My long-time colleague Karen McCall published a fabulous post last week called “Saving Your Way out of Debt”, where she lists ten steps for breaking the vicious debt cycle so many people are caught in. I want to call attention to her second step: Stop the leaks by stabilizing debt.

McCall says that if you’re trying to get out of debt, you first have to stop using your credit cards. Gasp!  Not use a credit card? But she insists this is true, and I know you won’t be surprised that I agree with her. She writes, “This (continuing to use your credit cards if you’re trying to get out of debt) is like sitting in a boat with a grapefruit-sized hole in the side and bailing out the gushing water with a thimble.”

Yikes. What an image.

Indeed, it’s a very apt image. If you owe thousands of dollars to Capitol One, Discover or Macys, your very first step is to stop adding more debt. Of course this part makes sense. But what people underestimate is that it is nearly impossible to keep from adding to your debt load if you continue to use your credit cards. People will rationalize that they can, and indeed, must, use their credit cards. They say they will pay far more than the minimums and get out of debt. Or they will try to pay off in full all the new charges.

How is that working for you?

It IS theoretically possible to get out of debt while still using your credit cards, but it is the slowest and most frustrating way to pay off debt. And I can say that I’ve rarely seen someone pull it off.

Why would you do this to yourself? It is very unkind to you. Why, if you want to get out of debt, would you choose the slowest and most frustrating and cloudy way possible to become debt free? 

It doesn’t matter how smart you are– credit cards foster money fog. You charge things in one month that you pay for in another. And you have old debt and then your new charges. This all creates fog. And credit cards affect both our brains and our emotions. (Remember, people spend 20-30% more when they use a credit card because the money doesn’t feel as real since it is not immediately coming out of their checking account.) The bottom line is that as long as you use a credit card, you will not be forced to find a way to pay for your life with the money you currently have.

As McCall writes, you must first plug the leak—stop using your credit cards– BEFORE you start reducing your debt. You simply can’t get out of debt while you continue to put purchases on your card. You are going in a circle!!! You are paying on your credit card while you are adding to it.

Learning to stabilize- not add more debt—will change your life. If you stabilize your boat and plug that grapefruit-sized hole first, you can start to make amazing and sustainable progress.

Bailing out water with a thimble is very tiring. Really.

I’ve been looking forward to a certain Saturday morning in late December for a while. Why? Because I want to know if I can put new windows on my house this year. And I want to know if I can afford some extra landscaping help before my backyard turns into a wildlife preserve. (That’s just not my style.) Oh- and I want a lot more clothes this year. And maybe more of those three day weekends, where I actually leave the city. And I think I need more of this and I want more of that…

So  a couple of Saturdays ago, I finally sat down with my magic crystal ball. I was a bit nervous what I would see in the ball. For extra support, I stayed in my pink fluffy bathrobe, grabbed some of those Christmas cookies my mom made and brewed the best cup of coffee. For extra measure, I poured some eggnog in my cup, instead of milk. Then I called up The Crystal Ball and set to work.

(Lights darken, crystal ball begins to glow, getting brighter and brighter, mists swirl in its depth and begin to part, and I lean forward, peering into the future….)

Two hours later, I had all my answers. Well, I had a lot of answers and I wanted time to think. To feel. To journal.  To digest the future I had just seen. This future seemed to have several scenarios and I was going to have to make some choices. (I am reminded of that saying, “You can have anything you want, but you can’t have everything you want.” Rats.) And it’s true that you can’t change what you can’t see. Now I had “seen” it all. Yes, I would need to make some changes to my oh-so-beautiful plans for the year. So I poured another cup of coffee. With eggnog.

Each year I go through this ritual, and I simply can’t imagine living without a crystal ball. The crystal ball is my annual spending plan.  Some call it a “budget”, but I really hate that word and I don’t even let my money coaching clients use it. It’s a PLAN.  My plan. I create a plan every month to guide me through the month. Wow. It’s truly hard for me to imagine not having this monthly guiding light. But every December I take it to the next level and plan the entire year. I do for myself what I help my clients do.

