Tag Archives: planning

SMART Planning

We all know planning ahead can help us reach our goals more easily, but when it comes to actually doing the planning well that’s not quite as easy. What got me thinking about planning was listening to the latest podcast Planning Ahead again where Laura shared the way she has helped her son plan for his independent future. I have suddenly realised that time is running out for me to make sure my daughter has clear goals that will get her to a place where independent living can be her reality. It’s fine me going on about how she will be independent, but it simply won’t happen unless there is a clear plan about how the skills she will need are to be developed and learnt.

That’s not to say I’m completely unprepared and haven’t done any planning. There are many things we do as a family to prepare her. She would argue she is a bit like Cinderella doing all the cooking and cleaning around the house. Not quite true but over the last couple of years, there has been a focus on getting her to cook both for herself and the family. She even knows how the washing machine and dishwasher work.

I think listening to Laura talk about her son resonated because she has got him to exactly where I hope I get my daughter to in a few years: he’s just about to leave full-time education equipped with many of the skills he needs for independent living. More importantly, he knows exactly what the next steps will be. He has avoided that going off the cliff edge you will have heard mentioned when it comes to what happens to our children once they finish full-time education.

There is no doubt that one of the main reasons for this success is the level of planning that he and his family have put in. To quote Laura, “We never concentrate on the present, it’s the future you’ve got to always be thinking about.”

So, a great idea but how to do it? Laura’s strategy was to sit down and make a list of what her son wanted to do, at least in terms of what job he might do. This is the big one really because a key part of independence is always going to be linked to a job. So, making a list of all the areas they may want to work in, then going through the list together and considering each option, very honestly, makes sense. This is a conversation I have started with my daughter, but I need to do it in a more structured way.

In terms of really getting goals written down with a structure, I plan to use the S.M.A.R.T approach. This stands for Specific, Measurable, Achievable, Realistic and Time-Bound. You may have seen this acronym before but if not, the idea is to set goals that have all of these elements. So, a goal I might set with my daughter would be  “Cook a lasagne for the family without any help by the end of this year“.

This is a very clear goal even down to the dish she is to cook so passes the specific test. It is measurable because we will be eating lasagne if she achieves it. It is achievable because it is based on what we know about her cooking skills and that is that she is ready for this next step. It is realistic also because we have been working with her and she is already doing a lot of the preparation and cooking by herself. It is time-bound because we have said exactly when we want her to have achieved this.

I think using SMART goals will work really well for my daughter. She likes to know what’s happening in her life so that’s specific and measurable covered. Achievable and realistic are in part down to us as parents, we will have to make judgements on what she is ready to do, although the big issue here is that we must be careful not to underestimate her abilities.  Time-bound is very important too. Like I said earlier, I can tell the world how I want my daughter to be independent, I can believe it but if I’m not really working to a plan to achieve it then it’s very unclear when it might happen. I do have a vague notion I would like her living away from home by 25. So, setting a time frame to achieve certain skills will ensure she is always moving forward towards that independence.

What goals to start with? As I mentioned above, work will be the main thing that needs careful planning.  I do plan to put in other things as well including skills around daily living. The example above is an actual goal but I’m thinking there will also be other goals linked around this such as shopping independently to buy all the food she might need to make a meal. We are having some challenges with social media at the moment, so there is bound to be a goal around that too.  Budgeting and dealing with money will also need some clear goals.

Of course, any plan I do make is very likely to be interrupted by unexpected events, or by a realisation that my daughter can do more than I think she can, or that some of the goals set for her need to be delayed or extended.

Using this clear goal approach has helped Laura enable her son to be independent but in a very structured way. This “helping hand” approach is a tactic that many parents use to help guide the way for their children, and it’s something that allows them to gain the confidence they need to live a more independent life. It’s one I plan to replicate and use with real purpose. It’s time I was more SMART.

Going To The Movies

Last weekend I went to the movies with my daughter. Some father and daughter bonding time Hollywood red carpet with starsmade better by snacks during and dinner afterward of course. We saw The Greatest Showman – a film all about big dreams, financial risk, and belief.  Things I need to go with my big vision for my daughter.

