Monday, January 24, 2011

How to Live Within Your Means

Tip of the Week, January 16, 2011

A client recently described one of her organizing goals as wanting to feel more like she was living within her means. She went on to explain that she was referring not only to avoiding overspending or purchasing things she couldn't afford, but also to not having more stuff than she needed and used, and not living in a home that was too large for her.

Our conversation got me thinking: so often the phrase "living within our means" refers to not spending more than we can afford, but it can so easily refer just as well to making sure that other aspects of our lives--our living space, our possessions, and our tasks and activities--are the right "size" for us. Here are some thoughts on how to recognize and rebalance areas of your life that might feel out of whack.

In the midst of the housing bubble a few years back, we heard a lot about people living in homes that were well beyond their means, both in terms of how much they cost and how large they were. Did couples without children at home really need 4-bedroom mini-palaces with great rooms, formal living rooms, and finished basements?

Especially in American culture, we sometimes equate copious living space with happiness, whether or not we need quite so much room, or use it, or can afford it. But too much space can leave us not only poorer, but also feeling hollow. To live within your means space-wise entails choosing a home that allows you to live comfortably, but one that's not well beyond your needs or your budget. If you're living in a too-large home, is it time to rightsize? (I recommend checking out Rightsizing Your Life for guidelines and pointers on this.) If you're in a space that feels too small, take a look at what's in it: is your stuff or your furniture taking up more room than it should?

People who have kitchens full of fancy gadgets and appliances, but who never cook at home; who have closets stuffed with career wear and formal clothes, but who almost always wear casual outfits; who have closets full of craft supplies, but who haven't created anything with them for years--all of these people are living beyond their means in terms of possessions.

Your stuff should support and enhance your life as you're living it now, and should do so in a way that doesn't have a negative impact on your finances, your space, or your relationships. If there's stuff in your home you don't need, use, love, or find beautiful, there's a chance you're living beyond your means and that it's time to do a bit of culling.

Of course, having too many things often goes hand in hand with experiencing money issues, so getting control over the stuff you allow into your house is often an important step toward getting control over your finances and overcoming overspending, too.

Tasks & Activities
Finally, one realm in which far too many of us regularly live beyond our means is that of our tasks and activities. It's one thing to have an active schedule that's comfortably full of projects, hobbies, and events that are either critical (like work) or enjoyable to you; it's another thing entirely to have a calendar that's so jam-packed you can hardly stop to breathe. Just as living beyond our means by spending more than we can reasonably afford to will eventually cause us serious problems, so, too, will trying to maintain an endlessly hectic pace.

Rebalancing your schedule doesn't entail hiding out at home and saying "no" to everything. Instead, try taking a look at your calendar and your To Do list and jettisoning one or two things that you don't truly need, want, or love to do. Maybe it's time to admit that book club isn't your thing, or that trying to fulfill two volunteer roles at the same time is driving you batty. It might feel uncomfortable at first to part with these activities, but the trade-off will be more time to devote to whatever it is that's really important to you--or more time to relax.

Living life within your means doesn't require being monk-like or getting rid of things you love or cutting off all of your activities. Instead, it entails getting a clearer sense of how you define "enough" in each realm of your life, and then taking steps to reach that point. The result? A greater sense of calm, less stress, and the satisfaction of knowing that you're living your life in balance.

Tuesday, January 18, 2011

A Great Guide to Help Get Your Finances Organized

Tip of the Week, January 9, 2011

There's perhaps no type of disorganization that's more stressful than the financial kind. Feeling like you're out of touch with your money--how much of it you have, how much of it you owe, what your bank and brokerage and retirement accounts are doing--can be unsettling at best, and sometimes downright terrifying. It follows, then, that getting your finances in order can go a long way toward making you feel more in control.

But that kind of organization can be a big job, especially if you're starting from what feels like sheer money-related chaos. The good news is that there's a guide for those of us determined to forge a better relationship with our cash: One Year to an Organized Financial Life, by Regina Leeds and Russell Wild. Here's what I liked about the book, and why I think it's a worthwhile addition to your bookshelves.

What It's Like
As the title suggests, One Year to an Organized Financial Life is a year-long approach to getting more in touch with and more control over your money. The book is divided into months, with a different area of focus for each month (January's is Take Control, for example, while July's is Make Long-Range Financial Plan). Within the chapter, there's a habit of the month, a tool of the month, and a separate mini project for each week, designed to help you accomplish the month's overall goal.

Sprinkled throughout the book are sidebar tips on everything from when to get the best deals on essentials throughout the year to how to cut down on things like catalog clutter and unwanted credit card solicitations.

There's also a thorough list of resources at the end of the book, including recommendations on finding financial and organizing help.

