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it won’t happen to me

What is important is seldom urgent and what is urgent is seldom important.

—President Dwight D. Eisenhower

Who doesn’t love payday? Early in our marriage Marco got a paycheck every Friday, and I got a direct deposit every other week. I considered myself a diligent financial planner and a fiscally responsible person. Each payday I would assess our current financial situation, look ahead at the next two to four weeks, and make plans.

My high-tech accounting system was done on the back of an envelope. I would start by balancing the checkbook. I’d get the current balance from the bank’s phone line, since this was pre-Internet banking, then try to remember any outstanding charges or checks that would be clearing soon. From there I’d subtract out the bills and debt payments we needed to make within the next pay period or two. Then I’d allocate money for things like gas, groceries, and eating out. If there was anything left over, and there frequently was a little something left, then Marco and I would make decisions on a case-by-case basis about how to spend it.

I felt very proud of the planning I was doing for our family. I purposed to look two pay periods ahead when anticipating our expenses. I’d heard of the dangers of living paycheck to paycheck and deemed two paychecks to be a much healthier amount of foresight. I believed we budgeted our expenses and was convinced that we were living within our means.

As proud as I felt, I was also confused. We couldn’t have money left over at the end of the month and be financially overextended, could we? All of our monthly bills were paid on time, but when something more significant came up—like a broken tooth that needed a crown or a fender bender with a $1,000 insurance deductible—gulp! We never seemed to have enough to cover those extra expenses. We also had an increasing debt load. Why were we turning to credit cards and other types of borrowing if we truly had more than enough? I couldn’t make sense of it. It was an oxymoron. In our life, excess coexisted alongside lack.

Why the Oxymoron?

Marco and I only budgeted for the expenses that were in our face at the moment. We managed our money as if predictable and inevitable yet unscheduled things like birthday gifts and new shoes—and life’s bona fide emergencies—wouldn’t happen to us. We were living a lie. If it was March, I was not thinking about Christmas. When he was feeling strong and healthy, I was not planning for Marco to think he was having a heart attack, therefore needing an ER visit and extensive lab tests. If the furnace was working, I was not saving for its repair. We did not think about the future until the future came crashing into the present.

It’s like a single mom I know. She has five kids and drives a school bus for a living. Last January she posted a Facebook status update that read something like “I just got my heating bill and can’t believe how high it is. Better start pinching pennies.” We live in Minnesota, where winters are frigid and ginormous heating bills are typical in December and January (and even in February and March in bad years). A cold winter (or high heating bill) is never really unexpected.

I myself have complained many times when a large car-repair bill seemed to pop up out of nowhere. I never specifically considered that on my way to work I pass through at least fifteen stop signs and traffic lights. Taking the same route home, I brake again for those fifteen-plus traffic signals. That means that every single workday I am thirty traffic signals closer to needing new brakes. New brakes were not an inevitable reality to me but rather something out of sight and out of mind. So instead of being ready to pay for car repairs when I needed them, I’d act flabbergasted and mad at the mechanic who delivered the message that my brakes would brake no more.

Based on my actions, you might suspect that I don’t value a well-maintained, properly running car. Or you could think that my friend doesn’t value a warm home on a cold January night. No. Not at all. It’s just that my financial planning was disconnected from my values.

Be Led By a Compass

In the mid-1980s, the fourth graders at Birch Grove Elementary had a rite of passage. Every year they went on a long-anticipated winter field trip to a nature center and park preserve. The day away from school consisted of cross-country skiing, identifying animal tracks, heating canned soup over a campfire, and the highlight—orienteering.

In small groups we were given a compass and a set of coordinates, then charged to find our way through the deep, thick forest (well, it wasn’t really too deep and thick, but it seemed that way to my nine-year-old eyes). When we found the tree at the end of each set of coordinates, we could ink a stamp on our tagboard passports to prove we’d been there. Group after group returned to the warming house with dramatic stories of finding their way from coordinate to coordinate simply by following their compass’s guidance even when they couldn’t see the next specially marked tree with their eyes. We were all amazed at the compass’s ability to provide direction and our ability to follow that leading.

