Financial Transformations

money-management
financial, money

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My short story, Jake’s Financial Transformation, is loosely based on someone that I knew in my late teens.  Blessed with the adroitness of an excellent carpenter, he took great pride in his work and started his own business at a young age.  Sadly, his skills as a carpenter and as a businessman were at opposite ends of the spectrum.  The business failed because he lacked basic business skills, like pricing a job competitively.  His estimates were often too high, resulting in lost opportunities.  When he did get hired, he dealt with cost overruns.  He simply couldn’t find a way to be profitable.  His alternative was to take a job with a contractor.  His money management deficiencies now surfaced in a different light.  On payday, he could make his take-home pay vanish before arriving home, like some latent magic ability.  For someone that was making a decent living, he was always broke.  This pattern occurred in tandem with a rotten attitude towards “the rich” and constant complaints about having to work for a living.  In his home, there was daily commiseration with his dad about “the rich”.  He was living out this destructive money script, oblivious to how he could transform the gift of his skill into a rewarding and successful reality.

I tried to help.  Together, we nailed down a plan for him to save $100 a week which should have been fairly seamless.  He lived with his parents and had limited expenses.  After imagining how he would have to tighten his expenses, he scoffed and didn’t give it a second thought.

Individuals that carry this kind of attitude are constantly in debt.  Because they never build a savings account and plan their purchases, they never have their own resources and must use the maximum credit provided to them for their home, car, or other large purchase.  If they have $500, their financial obligations match the $500 limit; if they have $1,000, their financial obligations match the $1,000 limit.  There’s never an excess and they’re always scraping by.  Any financial emergencies become fire drills and inevitably create a setback.  Banks and credit card companies love these people.  These are the consumers that live on the financial hamster wheel.  Earn, spend, earn, owe.  Rinse, repeat.

Jake personifies those that don’t have a clue.  They don’t know what they’re good at or what they want from life.  In their little bubble of the world, life just happens.  Many people wallow in self-defeat, not realizing that a life of satisfaction is not a far leap.  They struggle along, thinking that the “good life” is beyond their achievability.  Often, they’re frustrated and they don’t even know why.  These mental chains prevent people from developing useful skills, resulting in untapped talent.

Feeling in control seems like an impossible state to this unenlightened bunch.  What Jake learns from some prodding by his older cousin is that he needs to come up with a plan and figure out his life.  Jake only knows one song and it keeps playing over and over in his head.  But nothing changes unless actions change.  Eventually, Jake experiences a breakthrough and soon realizes that he needs to acquire some education in the field that he knows – cars.  He takes his part-time job activity and turns it into a full-time, marketable skill.  With some basic money skills, he builds up a small savings account and starts to see his life taking shape.

I believe that everyone has the ability to attain self-sustenance.  In Jake, I show the reader that someone with an uncertain beginning can unwind their destructive habits and find their way.   Anyone can create a vision from a blank screen in small, focused steps and find fulfillment.

Dr. Brad Klontz writes extensively about money scripts. More on that in future posts.

investing

Investment Compounding Schedule

 

THIS POST MAY CONTAIN AFFILIATE LINKS.  SEE MY FULL DISCLOSURE FOR DETAILS.

I devised this schedule to predict what my future investments would be worth.  The typical Future Value calculation involves taking today’s account balance, applying an interest rate and the number of periods for compounding. 

That’s great if you are working with only one balance at one given time. 

Because I make regular deposits into my investment accounts, I wanted to increase the balances at different intervals.  I created quarterly segments where any additional investment can be entered.  The formula will take the new end-of-quarter balance and apply the compounding. This repeats for all quarters. 

The yellow fields are the input fields.  The investment account balances can be entered at the top left.  You will see the entire schedule update as soon as an investment balance is entered.  Amounts can be entered in all the “Cash Invested” fields. 

At the end of the schedule, I calculate a cash flow amount based on the final balance.  I have used a conservative 3.5% return.  Below, I have a short list of estimated living expenses. Both cash flow and living expenses can be calculated on a monthly or annual basis.

If you’re good at Excel, you change alter the rates and add rows for additional years.  Let me know what you think of the schedule. I hope you find it useful.

Inv Compounding