$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ WEALTH HEALTHY WOMEN [TM] Healthy Attitudes ==> Wealthy Women [TM] Volume 2, Number 4 September, 2001 $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ WELCOME to Wealth Healthy Women [TM], a free e-mail newsletter for women seeking greater financial freedom and well-being. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ IN THIS ISSUE: 1. Note From Your Editor, Lynne - Credit Card Debt 2. Article: Five Steps to Overcome Overspending 3. Spotlight: Bottom Line - Personal 4. WealthHealthy Announcements ************************************************************ Note From Your Editor Do you remember how, just a couple of years ago, our economy seemed "to die for?" Stock values were soaring, companies were expanding rapidly, even new graduates were commanding good if not great salaries. American consumers were doing their part too--new cars, cutting-edge computers, mobile phones, private schools for the kids, adventure vacations, designer shoes, you-name-it. It's still unclear which way the economy is turning as we head into the Fall of 2001. But with the economy slowing over the past year -- which has meant reduced business spending, increased layoffs, and other related financial consequences -- a longstanding, hidden problem has emerged: Many Americans are maxed-out on credit cards. Major publications such as Newsweek ("Maxed Out!" August 27, 2001); Reader's Digest ("Staying Ahead in Tough Times," August, 2001); the Washington Post ("Seven Steps for Climbing Out of a Budget Hole," by Jane Bryant Quinn, September 2, 2001); and Bottom Line -Personal ("The Average Family Owes Over $8,000 on Credit Cards Alone," June 1, 2001) have carried articles recently on this serious by-product of the "convenience of plastic." Buying on credit may explain why consumer spending stayed strong despite the gloomy reports of economic slowdown. In addition, a Wall Street Journal article ("A Refinancing Boom Helps Explain Strength of Consumer Spending, July 26, 2001), points out that Americans have also been borrowing on the rising value of their home, using windfalls from refinancing for "goodies" as well as to pay off other debts. The bottom line? Americans have been overspending. Seriously. While many have not had to pay the piper during boom times, the ugly consequences are now rearing their heads during down times. If you -- or someone you know or love -- are in this situation, take a few minutes to read the feature article "Five Steps to Overcome Overspending." Or, consider joining in on a free teleclass, "Overcome Overspending Now!" See the WealthHealthy Announcements section for details. $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ Feature Article: Five Steps to Overcome Overspending So you have debt. Maybe you don't have debt yet but are heading in that direction. Or, maybe you haven't opened your credit card bills lately so you don't "know" that you have a problem. Whatever your situation, debt is HEAVY. I mean emotionally heavy. Whether you are actively thinking about it or suppressing the worry and uncertainty, debt takes its toll. Nancy, a client of mine, noted "It's like there's a black shadow on the edges of my mind all the time, just waiting to leap out. All the bills I have yet to pay...it's awful. I don't see any solutions." Sandra feels the weight of shame. "People see the outside -- my new car, new top-of-the-line laptop. I look on top of things. And I tell myself that I need to look successful for my business. But I feel like I have this nasty little secret, that I'm maxed on my credit cards. I worry that somehow the secret will get out and people will think I'm a real fraud." In order to deal effectively with debt, Nancy and Sandra first needed to look at their relationship with money, specifically, how they spent money. Through coaching clients like Nancy and Sandra, I've identified five steps to this process. $ STEP 1: Am I overspending? I would guess that most of us would immediately answer "no." We all need to eat, get around, have a place to live, make phonecalls. Nancy's situation may sound familiar: "I rarely go out or spend money on myself. I can't figure out how I'm supposed to cut out anything." Let's go back to the question: Are you overspending? If you are spending more than you bring in as income, you are overspending. It's that simple. It's not a moral judgment, it's a fact. Step one is: Face the fact without judgment. $ STEP 2: How much am I overspending? This step is pretty basic. Add up your sources of income and your monthly expenses. If you have expenses that you pay once a year, divide that amount by 12 and add it to your monthly expenses. Subtract expenses from income; you'll have the average amount that you overspend per month. (And good for you if you earn more than you spend!) TIPS: * Many books on personal finance