Before we discuss that belief in those big dreams, let’s talk about how we got into the movies using the CEA Card first.  This is for those in the UK only but there may be similar schemes where you are and if there are please let us know so we can share them. In the UK, it is relatively easy to get just fill in a form which you can find at www.ceacard.co.uk. Some of the Rows of red cinema or theater seats in front of white blank screen. Vector.online booking systems don’t have a place to add this card the so occasionally you might need to buy your tickets at the cinema. As I showed it to the usher at our local cinema, he said to me it confused him why the carers get the free movie pass rather than the children; I felt like saying, with a smile of course, “yes but I put up with a lot too”.

The Greatest Showman tells the story of a man who also had big dreams, took a mountainous financial risk, and despite the hardships along the way ended up at a place he didn’t expect but one that gave other people happiness, joy, self-fulfillment and pride along the way.

Just what we are all trying to do for our children.

Sometimes we need belief when all logical reason says we shouldn’t expose ourselves so much – I certainly feel this a lot of the time.  Few of us would’ve picked our paths if we had a choice, A magnifying glass finds the word Can among many instances of Can't symbolizing a unique positive attitude and resilience to defeat the odds and achieve successbut sometimes I find the rewards of our “little victories” are greater than we might have experienced if our lives had been (quote) as “normal” as every other parent.  But that doesn’t change the fact that we sometimes need belief.

Belief in our children’s ability and belief in the plans we have made for them.  I know the responsibility of planning for my daughter falls on me and my wife.  If they don’t work, it’s us who have shaped her future.  A thankless responsibility but honestly one taken on willingly. I think when we have children we all change suddenly we have another human being to care for to be responsible for. Of course, as our children grow up they push us away just as we did to our parents. But the big difference is while my daughter may push me away I can’t really go away. I need to stand beside her as invisible as I can make myself. I plan to interfere in her daily life as little as possible whilst planning her future without me as much as possible.

So, when it comes down to it I need self-belief and faith that the financial and other plans I Walk Of Fame Type Star, Vector Illustrationmake for my daughter are good. It’s a risk like the greatest showman’s circus. But I have to have faith in what we are doing. If we don’t believe in her future then we can’t expect others to and most importantly for her to truly believe in her own independent future.

When Inflation Is Your Friend

Child holding paper house in hands against spring green backgroundBuying a property is the goal of most of us but it seems so daunting – huge price, mortgage, debt.  As parents we might feel even more daunted because we face extra costs looking after our child with additional needs. Added to this, we are also likely to be trying to figure out how we can leave our child something, anything so they are not completely reliant on the government to live their lives.  Quite frankly, it all seems overwhelming.

So buying a property can sometimes feel like another massive hurdle.  In the UK prices seem to rise continuously, and this is also true for other parts of the world.  But if it’s feasible, leaving an asset like a property is one brick (if you pardon the pun) of many in the plan to leave our children financially healthy.

Yet a figure like £200,000 is a big number, many more times than average salaries.  The question is: how can we make this number smaller?  I don’t have an answer to that, but with a bit of knowledge about inflation it will seem smaller if you intend to live in that property for a long time.  With inflation, in real terms, that £200,000 value will half in value over the years.  That is, inflation can make it easier to pay off your mortgage.

Before we look at the maths, let’s think back to when our parents took us on our first holidayInflation notes going into grinder coming out as coins
when we were children.  I don’t know where you went or what it cost, but let’s say it was two weeks wages.  Let’s say it was £200 back in the early ’80s.  That £200 bought a week’s worth of fun for the whole family.  Today that £200 would barely buy your same family a day out with a meal at the end, let alone a whole week.  Getting the picture.  As prices rise and wages go up, money is worth less.

And so it is with property.  To buy a property in the beginning is more expensive than rent.  You not only have to pay the interest costs of the mortgage but also pay some back to the original loan.  You have to stretch yourself to buy insurance and do whatever repairs yourself, out of your own pocket.  But once you get in to the property, and with a little time, it starts to pay dividends.

Rents rise with inflation.  Mortgages rise with interest rates and fall when interest rates fall.  But the actual cost of that property, in real money terms, falls with time.  Inflation makes that £200,000 seem like only £100,000 in actual cost out of your pocket terms.

Let’s talk about inflation more.  Inflation is the percentage that prices increased as an average over the year.  There are several different ways of measuring it, depending upon how politicians want to make the figures look good for their own ends.  But let’s agree that inflation is a simple measure of how much prices when up in a calendar year.  Let’s say from the 1st January to the 31st December of that same year.

