On today’s vlog session, I’ve gathered the following topics – all related to debt:
Flashback to 2008 – Bear Stearns: the precursor of the Great Recession
Assessing stocks – the most important company metric is debt and risk level
Book review: Squeezed. What the author describes as new for our economy is actually not new at all. And by maintaining low levels of debt, you can maintain a high level of resiliency when responding to changes in the financial environment.
How are you managing your debt or is your debt managing you?
Janesville is an account of the economic adjustments that occurred subsequent to the closing of the local Janesville, Wisconsin, GM plant. The book documents the shakeout of the newly-unemployed individuals that relied on their financial livelihood from the assembly plant. To earn their living and raise their families, generations of workers banked on GM employment as a default. When GM closed down the Janesville assembly plant, it disrupted the economic environment, leaving GM workers, and workers of supporting businesses, without employment.
When it comes to your financial knowledge, stop pretending that you don’t know what you’re doing. There are more resources than ever. If you’re a book lover, read a few on personal finance. If you’re a net surfer, start Googling up on financial terms.
Answer the following questions and take a few minutes to research anything that you don’t know. Don’t be afraid, we all have an area that we need to focus on. These items are off the beaten path, and from what I’ve seen, points that cause confusion. Some are Yes/No or True/False, while others are thought questions.
I’m all about sharing knowledge. I learn something new every day and never stop reading.
True or False: I have a progressive career plan that will increase my earnings within the next five years.
The last time I improved my work skills was ______________.
I didn’t focus on being financially independent until about three years ago. I had an idea what my net worth was, but wasn’t fully clear on the exact number. The lack of a plan made it a nebulous target.
In my 20s at the start of my career, retirement seemed so far away. I relied heavily on my accounting career to give me financial security. After all, I chose the career knowing that I’d always have a job. Consequently, every ounce of my energy went into working. There were summers that I never saw the light of day. I never knew when I was getting home and I made many sacrifices. Believe it or not, it was exciting and I enjoyed it. I latched onto an upward trajectory of promotions and raises. When I had full autonomy over my position, I liked being relied upon and the responsibilities that went with it.
If my head were to split open, blobs of financial material would spill out. The latest stock prices of Amazon, Veeva, Comcast/how much I plan to save this month/the order that my bills need to be paid to meet my savings plan/ Trump’s tax proposal and his idea of tax rates that are going to enhance working lives/what sector of the stock market is on the verge of growth/how much I plan to spend this month. Small splashes of yoga poses that I plan on attempting might be in the brain matter, but at a minimal level. I gave up on twisting myself into a helix years ago. What I’m getting at is the majority of my mind is focused on financial elements. I realized that most people don’t have a grip on this topic and I had an idea to put it into a book.
In How Ally Found Her Financial Freedom, I take the reader through common financial problems – no idea how to manage money, accumulating debt, little knowledge of financial instruments. Ally is a working professional with no money management skills. She’s deep in debt and wonders why she impulsively spends money. Ally acknowledges that she doesn’t have all the answers and finds a mentor. Cue Victoria, a family friend that Ally feels has the accomplishments and successes that Ally longs for. Victoria commits to her mentor role, providing sound advice and guidance. Ally is compelled to examine how she thinks about money, especially her personal money script. She’s challenged to think about money every day and remain disciplined. Ally takes bite-size actions, baby steps to pursue financial contentment.
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.