Lifestyle Archives - Sustain Financial Inc.

Category: Lifestyle

How Much Money is Enough?

I’ve been thinking a lot about the concept of enough, and not just when it comes to money, but rather about how having a concept of enough is closely tied to the ability to feel satisfaction.

It has occurred to me that if we live in a world where we don’t believe we can have enough of certain things, that it robs us completely of our ability to ever feel fully satisfied with them.

Think about how often, and nonchalantly, phrases like, “you can never have enough _____________,” or “no such thing as too much/too many ________________,” get tossed around, like little landmines waiting to undermine our satisfaction with whatever word somebody dropped into those blank spaces.

A Constantly Changing Threshold

With money, enough can feel like a hard concept to pin down. For most of us, there’s always something we could imagine adding to our lives if we had just a bit more to spend. Or a ‘feeling’ of a certain level of security we believe that a certain dollar amount in the bank or stashed away for retirement might bring. But it’s a sneaky feeling to follow, because over the course of one’s lifetime, it’s not uncommon that we just keep moving the bar on that concept of enough.

The only thing that stays the same about the phrase, “If I only made (or had) this much… then I would feel more secure (or quit my job, take a little more time off, etc.),” is that we seem to keep saying it, but every time we say it, we’ve changed the bar so it always feels just out of reach.

There IS Such a Thing as Enough Money

But the concept of marginal utility applies to money, and everyone reaches a point at which more money and more stuff doesn’t actually add more comfort or happiness in the way that they once did. In fact, what research has found is that once a certain level of comfort is reached, money, like just about everything else, eventually reaches a peak where the pursuit and accumulation of more actually detracts from overall happiness and feelings of satisfaction.

And if we are stuck in a loop that says there’s no such thing as too much money, or you can never have enough money, it’s also quite easy to just accidently spend a significant portion of our lives on the downside of that marginal utility peak… pursuing more happiness through more wealth, when in fact, it may actually be starting to take away from our feelings of joy or satisfaction.

Which is why it’s essential to define this idea of enough for ourselves.

Without a clear definition of what is or is not enough, there are so many decisions that are impossible to make. How do we know if it’s worth it to take that higher paying job or work more hours? How do we know if it’s okay to take the dream job that pays half as much? How do we know if we can take a year (or five) off of work to stay home with our kids? How do we know when to stop accumulating money to fund our goals? How do we know when we can retire? How do we know if we can give more of our money away to the causes we believe in or people who have a greater need than ourselves?

Developing a Qualitative Definition of Enough

The first step in this process is to define what a satisfying life looks like for you, now and in the future. The important thing here is not that we all have the same definition of enough, but that we each work to define a life that feels like enough for us.

A good place to start is to think about the times/places you’ve felt happiest and most fulfilled.

What does your life look like?

Where do you live?

What are you able to do without financial worry or hardship?

How much do you work?

What are the things you spend money on that add great value to your life?

What are the moments, days, and times in your life where you felt fullest and most satisfied?

What did you need from money in those times, and what elements were unrelated to wealth or earning?

What does your life look like?

Where do you live?

What are you able to do without financial worry or hardship?

How much do you work?

What are the things you spend money on that add great value to your life?

What are the moments, days, and times in your life where you felt fullest and most satisfied?

What did you need from money in those times, and what elements were unrelated to wealth or earning?

That’s really job one – defining the parameters of a satisfying life for yourself and noticing what elements of those times were made possible by a certain level of earning or availability of funds.

Because if we try to start with the dollar amount, we’ve missed the entire point of money. Money is a tool to meet our needs and to increase the comfort and quality of our life.

A Scrooge McDuck-style roll in a pile of money never left anyone feeling anything but the need for a shower. It’s not the money itself that matters, but the life it allows you to live, and perhaps some feelings of security, flexibility or freedom that it allows you to have. Start by defining that. What are the non-monetary characteristics of a satisfying life for you? In what ways does money contribute to or allow you to pursue that life?

What Does Enough Cost?

Job two is to figure out what that life costs, now and in the future, and to figure out how much money you need to earn and save to have enough to comfortably live the life that gives you the best shot at feeling satisfied.

When it comes right down to it, this is at the heart of why a lot of people choose to work with financial planners. In a world that directs us to earn and save as much as we possibly can from the minute we start working, there becomes a point at which many of us actually need someone to help us decide when it’s okay to jump off that cycle – to get a professional opinion so that we know when it’s okay to work a little less or take a lower paying job; to know when we’ve saved enough and perhaps can think about spending a bit more, and when it’s okay to retire. Without that, we may find that we never know if what we have is enough. We may find ourselves working longer than we need to, or hesitant to say yes to an opportunity that could really add a lot of value to our lives just because of its cost. But what if we can actually afford it?

That’s really at the heart of what a good financial planner does. They don’t define the parameters of your most satisfying life—that’s up to you. But they realize that it’s not really about making you as wealthy as you can possibly be. If it’s done right, financial planning is about taking your definition of enough, your definition of a satisfying life, and helping you understand what money you need to earn, save, and invest to get there.

Image Attribution

Hero image and image of a hand holding cash by Kaboompics

Financial Avoidance is Probably Increasing Your Money Anxiety

Feel anxious looking at your money?

Avoiding it is probably making that worse.

When I first say that to people who are money avoidant, they often don’t believe it. How could it be possible? If looking at my money is the source of my anxiety, how could it be possible that not looking at it is an even bigger source of anxiety?

Time and time again, after working with people to address debt, budgeting, and overall money avoidance, one of the most consistent observations we receive from clients is about how more regular interaction with their money is actually decreasing their anxiety, and how, when they occasionally slip into a busy period of time where they don’t have time for regular check ins, that’s where the anxiety starts to ramp up again.

The remarkable thing they’re starting to realize is that the antidote to that anxiety about money is actually money interaction, not money avoidance.

Why is this the case? There are a lot of reasons, but like many avoidant behaviors, we create a million excuses for why it’s too stressful to sit down and work with our money when the reality is that our subconscious brain knows we need to do it, and that the longer we wait to do it, the more overwhelming it’s going to be.

For most of us, it’s the pressure of the subconscious brain – the one that says “okay, enough, it’s more stressful to keep avoiding this than to start to face this” that finally pushes us into action around money management, debt payoff, etc. But often, by the time that mechanism kicks in, a financial hole may have been dug that is now quite difficult to get out of, and it often results in one day of making drastic decisions to change our money situation, followed by pretty much the same old money avoidant behaviors.

In this respect, it’s a bit like doing the dishes, cleaning the bathroom, or mowing the lawn–when attended to regularly, it’s a lot easier to do. The longer we wait, the more it starts to feel like an insurmountable task. Then, when we finally do take it on, though it feels good in the moment, it’s easy to revert back to our old ways of anxious-avoidance.

So, if you find that stress and money avoidant behaviors tend to go hand in hand for you, it’s important to find entry points and routines around money interaction to help it happen more often. Below you’ll find some tips to build those.

4 Tips to Tackle Your Financial Avoidance:

1. Make your entry point to money interaction small, regular and neutral.

When you’re first starting this process, a huge mistake can be to try and take on everything you’ve been avoiding about money at one time. That not only feels overwhelming – it IS overwhelming. And for many, if you can work up the courage and energy to tackle money in a big way, it’s often not sustainable – it leads to grandiose gestures and planning around how you’re going to fix all your money problems, but with little day to day follow through.

I often encourage folks to start with one of the following exercises just to practice daily, regular, money interaction.

Stop and notice your spending. Carl Richard’s recommends a method for this called “30 days, 3 seconds” and I think it’s a good place to start bringing basic awareness and interaction to our money. The key is a 3 second pause after spending and a non-judgmental awareness statement. Something like, “I just spent $_________ on ___________. Isn’t that interesting.” Not good, not bad, just interesting. To add to his suggestion, I might also suggest 3 deep breaths. This is about a 5-10 second time commitment per transaction.

