HOW TO GET YOUR FAMILY’S FINANCES IN ORDER—NOW!—FOR 2009

Listen up, parents: It’s time to get your finances in order. With the  new year fast approaching, there’s no time like the present to take  action. Not only will being proactive about your money situation make for a calmer, happier, and, ultimately, more successful year,  but it will get your kids on the right track while they’re still young,  setting them up to have a healthy relationship with the the almighty  dollar for the rest of their lives.

Our kids inherit more than our eye color and height—they also inherit how we think about money and how we behave with money. If, for example, you use money to feel good (buying a new sweater after a bad day, buying your kid a toy when you feel distant from her) you are literally teaching your kids that buying more things will somehow, eventually, fix the problem. They, too, will begin to feel a sense of deprivation—after all, if you did have enough, why would you need to constantly acquire more?  They’ll also begin to believe a particularly problematic falsehood: the best way to ease discomfort is to make a purchase. It won’t be long before their own behavior mirrors the messages they got from mom and dad.

Rather than head down this road for yet another 12 months, take advantage of the New Year to get clear with yourself and with your kids about what your spending and saving will look like for 2009. Why is it important to include your children in this process rather than just let them figure out on their own that your spending is changing? There are two reasons. First, if you are up front with you’re kids about how you choose to spend the family money, they won’t create negative, imaginary reasons for the change.  Just as children of divorce often invent that they are to blame for their parents’ split, children in homes with suddenly- tighter purse strings may come up with destructive, unhappy and untrue causes  for the shift.   Second, if your children feel they are a part of the decision process rather than serfs to your financial decrees, they are less likely to rebel or develop a negative attitude. This is particularly true of older kids.

So how do you decide what needs to be done in the New Year, and how do you talk about it with your kids?

Here are my 6 Top Tips for Creating Financial Family Fitness in 2009:

1	First and foremost: Before getting together with the kids, if you have a partner, share with him or her the money message you got from your parents so that each of you knows what inherited money beliefs you each bring to the table. You may be working with the basic belief that the love of money is the root of all evil, while your partner is positive that money makes the world go ‘round. If you don’t have a partner, have this talk with a friend. Recognize that our adult money activities are driven by childhood beliefs. This understanding can help you turn any judgments you may have about your own or your partner’s money habits into compassion.
2	Complete a Spending Intention worksheet with your partner—this gives you a clear picture of your actual cash flow and allows you to create a spending range for each category of expenses. And, if one of you tends to hand over the reigns when it comes to family finances (happily or begrudgingly), this will help to restore some balance.
3	Remember the value—and yes, the fun—of saving. Our grandparents generally couldn’t overspend much because they didn’t have Visas and Mastercards. If they wanted something, they typically paid cash up front, or (drumroll please) saved for it. Restore this practice with your children. Give them the experience of anticipation, excitement, and accomplishment that comes from saving, and experience it yourself by helping out. If there is something your kids really want this year—a bike, a trip to Disneyland—instead of using the credit card to buy it, develop a matching savings plan. If they save five dollars, you add 10.
4	Speaking of credit cards, let them go. It is wise to keep one or two on hand for emergencies and credit cards can play a role in restoring damaged credit. But generally, they should function as a spare tire, not a steering wheel. Overusing credit cards not only plants you firmly in the debt cycle, it’s teaching your kids—and yourself—that saving is essentially impossible or useless, and that you can have whatever you want whenever you want it. The thorny truth is that you can’t—not without paying the price in interest, stress, and the growing sense that you don’t have enough. If we want our kids to be patient and wise spenders, credit cards are teaching them the opposite values.
5	Sit down for a family money meeting, but take care to strike an information balance. Too much financial information stresses kids out. They don’t need to know all the details of your mortgage, the raise that didn’t come through, or the 401K that’s losing traction. If your intention is to decrease family spending, tell the kids how you are going to cut back and invite them to come up with ways that they can reduce the family’s spending as well. It’s beautiful to witness how children can step into greater maturity and responsibility when their ideas are taken seriously.
6	Finally—and trust me on this—there is nothing that will improve a family’s sense of security and wellness more than giving to others. It is the quickest way to dissolve a sense of not having enough or needing more. Generosity necessarily undermines our feeling of scarcity and sufficiency blossoms. So sit down, put your heads together, and select a beneficiary and an appropriate amount.

