Ep.4 12 Things You Need to do to NEVER Worry About Money Again

[CFM COACH ASSISTANT AI ]: Hey everybody, this is Madeline from Strasbourg coaching, and you are listening to the money's not your problem podcast. I use what I love most, my LDS faith, the common sense of Dave Ramsey's baby steps, and Brooke has life coaching tools to help you identify and manage the real issues behind your financial problems. I still remember the moment I learned that you weren't supposed to talk about money. I was in my house with my mom and my cousin, my cousin's psychologist, and she was talking about her job and I looked at her casually and just asked, how much money do you make? And both reactions, my mom's and my cousin, were priceless. My mom took that time and was like, no, we don't ask people about how much money they make. And then my cousin was just quiet there. And then she said, yeah, I prefer not to talk about that. And then my mom, no, it's a good thing that this came up because then we can teach you and you can learn and she's your cousin and all that. I am not blaming my mom. I love my mom. Shout out to Hania Furia, we love you. But she was just doing what she thought was right. Remember, we talked about this before. People always have a reason for what they do, and in society, that's a normal thing to be not talking about money, right? 30 plus years later, I do precisely that. I talk about money for a living. For years I taught personal finance in the classroom, so I talk about money with my students all the time. And now I coach people on their beliefs and financial habits. In a 2019 E Money Advisor survey of 2,500 adults, more than half, 57%, admitted to avoiding money talk with their friends purposefully. And Almost 2/3, 63%, stated they've never worked with a financial advisor. We are told that it's not appropriate etiquette to talk about money. According to another recent study by Fidelity International, women dislike talking about money so much that they would rather voice their opinion about sexual dissatisfaction with their partner than talk about money. In addition, the study states that 8 in 10 women confess they have refrained from discussing their finances with those they close to. Here are the top four reasons they selected as why they refrain from discussing it is too personal. I don't want those I'm close with to know this information. It is uncomfortable. I was raised not to talk about finances. Even among spouses, many people avoid talking about money. And it is all in our heads. When one person in a relationship has had bad luck with money, like massive credit card debt, a business deal gone bad bankruptcy. It could be difficult for the couple to move into a healthy financial relationship. That's because either the person with the painful past thinks he's an idiot when it comes to money and would rather let someone else handle it, or his spouse thinks he is an idiot when it comes to money and would rather handle it herself. He doesn't trust himself and his spouse doesn't trust him either. And it could be vice versa. When I asked why people don't like to talk about money to a couple of my clients, this is what they money, which is how much a person makes and how much they have, is very personal. It's one of the primary things upon which we are judged in our society. Whenever we talk about money, we are inevitably being judged relative to the other people. Money is how we measure each other and keep score, which makes the subject uncomfortable for most people, especially when we don't measure up favorably for this reason. Talking about money it is a social taboo in our society. A topic one doesn't discuss in polite conversation. This is the other answer. People tend to associate their self worth with how much money they make or have. Which is why if they feel like there might be others who make more money, they are unwilling to talk about it. However, once you realize that the only way to improve your financial situation is to talk about it and everyone else starts talking to you, that is the only way we can break the taboo and make better financial decisions. Yeah, it makes me think how you're supposed to learn about money if you don't talk to people, especially in your house. If you're not talking to your kids about money, they're gonna learn from the Internet. And we all know that everything is on the Internet. It's true, right? Given the rise of student loan debt, the past year's increase in unemployment claims, and the fact that so many Americans are behind on their retirement savings, it makes it even more important than ever to talk about money. Also, as we talked about before, how can youth make informed decisions about their future and their work life if they cannot talk it? We parents, if you have kids, have to teach them. We have to teach them. Their brains are not entirely developed to sift through all the information on the Internet to decide what is true and who they can trust. So it's very important the conversations we have at home, being willing to deal with the discomfort to talk about it, being intentional about the beliefs we pass on. So if it's something doesn't work for you, why you keep passing that on to the next generation, Right? And the example we're setting, those are very important factors in the life of anybody developing their understanding about money. That's why working on practical money steps. So understanding the money and your mindset is crucial because then as you develop your understanding about money and personal