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New -- Cash Flow Projector!!

We have a new feature in My Money Picture which will allow you to predict your future financial position.

My Money Picture has always been a terrific way to record and track your spending, as well as analyze spending patterns.   This enlightenment often leads to knowing which behaviors to modify to best reach your goals.

However, recording spending and discovering patterns takes time, and also is looking at the past.   We still feel this is the most effective way to reach your financial goals, but we wanted something that would give immediate feedback, as well as look forward.   This look forward can be very motivating.

Please look at the slideshow below to see how it works.   Click anywhere on slideshow to advance to the next slide.

The Cash Flow Projector fits in perfectly with the rest of My Money Picture, and we think you will love being able to peek into your possible future.

Is Cash Still King?

Is Cash Still King?
When it comes to personal finances I have a confession to make, I am rather old fashioned. Now don’t get me wrong, credit cards, bank loans and borrowing money have their place but if a person can’t survive on what they earn then eventually they will end up in financial strife.
Anyone who sees their borrowings or credit card debt increase has a twofold problem. Not only are they unable to live within their means but because their debts are increasing their interest payments are increasing as are their minimum payments leaving less and less to live on. The sooner they can start resolving the debt problem the easier it will be.  
Following on from the last post, most people can find $3,000 to pay someone to help them when they need to. In fact they can find more than this because the people they are paying to help them also start paying off their debts. So why can’t people find this money before they get into financial trouble?
Invariably the problem is their lifestyle, by that I mean they are just indulging themselves or buying things that they simply can’t afford. That might be a new HD television, an overseas trip or possibly a new car. These are often one off major expenses and if they were truly “one off” then maybe it wouldn’t be a problem. Unfortunately, these “one offs” might be why the money is borrowed to start with but they are not the reason they are drowning in debt.
They are drowning because they are spending more than they earn on day to day living and yes, day to day living includes interest and debt repayments. As shown above, when people need to they can find ways to save thousands of dollars. So why do people get themselves in trouble by spending so much?
Almost every guru has their own opinion. The wall Street Journal, in an article last year, put forward a number thoughts. Make of them what you will.
The comment about rising house prices rings true. Some would say Australia is in a prolonged housing bubble. When house prices were rising at their greatest everyone felt rich and were spending their winnings. Unfortunately, they were spending their increased house equity on day to day living. Once house prices stopped rising at ridiculous rates they all had to cut their spending to survive.
To me the comments regarding willpower are most interesting. A Stanford University study divided participants into two groups: those who thought willpower was finite and those who thought it was abundant. During stressful periods, people who believed willpower was finite reported more impulsive behaviors, including overspending.
Which raises an interesting question; if someone knows that they lack willpower with regards to spending why do they walk around with an almost unlimited amount of money in their pocket? No, not cash, money. At least until they have spent so much that those cards are all but worthless.
Think about it, most Americans have 3 or 4 credit cards in their purse or wallet. They also have cards attached to their bank accounts and possibly even debit cards. On any given day those cards have access to more than enough money to buy whatever they want, whenever they want, for now.
So why do people who know they lack willpower open themselves up to such temptations?
For some people it is a necessity, I know of a friend who lives on the road going from hotel to hotel. Without such cards their life would be much more difficult. For others it is as if the money is burning a hole in their pocket. They indulge themselves through their lifestyle. Nothing too big, a coffee a day at work $1,300, take out for the family once a week $1,500 and so on.
It is a bit like the straw that breaks the camel’s back, nothing by itself is a big deal but when you add it all up you have a problem.
This is where I think cash or similar has a significant advantage. If you put $100 in your wallet/purse and after just a day all you have is change in your pocket then you have a pretty good idea how much you just spent. If all you do is swipe or wave a card then that feedback is lost.

Now I accept that cash is not for everyone. Next time we will look at the alternatives.