Instead of directing our financial course with a blind it-won’t-happen-to-me attitude, we could operate like the orienteering nine-year-olds. We can use a compass, established by our personal values, to set our course, then allow that compass to guide us from financial goal to goal in the same way we went from tree to tree. This way, our financial priorities would reflect our values.

When we aren’t led by a compass, the results can be deadly. October 24, 2004, was a horrific day in NASCAR history. En route to a race in Martinsville, Virginia, the Hendrick Motorsports aircraft crashed, killing all ten passengers, including Ricky Hendrick and former NASCAR driver John Hendrick.[15]

The National Transportation Safety Board (NTSB) investigated the crash and uncovered the cause: faulty navigation caused by human error. In foggy conditions, the plane missed its first landing attempt, then veered off course and crashed. The NTSB says the pilot did not use all available navigational aids while attempting to land the plane.[16]

I am sad to hear of the loss of ten lives in an avoidable accident. The pilot, the one charged with steering the aircraft, had navigational instruments available to him but for some reason did not use those aids. The result was devastating.

In our financial lives, we have a navigational device available to us. Yes, we need a vision that is larger than ourselves to create a context for sound decision making—like we discussed in chapter 3. But we need even more than that. On a day-to-day basis, we need input that allows us to steer even in foggy conditions. Goals that flow out of clearly articulated values are our compass.

Four Types of Financial Priorities

Stephen Covey popularized the Eisenhower method of time management in his book First Things First (Simon & Schuster UK, 1994). In it he explains that effective time management evaluates every task through the lens of whether the task is important or not important, and whether it is urgent or not urgent. Every task falls into one of four quadrants, or types of tasks.

I believe the concept of considering something’s urgency and importance translates into our personal finances. That framework creates four types of financial priorities, each one defined by its position along the urgent/not urgent and important/not important continuums.

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Bills

As I described above, Marco and I lived almost exclusively in this category. We focused on what was urgent and immediately before us. Many of the things in this category are essential to survival and to meeting life’s basic needs. They truly are important, but they should not consume the entirety of our financial resources and focus. This category includes

Leaks

We extensively discussed financial leaks in chapter 3. These are right-now, in-your-face impulse buys that are not important. These expenses aren’t aligned with your long-term dream and vision for your family. They are misaligned with your values and intended to give you a short-term emotional fix.

To be clear, I’m not picking on any particular expense. I’m talking about motive, which cannot be judged from the outside looking in. For example, you may grab lunch out with a co-worker and it’s a leak. To someone else who has established a personal goal of creating stronger relationships with co-workers, it isn’t a leak. Then lunch out is a planned and perfect way to make progress. But really, it isn’t the actual expense or activity that matters; it’s whether that item is consistent with your values, moving you toward your goals, and planned for.

Until Marco and I got serious about changing our financial situation, we spent 90 to 110 percent of our monthly income on some combination of bills and leaks. It left almost nothing for the most important category—goals.

Goals

Most every notable expense that you are thinking about for next month, six months from now, or next year falls into this category. These expenses are not urgent—they don’t have to be paid today—but they are important to you, regardless of it being a need like a new roof on your house, or a want or desire like a much-needed vacation or a remodeling project at home. Usually these non-urgent expenses reflect some type of personal goal, whether you’ve consciously stated them that way or not.

Expenses in this category include items that are applicable to almost all of us:

Important but not urgent expenses are not limited to these generally applicable items. As you and your family establish unique personal goals—whether it is a remodeling project, vacations, sending a child to a specific summer camp, or upgrading to a nicer vehicle—you have your own goals that are birthed from your value set.

Most every one of those value-based goals costs something to accomplish. You can plan financially for those goals instead of waiting for them to become urgent expenses that upset the apple cart of your monthly bills. When we don’t properly plan for the things that are coming six to twelve months from now, we are often left unprepared and turn to a credit card or other form of debt.

Wastes

In time management, the non-urgent and non-important items are considered distractions. Financially, I call them wastes. They are expenses that are more than grossly misaligned with our visions, goals, and values. They have a destructive component that actually works against the priorities we’ve otherwise set.

