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Financial Planning: Don’t Be a Tool

by J. Money on Monday, October 3, 2011

don't be a tool(Guest Post by Babs Wagner)

Everyone in the financial advice biz tells you to make plans to achieve your financial goals.  I’ve made a few plans myself, but rarely followed them.  I finally stopped planning and budgeting about a decade ago.

Even so, in a couple of months I’ll achieve my goal of leaving the paid work force at an early age.  I don’t think I’m unique in my aversion to plans—there must be a bunch of folks like me or J$ wouldn’t be trying so hard to reform us.

Why we don’t like financial plans

I also think I know why we don’t follow financial plans:  we just don’t like the plans we make.  Most budgeting feels like punishment.  Saving money is like dieting.  You know you should lose a few pounds (or save a few bucks) but it sucks depriving yourself.  You starve for a week, sweat 2 hours a day in the gym, step on the scales, and you’ve lost half a pound.  Great!  There’s a week of your life you won’t get back.

Likewise, when you start budgeting and saving for some far-off goal, it’s pretty hard to get excited about the short-term results.  You give up lattes for a year, put a thousand smackers in the bank, check your statement at the end of the year and voila!  You’ve earned a lousy $10 bucks in interest for your trouble.   Yeah, yeah, you pat yourself on the back for setting up that emergency fund and being a responsible adult, but (and don’t tell J$) it’s really not that sexy.  And just like the dieter who binges after blowing the diet, it’s pretty tempting to take that credit card and charge a latte or a European vacation and run up more debt than you’ve saved.  After one botched attempt to save in my 20’s, I cut to the chase and just piled up debt for a decade.

Don’t shoot for a bazillion dollars

My husband and I eventually spent a year paying off $20,000 in credit card debt and I spent nearly another year losing 40 lbs.  Those experiences taught me two things that really clicked.  The first is, you need a great goal.  Not a vague “I want a bazillion dollars sometime” goal.  Money isn’t a thing, it’s a symbol.  Before we had money, we traded things directly.  Now we trade money for things.  Your goal needs to be the thing you really want, not the dollar value you attach to it.  It might be small, like a vacation.  It might be big, like retirement. Either way you need to visualize your goal, dream about it, make it real.

Imagine yourself living the goal—what you’ll do and how you’ll feel.  Make your goal a complete vision.  Figure out how much that life costs, then make a plan to get that amount of money.  While you’re piling up the money, you need to focus on all the aspects of your life that are part of the goal.  If your goal is to be a millionaire rock star in your 30’s, you better be taking guitar lessons, or having the million dollars won’t get you to your goal.  Once you’ve fully explored your dream goal, and understand everything it takes to achieve it, you’ll be excited about doing what it takes and the financial steps will be a lot easier.

My husband and I started out with the “bazillionaire” goal.  We got out of debt and saved a good bit, but our heart wasn’t in it.  One day, I realized what I really wanted was freedom.  I simply didn’t want to work for a paycheck.  I decided I didn’t need to be a bazillionaire to be free; I just needed to stop working.  So I lowered my total savings target, so I could be free sooner.  Then I calculated what kind of hovel I could afford on my freedom income, and decided to raise the dollar target and extend the time frame.  Over the years the numbers have evolved as I researched the cost of living in my dream city, decided how big a house I wanted, and fleshed out how I’d like to spend my time.  (Being a full-time volunteer takes a lot less income than being a professional shopper.)  We took family vacations in our dream city so we’d know what it would be like to live there and what kinds of activities we’d want to include.  The more we explored our dream of freedom, the more excited we were about saving money.  My husband and I have been enthusiastically saving a third of our income for many years, because we finally got passionate about our goal.

Follow your values, not “the rules”

The other thing I learned is that your financial choices need to follow your values, more than they need to follow “the rules.”  There’s lots of great advice out there, but blindly following every tip for piling up money might not be the way you want to go.  Consider this plan for piling up a bazillion dollars, based on actual financial advice:

  • Get a college degree in whatever field has the most jobs that pay the most money, forget following your bliss.
  • No loans for college—work full time and see if you can get your degree in less than four years.  Too much free time and socializing lowers your grades and increases the likelihood you’ll drop out.
  • Work for whatever company pays the most, even if you hate the work and everything the corporate machine stands for.
  • Spend only what is necessary for survival, buy used or rent everything but food, and invest the rest.
  • No debt, period.
  • DO NOT indulge in dating, personal relationships or any social interaction that isn’t free or reduced price.
  • If you must date, insist everyone pay their own way and do things for which you have a coupon.
  • Screw philanthropic donations. Since you don’t own a house, charity isn’t tax-deductible—better to donate to your bazillionaire fund.
  • If you have the free time to volunteer, ask for overtime at work instead.
  • Avoid marriage at all costs, it’s tax-disadvantaged and there’s a risk you’ll be stuck with your spouse’s previous debts, shopaholic issues, and poor credit history.
  • Above all else, don’t have children.  They’re an endless money pit and will expect you to pay for college.