Q :  Can you please provide specific and concrete steps for releasing the  limiting beliefs around money I currently have and replacing them with new and expansive beliefs.

A : The first thing is to become aware of your feelings during every financial transaction you make:  investing, saving, spending, talking about what dinner cost, giving your kids their allowance, responding to a charitable request.  What is your belief about money in every situation?

Now ask yourself:  what would your life be like without that limiting belief?  The answer to that question will be the seed for the creation ofa new curative money message.

Some blogs I found about Money Beliefs :

Jaclyn is one of the smartest women I know—and certainly one of the savviest real estate investors. Her investing success made her a wealthy woman, and she lived like one, in a sprawling, high-tech house, valued at $2.4 million, that she shared with her husband, and three stepkids. Then about a year ago, just as the real estate market was starting to skid, and with two of the kids now in college, Jaclyn and her husband sold the $2.4-million house and “downsized” to a one-million-dollar establishment. And just recently I learned that Jaclyn had sold the million-dollar-house, at something of a loss, and was hoping to rent a little place somewhere.

I was sorry to hear it, but I didn’t need to ask the reason. Clearly, with her money tied up in a portfolio of properties that were fast losing their value, Jaclyn needed cash simply to stay afloat.

“How did you escape making a similar mistake?” my wife asked after I had told her the sad news about Jaclyn.

“I learned the lesson at my mother’s knee when I was seven,” I replied: “’Don’t put all your eggs in one basket.’ Didn’t you hear that when you were a kid?”

Janine thought for only a second, then nodded.

Of course, we all learned it. In my case, I think it was when I finally got tired of always being assigned to right field when we played baseball at school. “Maybe you should try another sport,” my mother suggested. “After all, you shouldn’t put all your eggs in one basket.”

I would hear the same dictum when I devoted so much time to studying math that all my other grades suffered. And when I got on an ice cream kick and wouldn’t eat anything else. And when I developed such a crush on the tallest girl in sixth grade that I had no eyes for anyone else. “Don’t put all your eggs in one basket,” my mother repeated as I sank into each of these disasters. “Keep your eye on the big picture. It’s a varied world out there.”

That is precisely what Jaclyn forgot. A business school graduate and an expert in all the complexities of real estate investing, she neglected this simple wisdom from childhood—and she put all her investing eggs into the real estate basket.

Does this mean that investing in real estate is a bad idea? On the contrary. It is a very good idea. As investment categories go, real estate, over ten-year periods, is typically a very good investment. What’s more, through the power of leveraging, real estate investing offers the potential advantage of “multiplied” gains, although that entails the risk of multiplied losses as well. That is, if you borrow money to invest in real estate—as most people do, putting up a portion in cash and the rest as debt—your returns are magnified on both the upside and downside. If the property increases in value, your gains are greatly multiplied because you’re getting a return on the whole amount invested, even though you only laid out a small portion from your own money. But if the property decreases in value, your losses are also multiplied: you’re responsible for the debt as well as the lost value.

That’s what happened to Jaclyn. And it happened, not because she was naive or because real estate is a bad investment; neither is true. It happened because she forgot the childhood wisdom about not putting all your eggs in one basket. In investment terms, she concentrated all her resources in only one asset class; that’s why she’s hurting today.

What’s an asset class? Here’s how I define it in my upcoming book, The Cure for Money Madness: “An asset class is simply a group of investments with similar characteristics such that the investments behave the same way in the marketplace.” Specifically, the companies have similar size and growth characteristics, and so they behave similarly as investments. Large, fast-growing companies—Microsoft , Nissan, General Electric, and FedEx, for example— behave similarly to one another, even though they represent different industries. By the same token, small, slow-growing companies behave, as investment assets, like other small, slow-growing companies; stocks in small manufacturing companies, for example, no matter what the companies manufacture, tend to go up and down together.