I think about all the things I really want in the coming year, and all of the things I need. (I really need windows. I really want more travel.) I think about the reality of my life and what large expenses will come regardless of my love of them—car repair, my son’s orthodontist bill. I think about my goals and my dreams for the future.

When I work on my annual spending plan, I have to balance all of my needs and wants against the money I have coming in this year. Oh- that part. But there is a fundamental truth to money that doesn’t change: you simply cannot spend more money then you have coming in. Well, you can by using debt or draining your assets, but in the long run, there is great unhappiness and stress down that road.  So when I create my annual plan, I do indeed compare all of my desired (and undesired- let’s be honest here) outgo, with my projected inflow. 

Working with an annual spending plan is where art meets science. For 15 years I’ve helped people feel more in control of their finances, and hence their life.  It’s certainly true that money is not the most important thing. But I find that when people have a clear plan and have a way to actually follow their plan, they think less about money and can then settle down and focus on what is important in their life. I have definitely found this to be the case in my own life. 

Well, for now, I’m still working on my own annual plan. The crystal ball showed me several futures and now I do indeed need to make some decisions. I need to chart the course for this year. That’s the beauty of the crystal ball. It merely shows possible futures and outcomes. It shows me where I will be financially come next December if I do various things. Nothing is set in stone. I get to ultimately decide which path I will go down. Then I can relax and put some time into my hobbies, my family, my friends, my life.

I love the feeling of being in the driver’s seat of my own life.

The other day I’m watching television and I see this Chase commercial announcing that they now have a smart phone app that lets you know when your bank balance is getting low. They’ll “alert” you. The commercial shows a woman in the middle of a yoga class getting such an alert. She calmly extends her perfect yoga poise and uses her smart phone to transfer more money into her account. (From where, I wonder.) Thank goodness the bank let her know before she went into overdraft.

I’m not sure anyone has noticed this, so let me point something out: people’s handling of their personal finances have not improved since the advent of on-line banking. In fact, it’s gotten worse. The reality is that many people who used to balance their checkbook stopped balancing when on-line banking came out. There is this strange perception that the bank is somehow managing your account for you now that you can see your statement on-line. When you add to this the ability to put bills on auto-payment, many people have simply checked-out. Who needs to actively manage their personal finances? It’s all on autopilot…

Is this really how we want to run our finances? This is the definition of being reactive around money, as opposed to proactive. Here is how it is supposed to work: We are supposed to be in control of our money and know where it is going and how much we have.  But many of us feel foggier now than ever before. So many are so frustrated and don’t know what to do.

I fear that the world of electronic banking has a very dark side. I worry that it allows us to abdicate our power to the gods of technology. Yes, we are all very busy. And we tell ourselves that we don’t have time to manage our money. (Besides, the bank is doing it for us.) We’ve stopped paying attention as much as we used to. (And some of us never paid that much attention to begin with, I know.) And if our balance goes too low, well, now the bank will just let us know! Like Pavlov’s dogs, we simply react to the sound of the bell. Now we can pay even less attention! We can be totally reactive and just wait until our phone tells us what to do….

So let me plead with you for a moment. Whether you like it or not, money is one of the most important substances in your life. You need it to eat and generally provide for yourself and your loved ones.  It’s also likely that you work between 30 and 50 hours a week for money. Do you really believe that you don’t have time to spend 30 minutes a week managing it—tracking where you spent it or deciding where you want and need to put this form of life energy? Remember, money is simply a form of life energy. (See my previous post on three reasons that people stay in the money fog. As a money coach, I know that it is not as easy as simple deciding to get out. But I just had to rant about electronic banking for a moment!)