If you follow these rules, you’ll be a bazillionaire while you’re still young.  Plenty of time after that to buy the trophy spouse and settle down.  To be on the safe side, get an airtight pre-nup.

OK, I’m being snarky.  My point is there’s a lot of good financial wisdom out there, but if it doesn’t track with your values, it isn’t right for you.  Being a slave to the “rules” of finance is just as bad as being a slave to overspending and debt.

The values that took away from my freedom plan

My values include doing work that makes a difference, marriage and family, occasionally spoiling my kids, and taking awesome family vacations.  These all took money away from the freedom plan.

  • My husband elected to stay home to raise our two boys, a major hit to our income and savings.
  • While we were piling up money for our goal, we also blew lots of money in big and little ways.
  • We probably paid too much for housing, because we chose to live in neighborhoods with the best schools
  • We don’t buy expensive cars and we drive them till they’re dead, but we always buy new.
  • While I’m happy to buy a t-shirt on sale at Target, I’m just as happy to pay regular price at a high-end store.
  • We don’t budget.  We figured out how much we want to save for our goal, we have that automatically removed from our paycheck, we pay our bills, then the rest is ours to blow.
  • We generally pay off our credit cards every month, but give ourselves a few months to pay off the big vacations.

We could have retired several years ago if we’d been more diligent or more willing to economize, but I love my job, and was happy to keep working.  We probably look capricious, undisciplined, wasteful and dumb to the casual financial observer, because we don’t follow rules–we follow our values.  So sue me, I’m still leaving the workforce at a young age.

It’s important to live your dream life now, rather than waiting till you’ve got bazillions to start living the dream.  It’s equally important to remember that planning and saving money are just tools to achieve dreams; they’re not the dream itself.  I’m convinced if we don’t keep that straight, we become the tools. :)

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Barbara “Babs” Wagner is a former poster child for financial misadventure, who learned most of what she knows the hard way.  She has a degree in business and has studied personal finance, most of which she now ignores.  Her mission is to poke fun at conventional wisdom, keep money subservient to her values, and inspire others to learn from her mistakes. She loves to read your comments, but prefers they not start out with, “Babs you ignorant slut.”  (watch SNL Point-Counterpoint on Youtube if you don’t get this joke)

Other articles by Babs on Bugets Are Sexy: What Old People Know and Don’t Be ASS-Pirational

(Photo by Magic Robot)


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{ 19 comments… read them below or add one }

1 MikeTheRed October 3, 2011 at 7:26 am

The article comes off a bit harsh overall, deriding “standard” advice and being a bit hyperbolic one some of the points (Never get married! Live a life you hate!), but the core point is an excellent one.

Set your own goals to reach what makes you happy. Handle things in a way that works for you personally (even if it flies in the face of conventional wisdom).

I’m a bit of an anti-budgeter myself. I tried the spreadsheets, the tracking, the endless penny counting to make everything balance out correctly, and it made me feel miserable every time I messed up. Now, I’m in the Babs camp where my savings is just another bill I pay every month. My savings is growing at a terrific rate, helping my wife and I meet our major goals: Home, Travel, Security (Massive e-fund, growing fund for the wife to quit her job etc). It’s all about setting the right priorities.

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2 Kim B. October 3, 2011 at 7:54 am

Babs, your viewpoint really resonates with me. My husband and I have made many a budget and not stuck to them, mostly because we were SO focused on saving as much money as possible, no matter what, that we forgot to allot enough money to enjoy our lives in the meantime. It just didn’t end up being sustainable. Now we are forced to tighten our belts because of a baby on the way and a maternity leave (1 year in Canada) with reduced income. We have created a budget with ample money toward savings AND ample money toward living. What it opened my eyes toward is that while it is very important to save, pay off debt, and plan for the future, it’s equally important (for hubs and I, anyway) to enjoy our lives. We’re not extravagant people, nor are we “stuff” people, so this takes relatively little to accomplish and leaves us far more happy. Once our small amount of credit card debt is paid off, we will set up our automatic savings and probably ditch our envelope system.