Addictions are the foremost wastes in my mind. My extended family has loved ones who have battled gambling addictions. It’s not only costly in terms of dollars and cents, but it clouds the addict’s judgment and makes healthy prioritizing difficult. Gambling is certainly not the only addiction. It may be alcohol, drugs, pornography, food, or shopping. These expenses are beyond a dripping leak. Left unresolved, they can derail the entire train.

Getting Your Goals in Place

By the end of this chapter I want you to have articulated value-based goals that you can use in your financial planning. Value-based goals move you away from it-won’t-happen-to-me thinking. Instead of pretending that the future is not going to happen, you plan to create a future you want by setting goals, then moving toward those established benchmarks. These benchmarks will guide your spending, your savings, and your relationship to debt as they reflect the non-urgent but important things in your life.

Our First Two Goals

When Marco and I decided that we would plan for our future, we immediately set two goals. The first was to get out of debt. The second goal was to stay out of debt for the rest of our lives. Those goals overshadowed all the other smaller ones, and still do.

To avoid debt, you have to save money in advance of needing to spend it.

We knew that meant we’d have to pay off all our current obligations and simultaneously save money so that we’d have enough to cover every future expense. We’d never been diligent savers, so our process started by looking at the two types of expenses we knew we’d encounter in the weeks and months ahead—bona fide emergencies and planned expenses related to accomplishing our goals.

We learned the value of an emergency fund on Christmas morning, 2006. We got a phone call at 4:30 a.m. that Marco’s father had passed away. The funeral was being held the next day, so Marco had to get on a plane to Rio de Janeiro, Brazil, on Christmas Day. The ticket alone cost an insane amount—over $2,000—plus Marco had to take a week of unpaid time off to accommodate the trip. Thankfully, because we’d been building our emergency fund for about six months at that point, we buffered all those expenses without missing a financial beat. It was the first time we’d ever done that without credit cards. (It felt really good, in case you were wondering.) In chapter 10 I’ll provide details of how to build your own emergency fund.

Your Goal List

Apart from unpredictable emergencies, you have goals, plans, desires, and ambitions for things you hope to do and buy. You need to make a list of everything you want or will need to spend money on in the next six to twelve months. Make this a raw, unedited list that isn’t censored by self-talk that says “It’s too big of a goal or too expensive—don’t write it down.” In my experience, suppressing a desire for something does not make the desire go away. What typically happens is you find a way to meet that desire outside of your established plan, and it creates financial pressure because it isn’t planned for.

Trust me: It’s better to put every single desire and need on your list so you can make choices to accommodate as many of them as possible. I’ve been surprised time and again with how many things Marco and I have been able to accomplish with intentional proactive planning. I am confident you can accomplish more than you ever imagined possible if you are completely honest with yourself and your spouse.

Think through these different categories and jot down a list of likely or desired expenses.

Paring Back Your List

Now you have a laundry list of wants and needs. Your next step is to assign each one a dollar value and convert them into financial goals. “Save $750 to buy Christmas presents for my kids, nieces, and nephews next year” could become a goal on your list. If you quantify each item on the list, I suspect you’ll run into a problem. You’ll likely find that the total cost of fulfilling all your needs and wants is greater than your available income.

You have three choices at this point: You can incur debt so that you can spend beyond what you make; you can increase your income to cover those expenses; you can decrease your expenses to fit within your income.

I’m hopeful that before you made this list, you decided to avoid future debt. That leaves you to either increase income or decrease your expenses. Before you roll your eyes at me, sigh, and think, I hate lists like this because I know I can’t ever do the things I want. The things I need take up too much of my money, hear me out. Before you start hunting for a moonlighting gig, let’s see if you can find a different way. Maybe, just maybe, you can rework your list, provide for the things you value most, but do it in ways that cost less than what you’re thinking they’d cost right now.

First Why, Then What

It is important to separate your goal from the value that’s fueling it, because there is always more than one way to accomplish something—and some ways cost less than others. You may really want a new deck. You’re ready to take out a home equity line of credit to get it built. Your husband disagrees with you and the topic has become a source of tension between you. After reading these words, you stop and think about why you want that new deck and why you want it this summer. Why aren’t you willing to wait a year or two until you have the money saved?

