie here is that if your managing to your account balance then you're already out of control. The most common day for the average NORMAL individual to check their bank account is on payday (I bet if we were in the same place I could have said JINX just then). I know we all know that, and we all do it! The problem is what happens next…..
We check the balance, and if we are managing to a balance and NOT to our budget then we get a surge of endorphins, and we start to immediately imagine everything we can do with the money that we see in the account. Of course, we all know that when we spend the money its gone, and we know intuitively that there are priorities that already have claim to the money that is in our account right now…..but we quickly convince ourselves that we're only buying a couple extras, or if we play a few extra lottery tickets and win big, or any other excuse then we can spend now, and ask questions later. I hear it all the time…..I can use a credit card this week and pay it off when its due with my next paycheck…….but lets look closer at the behavior and the pattern associated with payday.
We see that its payday, and we check our account balance, then we imagine what we could buy, and we rationalize that we can defer the costs and buy now or finance and then pay later. There is a fast growing market based on this principle and they have claimed billions of retail marketing dollars in the last 2 years to take more of your money away from you. And don't think for a second that you are immune to it, because every one of us has fallen victim to it at some point whether we realize it or not. The buy now pay later strategy isn't a new concept, but it has become a standalone platform, and there are company's being born overnight with the volume of money being spent in this category of marketing. They are good at it, and your money will get caught in the trap….UNLESS you have a well-defined plan and have developed the budgeting muscles to defend against these kinds of attacks.
So back to the behavior that gets us in trouble…..we now have every excuse we need to spend the money on unplanned or otherwise unnecessary expenses, and can do so quickly and relatively pain free…..at least for a moment. But that's all it takes…..a moment! Then the purchase is made, and in some cases the buyer's remorse sets in so quickly that you can return or cancel and get our money back, but in most cases that is NOT the outcome. Typically we complete the purchase, receive the item and enjoy it. Returns are no longer an option, and we go on with our plan to repay the debt that we have created, either as a loan, finance or credit purchase, or even if the item was purchased with cash or debit, we now have a cashflow restriction, and as we continue toward the end of the month, we run out of money for our needs, and have to finance those with the intent to repay on the NEXT payday.
Hopefully by now you have spotted the error of our ways and the pattern that is developing. This pattern takes you deeper and deeper into debt, with an ever increasing level of risk for your way of life and the financial security of your family or household. This behavior can result in months when savings are increased, but then the savings are depleted the next time you buy NOW, and then think you pay later with ZERO consequence. It just doesn't work longterm, and guess who wins…..the sellers! They get your money and all the benefits that come with closing sales that are related to your reaction to the marketing techniques being used. Then the marketers get their bonus's and so on…..
You are left wondering how this happened, AGAIN, and how you are ever going to get out of it. You think that if you take your focus off the bank account for even a second, then you will overdraft and lose all your hard earned money…..meaning you are afraid of losing control. See how sneaky this attack can be. It pretends to be your friend and then when you finally see what is happening, it's too late and your money is gone!
Our son watches a cartoon most Saturdays that typically takes real-world scenarios and exaggerates them to create a dramatic and humorous outcome for the kids watching, but if you are an adult and happen to see the end of the scene, then you can appreciate the real-world application that a child is oblivious to. Its harmless fun, but recently they used a scenario where a magician appeared and impressed a small group of friends with some very basic and silly tricks, and the friends all started throwing their money at him on the promise that they would get it back, and possibly even more. There was of course one smart kid in the group and he was trying to tell his friends to stop, but they were blinded by the flashy show in front of them, and then in an instant, the magician disappeared, and so did their money.
All the friends immediately snapped out for their daze, and realized what had happened, and that was the end of the skit…..but its easy to take that example and replace it with a good commercial or a suggestion to add items to your cart when checking out online or on an app. They may be offered as something that many people are buying with this product, and even though you don't need it, it’s a small price and an easy addon. They sweeten the deal by offering to spread the payments over a few months….not the typical loan product that cost interest over several years, and you would be floored to review the numbers associated with this type of marketing. They are staggering…..but I will save that for another episode when we cover the top 5 financial products that are robbing your future wealth.