contain worksheets for Monthly Expenses that you can use for this step. * Group individual expenses by categories such as Household, Insurance, Transportation, Health\Medical, Fun, Savings, Debt Payment, Gifts, etc. This makes it easier to see where you are spending your money. * Rate each expense as "Essential" or "Discretionary." $ STEP 3: Why Am I Overspending? I see three broad groups of overspenders. One group is like Nancy - barely getting by. They aren't extravagant, but don't seem to make enough to pay for even the essentials. Credit cards can become a regular way of getting by. Unfortunately, the interest begins to build up and debt increases. One mental mindset that can be an obstacle for those barely getting by has to do with what is considered "essential." We develop our financial beliefs, attitudes and expectations based on our life experiences -- in our family, with peers, and significant others. For example, Nancy "learned" that being an adult meant owning a house, having the paper delivered daily, making regular long- distance calls to family and friends, giving gifts for birthdays and special events, having plenty of insurance, among others. These "essential" expenses, and how she defined them, went unquestioned. The second group of overspenders are compulsive spenders. In her book "Overcoming Overspending," Olivia Mellan gives insights into the motives that underlie overspending -- to show affection to yourself or others, to relieve guilt, to obtain peer approval, to get revenge, to snag a bargain, to show power or superiority, to fill an insatiable need, and for the thrill of testing one's self against the odds. While not a compulsive overspender, Sandra certainly felt the push of her desire to be approved of and to demonstrate power through what she owned. (If you're interested in issues of compulsive overspending, Mellan's book is a good resource.) The third group is characterized by a more recent cultural mindset about money. This mindset was well-expressed by an interviewee in the August 27 Newsweek article "Maxed Out!" Jen, age 29, carries $8,000 on credit cards and a $438 per month loan on her Saab -- on a $40,000 income. She states "Just because I don't have the cash for something doesn't mean I shouldn't buy it. I don't think debt is a sin. I'm living in a style I want to become accustomed to." Sandra had some of this philosophy, too, until she had a number of business setbacks which put her into some embarrassing financial situations. $ STEP 4: What is maintaining my overspending? Typically, it is denial or lack of awareness, ambivalence about changing patterns, not having the necessary tools or skills, or not taking the step to move into action. For those of you who read Wealth Healthy Women, Issues 1.1 and 1.2, we discussed a stage model of change. Denial or lack of awareness is part of the first stage, Precontemplation. Ambivalence is characteristic of the second stage, Contemplation. Fear may cause you to avoid looking at your financial situation. Anger, resentment (why should I have to change my lifestyle?) and guilt are also common emotions at this stage. The third stage is Preparation, which includes identifying more constructive attitudes and expectations, as well as skills, necessary to make changes. Finally, we all need some reason or way to get moving on action, the fourth stage. $ STEP 5: What do you need to do? This step requires knowing where you are in the change process. Reading this article may be a first step toward breaking into denial. Completing Steps 1 and 2 help move you further down the path. If you are in Contemplation, spend some time on Step 3 to understand why you overspend, and the feelings you have about money as well as changing well-worn habits. Perhaps you are in the Preparation stage. Analyze your situation. What areas of your financial life are you on top of? What are your weaker areas? Where can you redefine what's "essential?" Can you see specific areas in your monthly expenses where you can cut back? Do you need to find some resources, such as reading materials, or assistance such as a financial planner, credit counselor, or money coach to help you proceed to action? Finally, if you are ready for action, here are some tips from the experts: * Identify situations where it's easy to overspend such as buying from catalogues, impulse buying at the grocery store, having cash in your pocket from the ATM, making long-distance phonecalls. Decide how you want to change the pattern and implement it. For example, wait a week to send in catalog order forms to see if you still really want the item; grocery shop with a list; take a certain amount out of your paycheck for two weeks; use a phone card (ideas from Bottom Line - Personal). * Stop using credit cards - may be essential for compulsive spenders. * Set up a monthly spending plan. * Begin to reduce high-interest credit card debt. Put any bonuses, refund money or extra savings into lowering this debt first. If you can, transfer balances to a lower-rate card. * Consider taking a personal finance workshop or hiring a personal coach who can help you to set goals and develop effective strategies for reaching them. Mellan, O. (1995). Overcoming Overspending. New York: Walker and Company. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Keep in mind a key element of the WealthHealthy philosophy: INFORMATION ABOUT YOURSELF IS EMPOWERING. Often, information can initially feel dissettling or uncomfortable. Think about that as a good signal--discomfort can be the energy source for change, if you can take a step back and "read the data." Consider taking a FREE WealthHealthy teleclass on "Overcome Overspending Now!" Examine your spending patterns and learn how to gain financial balance in a friendly, supportive environment. See the WealthHealthy Announcements section for more details. $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ Resource Spotlight -- Bottom Line - Personal Have you heard of the publication, Bottom Line? My brother gave it to me as a present, and I've loved it. Marketed as "America's inside information magazine," it is an information-packed, highly readable magazine that is 16 pages in length (just right for me!) and comes twice per month. It covers financial topics ranging from commentary on the current market through tips for tax deductions, opportunities in the stock and mutual fund markets and ways to simplify your finances. In addition, there are articles on business, nutrition, health, cool websites and other life tips. All articles are brief and to the point. Bottom Line offers a website and weekly e-mail letter for subscribers. Bottom Line - Personal; Subscription Center; PO Box 58446; Boulder, Colorado, 80322.** **The information presented above is not intended as an endorsement of the publication or products discussed in its articles. If you would like to share information regarding other financial publications with the Wealth Healthy Women [TM] readership, kindly send the information to Lynne@WealthHealthy.com. $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ WealthHealthy Announcements FREE WealthHealthy Teleclass on "Overcome Overspending Now!" Examine your spending patterns. Identify where you are in the stages of change. Develop strategies to begin changing unhealthy to more effective spending patterns. Join other like-minded women in an informal, interactive 50-minute class--easily accessible by telephone from the convenience of your home or office! This teleclass will be offered twice: Thursday, September 13, at 12:00 pm (noon) EDT, and Tuesday, September 18 at 7:00 pm EDT. Register by contacting Lynne@ WealthHealthy.com. Please put "Overcoming Overspending" in the Subject box of your e-mail. Include your name, phone number and e-mail address in the body of your e-mail note. You will then receive a confirmation of the date and time, and further instructions for accessing the special phone line for the call. $$$$ To hear a 10-minute description of the WealthHealthy approach, as well as a bit about me, you can call 1-212-461-2660. If you are interested in coaching, simply e-mail me at Lynne@WealthHealthy.com or call me at (202) 387-5923. Please include your name, e-mail address, phone number and brief description of your interest in being coached. $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ Pass this newsletter along to friends, family, and colleagues who also may be interested in moving toward greater financial freedom and well-being. They can get their own free subscription by going to http://wealthhealthy.com and signing up - it's as simple as typing in their e-mail address. Or, send an e-mail to whw-request@WealthHealthy.com with the word "subscribe" in the body of the letter. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ NOTE: Wealth Healthy Women [TM] is intended for informational and educational purposes only. It is not a substitute for financial, legal, accounting, psychotherapeutic, or other professional advice and consultation. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Copyright 2001 Lynne Hornyak All rights reserved. The above material is copyrighted but you may retransmit or distribute it to whomever you wish as long as not a single word is changed, added or deleted, including the contact information. However, you may not copy it to a website without my permission. Reprint permission will be freely granted upon request. Advance written permission must be obtained for any reprinting of this material in modified or altered form. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ CONTACT INFORMATION Lynne Hornyak, Ph.D. WealthHealthy.com Phone: (202) 387-5923 Fax: (202) 986-8980 e-mail: Lynne@WealthHealthy.com Web: http://WealthHealthy.com