Make a record – either as it happens, or at the end of each day, of your spending. You don’t have to keep it. You don’t need to judge it. You don’t need to do anything with it. Just practice writing it down, taking a few deep breaths, and for now, leaving it at that.

If even those feel like too much to take on at first, start smaller. Open your banking or budgeting app on your phone once per day. Just open it. Look at it. 3 deep breaths, close it.

The point here is not to move the needle on your spending or savings behavior, it’s to start to move the needle on your avoidant behavior and anxiety.

Years ago, I worked with a student who had such severe anxiety about coming to school and being at school that we made a plan for her to become my before school teacher’s assistant. The agreed upon purpose of that time was to give her a way to come to school and just sit in a neutral space for 30 minutes, and from that space, decide whether she could carry on with the rest of the day. That’s it. Sometimes we’d talk, sometimes she’d draw, and sometimes other students would come in to get help or talk, and realistically sometimes she didn’t show up.

But the key element was that the time wasn’t for her to help me, or for her to get caught up on work she’d missed, even though she had a ton of it. The point was to make the step between her and her first period class smaller, and less anxiety-inducing. It was for her to practice walking into an environment that caused her anxiety, and to give her a safe place to land on the other side. Of course, from a behavioral perspective, I knew it was more likely that she’d decide to go to first period if first period was 50 yards away than if it was 4 miles away, but I also knew that the only way to get her 50 yards away from first period was to help her create a regular routine where she could be met on the other side of the school entry way with a place to calm her amygdala down.

Step one is not about changing your money behavior; it’s about creating a micro-money routine that feels safe enough to enter into daily, or even multiple times each day.

2. Start to Build Your Plan of Micro-actions.

If you’ve done 30+ consistent days at step one, then it’s time to start thinking about moving the needle on your money situation.

The smaller the parts you can break this process into, the more likely you are to do them, because they are far less likely to feel overwhelming.

Make them present and maybe a tiny bit future focused. Spending a lot of time at this stage thinking about why you don’t have any savings or how you got into debt is not actually very productive. Similarly, spending a lot of time thinking about retirement or buying a house if you’re buried in a pile of credit card debt is also likely to just kick that avoidant-anxiety into high gear. What small action could help improve your money situation today? What might you want to try and accomplish this week with your money?

What kind of “small action” are we talking about?

Depending on your financial situation, what you need to move the needle on your money situation may be different than what someone else needs.

The following examples aren’t suggestions for your situation, but rather, designed to illustrate the size of the action you might want to consider taking on as a next step:

Opening a savings account.

Starting an automated $10 per month contribution to your current savings account.

Submitting an application for assistance with a utility bill.

Canceling a single subscription that you’re not using much.

Making a trip to a no-barrier community support resource like a food bank so that you have enough to pay your rent this month.

Calling a credit counseling company about a debt management plan.

Don’t ask all of these of yourself at once. For example, if your next step is to open a savings account, focus on that this week. Perhaps next week or the week after, your next step can be to automate a $10 transfer per month into that savings account. And 2 months from now, you might increase that to $15 per month.

The key here is to pay really close attention to making the steps small enough at first that you can reasonably tackle them without anxiety stopping you. If you create a task that you don’t accomplish – ask yourself: how can I break this into two manageable parts and do the first one?

What is interesting about micro-actions is at some point, they often will lead to more actions, and you’ll do more than you set out to. Don’t resist that when it comes, but it’s important to also not expect it or be disappointed if it does not immediately have that impact.

You might ask yourself to only open the savings account this week, but once you’re on the bank website doing it, you might also find that it’s not much more difficult to set up that automated transfer now.

You might plan to cancel one subscription, but once that momentum is going, you might feel called to cancel a couple more.

The key is that the extra step is not the expectation. You can do it if you want to, but to get today’s gold star, all you have to do is the single small task. If you happen to WANT to do more, do, but if you just do the smallest task, that’s still a big deal, and it’s enough for today.

In the “pile of dirty dishes” analogy, the ask is simply to walk over to the sink and wash one plate. If you also happen to wash a fork while you are there, that’s just extra credit 🙂.

Remember that the idea or the goal here is to build small, intentional action items that help transform your feelings about interacting with your money from anxious and avoidant into neutral, and eventually positive.

3. Just keep doing it, adding small intentional money interactive steps.

It’s funny, we make money out to be this thing that’s different from other things. Like somehow, the steps required to become better with our money are different than the steps required to become better at anything else.

Think of it like a hobby or a sport. You don’t become good at it overnight, and you don’t become good at it because you made a new year’s resolution to become better at it. You become good at it because you learn about it, you receive coaching and support where needed, but most importantly, and I cannot stress this enough, you become good at it because you practice it regularly.

Consider for a moment trying to become a better piano player or a better ballet dancer. If someone said to you, “What is a better way to become better at this, practice it every day for 5 minutes, or practice it four times per year for an entire 8-hour day?” – it’s a no-brainer that 5 minutes a day will make you better than 4, 8-hour days of practice with nothing in between.

It is, in fact, the exact same time commitment, but one will yield far better results. This is also true for money.

4. Notice how your consistent interactions shift your feelings about money.

One of my favorite client moments was talking to a client who, after a year of working with me, came to our meeting and told this story:

Last weekend, we took our kids to a Mariners game with their baseball team. We got caught up in the moment and spent more than we intended on everything. I was feeling really anxious about it, which a year ago would have led me to more spending, relying on credit cards to get through the month, and feeling like I wanted to give up. But the next day, we just sat down with our budget and realized, we really only spent $80 more than we had intended to, and if we just cut back on a few of our more expensive grocery items for the next couple of weeks, we’d be right back to even. And we had a lot of fun that day at the game, so it felt like a worthwhile tradeoff

My financial planner heart did some backflips for the client in this moment. What a big deal – a huge moment for them to not only have this experience, but also to have such awareness of it and how much they had changed.

The quicker you go back to full engagement with money after spending more than intended, the less likely it is that the runaway train of anxiety takes over. You’re also more likely to spot a quick solution to alleviate the impact of overspending. And the better you build your routines around low-stress daily money interaction, the more likely you are to do this. And the more you notice it working, the more you’ll come back to it.

But notice another key element of this story… it happened after A YEAR of work on this. A year of advisor-supported work with this.

This change doesn’t happen overnight.

And whether you’re working with a financial coach or advisor, an accountability partner, or simply tackling it on your own, at the end of the day, it’s the daily habits, the daily interactions, and the regular engagement that will not only move the needle on your overall money picture, but that will actually alleviate that intense feeling of anxiety that follows some of us around when we go out of our way to avoid dealing with our money.

Want to learn more?

Get in touch with Lorri or Gabbi to talk about your financial goals today!

Image Attribution

Hero image by Alexander Grey

Rethinking our Response to Holiday Overspending

Did you overspend for the holidays again?

Whether it’s travel, gifts, decorations, going out, or hosting parties or dinners for friends and family, December is one of the most common months for budget-breaking in American households. And, with New Year’s resolutions right around the corner, it also prompts one of the most common overspending responses: the desire to quickly forget it and “start fresh” tomorrow, where you will, by some magical power that has let you down a million times in the past, be better able to get a handle on your spending.

Consider just how many years you have repeated this pattern, only to end up back here again, overspent in December and overly optimistic about your ability to start fresh on January 1.

This year, instead of pushing those crappy feelings about overspending out the door as quickly as you possibly can, what if you tried a different approach to thinking about your holiday overspending that included just a little bit more time and attention to the present, tuning in to both the emotional and financial data you have in front of you?

