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Financial Coaching Before Tying the Knot?

- 10/20/2009

Flowers? Check. Cake? Check. Ring? Check. Financial Coach? Ummm, what?

Considering a common statistic that money problems are claimed by 70% of failed marriages as the reason for the divide, this should not be far off the mark. I believe one of the neatest gifts parents can give their children who are getting married is financial coaching or counseling. It will unify a couple’s money perspective, so they can begin life together with smart financial behavior. My wife and I received traditional pre-marital counseling, but our pastor was brave enough to require homework of us that included forming a budget for our newly married life. And he got a good laugh when we thought we could live on $50 for groceries together in a month. We had a lot to learn and were given the chance to start communicating about it early.

After all, the money itself isn't the real issue. "It's always what the money represents: dependency, control, freedom, security, pleasure, self-worth," says Olivia Mellan, a Washington D.C. therapist, who has written several books on money and relationships. Nevertheless, it stands to reason if couples agree on money issues prior to tying the knot, in doing so they have also addressed those areas that money represents for them.

On the flip side, if a couple cannot agree together on money matters, I strongly suggest that they put off marriage until they are in agreement in this area. “But Victor, we are in love and you are being sooo mean!” Hey, this is tough love, kiddos. If 70% of failed marriages blame money problems, this is no joke. The good news; when unity is achieved in this area, the romance blossoms. It creates communication. Every old married couple I know swears communication is the key to a their healthy marriage.

One last warning: if your fiancé requires a "pre-nup", it may be time to say “adios.” Hollywood uses it as an insurance policy in case the marriage goes south; Hollywood history proves it’s more like planning their divorce. I’d recommend the wedding be postponed, even cancelled, if asked to sign a prenuptial agreement. Better yet, talk about an agreement requiring financial counseling together before putting on those rings. Don't marry someone who isn't ready to trust you.

Living the 'Wack' Life

- 10/12/2009

My wife Laura and I are constantly on the hunt for a deal. If we can seal those deals and save a few bucks here and there, we feel the dollars saved can go towards our kids education, retirement savings, or that new fly-fishing rod to satisfy my incurable need to hook and land a beautiful brown trout in a cold northern lake (No, Sweetie, I don’t have anything on lay-away).

One reason we're successful at snagging great deals is because we committed to living differently. We are, financially speaking, politically incorrect, or what our teenage friends at church just call "wack." Early on in our marriage we got fed up with debt and decided, who cares if haggling and negotiating are not in vogue? Let others buy without thought of price and live to impress others with their stuff; they may just end up sucking wind paycheck to paycheck and swimming in debt.

So I say be wack and fear not. Take every opportunity to ask for a discount. Smart retailers just want to keep inventory moving at (almost) all cost. Their vast clearance sections and weekly "annual sales" testify to this. Why wouldn't the seller be willing to part with that shiny, stainless-steel 5-burner barbeque grill on the showroom floor for $25 off the listed price? If they are not willing to part with that grill at your price, at least ask for them to throw the grill brush into the deal. If they are unwilling to throw in a $10 brush with the $300 grill, maybe you are shopping at the wrong store.

Be more wack: take some cash. How low will Lowe's go? If they won’t discount for green, I’m sure House Depository will. Finally, be prepared to walk. If the stores we shop at aren’t willing to do a deal, we find stores that are. If convenience is your only concern, be prepared to pay full price. If you want to save, you must be willing to be a little 'wack.'

Saving Dinero

- 10/7/2009

My Nani (that's "Grandma" for my gringo friends) owned a succession of huge ceramic piggy banks that she would buy every couple of years from a shop on Alvera Street in East Los Angeles. She would drop all her change in it and when summer time rolled around, she would bash that pig and she and Tata (that's "Grandpa" for the rest of my gringo friends) would take my brother, sister, and me to Disneyland, the beach, and Alvera Street to get another piggy bank. I'll never forget those trips and I will never forget how Nani saved for those vacations.

I'm always amazed at what one person can accomplish when there is a purpose, a goal. You can squirrel away coins and cash for a vacation like my Nani. Or you can "Que huerde para un dia que lluvia"- as my Nani use to say, "save for a rainy day", like when the toilet backs up because your toddler tried to flush the entire roll of toilet paper. And then you can stash more cash for his college education. Or you can miser money away in a sock with no end but to have more of it. The size of the mountains you can move by saving depend on the reason behind it.

I've discovered a great calming effect from having those emergency savings set aside, whether they are placed in a CD, money market account, savings account, or even an ugly ceramic bank shaped in the likeness of a pig. I am by nature a spender, so putting money aside month after month can seem monotonous and pointless compared to the immediate rewards of taking my family out to a great dinner. But I've discovered that I prefer the boredom of saving to the roller-coaster ride of spending and then worrying about the monthly bills being met when the rainstorm hits; or having that great vacation greet me at my mailbox in the form of a credit card bill. My Nani would not approve.

I suggest taking some time this week to think about your saving: what you save for, when you save, how you save, and - most important - why you save. If the concept or execution of saving money feels like a battleground to you, pick up the phone and call me. I'd love to help you design your personalized savings plan of action.

