The Cure for the Common Finances

Tips to Cure Your Common Financial Issues

For over 12 years of providing professional tax advice and helping my clients build financial vision, I’ve found there are three financial principles that are true for most people:

  1. The more you make, the more you spend.
  2. “Goals not written down are just wishes.” -Fitzhugh Dodson
  3. There is a quantifiable, mathematical solution to your financial difficulties, but the price you pay is usually emotional.

 The more you make, the more you spend

Most middle-class Americans don’t have an income problem, they just spend most of what they make. Many believe that getting a raise or making that bonus will solve their financial struggles. The truth is if they have money to spend, they will find something they want to spend it on. Being rich isn’t about earning more money, it’s having an income that exceeds your expenses. When people fantasize about being wealthy, they don’t picture all their money going into stocks and bonds, IRAs, money market accounts or other such vehicles for saving. They picture spending the money on a new house, car, boat or other fancy toy their neighbor bought.

I get it, saving money isn’t sexy, spending it is. You can get to the spending part though, I promise. You just need to earn it first. Unfortunately, the world doesn’t teach this anymore. You can buy just about anything on credit and most vendors have their own credit card. They advertise 0% interest for a set period, and once that time is over it can be anywhere from 10% to 25% compounding interest.

Compounding interest can work for you, or against you. When your monthly income exceeds your monthly expenses, and you allow that excess to work for you, you are on your way to independent wealth. Juxtapose that with the situation many people face. Their monthly income is very slightly greater than their monthly expenses, but they can always find someplace to spend it if they have some left over. This family never has more than $3,000 saved at any given time. This type of attitude will pervade even when income rises. Once the income increases there’s another purchase to be made.

The real struggles begin when you’ve spent what you’ve made, and an unexpected expense arises. So you turn to credit cards. You must spend the money, you don’t have a choice, the AC unit went out, the car broke down and you need it for work, an unexpected medical bill, all these things are necessary and they can happen unexpectedly. In these situations, compounding interest is working against you while you try to catch up.

Solve it!

The first step to solving this is to identify the real issues. To do that you need data. In our Family Finance Appointments we document and assess your monthly income, monthly expenses, liquid assets, illiquid assets and your current debts and corresponding interest rates. Once we have that whole picture, we can determine next steps and craft a plan to begin creating a positive excess in your monthly income vs expenses.

“Goals not written down are just wishes” – Fitzhugh Dodson

In your head you have financial goals and dreams. How many of these are written down? Dr. Gail Matthews of the Dominican University of California held a study with 267 participants ranging from ages 23 to 72 regarding goal setting and achievement. Specifically, she was able to document that participants were 42% more likely to achieve their goals if they were written down.

In my experience motivation can be a powerful tool for immediate change. New year’s resolutions are a great example. However, motivation alone isn’t enough. Over 25% of people abandon their resolution within 7 days. In order to sustain real change, you need something more than motivation, you need discipline. Discipline can be acquired in many ways, and if you’ve found yourself lacking financial discipline, I would invite you to give me a call.

The people who like to work with me do so because I help hold them accountable for their finances. Through our Family Finance Appointments, we write down your goals and on a monthly, quarterly, or annual basis, I hold you accountable for those goals. There’s a saying in business “what is measured improves”. We’ll create a plan, both of us will have a copy, and then we’ll reconvene for a follow-up appointment. During the follow-up we can review bank statements, alter the budget, and extrapolate data from your spending. By writing down goals and then reviewing your progress to these goals you will see improvement.

There is a quantifiable, mathematical solution to your financial difficulties, but the price you pay is usually emotional
In order to solve your financial difficulties, we first must remove emotion from the equation. We need to review the data as quantifiable math and go from there. Only after we’ve documented the quantifiable data can we then inject the emotion back into it. I’m not recommending you ignore your need for self-care, vacations or other unnecessary spending. I’m also not championing the removal of emotion from finances altogether. However, we must first identify, without bias, where the issues are. Our pragmatic approach of reviewing and documenting your finances does just that, and without bias.

The emotional price to pay can be quite the challenge. You must decide you want financial freedom more than you want all those streaming services you pay for monthly, new airpods, or the more expensive car. You must actively decide what you need and what you don’t. For example, my wife and I both enjoy going out to eat or ordering in. While Sarah is a fantastic cook, having three young children can make meal preparation very difficult some days. Over time we found ourselves spending more and more money on prepared food. We finally sat down and reviewed the outgoing monies and decided we didn’t need that prepared food. We would do what was necessary to enjoy our meals from home instead. However, we created room in our budget for one night per week to go out. While you could call this unnecessary spending it’s something both Sarah and I enjoy and will continue to do. Once we reviewed the quantifiable data it was an easy decision to make.

While I’m not much of a chef, this decision has led me to spend a little more time in the kitchen with my wife. We recently made raspberry pastries (a favorite of mine) and had a lovely time together. The pastries, mostly thanks to Sarah, came out sweet, crispy and delicious. We have since repeated that event and plan to do so again in the future.

Financially free

Freedom from financial worry is yours if you want it. No one is going to give it to you, but you can achieve it with the right tools. Be prepared for those unexpected expenses and make compounding interest start to work for you, rather than against you. Write down your goals, review them often and find some accountability for your efforts. Finally, put together a picture of quantifiable data and decide what it is you need and what you don’t, then pay the emotional bill and you’re on your way.

I promise you the peace you’ll feel from even just beginning the process of identifying your financial stresses and planning to solve them will increase your quality of life in ways you didn’t think possible.

One of my greatest passions is helping my clients build financial vision for themselves, their family and their business. Call Molen & Associates at (281) 440-6279 today and ask for me, Kevin Molen, and tell me about your financial worries. Alternatively, you can email me directly at kevin@molentax.com. I would love to help you create a plan to financial freedom!

Kevin Molen
Advisory Services Manager

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We have been using Molen & Associates for years for tax preparation. They are very professional and easy to work with. No notes! Give them a try!
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My first time using Molen Tax Services. I was very pleased. Everyone I encountered was very friendly and professional. I will be using the company next year.
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If you are wanting honest and sincere tax preparation, this is where you need to go. We have worked with other well know tax preparation companies and ended up at the bottom of their priority list because we chose not to get the Platinum advance or whatever it was called this year. We had to file a previous year along with our current year. Brittany was awesome. She was able to calm the nerves associated with filing taxes and tax preparation as a whole. She answered ALL of our questions and even asked questions that we would have never thought of. She made us feel that there was nothing to worry about, She was looking out for us and not to get us. We will be asking for her again this next year. I'm definitely recommending Molen & Asociates to everyone I know. The fact that they are booked solid during tax season only confirms the fact that they are good at what they do.
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Grateful to have found this place and its people. Grace and Kathy have been patient with me as a new business owner. They are supportive and attentive with their knowledge and time. I highly recommend any new business owner to use Molen for their bookeeping and tax services.
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Every year we have done business with Molen for our tax return prep and business advice, we leave with a sense of confidence that we have chosen the most qualified people to take care of us in all of Houston. We would like to extend our gratitude to Brittany for being thorough, friendly, and superb at doing her job. Although we have the option of handling everything electronically, we choose to go in for the final signing just to have that person to person friendly interaction.
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I have used Molen and Associates for at least 15 years or more for my tax preparation. They are very professional and very friendly in all aspects of the process. I'm on my second tax preparer and feel that shows you they must be a good company to work for. I'm very happy with how my tax return is completed each year and how honest they are, I have no worries the IRS won't accept my return. I highly recommend Molen & Associates if you are looking for someone to do your taxes.
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Professional, trustworthy, friendly; feels like family. Best team to work with.

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