Break It Down, Avoid Breakdowns

Changes are afoot in our house. My husband and I recently reviewed our split of financial tasks and decided to revise who is responsible for what.

Just because I counsel people on issues of financial self-care doesn't mean these processes are always perfect in my own life. I probably have more than my share of quirks and blind spots -- why do you think I went into this business in the first place?

So I begin with a confession: I have fallen down a rabbit hole. I sit here surrounded by multiple stacks of open files. I have two online accounting programs open, as well as a now-four-page Excel workbook. I'm totally over-caffeinated and I've been in this chair for five hours.

It's not uncommon for large financial initiatives to inspire manic bursts of effort. But problems arise when we let our mania run the show. I started out on one small task -- creating a simplified family budget -- but then I had to look up some insurance info in our files. That led to reviewing policies. Then I opened Mint to look at numbers for shopping and groceries. This led to a hyper-detailed tagging project. Then I wanted a clearer idea of how much our daughter's activities cost per year, so I started pulling data going back several months.

Somebody help me!

Large financial tasks require structure. They require a goal, sub-tasks, and a time line. When you jump in with only a hazy idea and a Venti-sized twitch in your fingers, it's too easy to get into trouble. You start off strong, then you run into a snag, and then you get distracted, and then you start something else, until finally you're waist-deep in fifteen different projects with nothing actually accomplished. The cycle ends when you run out of time or energy, and the emotional imprint that's left on this experience is one of frustrated depletion. What's even worse, you've left the task in such a state of mess that it's hard to find the thread to pick it up again later.

If I were to be my own client here, this is what I would advise:

Set a start time and an ending time.

You never want to make your level of motivation the key determinant of task structure. This morning I was filled to the brim with motivation. I couldn't wait to get started! But five hours in I had exhausted myself. I'm walking away from the task feeling terrible. My motivation for picking it up later to continue the work? Not high, my friends. I've created an association between this project and feeling crappy about myself. That emotional association is going to make it more difficult to resume the task and see it through to completion. To create a positive emotional association, you want to structure the task such that you walk away with some motivation still in your tank. Then, next time, you'll be excited to jump back into it.

Make 'Create a Clear Plan' the first sub-task.

My simplified family budget idea was too vague. What's the purpose of said budget? What does "simplified" mean? Knowing that I have a visual learning style, I should have sat down with a blank piece of paper and sketched out exactly what it was that I wanted to figure out, what resources (information) I would need to do it, how long it would take and when I planned to do it. Only then should I have allowed myself to touch the computer or filing cabinet.

Make 'Organize the Project for Next Time' into the last sub-task.

Have you ever seen a contractor at work on a big construction project? It may seem like a waste of time (and your money) when they start putting everything away at 3:00 in the afternoon, but the truth is that ongoing jobs require careful organization for each phase of progress. Along with setting an end-time for today's work, I should have also allotted time to tidy up and put things away in some sort of order. Looking out at my sea of files, I want nothing more than to just dump them all in a drawer and never open it again.

Put the project away and do something rewarding.

Okay, so I was not good at these first three, but my reward today was to vent a little by writing a slightly whiny blog post. There is also a very good chance that as I type this I'm sitting here with a generous bowl of ice cream. And I'm totally watching The Closer as soon as I wrap this up.

Review of process is the only way we learn to do things better. The good thing about financial tasks is that they are a regular part of life. I am going to get many, many, many opportunities to work on this some more, and when I do I am going to follow my own advice.

The World Spins Madly On

Surprisingly, I'm not a numbers person. When I do sums in my head I actually visualize colored bars of varying lengths that represent the "size" of the numbers, and then I mentally manipulate those colored bars. True story.

Dancing colored bars have their limits, so of course I'm totally fascinated by programs that visually model complex data. The World Bank Data Visualizer uses colored bubbles to show how population, life expectancy and income per capita have changed by country from 1962 to present. Watch the bubbles chase each other! It's not the World Cup, but you might still find yourself chanting "USA! USA!" as China and India race us across the board. Thankfully, the World Bank chose not to set this to an annoying vuvuzela soundtrack.

Before You Cut, Spend

There’s an old business adage that says you can’t manage what you don’t measure.

It’s surprising how many people ignore this advice when it comes to budgeting for discretionary expenses. In designing a monthly plan they simply write down what they think they should spend rather than taking some time to figure out what they’re already spending.

Why is this? In my experience resistance to measurement stems from two things.

First, people want to rush through the budgeting process. Sure, I like to linger over a bank statement like it contains the drama of a Jane Austen novel, but I’m wired a little differently that way. For most of us, budgeting is something we do in response to financial stress – we want to do it as quickly as possible in order to fix a problem.

Secondly, reflecting on past purchases contains all of the anxiety of spending with none of the pleasure. Those numbers in aggregate often seem astronomical (“I spent HOW MUCH on coffee last month?”) and trigger a backlash of self-judgment that can short circuit the whole process.

So people guess. They come up with idealized numbers that are not necessarily a reflection of their actual behavior. In doing so they usually fail to account for what they need or value, and down the road their budget fails accordingly.

Provided there is no cash flow crisis, I usually recommend that people track their spending for a solid month before we even discuss what expenses to adjust. A baseline measurement of your routine is valuable not only because of the data generated but also because it gives you the opportunity to work on another important budgeting skill – being able to engage consciously in financial activities and tolerate the feelings that come up when doing so.