finance, then working at the same time with your mindset, you're able to be a better source. No matter where you are in your journey. If you manage your mind, you can help others around you, not only your kids, in their journey. So at home, we always talked about money. And we watch financial peace together. And my daughter, when she became a teenager, I watched with her and we're always talking about money. We also talk about money with the youngest one. When you start having this conversation early on, it just becomes part of the rhythm of the house. It's something that everybody talks about and we discuss and we talk about the actions, the consequences, and the decisions that you make with your money, of course, based on their age. But it is really important to establish that. So it's always ongoing. Right. When I was working with the students, I was always open to whatever conversation they would bring it to me in terms of money, because a lot of those kids did not have access at home to be able to have those questions answered. And they would observe what was going on at home. They could feel the stress of the money and the fights and all that. But for the majority of the kids that I work with, they didn't have access to that open conversation. So on another episode of the money's not your problem podcast, we talked about Dave Ramsey's baby steps. And that's the plan I follow that shows the practical money steps to take. But there are essential financial elements that are not necessarily official baby steps on Dave's plan that I would highly recommend you to have to help you feel prepared. I call them the elements of a financially confident life. Here they are. A zero based budget, a retirement account, a durable power of attorney, and a health power of attorney. Health insurance, homeowners or renters, insurance, identity theft protection, a three to six months emergency fund, a will term life insurance, auto insurance, college savings and sinking funds for annual bills of special plan expenses. Having these items in place, in order, organized, ready to go in a folder, they're gonna bring you so much peace, you have no idea. It's like, it's like you take this big weight off your shoulder even when you don't have all of them in place. As you're moving forward and doing one at a time, you're already gonna feel great because you're creating that momentum, that positive momentum that you're like, okay, I got this one, let's do the next one. And it gives you motivation to keep moving forward. So let's talk a little bit more in depth about them. So the first one is a zero based budget. Well, it's just a budget that you put together a to do list for your money as you will. And zero based budget means that you have a budget where all your income minus all your expenses equals zero. That way there's no leftovers at the end of the budget that at the end of the month you don't know where that money went. Right. So you assign a category to each dollar that you have on your budget. It doesn't mean that you have $0 in your bank account, don't get me wrong. It just means that you're allocating every single dollar to a category. So you're going to put money into savings, electricity, daycare, pocket money and so forth. You cover everything. And if you have some leftover money, then you can put more in savings or you can increase a little bit on your spending money. If you never created a budget before, I recommend you start with what we call the four walls and the roof. Four walls would be food, shelter, basic clothing and transportation. And the roof would be paying your tithing. You can use a paper form, a spreadsheet or an app. Whichever method works for you. All you need is to actually do it. A recommendation is for couples to work together. One budget for the whole family, and each spouse has a say in it. Usually one of the spouses more administratively inclined in a marriage. Dave Ramsey calls it the nerd. So the nerd is the spouse who loves or doesn't mind crunching the numbers. And it's more detail oriented. That spouse can put the budget together, that's okay. But then both will look over it together and make adjustments. So they agree and use is not useful to have one person create the budget and then the other person does not follow it. So that's why they have to sit down together, look over the budget together and then decide what needs to be changed and then go from there. Because then it's going to be like a contract between the two of them. That's what they're going to follow. Right. A lot of problems appear when one of the spouse, the nerd, creates the budget and doesn't allow the other one to make adjustments or ask for clarification. Certain things. Right. The other one's called the free spirit. That's what Dave Ramsey calls It the others pass. It is also important for you to be patient with yourself and the process and anticipate they will not be perfect the first time. Usually it takes about three months for it to become more accurate and it's not set and go. You need to review every month because there's always something different every month. Okay. You might be thinking, this will never work for me. My spouse does not allow me to be part of the finances. I don't bring any money in. I don't have a voice. I feel for you. In those cases. The problem is not the finances. You need to tackle the significant issues in your marriage first because usually the money is not the issue. Money is only the symptom. Alright, let's talk about sinking funds for annual bills or