If I ask you how much of your last paycheck you spent on car repairs, clothes or home maintenance, there is a high probability that you will be able to give me an accurate figure or a close estimate within an hour. But you will probably not be able to give me an answer within  24 hours if I asked you for the total amount you have spent on these same categories year to date (so far in 2011). The truth is that many of us are able to manage our current check, profit or windfall effectively, doing what I like to call “pay as you go” financial management, but we often deprive ourselves of the benefit of seeing the bigger picture.

You may be wondering what is wrong with managing your money (and really well too) as it lands on your laps, the problem with that approach is that it limits your view, and the view you have when you document what you spend is unbeatable. Let me try to explain this using something a bit more fun than accounting for money. If you could afford it, would you rather get the best front row seat at the stadium/arena to watch your favorite team/musician or would you rather sit at the back in the upper level section where all the players and artistes look like small flies and its all a blur? I am sure you’d prefer the front row seats, so why not do same when it comes to your own life?

Managing your earnings as you get it is good, at least you are doing something! But you are better off if you are able to review what has happened over a period of time because this can help you make necessary cuts and changes, negotiate better discounts and deals, and plan ahead. Your life is your business, and you, the CFO must be able to grow this business through proper planning and accountability. Let us take a look at the example in the table below. This is from Sola’s cash book or Microsoft Excel sheet on her computer as at the end of March 2011.

Category	January	February	March	Total
Salary	+1000	+1000	+1000	+3000
Loans/cash gifts	0	+350		+350
Groceries	(200)	(250)	(300)	(750)
Cable television	(150)	(150)	(150)	(450)
Clothes, shoes etc	(300)	(500)	0	(800)
Savings	(100)	(100)	(100)	(300)
Car repairs	(250)	(350)	(400)	(1000)
Total Expenses	(1000)	(1350)	(950)	(3300)
Balance	0	0	+50	+50

By documenting how much she is spending and what she is spending it on, Sola can make crucial financial decisions that will leave more change in her purse. She will look at this sheet and realize that she probably made some poor choices in February, which led her to borrow money from her boss to supplement her salary. She may also decide to shop around for a better cable television deal because she is spending 15% of her monthly income on cable television and there may be better and cheaper providers in her area. And she may review her car repair costs and decide to sell off her car and save up to buy a new one in the near future because she is currently spending too much money repairing her ‘run down’ car.

You don’t really have to draw up something fancy or elaborate like a real company, you should just maintain something simple that works for you and empowers you to take stock and plan ahead. Research has shown that people who document what they eat tend to eat less and also eat healthier. That is the same thing that will happen to you if you learn to document how you spend your money. The ‘can i afford this now?’ question will be answered easily when you look at how much you have spent on various categories year to date.

So why not give this a shot in 2012? Don’t be surprised when you finish the year with more money in the bank!

Do you need help getting front row seats in 2012? Please contact me here: https://ourfinancialcoach.com/contact/

Can you imagine what happened at the office today? We were all expecting a decent Christmas bonus to be announced when the CFO called a meeting. Do you know this man starred at us for a few moments and began saying “Ladies and gentlemen, as you know, we have had a very challenging year, the unrest in the Middle East, recession in the US and the debt crisis in the Euro zone really hit businesses of our size rather hard. Therefore, we will not be able to pay any bonuses this year, and unfortunately we will have layoffs and benefit cuts in January. We will do our best to treat everyone fairly, but we must face the tough reality of the current times.”

What? I feel so betrayed, this is the company I have been working at for years, I have made huge sacrifices for this job and for them to treat me like this is just wrong. Can you imagine we are being punished while they (management) got new cars, allowances for designer clothes and even hired the best decorator in the city to renovate their living rooms and offices at the beginning of this year? I just don’t get this at all.