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3 Rochelle R October 3, 2011 at 8:15 am

I thought it post was great. All good points. Thanks for sharing it.

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4 Roger Wohlner October 3, 2011 at 9:02 am

As a financial planner I enjoyed your take on financial planning. In a major sense you have formulated and followed a financial plan. I can’t speak for other financial planners you may have dealt with, but the planners I know generally start by asking a client what are their goals, where do they want to be, and similar questions. I agree that a plan should be based on a client’s values.

While a financial planner might use more formal tools than you, if I read your post correctly you are doing planning for yourself. You are setting goals (with time frames and dollar amounts), you save/invest towards those goals, and you live within your means. Call it what you like you are doing financial planning.

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5 Molly October 3, 2011 at 9:04 am

I also agree with your point. My turning point was when I went from feeling like I was starving myself and focused on all the freedom I was getting. I can still get a little whiny at times but I’m just a little whiny :)

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6 20's Finances October 3, 2011 at 10:03 am

Great post and thanks for the honesty. I agree that you have to give your self concrete goals and also establish a guide based on your own values, not some arbitrary hard and fast rules.

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7 Darcy October 3, 2011 at 11:25 am

I started reading this and was going to slam it but then I kept going and you definitely make some great points. I would point out that by setting aside the amount for your goals and then paying the bills before blowing the rest, really is budgeting. At least I consider that budgeting. Budget doesn’t need to equal self sacrifice its just planning so you know the needs and goals are covered before you enjoy the rest.

Anyway great article and some good tips specially about knowing what concrete goal you want to accomplish. Starting with the end in mind makes the path less pointless.

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8 Babs October 3, 2011 at 11:57 am

Mike: Ouch! I was trying to be funny with those comments, thanks for letting me know I shouldn’t look for work as a stand-up commedienne.

Mike and Kim: Boy have I been there, done that, with spreadsheets, envelopes, finance software, budgeting and more. I was spending hours every month managing our finances, but it really felt like the finances were managing me.

Kim: congratulations on your upcoming child! For all its challenges, parenthood is an amazing, wonderful journey and you’ll find it gives you a whole new perspective on your financial plans and dreams. My “babies” are now 6-foot tall men, and my focus of late has been sharing what I’ve learned about life and finances as they set out on their own adult lives. This post was actually written for them, but I’m delighted it resonates with others as well.

Roger: I feel like I’ve just been outed–OMG, I’m a planner! Actually, you just reminded me of something I tell folks at work when we do strategic planning activities. It’s long been my contention that planning is a natural human activity we screw up with formal tools and burdensome processes. Apparently, financial planning is so natural for me I didn’t know I was doing it!

Molly: I too, am predisposed to whininess, but I learned something from dieting that helps. When I was losing the 40 lbs, I ate some chocolate EVERY day. Not a lot, just enough to feel like I was still living the good life so I wouldn’t hate my diet and quit. I’m not sure what the financial equivalent of chocolate is for you, but when you’re feeling whiny, don’t forget to have a little of that. Or just nibble some chocolate, it pretty much cures everything.

Rochelle and 20′s: Thanks!

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9 retirebyforty October 3, 2011 at 1:42 pm

Financial planning is very personal and you need to do what works for you. It sounds like you found the perfect plan and stuck with it.
So both you and hubby are not working now? I guess you have enough passive income to pay the bill. Great job!

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10 Babs October 3, 2011 at 2:11 pm

Darcy: first Roger calls me a planner, now you tell me I’m budgeting. All my dirty little secrets are out for the whole world to see!

Retirebyforty: I’ll be retired in the next few months, just wrapping things up. My husband has been a full-time homemaker for 18 years. We’ve lived well below our means for a long time, so our retirement income (a combination of pension and investments) will be the same as our working income was after subtracting the savings. My husband and I waited till our 30s to grow up financially, and we weren’t interested in sacrificing the present for the future, so I’ll be retiring at age 53. As you’re well aware, if we’d started even a few years earlier, or saved a little more agressively we’d be much younger now. Still, 53 isn’t exactly decrepit. I’m happy with our choices, but you can bet I’ll make sure my sons understand the many ways they could beat mom and dad to the finish line!

