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Is Your Financial Stash Keeping You Poor?

by Ryan Guina

The following guest post is from Neal Frankle, of Wealth Pilgrim. After reading the post, head over to Neal’s site and check out his free subscription options.

“I’d do anything to improve my financial situation except give up …..(you fill in the blanks).

Is this a sentence you’ve heard yourself say before?

Several years ago, a woman I met who told me she was in a desperate financial situation and needed help. She was right.

Her income was less than $3000 a month and she was spending over $4500 a month.  It doesn’t take a genius to project out the inevitable result of that equation.

When we looked at her expenses, it turned out that she was spending over $1100 a month leasing and flying small airplanes.  She just loved flying and told me she would not give it up.

This was a woman with almost no assets and very little income. In fact, her only major asset was her home and she was creating the real possibility of losing that home very quickly.

She had a reservation. She was willing to ask for help and take action on everything else other than the one thing that would have the most significant benefit.  Flying was her stash and it was going to send her to the poor house.

I bring it up because I think we all have our own reservations or sacred cows. I agree that being clear on our priorities is great and really helps clarify who we really are. But our reservations can sometimes really hurt us.

In a way, it’s similar to what people struggling with addiction confront.  They have their stash they don’t tell people about.  They would rather die than give it up, and in some tragic circumstances… they do.

Recovering addicts on the other hand, know they can’t have a stash – it’s too dangerous.  They also know they can’t have any sacred cows whatsoever.  They realize that they have to remain sober no matter what.  Their sobriety comes first every time.  No question about it.

So what can you learn from this? I think we all have to ask ourselves if we have some reservation about our financial lives.  Are you willing to do whatever it takes to improve your financial situation or do you have a secret that you’re not willing to share?  Are there one or two things that you aren’t willing to give up despite the cost?

Here’s a 3 step method that will help you get your priorities straight:

1. Find out if there is a problem or not. If you can afford your expensive hobbies, go for it.  But if not, it’s time to take action. You probably already know if your spending is out of line with your income.  (One subtle hint of this might be when you notice that the only people who call you are bill collectors).

2. Write down what is going to happen if you don’t fix the problem. Using the example of Linda, she was running a deficit of $1500 a month.  We projected out what that would mean for her in 4 years.  In her case, it meant she’d lose her home.

3. Decide if you are willing to pay that price. In Linda’s case, if she lost her home, she’d be forced to live with her son and she wasn’t willing to do that. When she clearly saw the cost of her decisions, she became motivated to take action.

My experience tells me that we have an endless list of wants.  It’s human nature.  The need to satisfy our wants is made greater by constant encouragement from television and other media outlets.  Nothing wrong with having wants. But just because we have wants doesn’t mean we can afford them.

By going through this process on a step-by-step basis, you’ll be able to identify those wants that you really can’t afford and have a process by which you’ll be able to wean yourself from them.

Have you had to go “cold turkey” on your stash?  What was it like?  Do you know somebody else who really should?


Published or updated August 4, 2009.
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{ 5 comments… read them below or add one }

1 Miranda

I love travel. However, since we decided a yard was the priority this year, we had to curtail our travel. The other stash my husband and I have is eating out. But, since we go to lunch and try to limit it to once a week, it hasn’t become a problem. You are right that we need to reconsider what we hold “sacred”, and decide whether those things really are more important than establishing financial freedom.

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2 Kreestee

Tim Horton’s coffee. While it’s cheaper than Starbucks, it’s still running me a pretty penny every day to the tune of $1.50/cup, more if I’m running behind and add a bagel to my order ($.85) Plus, my husband and I stop there for our weekend pick-me-up. I figure it’s running me close to $75/month. I could do some serious damage to my existing debt with that.

My compromise? I set aside $20 for spending a week – PERIOD. I used to have a spending amount *and* threw money away on coffee. I can choose to blow it all on Tim Hortons or to go to lunch with a friend or to save for a haircut.

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3 Neal@wealthpilgrim.com

Miranda/Kreestee,

Thanks for your honesty….the first step that is the gateway to freedom.

Nice work!

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4 ChristianPF

great article Neal – you’ve got me thinking now… When I started working my way out of debt there were lots of things i had to give up – I pushed a lot to the side – in order to be able to have it later – in greater measures. I think this is very important for people to remember when “giving up their stash”

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5 Paul @ FiscalGeek

Awesome Neal, and I’m with Bob, some sacrifice now is worth it for the end game. It’s the very indulgences or “stash” that got so many of us in the straits we may now be in. My stash was “hobbies, plural” I love hobbies, and it seemed the more expensive the better. I know find my hobbies in the form of free activities or enjoying all of the “stuff” that i’ve already acquired.

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