What you want is your goal. Why you want it reflects your values.

You realize two things when you get quiet and honest with yourself. First, you love entertaining and want an outdoor space where you can do it. Second, your sister recently redid her backyard and you love her space. You’ve put pressure on yourself to keep up with her. Once you identify that internal pressure, you let that go. You don’t want to make financial decisions based on an unhealthy competitive drive. But your desire to entertain outdoors is real and legitimate.

Now you go back to your husband and instead of trying to convince him that you need a new deck, you share your desire to do more entertaining and explain why your current setup doesn’t work as well as you’d like. He can see and understand what you’re saying, since the two of you have hosted more parties, reunions, and gatherings over the years than he can count.

So you ask him, “Honey, can we think of four or five different ways we could meet my desire (to entertain outdoors) this summer while we also save for the deck I ultimately want?” The two of you brainstorm a handful of ideas, talk through the financial component of each, and devise a plan. This year you’ll buy an outdoor rug and a new umbrella for your patio furniture without incurring any debt. With those two things, you are more comfortable utilizing the deck you have. (Plus, as an added bonus, you’ve eliminated “arguing about the deck” from your list of marital issues.)

Now it’s time for you to go through your entire laundry list of goals and upcoming expenses to articulate the “why” behind each one. What is your motivation in desiring that thing? Why have you allocated that specific dollar amount for the item?

Let’s use our example goal to save $750 to buy Christmas presents for your kids, nieces, and nephews next year. Why are you buying Christmas gifts for each of those people? You like to bless your children and enjoy seeing the look on their faces when they get gifts they’ve desired. You give to your nieces and nephews because your siblings give to your kids. You actually feel obligated to do it.

After talking with your siblings, you all agree that buying gifts for every kid is a financial burden, so you collectively decide to draw names and give one child a $25 gift. That saves you about $250 in Christmas gifts this next year. You are able to do what’s most important to you—make your own kids smile—and spend less than what you had expected.

Communicating About Values

Right now in our life we have a lot of competing financial priorities. We recently bought a new-to-us home (yes, we took out a mortgage, but we have a goal and plan to pay it off in no more than fourteen years), and off the top of my head I can list a dozen things we need or want for our new house, including a storage shed, a new water heater, blinds for all the windows, a snowblower, a new central air-conditioning unit, and on and on and on.

The house isn’t the only thing we expect to spend money on in upcoming months. We’d like to take a family vacation this summer. We typically go to a friend’s cabin up north, but we would like to take our girls on a trip outside of Minnesota this year. Our oldest starts kindergarten in the fall. Her school requires a very specific uniform, so outfitting her will be a $300 to $400 proposition. Marco has a medical procedure he’s been waiting to have done that will cost nearly $1,000. We could use a few more sets of bed sheets—one for each bed in our house, since they’ve gotten tattered lately. Not to mention that we put almost $10,000 into our old house before we sold it, so we’d love to replenish our savings.

Big and small, we experience constant demands for our money. Sometimes it seems that when Marco and I look ahead to plan and discuss what’s coming, the list of goals superexceeds our budget. In those times, it often happens that Marco and I don’t immediately agree on which goals should get financial priority and which ones get delayed for a few months. Compounding the problem is my opinionated and stubborn nature that can drown out Marco’s attempts to express viewpoints that differ from mine.

Choose From Two

Like the woman who wanted a new deck and found herself consistently arguing with her husband about it, we have found that when we shift the conversation from what we want to why we want something, the tension diffuses. Time and again we’ve used a simple technique to facilitate this type of values-focused dialogue. I call it “Choose From Two.” It’s especially useful when Marco and I have a long list of competing priorities.

We make a laundry list of goals. Our list includes everything we could want or imagine spending money on or saving money for in the months ahead. Usually we’re in sync about the priority of some things on the list but disagree about other items. We take one of the contentious items and compare it to one other thing on the list. We each have to answer these questions about those two items:

Then we line that same contentious item up against the next thing on the list. We ask the questions again for those two items. We continue through the list, comparing the contentious item with each other thing and repeating the questions for each pair. Then we move to the next contentious item and repeat the entire process.

