Urgent vs. Important

They sound similar, but are they? Do you know what the difference is between urgent and important? I know you probably do. When was the last time you gave those two concepts thought when looking at a laundry list of things to get done?

Urgent could be defined as "compelling immediate action or attention".
Important has one definition as "of great significance, value, or consequence".

The telephone ringing could be considered urgent, but it may or may not be important. Completing a school or work project is probably important, but may or may not be urgent.

Having addressed those suttle differences, we can apply those labels to the things that need to be done in our lives. Some things are not urgent, nor are they important. Others have varying degrees of those two labels or characteristics.

With time management, we try to focus first on those things that are both important and urgent. Anyone out there still working on their taxes? How about those deadlines for college applications?

Next we make sure that we allow time for working towards those things that are important, but not urgent. Maybe we need to make some headway on that budget we keep putting off or planning our goals for the next year or two and monitoring our progress. Setting aside time to be with family can fit here. Maintenance projects that tend to sneak up on us could be considered important, but not urgent.

As time allows, we can look at those things that are urgent, but not important. Some phone calls or e-mail could be considered urgent, but not important. Your friends just called with plans to go away for the weekend tomorrow? Definitely urgent, but important? That's for you to decide.

Lastly, we have the things in life that are not urgent and they are not important. In this area we look to minimize any time spent at all. Junk mail goes here. Solitaire anyone? Try to eliminate the time wasters in your day that do not help you or your situation. You'd be surprised how much time this will free up in your life.

I am not suggesting that your life must be a perfect model of efficiency. Steering your time towards the things that will have an impact on your life, while making sure we don't ignore those things off on the horizon, will make for a more successful, satisfying life.

Next time something gets dropped in your lap, ask yourself "Is this Urgent? Is this Important?" Then decide when it will get done, if ever.

When you are all done, meet me by the pool. I'll be doing something that's not urgent and not important. But that's okay sometimes too.

Savings Auto-Pilot

Imagine it's Payday. We're feeling momentarily rich. It's time for the little things that we have held off on all week. A Starbucks Carmel Macciato at lunch. Friday or Saturday spent doing dinner out and a movie. That quick run to the mall for those shoes you wanted all week.

STOP!!! – So far you have paid Starbucks shareholders, the restaurant owner and his wait staff, Ben Affleck and Steve Madden. Have you paid yourself? Have you put money aside for your rainy day or your future? Ahhh – just as I thought! It's just too tempting with Friday's check making you feel financially invulnerable. It's time to make some simple changes.

Much of the savings that we need to do can be put on auto-pilot. We live in the age of automatic wire transfers or ACH debit/credit transfers. Everything from general savings/investments, to retirement savings, children's education savings and savings for medical needs can be put aside automatically on a schedule you set.

If you have a standing order set up with your financial institution, they will transfer money from your main account – let's say your checking – to other accounts. Let's say that your weekly paycheck is for $500. You deposit that in your checking account and have orders set up to move $75 to your retirement account (maybe a Roth IRA), $50 to your savings account, $50 to your kids' education (possibly a Section 529 Plan) and another $25 to a Health Savings Account. At the end of the year, you would have $3,900 in retirement, $2,600 in savings towards your next car, $2,600 for education and another $1,300 for medical needs. You never once had to decide if this was a good week to save. It's automatic.

The best part is that by knowing that you really only have $300 to spend ($500 paycheck less $200 in forced savings), you will spend less. You won't fool yourself into feeling richer than you are and making purchases that you probably shouldn't.

If that isn't enough, many people forget one thing: good decisions (or bad ones) can have cumulative effects. Above we described a scenario with a person saving a total of $10,400 from $26,000 in take-home pay. What is the impact in five years if we keep that up? $52,000. It adds up quick.

If you are your own worst enemy when it comes to your finances, take the decisions out of your hands and put your savings on auto-pilot! Talk to your bank or investment brokerage to see what options they have available.

These ideas just scratch the surface of automating your savings. If you have a question, there is probably another reader/subscriber wondering the same thing. Please post your question using the comments section, below this post. I will be happy to go into greater detail in any area that seems to be of interest to all.

Live Well (Within Your Means)

We had touched on the area of over-consumption. So many of us today are very competitive in our need to have the latest and best (name your indulgence here). "Things" become our identity and our barometer of success, to ourselves, as well as to those we seek to impress: family, friends, neighbors, co-workers and clients. This might be in our clothes, cars, cell phones or expensive toys.

For a fleeting moment we have purchased happiness! Quickly we realize that we were mistaken. We have only assumed debt, filled our garages, added to our maintenance responsibilities and if we are lucky, we realize some great salesperson just talked us out of our money – again. Over time, that weight lifting equipment or motorcycle gathering dust in the garage becomes a constant reminder that we wasted our money.

If you are in the top 3% of Americans who can really afford those things, buy up! Hire someone to inventory your shoes! But for the rest of us, we should learn from the millionaires.

Millionaires don’t take out loans to buy boats or ATV’s. They don’t use home equity loans and credit card debt to finance vacations. They save. Then when they are done saving, they save some more. Eventually they have developed a series of nest eggs that can begin to provide extra income for that vacation, or boat, or home theatre – while paying CASH.

But you are looking longingly at the new BMW your neighbor just pulled up in. Forget it. He probably can’t afford it either. You’ll only be following him into the vicious debt cycle that most Americans are trapped in – picture the hamster wheel spinning freely while you get nowhere.

