No more excuses! Get financially savvy
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The power of ‘good enough’
The logical next question is: How do you get unstuck? Step one is getting yourself to acknowledge — no, more than that — to really believe, that in this particular area of your life, you do not have to be right. Yes, you heard me correctly. You don’t have to be right. Not only that:
- You don’t have to be perfect.
- You don’t have to be the best.
- You don’t have to be at the top of some class.
- You don’t have to be the smartest.
- You don’t have to be the winner.
- You don’t have to prove yourself.
- You don’t have to do better than your neighbors or your parents or your siblings or your friends.
Instead: You have to be good enough. And you have to believe that good enough is just fine.
What does that mean in real terms? It means your investments don’t have to do better than the market as a whole or better than other people’s investments. They simply have to do well enough to meet your goals. It means you don’t have to save more or spend more or make more than anyone else. It means you have to negotiate these areas of your life well enough to secure your happiness and make yourself comfortable.
You do not have to justify your financial life. Not to the markets. Not to your friends. Not to your relatives. And, most certainly, not to the men in your life who may not understand how you can sit there, perfectly satisfied with your “good enough” portfolio, without reaching for the stars. (Try not to blame them. It’s in their DNA, just as not taking so many risks that you can’t sleep at night is in yours.)
I know this sounds foreign. We live in a world where relativity is key to our sense of inner peace. It’s not enough to be thin or smart or funny. You have to be thinner or smarter or funnier than someone else. The problem is, in the world of money this kind of measuring up won’t make you rich. It will make you poor. Why? Because it will entice you to behave in one of two ways, neither of them any good for your wallet. Either you will go overboard in your quest for wealth, taking risks that are both unnecessary and unwise (Amazon at $400, anyone?). Or you will become so convinced of your inability to be richer than the next guy or gal that, once again, you will become stuck.
The truly great thing about “good enough” — and the reason it is so powerful — is that it allows you to get to the starting line in a way that waiting for the ultimate, best possible result does not. Take an example that you may have faced dozens of times in the past couple of years: refinancing your mortgage. Say you’re sitting with a $200,000 30-year fixed-rate home loan at 63/4 percent. Rates have fallen to 6 percent. Refinancing now would save you $98 a month — the difference in your $1,297 monthly payment and the $1,199 new one. But some “experts” have been quoted in the paper saying they see rates falling to 5 percent, maybe even lower. Do you refinance now? Or do you wait?
If you’re expecting the best possible ultimate result, you are stuck. What if tomorrow rates fall farther? Then you’ll be kicking yourself, won’t you?
But if you’re a believer in the power of “good enough,” you forge ahead. And then — guess what? Starting tomorrow, you pay nearly $100 less a month. Over the life of your loan, that means you’ll save $35,314 in interest alone. If you put the money you’re saving into an IRA or other account where it can grow tax-free, at the end of those thirty years you’ll have a fat $147,126 in addition to your paid-off house.
Map to a million
How much more money could you save if you made the little changes I’m going to suggest to you throughout this book? How much richer could you be? I want you to see the answers in straightforward numerical terms. I want you to see the actual dollars — and in some cases cents. So throughout the chapter I’ve sprinkled lots of little Maps to a Million. Unless otherwise noted, I’ve calculated returns at 8 percent and assumed that the savings invested were tax-deferred. Follow the actual steps and you’ll see the wealth start to add up. Then, starting on page 241, you can see exactly how fast incorporating a few of these steps into your life really does add up to a million — or more!
Here's an example:
Refinance a $275,000 mortgage
Prior rate: 63/4 percent
Monthly payment: $1,783
New rate: 6 percent
Monthly payment: $1,648
Annual savings: $1,620
10-year savings: $24,997
20-year savings: $80,182
30-year savings: $202,674
If the rates fall to 5 percent — or lower — as the “expert” predicted, you can always refinance again. But what if rates don’t fall that far? What if the “expert” — because in this world of no right answers even “experts” can be off-base — got it wrong? In the world of ultimate perfection, you would lose. But in the world of “good enough,” you still would come out a winner.