If they went up by 5% that means a loaf of bread that cost 1.00 when you made your New Year’s breakfast (assuming it wasn’t in the January sales!), then come the end of the year when A green percent or percentage symbol in a shopping cart to represent comparison hunting for the best or lowest interest rate or inflation affecting prices for products you want to buyyou’re planning your New Year’s Eve party that same loaf would cost 1.05.

Providing you got a pay rise of 5% you’d be no worse off.  However, if your pay only went up by 1%, as it has for many public sector workers in the UK, you’d find prices are going up faster than your income and there only so much belt tightening we can all do.

But inflation can be our friend too at least when it comes to property.  In financial terms there is a rough rule of thumb called the Rule of 70.  This is a formula to determine how many years it takes the value of money to half in real terms.  It is:

70 divided by the annual rate of inflation   =   number of years value of money halves

For example,

70 divided by 5% inflation   =   14 years for the value of money to half

Model house on a stack of coins representing high prices on real estate marketTo relate that to a property purchase of £200,000, this would mean in 14 years the money value in real terms would be £100,000. This means that when you think of how much you owe on your house it’s no longer the original sum of 200,000 but actually closer to £100,000 – half in real terms.  Why because in 14 years time what we think of today as £200,000 is only worth £100,000 in terms of what we can purchase with it. This means that your mortgage payments although they may still be around the same amount, but in real terms when you look at your total income they will be an awful lot less.

And of course the actual value of the property would have increased, quite a lot if current house prices keep going up as they have at least in the UK and Australia and some parts of the USA. So your house might be worth £300,000. So the key is to get on the property ladder and hang in there.

Now obviously i’m not suggesting that anyone should buy a property just because inflation is rising.  There are many other considerations and of course higher inflation also means higher day to day living costs which may impact on the ability to meet those mortgage payment.  You should take independent financial advice from a regulated advisor.

But why tell you all this?  Well many people, at least in the UK, have been put off purchasing a property because the prices seem crazy. Yes, they are but you have to balance this desire not to join the crazy people with the knowledge that if you can afford to get that deposit together and meet the monthly repayments, then in the long term buying is still a good option.  Your home can also be one part of the financial legacy you are planning to leave to your child with additional needs so they are assured of a secure financial future.

Dealing With Debt

When I held debt, debt actually held me. It held me pretty tight actually. Each month I had my living expenses and right next to that was my debt repayment. Perhaps it should have been called debt burden. That’s how it felt like to me.

As I mentioned before in My Biggest Budgeting Mistake, I was in my early twenties when I hit my credit card a little too hard. I was fortunate enough to be young, free and single, and so it was a matter of six months or so of watching what I spent and not using that bit of plastic until I had got myself back to a zero balance.

But today I know my ability to pay off any debt has changed. I have children and they are not cheap. Getting out of debt now is so much harder than it was then. Child with euro money. Business concept.How much it costs to have a baby?Budget cuts are harder to find; it’s not a case of a few less nights out, especially as like many parents we don’t get that many nights out anyway.  In simple terms, £100 per month spent on credit card interest (or other debt interest) is £100 that I would not be able to spend on securing our families’ future.

I would rather that £100 be used by me than given to a bank. Of course I’m not saying banks are bad. Without banks we wouldn’t have got a mortgage to buy the home in which we live. But I’m not keen on giving banks interest payments for anything but a mortgage. Dead money spent on interest payments harms my long term financial security

In Why Compound Interest Is Sexy  I talked about the positive benefits of rolling over interest on the interest on the interest. That is, we get extra money on your interest, and then we get even more extra money on the interest each year. The same also works in reverse. If I had a credit card debt that I couldn’t pay off each month, the interest on the debt compounds each month, and I keep paying interest on the debt each month over and over again until it is finally paid off.  A credit card with the name Go Broke Quick showing money flushing down the toiletBefore I know it, I could be paying anywhere between 18% to 25% on whatever I owe. No wonder financial institutions allow easy access to credit cards, and keep sending me letters in the post wanting to extend my credit limit and offer 0% balance transfers… and I thought it was just me they liked!

But the banks aren’t to blame because I know what’s happening. I know that using a credit card or taking a loan isn’t a good idea. So the obvious answer is for me to not have debt, and to get rid of any I do have to take back control of my financial life and financial future.