I was so frustrated during the following Q&A session: one of the floor managers asked the CFO to justify those extravagant purchases management made and he said, “Those things you mentioned were really an investment. In fact we got a loan from Union bank to be able to afford them. Our top people have to look respectable in order to be taken seriously when they meet to discuss business with people on these high levels you know.” Can you imagine? Are our executives so shallow and our products so worthless that the only way we can get business is for them to wear what they cannot afford? The most unfortunate part is that this so called investment did not yield any fruit! These people wined and dined at our expense but closed no major deals. How can that be an investment, especially one to borrow for?

I thought I was going fall on the floor when he was responding to questions on financial records and future plans thus: “We are putting together our financial statements, the accountants are working round the clock, calling banks and checking receipts to put the most accurate set of financials out there, we will share them with you in the coming weeks….. Unfortunately we did not conclude our budget process in the first quarter, so we don’t have a budget to share with you for this year, we will build one for next year….. We are considering a lot of options to bring the business back to a healthy position, one of the options was what I discussed earlier – payroll and personnel management. We have also considered price increases but we know that will allow competitors to steal our market share, so it is not the best route to take. The economy does not leave us with a lot of options, but we must come up with a plan soon.”

So no one was checking actual expenses to budgeted amounts and business plans while they were buying cars and designer shoes? And the only plan they have been able to come up with so far is to hurt the workers? Did anyone think ahead here? As I sat down at my desk after the meeting, the truth hit me – our CFO and the rest of the management team are the most incompetent managers in the business. They have been living large on bank loans all this time? I honestly don’t want be here when the union bank receivers come and possess everything, and I know that time is coming. I need to find another job.

The situation above is now a common scenario in many corporations around the world, and like the ‘victim’ narrating this story, we feel hurt and betrayed when our employers act so carelessly. But what we forget to do is relate these situations to our own lives as well. The truth is that YOU are a business and the CFO of that business is you. The smartest CFOs, the really wealthy people, focus on building long term wealth instead of seeking instant gratification. They do not go around borrowing money from banks (swiping credit cards) to buy vacations, clothes, luxury cars and other similarly nonproductive items just to feel among a certain crowd. Part of being mature and respectable is knowing how to improve your ‘brand’ to the level that you do not value yourself based on what you wear, and become comfortable knowing that people who try to place a value on you and your ideas based on the bag you carry, car you drive or shoes you wear will not benefit your brand anyway, therefore should be avoided. How did Warren Buffett and Sam Walton close business deals and build massive empires without splurging their capital on expensive watches, cars and clothes?

On a recent trip back home toNigeria, I noticed that a lot people in my generation are indirectly killing their children’s self worth under the guise of ‘giving them what they never had.’ Folks are borrowing to fly themselves and their kids in the upper class section of the plane, buying designer clothes at ridiculous prices they can hardly afford. And when you ask these parents about the education fund they have set up for these kids, they start stammering. I also saw the trend of riding flashy cars and wearing watches bought on credit. It was appalling and disappointing to say the least. Your duty as a parent is to instill the right values and be the best example for your children not to teach them that they can borrow or loot their way through life.

Before you take the next loan or buy the next flashy item, please ask yourself the following:

1. What type of lesson are you teaching your child when you buy everything she/he asks for?
2. How much wealth have you built for this child’s real needs in the future?
3. How many houses do you own (minus the one that is truly owned by the bank)?
4. What happens if you suddenly lose your job tomorrow? How much do you have saved and what will your life style be?
5. Is your life really all about watching other people on TV and hanging out with people who don’t matter to your brand?
6. When was the last time you read a book that inspired you?
7. It sounded ridiculous when the CFO in the above story could not come up with a financial plan, but what about you. Do you have a budget or financial plan?
8. How do you decide what to spend your salary on?
9. How much have you spent this year and what did you spend your money on?
10. What are your short and long term goals?