If you’re willing to give something new a try, here’s what I recommend:

Close up shot of a pen resting on a journal

1) Sit with the discomfort and the consequences of your overspending.

This is not meant to be a shame-inducing exercise. We all need to practice holding discomfort and disappointment around choices we’ve made without shame or guilt. Imperfect choices don’t make us bad people, they make us human. But, to learn from them we must be willing to let ourselves acknowledge how they make us feel.

You shouldn’t shy away from the bad feeling overspending is giving you. You need to spend enough time with it to know it and to be able to bring it up again in the future. Try writing it down or recording a voice memo of it – something that you’ll be able to look at next November to help you remember this feeling as you head into the holiday spending season again.

If you’re having trouble accessing the feelings directly, consider some of the following:

How has this choice made it harder for your future self? (For example, by creating debt that will have to be paid off or diminishing savings that was meant for something else.)
What are you giving up in exchange for the spending you just did? Was it worth it?
Did your spending provide you with any level of enduring satisfaction?

Our brains love to get rid of bad feelings and bad memories as quickly as possible. They are trying to protect us. But having a strong, aversive memory related to the feeling created by overspending at the holidays when the holiday season starts next year is one way to help combat the pressure to overspend for a dopamine hit. If your brain is trying to tell you that all this overspending is going to make you feel great, because “tis the season,” you need to have a stronger memory of how it actually makes you feel when you overspend. And then, you need to pause before you start up with the pattern again. Just take 5 minutes and sit with that feeling before you purchase a single thing for the holidays next year. Look back at your notes and journaling. If it’s uncomfortable to spend 5 minutes thinking about that memory, then do you really want to recreate that scenario all over again?

2) Plan for the financial ask of the holidays.

Pay attention to the details. It’s true, the holidays, for most of us, will likely always ask a bit more from our budget. And while we can pay attention to where and how much we indulge in that ask to keep that overspending to a minimum, we can also plan for that ask where it may feel like an inescapable reality.

For many, it’s probably unrealistic to think that December spending and February spending are going to be identical. But if you sit down and look at the numbers right now, you could just plan to save a little extra for December all throughout the year. If December is running you $1200 more than a normal month for gifts and food, maybe you just need to create a savings bucket for December and put $100 into it each month. The key here is – you have the data right here and now in front of you to look at, and an entire year to save for it. There’s literally no time like the present to see how much holiday spending is costing you and to put a plan in place to save for it ahead of time. And I’d emphasize again, if that’s uncomfortable, that’s all the more reason to do it.

What if that was your only New Year’s money resolution: to save enough through the year to make December not a financially stressful month, and you kept at it all year and were able to get through December without creating that financial bust feeling that it always brings. Think about how much more you might trust yourself to actually see another small financial goal through the next year, feeling good and well prepared for a month whose spending normally has the opposite impact on your feelings about money.

The consequences of overspending on anything that takes you farther away from the financial life you want to be living should be uncomfortable because it is a form of self-harm. If these feelings are not uncomfortable, you’re probably not spending enough time with them. If you don’t take some time to sit with the feelings and the data, you risk heading into the New Year with idealistic planning euphoria that will likely let you down again. To find the lesson in the choices that got you here, you need to spend some time with how they make you feel, and plan for the reality of what predictable and repeatable annual spending, like the holidays, asks of your budget.

Rethinking Default Inheritance Assumptions

When having estate planning conversations with clients, one of the common questions or discussions that comes up is, for lack of a better word, who could be their “logical” inheritors. For some, there’s no question about who they want to inherit the bulk of their assets and estate. But the conversation, particularly when clients don’t have a significant other or children, often becomes a process of listing extended family that would be the next logical familial inheritors. Sometimes, these relatives are distant and hardly known to the client, other times they are siblings whose age is such that it’s unlikely that they’ll even be alive when the client passes away. Even though my clients are generally the type of people who tend to make their decisions through a lens of high social responsibility, it makes me wonder if we may all be sleepwalking a bit when we think about aligning our estate planning wishes with our values-based lifestyles and financial decisions.

Now, I want to be clear that I am not objecting to a choice someone makes to leave the bulk of their accumulated lifetime savings to their children or even a long-lost relative. It’s really none of my business who your choice ends up being. It’s just that this choice, for many, represents the largest bequest of assets they’ll ever bestow upon any recipient – so I believe it deserves as much thoughtfulness and intentionality as the other financial decisions clients make.

I have a suspicion that part this “pick the next logical family member” attitude comes from a general discomfort with the estate planning process. At any age, it’s uncomfortable for many of us to sit down and think about what happens to our stuff and our money when we die. Uncomfortable to think too much about someone else living in our home or selling it. Uncomfortable to think about a lifetime of things we consider ours just being given away, especially if we don’t have that perfect someone in mind to give it to.

Since I’ve recently been working on re-drafting my own estate planning documents with my attorney, and I, as a single, childless person, am in a very similar situation to the one described above, it’s given me an opportunity to think through this process of intentionally designating heirs. And through this thinking I’ve tried to develop a series of questions to work through with my clients when a situation arises where they may feel uncertain about who the recipient of their bequests should “logically” be.

Question 1:

What do you value and how can this decision reflect that?

It’s important to set up this conversation as we would any financial decision – against the backdrop of your values.

If you haven’t yet tackled the “what’s most important to you” question as a part of your broader financial-decision making process, it’s worth it to do that before sitting down to make decisions about your estate plans. Because it seems like trying to answer the question of who you want to benefit from what you’ve accumulated over the course of your entire hardworking lifetime must first be a question of what you think is important.

Question 2:

Realistically, what is the need and the extent to which your family, extended family, or long lost third cousin will benefit from your bequest?

This is obviously a complex question, because we don’t always know that much about the financial situations of others. And, realistically, for most middle and even upper-middle class folks, there are very few people who wouldn’t generally feel a bit more comfort after receiving an inheritance. That being said, it’s also true that many people don’t inherit from their parents or older relatives until they are well along their own path to financial stability. And while it may be important to leave your family something to improve the quality of their lives with, by the time they receive it, it may be more like icing on the cake. And if that’s the case, it worth considering whether there might be other people or causes whom you feel may benefit more significantly from at least a partial bequest of your estate.

Question 3:

Are there organizations who might benefit from a donation, or even a specific asset in your estate?

Many clients I work with place a high value on philanthropy throughout their lifetimes, and often lament the fact that they cannot do more, and yet it’s quite common for them to never bring up charitable bequests within their estate planning wishes. If charitable giving is important to your lifetime financial decision-making though, I think it’s at least worth a consideration in your legacy.

Another way to think of this might be around what parts of your estate may actually really benefit certain organizations that you value and would like to support. For example, the bequest of a house could be hugely impactful to something like a housing and land trust whose mission is focused on the creation of affordable housing opportunities, or the bequest of your vehicle might have a bigger impact to a charitable organization that could put your vehicle to use than its resale value would represent to your estate. Similarly, heirlooms or collectibles that your family has expressed little or no interest in might be extremely valuable to a historical museum. So, it’s also worth considering whether you may have specific assets that would benefit a charitable organization in a way that far exceeds what the sale of that asset would bring.

Question 4:

Are there ways for heirs to benefit from your accumulated assets even before your death?

This one doesn’t apply to everyone, and I’d always recommend working with a good financial advisor to help with these types of decisions. But very often, retirees do hit a point where it becomes clear that they have more than they need to see their retirement through, even if they live to be 105, and need a fair amount of long-term care.

If you are fortunate enough to be in this position, it might also be worth considering upping your lifetime giving to future heirs (whether they are your kids, your community, or organizations whose mission is important to you). Not only is this a good way to put your legacy wishes into action when you can still see their impact, it also may have some underlying tax-advantages as well if structured correctly.

