A financial plan pays attention to receipts, disbursements, savings, and giving. Of the four, disbursements may be the hardest to control, seeing as how something always comes up and we live under the pressure of a consumer society. But once you become aware of your spending habits, it’s possible to develop a plan for financial success. It all starts with writing things down.
This past week I had the opportunity to travel to San Francisco to speak at the Future of Coaching Conference sponsored by CoachVille. It was a delightful opportunity to share with and learn from many people around the world. About 100 of the participants asked to be added to the distribution list for LifeTrek Provisions. We welcome you to our growing family of subscribers and we look forward to sharing and coaching with you as time goes on.
In many ways I owe the readers of LifeTrek Provisions a debt of gratitude for the invitation to speak in San Francisco. If it weren’t for our vibrant coaching community of 37,000 readers, I would not have been on that stage with other successful leaders in the coaching movement. People want to know our “secret.”
How do we have so many readers, for such a long email newsletter, in a world that suffers from email overload? How do we use handheld devices to deliver content and stay in touch with both readers and clients? How do we get people to reply and use our forms every week, creating an ongoing coaching conversation with many concurrent threads? How do we organize our work as a coaching company, with six staff people?
People are looking to learn from our experience, which I marvel at and barely understand myself. All I know is that every week we write about the things that are going on with us, the things we are learning and thinking about, the things we are reading and working on with our clients, and the things we find surprising and delightful about life.
Those things have apparently generated enough interest to build LifeTrek Coaching International into what it is today, and what it will become tomorrow. You are part of the buzz, and I thank you from the bottom of my heart.
Last week I wrote about the importance of planning your financial receipts, by way of analogy to nutritional receipts. At least one reader found that to be a curious use of the word “receipts,” which he was more accustomed to thinking about as things he saved for his tax accountant. Another reader found it fascinating that I would write about “planning our receipts,” as though we control the way money comes into our lives.
Well, that was precisely my point. The money that comes our way is not an accident. With an understanding of how money works, we can create and follow a plan that makes money work for us. And the first understanding of how money works, let’s call it Accounting 101, is that not all receipts are income and not all disbursements are expenses.
Here’s a classic example. Recently I met with the branch manager at my local bank to discuss various investment vehicles available for their account holders. Along the way, I mentioned that we planned to make a significant capital improvement to our home this year which she immediately assumed would be funded through our home equity line of credit.
As that assumption became obvious, I stopped her to say that we planned to pay cash and that our long-range plan was to pay off our home mortgage in less than 15 years • so we certainly didn’t want to increase our total indebtedness by taking out a home equity loan. She looked a bit surprised, as though getting out of debt was a novel idea seldom discussed in a banker’s office.
Now I can understand why getting out of debt is something bankers don’t want to talk about. Loaning money is their business! When a bank loans you money, their disbursement becomes your receipt but it doesn’t become your asset. It’s still their money, as evidenced by all the paper work you have to sign and how they position that loan on their balance sheet. You may see the money in your bank account, or in a capital improvement, but it’s not income and it doesn’t belong to you. It’s a debt that will end up costing you a premium as you pay it back plus interest over time.
That’s all part of what I meant last week when I said we need to plan our receipts. We need to plan the money we expect to earn, borrow, inherit, or otherwise receive. Until we do that, there’s no way to know what we have to work with in order to achieve optimal financial well-being.
Once we do that, just about anyone can end up significantly better off over time. David Bach’s excellent book, Smart Couples Finish Rich, gives illustration after illustration of how planning your receipts, disbursements, savings, and giving pays off over the long run. Saving a little bit of money on a regular basis now can turn into a lot of money in decades to come. And the more time you have to work with, the more your little bit of money can grow into something truly substantial.
Perhaps that’s why one reader noted a few weeks ago that saving money doesn’t make sense if Jesus was raised from the dead. In other words, if death is not the end of life then planning to save money in this life may be rather shortsighted. What are we saving it for?
Each of us has to answer that question for ourselves. In our case it has something to do with the quality of life we seek to enjoy and bequeath to our descendants along with the good we can do in the world. We may not be able to take the money with us, and we may have to live with ourselves for the rest of eternity, but we see no conflict between our values and our money. Being responsible about both is the only way to go.
On my way to San Francisco I struck up a conversation with a 15-year old boy who was one tough cookie. He had gotten into a fistfight with his stepfather, which led him to live with his uncle for the past two months before returning, now, to try again to make things work at home. We talked a lot about his life and how we wanted things to go.
We also talked about my work as a business and life coach. He had never heard of coaching, apart from athletics, so I talked about how coaches assist people to reach their goals and how I generally worked with successful people who wanted to be even more successful. “In other words,” he replied without delay, “you help people to be greedy.”
Out of the mouths of babes! If I thought for a minute that my coaching was helping people to be greedy, I would have two problems on my hands. First, it would conflict with my values. Second, it would backfire. When you set out to die with the most toys, when you make greed rather than service your goal, when your focus is on how much you get rather than on how well you live and give, then you can easily get in trouble on the disbursement side of the equation.
In other words, an insatiable desire for more and more can make us spend and consume too much. Instead of waiting until the time is right, we can overextend and ruin ourselves in very short order. But there’s no way to know when to wait and when to buy until we plan our disbursements, all the way down to the small stuff. Without a plan we will ride the bumpy road of impulse and estimation, suffering more than a few blowouts along the way.
David Bach’s suggestion for those who want to get serious about planning their disbursements is to track your disbursements for a week. Write down the who, what, when, where, and why of your day-to-day spending. Write it down concurrently, not as an estimate at the end of the day but on a pad of paper or in your personal information manager as you go along.
This simple exercise is often eye opening. When I have clients who want to lose weight, we sometimes include a similar exercise at the outset of our coaching. They write down the who, what, when, where, and why of their day-to-day eating and drinking. I often have them include a map of their house, indicating where in their home they ate or drank every meal (M) or snack (S) during the week. They track everything except water.
Guess what? The simple act of writing things down raises awareness and build motivation. Without any coaching from me, people suddenly start making better decisions. And so it is when it comes to planning our disbursements. By writing down what we spend, on what, and where we spend it, we become aware not only of where our money goes but also of the triggers that make it go. And as we become more aware of our disbursement patterns, change becomes not only possible but inevitable.
If you haven’t ever done this exercise, or if you haven’t done it in a while, then I recommend it highly. Track your spending for one week • all the way down to the pack of gum that you think doesn’t even count. For this exercise, every disbursement counts since they constitute what might be called your disbursement profile. Even if you have done this exercise at some point in the past, even if you’re not having money problems and think you’re on top of the world, this simple exercise can assist you to move from understanding your disbursement profile to reshaping your financial plan.
Coaching Inquiries: Where does your money go? Do you control your spending or does your spending control you? How would it feel to have and achieve a great financial plan?
LifeTrek Readers’ Forum (selected feedback from the past week)
Editor’s Note: The LifeTrek Readers’ Forum contains selections from the comments and materials sent in each week by the readers of LifeTrek Provisions. They do not necessarily reflect the perspective of LifeTrek Coaching International. To submit your comment, use our Feedback Formor Email Bob.
Bob, thought you’d be interested in this article regarding Adam Smith, a seminal 18th century economist, as it applies to your own work on Wealth and Health. Click Here.
Nice AvantGo site. Keep up the good work. Thanks. Top
May you be filled with goodness, peace, and joy.
Bob Tschannen-Moran, MCC, BCC
LifeTrek Coaching International
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Williamsburg, VA 23185-5043