I was sitting in Starbucks enjoying the afternoon with a dear friend (yea I know, for those of you who know me, you are saying to yourself “yea right, Paul in Starbucks never happen”). As much as the smell of coffee, and in the case of Starbuck’s burnt coffee, makes me want to vomit, I have trained myself to ignore it so I can enjoy the coffee café environment with friends. But, I’m not here to talk about burnt coffee, I’m here to talk about how most people live in denial in regards to their financial standing. So, back to my friend, I knew this person was having some very hard financial times, and from our conversations I gleaned that she was in denial of where she stood financially.
I had my laptop with me, so I opened my handy-dandy expenses spreadsheet template and saved a file in her name. I took her by the hand and said, “let me help you breathe easier”. She looked at me funny and said, “I’m not having any problems breathing”. After a good nervous laugh on her part, I explained what I had been through and what I had done to fix my financial problems over the past ten years. As I explained what I had done, I could see that she was starting to shuffle in her seat and was becoming very uneasy. I simply asked her, do you know how much money you have left each month, and where your money is going. She turned very red, looked down, and started to cry. After some hugs and encouragement, I asked her again to let me help her. At that moment something amazing happened, I saw a little ray of sunshine beam from her eyes, and a small smile swept across her face.
We started off with the easy and less painful part first, how much income do you take home net? I recorded that, and some other income she had, into the income portion of my spreadsheet, which auto totaled all her income for the month and the year.
Next, we started off a little harder by entering in all her non-debt monthly expenses such as utilities, cell phone, food, and any other monthly expenses she had. You would be surprised how most people cannot even list a ¼ of the expenses they pay monthly from memory. From there, I went on to the painful expenses; her debt. We listed all her debt, total owed, monthly minimum payment, and interest rate. We were able to find out all this information by logging into each of her financial institutions from her computer.
And, for the first time in her 40 years she had a financial picture of where she stood. You could see this was a very hard process for her, and there were many emotions experienced in the 45 min that it took us to finish this exercise. As I mentioned in my previous post, much of the work that has to take place to get out of debt is a change in the way you think about money. Most people fear doing their bills each month, and put them off to the point that they have many overdraft fees each month (and heart burn; add a row on the spread sheet for Tums). As we talked through the process she said this was the first and only positive conversation she had ever had about money. Her parents and school never taught her about money, and her ex-husband would yell at her and blame everything on her. No wonder she cried when I wanted to talk about money with her.
When we got done with her financial picture, at the very bottom of the spread sheet where it subtracts your expenses from your income it showed that she was going in the hole $75 per month. Now you are saying to yourself, $75 in the hole per month, that is nothing you should see how much I’m going in the hole per month (going in the hole each month is not a badge of honor). I can tell you from experience it does not matter if you are going in the hole $75 per month or $5000 per month, it is still just as real and just as scary. I will admit it is much easier to fix $75 than $5000 but, if you don’t have the money you don’t have the money. And, as my mother always liked to remind me “money does not grow on trees”.
So, we took the next 45 minutes and did what my spreadsheet does best, played the game “What If”. We started making some changes, like turning off cable ($120 per month), stop waxing ($75 +tip, per month), and reducing other expenses she really did not need. In the 45 min she was over $1000 per month positive, which she will divert to paying off her debt.
She had been in denial, and beaten down by those around her to the point that she had no clue how easy it would be to turn her financial picture around. I’m not saying it is going to be easy for her, because there are many mental changes she and her family are going to have to make in how they deal with money. If she does not take the time to make the mental changes, as with most of us, she will go right back to her old patterns and go right back to the bad financial habits she has been using her whole life. Until you change your inner being, you will always manifest the same results from your actions. If you live in denial it does not make the problem go away, it only hides it from view for a little while. But, you always know that debt is looming in the back of your head, and will still be there when you wake up. By seeing your financial picture in a spread sheet it makes it very easy to come up with a plan to conquer and overcome your debt.
According to a survey done by Nerdwallet in 2015, many people don’t know how much debt they actually have and are embarrassed to admit how much debt they have. In the survey, 23% of people with a credit card say they have been surprised at least some of the time by their bill.
So, if you are in denial about how much you owe in debt, it is never too late to take control of your financial future. As scary as it may be, you will find it liberating to fill out an income and expense spread sheet and get a good picture of where you stand financially. Now it is time to get educated on finances, but again don’t be scared because getting out of debt and building wealth is not rocket science. In our course, Bread Crumbs to Financial Freedom, Bread Crumb step number two will take you through the process of filling out an income and expense spread sheet and planning a budget.
Let me and my team help you to help yourself become financially free, by joining our Budgeting Workshop. Don’t be scared to ask and seek out help, and imagine the possibilities of getting out of debt, building wealth and changing the way you live, work and play.
If you want to join the budgeting workshop, CLICK HERE to learn more about and join the budgeting workshop.
I look forward to working with each and everyone one of you in the near future, and remember, each new day is another chance to change your life – you just have to find the right path and take action.
Cheers
Paul