A Salient Lesson

Everyone who comes to MyMoneyPicture does so for much the same reason. There is something about their finances that is troubling them.
For some it is the scourge of ever increasing debt, usually through credit cards. Others just know that they should be getting ahead more quickly but just can’t seem to save money.
The vast majority are certain they just don’t earn enough money, if only they could get a raise or find a better paying job, but is the real problem their income?
Human nature is a funny thing. Generally people are reluctant to accept responsibility for their lot in life regardless of what the issue may be. Often they have convinced themselves that they are doing as good as can be expected and there is little room for improvement while looking for a magical cure or solution. Sometimes they know what needs to be done but just can’t bring themselves to do it.
Meanwhile, while they do nothing to change what is happening, their situation continues to frustrate and depress them. At worst it keeps deteriorating until they feel there is little hope left.
Some sayings come to mind:
“The darkest hour is just before the dawn”
“To hit rock bottom”
Many self-help experts claim that until someone has “hit rock bottom” or “lost all hope” they will find it difficult to look at their situation and make the behavioural changes needed to fix things. That may well be the case but it doesn’t need to be.
What if the problem was as simple as spending less? I know, it sounds ridiculous, but is it?
Let me talk about a company in Australia that makes lots of money from people’s heartache and misery. The name doesn’t matter but I am sure that someone from Australia reading this can probably work out who they are.
The founder devised a business model that can be described as paying someone else to manage their finances”.
Now keep in mind that all these people are struggling with their debts and can’t find a way to get ahead. So how much do these people pay to have someone else manage their finances? The company charges a client fees of some $1,000 to set things up and about $40 weekly as an administration charge, so that is $3,000 a year. In return they manage the family bills and budgets.
Just think about that for a moment. This company is able to find $3,000 in a family’s budget when that same family is often drowning in debt and unable to see a way out of their predicament.
So how do they do it?
If the customer chooses, the company may consolidate any debts owed, but in most cases it’s a simple equation of money in, money out – all the client’s income goes into a new bank account, this income is used to pay the client’s bills and debts (including the fees) and then the client gets what’s left over as their allowance.
So does something that seems so simple actually work? Last year their clients paid over $30 million in fees, which works out to more than 10,000 clients. If it wasn’t working for that many people then I am sure they wouldn’t still be in business.  
What can we all learn from this?
Well, it should give everyone confidence that their financial position, no matter how perilous it may seem, is manageable and capable of being turned around.
So what is the salient lesson?
Maybe, just maybe, things can improve if we learn to live within our means and simply spend less. Yes, I know, easier said than done.

Next we will look at how we might be able to make this happen.

Recreational Spending --- Or Shopping to Relieve Boredom.

As I have mentioned in another post, I am reading a book by Josie Spinardi entitled How to Have Your Cake and Your Skinny Jeans Too.  In this book she mentions that the same psychological issues can manifest in different people as over-eating, over-spending, or other habits like drug and alcohol abuse, or even gambling.
Research on drug, alcohol, and food challenges shows that the number one predictor of relapse is the balance between obligation and pleasure in a person's life - the Have To's and the Want To's.  People whose lives were more evenly split between fun things they genuinely wanted to do, and tasks that were hassles to perform, were far less likely to relapse.  They were more successful in changing their undesired behavior.

In my own life, I often travel for work and spend weekends alone in strange cities.  The temptation is to spend my downtime strolling through a mall or going to restaurants.   This is eating and spending to relieve boredom.  I am often tired from the work week and I want to do something for me, but I am not sure what that should be, so I opt for the easy option of shopping or eating out.

My business partner Brett does not have issues with recreational spending or eating, and I wonder if this is because he is an avid sailor.   Also, like many Australians, he values having a full and balanced life and doesn't believe it is healthy to live a life of all work and no play.

I have worked with people who play golf, basketball or baseball on their weekends.  The rocker Alice Copper has said that he was only able to give up alcohol after replacing drinking with golfing.   I also know people who sew, scrap book, show dogs, ice skate, have cook outs with their families, or read for pleasure.   For me, taking a book or magazine to the beach or even the hotel pool would be a much better option than strolling through the local mall.  On one contract, a coworker and I would go hiking on weekends or walk around downtown after work to talk and get exercise.

Many leisure activities are quite inexpensive.   A book or DVD can even be free if you get it from the local library.  Alternatively, you could volunteer your time for a cause you believe in, for example walk dogs at the local animal shelter or learn construction skills with Habitat for Humanity.  Engaging in pleasurable activities will keep you from spending out of boredom.

In the book, Josie Spinardi says the solution to recreational eating or spending is to sprinkle activities you genuinely can't wait to do throughout your day, week and year.   She says giving ourselves permission to enjoy these things, and seeing the value in balancing pleasure and pursuit is key.    And the benefit is more than just smaller sized clothing or reduced credit card debt, it is having a full and enjoyable life.

Task-Oriented Coping to Avoid Emotional Spending.

Modifying how you cope with stress could improve your finances!

I am reading a book by Josie Spinardi entitled How to Have Your Cake and Your Skinny Jeans Too . The book advises to eat when you are hungry and stop eating when you are satisfied.  Pretty simple huh?  However the book explains how restrictive diets can trigger binge eating, and also how some people use food to cope with stress.

I am most intrigued by the stress-induced emotional eating, because many people also often emotionally spend. They don't call it "Retail Therapy" for nothing. After a hard day or week, we may reward ourselves with a shopping trip to help us forget our troubles. She describes this as "Emotion-Oriented Avoidant Coping Behavior" (we avoid the problem causing the stress and focus on a distraction like shopping or eating to feel better).