I worry for younger people growing up with on-line banking. Will they fall prey to the notion that technology can do everything for them and they don’t have to spend time deciding where they want this valuable resource to go? No one and no gadget can manage your money—only you can do that. Now,  I am not opposed to technology. I use technology to help me plan my income, spending and savings, and to track where my money goes. And yes, I pay bills on line. But I am in control of it. I don’t hate on-line banking.  I love being able to easily access my accounts. And paying my bills on-line beats licking stamps any day. But there is a right use of technology. Anything that beeps at you in Yoga class and causes you to react should be suspect. You are the driver of your financial life.

That faceless, nameless monster wrapping its numbing tentacles around you may be none other than: the Money Fog Monster. Run! Scream! Hide! But it has a hold on you….

What exactly is this Money Fog Monster? Well it doesn’t really like to be pinned down (or it would lose some power), but let’s throw out some questions to shine a quick light on it. If you answer no, the money fog has got you. I should know. I used to be in its grip!

* Do you know how much you spend eating out? On groceries? How much have you spent on clothes this year? What about your hobbies? What do you spend on gardening, books and other fun things? What have you been spending on your car?
* If you have debt, do you know all your debt balances (and what that money was used for?)
* Do you know your savings balances and do you know what your net worth is?

Those irritating questions point to the monster. And if you feel its tentacles curling up your leg, constricting your ability to see clearly (or breathe sometimes!) you are not alone.

Now, I’ll write other posts about escaping from this Money Fog Monster, but I want to look at the question: why do we stay in a fog? It likely sounds obvious that it would FEEL better to be clear. We often have a friend who doesn’t seem to live with the Money Fog Monster, whether she makes more or less then us, and we secretly envy her. So why do we live with the fog?  Three reasons:

1. We don’t realize we’re in a fog. Maybe we know we’re a little foggy, but it’s not that bad! Sometimes it takes an event to wake us up. Our debt deepens and we are seriously perplexed. It seems like we must be making enough money, so why the heck is the debt going up? Or where the heck is all the money??? It’s a big version of going to the ATM machine to take out 60 dollars and then a week later your wallet is empty and you just can’t remember where it went so fast. Often times, I find that people don’t realize just how deep the fog is until they start to come out. (By the way, because the fog can feel like it thickens when you try to get out of it, it’s one more reason why we back away, give up and stay in the fog. It can feel like the fog has a mind of its own. ) The Money Fog Monster would rather you stay foggy. Wait—is that a part of US that would rather stay foggy?

2. We don’t know how to exit. Let’s say we do know we’re in a fog. Lovely. So how the heck do we get out? I had a client once who said it felt like she had fallen down a well and couldn’t figure out how to climb out, and was terrified. When we started working together, she said she had this image of me standing at the top of the well, throwing her down a knotted rope and coaching her out. I’ve never forgotten that image. The truth is that we often simply don’t have the skills. No one taught us. Did your parents teach you how to plan where you wanted to spend your money? And then analyze what was happening? And then figure out creative ways to get your needs met so you didn’t feel completely deprived if you didn’t have enough? I hope you had those parents, but I’ve heard countless stories of people who learned nothing beyond a few financial platitudes. “Don’t go into debt. Here’s a credit card”, “You better live within your means”. “Don’t talk about money”. Seriously folks- learning about money is not something in the water supply. You won’t understand money if you were not taught about money. That is not your fault!

3. We are afraid of what we’ll see. Let’s hit this last one on the head. So often we are afraid of what we’ll see that we don’t want to escape the fog. It’s the whole “ignorance is bliss”. Or—“if I don’t know, maybe everything is okay.” Maybe. Money is a very emotional subject.  It is part of our very survival, so no wonder it is a scary subject. If we escape the money fog monster, we are often afraid of what awaits us on the other side—will we have to spend less? Is it possible we can’t have everything we want—or need?! Will we have to make hard choices? What about income? Will we see that we don’t make enough? How will this whole financial clarity thing affect our relationships? Our career direction? Gulp. No wonder we would rather live with that blasted monster!

I find that people write about money issues all time like it is not an emotional subject. “Here are the rules. Just do this.” But the truth is that there are reasons we stay in the fog, and no one seems to talk about that. So let’s talk.

