Continued from Part 1
Habit 4 – Talk about money (Even when its hard)
Rachel and her husband Winston often have couple nights together and loves to talk about what they want life to be like in the future. They talked about all kinds of dreams like places to travel, owning rental properties, bringing their kids to Disney, financial independence or life during retirement. As they go on and on, they suddenly snapped back to reality. They thought they were a bit shallow but then it struck them: no, they weren’t being superficial – they were dreaming and doing it together. This is one of the most amazing feeling a couple could experience as they strive towards a common goal together.
Just go ahead to dream as much as possible and have fun talking about your future. These keep couples going where the conversations bring focus, purpose and meaning to their marriage. This is also one of the most positive energy a couple could feel that you are living out your life together and not wishing that you were living someone else’s life. Rachel thinks that everyone could do it and talk about money even when it’s hard as money is the number one reason that tore couples or families apart. Push through the hard conversations and get to the other side. She also hopes that all couples could get on the same money page and start to find a new level of bond in your marriage that you would otherwise not be able to to experience in any other ways.
Rachel and Winston have joint account ever since their marriage as they believe that having separate accounts are destructive in relationships. They believe in being transparent in whatever they do with their money to build on their trust that they have with each other. Therefore, constant communications on their purchases are always there and they stay accountable towards their saving goals. They have a budgeting meet up on a regular basis to discuss about their expected new expenses for the coming month. So they could see if they have enough funds to cater for that probably by cutting down on other expense categories or dipping into their savings.
Rachel also mentioned the bottom line is this: someone is always going to make more in any marriage. Avoid focusing on your income and your spouse’s income as separate entities and get rid of the “this is my income” mentality. Any money that goes to the household will be seen as one combined income and this will create a unified mindset. When Rachel talked about their income nowadays, she doesn’t even think what she makes versus what he makes. She only cares about what they make together as a team.
Habit 5 – Save like you mean it
You can’t really schedule emergencies but you can count on the fact that you will have them. The emergency fund is a must in life and everyone should have this in place as fast as you can. Rachel cited that majority of the Americans does not have an emergency fund of at least $1000 and tend to tap into their credit cards in case of emergency. The emergency fund is mainly there to help you navigate a job loss, for car repairs, fixing your leaking rooftop, unexpected medical bills etc. She recommends that we should keep an emergency fund of $1000 initially and then bump it up to 3 to 6 months worth of living expenses. Can you imagine a life with no debt payments and six month’s worth of expenses saved in your bank account? Seriously, stop and think about how life is going to feel once you reach that point. This financial goal is a life changer and anybody can do it. Once you have 3 to 6 months of expenses in place, then you can talk about saving for short term goals like car, renovation, wedding, vacations or long term goals like kid’s college and your retirement.
Everyone’s biggest saving goal of their life will most probably go towards owning your own home. Nowadays, a growing number of young Americans use more than 30 – 40% of their monthly household income to pay for their mortgages over a long period of time like 20-30 years. After the record high number of housing foreclosures during the 2008 financial crisis, she advocates that your house installments should not be more than 25% of household income in order to make sure you do not overstretch your finances. But Rachel also did mentioned that almost 25% of all homes purchased in the last 15 years were bought with cash! There are some amazing stories on people who paid cash for their first home. There was this couple who live above an elderly women’s garage for free because the husband did her yard work. They lived there for 5 years, banked his $50k salary and only live off her teacher’s salary. After 4 years, at age 27, they paid cash for a $150k home plus they still have thousands of dollars to furnish it. That’s an incredible story and it’s not uncommon nowadays. You could also make it your own inspiring story one day and inspire others.
Habit 6 – Think before you spend
There are some stores you do not appreciate until you reach the next phase of your life. Rachel was once in Williams-Sonoma (kitchenware and home furnishings) store shopping for a gift for a friend. When she walk past a set of pots and pans which she really wanted all these while, she stood still mesmerized by it. She even envisioned herself using the new pots and pans and felt great on her decision to splurge on some new kitchen necessities. Reality set in when she saw the price and the little movie running through her head came to a screeching halt. Rachel thought that just because she have enough money to spend, didn’t mean this purchase was a wise decision. Rachel is a born spender and for her to walk away from purchases, it will be a very tough decision for her to make. But that day, she did it. Having the discipline to say no to yourself even when you have the money, is one of the hardest things about handling money.
A growing number of people creates a gap between their lifestyle choice and actual cash they have on hand. Best selling author Thomas J. Stanley captured this gap perfectly in his book ” Stop Acting Rich“. Acting like we are wealthy only lead us to more debt and despair rather than happiness. Every spending and saving decision will dictate your life towards financial success or financial distress. Too many people want to live a life they can’t afford, drive a car they can’t pay for, eat out more often than they should and wear stuff they charged using their credits cards. They want to chase after the so called ” American Dream” by what they see on TV or in real life. When these people do not have enough cash to purchase more stuff, they rack up more debt to finance their way to “happiness”. Most people are confuse between having more fun stuff and happiness. They thought they could eventually find happiness by having more consumer purchases. But most of the time, true happiness aren’t really for sale.
Habit 7 – Give a little … Until you can give a lot
It’s easy, even natural to live in a selfish state of mind. Our culture is based on an attitude that demands “me first” and instant gratification. And our minds centered on what makes us happy and not about making others happy. If giving isn’t already a lifestyle to you, becoming generous can seem to be counterintuitive. Generosity isn’t just a simple act of giving but it could also be a lifestyle that changes hearts and minds. Rachel have learned over the years that giving is fun and she is hooked to it.
John D. Rockefeller, generally regarded as the wealthiest man in US history said this ” I never would have been able to give the first million dollars he made if he had not give when he started working at $1.50 per week.” Rachel cited the dollar amount is not the issue but getting into the habit of giving is important. And she call this habit ” Give a little… Until you can give a lot.”
Rachel also mentioned about her friend’s five year old daughter who is very passionate about giving. The girl heard about a local family trying to raise funds for their child to get an important medical procedure. She will go to everyone she knows in her neighborhood to raise funds and spend the night counting how much she has collected for that whole day. Her mum said that she did great and she is so proud of her little girl. Her daughter responded that this is not enough and left her table. A while later she took out out all her savings which she was saving for a new doll. Rachel’s friend teared up and ask her daughter if she is sure about giving away all this money and said she really don’t have to do that. The little girl replied decisively ” Yes, I want to!” She collected more than $100 and gave it all to the local family who was very grateful and amazed by such kind act of generosity. At five years old, she had learned that it’s not enough to simply ask other people to give; she wanted to participate in the giving herself. A life of giving was the life she desired.
Thats what Rachel hope to inspire everyone – a great start towards giving. It doesn’t matter how much you give but its more important to cultivate this key habit from young. This wil help you unlock the power to change your relationship with money and embark yourself toward this amazing journey in life. We also blog about this on the greatest gift of life here.
A great book with simple illustrations of money habits which are important towards wealth building. Definitely my recommended book for those who are starting out on their financial freedom journey.