You want to break the cycle that almost all Americans are living in? Try something drastically different. Live like a pauper. Hold your head up high and declare that you have the patience and discipline to live well within your means. Impress yourself, as you watch the zeroes build on your bank statement. If you have the conviction to do what you believe in, you don’t have to impress anyone else.

The Budget

The value of planning has been seen as an elusive truth over time:

• "By failing to prepare, you are preparing to fail." - Benjamin Franklin
• "People often complain about lack of time when the lack of direction is the real problem." - Zig Ziglar

Taking the time to budget is a necessary step in assuring our financial health. But what do we really mean when we say "budget"? There are several steps involved. First we need to understand how we are spending our money currently. Secondly, we need to lay out a list of our monies coming in and monies going out. This is not complicated stuff, but it is very difficult for most of us.

If you are not already doing so, it's time to figure out how we are currently spending our money. Programs like Quicken can help - Intuit even has a free online version of its Quicken software: http://quicken.intuit.com/. Some people find a spreadsheet like Excel can be useful, with free online expense and budget templates available. There are those who are comfortable with a pad and pencil. The method is not important.

Take your checkbook and other available records or receipts and list what is being spent. Have columns that show who the payments are made to, the amount and the categories of expenses, such as "Food", "Gas", "Clothing", "Rent", etc. Some of our expenses will be very routine, occurring every month for the same amount, like "Rent". Others will be more sporadic, like "Medical Expenses". We should look at a couple of months at least. The longer the time frame that we look at, the more we recall those expenses that happen infrequently.

At this point we have an idea as to where our money is currently going. Time to begin laying out a plan. You can plan the whole year, but for those who are totally new to this, let's just start with planning out the next month.

List and total the income you expect to receive in the next month. Now, using the expense categories we discussed earlier, make a list of the types of expenses that you expect to have to pay in the next month and the amount you would guess you will need. This does not have to be exact. Getting started is the key here. A good plan today beats a perfect plan tomorrow.

• "Plans are worthless. Planning is essential." - Dwight D. Eisenhower

Include in this list of expenses money for savings. By paying yourself first, you are developing a pool of money to fall back on in the event of some unforeseen hardship, like a lay-off, medical surprises, or unexpected home or car repairs. 10% of your gross pay (before taxes) is usually a good start.

Total your expenses. Do you have enough to cover all of your expenses and some savings? Wonderful news! Any excess can be used to cover additional savings for that vacation you wanted or to develop your nest egg more quickly. I can see that more than a few of you are scratching your head because it seams that your money didn't last as long as your month.

This too is actually a good thing in that we are discovering, in advance, what many people don't discover until their debt cup runneth over. Time to sharpen the pencil!

Working with your family, go through your expense categories and ask yourselves:

• Do I need the half-caff soy double latte each day at $3 a cup or can a $.50 a pot cup of coffee at home do the trick? You'll live?? Good News - you just saved close to $1,000 a year
• Instead of eating out twice a week, maybe cutting back to once a week or twice a month can be sufficient. This move alone could save thousands each year.

"Got it Chris - but we've already cut out that kind of fat from our expenses!" OK! Let's dig a little deeper! Here are some of the areas that I find can be deceptively harmful:

• Fast food: Picking up McDonald's for a family of four once a week because we are too busy/tired to cook: This could easily cost close to $25. For that kind of money you could easily prepare a healthier, more nutritious meal at home and still bank an extra $500 a year. This doesn't include the reduction of future medical costs. If this doesn't convince you rent the DVD "Supersize Me".
• Rent? I mean go to your library and borrow the DVD. Many public libraries today have great, current DVD collections. Two movies a week from "Blockbuster" or "On-Demand" will run close to $500.

These are just some simple, easy targets. Many more lie within the details of your budget.

How hungry for change are you? In the words of Dave Ramsey, author of The Total Money Makeover, we should be telling our money where to go, instead of asking where it went. Taking control of our money is not rocket science, but it is work.

As with the most difficult tasks in life, it starts with one foot forward. Start now! You have it within you to take control of your life. No one can do it for you. It's up to you!

It's a great day!!

"Beware of little expenses; a small leak will sink a great ship" Benjamin Franklin

How did we get here?

It's getting tougher all the time. Do you find that you often have more month left over than money? It's easy to get there. But how?

First we have the "gottahaveitnow" camp:
We decide that what we want, or "need", should be satisfied immediately. That new car or TV, or that bigger house, is so mission-critical for us that lack of money should not stand in our way. We find our selves out "just looking", which quickly evolves into "we can't pass up this deal".

"Things" become our identity and our barometer of success, to ourselves, as well as to those we seek to impress: family, friends, neighbors, co-workers and clients.

Then there are those who succumb to emergencies:
Unexpected and under-insured medical expenses, broken down cars and appliances, or necessary home repairs to name but a few. In the recent past, medical expenses were the most common reason for personal bankruptcy.

The cost of responding to these needs, whether real or imagined, are made decidedly worse by the fact that we often use credit to pay for them. Credit cards, mortgage and equity loans, payday loans and rent-to-own arrangements are all part of the mix. "We can get you in the car you deserve!" or "No payments for the next 6 months!" or worse yet, short term loans that equal interest rates of over 100% per year.

Budgeting, planning, saving for a rainy day: these are the tools of the rich. They don't get caught paying substantially more for something, because they didn't plan for that purchase or that unfortunate event.

In the coming days, we'll talk about some of the basic tools you should have in your arsenal. Instead of asking yourself how you got here, you'll be deciding where you will be one month, one year and five years from now.