When it comes to money, I continue to suggest that you read either the book, Your Money or Your Life by Joe Dominguez and Vicky Robbins or find the old taped course " How to Transform Your Relationship With Money and Achieve Financial Independence" by Joe Dominguez. Money along with Food are two things that live an emotional life within us that often distorts how we use and respond to them. This distortion leads to us acting in a way that may satisfy an emotion in the short-term but leads us away from what we want.
When you combine the emotion of your childhood regarding money, with the general lack of education we receive about it, it is no wonder that most of us have little to show for the amount of money that has passed through our lives.
The collapse of the real estate and stock markets in late 2008 and the tightening of consumer credit has affected both the overall economy and nearly every household in a significant way. I am in a tight financial position as a result of three events in 2007 and 2008.
1) My divorce settlement was negotiated in August through October of 2007, when the S&P500 peaked and my collective investments were near their maximum value. I agreed to current and near future cash payments to keep as much of my investments as possible. Although my non-real estate investments have bounced back since January of 2009, they are still significantly off their peak.
2) I have been subsidizing college costs for my three children for the last five years and thus spent down my cash reserves and increased my debt.
3) The collapse of the financial markets in September of 2008 caused an instantaneous disruption to the signing of new construction contracts. My primary source of income in 2008 was my position as VP of Finance and Operations for a small green energy construction firm. As the company completed its existing contracts we needed to lay-off nearly everyone and I left to go back to consulting and project management. My agreement had a significant profit sharing structure which was completely wiped out by the Fall of 2008 economic collapse.
In a nutshell, I took a hit which will take several years to overcome, but I am still in a better position than most American households primarily due to the principles in these courses and obtaining an education in how to invest.
Even in a period of temporary distress, the principles of achieving financial independence apply. Your ability to save and invest for the future is the primary lever due to the compounding effect of earning money on your invested money. The relationship between your spending and your fulfillment needs to be examined. Where do you get your morning cup of coffee? How much do you spend a year on it? Can you make it at home less expensively?
Change the word "coffee" to fast food or your favorite convenience or impulse spending item. The point is to either start saving some seed money or to at least begin paying down debt. I would suggest that you do both simultaneously. If you both build a cash reserve and add to the rate at which you pay down your highest remaining interest rate debt, you will both build a cushion in case of a lay-off or income disruption and create more money to build a cushion over time by reducing your outgoing interest payments. (In the current environment, paying off credit cards completely has lead to some people having their credit lines dropped so I would build cash reserves ahead of a complete pay down.)
What if the financial hole you are in is too big to work your way out of it? If your debt from real estate, credit cards, medical bills or the failure of a small business exceeds what you expect to earn in the next two years, you need to strongly look at bankruptcy. Bankruptcy is a legal remedy for obtaining a fresh start in a financial life. The rules are strict and bankruptcy will impact your ability to borrow money for the next 10 years but it can be a useful tool. Companies of all sizes use bankruptcy to secure a new life, when they can not both operate and meet their debt payments.
In many states, bankruptcy will not cause you to lose your home but in others it will. Your 401K and IRAs are protected in bankruptcy, so if they contain most of your savings, those savings will still be there after bankruptcy. One alternative option for eliminating debt that you will see advertised is debt restructuring for credit cards, this can halve your credit card debt but will create income tax liability for the debt that is forgiven as well as damage your credit rating. To see whether bankruptcy may be a tool on your road to financial independence, you will need to speak with a lawyer or financial advisor with bankruptcy expertise.
After two years, your bankruptcy will not affect your ability to qualify for a mortgage. The ten year damper on obtaining consumer credit may be a small inconvenience compared to having much of your income going to debt repayment and depleting your retirement savings.
The methods in the book, Your Money or Your Life, will help you live a life without taking on debt as a means of short-term funding. It is important to remember that even a person of modest means can gain leverage over their financial life. It is also important to remember that "possessing" money is not the goal but rather having that having financial resources supports the goal of living a grounded creative and values based life.
Showing posts with label dependency. Show all posts
Showing posts with label dependency. Show all posts
Sunday, October 25, 2009
Tuesday, September 15, 2009
Dependency and Reactivity Lead to Disempowerment
In his must read book, The Path of Least Resistance, Robert Fritz writes eloquently on the difference between the creative stance and the reactive stance. The creative stance is a vision driven, truth telling stance where there is no room to hide from mistakes, responsibilities and whether or not the result is "working".
Vision is a clear and complete understanding of the desired end result, even if it can only be envisioned in the head and heart of a lone creator. (In an organization, there must be dialogue to really share understanding and concrete examples to true up how people see things differently.)
