Mindful Money

An Outreach Center of the Sam and Irene Black School of Business at Penn State Behrend

February 2011

Welcome to the Center for Financial and Consumer Outreach's second installment of Mindful Money, brought to you by Penn State Alumnus, Kathryn Nusbaum!

Mindful Money

Keeping the Financial Winds At Your Back

Here it is, the beginning of another cold, February morning in Northwest Pennsylvania. It is so cold, the wind stings any part of your face that is exposed. We have all experienced those winds that have been so strong they have stopped us in our tracks. The forces of the financial winds in our lives can be just as powerful. The financial winds can become so overwhelming that they hold us back, stuck in a very dark storm, or they can be one of our greatest resources in helping to propel us throughout our lives, making each step of our destiny a little easier.

This month's article is about getting the financial winds at your back and using them to help you sail into the best version of your life. Here is how to do it. Let's talk about the most obvious things first, which include those same tried and true messages that you hear over and over again. Avoid credit card balances, large car payments, and mortgage payments that stretch you too thin. These are the choices that rob your future of financial security because you are paying for yesterday's choices and, in most cases, paying interest, which is getting you nothing. You are caught in this loop of making payments, getting nothing more in return, and foregoing your future wealth by making payments to someone else.

The most powerful forces with which you can arm yourself are positive patterns of spending and saving. Positive patterns of spending include spending within your means, or in other words, spending less than you are earning. If you are spending more than you are earning, attack it from both ends. Look for ways to earn more and to decrease your spending. Use your resources and creativity to find ways to spend as little as possible until you are living within your means. For example, flow all of your spending through a debit card and commit yourself to a specific, limited number of transactions per month, which should include all of your spending. This will force you to think about the month ahead and use your limited number of purchases prudently and mindfully.

Financial advisors are constantly asked for their best piece of retirement planning advice. Unequivocally, the people who are in the best financial spot in retirement are those individuals who have very low fixed expenses when they retire. When discussing retirement, the focus is often on the investment strategy, but the expense side of the equation is much more controllable for individuals, and it can certainly have a greater impact on an individual's financial well-being than would their investments. When an individual has fewer fixed expenses, they have a tremendous amount of financial freedom. Financial freedom is as soothing as the warm sun on your face.

The earlier you begin making positive financial moves, such as paying yourself first, rather than always paying for things with debt, you will have significantly more purchasing power over your lifetime. When you save, your money begins working for you. You begin earning money on your money, without lifting a finger! Over time, the trend of earning money on your money will compound, and soon your financial freedom will expand effortlessly. Make a habit of keeping your fixed expenses as low as possible, and saving your money to invest in your life. With the financial winds at your back, you will feel the satisfaction of gliding through a life of financial security and peace of mind.

About the Expert

The above advice has been written by the Center for Financial and Consumer Outreach's financial expert and Penn State Graduate, Kathryn Nusbaum. Kathryn Nusbaum, CFP®, CPA is the Chief Executive Officer and co-founder of Middle America Planning, Inc. She is passionate about moving her clients towards a confident and secure financial state of mind. In addition to working with clients one on one, Kathryn speaks regularly to students and adults across the country on effective money skills and aligning conscious, financial decisions with personal goals.