Not everyone is fortunate enough to have this opportunity, and again, I wouldn’t start giving things away during your life too freely without the advice of a financial advisor. But if you are in this position, lifetime giving may be another strategy to explore as complementary to your estate planning wishes.

A few additional notes to consider as you embark on this journey…

1

It’s not really comfortable to do this type of thinking.

No other financial decision brings out more of a “just want to get it over with” attitude in my clients than estate planning.

I think this is why it’s so tempting to just say – leave it all to the kids, or my brother, or this third cousin I don’t even know. The less they have to think about it, the less time they have to spend in that discomfort.

As I mentioned, I recently went through the process of making some of these changes to my own estate planning documents, and it IS uncomfortable. But what I ended up with is a set of documents that I feel represent what I would want to leave behind in this world even if I was no longer around to make a daily impact on it. A set of documents that are far better aligned with how I make my other financial decisions than my previous ones were. But it’s still uncomfortable to think about. I don’t know if that will ever go away.

2

It’s not an all or nothing decision.

Your desire to leave something to charity, or a long-term caregiver, or a good friend or mentee doesn’t mean you can’t leave anything to your family. The great thing about a will is that it allows you to make specific bequests, and it also allows you to portion out your estate. Maybe your comfort level right now is with leaving 5% of your estate to a charitable organization, but maybe in 20 years, when you’re confident that your kids are on their way to being financially stable, or your estate has grown some, you’ll feel like you can increase that percentage or dollar amount.

Portioning off your legacy by percentages, dollar amounts, or even specific assets is something any good estate planning attorney should have no problem completing for you.

The point here is not to cut your kids and loved ones out of your will, the point is to make sure your last big financial transaction is well aligned with what you value, and how you make your other financial decisions. That you’re not just doing it on autopilot.

3

It might be worth having a conversation with your default heirs about your plans.

I have a lot of conversations with clients who are likely to inherit something from their families someday about the importance of not counting on or relying on this inheritance as part of their financial plan. But not everyone has a financial advisor to give them the same advice.

And, even with that, there’s no question that in our society, it’s easy to get gifts (particularly financial gifts) and who receives them tied up with questions about who is favored or loved. So, if you are making changes to your will to include heirs that may not be your children, I think it’s worth considering whether you can reasonably have a conversation with your kids about your intentions and why you are making the choices that you are, so that they’re not left to interpret these decisions as a lack of love for them after you’ve passed.

This is not universal advice – the dynamics of all families are different and I realize in some families, this is simply not possible to do. But often, one of the major complaints I hear from my clients as it relates to inheritance has nothing to do with if they’ll inherit or even how much. It has to do with the lack of transparency and communication their parents have had with them about this particular topic. Their bigger concerns are often just whether there are appropriate estate planning documents in place at all, and what their responsibilities will be when the time comes to enact them.

Remember, the point here is not to cut your kids and loved ones out of your will, the point is to make sure that this decision is simply as well aligned with what you value as all of the other financial decisions you make over your lifetime. That you’re not just doing it on autopilot because you don’t really want to think about it.

How much rent or house payment can you afford?

How Much Rent or House Payment Can You Afford?

This is a question I get frequently from clients, and there’s unfortunately no “one-size fits all” answer to this question. However, whether you’re considering rent or a mortgage payment, there are some key financial metrics and guidelines that can help you make this decision.

Conventional Rules of Thumb for Monthly Housing Costs

Most conventional recommendations advise limiting your total monthly cost of housing to 28% of your gross (before-tax) monthly income. So, for example, if your gross pay is $7000 per month, you’d be wise to shoot for a maximum housing allowance of about $1,960 per month for a rent or mortgage payment. And while this is a good rule of thumb to consider, there are other factors that may be at play in your personal financial situation that you want to take under advisement as well.

When considering the 28% recommendation for housing – look at how it factors into your other key financial ratios:

50/30/20 Ratio (For Renters and Home Buyers)

The 50/30/20 Ratio states that, as a general rule, 50% of your take-home income should be spent on non-negotiable needs (Rent or mortgage, utilities, groceries, insurance, and minimum debt payments), 30% on wants (Shopping, eating out, happy hour, concerts or sporting events), and 20% should go to savings, or to making additional debt payments if you are trying to get out of credit card or other non-secured debt. So, in the example above, if your $7000 monthly gross income results in $5,600 in monthly take-home pay, you would be wise to not exceed $2,800 per month in spending for necessities. And if the $1,960 per month that you’re spending on rent or a mortgage pushes you over that limit, you may want to reconsider whether it’s financially feasible for you to take on that payment or whether you need to look for a lower-cost housing option.

Overall Debt to Income Ratio (For Home Buyers)

Your total Debt to Income Ratio basically demonstrates to lenders what percentage of your total monthly income is going to pay off existing debts and is an important factor to consider if you are thinking of purchasing a home. Typically, a good or ideal debt to income ratio will have no more than 35% of your gross monthly income being spent on repaying debt (including the mortgage payment you’re intending to take on). So continuing with our example, if you were making a gross income of $7000 per month, ideally no more than $2,450 of that would be spent on paying down debt. That means that in order to afford your $1,960 per month mortgage payment, you’d need to have less that $490 in other monthly debt payments.

Don’t Neglect the Cost of Your Escrow Payment, Increased Utilities and HOA Fees

For first-time home purchasers, a major source of monthly-payment shock can come in the form of what you pay monthly to cover your escrow account payments. This amount essentially goes into an account that your property taxes and homeowner’s insurance are paid from. Because property taxes vary so widely, it’s hard to give an exact prediction of what this amount will be, but you can anticipate that it will typically be at least several hundred dollars, if not more in higher priced housing areas. When working with a lender on pre-approval, make sure they provide you with total monthly costs including escrow for different purchase amounts, and make sure to take that into consideration when evaluating the total cost of housing as part of your 50/30/20 Ratio. Utility costs often increase for homeowners as well because certain utility payments are factored into the cost of rent that will have to be paid separately when you own a home. And for condo purchasers, it’s also important to factor in the cost of monthly HOA dues.

Can You Cut Back Other Expenses to Commit to a Bigger House or Rent Payment?

If you were my client, I would advise against this as a plan without testing it first. If you were insistent and committed to it, I’d ask you to prove it to me. Prove to me that you can sustainably cut expenses elsewhere before you commit to a 30-year monthly payment on a home that exceeds recommended ratios. And the catch is, you can’t take it out of the 20% savings category. If you’re confident that you can reduce your “wants” spending to say, 15% so that you can afford more in the needs category, spend a year doing that before you commit to doing it for 30 years. And take that opportunity to save that extra 15%. After all, you’re about to embark on a purchase that will inevitably require a bigger buffer savings account than you needed when you were renting, so you might as well start now.

But if you’re already having a hard time meeting your 20% savings goal with your current monthly expenses or have already accumulated some credit card debt because you overspend monthly or when things come up, you are fooling yourself if you think that suddenly buying a home that increases both your monthly expenses AND your potential unexpected expenses for large-ticket items is going to fix this. It will not, no matter how alluring the idea of home-ownership is.

What If You Live in a Place with a Very High Cost of Living

This is very much a reality for many folks, and I’m not naïve to how variable housing costs are in different areas of the country. That being said, I think it’s important to have the conversation about the tradeoffs that come with being a lower-income earner in very high cost of living areas. Long-term, it is likely not going to be a sustainable way to live unless you are 1) actively pursuing a way to make more money, or 2) willing to explore alternative options for housing, like living with or renting to roommates, or possibly renting or purchasing a very small space. All of these are viable options, but otherwise, it just doesn’t compute. It’s not ever going to get easier to make ends meet living in an area where you can’t afford the cost of living unless you have a plan to either make more money or find creative ways to spend less. High cost of living areas are often filled with opportunities to make higher salaries, but if you are not pursuing those opportunities and are not willing to reconsider where you live, you may need to reconsider how you live and who you live with in order to make the available housing options affordable to you.