Through this choose-from-two exercise, we hear each other’s reasoning. I understand why he wants to spend or save for certain things, and he understands that from me. Then we can develop a plan that meets the most important needs, but does it in ways that are potentially different from what either of us first expected.

Yesterday a friend told me about a conversation she and her husband had. He really wanted to take a summer vacation to a certain city; she really didn’t want to. After she asked him why he wanted the vacation, he explained that a vacation is the primary way he unplugs and relaxes from his busy life as a lawyer. It’s how his dad disconnected from work when he was a child and he cherishes those memories. He wanted to go to that particular city because it is a place my friend and her husband had not been together as a couple. She resisted the idea mainly because she wanted a less expensive vacation so they could also get a new kitchen table, which is something they desperately need. They eventually agreed upon an alternate destination that will provide him the break and vacation he desires while costing less so she can also get the kitchen table she wants.

Protecting Me From Me

After Marco and I made our first set of financial goals, including a commitment to build a three- to six-month emergency fund, we had to start saving money toward them. This petrified me, as I knew that I was a threat to our success.

A few years prior, I’d sold a home I owned for a $70,000 profit. Yes, you read that correctly—$70,000. I paid off the remainder of my student loans and my car loan, then gave a significant cash donation to my church. I was out of debt and had $25,000 in savings.

That was the same time I moved to the Peruvian Amazon, where I lived and worked as a missionary for a year. I had financial partners who gave contributions toward my $1,000 monthly living stipend. Considering that my housekeeper, who worked six days per week, made less than $100 per month, $1,000 is a huge amount in that part of the world.

But it wasn’t enough for me. I didn’t see myself as limited to my monthly stipend. I considered my savings account to be an extension of my checking account and readily transferred money as I needed it. I put on large ministry events, bought the local church a variety of things, and outfitted the three-bedroom home I rented (and lived in by myself) with furniture and appliances. When I returned to the states after a year, I had less than $1,000 in that savings account.

Now that Marco and I had set financial goals, I knew that we had to minimize the possibility for me to sabotage our savings. Marco and I both knew that if we did not actually save the money we’d earmarked for our goals, we’d continue to live as if “it won’t happen to me.” We would not be able to get out and stay out of debt. We did two things:

Protecting You From You

Now it’s time for you to take an honest look in the mirror at your track record of saving money.

If you have any sabotaging tendencies, identify what they are. Think about why they exist, then make a plan to defend yourself from them. You need to be able to actually save money—large sums of money—if you are going to accomplish your life’s goals without constant financial pressure.

Quiz

Do you often have expenses come up that surprise and frustrate you? Here’s a quiz that may help reveal your own internal attitudes. Using the following chart, place a number after every statement.

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  1. I use my credit cards for emergencies and unexpected expenses.
  2. Every time I try to set money aside, I pull it back out of savings.
  3. There’s no way I can save for emergencies or expenses outside of my monthly bills, so I prefer to not think about them.
  4. I live in fear of my financial future.

Tally your scores. Your total demonstrates how strongly you hold the attitude that “surprise” expenses are indeed surprises.

0–6:
 This attitude has minimal influence on your financial decision making. Other attitudes may need addressing first.
7–13:
 This attitude is part of your financial decision-making process. For your long-term success it needs to be addressed.
14–20:
 This attitude strongly influences your financial decisions. It is a priority to change this attitude.

Discussion Questions

Here are a few questions to help you think through your own financial situation, by yourself or with a small group:

  1. Make your uncensored list of everything you will need or want to spend money on in the next six to twelve months, using the suggestions on pages 71–72 to trigger your thinking. If you are married, make separate lists.
  2. Now that you have your list of “whats,” talk about your “why” for each item. Listen to yourself and your spouse without judgment.
  3. Prioritize your list. If necessary, use the choose-from-two method.
  4. What are some creative ways you can satisfy your “why” without spending as much money as you initially expected?
  5. Identify, write down, and share with your group any sabotaging tendencies you can identify in yourself. What steps would work for you to defend yourself?