Why do you stay in the fog? Which of these reasons spoke to you? For me, it really was all three. I didn’t realize how foggy I was until I started to climb out. And I really didn’t know how to climb out. But I found a great mentor. And in helping me climb out, she helped me face my fears of why I didn’t really want to climb out.  And now I coach other people out of the fog.

In the end, clarity is a far more beautiful thing. I can go on and on about how happy I am about being financially clear. But I vow never to forget all the reasons why it was so hard to face that damn money fog monster.

You know my motto: Earn more and spend wisely! So this post is about that second part- because it doesn’t matter if you earn more- if you blow it all at Target.  Well, thanks to the hot new field of “neuroeconomics”, I’ve learned another bit of shopping advice.

Recently, I wrote in a post about going to Home Depot and what happens when you buy something big and then follow it up by buying a lot of small things. Those small things really start to feel free, in comparison.

I mentioned that I have this habit where I always tell myself I can throw anything in my cart, but it doesn’t mean I’ll buy it.

Now I’m thinking I should rethink that habit, due to what neuro-economists call “the endowment effect.” Brian Knutson, an associate professor of psychology and neuroscience at Stanford, has written about this. Basically, he says that you should avoid hanging on to items you’re thinking of buying in a store. When you carry them around with you, they start to feel like yours. Then you experience pain when you think about getting rid of them. In essence, you will feel like you are “losing” these objects if you don’t buy them, because you’ve become attached to them.  They’ve done interesting studies to support this, all of which point to the same thing: when you have an object in your possession, it feels like “yours”, and you start to value it more then you should. It’s not really conscious.

If I hit Bed, Bath and Beyond and pick up the bamboo cutlery organizer which is right at the entrance to the store, and then proceed to carry it around with me for twenty minutes while I look at other things, well,…. It gets harder to let go of. I’ve pictured it in my kitchen and held it for a while. The point is that it is more painful to put it back then we realize.  If I had left it on its shelf and then gone back to check it out at the end, I would be less likely to buy it. But who wants to have to go all the way back to the front of the store? (Stores know this, of course. They steer you around more purposefully then we know.)

When my son was younger, he was into “Rescue Heroes”. (They are basically action figures for younger kids.) We went to Toys R Us one day to spend a gift certificate and his allowance. While there were many things he wanted, the Rescue Hero’s display was the first thing he saw. So he picked up Billy Blazes and carted him around the store while we were looking. Well, surprise- even though he found a Lego set that he had talked about for a LOT longer, he simply couldn’t give up Billy Blazes.  It was too painful to part with him. The toy already felt like his.

I guess we’re not that different. So I think that I’ll stop carrying stuff around in my cart while I “debate” buying it. Because it does start to feel painful to part with my stuff…

So I’m at Home Depot to buy a hundred dollar garden bench. This was the plan. Really. And while I was wandering around the garden section, I found these cute five dollar hangers for pots. Then I saw some discounted annuals. Three dollar Pansies. Even I can grow pansies. Throw them in the cart. I mean, really, it’s almost free. I was already spending one hundred dollars! Then I saw some ten dollar solar lights for my garden. Hey, they were only 7.99 on sale! Throw them in. Okay, now some 99 cent seed packets and a $5.00 hose attachment. I mean, come on, it’s only five bucks. I was there to spend a hundred. What’s five bucks?

I always tell myself I can throw anything in my cart, but it doesn’t mean I’ll buy it. So before I hit the checkout stand, I added up my “freebies”. They came to forty bucks. Oh, and the hundred I was already planning on spending.

What was going on here? I was experiencing a shopping phenomenon that actually has a name: It’s called “decreasing sensitivity to losses.” George Lowenstein is a cutting edge researcher in the hot new field of “neuroeconomics”, at Carnegie Mellon. And he warns against this. (I’m really fascinated by this new field of “neuroeconomics”. I just can’t help it. I’m a money coach who has a masters in “consciousness studies”, so it’s not a surprise, though perhaps a bit nerdy.  It’s a combo of psychology, economics and neuroscience. )

Basically, you want to be careful about buying too much in one store. When you spend a large amount at a store (my hundred dollars) then everything else feels cheaper there then it normally would. It’s all relative, right? So when you start buying a lot of small items, they start feeling free.