So do real estate investments. They rise or fall in value as a class, as recent events illustrate: when mortgage money was readily available, demand for houses, to take just one example, outstripped supply; house values rose, and investors in housing made fortunes. As they did so, the investors’ tendency was to ply their gains back into more real estate investing, concentrating in this one asset class even more.

That’s what Jaclyn did, and for a good number of years, as her leveraged gains registered as nothing less than spectacular, plowing everything back into this one asset class must have looked like a good idea. Maybe Jaclyn grew giddy on this soaring wealth, and maybe the giddiness seduced her into concentrating more and more resources in these persistently rising investments. It was Jaclyn’s money madness gone wild; she was hitting not just home runs but grand slams on every at-bat, and it must have seemed to her that nothing could go wrong.

I think that kind of madness is just human nature. We stop thinking when we’re on a high; we stop seeing things clearly. By the same token, when we’re low, we see too sharply and narrowly, and think too much. If only there were a mechanism to keep us level—at least where investing is concerned: to stop us when we’re carried away by some infatuation or other, and to move us along when we’re stuck in a rut.

There is. It’s the Rainbow Portfolio™, and I created it for just these reasons: to stop me in my tracks when I get giddy and to keep me going when I get low. In both cases, the Rainbow Portfolio™ is a fail-safe mechanism that automatically reminds me of what I learned at my mother’s knee.

Had Jaclyn been a Rainbow Portfolio™ investor, for example, it would have forced her to take some of his gains and diversify into other assets—large- and small- and medium-cap stocks, international and domestic, value and growth stocks, commodities and bonds. Automatically, the losses she is suffering today in her real estate investments would have been offset, or at least mitigated, by gains from other investments. What’s more, instead of being forced to sell her family home, as she must now do, she’d be able to stay put, despite the house’s dwindling value.

That’s why ‘Don’t put all your eggs in one basket’ is the most basic, most profound, most important investment mantra there is. It even trumps that other classic, ‘Buy low, sell high.’ Another friend is a case in point.

I’ll call him Frank. Like Jaclyn, he was a real estate investment wizard. So stunning was his fast climb to wealth that he actually disdained the kind of investing I advise, and we used to kid one another about our opposing investment ideas—mine for multi-asset, passive investing, Frank’s for go-getter, highly leveraged investing in real estate.

Until the day, not too long ago, when Frank phoned to say he was desperate. Plunging real estate values were reducing his net worth steadily and substantively. He did not know where to turn or what to do. What could I advise?

“How much of your portfolio is in real estate?” I asked.

Frank did some quick figuring. “Ninety-six percent,” he said.

I gulped. “Sell,” I said.

“But I’ll lose a fortune selling at the bottom of the market!” Frank protested. Such an idea—selling low, especially after having bought fairly high—was simply anathema to him, schooled, as we all are, in the principle of buying low and selling high. It’s an important principle, but in Frank’s case, it clearly came in second to the eggs-in-the-basket principle. Simply put, it is better to sell low and diversify than to have nothing at all.

So I refrained from mentioning that Frank was losing a fortune anyway. Instead, I argued that with that much concentration in a single asset, he was looking not just at loss but at wipe-out. “The first thing you need to do is avoid total disaster,” I asserted, “and that means reducing your real estate allocation from ninety-six percent to fifty percent. That way, even though it’s painful to sell at a loss, reinvesting what you earn on the sale might very well make you more money in the future. So for now, sell.”

Two friends who hit fantastic heights with their investing have now plunged to unexpected depths. The fault was not in the asset they invested in but in the concentration on that asset to the exclusion of others. The fact is that there are some simple rules about money that keep us safe and, like smoke alarms, alert us to impending disaster. When our money madness makes us giddy, luring us into thinking we just can’t miss, it becomes easy to forget the rules—and such forgetfulness is fuel on the fire.

