Make a Plan That Works for You!
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Money Talks, LLC
Susan Hammitt, AFC, CDFA
Email:  - Telephone: 503-233-8142
Money Talks, LLC Newsletter                      February 2010
In This Issue
A Valuable Daily Life
Building Block ONE:
Budget for a Valuable Daily Life
Back Story of Success

George Goes to the Vet:  A lesson in Healthcare Rationing

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Susan Hammitt, AFC, CDFA 
Financial Counselor
Divorce Financial Analyst
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Talk About Money


The Achilles Heel in personal finance is silence.  


Learn to talk about money with your partners, families, and friends.  It's a powerful message to hear people you love and respect share information like, "I can't afford that." and, "That's just not important enough to spend money on, it's a choice I (we) made."  and "I've been saving for retirement since my first paycheck."  


Talking about money in the context of our daily lives helps keep financial decisions in perspective and builds stronger financial community.



Last month I encouraged everyone to test their financial awareness. This month the focus is on the first building block for achieving Personal Financial Sustainability. 


A Valuable Daily Life

The first building block for Personal Financial Sustainability


The first building block for Personal Financial Sustainability is a budget for a Valuable Daily Life. Most Americans are accustomed to budgeting from the top down, beginning with income and making financial decisions based on how far they can stretch those dollars.  Too often this leads to under allocation for emergencies and long term needs. It also leads to risky dependence on credit.


Budgeting for a Valuable Daily Life establishes a baseline for quantifying assumptions in personal financial planning.  Using this method provides a healthy alternative to over used and misleading wealth building models. Budgeting for a Valuable Daily Life focuses on quality of life, through cash flow management, over a lifetime.  


When we look to exceptional role models we hear stories of fugal blue collar minimum wage earners who manage to attain relative wealth.  Or, quiet millionaires living comfortable lives tucked in modest communities. What do they have in common? They budget for a Valuable Daily Life and save/invest the rest. 


This is a very important concept.  As our world continues a course of accelerated change resulting from globalization and technological diversity we need to manage cash flow assuming periods of under-employment, unemployment, and career changes.  This is more than a reflection of our current crisis.  I believe it will continue to be a theme in personal finance.



Building Block ONE

Budget for a Valuable Daily Life

Allocation of resources is an organic extension of values and priorities. A Valuable Daily Life is a life where basic needs are met and values and priorities are nurtured and honored. Your unique budget for a Valuable Daily Life will become the baseline for making future financial decisions and a life boat in times of change. There are three parts to this exercise. 


1.      Using the Time and Energy Planner create your model of a Valuable Daily Life.  Be specific, how would you allocate your time and energy in a balanced and valuable life?  Think of this exercise like cleaning out a closet and keeping only those items you require or value.  And, perhaps add critical missing pieces.


2.      Create a budget of expenses for the life you modeled. Determine the amount of cash (in)flow required to support that life. This number is not attached to current income, spending, or dreams of attaining future goals.  What inflow of cash do you need to live a Valuable Daily Life?


3.      Consider the amount of reliable annual household income to which you can comfortably commit.  Keep it simple, no time value of money calculations in this exercise. Think in terms of job changes, attained age, and periods of one or two incomes. Fill the blank in this statement, "I (we) believe I (we) can comfortably and reliably generate $________ in annual income for the foreseeable future."  


Keep working on this exercise until you come up with your dollar amount for Personal Financial Sustainability.   



 Your Credit Score Is Not Your Life Score!


The Back Story of Success

In a recent OPB segment of Money Tracks, they presented examples of two investors who managed to accumulate wealth using different investment strategies.  A man who never earned more than $20,000 a year accumulated approximately $500,000 and a housewife bought and held approximately $600 in stock that later made her a multimillionaire. Their investment strategies were the focus of the show.  However, I wanted to know the back story of their success.
How did they budget for a Valuable Daily Life?  Did they raise children?  Did they experience financial hardships, periods of unemployment or illness?  Did they have alterative resources, trust income, gifts or other windfalls?  I wanted more information for myself and my clients.
Exploring the back stories of personal financial success provides an opportunity to create meaningful models in Personal Financial Sustainability.  Reach out to perspective role models and ask for advise and counsel.  Real people, living real lives have a lot to offer.

Healthy Partnerships Require Active Participation Of Both Parties!

George Goes to the Vet
A lesson in Healthcare Rationing
I love my cat, George.  He is a great cat.  A few days ago he began gagging and it went on through the night.  By morning I was stepping on mini puddles of gooey slim throughout my house, Yuck.
I called the vet and they said bring him in.  I have insurance with this veterinarian and office visits are no charge.  So, I took him right in.  Otherwise, I may have waited a few more hours just to feel certain it warranted the $50.00 expense.
After an examination the veterinarian began to list all the tests and X-rays she recommended.  Even with my insurance it came to nearly $500; and that's just diagnostic work!  I blanched, immediately thinking I should have waited to see if this was a passing thing.  The vet waited for my answer. Within seconds I thought, I can charge $500 to my credit card (already thinking how I could pay it off over three months). Before my mouth and my heart went to auto pilot I asked myself what I would do if it were me.  Here's what happened:
I asked, "If you do the X-rays what might you find?"  She answered, "Some type of obstruction."
I noticed the line item, radiologist report and ask, "Can you read the X-rays?" She replied, "Yes, as long as there is nothing that raises questions beyond my expertise"
I asked, "What are you concerned about with the blood work?" She said, "Because George goes outside perhaps he has ingested some toxin.  If so, we may need/want to flush his kidneys with an IV drip."
"How much is it to do the flush without the test?" She looked surprised but responded, "The test is $125.  The IV treatment is $150."
After considering my position I said, "I respect you and your opinion; I just cannot afford to spend money unwisely.  What if we take this one step at a time?  I want you to do the X-ray and see if you can identify a problem.  Then call me if you need a consult with a radiologist. Once an obstruction is ruled out, how do you feel about doing the IV flush of his kidneys without the test?  Quite frankly, if that fixes the problem I don't need to spend $125 to know what the source."
She agreed to my rationing plan and called me later to go over a revised treatment plan. 
The X-rays provided no evidence of obstruction or need for further evaluation.  Rather than do a kidney flush she advised a hydration treatment, test for giardia (negative), a shot for  nausea, and prescription for a medicinal coating for his stomach and intestines.  Total cost to me $291.00.  Twenty four hours later George was back to normal.
Did I handle this perfectly?  As a single woman relying on a cat for companionship I likely took him to the vet sooner than a family with three kids living paycheck to paycheck.  And, I know I was more frugal than many other pet owners. The lessons in this story are:
  • Whether it is a pet or a family member, available resources will determine available options.
  • Those services for which we do not have to pay directly will likely not be questioned.
  • Sharing responsibility in the decision making process provides an opportunity to optimize cost and benefits.
  • It's difficult to establish standards of care when resources are significantly different.

If your are interested in hosting or participating in a group workshop focused on Budgeting a Valuable Daily Life or Personal Financial Sustainability: 

 email: Money Talks, LLC   or    call: 503.233.8142