If you go to another store to buy these small things, they don’t feel so free. I doubt I would have spent the forty bucks there if I hadn’t been about to part with a hundred dollars.

I find this type of research really helpful. First of all, it tells me that I’m pretty normal. My brain is just as likely as anyone else’s to experience this. I’m really a pretty smart cookie. And now that I’m more aware of this “phenomenon”, I’m less likely to fall prey to it.

I could say, “Would I still buy all of this stuff if I wasn’t spending the hundred?” Or I could simply put it all back and tell myself that if I still wanted it, I could come back a different time and buy it. But that gets into delayed gratification, and that’s a different post.

For now, I’ll try to be aware of adding a ton of “free” things when I’m spending a hundred bucks.

I did it! I finally finished my new website about my money coaching/ Financial Recovery Coaching and I want to share it with you—www.seattlemoneycoach.com . (Yes, my clients are all over the country, but my actual office is in Seattle.) The Women’s Earning Institute has had a site for many years (and still does) but I’ve realized that the information on my coaching practice was very buried. That, and I think some people thought I stopped taking private clients because I do so much work on underearning issues. But underearning is just one facet of money coaching.

Actually, the number one reason people call me is that they are either tired of not feeling in control of their money (business or personal) or they just wish they felt—more in control of their money! And they want to escape the money fog, end the debt cycle, build meaningful savings and deal with emotional money issues. Oh yes—and earn more. So if you’re curious, I recorded a four minute video where I talk about my coaching practice. One of my gifts is helping people develop—and integrate into their lives–  their own P.F.P.- Personal Financial Practice. And self-employed people desperately need this too. (How many of us talk about developing our prayer or meditation practice?) It’s life-changing work. So check it out.  www.seattlemoneycoach.com (By the way, I do help train new Financial Recovery Coaches, so contact me directly for information on that.)

How does your money feel about how you carry it? Is money feeling well cared for in a lovely home that has room for all of it? I’m talking about your wallet.

Money is very important in your life, whether you want this to be the case or not. You spend about 40 hours of your life every week working for it! You have many, many places that you need and want to spend it. So does your wallet reflect something as important as this?

I often ask new money coaching clients if I can see their wallet. Many sheepishly drag out something they are not super proud of. It is crammed full of “stuff”, or it is almost empty because it’s what they grabbed that morning.

One issue I find is that people feel very financially scattered, and this carries over into their wallet habits. They carry their debit card in one place and their cash in another. (Is your cash stashed in nooks and crannies of pockets or loose in your purse?) They keep receipts here and there, and somewhere is their checkbook.

If this is the case for you too, then your money is feeling fractured. If you want to honor money, carry it all together. Carry your card in the same place as where you keep your cash and your receipts.

Certainly heading out to a night club may be an exception. Perhaps you only take your license, lipstick and cash. But generally speaking, use the same wallet every day. You may change your purse, but don’t change your wallet. It helps you keep your money life together.

I have a beautiful brown leather wallet. It is just the perfect size—for me. It has room for receipts in one place and cash in another. It carries my cards, and my checks. When I sit down to work on my money, all my receipts are in one place, along with my checks. I’m never hunting for my debit card and nothing ever gets lost. It is very easy.

Your wallet is the literal and figurative home for your money. If you want to honor money (and money is likely to stick around and increase if it feels honored) then consider its current- and most personal- home.