However, she writes that studies show people who use a Task-Oriented Coping Strategy (focusing on the problem and how to solve it) "enjoyed higher life satisfaction, attained more personal success, had more satisfying relationships and suffered from far fewer mental and physical illnesses."

Many of us, myself included, often try to counteract the feelings caused by stressful situations, rather than try to correct the actual problem or situation causing the stress. We may do this because we believe we have no power to improve the situation causing the stress, but is that true? And of course, after the thrill of shopping or eating has worn off, the stressful situation is still there, and possibly even worse.

Next time I am stressed, before I punch Macy's into my GPS, I will do a "Root Cause Analysis" (another term used in the book) to determine if there might be a "Task Oriented" way to cope directly and proactively with the issue causing me stress.

Focus on a Routine, Not Goals

I recently received a newsletter from The Motley Fool where author Morgan House said he was done with financial goals, and focusing on systems instead.

Here is an excerpt:

In place of goals, a lot of successful people have systems. What's the difference? A goal is a target with an end date. A system is a way of doing things all the time. Scott Adams, the genius behind the Dilbert comic, writes in his book How to Fail at Almost Everything and Still Win Big:
A system is something you do on a regular basis that increases your odds of happiness in the long run. If you do something every day, it's a system. If you're waiting to achieve it someday in the future, it's a goal.
He gives a few examples:
The system-versus-goals model can be applied to most human endeavors. In the world of dieting, losing twenty pounds is a goal, but eating right is a system. In the exercise realm, running a marathon in under four hours is a goal, but exercising daily is a system. In business, making a million dollars is a goal, but being a serial entrepreneur is a system.
Turns out there are many great articles on the web about this.   Just a few that come up with a quick Google search:

Oliver makes an especially good point, while also referencing Scott Adams' book:

As anyone whose employer foists “performance targets” upon them already knows, a fixation with goal-setting has many downsides. But Adams adds one more: when you approach life as a sequence of milestones to be achieved, you exist “in a state of near-continuous failure”. Almost all the time, by definition, you’re not at the place you’ve defined as embodying accomplishment or success. And should you get there, you’ll find you’ve lost the very thing that gave you a sense of purpose – so you’ll formulate a new goal and start again.
And, even Harvard Business School argues that the beneficial effects of goal setting have been overstated and that the systematic harm caused by goal setting has been largely ignored.

MyMoneyPicture is a system that helps us maximize our prosperity and financial independence.   The simple daily routine of entering expenses makes us more aware, and less likely to engage in thoughtless spending.

MyMoneyPicture makes this even more potent by also providing valuable feedback.   Experts agree, the best systems incorporate a feedback loop.  Feedback is essential to maximizing progress.

Click through the slideshow below to see some of the feedback features we've incorporated into MyMoneyPicture.

What People Are Saying About MyMoneyPicture

We were very pleased to receive the following emails from Alan from Canada:

Very recently I had emailed that I had made your system work for me as to the use of credit cards.

My 82nd birthday is tomorrow. I am fortunate as my wife tracks all bill payments in our home. As we moved to a new home over 18 months ago and after down sizing it was thought our monthly expenses would be less. We are also in a city in a different part of our Province.

After 6 months here, my wife became annoyed with me when I asked where our money was going. She had told me she keeps all receipts in separate envelopes and checks them off against the various statements. In other words, no day to day tallies. She had suggested to me that maybe if I used my Quick Books program I could assist her.

I found that not to be handy for me. Just too much to review. Then just over one week ago your program came to my attention. To date I have all our credit card info up to date & just showed her how it works. She is so happy as it has placed money owing onto both our shoulders equally. 

As we hardly ever have disagreements, we now have one reason less. Fantastic!!

I am now trying to category all our fixed expenses into your program & add another dimension to money that flows out. On this I will keep you posted.

I cannot believe how enthused I am about

Thank you so much, 


As a furtherance to my story, my wife and I sit at our kitchen table every 3rd day matching receipts and tracking totals. We never worked together on this previously. All was discussed but now it's shared. Better for us both. Still thanks to MMP.

After my Mother passed on and being the only child, it was necessary to sort her 92 years of personal belongings.  She had many. 

She came through the depression years and it was easy to see why the lack of money contributed to her family success.  There were no computers in her days.  In fact her schooling ended at grade 8.  However, she kept her own hand written  journals of logging every CENT in and out. 

She never owed anyone. Tracking money was her religion, it was her way of keeping her head above the line.

Many of us are not so careful, maybe some people don't need to be. Many won't take the time.  Your program offers to anyone the possibility to track CENTS. Should one be able to ask Mother, I am certain she would agree.
Best regards,

N.b. -- her journals actually had entries for one cent.