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11 Darcy October 3, 2011 at 5:48 pm

Babs ….being told your budgeting on a website called budgetsaresexy is a complement lol

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12 Jen @ Master the Art of Saving October 4, 2011 at 3:38 am

Everybody is different and their finances should reflect what’s really important to them specifically. Great post Babs. :-)

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13 Sarah October 4, 2011 at 10:11 pm

Thanks so much for the guest post! I think focusing on values is something easy to lose sight of, at least for me. I’m the kind of person whose default is to go by-the-book and follow the rules. It’s like instinct for me. It’s good to be reminded that my hard work has to have a value-driven end goal, though; especially if it means I can cut some slack on myself and enjoy the life I’ve both been blessed with and am working on (graduate student). Thanks again!

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14 Heather October 5, 2011 at 8:43 am

Thanks for sharing this article. I’m very much a planner and budgeter but lately it’s been driving me crazy. My husband and I are trying to dig our way out of credit card debt while building a 6 month emergency fund. I run the finances and I find that while we’re paying off cards at a good rate, we’re also adding debt to one card in particular to pay for our entertainment that I didn’t leave enough room in the budget for, like a spur of the moment dinner out. And it’s driving me crazy. What’s the point in paying off cards if we’re still ADDING to the debt?!

I’ve decided to leave us more room in the budget to still enjoy our lives (hey, we’re both 26 with no kids, we want to ENJOY this time while we can). Of course, we’ll still be paying our credit cards down and putting money in savings, but maybe not as much. We just need more freedom because I literally stare at the budget for HOURS trying to come up with ways to create more money and it’s super stressful.

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15 Bergie Powers October 5, 2011 at 8:40 pm

I love how you talk about making your values a priority. I have been learning this lesson the hard way recently as my husband and I struggle to make ends meet. It is a relief to hear your experience! I started living a life that was completely wrong for me and stressful on my family, all to make a few extra bucks to pay the mortgage.. The funny things is, the extra bucks weren’t even enough to do that! So, we need to figure out a new plan for how we can afford to live in the future. I will keep in mind focusing on our values so that we can enjoy our lives and pay for our needs. Thank you for the good advice. The dramatic list was funny and certainly brought some good points to light!

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16 Babs October 5, 2011 at 10:08 pm

Jen and Tamara: thanks for the kind words!

Sarah: cutting yourself some slack on EVERYTHING is one of the life lessons we all need to learn. There’s practically never a right or wrong answer to any situation, the point is making choices that are authentic and then being happy with what we choose. I’m jealous, grad school is a great choice.

Heather: now you’re talking! If your money and effort isn’t giving you a little fun in your life right now, what’s the point?

Bergie: it makes my day if my experiences can help others think things through a little differently. I learned a long time ago to put a value on aggravation. Stress can do some serious damage to your physical and mental health and no bargain or income source is worth that.

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17 J. Money October 6, 2011 at 6:14 pm

Thanks again Babs! You killed it as always! (Or else I wouldn’t have posted it up, haha….) Appreciate you responding back to everyone too – that means a lot to me, and I’m sure them as well :) Don’t you just love our little online family here?

Hope you all enjoyed the guest posts while I was away!

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18 Jaime October 7, 2011 at 4:07 pm

My mom retired in her late 50s and I have a plan for early retirement. I think it’s awesome you were able to retire at 53. Way to go. I used to get really overwhelmed when retirement calculators spat out that I needed 2.3 mil. for retirement. That number is just so overwhelming that I almost wanted to abandon planning for retirement.

I knew deep down I didn’t want to be working in my 70s. You just don’t know what the future will bring. I started reading finance books and blogs. I learned people do retire on normal incomes and quite a few retire early. What really helped me is to practice conscious spending. I don’t feel deprived. I feel liberated. :D

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19 J. Money October 9, 2011 at 11:28 am

Oh yeah, those retirement calculators are all kinds of “interesting.” The thing that drives me crazy is that they rarely incorporate your *lifestyle* into it. Some of us only need $2,000 a month to live a decent life, while others might need $10,000. How could both of these people be okay w/ $2.3 million? It doesn’t make sense. And it IS totally daunting. Though I will admit these calculators are good for getting people started and thinking about it as most people DO need a lot more money to retire than they think…. and if they’re at least playing around w/ these calculators, at least they’re trying to do something about it :) Now if only we can convince them to lower their daily expenses while at the same time enjoying life!

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