Who are you doing this for? You!
My aim is to make you feel like a winner. I want to make you feel better about yourself and your life. But in order to do that, I need your help. The unfortunate truth is that taking control of your financial life won’t work until, like a good diet, you are doing it for yourself. You may be able to lose five pounds for your husband or your doctor. But you’ll keep them off only if you’re doing it for yourself. You can buy a book on money management because it makes your partner happy to see you walking into the business section of your local bookstore. But you’ll read it and follow its advice only if you’re doing it for yourself.
Sound selfish? It’s the furthest thing from selfish. Becoming financially self-sufficient is like giving a huge gift to the people you love. It means you will not be a burden to your parents or your children. If you are in a committed relationship, having a handle on your own money makes you a full partner rather than an associate. (And no, having more than enough money to live on doesn’t mean you don’t have to take the reins. Do you think your grown children relish the thought of taking over your checkbook because you never learned how to pay bills during your long marriage? Think again.)
You are taking control of your money because doing so will make you feel happier and smarter, more confident, more content, and more useful. Having a little extra money in your wallet will not make you feel more satisfied with your life. What you do with the extra money will do that. Having better control of that money, however, will make a huge difference in how you view yourself and your place in the world.
The folks at Real Simple magazine did a study in which they asked women to describe in a word or two what they’d need to feel successful. Here is what the respondents said:
Happiness: 80 percent
Peace of mind: 75 percent
Fulfillment: 71 percent
Self-confidence: 71 percent
Freedom: 70 percent
Balance: 70 percent
Learning to manage your own money can help you achieve about every one of those line items. For JoAnn, who is 68 and retired, it did precisely that. Here is her story:
During my growing-up years, there was very little money to manage. At the age of 10, I asked my parents to give me the money that they would have spent on my clothes and allow me to do my own purchasing. I was unhappy with the things my mother bought for me in a very low-end department store in Detroit. I felt that I could do a better job. I found I could buy three semi-attractive outfits instead of the six cheaper ones that my mother purchased. Each year, I added a few better things and even managed to snag a much-lusted-after cashmere sweater on sale. I was very proud.
Lack of money continued into my married years, this time accompanied by bill collectors. It was a time of minimum payments on credit cards and trying to meet the needs of the children. And it was very depressing and stressful for the whole family.
I took a minimum-wage job when the youngest child went to kindergarten. The job had health benefits and a pension to make up for the low salary. My husband felt that every cent I earned was needed to reduce our debt and run our family. I made a decision on my own, however, and signed up at work to purchase a $25.00 U.S. Savings Bond every two weeks.
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Each time I was promoted or received a raise, I invested most of that money in more and higher-denomination bonds. Over the years, I quietly accumulated the unimaginable (to me) sum of $100,000. My husband and I managed, through both of our jobs, to resolve our money problems and shortages. Today, the bonds are untouched in a safety deposit box for use in case of an unexpected major expense or a future big surprise for the kids! It was a difficult time for me, and I never want to be poor again.
In recent years, I have left most of the money management to my husband. I am knowledgeable about my life-time pension, I know when the Social Security checks are direct-deposited, and I know where our money is invested. And I also know I could carry on financially in the future if I had to.
Can you imagine: $100,000-plus on $25 twice a month. Yet JoAnn did it. How? By taking control of her life. By taking control and starting to save even when her husband thought the money would be better spent in other ways. By doing what she knew was the right thing for herself, her future, and her kids. And how did managing her own money make JoAnn feel? “Very proud,” she said.
JoAnn had every right to feel proud. And you can feel that way, too.
Excerpted with permission from "Make Money, Not Excuses: Wake Up, Take Charge, and Overcome Your Financial Fears Forever" by Jean Chatzky. Copyright 2006 by Jean Chatzky. Published by arrangement with Crown Business, a division of Random House, Inc.
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