At the end of the day, there really is no one right way to do this. No exact rule that can answer this question for you. But ultimately, I’ve seen far too many people try and make high-cost housing options work that end in nothing but financial heartbreak and frustration. Keeping your housing choices within the realm of what you can afford is extremely important for your long-term financial health, and it also factors into preserving the life you want to live today (after all, for most people it’s a big tradeoff to let go of all their “wants” spending simply to buy the house they want… especially when considering how long the commitment to a mortgage is). But above all, I encourage you to avoid the trap of thinking you can make something work if you haven’t taken the time to prove to yourself that you can sustainably live on what’s left over after you’ve taken on the bigger mortgage or rent payment. That’s something to test before you make a life-changing financial decision, not after.

Have more questions?

Book a call with Lorri to discuss your situation, and to see what you can do to accomplish your goals.

BOOK YOUR CALL

Join Lorri in designing an intentional and resilient financial plan that works for you.

Setting a Fraud Alert

Setting a Fraud Alert:

A Simple Step to Protect Your Credit

Years ago, when identity theft started running rampant, many of us were advised to freeze our credit. It was free, not overly complicated, and ensured that no one would be able to open a line of credit in our names.

But, if you’re anything like me, after one or two attempts to open a new line of credit in my own name, where at least one of the credit bureaus made it nearly impossible to remove the freeze in a timely manner, the credit freeze started to feel more like a hindrance than protection. It was, to say the least, frustrating. After all, I froze my credit to keep others out, not myself.

I know many who have gone through similar experiences to my own and have given up their attempts to protect their credit through a freeze. And, not wanting to pay for the more costly but easier to use credit “lock” services, many are now relying solely on a free credit monitoring type service or aren’t really monitoring their credit at all.

And while a free credit monitoring service is definitely a good idea, it’s not actually a proactive way to prevent someone from using your personal information to open up a new line of credit in your name. It simply gives you a fairly timely alert when somebody does.

But is there anything you can do that won’t lock you out of using your credit for several business days when you need it, but could potentially stop someone else from accessing it? Fortunately, the answer is yes. By setting a fraud alert on your account with the credit bureaus, you basically communicate to them that it’s okay to open up a line of credit in your name, but they need to call you first to authenticate that it’s actually you opening the line of credit. It takes only a few minutes to do, and once you set a fraud alert with one of the credit bureaus, they have to communicate that with the others, so that they’ll all be forced to call you before you (or anyone else) are able to open a line of credit in your name. I personally find the Transunion site to be the easiest to navigate when it comes to setting and removing fraud alerts, but it can be accomplished using Equifax or Experian as well. No matter which site you choose to set the alert on, once you’ve set it, you’ll receive confirmation in the mail from the others letting them know that they’ve added a fraud alert to your account.

It’s a simple step to put a little bit more hassle in between your credit and someone trying to take advantage of it. While not impenetrable (if someone has your phone as well as your social security number, and other personal info, they’ll be able to get around this), the truth is most people looking to commit fraud are out there looking for something easy to accomplish, and the more layers of complexity they have to go through, the less likely they are to see their nefarious mission through.

The catch is that a fraud alert only lasts for 1 year, so you’ll want to set a calendar reminder each year to reset the fraud alert as part of an annual money maintenance routine. But once you’ve done it, it’s a relatively easy thing to go in and set again, and unlike a credit freeze, it won’t prevent you from opening a new line of credit (you just need to make sure to have your phone handy if you’re applying for financing, as you’ll typically receive a call almost immediately).

Like any level of credit protection, it’s also important to realize that this can’t protect you from everything. Credit/debit card number theft for already existing lines of credit and someone filing a tax return in your name hoping to collect on your refund aren’t protected by this measure. But this will put an added barrier in between you and someone trying to take out a $50,000 car loan in your name, or someone opening up a new credit card and running up a bunch of fraudulent charges. And since it takes only minutes to set up (but often weeks or years to resolve identity theft cases) there’s no reason not to put a fraud alert on each year as a minimum level of protection for your credit.

Got a few more minutes to spare? People who make a life and a living out of stealing your information are often deterred by anything that makes their job more difficult. After all, why spend hours or days on something if someone else is making their accounts accessible in seconds or minutes. So set aside some time to regularly change your passwords on your accounts (particularly money-related accounts and the email account you use for 2-factor authentication), and read up on what makes it harder for someone to brute-force break your password before choosing new ones. An hour a year spent putting a fraud alert on your credit and protecting your accounts with new and strong passwords is a small time investment that has the potential to protect you from all but the most targeted attacks on your identity, and potentially save you a lot of time, hassle, and money. So don’t put it off.

What’s driving your impulse spending?

What’s Driving Your Impulse Spending?

Let’s face it. When it comes to spending, 99% of us are making choices that involve tradeoffs. More money spent today means less to save for the future. And even if we just consider the tradeoffs in our current lifestyle, more money spent in one category of our budget means less that’s available for another.

In one of the earliest Sustain Financial blog posts, I talk about using a question to help us evaluate these tradeoffs: In this more important than…? But in this post, I want to explore another tool or strategy to help you on the path to making more consistently aligned spending decisions: taking the time to think about what the underlying feeling is that’s driving your impulse to spend.

To make any of these strategies really work, the first thing to recognize is just how much of our spending is a choice. That’s not a criticism of unnecessary spending. I, too, enjoy spending money on things that are wants rather than needs. But many of the “essential” items on our lists: expensive groceries rather than budget-conscious groceries, cable and streaming services, new clothes, new phones, etc. are not exactly the necessities we sometimes make them out to be. That doesn’t mean it is easy or comfortable to get rid of them. But if we really are honest about what our families need to survive, it’s basic foods that can be prepared with inexpensive staples, a roof over our heads, clothes on our bodies (old clothes will do) and not a whole lot more. So, everything else is really a choice we’re making about what to spend money on.

And while it helps to weigh that choice in terms of whether it’s more important than another option or choice, sometimes if there’s a really pressing feeling under that impulse to spend, just asking the “is this more important than…?” question may not be enough to override that impulse.

This may seem overly simplistic, but I think a few concrete examples may be a good way to illustrate how there is often a lot more to this question than what meets the eye.

So, a great series of follow up questions are…

“What’s the underlying need
that’s driving this decision?

Will this spending even actually
meet that need?

Is there another way to meet it
that won’t blow my budget?”

The examples I’m going to explore here are:

1) The need to buy a new item for your home

(decoration, piece of furniture, storage containers, lawn chairs etc.)

2) Unplanned eating out

In my work with people around budgeting I find these two categories are really common places where people don’t plan for a lot of spending and often end up consistently over-budget. Which means that they are likely a place that a lot of unplanned, impulsive spending happens.

Let’s start with that new item for the home.

These purchases can seem like innocuously small things, often bought with no real forethought, but whose accumulation over time really adds up. The thought that goes into purchasing them is often something like, Wouldn’t that look nice or be nice to have in the house or yard, and it’s only $30. But then it’s $30 here and $20 there, and pretty soon it’s several hundred dollars in a month that you hadn’t planned on spending.

So, what would it look like to dig into what’s behind that spending desire. Really common underlying forces in this type of decision are a feeling that this item can fix or make you feel better about something you’re not fully satisfied with in your living environment or your life. Boredom with your current home environment, clutter, or jobs that need to be done around the house that you don’t really want to do, are all common reasons we seek to add something to our living environment. No matter what it is, it’s really important that you clearly identify the current problem with your home or your life that you think this purchase will fix. If I’m tempted to buy new plants or outdoor furniture, but when I really think about it, my yard has a ton of weeds in it. The plants and the furniture are a distraction. I should probably head home from Target (or get off Amazon) and start pulling some weeds.