A healthy budget is not a problem to be solved. It is a statement of purpose that reflects where you want to allocate your resources. There is nothing wrong with spending $200 a month at Starbucks provided that experience is meaningful to you and the rest of your financial choices fit around it. The challenge is whether you can look at that behavior and own it without self-judgment.

If you want a slimmer spending plan that still gives you optimal quality of life, start by going about your normal routine and simply recording when, on what, and how much you spend. A month of measurement is an investment you make in your long-term financial wellness.

You're Not Broke(n)

Of all of the different ways that people describe their financial woes, the one that always raises my hackles is “I’m broke.”

Broke is a state of having little or no money. But there is a deeper connotation, which is that there is something broken in one’s financial life or one’s ability to earn enough money. “Broke” indicates an internalized attitude of insufficiency, which is about as motivating as a blanket of wet felt.

Terminology is important. It frames how we experience our financial lives, both mentally and emotionally. “I am [x negative descriptor of self]” is a particularly toxic frame, because it takes an external, temporary state (in this case, of depleted cash flow) and makes it a character statement.

When we see ourselves as broke we ignore or devalue the money we do have and how we choose to allocate it. Managing cash flow is a series of choices. You can choose to own those choices and stand in your own economic power (even owning your mistakes), or you can choose words that disempower you and reinforce a sense of personal failure each time you run out of money.

Look at the difference between saying “I’m broke,” vs. saying, “You know, I can’t afford to do that right now because it’s not in my budget, but let’s plan to do it next month.” The first one is a non-starter. Want to do something with me? Well you shouldn’t, because I can’t and I don’t have any idea when that will change.

The latter statement expresses healthy choices, boundaries, and it furthers the relationship with the person to whom you're speaking. Sure, it’s a little wordier and may feel a bit awkward at first, but when you’re using financial behavior to transform personal attitudes, words matter. Plus they're free. Use the good ones.

Building Financial Intimacy

With Valentines Day coming up this weekend, I understand that your romantic plans with your sweetie probably do not include money talk -- yet. Let me make my case for the least understood, most unappreciated, yet totally romantic topic of them all.

After the intoxicating initial flush of love, financial cooperation and compatibility are one of the cornerstones of true intimacy. Money is tied to our most basic sense of security. When we can't trust our partner or we feel we can't be our own true financial self in the relationship, then the long-term prospects for the relationship are terrible. Chances are we will either blame, bolt, or cheat (financially speaking). You've heard the statistics about how conflict over money is the leading cause of divorce, right?

How do you boost the financial intimacy in your relationship?

Having different financial mindsets doesn’t have to be an issue. You simply need to communicate in order to play to the other person’s strengths. Next time you’re gazing at each other over candlelight (and maybe after a glass or two of wine), see what happens when you introduce a little money talk.

Here are the questions you should ask your partner:

• After your regular bills are paid, what do you like to do with the rest of
  your money?
• Do you have any financial goals in the next five years? What are you doing
  right now to work toward those goals?
• How do you feel about debt?

My article for LearnVest on How to Have the Money Conversation with Your Significant Other has more on the right questions to ask whether you're just dating or moving toward marriage.

Tweet Your Way to a Balanced Budget

One of the biggest obstacles to tracking spending is creating a habit around it. Writing down each expense may seem awkward, uncomfortable, or time-consuming.

What if you could use your addiction to social media to help put yourself on a budget? That's the idea behind Tweet What You Spend, a free financial tracking tool that works through your Twitter account.

After each transaction, you simply send a direct message to TweetWhatYouSpend (@twys) with the amount you spent and what you spent it on. There is a special TWYS syntax that makes sending the information quick and easy. Tweet What You Spend then securely parses the information into your own Cash Journal.

And while I am no fan of shame-based strategies for keeping yourself on track, TWYS does have a "Wall of Shame" feature that allows you to highlight transactions that are not in keeping with your financial plan by dragging them onto a special bulletin board. If for some odd reason you'd also like to share this information with a community, you're welcome to do that, too. (Personally that sounds a little weird to me, but I have been known to get a lot of clients who begin each session with a mea culpa, so maybe there is a huge need here for public shaming.)

Because I'm Worth It

I know a lot of superwomen. We pride ourselves on shouldering the challenges of career, family, charity, and friends with nary a hair out of place. Complaining about this is really a form of bragging. Secretly we don't want to change anything because being needed makes us feel secure.

Superwomen are notoriously awful at voicing needs, setting boundaries, and saying no. This may make us beloved (and thus relationally “safe”) but it puts us at serious disadvantage in other ways.

Amanda Steinberg at Daily Worth recently asked me to comment on the news that only 4% of venture capital is directed to companies with female chief executives. Is this because women entrepreneurs tend to prefer a different type of business than the kind favored by VC firms, or could the reason be more insidious?

Sure, there probably is a component of gender bias in the VC system, but my hunch is that the superwoman complex is also present. Women run small businesses in record numbers (where they will take on monumental work loads and start up costs, not to mention considerable debt) but competing for capital is another story.

Being financially powerful women, whether that means raising capital or saving for our own retirement, requires that we confront unconscious paradoxes that hold us back. Too many of us believe that we are only loveable (or attractive) when we are non-threatening givers, focused more on the needs of others than ourselves.

What kind of ROI can be expected from a belief system like that? Apparently not the kind that attracts VC money.