Jaclyn and Frank forgot the simple rules—and were badly burned. They abandoned the wisdom we all learned as children: in investing, as in all of life, it pays to embrace the world’s infinite diversity.

It’s a reminder that now may be a good time to count how many baskets your eggs are in…

Some blogs you might find interesting on Real Estate :

When I arrived at SFO for my flight to New York a couple of weeks ago, I used the automated kiosk to check in, and when I got to the screen offering upgrades, I thought I’d just find out how many miles it would cost to sit in first class instead of economy. After all, it was a long flight, and it was the redeye, so comfort suddenly seemed like something I might just be willing to pay extra for. The thought of getting in a few hours sleep without being disturbed by screaming kids was appealing, and as the father of kids who sometimes fit that description, I knew whereof I spoke. As I was mulling over such luxuries, however, I must have touched the touch screen a little too casually, and before I knew it, I was being congratulated for having upgraded to a first class seat!

I proceeded to the gate, where I decided to take up the issue with a live customer service representative. “Hi,” I said to the young woman behind the counter, “can I get my miles back and return to economy class?”

The customer service rep looked me up and down. “I wouldn’t if I were you,” she said. Then she added: “Why would you downgrade? It’s just not what people do.”

Maybe. All I knew was that I was extremely uncomfortable at the idea of sitting in first class. So uncomfortable that although I was sleepy, burdened with carry-on luggage, and would be getting the roomier first-class seat for miles flown—and therefore virtually for free—I couldn’t quite bring myself to do it. What was this about?

It all had to do with a very recognizable feeling from my childhood. I had grown up in a neighborhood in Queens, New York that was quite literally split down the middle in socio-economic terms. On one side of the wide avenue—our side—were small apartment buildings like the one my family lived in and a number of narrow, two-family houses separated by cement alleys. On the other side of the avenue were “the rich people,” as we thought of them, who lived in sprawling ranch houses and “split levels” with wide, grassy lawns.

The split was real. The two sides didn’t mix. Nobody ever “crossed” the avenue. I grew up feeling uncomfortable with the whole idea of people who had a lot of money, even though I just about never met any. How could I? Money divided us from one another. My father wouldn’t even set foot in “that neighborhood,” and although nothing was ever spoken directly against rich people, we nevertheless absorbed a sense that they were alien from us—a whole different caste, out of our reach, people we wouldn’t want to be seen with.

Now here I was in the airport about to become such people. When we boarded the plane, I and the other first-class passengers would go first, marching down a special red carpet meant to announce that there was something special about those whose feet graced the carpet, even though the only thing that set us apart was that we were paying more money for a more comfortable seat. Still, everybody would see me—and would know me to be from the other side of the divide.

I was on the horns of a dilemma: I wanted to sit in first class, but I didn’t want to be set apart. I wanted the extra foot of legroom, but I didn’t want to be thought of as a rich guy who could afford to pay for that legroom.

Could there be a clearer example of childhood emotions driving grown-up behavior? My discomfort about first class was born in the distorted perception that money defines who we are. Therefore, if people see that I can afford first class, they’ll lump me with those rich people I found alien as a child—and they’ll be as distrustful and envious of me as I was of the folks on the other side of the avenue.

I decided it was time to stop being embarrassed to be me, and I kept my first class seat. And for the first time in my life, I wondered what those first-class folks on the other side of the avenue may have felt about those of us on my side—and what they were like as people…

Some interesting blogs on the first class topic :

I am drawn to make others take a step back and think outside the box – especially with money.

Have you heard the latest money joke?

No?

That’s probably because there isn’t one. ( Ok, I did find the jokes about money listed at the end of this blog  – but in general, it’s not a huge humor topic! )

Money is serious. Say the word, and people’s posture improves. It’s as if they were hearing a parent’s voice telling them to mind their manners and tuck in their shirt. I’ve seen playful looks freeze into masks of solemnity when the subject of money comes up, with worry lines around the mouth and anxiety wrinkles around the eyes. Money is stressful; as my father used to say, it’s “no laughing matter.”