More to the point, we fall into these traps and the paycheck to paycheck mentality by looking at our account balance rather than exercising the budgeting muscles that create an intentional path forward for the entire month, and observe the income and the expenses as a whole. This is also why your budget and your account balance will likely never match when you look at them. The budget is looking ahead and has been updated with the events that have already occurred…..assuming that you're entering and tracking your transactions. This is called a forecast….also known as a plan, and it's very fluid so that it matches your day-to-day activity and gives you the ability to make adjustments as needed throughout the month. You are then always balancing to your available income for that month, and not spending the money that is available today in your account. This is a huge difference in how you think about managing your money….if you have been living out of your account. That plan only got you in trouble, and if you were able to keep your head above water then you are probably just breaking even, and still not achieving your wealth goals.
You will notice that I have used the work wealth several times, and that's because while we are talking about financial behaviors, or focus is on that ability to build and retain wealth over time. Just like building muscle is no secret…..it just takes proper technique and tension over time….wealth is our financial muscle. We are trying to make these muscles stronger, and there is no secret on how to do it…..proper technique, and focus over time.
The techniques are not hard, but they may be new to many who have never focused on this muscle in this way, and for that reason you will feel uncomfortable when you are getting started. This is expected and again, it's just like exercising a physical muscle…..the first few reps or workouts are going to be uncomfortable, but remember that this is where the majority of your improvements come from. When you want to get batter, stronger, faster, smarter, you have to make yourself uncomfortable first, and push yourself harder than before. This is easiest when you are first starting anything new, because its new, and so its already uncomfortable, and you are pushing yourself past your current abilities….the hard part comes much later after you have established good behaviors and a strong financial muscle. In order to maintain it, you have to keep exercising, and when you want to improve again, you have to push yourself that much harder, and into new levels of discomfort to reach even higher fitness goals.
This is really when coaching can be a huge value just like when you are first starting out. Someone with limited knowledge needs to seek guidance and knowledge to achieve the desired skill, ability, or fitness goal. I had a coach when I played tennis in high school. I was ok on my own, but my coach helped me achieve greater success, and be able to reach competitive levels of the game. I've had coaches in other aspects of my life as well, and I currently utilize a coach to help me be a better coach for my clients.
I don't always recommend a coach for everyone in every situation. I typically recommend a coach to help get you started, and create a plan that you can then follow on your own, and then when you have found a level of comfort, it's time to get the coach involved again to help you push through the comfort zone and into the next level of growth, safely and intentionally. IF that is the role of the coach in your life, then you will see the value of that relationship paid back in multiples.
To avoid the attacks of what I have already described you need more than just strong muscles, you also need confidence in your ability to avoid them and to execute your plan in a way that satisfies the need to be in control. It becomes a belief in something that isn’t being promoted or marketed, and a confidence to say NO when everyone else is saying YES. You're going to look and feel different, and people won’t always understand, but just like good diet and exercise……its won't be long before people start to approach you and ask for your secret to getting financially fit. It's up to you how you answer that question, but no matter how you choose to respond, I promise it feels just as good for all us to hear it from those who have been critics in our lives, when they realize that it's really them who have something to learn.
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Challenge time………starting today…….interact with your budget and don't be afraid to make as many changes and updates as you need to, but remember that you guardrails are your income for the period that you are budgeting. A simple way to get started is to make next month's budget with this month's income, and keep using that pattern until you have your emergency fund in place. This will give you a little extra cushion, and you will never have to worry that your account is going to run out. Then find a coach and build a plan to achieve higher levels of financial fitness. If you're starting out, get a coach…you need one, and it's better than guessing yourself into financial ruin……if you don't know where to start, you will find a link to my coaching page in the show notes. I would be honored to work with you once, or as many times as it takes to help you build a plan and build the confidence you need to build wealth and keep it!