Consider a “wallet makeover” if:

* Your cash is crammed in your pockets or side of your purse
* You’re not sure where all your cash is
* Your debit card roves around
* You carry your checkbook in different places
* Your checkbook get’s rumpled and sometimes torn because it moves around
* Your wallet is not large enough to carry your cash, receipts and card (and checkbook if you write checks)
* You don’t like your wallet and are embarrassed to take it out

I tell clients that one of our first jobs is to help them get their arms around their money and come out of the “money fog”. If you want to get your arms around your own money, then a great place to start is cleaning out your wallet and carrying the same one with you all the time. Money will thank you.

Challenge: Is it time to buy a wallet you truly love? Or is it time to stop playing wallet roulette? Share your thoughts!

Five tips on negotiating a new car (and shopping with my dad)

Okay, let’s catch up. My old crap car was decaying around me and it was time to buy a newer car. I had decided on what I could afford and was ready to get serious.

(Click here to read part one, Mikelann Wants a New Car: I Want What I Want When I Want It!)

I was at peace with the prospect of buying a good used car. (Again, see my previous post on my initial emotional tantrum.) As they say, “every car on the road is a used car”. And I knew cars lost value the moment you drove them off the lot. And leasing a car is definitely a bad idea financially. (Leases only make sense if you have to have a brand new car every two years.) But I wanted a really good car- a car I loved and was in great condition.

I wanted a newer Honda Civic two door coupe. A little sporty car that was quality and beauty all rolled together. (Okay, and my new single life with one ten year old child meant I could leave the “family car” behind. Hee hee! )

I confess that I felt on my own. I had read about how many women were taken advantage of at car lots. I thought of renting a large silent man to make sure the dealer would treat me fairly. How irritating is that!

I started reading about how to negotiate for a car. Now, mind you, I do teach negotiation. I also felt the pressure of doing a good job- practice what I preach and all that. Well, the first key to negotiation is doing your research and learning what you can. But before I continue my story, let me give you five tips.

Five tips to buying/ negotiating a car:

1. Research what the car should sell for. Check out Kelly’s Blue Book value. The internet is a great place to do research on cars. You can input your zip code and the year of the car as well as the condition etc etc. (I started looking up the value of Honda Civics’ in my zip code, 2002- 2008 models)

2. When talking to a salesman, DON’T tell them how much you can spend. For example, never say “Well, I can’t spend more than $8,000.”

3. Don’t tell them you are most worried about the monthly payment. They can finance anything to make a monthly number look good. Of course you’ll pay a ton in interest.

4. Don’t tell them if you have your own financing, will use them, or you’re paying cash. Don’t bring any of that up until you’ve settled on a price.

5. Bring a friend. Bring anyone. It doesn’t have to be a man. But you’ll be talking to someone who negotiates for a living. You want someone with you you can talk things over with, privately. Someone you can bounce ideas off of or someone who can help walk you away from a not-so-great deal. Make sure your friend knows your bottom line so they can keep you on the straight and narrow. (And it doesn’t hurt if he or she can pretend they know something about cars…)

Like I said, I knew the stories about women and car lots. It’s a bad combination. So many of us don’t know *#$% about cars, and we don’t like to negotiate. Bad, bad, combination. (“Good girls” especially don’t like to negotiate. I know because I’m trying to reform my inner good girl- people pleasing ways.) I really don’t know crap about cars. I’m a little more comfortable with negotiation.

And now let me share that once I did my research on price, primed myself on car negotiating and located four cars I wanted to see…. I called my dad and convinced him to come with me. (Remember point number five- bring a friend.) Yes, he’s that amazing super man who has been working on my house and just installed two new electrical outlets in my living room “because you can never have enough outlets”. So true.

And I also confess that a part of me felt like I wimped out by bringing my dad. A “real woman” can go buy her own car! I really wrestled with this one. But I also reasoned that bringing my dad was like bringing a friend to an important doctor’s appointment. Do we really have to do everything alone?