Well, it should be. All this gravitas around money is actually an obstacle to money success. It keeps us from thinking clearly about money, from looking at it realistically and making wise decisions about it. We feel weighed down by the ponderous complexity we assume surrounds the issue of money. The bulk of all that information hurled at us by the media displaces our common sense. And the freight of a culture that equates financial worth with self-worth produces the kind of stress that makes us react to events when we ought to be responding with objectivity and common sense.

That’s why one of the things I always try to do in my workshops is to get folks to lighten up about money. So when I found myself staring at a money boa in a San Francisco novelty store one day, I bought it instantly.

What’s a money boa? It’s about a hundred folded up hundred-dollar bills—fake ones, of course—strung together like a scarf. The fakes are pretty authentic-looking, so at a glance, I really do appear to be “wearing” $10,000 around my neck.

I first wore the money boa at a curing money madness workshop I did in New York for 500 people. I knew, because it’s always the case, that a lot of the workshop participants were feeling stressed, hopeless, and frustrated about their money situation. Yet even as I approached the podium, boa flapping as I moved, I could hear a few embarrassed titters. Then some chuckles. And by the time I was center stage, the place was downright mirthful. The point was made. A weight had been lifted, and in this more buoyant environment, it was a lot easier to help participants cure their money madness.

A few days after the workshop, I had to fly east on business. To my dismay, I found that I couldn’t really pack the boa; the hundred-dollar bills could not be refolded. So I simply wore the boa, and the reactions this provoked were pretty astonishing.

As I made my way through San Francisco Airport to board my plane, kids ran up to touch the boa and to ask for money. Adults smiled at me and shouted out questions; I just responded that I wanted all of us to lighten up about money, and every one of them agreed and thanked me for the reminder. A security guard asked if the money were real, and once I boarded, my fellow passengers were quick to start chatting; all by itself, the money boa broke the ice.

Then I arrived in New York. Cold, distant, unfriendly New York, as legend has it, money capital of the world. In fact, despite the fact that it was May, New York was chilly and windy—at least, until I walked its streets wearing my boa.

People laughed. They waved. Cops directing traffic at the world’s busiest intersections blew their whistles. New Yorkers wisecracked one-liners at me. Yes, there was a man living on the street in Times Square who tried, somewhat aggressively, to rip some “money” off the boa, and there were a number of people who simply didn’t notice at all, but for the most part, the reaction was: that’s funny.

All of this says to me that there is an untapped reservoir of lightness about money that has been pushed down inside us by a lifetime of stressful conditioning. The conditioning affects different people in different ways: some are obsessed by money, some are determinedly oblivious to it, some find it a distasteful necessity. But it seems to me that if we can access that reservoir of lightness, going back to a time before the conditioning planted distorted childhood money messages in us, we might clear the way for curing our money madness and making better, more successful money decisions.

How to do that? Remember back when you were seven or eight years old and were given a five-dollar bill to spend as you liked? If you could recapture the sense of wonder and excitement those five bucks incited in you, you’d be halfway there. So here are three suggestions for putting the fun back in money:

1. Save in a shoebox. Literally. Identify something you want to save for, find a shoebox (or piggy bank, or similar), and start putting in loose change on a regular basis. Even better, save with a friend: maybe plan a vacation together, and determine that every time you get together, you will each put ten bucks into the vacation kitty. Watch your savings grow, just as you would if you were seven or eight—with a sense of wonder and delight—and have fun spending it.

2. Consider the path your money travels next time you pay for something. The dollar that bought you today’s newspaper, for example: it helps pay the bills of the newsstand vendor, the salary of the driver whose truck delivered the papers, the reporters and photographers who covered the stories you’re reading, the editors, production team, and so on. Money works; it has a function. But it travels light; money is not leaden.

3. Come up with three reasons why you are overpaid for your work. Maybe it’s the lunchtime use of the office computer to do your shopping. Or the skybox at the stadium you get invited to regularly. Or the secret fact that you would do this work for nothing. Think about it, come up with your three, and write them down. No, this is not a joke.

Jere are the jokes about money i could actually find!