special plan expenses. A sinking fund is a strategic way to save money by setting aside a little bit each month. Sinking funds can be used to save money for specific purchases, to pay for annual bills, or for inevitable expenses. Notice that this is not your emergency fund. For example, I have a sinking fund for our auto insurance, car registration, home insurance, car repairs, home maintenance, and Christmas. Yeah, Christmas comes in December, December 25 every year. It is best to keep them in separate savings accounts at a different bank. Funds must be easily accessible but not easy enough to be used for everyday purchases. All you have to do is divide the expense by the number of months or pay periods that you want to save for and then deposit that amount in the number of months or pay periods. So let's say I'm saving for Christmas and planning to have $1,000. If I start in January, I would want that money available in November. Hello, Black Friday. Right. So I would have 10 months to save. So it would equal a hundred dollars a month that I would put in my savings account. My sinking fund. The math part is super easy. All you had to do is divide. The difficulty may be to resist the urge to use the money as you see it grow. And that is why thought, work or mind management is so important. If you need help with that, sign up for a free coaching session and I can help you look at what could be holding you back. Just a little plug there. All right, next one. Health insurance. The purpose of health insurance, any insurance, is to transfer risk. It protects you from all the bad and expensive things that can come up. The best way to get health insurance is through your employer. If you don't have an employer, maybe your spouse's employer. The average cost of a three day hospital stay in the United States is around $30,000. The average hospital bill for a complex COVID 19 case in Utah, which was lower than those national totals, was around $262,000 out of network and around $92,000 with the allowed insurance amount. No wonder medical bills are the number one cause of bankruptcy for American families. 63% of bankruptcies in the United States are due to medical bills. Now, why are health care costs so high in the United States? According to an article from Investopedia, one reason healthcare costs are so high is administrative waste. Providers face a huge array of usage and billing requirements from multiple payers, which makes it necessary to hire costly administrative help for billing and reimbursements. Also, in other countries, prices for drugs and healthcare are at least partially controlled by the government. In the United States, prices depend on market forces. Another reason, and you might have noticed that yourself, salaries for American workers have risen, but net pay has stayed the same because of increasing changes for health insurance. My point here is not to discuss politics, why that is important too. Instead, my point is to highlight the importance and necessity of having health insurance. Without health insurance, you are only one accident away from financial ruins. Alright, next element very important is auto insurance. It is required by law and premiums vary based on your deductible, your age, the make and the age of your car, your driving history, the state you live in and the type of insurance you purchase. And if you have a financed vehicle, well, guess what, you're gonna have to have full coverage. Full coverage policy will cover the car in the case that the bank of the lender has to repossess or repo the right. They want to make sure that they get the money that they don't lose any more money. Auto insurance is really important in the case of an accident. They're going to cover the medical bills part of it or they're going to fix your car. All these things without a good policy, all the costs are going to come out of your pocket if you don't have a good auto insurance policy. And remember that if the car is paid for, you can have liability only liability is gonna make sure to cover the other person's vehicle if you hit someone. Alright, now we have another type of insurance, homeowners or renters insurance. Well, what does that do? Well, it repairs or replaces a home and its contents when a cover accident occurs. So that's for the homeowners and it's required with every mortgage and protects the homeowner and the lender. Make sure that if your property increases in value, you reevaluate your homeowner's insurance to make sure that covers the replacement of the home, the actual value of the home. Right now. Okay, Renters insurance only covers a renter's possession inside the renting structure. What does that mean? Only covers the stuff that you have inside the place that you're renting. It doesn't insure the property or the structure. So the house or the apartment, that's the responsibility of the landlord. The landlord is the one that pays for the insurance of the property and the house and the structure. All right, let's talk about the emergency fund. The emergency fund should be a three to six months emergency fund. And it's money that you set aside for life's unexpected events. It's the famous rainy day fund. It is used to cover the bare minimum expenses and if or when a big emergency occurs, it's not to keep your lifestyle. Okay, so you cut everything down to the bare bones and just use the money really to pay the four walls and the roof. Okay, the minimum you can. So what would qualify for emergencies? So maybe a car accident, extra hospital visits. Or