Financial Faith

- 9/30/2009

I heard a great definition of “faith” in church a awhile back. The speaker, Henry Rojas declared, “Faith is taking action in the face of great doubt." I cannot think of a more graphic portrayal of this than a vivid scene in the movie Lord of the Rings: when Frodo Baggins accepts his task to carry the mysterious, dangerous ring to the dark land of Moria. Certainly, none of us have been called to take on evil wizards, ugly goblins, or viscous orcs on our path to overcoming a great barrier or accomplishing a great deed in our lives; that is, unless some of you have delved waaay too far into Dungeons & Dragons. In any case, you can't have existed in any version of the past several thousand years on this planet without facing times in your life when you must take action despite the uncertainty of the outcome.

In our finances, we often face circumstances that pose mountainous barriers or unstoppable forces. We face a wall of debt that we think can not be climbed. Or a savings goal that we can never seem to make headway with. Or an onslaught of bills that endlessly attacks our monthly budget. Whatever the circumstances, they stand there like the hordes of orcs at the final battle scene. We lose hope. We feel like no action we can take will save us. We stand in “great doubt" that we will survive, much less triumph.

Well, I’m hear to share with you that there is hope. Just like a great general in a battle plans his strategy, and a great baseball coach prepares his team to take the field, we must sketch out a plan and prepare ourselves for victory. I believe that with some hard work and a great plan, our financial lives can end in victory. And as Frodo discovered, along the journey it is necessary at times to place yourself in the hands of powers greater than yourself. That takes commitment, and trust, and faith. Start today by believing that living debt free is possible. Believe that the same God that owns every penny we earn is the same God that loves us enough to want us to live unenslaved by our wealth or our debt. That knowledge should give the most hopeless of us hope: we are not alone, and we have the infinite power of our almighty and loving God on our side.

The Business Plan

- 8/29/2009

By now you can see that planning is a major theme in my coaching to success in personal finances. This remains true when I advise start-up businesses. Every business needs a business plan. There are different reasons for having one, but it is critical to the success of a business. Without a plan of action, the business leader rapidly loses focus of set goals, which can result in lost market share, customers, key employees, and money.

A well thought-out business plan builds confidence and helps business owners to identify the key areas of the their business that will best grow and sustain their business. It is a “road map” or a blueprint for a business. I find it interesting that the Hebrew word for plan literally means “blueprint." A good business plan enables its owner to attract key employees, discover new business prospects, and manage a business more efficiently.

An effective business plan includes the following:

The basic business concept
The products and services and their competitive advantages
The markets to be pursued
The strategy and specific actions that will sustain growth over time
The management background and key employees
The financial needs

Since business plans vary greatly in length and detail, the amount and type of information contained in a plan also varies. Consider who you are writing your business plan for and remember that your audience’s time is valuable. Don’t fill a business plan with unnecessary information. It should contain enough information to accomplish its goal. As Alan Lakin said, “Planning is bringing the future into the present so that you can do something about it now.” Investing a little time in a business plan right now may be the key to success later down the road.

Counting the Costs

- 7/31/2009

It is very important to know how much cash you will need to start and operate your business before you turn on the lights to your new company sign. Keeping a business running smoothly at startup requires enough capital to cover all expenses until you reach the break-even point. Many experts recommend new companies start out with enough money to cover forecasted expenses for at least six months (sound similar to my personal emergency fund philosophy?). It is definitely wishful thinking if one expects to generate revenue immediately. As with our personal finances, we must live by a plan in our business and it is best to be safe and have a contingency plan.

Start by creating a list of expenditures. Here are some suggestions that will help you get started.

List equipment, furniture, supplies and personnel needs to operate your business.
Itemize startup costs for inventory, signage, sales and marketing literature or tools, research and development, licenses, permits, operating capital, and legal or professional fees. Add in your monthly overhead for rent, supplies, utilities, business and health insurance, taxes, Internet access, website fees, shipping and miscellaneous services. Factor in your salary and employee or contractor wages.

You will want to research industry specific startup books and get as many resources explaining the costs that may apply to your respective business type. It’s always a good rule of thumb to assume that everything will cost more than what you expect, so pad your numbers and build a business emergency fund.

For me this was one of the most exciting times of being an entrepreneur and it helped me prepare to put together a solid business plan. Surely, there are challenges, but with a great plan you can position yourself for success.

Got a Great Business Idea?

- 7/29/2009

Heard the phrase, "I've got a great idea for a business"? One reason these businesses fail between the idea and the execution of it is that often the marketplace they live in has no audience for their product or service. Some time spent in planning and thorough research will help locate any potholes in your business idea or plan. Here are some questions to ask yourself as you move forward:

- What problem does my product or service solve?
- Who will buy my product or service?
- Why will they buy it?
- Where will they buy it? - specialty shops, department stores, mail order, online?
- What do I need to charge to make a healthy profit and will people actually pay that?
- What products or services will mine be competing with?

Remember, no business, especially a small one, can cater to all people. Pinpoint your precise target market. Both MacDonalds and Ruth's Chris Steakhouse are restaurants, but market to wildly different customer niches.

If your idea is already taking wing, you will need to do some formal market research, to determine if your business idea has a chance of succeeding in the marketplace. Once you see hope for your business in concrete facts and figures, then you can confidently move ahead.