If the current problem is a lack of seating, and you’ve landed on a $500 chair that you really can’t afford right now, then the next question would be, is there a way to fix the problem with a less expensive solution? But it’s highly probable that the need you’re trying to fill may not actually be quite so directly linked. For example, you may be feeling bored with your home. It might be that your house doesn’t look how you want it to – and rather than cleaning it, or sorting, organizing and donating items you don’t need any more to reduce the clutter that’s actually underlying your dissatisfaction, it’s easier to just simply buy an item that will add a little novelty for a little while until it, too, eventually becomes something you are bored with and/or adds to the clutter.

It may be that you’re missing backyard parties with friends or camping with family, so buying a new cooler or lawn chairs might make you feel excited about that being a part of your life again. It’s not that the cause will be the same for everyone, but rather, that it’s extremely important to identify the cause to evaluate whether the purchase you’re about to make will alleviate your underlying feeling of boredom, dissatisfaction, etc. for more than a few hours or a couple of days. And it will give you an opportunity to think about what will alleviate that feeling if this impulse purchase will not. Is there something you can clean, re-arrange, organize, donate, etc., or can you start planning the next camping trip or backyard barbecue? All of those are much more likely to create a more lasting impact on that underlying feeling than buying that item will.

Eating out, particularly unplanned eating out, is a trickier example, since it’s typically linked to hunger, and food is a basic human need

But like the $500 chair, it is a good example of where there are opportunities to assess whether the trip to McDonald’s, the café next to your work, or the local taco truck are really the only ways to address your underlying need.

The “underlying need” question is not really whether food is a way to satisfy your hunger – of course it is. But rather, it’s whether eating out is really the only way to meet the need and to assess the other underlying feelings that are leading you to convince yourself that it is. Just like in the first example, though, these are often decisions made at the last minute and impulsively.

And they are also ways that $30 here and $20 there can end up adding up to hundreds of unplanned and unbudgeted spending at the end of the month. In the moment, they never feel like that much, but they add up quickly.

For example, if I’m driving home from a long day at work and I’m hungry, and I don’t have a plan for dinner, or I have a plan for dinner that’s labor intensive or doesn’t really sound very appetizing, going out or picking up takeout may seem like an irresistible decision in the moment. It might even feel like a need. And your hunger will, in fact be satisfied by this purchase. But the importance of identifying the other feelings at play here, whether they be boredom, convenience, etc. is that you won’t be able to see another option to satisfying your hunger if you can’t first identify what’s driving the desire to eat out when you hadn’t planned to.

If you’re simply feeling too busy, hungry, tired, or overwhelmed to actually prepare food, the solution can be as easy as stopping by the grocery store for a less expensive, low-effort option – like a can of soup, or making sure to keep a snack handy that will satisfy your hunger long enough to give you the energy to make dinner when you get home.

But, if you’re feeling bored with the food options you have at home, it may be time to put some effort into re-thinking whether the meals you’re planning have become too routine, and to introduce some new recipes into the mix. And in the meantime, since that’s more of a long-term solution, is there something you already have that you could do tonight to change it up that won’t involve the expense of eating out, like making breakfast for dinner?

If a lack of time in the morning has you running out the door before you pack a lunch, you could prepare a lunch the night before. But if it’s really that you’re bored with the sandwiches you keep pulling out of your lunch box, that won’t fix the compulsion to eat out instead of eating your sandwich. So maybe it’s time to think about adding something new to the lunch menu.

No matter the driving force behind all this unplanned eating out, the importance in identifying what’s driving it can’t be understated. Because if what’s really causing you to eat out is boredom with your current food options, but you misidentify it as being too tired to prepare food, then any of the alternative options you explore that will cost you less likely won’t be appealing to you because they’re not addressing the underlying issue that you’re just kind of bored with the food you’re preparing at home. A good way to recognize that you haven’t quite hit the mark on identifying the underlying driver behind your impulsive spending is that none of the alternative sound appealing or satisfying.

Looking for alternative ways to meet what underlies impulsive spending is not always easy, and it’s not always comfortable.

In fact, at times, you can be led down a path of realizing that you might be rather bored or generally dissatisfied with life, and that your impulsive spending may be your way of trying to avoid or distract you from that feeling. After all, it does provide momentary relief. But at what cost? It’s temporary (sometimes so temporary that only minutes later, you find yourself looking for another way to alleviate that discomfort), and it’s harming your ability to care for yourself financially.

So, if your path to uncovering what’s behind your unplanned and impulsive spending is deeper than just meeting a more superficial level of dissatisfaction with your menu or your home or the cold weather, it might be worth it to seek help from a qualified therapist to work through some of these bigger feelings of dissatisfaction that your overspending might be trying to alleviate for you. And the sooner the better, because overspending, particularly if it involves accumulating debt, is a problem that will only get worse the longer you put off dealing with it.

Ultimately, it’s not about whether or not it’s okay to spend money on things that are not necessary.

If you can afford it, of course it is. But unplanned, impulsive spending that wreaks havoc on your overall financial health or actively works against your ability to prioritize saving for the things you really value is an extremely important thing to address. And in order to address it, digging down into the underlying motivation behind it can be a critical step in the process.

Reading the Morning Headlines like a Financial Advisor

Reading the Morning Financial Headlines like a Financial Advisor

Let’s visit a single day’s worth of morning financial headlines – through the lens of good financial advisor.

Before I dive into the content for this month’s post, I think an important disclaimer here is that I don’t often read the daily financial headlines. In fact, I try to avoid them. I don’t watch CNBC, Fox Business, or Bloomberg. I don’t pay too much attention to what the market is doing on any given day, because I’m far more concerned with what my clients are doing to make the best possible decisions they can for their financial situation. And it turns out, the morning financial headlines, the market forecasts, and what the market did today have literally no bearing on how my clients or I should be making our financial decisions. They simply don’t matter.

But every now and then, when I find myself perusing the morning news for something else, I am struck by the bombardment of financial headlines. And to help you be a better consumer of these headlines that compete for your attention and emotional bandwidth each day, I thought it might be interesting to do a walk down a single day’s worth of morning financial headlines, seen through the lens of good financial advisor.

So, one morning (in early November of 2022), I took to the internet and took a screen shot of the first 10 financial headlines that I found in the Google News section. And then I jotted down the thoughts that went through my head as I read each one of them. And in a bit of a non-conventional blog-post, I’d now like to demonstrate how I read the morning financial headlines, on the rare occasion that I read them at all.

Headline 1:

Stock Market Outlook: S&P 500 to fall 16%, UBS says

16% is an oddly specific number. How could you possibly predict that? And over what timeline? And if it falls 18% will this prediction be considered correct? WHY would you put something like this out there when everyone knows you can’t predict what the stock market will do? And 16% — really. Weirdly specific.

And the certainty of that language “to fall” is wildly misleading. As if there were any way we could know that for sure.

Headline 2:

Stocks are trading exactly where they were 5 months ago, which could mean they’re poised for more gains, one analyst says

Dramatic twist. Looks like not everyone agrees with UBS. The plot thickens.

Headline 3:

A fund manager with 50 years’ experience is beating the S&P 500 this year. How he did it and the stocks he’s watching

Nobody cares. Since 95% of fund managers can’t beat the S&P 500 over time, it really doesn’t matter what they do in a year’s time – this is absolutely meaningless garbage. I hope no one runs out and puts their money in this fund. If he beat the S&P 500 this year, that ship has probably already sailed, and most likely he won’t do it again next year.