it could be a cracked tooth. Not on purpose. I chose this three medical issues. Right, but those are emergencies. Things that just happened and you were aware that they were going to happen. Or it could be the hot water heater that could just kapoof stop working. Right? So then you have an emergency fund to cover that. It is wise to keep it on a separate savings account or a money market account at a different bank so you don't end up using it for things that are not emergencies. You would think that after this COVID pandemic situation, people would be more intentional about saving money. But nearly 70% of Americans have less than $1,000 saved in their bank accounts. Those with savings between $1,000 and $5,000 stands at about 12%. With seven out of ten Americans living paycheck to paycheck, it is understandable that most people have very little savings. An emergency fund gives you the confidence to tackle any of life's unexpected events without adding money worries to your list. Especially for not having to rely on credit cards or high interest loans. Rely on a credit card as your emergency fund is not wise. Personally, I think it makes no sense at all. If you have a credit card, you're less likely to look for other solutions during an emergency time. Two, you're turning an emergency into debt. Three, using a credit card for unexpected expenses when you can't pay them in full can turn your one time costs into months or years of debt payoff. And four you're only pushing the issue further out. Best way to deal with emergencies, use your emergency fund. All right, next would be term life insurance. Does everybody need life insurance? No. If you don't have kids or if you don't have anybody depending on you, you're single, then you don't need life insurance. Life insurance is designed to replace income loss in the event of death. If someone depends on your income, then you need it. Stay at home. Parents should also have their own policy to replace the economic value they contribute to the family if they pass away. Insurance is not an investment, but it is there to protect you and your family. Again, it's to move the risk away from you. Right? So choose term life insurance. 10 to 12 times your annual income. About 15 to 20 year term after the passing of one spouse. I've seen people use the money from the life insurance to buy car, to buy a house, to buy other things, to go on vacation. And then the money runs out and the person has no money left over and they have to go back to work, which is very sad if that's not what they want to do. So what are we supposed to do with the life insurance check? Well, the best way would be to invest it and only use what the money produces. This way you ensure that the money keeps coming into the household. All right, Next. Retirement account. Retirement is a crucial part of a financial plan. If you have a job one day you. You might want to stop working, or you might be forced to stop working because you are unable to continue working. But it's coming either way. Once you've set your automatic investment, you just let it grow. Knowing that you're investing, you will feel good for doing it, even if it's a small quantity. This attitude improves the chances of the person to increase their investment later because it will fuel the confidence that leads to good actions and the development of great habits. Alright, next. College savings. Does everybody need college savings? No. If you don't have any kids, you don't need to save for college. Also, saving is a worthy goal if the family can help the kids with college. But remember that college is not a right. Everyone will eventually retire, but not everyone will go to college. Many parents feel guilty and ashamed that they cannot pay for school or let their kids decide where they want to go, even if it is because they want a college experience or they are just tired of living at home. So they take out parent plus loans. And because those conversations are uncomfortable, they do not define the conditions of these loans. Are the kids responsible for taking over loan payments after graduation. Also, some high school teachers and counselors make these even worse by encouraging these kids to attend school in other states or not taking advantage of the low cost opportunities available through community or state colleges. This just drives me crazy. Alright, let's talk about the next a will. Does everybody need a will? Yep, everyone over 18 years old should have a will. If you don't have a will, the state will decide how your possessions will be divided. Also, while very uncomfortable, it's essential to let whoever is part of the will know what is in it and who will get what. Being unclear is being unkind. I can almost guarantee that you know at least a couple of stories about family members that don't speak to each other or have contentious relationships because of distributive of the person's stuff. While we know we cannot control how people will react, we can feel assured that we did all we could to protect our legacy and have our wishes known. And no, just because you are doing your will and you created your will does not mean you're going to die faster. Okay? Rest assured we all going to die sooner or later, but not any sooner just because we created our will. So here's a situation of someone that did not create a will and he has all sorts of problems now. Aretha Franklin, she was known as the Queen of Soul. She was a singer. She died from cancer at age 76 in 2018. At the time of her passing, her worth