When what exists and what is created is tested against this vision and comes up short, you need to be prepared for disappointment and take failure head on when you come up short. You truly need to learn from your mistakes, by first admitting them and then working through the alternatives to your failed action.
If your efforts shift instead to easing the pain of failure by declaring false victory or creating secondary goals, you have actually undermined your ability to ultimately be successful. America is in the words of Dr. W. Edwards Deming, "looking for instant pudding". Deming worked with the Japanese under the Occupation Forces of General Douglas MacArthur and taught the leaders of Japanese Corporations (Toyota for example) how to manage and deliver high quality products.
This "Instant Pudding" mind set leads to all kinds of short-cuts, cheating, dropping out and blaming others for our own mistakes and failures. Our egos require instant success and our souls require, as John Lennon said, "Instant (good) Karma". We want to both have it or be it all right now.
Many of us would rather give up on our creative vision (a meaningful and compelling desired end result) than deal with the frustration, disappointment and embarrassment of our failed attempts. I have struggled with this myself.
The reactive stance is not vision driven but rather it is driven by negative consequences. In the reactive stance our life energy is not focused on creating but rather on the problems that come our way. Since the problems that come our way, have little to do with where we want to go, they are will never lead us to real progress on creating the desired results. Problems are "like tales told by idiots", in Shakespeare's words, they are " full of sound and fury, yet signifying nothing."
The creative stance can be frightening and requires fortitude, but it is also empowering. Self empowerment and the creative stance go hand in hand. Dependency and the reactive stance go hand in "hand out". When you subjugate your power to determine the path of your own life and seek to hide from or have others mitigate the consequences of your own actions then you dis empower yourself.
In Jurassic Park, Michael Crichton writes about the how the power of money to buy what others worked hard to create has left the leaders of Ingen (owners of Jurassic Park gone to hell) without sufficient wisdom to know what to do with what they've acquired. To paraphrase, Never confuse a giant with someone sitting on the shoulder of a giant. A giant is grown and developed over time and gains exceptional wisdom along with exceptional capabilities. Anyone with enough money or power can sit (if only for a moment) on the shoulder of a giant and wield those capabilities with insufficient wisdom.
When you work from the creative stance you will build a giant in both wisdom and capability.
Vision is a clear and complete understanding of the desired end result, even if it can only be envisioned in the head and heart of a lone creator. (In an organization, there must be dialogue to really share understanding and concrete examples to true up how people see things differently.)
When what exists and what is created is tested against this vision and comes up short, you need to be prepared for disappointment and take failure head on when you come up short. You truly need to learn from your mistakes, by first admitting them and then working through the alternatives to your failed action.
If your efforts shift instead to easing the pain of failure by declaring false victory or creating secondary goals, you have actually undermined your ability to ultimately be successful. America is in the words of Dr. W. Edwards Deming, "looking for instant pudding". Deming worked with the Japanese under the Occupation Forces of General Douglas MacArthur and taught the leaders of Japanese Corporations (Toyota for example) how to manage and deliver high quality products.
This "Instant Pudding" mind set leads to all kinds of short-cuts, cheating, dropping out and blaming others for our own mistakes and failures. Our egos require instant success and our souls require, as John Lennon said, "Instant (good) Karma". We want to both have it or be it all right now.
Many of us would rather give up on our creative vision (a meaningful and compelling desired end result) than deal with the frustration, disappointment and embarrassment of our failed attempts. I have struggled with this myself.
The reactive stance is not vision driven but rather it is driven by negative consequences. In the reactive stance our life energy is not focused on creating but rather on the problems that come our way. Since the problems that come our way, have little to do with where we want to go, they are will never lead us to real progress on creating the desired results. Problems are "like tales told by idiots", in Shakespeare's words, they are " full of sound and fury, yet signifying nothing."
The creative stance can be frightening and requires fortitude, but it is also empowering. Self empowerment and the creative stance go hand in hand. Dependency and the reactive stance go hand in "hand out". When you subjugate your power to determine the path of your own life and seek to hide from or have others mitigate the consequences of your own actions then you dis empower yourself.
In Jurassic Park, Michael Crichton writes about the how the power of money to buy what others worked hard to create has left the leaders of Ingen (owners of Jurassic Park gone to hell) without sufficient wisdom to know what to do with what they've acquired. To paraphrase, Never confuse a giant with someone sitting on the shoulder of a giant. A giant is grown and developed over time and gains exceptional wisdom along with exceptional capabilities. Anyone with enough money or power can sit (if only for a moment) on the shoulder of a giant and wield those capabilities with insufficient wisdom.
When you work from the creative stance you will build a giant in both wisdom and capability.
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