Headline 4:

S&P 500 could plunge another 30%, US faces historic recession

Take that UBS. This guy doubled down on your 16% prediction. His crystal ball foresees nearly twice as much loss. Words like plunge and historic make this one sound particularly scary.

Headline 5:

S&P 500 typically gains big in year after midterms, even when there’s a recession

We’re bordering on meaningless (let’s be honest we’re well past it) at this point. Four of the first five headlines are just making competing market predictions, half for the market doing better, and half for the market doing worse.

Headline 6:

Midterm Seasonality: Is there a 100% chance of a higher S&P 500 in 3 months’ time?

100% chance? No, of course not. There’s never a 100% chance of anything in the market (or in life). What a click-bait headline.

Headline 7:

Elon Musk would have this much cash if he sold all his Tesla stock

Oh, who actually cares? This is not news. It does not belong in the news section. Well, actually, none of this is news, but this is bordering on Real Housewives of Finance territory.

Headline 8:

Everything has a season, even stocks. Why now could be the right time to buy

This is the third headline I’ve read with the word “could” in it. Just to make sure we don’t take these crystal ball predictions too seriously and nobody gets sued when they turn out to be wrong. Which obviously at least half of them will.

Headline 9:

S&P 500 earnings estimates for 2023 take a ‘complete U-turn’ as recession risks loom, according to BofA

Ooooh. This typically means they made a prediction a few weeks or months ago that they’d now like to reverse. And even though that one was wrong, they’d like us to believe this one. This one is definitely better.

Headline 10:

The S&P 500 is mounting a comeback, and these stocks are ahead of the curve

Is it? This is news to me. I wonder what we’re supposed to do with this list of stocks? If they’re ahead of the curve on the comeback, that probably means we shouldn’t buy them, because they’ve already recovered more of their losses than some other ones that are still searching for rock bottom. But I bet the article won’t say that.

I can’t say that I read the last article to confirm whether it said that or not. I didn’t read any of them. Giving financial advice based on this would be highly irresponsible. Financial decisions (including investment decisions) should be made based on financial goals not click-bait financial headlines.

What I can say, though, is that it’s best to take headlines like this (if you have to read them at all) with an enormous grain of salt. Bring some awareness to your emotions. If you let one headline swing your brain around to convince you that doomsday is near, make sure to keep reading to find the dramatic conflict of the next headline that will tell you the market is poised for a rebound. If you’re wondering who to believe? Don’t. Neither is worth paying attention to. Smart financial decisions aren’t market driven, they are goal and timeline driven. They are personal. They involve things you can control – like how much you spend, save, and invest over time. There’s not a single thing in the headlines above that should even make you consider changing your investment strategy.

So, if you find yourself subjected to these headlines in a way that is out of your control, like on your search engine page, your radio, or an airport TV, remember to take them with levity. I know, it’s not easy when it comes to investments. But if you let them incite the emotion that they are designed to, you’re letting something that doesn’t matter get the best of you. Because no matter which of the headlines above prove to be true, it shouldn’t change the best course of action for your personal financial decision-making.

Looking for someone to help with your 2023 financial planning needs?

Lorri might be the right fit for you!

Schedule an initial consultation meeting today

Schedule with Lorri

Life After Teaching – How to Start a New Career

Life after teaching

How to start a new career

When I got my Master’s in Teaching at 25, I thought I’d be in the classroom until retirement. But this year marks my 13^th year of teaching and my last. I’ve spent the last five years building and growing this business to serve teachers and state workers here in the state of Washington, and at one point I thought I might continue to do both jobs for many years to come. But growing disenchantment with public schools and an increasing demand for my financial planning services have led me to the decision that it’s time to call it quits as a classroom teacher.

And I’m not the only one. More and more, I talk to teachers who may still be 15 or 20 years from retirement, but whose mounting frustration with teaching as a career choice is taking such a massive toll on their mental health and quality of life that they are ready to start thinking about life after teaching. Teacher burnout is real, as is the feeling that there’s no clear route to take to move out of the classroom and into something else.

And really, unless you’re heading into administration or some other very specific, education-related field, there actually aren’t any real clear pathways out of the classroom and into another career. For many teachers, having spent most of their lives bound to the daily and yearly schedule of public schools, it feels incredibly overwhelming to think about what might exist for them after teaching, often creating a state of paralysis that keeps some teachers in the classroom far longer than they want to be.

Having gone through the process myself and worked with clients who were burned out on teaching and ready to move on, there’s no doubt in my mind that it’s possible, but also not easy to make the jump from classroom teacher to just about anything else. I’ve also read what feels like a million blog posts about how your skills as a teacher are very useful outside of the classroom, and then list 10 jobs that you might be qualified for (and amazingly, at the end of my reading, I was no clearer on what I should do next, nor any closer to having any of those jobs).

So, what should you actually do if you’re thinking about a career change to something outside of public education?

Accept the Reality of What It’s Going to Take to Change

Every job and career decision comes with tradeoffs, and this one will be no different. If you decide to leave teaching and strike out on a new path, it’s possible you’ll take a pay cut while you develop your expertise in some other field. Any new job in a new field may require you to accept lower pay, longer hours, and/or more training or schooling. You may be an expert in the classroom, but you’re not yet an expert in your new career.

It’s likely that this sacrifice won’t last forever. It’s just important to realize that making a mid-career change may reacquaint you with some entry level conditions that you haven’t experienced for a while. And how you spend your time and money may have to flex accordingly. If it were easy to leave teaching, a lot more people would be doing it. Prepare yourself for the discomfort, crunch the numbers to see what you and your family can afford to live without for a while, and remember that this is a long-term investment in a more sustainable career path.

Hand in the water creating ripples background. Photo by Nick Moore on Unsplash

Reflect on What’s Working About Teaching (And What’s Not)

Start by thinking about what you like about teaching and what you don’t. To avoid jumping from the frying pan into the fire, you need to honestly assess what works for you and what does not when it comes to the job you have. No job will be perfect, and in order to find one that’s a better fit, you need to use your current experience constructively.

I remember when I first told my principal that I was going to start exploring other options – he encouraged me to think about school administration. I spent about 5 minutes (possibly just 5 seconds) thinking about it and immediately knew that job that would fill my days with everything I disliked about the classroom and nothing that I still liked about it. This led me to conclude that the next step for me, whatever it was, would be outside of the public education system.

Just because a next logical career step, like becoming a principal, teacher-coach, or even teaching abroad may be obvious or easy, doesn’t mean it’s the right one for you. It took me almost a year to decide what the next step would be for me. And even once I started down that new path, it took a few years to really dial in what I really wanted to do and how I really wanted to work.

Here are some guiding questions that helped me:

1) Where do you excel as a teacher and where do you struggle? During your best moments what type of work are you doing?

Try to think beyond just the teaching and the kids, what parts of preparing, planning, and implementing a year of teaching interest you, and which ones would you be happy to never do again? Understanding what type of work you want to do is as important as understanding what you want the focus of that work to be.

2) What tradeoffs are you willing to make?

There’s no magical unicorn job out there waiting for you. Every job comes with tradeoffs, and it’s important to think through which ones you’re okay with. Is income growth potential more important than job stability and income certainty? Is a flexible schedule more important than a consistent predictable schedule? How important is the percentage of your time spent doing meaningful work? What’s your tolerance for bureaucracy? It’s important to clearly understand what your preferences are, and what the tradeoffs are, because no job will be without them. It’s likely you’ll be as frustrated with your new job as you are with teaching if you don’t pay attention to choosing your tradeoffs consciously, or if you go into another job believing that there will be no tradeoffs.

How you answer these questions will tell you a lot about the type of work you may want to start thinking about – government work, private employer or non-profit, or even a small business owner. Once you get a broader sense of the type of work or employer you may be best suited for, it’s time to start to get serious about what’s available.