was about $80 million. But because she didn't do a good job planning her state, the late singer's children, they haven't seen a dime yet of the inheritance and what they eventually will receive, it's going to be depleted from taxes that she didn't pay. It's still not clear whether or not she had a valid will. They found four different wills. Three were handwritten, that's not worth for anything and the other one was in process. So she never signed it. And for a will to be valid, it needs to be signed and notarized. So although she had good intentions in creating these things and she wanted to take care of her family, her lack of planning actually splitting brother against brother and exposed the secret that she owns the IRS. $7.8 million in unpaid taxes. And perhaps the worst of all, while the legendary singer was very private, all of this is playing out in news headlines for the whole world to see. Her situation is tragic, but it's too common among musicians. Prince, Jimi Hendrix and Bob Marley all die without a will. My hope is that by sharing her story, I will impress on you. My hope is that by sharing her story and the struggles that her family is going through that it impress upon you the importance of doing this work, that it is really important to have a property. My hope by sharing her story is that you be inspired to create a proper state plan for your family. You cannot guarantee that your family members are not going to fight over things when you're gone, that there's no way you can control that, but at least you can allow them to grieve and to have their time to processing your passing without having to worry. On top of that, in figuring out what to do with your state and such, planning is vital even if you have far less wealth than Aretha. In fact, planning can be even more critical for those with fewer assets. After all, she had such a massive fortune, it's likely that her heirs will still receive an inheritance, while similar mistakes would likely totally wipe out a smaller state. So show your family some respt and if you don't have a will, get one and please get it signed and notarized. All right, and now we come to the last two elements of a financially confident life. Power of attorney. We should have a durable power of attorney for health care that allows an individual to make necessary decisions with doctors and hospitals. If the designated person cannot do so, it should also be notarized to be valid. And then the next one would be a durable general power of attorney, which is a legally binding document that allows you to appoint someone to manage your property or financial affairs. Even having those documents in place, we can still face some obstacles and people don't want to take the power of attorney. But you increase the chance of being able to deal with those situations when your loved ones are not able to do it anymore. It seems to me that sometimes it's a conveniency issue. Some people don't want to take the power of attorney even though my in laws are still alive because they think that they can make up their minds in whatever we're trying to do. But having that document being notarized, legally binded, then you can use that to make those decisions no matter what because it's a legal document. So there you have it, the elements of a financial confident life. Of course you can add other things to it, but these are the ones that if you have those in place, you will feel so much better and you're gonna feel that you're making progress with your life and you're prepared for the whatever life brings you. So let's review a zero based budget, a retirement account, power of attorney and health power of attorney documents, health insurance, homeowners and renters insurance, identity theft protection, a three to six months emergency fund, a will term life insurance if someone depends on your income, auto insurance, college savings if you have kids, and sinking funds for annual bills and special plan expenses. But remember, getting your documents together is important, but learning how to manage your mind about money is key to feeling peaceful and confident about your life. Even during the process of getting them in place. You don't have to feel peace just at the end when you get them all done. You can feel peace as you move through one by one and put them in place and organizing your stuff. We usually think that once we have all these done, once we have this or that, then we're gonna be feeling happy. No, you can feel happy as you move through those things. You can feel confident, you can feel that you got this, that you can put your money life in order. And once you feel that way, you show up differently in your family, you show up differently to your relationships, you fight less. And that's usually what we want. We want to feel happy with our lives. And that is possible every even if you're not all done getting your things together financially. Okay, remember, money is not your problem now. If you want a copy of the elements of a financially confident life discussed in today's episode, make sure to go to my website strasbourgcoaching.com checklist and download it. Or click on the link in the show notes. I hope you've enjoyed today's episode. Remember to subscribe, rate and review. And if you're ready to invest in yourself, check out my website StrasbourgCoaching.com to schedule a consultation or try my membership group for free. I'll be back next week for another profitable episode of the money's not your problem podcast. A Tebrevi yo Brigade Sam.