I got the inspiration to write this piece when I was watching the movie ‘Gifted hands’, which tells the story of the great pediatric neurosurgeon, Ben Carson. There was a line in the movie that really caught me: Ben was asking his mother for nice and expensive clothes like the rest of the kids in school and his mother said the clothes the kids were wearing were ‘cheap’ because beyond the price of the clothes, those kids had nothing on the inside. So think about yourself, look inwards. Are you spending money you should be investing to build wealth or borrowing to buy things you don’t really need because you are cheap and insecure inside?

If you have not been doing so in the past, it is not too late to start being the proactive CFO of the business of you, there is no better candidate for the job apart from you.

Enjoy the holidays, spend wisely, take stock and come up with a plan for the new year!

So you shop there all the time, in fact its your favorite store in the whole wide world and to top it all up, you get a 15% discount on your purchases when you sign up for the store credit card. So in your mind and according to the friendly and persuasive clerk at the check out line, it makes sense to sign up. Well, not so fast! Let us take a look at the reasons why you should not sign the dotted lines ….

Addictive: If your goal is to save money and live your best financial life, then you have to watch what you buy. While you are in the process of building wealth through savings and meaningful investments, you should not make a habit of shopping indiscriminately. You should buy what you need and not what you want so that you can have enough money to build your wealth. If you have a store credit card and will get incentives for using it, what will really stop you from confusing needs and wants? How will you stop yourself from going back every day, week or month to buy what you think you need, but which is really what you don’t need if you want to live comfortably tomorrow? 

More Expensive: So you get to save $10 off your $100 purchase just by putting it on the store credit card. That could be sweet if you pay off your bills right on time, do not pay just the minimum balance and there are no fees or charges associated with the use of that card. The truth is that the stores and the banks they work with know that they will gain much more than the 10% they gave you off the merchandise. In reality, you may forget to pay off the balance as at when due, or you may not have enough money to pay off the entire balance, especially if shopping in that store has now become an addiction as earlier discussed. The truth is that you have no guarantee that you will be able to avoid the fees, interest and charges associated with that card once you sign up for it. At the end of the day, you may now find yourself paying far more than the $10 you thought you were saving on your purchases when you signed up.

Your credit score: Your credit score is determined by many factors, among which are the amount, balance and payment of your credit cards. You have to realize that one of the factors that can impact your credit score negatively is the percentage of department store accounts or charge cards to all of the accounts in your credit file. Therefore, if your credit profile is full of debts such as store credit cards, then you are doing your credit score more harm than good. So think about how much you are saving on that new $100 dress and compare it to how much more you have to pay for a mortgage or car note because of a lower credit score, before signing the dotted lines.

As we approach the holiday aka shopping season, you have to pay close attention to what you buy and how you pay for it. You are really better off buying what you can afford right now and which you have the money to pay for immediately. If store A wont give you a 10% discount on the dress you want if you do not sign up for their credit card, then do yourself a favor by walking over to store B that is ready to sell the dress at the real and lower price. Your financial life is always at stake and no one can take better care of you than you. You should treat your financial life like a business, so you must work hard and make sacrifices to save up enough capital to put to work for you, and then you can make profits out of which you can spend money tomorrow. If you spend all your capital on servicing debts you incurred to buy shoes and clothes today, there will be no profits tomorrow.

Financial matters can be quite overwhelming. There are so many resources out there and many experts giving great advice, but when it really comes down to it, most individuals are at a loss on how take all the information out there and apply it to their own unique situation. Knowing where to begin especially for those who have spent several years passively managing their financial lives can be quite challenging. Whatever your reason is for deciding to become an active manager of your financial life, let me say congratulations that you are ‘here’ now. Before you start getting overwhelmed by all the information out there, you need to take the following basic steps to help you become AWARE of your present reality. It is only after establishing your reality that you can know if there are areas of improvement you need to work on or gains, which you can consolidate.

