It’s WHEN, Not IF

For most families, finances are generally ok......IF unforeseen issues don't pop up. That's the problem. We tend to live life as though it's an IF, but it's not. It's a WHEN. Unforeseen issues will absolutely rear their ugly head, but we won't know when, where, or how much. And WHEN they do, they can wreak havoc on our finances. 

Take this recent client story, for example. In a three-day stretch, this couple experienced a hat trick of crazy:

• Hit a deer with their car

• Coyotes attacked their dog

• Backed into their garage door

All that in three days!!! Wow. It wasn't an IF, but rather a WHEN. And WHEN happened to be an already busy week in the middle of November. They never saw it coming. They never anticipated a single one of these issues, never mind all three. They had enough life going on that they didn't need this to weigh them down. 

But they were prepared! This is the beauty of getting right with our finances. Instead of destroying their financial life and creating a ton of relational stress in their marriage, it was a mere bump in the road. An ugly bump, but a bump. Here's how/why they were able to navigate this week without it crushing them:

• They have a strong emergency fund for WHEN (not IF) life happens. 

• They are adequately insured to protect against significant liabilities falling on their plate. 

• They have sinking funds specifically for key categories (pets and home maintenance, in this case).

• They have margin in their monthly budget, allowing them to reallocate income to meet unforeseen needs, WHEN necessary. 

They are a wonderful case study of what it looks like to get this money stuff right. It didn't happen by accident. I began working with them in the spring to bring intentionality, preparedness, and acceleration to their financial life, but they have spent years building a strong foundation. Nothing here was good luck. I don't think anyone can accuse them of good luck after the crazy week they just had. 

They focused on getting their money right, so they don't have to dwell on their money when life hits hard. They practiced proactivity in the past, which resulted in them not having to practice reactivity in the present. It's not making money our number one priority, but rather putting intentional focus on financial matters so that we can continue to push money down on our priority list of life. It's living with financial margin, which prevents any single life situation from knocking us down. It's called humility and contentment. 

That's what it looks like to live meaning over money. 

Intensity vs. Diversity

Does it ever feel like there are too many needs and not enough money? You're not alone! There are lots of priorities vying for our money. We may need to buy a car soon. We'd love to purchase a house one day. We want to buy an engagement ring for the love of our life. That trip to Europe looks pretty fun. We have a medical procedure coming up in a few months. So many things!

How do we juggle all these priorities when there's more need than money? There are two primary lines of thinking: intensity and diversity. Intensity is just that, intense. It's the strategy by which we focus on one particular goal until we achieve it, then shift our focus to the next one. Diversity is the opposite. It's recognizing there are several priorities in life, and then spreading the dollars over each one. We make less progress on any given goal, but we're making progress on several. 

Let's use an illustration. Let's say we have $2,000/month of discretionary income. Also, here are the upcoming needs/wants:

• Car: $10,000 (needed by year-end 2024)

• Engagement Ring: $4,000 (proposing in the spring)

• Travel: $2,000 (needed by year-end)

• House Down Payment: $20,000 (not urgent)

• Medical: $500 (needed in January)

If we take a more diverse approach, we might allocate $400/month to each of these sinking funds. We'll slowly make progress on each. However, we'll fall short of the necessary timing on a few. 

If we take the intensity approach, we'll focus 100% of the funds on the next item on the list. It might look something like this:

• November: $500 to medical (done) and $1,500 to travel

• December: $500 to travel (done) and $1,500 to engagement ring

• January: $2,000 to engagement ring

• February: $500 to engagement ring (done) and $1,500 to car

• March, April, May, and June: $2,000 to car

• July: $500 to car (done) and $1,500 to house

• Aug+: $2,000 to house

We can refer to this as cashflow mapping. This is a common exercise we do to help clients prioritize, plan, and execute their goals. There's also a third option. I call it the hybrid approach. Instead of diversifying or putting 100% focus on the next item, we determine what monthly saving is needed to hit each goal by the deadline. Let's use the $10,000 car as an example. Instead of going all-in on the car in early 2024, we recognize we have 14 months to hit the $10,000 goal. This equates to approximately $715/month. So, instead of crushing the car with absolute intensity, we can meter it out while attacking other goals at the same time. 

This is a helpful tool to add to your arsenal. Definitely try it sometime, especially when the needs start stacking up. It can give us a lot of clarity and much more control. Personalize it to your needs and lean into your values. And as always, meaning over money! Always meaning over money.

Letting the Wins Add Up

I recently received a call from a friend. He had a question. “I just got a $110k inheritance that’s sitting in my checking account. I need it in about a year for ______. I feel like I should do something with it between now and then. Do you have any good investing ideas?” It was an interesting question, and I had an immediate idea for him. 

I explained that if he opens a Vanguard taxable brokerage account, and deposits the cash but doesn’t actually invest it, he would receive risk-free monthly interest payments of about $500. I was anticipating an excited, dare I say giddy, response. However, he reacted with complete disinterest. “Nah, doesn’t seem worth the hassle.” Not knowing what his hangup was, I responded that I’d be happy to sit down with him to set it up…..it would only take 15 minutes or so. Again, he declined, stating it wasn’t worth the time and effort for “only five hundred bucks per month.” In a last-ditch attempt to change his mind, I reminded him it’s 100% risk-free, and he could take the money out whenever he wants. No bueno. He ended the conversation by saying he has a buddy with some good stock tips he might look into. Put another way, he just gave up $6,000+ of income that would have taken him a maximum of 15 minutes of his time……ouch!

Sometimes we’re so busy looking for the life-changing opportunity that we miss the little wins available to us along the way. Perhaps $500/month wouldn’t change his life, but what if he made this decision, then the next one, then the next one? Wins add up, big or small. Occasionally, I’ll take an inventory of a client’s wins over 6, 12, or 18 months. I’ll take stock of all the little choices they made and the net result of them. Each win, in and of itself, feels small. However, when viewed through a wider lens of cumulative impact, these small wins account for a significant shift in their finances. 

Mind those little wins. They add up fast!

This man’s story doesn’t directly impact you, but perhaps his non-decision raises your eyebrows. Yes, you can get a risk-free 5.25% by simply depositing money into a Vanguard taxable brokerage account. No strings, no commitments, no risk. Here’s how you do it:

• Go to www.vanguard.com

• Open a taxable brokerage account

• Transfer your money into your new Vanguard account

• DON’T invest it. Just let it sit there. 

• Watch the interest payments land in your account on the last day of each month.

• Transfer money back to your bank account whenever you want.

Or you can just shoot me a message and I’ll help you! It’s quick and easy.