I’m the one who did all the research on car prices and I would do all the negotiating. More on that in a minute. But to be clear, I brought dad for three reasons:

1. I really like my dad and we had a great time cruising dealerships and just visiting.
2. My dad knows cars. I don’t. And my dad knows Hondas, which is what I wanted to buy. At every lot I would pop the hood and stare at the engine and really scrutinize it like I knew what I was looking at. Yep, there was that bright shiny engine. There it was. Then when the car salesman wandered away, I would ask my dad what he saw.
3. I read one too many articles about women getting ripped off at car dealerships. And as good as I thought I was at negotiating, I couldn’t make up for my lack of car knowledge. As much as I wanted to prove my negotiating might, I wanted to also be smart. (Underearning is caused by our internal patterns around underselling ourselves- and one common way we do this is by not negotiating. But there is also real societal discrimination out there, to be sure. Get it?)

So off we went. It was interesting. One car salesman kept telling my dad that he should test drive my car. My dad actually did very little talking to them. But he carefully looked at the cars, the engines, the mileage etc. He knew my bottom line. I also said very little to the sales people. I played my cards close to my vest, not revealing what I liked or didn’t like. When a car salesman would go along for the ride in the backseat, my dad and I would talk about parenting and funny grandchild stories- give no information!

After four cars, we went to Starbucks and debriefed. It was obvious at that point what car was best- a sweet Honda Civic LX- two door coupe- perfect car fax history, only one prior owner, lower miles, great maintenance records, “Honda certified” etc . It felt brand new. (Though I’m sure they spray that “new car smell” around quite liberally. Hmmm. Just inhale it. There’s probably some mind numbing chemical in it, now that I think about it.)

I knew the Blue Book value and I knew what they were asking. Their price was quite reasonable, actually, and I could afford it even if they wouldn’t come down. But you’ve GOT to negotiate a car price.

So back we went. Dad played the somewhat “silent” bad cop in the back, sharing a few pre-planned reservations so the guy wouldn’t get to sales happy. (You and your friend can pre-plan this too. Have your friend show concern over the miles or whatever.)

“What are you asking again?” I asked.

He tells me the price and why it’s such a great deal.

“Hmmm. Well, as you know, I’m looking at some other cars too. Can you make me a better offer?” (Dad is silent during all this part, inspecting the office woodwork so the guy doesn’t get caught up in talking to him too.)

“Well, what were you thinking?” He asked me.

“Hmmm, would you consider—“ And I named a price about $1500 under his price and well under bluebook.

He hemmed and hawed. “Well, I’d have to call the owner on that.”

“Okay.” And I just sat there and said nothing more. (Dad is still inspecting the wood work and the guy looks at him anxiously from time to time but can’t get his eye.)

He dials the powers that be. “I’ve got this little lady here who’s looking for an early Christmas present, Jim…” (Why, oh why, do they always call you “little lady?”)

I actually got up and moved around his office while he was on the phone. I thought for a moment there was no one on the other end of the line, which wouldn’t have surprised me. But there was.

Long story short, he came back at $500 over my offer.

I drove my new car home that afternoon.

Confessions of a real money coach Part one

I was wearing my beautiful coat, dropping my son off at school on the way to my office. He turns to me and says, “Wow mom, you look so rich in that coat. Really rich! Too bad you’re driving around in such a clunker. Bye mom!”

And away he goes. Ah children. They have such a lovely but strange way of speaking the truth, don’t they?

Yes, my car was awful. In fact, it had come to the point where I hated my car. It was very old and I admit I’ve stopped properly maintaining it. Embarrassing but true! My dad would be aghast if he knew how often I checked that oil… (Sorry dad, I know you’re reading this.) And I had even stopped emptying the clutter out of it. (Clutter is a sign of many things…) I was silently protesting the car by simply not caring about it.

Now cars aren’t everything, especially to women. We generally don’t need the car to shore up our self-esteem, or project our image out to the world. But… I felt out of alignment. I was the director of the Women’s Earning Institute, a money coach, and my damn radio had stopped working.