Know what you own and owe: However little or much, write down those things you own and can resell if you need some cash. I am not talking about items like your shoes and designer clothes. I mean things like your home, bank accounts, stocks, cars and expensive jewelry. Can you go a step further and estimate their current market value? On the same note pad, write down who you owe and how much you owe them. When are these obligations due? Now subtract the value of what you own from you owe. Don’t get discouraged if you presently owe more than you owe, it is not the worst situation in the world, it can be corrected no matter how old you are. Don’t relax if you own more than you owe, things can change quickly if you don’t proactively manage your financial life.

How much do you earn, spend and save: For this exercise, get your last three months paycheck, bank and credit card statements. Now write down how much you earn per month (gross paycheck), write down (and deduct) the taxes and other deductions from your paycheck, the result if your net pay. Now list all the payments you have made for yourself and others under your care (e.g. your children), be sure to include the items you bought on credit as well, group them into the following categories:

• Mortgage/rent
• Car loan, savings
• Other loans/debts (e.g. student loans)
• Food and groceries
• Gas and transportation costs (e.g. car insurance, bus/train tickets)
• Home utility bills (e.g. water, heat and electricity)
• Communication and entertainment (cable, internet, telephone)
• Shopping (e.g. toys, hair, spa, clothes, shoes, jewelry etc)
• Vacation (including day trips and cost of dining out)
• Charity (including gifts)
• Education costs
• Medical
• Other expenses

Now ask yourself these questions: 

• Do I pay too much taxes? Perhaps you ned to talk to a tax expert if you find that 40% of your gross paycheck is going to the government.
• How does your monthly expense compare to your monthly income? Do you spend more than you earn every month? If this exercise shows that you are cutting your coat according to your size and not the available material, you need to take a step back and make changes. We will discuss cost cutting techniques in the near future by God’s grace, so stay tuned.
• What expense category do you spend the most on? Writing down where your money goes makes it very easy to make changes if needed. If you find that half of your income is going to the retail outlets, perhaps you need to check yourself. Or if you find yourself paying huge out-of-pocket costs for medical services, you may need to find alternatives to your insurance plan or sign up for a health savings account.
• What proportion of your monthly gross income do you save for tomorrow? I hear a lot of financial experts put percentages on how much we need to save, I promise to address this in future coaching sessions on this page God willing, but the question you need to ask yourself now is: “how much, if any do i save every month?”

I hope you are more aware of your financial reality after doing this exercise. Please don’t stop now, make this an ongoing habit. Check back with me in the coming days because I will be talking about easy ways to save, cut costs, set goals, build budgets and all other good stuff. I hope to see you soon!

Keep living your best financial life…..

Welcome to www.ourfinancialcoach.com, your personal guide to understanding, establishing and implementing smart and sustainable financial goals.  

The recent lingering global financial crisis and recession has left many unemployed, in debt and generally financially distressed. Many employees  and enterpreneurs now face tough financial decisions and uncertainty. The challenges of meeting regular financial obligations, paying for children’s education, health care and planning for retirement is daunting to more people in this generation than ever before. Unfortunately, it is extremely difficult and expensive to obtain timely and unbiased financial education that is easy to understand, can help restore normalcy to financial lives and/or help people who have fallen rebuild their lives. 

www.ourfinancialcoach.com was therefore created to provide an easy source of guidance for young graduates, new and veteran employees, small business owners and retirees to understand issues that surround key decisions that can lead to stress free financial lives in the short and long-term. Our primary goal is to educate our audience about key financial issues surrounding income generation, expense reduction techniques, budgeting and planning, employment benefits, debt, saving, investing, financial behavior and retirement.

Our coach is Ganiyah Tope Fajingbesi, an international chartered accountant  and a certified public accountant based in Washington DC. Ganiyah has 15 years accounting and financial management experience from big four accounting firms, fortune 500 corporations, labor unions and nonprofit organizations in the USA and Africa. She also holds a Bachelors degree in Accounting and a Masters in Business Administration from the Goizueta Business School in Emory University in Atlanta, USA (2003). She is very passionate about educating people on how to live their best financial life.