|Photo by Daniel Borman|
With a freshly popped housing bubble, high-unemployment rates, and federal and state budgets that can best be described as “in shambles”, Americans are now experiencing unprecedented levels of financial stress and uncertainty. And, as anyone who has suffered a serious financial setback can attest to, the effects of financial strain impact your body as well as your budget.
In a study titled “Negative Health Effects of Financial Stress” published in Consumer Interests Annual (Volume 51, 2005) researchers identified more than 16 different physical manifestations of financial stress that include depression, insomnia, headaches/migraines, high blood pressure, stomach pain and digestive problems, appetite disorders, fatigue, aches and pains, and ulcers. The study authors conclude that, “Research is increasingly confirming the view that financial distress plays a role in causing and aggravating different health disorders.”
In light of this, I thought it would be prudent to diverge from my typical fare of diet and exercise advice and since financial fitness is not my forte, I decided to call in an expert, Tony Elam, owner of Finding Forward Financial Coaching and the Finding Forward Motion Blog.
Besides the fact that he has a great name, Tony understands what it’s like for people who are struggling with debt and financial hardship. At one point in his life, he was divorced and facing a second round of bankruptcy. At the end of his rope, he had what he describes as “a real heart to heart with God” and set about seriously answering the question, “How am I going to clean this financial mess up?”
Fortunately for Tony (and us!) he discovered the tools and techniques of sound personal finance, payed off his debts, and became a Dave Ramsey Certified Financial Coach so that he could help others do the same. He is also happily remarried and leads “Financial Peace” groups at his church. About the process of helping people “renovate” their personal finances, he says, “I don’t get my excitement out of doing spreadsheets, or creating budgets. I get my excitement out of seeing changed lives.”
When I asked Tony to put together a list of strategies that might help FED readers suffering financial strain, he happily obliged.
by Tony Elam of the Finding Forward Motion Blog
As a financial coach I realize that personal finance is 80% personal and 20% financial. What I mean by this is that the financial decisions you make are typically the product of life choices, preferences, and personal desires, rather than some sort of financial calculation (cost to benefit ratios and the like). With that in mind, I think that we can begin process of constructing a healthy financial plan without getting bogged down by crunching numbers and constructing spreadsheets.
The first step is to have a vision. This does not mean that you need to have every detail figured out for the next 40 years, but it is essential to have direction. Ask yourself questions that will frame your financial decisions and use the answers (presumably what you really want out of life) to make it easier to say “no” to the things that don’t fit into your plan.
The following list of questions can help you to get started with this process, but remember that it is by no means a complete or comprehensive list. Feel free to come up with questions that are personally relevant and try to avoid the temptation to simply answer with what “sounds” good. I want you to take your time and thoughtfully answer these questions for yourself. Engage your creative self by imagining that your questions (and answers) are the beginning of a movie trailer. As they take shape in your mind, as yourself, “Would I want to watch this movie?” If the answer is “no”, then go back and start over until you find that you can emphatically say “YES!”
Where do I want to live?
How do I want to eat?
How do I want exercise?
What kind of money do I want to make?
How big of an emergency fund should I have?
Do I want to travel? (And if so, where?)
If you don’t have children, do you want to? And, how many?
If you already have children how would you like to provide for them?
How do I want my professional life to end?
What kind of work do I want to do?
What kind of legacy would I like to leave?
How important are cars, houses, and other material possessions to my happiness?
How important are people and relationships to my happiness?
The next step is to create a budget. (Full disclosure: I am not a natural budgeter. I don’t find them fun, but I do find them functional.) Budgets are simply a way to figure out how you can have more of what you really want. People think they can juggle it all in their heads, but I know from personal experience that you will inevitably “drop the ball”, and, in all likelihood, you may even drop two or three.
To start, I recommend that you learn how to create what’s called a zero-based budget. Despite the scary sounding name, you can easily create this type of budget with no more than a pen and a pad of paper. Sit down and list how much money you earn each month. After you have done this, begin subtracting your expenses starting with your highest priority (i.e. rent/mortgage, utilities, groceries, etc.) and ending with your lowest priority (i.e. going out to eat, movie rentals, lotto tickets, etc.)
Keep working on your budget until you get to $0.00 (thus the name “zero-based” budget). This means you have allocated every dollar you make before you actually get it. If you have never done this before then it might take several months to start feeling confident about doing one, but don’t lose heart! Keep coming back to the process with the awareness that it will get easier each time.
In the meantime, be sure to check out Tony's blog Finding Forward Motion. While you're there, you can also learn more about the amazing results he's achieved after only 30 days Paleo!