Replacing my car has simply been on the back burner. I’ve been very busy for several reasons. (Running a business, single parenting, buying and rehabbing a house and getting that divorce does take time….) Maybe that is why when the urge to buy a new car hit me, it hit with full force, a full blown hurricane of NEED-

I need a brand new, bright shiny car and I need it right now! And by god I deserve it! I work hard, and this is absurd. What kind of message is this sending? I hate my car…..I’m sick of this piece of shit. I don’t enjoy driving around in it, and the truth is that I do like driving and I enjoy cars. I’m sick of feeling so deprived…. And this is getting embarrassing!

The wail was almost deafening, especially after I dropped my son off at school that day.
Ah, but I have training in this type of thing- emotionally fueled spending that can really bite you in the butt. So I calmed down and asked myself: what is really important here? What is the need beneath this need? Do I really NEED a brand new car?

Well, the real need was a better car- a more reliable car that I felt safe in. And the want was a car that I enjoyed driving. I do love driving. (I would never drive an automatic because that’s no fun! So there’s a clue.)

Okay, so the next question I would ask a client is: Is there a more creative way to meet this need that won’t cause you undue financial stress, or won’t derail you from your financial goals?

God, I hate those irritating questions. I mean really. Was my inner money coach asking me what I could afford? Boring!

But I also noticed that while I had started to shop the car ads and was starting to regularly cruise www.autotrader.com, and had even gotten myself up to Lynnwood Honda on a brave day to “test drive” a new and a used car, I wasn’t really about to pull the trigger.

Why? Because I hadn’t completed my personal 2010 annual spending plan. My life is so different now than even a year ago. I have a new mortgage, my son has started a martial arts program with a monthly fee, and the dentist wants us to see the orthodontist. (Damn! That is my “wusband’s” fault- my son inherited his father’s lower teeth. Mine are perfect!)

Oh, and I have other wants next year too. It wouldn’t be very fun to have a brand new car and then not be able to afford any fun three day weekends cruising around the peninsula…

Sigh.

So last weekend I completed my annual spending plan to look at how much I want and need to spend in 2010 relative to what I am going to make. (That’s a whole different post. I’m still writing that one.)

And I came back to those irritating questions: Is there a more creative way to meet this need for a new car that doesn’t cause me undue stress or won’t derail me from my goals?
Yes. The answer was to buy a decent used car. Hmmm. But I want a new car!

Could I buy a brand new car? Yes. But at too high a cost. If this was a year in the future, I may feel different. But I am in the middle of a divorce and am still settling into my new house. I can’t change those facts. It will get easier. But why would I stress myself out by adding a high monthly payment to my life?

Ideally, I would pay cash for a new car. But that would mean emptying out my safety net. And my savings has already taken a huge hit with rehabbing my house. And if I have no safety net- my cash fund designed to catch me if I don’t bring in my paycheck (I am self employed, remember) or I’m hit with an expense so huge that my regular monthly savings habit can’t cover it– I won’t be able to sleep at night! Gulp!

In a year, maybe I could buy a brand new car for cash. But by then my car may start leaving parts behind it on the road. (Being a Toyota, it will never truly die. It will just continue its slow process of decay.)

So I wrestled my annual spending plan to the ground during a long boring football game (my beloved Seahawks suck this year) and came up with how much cash I could put down from my savings and what monthly payment I would be willing to make. I looked at the cost over the whole year and came to peace with a number.

Then I marched off to my bank to take out a small auto loan. After much debate with my nice banker Brad (they weren’t super thrilled with my debt to income ratio because my mortgage is brand new, but my credit score is very high and I don’t carry credit card debt) they gave me a $10,000 car loan. And of course I could pay it off early with no penalty. And since I do have some cash, I may not use all of the loan. (My inner money coach watched this all very carefully, noting how the monthly payment would fit into my monthly spending plan.)

So now it was time to find a car and negotiate the price…

And again- gulp!

I do like cars, but I don’t really know jack about the inside of them. Hmmm. The prospect of cruising car lots on my own was daunting, to say the least.

(Curious what happened? Watch for part two. It’s good!)