Why It Gets My Thumbs-Up
  • One of the things I like best about One Year to an Organized Financial Life is its week-by-week, step-by-step approach to what can easily be a huge, daunting, and completely overwhelming endeavor. The book is designed to be read a week at a time: read a few pages, undertake a simple, straightforward project, take a breather, and then move on to the next week--no need to worry about having to do everything all at once. The book ensures that you'll get to it all eventually.
  • The year-long approach is also great because it emphasizes that financial organizing (like any kind of organizing) isn't a do-it-and-be-done-with-it undertaking. Lasting organizational change involves slowly building up habits and practices you'll stick with over the long term, not throwing yourself so completely into a project that you burn out, get overwhelmed, and abandon it.
  • In terms of topics covered, the book is amazingly thorough. It deals with not only the usual suspects--setting up a budget and getting your financial statements in order, for example--but also things like finding ways of cutting costs everywhere in your life, helping your kids understand and respect money, and understanding every kind of insurance you have to make sure you have enough coverage without overspending.
  • The authors aren't preachy. I find books that claim there's one right way to do things insufferable, especially when it comes to a topic as complex as money. Regina Leeds, a professional organizer, and Russell Wild, a financial advisor, clearly know their stuff, but they present their tips and recommendations as, well, tips and recommendations, not as dictates.
  • The book takes a holistic approach to the topic of financial organizing. January's habit of the month: Drink more water. That may elicit a "Huh?" until you realize the motivation behind it: being hydrated helps you think more clearly and stay more focused, which in turn will make it easier to tackle the month's organizing projects. The authors stick with that approach throughout the year, making connections between other areas of our lives and our relationships with our finances.
A Few Small Downsides
  • One thing I would've loved to see in the book is fillable worksheets and checklists for tasks like creating a budget and reviewing insurance policies. The authors do encourage you to create a financial notebook from the start (it's January's tool of the month), but for me, pre-printed forms would be extra helpful.
  • Not all of the topics in the book will apply to everyone. If you don't have kids, for example, the September chapter (on teaching kids about money) may not be of interest to you. Consider using the weeks that cover topics you're not concerned with to take a break from financial organizing, or to finish up a larger project.
  • Due to the week-by-week format of the book, it's one you're better off owning than borrowing from the library. Luckily, it's not expensive: it retails for $16.95, and you can get it at Amazon for under $12. It's also worth checking with your local bookstore to see if they can offer you a deal.

I'm a firm believer in the benefits of having someone to guide you through the process of getting organized, especially when that process involves something as complex as money, and I enthusiastically believe that One Year to an Organized Financial Life is a worthwhile guide.

[Note: I reviewed a copy of this book sent to me, at no charge, by the publisher.]

Thursday, January 13, 2011

Are You Ready for Lasting, Positive Change?

Tip of the Week, December 26, 2010 and January 2, 2011

With 2011 just days away, you, like millions of others, may be setting resolutions for the months ahead. Whether your goals involve getting more organized, adopting healthier habits, taking control of your finances, or improving some other area of your life, you're far more likely to succeed if you do a bit of advance planning.

Here are a few questions to keep in mind that will help set you up for success as you choose your resolutions for the new year.

#1: Does my motivation come from within?
Adopting a resolution because you truly want to make a change, rather than because someone else thinks you should, will make you more likely to do what it takes to achieve it without resenting it. If the goal you have in mind isn't one you'd choose on your own, consider an alternative.

#2: Is my resolution realistic?
Ambitious goals can be motivational, but if they're not tempered by a dose of realism, they can be very hard to achieve. As you set your resolutions, aim to make them challenging but doable: rather than hoping to lose 20 pounds a month, for example, aim for losing 5 or 6 pounds at a time, and then keeping them off throughout the year.

#3: Do I have a plan?
One of the quickest ways to see your resolutions derailed is to try to achieve them without first creating a plan for each. Give yourself a leg up by defining solid steps that will help you work toward accomplishing your goals. Want to get more organized, for example? Take the time to write up a plan for weeding out what you don't need, creating storage for the items you keep, and developing habits that will help you stay organized over the long term.

#4: Do I have a support system?
No matter what your resolution, chances are it'll be easier to achieve if you don't have to go it alone. Find a supportive, nonjudgmental friend, family member, neighbor, or online buddy who can help you get through the rough patches en route to your goal and celebrate your successes.

#5: Am I prepared for obstacles?
No matter how motivated, well prepared, and supported you may be, chances are you'll run into at least a few snags as you work toward making your resolution a reality. To ensure that these hurdles don't trip you up completely, it's important, first and foremost, to be aware that they're likely to appear: if you're aiming to eat healthier, for example, you can expect some moments of temptation when you're faced with less nutritious foods. Believing that you'll be able to accomplish your goal without facing any challenges is unrealistic, and can make it even more demotivating when you do trip up.

The next step in overcoming obstacles is to prepare in advance for how you'll overcome them. If you expect that you might be tempted by junk food, what will you do? If your goal is to exercise more, how will you handle those days on which you'd rather do anything other than hit the gym or go for a walk? Having solutions at hand to overcome the hurdles you think you might encounter will make it easier to deal with them--and then to continue on toward your goal.

Whatever your resolution for the year ahead, use these five questions to create a plan that will make it much more likely that, come late December next year, you'll be celebrating 12 months of success.