Background image of two people meeting over coffee. Photo by Alejandro Escamilla on Unsplash

Start Looking at What’s Out There

The next step is to start looking at what types of jobs exist in those spaces that meet your criteria. One of the realizations I had when I started to look was just how many weird things people do for a living. I think so often those of us who head into professions with these clear paths and outcomes—teaching, nursing, firefighter, police officer—forget that most people are out there doing a job that we’ve probably never heard of. In order to get a sense of the possibilities, start looking at what people are hiring for. Start asking everyone you know what they do for a living, and don’t just accept “work for the state” as an answer. There’s an amazing array of weird work out there, and you’ll be better suited to navigate it once you’ve figured out what type of employment, employer, schedule, and work suits you. Just remember the lesson in tradeoffs – you probably can’t have everything you want, so figure out what’s essential and most important

As you start to spot things that might be of interest, consider what re-educating or re-tooling you may need to do to qualify for what you are interested in. Is this something you can start working on while you’re still teaching? What skills from teaching actually translate really well into this new position and how can you sell a potential employer on your skill set?

Remember that the next step doesn’t have to be the last step, nor does it have to be perfect. We learn a lot from each job that we take on, so make your best guess, then take the first steps to move in that direction. Sign up for a class you need, re-write your resume, what’s the next smallest thing you can do to make this a reality? Do that one, and then the one after that.

Financial Planning at all stages of life

Don’t Ignore the Financials

In this post from last fall, I discuss what financial considerations need to be addressed before making a leap from the public to the private or non-profit sector. But ultimately – it’s important to be aware of the financial implications of your decision to leave teaching. If staying another year or two would vest you in your pension, it may make sense to stick it out a couple more years. If you’ll be looking at a smaller pension because you’re leaving teaching before retirement, pay attention to what level of retirement contributions you’ll need to compensate for that. And if you’re planning to take a pay cut for a couple of years, don’t forget to sit down and adjust your budget accordingly.

Don’t Expect It to Happen Overnight

I’ve seen a lot of people bail on their plans to transition out of teaching because they thought about it, and after a few months another job they were interested in and qualified for hadn’t materialized, so they decided that it wasn’t a possibility. Then every year, it’s the same thing. They hate teaching, they think about leaving, and the process of finding something else seems long and overwhelming, so they stay.

It took you 4-6 years of school to get here, and possibly a few years of subbing before you landed a full-time teaching job. And though I’ve known a few teachers who just found an amazing opportunity that they happened to be well qualified for almost immediately, for most, it takes some work, some retraining, and some time to figure out what comes next and to find that next opportunity. It’s easy to feel frustrated that you can’t get out now, or to wish you had started trying to make this change a few years ago, but if you start working on it now and commit to the process, one step at a time, it’s likely to pay off.

You just can’t give up because it’s hard.

Tracking Net Worth and Cash Flow

In December’s post on creating financial New Year’s resolutions that work, I suggested taking some time to take stock of your current financial situation. Not only is this important if you want to set and accomplish concrete goals around money, but it also plays a huge role in tracking progress on these goals throughout your life. But how exactly do you start?

The two basic metrics you’ll want to pay attention to are tracking cash flow and creating a net worth statement. One without the other may result in a misleading picture of your finances or limit your thinking about long term financial goals—which should incorporate shifts and changes in both, according to what’s important to you.

Net Worth

A net worth statement is like a single point-in-time snapshot of your financial situation.

It tells you nothing about how money flows on a monthly or yearly basis. It doesn’t require constant tracking, so although you may choose to do it more often, simply creating an annual net worth statement is often a good place to start. It is also an essential tracking tool for lifetime financial progress.

A net worth statement is a statement of the value of what you own minus the value of what you owe. What you own includes checking and savings accounts, other investments, and retirement accounts. It also includes “use assets” like your home or car. Typically, in order to minimize how many “use assets” need to be recorded, I encourage folks to focus only on recording use assets over a certain dollar amount. Focus on big-ticket items like homes and cars so you don’t get bogged down trying to put a dollar value on everything you own.

Net Worth = What you own – Value of what you owe

A net worth statement can be both a powerful tracking tool over the course of a lifetime, as well as a powerful motivator. When cash flow feels tight because you are diverting more money into debt payoff, retirement accounts, or perhaps you just purchased a home, there can be motivation in seeing the growth in net worth that these choices are providing for.

Person at desk with coffee and calculator

Cash Flow

Put simply, cash flow is a statement of what you earn minus what you spend for a given period of time.

It tracks how money is moving in and out of your life over time, rather than how money is accumulating. For many people who struggle to track finances, tracking cash flow is a major pain point, but it’s essential to understand your cash flow if you hope to make educated financial decisions and set reasonable goals.

Tracking cash flow is typically done monthly because that time frame lines up with the way most people get paid and pay their bills. However, for anyone manually tracking their cash flow and trying to get a sense of what and how they are spending, I would encourage at least a weekly check-in to review and categorize expenses. Otherwise, it can become overwhelming at the end of the month to go back and look at what you’ve spent and categorize it.

The more often you check-in with yourself about money, the more awareness you are forced to bring to your spending, which for many is enough to interrupt at least some of our unintentional spending.

Additionally, the more often you check-in with yourself about money, the more awareness you are forced to bring to your spending, which for many is enough to interrupt at least some of our unintentional spending. I typically find that the more regularly the check-in occurs (for example, spending 5 minutes at the end of each day reviewing and recording expenses) the more likely it is that the cash flow record will be accurate and that a month of unusually high spending might be caught and modified before it ever occurs.

Getting a handle on cash flow is challenging.

It takes time and regular attention to money coming in and money going out. It forces you to look at where you are spending money, which can be uncomfortable for some people. It can also take longer than expected to get a good sense of cash flow. Though many of our expenses are experienced monthly, others (like car maintenance, vet bills, etc.) don’t materialize that often. So, I encourage folks to commit to at least a year of careful tracking to get a true sense of their cash flow. A month or two can be misleading because it often fails to capture the full breadth of one’s income and spending.

Methods for Tracking Cash Flow and Net Worth

Finding and committing to a clear method for tracking ones Net Worth and Cash Flow isn’t easy, and different methods will work better for different people. For years, I did mine in a notebook because I enjoyed the act of physically writing the numbers down. For me, it brought a lot of intention and awareness to my finances. For others, that might feel overly burdensome. Recently, I’ve moved to a spreadsheet because I want something that’s easier to pull up and look at as years go by. I’ve had clients who have had good luck with apps, and others who disengage too much if the app is doing the work for them. There’s not one right way to do this; the important part is finding a way that consistently works for you.

If you’re looking for a place to start and modify from, you might try this spreadsheet I developed which includes both an annual net worth tracker and a monthly cash flow tracker for 2022. Though there are some suggestions for categories, they are editable so that they can be adjusted to reflect your financial situation.

Download and start tracking

If apps have given you a clear path to success for other goals, like exercise, dieting, or better sleep habits, the most robust of the financial tracking apps that I’ve found is Monarch. This isn’t an affiliate link – just a recommendation based on what I’ve seen and played around with. Unlike Mint and You Need a Budget, I think Monarch does a better job of looking at both the cash flow and net worth sides of the financial picture and has a much more intuitive user interface. It does have a monthly fee attached to it ($10 at the time of this writing), but ultimately that may be a small price to pay if it helps you make big steps towards your financial goals.

Person fishing in mountains with a territorial view

Though it may feel like a challenge to step back from your audacious financial goals for 2022 and instead take a year just to get a sense of where you are, I encourage you to take the time to just observe and record.

It will not only help you set manageable goals and plans for the future, but it may also have more of an impact than you expect on current spending and savings habits.

Start tracking your finances today!

Download THe SPreadsheet

Check out last month’s blog post

Resolutions that stick