There are two ways to approach paying off debts according to the experts. The first is logical. The second, psychological. The logical approach is to pay the minimum balance required on all debts and then put extra money on the debts that charges the most interest. The psychological photo of tooth wheel mechanism with imprinted arrows and EMOTION, LOGIC concept wordsapproach is to pay off smallest debt first  (while still paying off the minimum amounts on all the others). The idea is that we get a quicker feeling of success by seeing a debt disappear quite quickly. Personally I prefer the psychological approach as I like to see tangible progress and feel like I’m moving forward.

I genuinely believe that paying off all debt, except for mortgage debt,  is the first thing I need to do to secure my and, more importantly, my daughter’s financial future. There are other family benefits too. The money I would have spent on interest payments can be spent the things that the whole family enjoys.

Next week, in part five of this mini-series, I share some ideas on how to save for the medium term to enable the longer plans become a reality.

I would love to hear your views on debt – I’m sure I’m not the only one that’s been there.  Please do this on our Facebook page.  Journey Skills is a resource hub  where we love to start conversations and learn from each other.

More From The Planning Ahead Series
Three Months Living Expenses
Emergency Fund
Budgeting Mistakes

My Biggest Budgeting Mistake

Was thinking I’d arrived.  There I was in my early twenties, just moved to London with a well-paid job in IT.  That was the 80s.  We all (my friends at least) spent on stuff – cameras, burning moneygadgets and whatever we wanted.  But the credit card bill soon caught up with me.

I was months paying that baby off!  I hadn’t arrived.  I was a financial fool being paid too much.  And like any other financial fool I thought so long as I could pay the minimum payment on the card each month, I was ok.  But even back then London costs were high, rent and travel and going out.  I eventually did come to a point when I realised I had to control my spending.

I hadn’t really thought much about the word budget, except occasionally when the UK government announced a new taxes on fun in the budget.  And I don’t think my  parents were any different to other parents: they paid the bills and didn’t share the details with us kids.  But I realise now they must have had some form of budget.

Gradually I finally dug my way out of my credit card debt.  But I’m not sure I learnt many lessons.  For years I have had what they refer to as to much month at the end of my money. Luckily I have managed to not go back into any real debt; of course I’ve had car loan (now paid off) and I do have a mortgage but I have avoided major credit card debt. But I never got any real control over my money until we decided to track our spending.

We had started to worry about the future for our daughter, what would she do? Where would she live? The usual stuff. So finances become a bit of a focus. On top of that we wereroad to nowhere utterly sick and tired of getting nowhere.  Budgets, tracking spending, always seemed to me like making life boring.  If you have to count money so hard you can’t be having any fun.  But by then we were realising that because of a lack of money we weren’t exactly having a lot of fun or living the life we wanted either.

We spent the first month just making a note on a spreadsheet of everything we spent.  Nothing else.  Not trying to control our spending.  Diligently logging everything, and then being appalled at the end of the month when we could see how much was being spent on things we did not actually need.

We did this for a second month.  By the end of it we could see patterns emerging.  Wasted money here, there and everywhere – definition of waste: not getting any enjoyment out of the spend or it not being part of the essentials like food, electricity or mortgage.

The third month we set up a budget.  We divided our income for all the things we needed to pay for that month.  Mortgage came first.  Then the bills.  Food .  A guess at what we would spend going out.  And a mindful attempt to not squander money on things that didn’t add to our lives.

We didn’t stick to it perfectly.  Our guestimates still needed refining.  But what we did get was a sense that we were in control of our money.  As the months passed, the budget got better and better, and we felt even more in control.  We have now got to that stage where, having taken control of our budget, we can actually put money into savings quite easily.

So what I’m really saying is that my biggest budgeting mistake was not having a budget.  A budget gave me back control over my own destiny, and I know that’s a big word!  But when I’m not in control of my money, like many others I worry.  My mind drifts.  When my mind is all over the place I am not in control of my own destiny. (Maybe this says too much about me being a control freak!)  But I know I’m happier when I’m not worried.

And even now, as I feel we have our budget under control, we still track our spending.  Technology helps. We use an app called Wally to track spending.  We log food shopping, petrol, going out, everything. Then transfer it to a spreadsheet to get our monthly totals.

I don’t think there’s any right or wrong way of doing a budget.  And it’s not as hard as it sounds.  All it takes is to log everything we spend, and then make rows on a spreadsheet for each thing we spend on – rent/mortgage, electricity, gas, water, travel, food, and going out.

Over the next six weeks in this Planning Ahead series I will share more about what we do and how it has helped us.  More importantly how it is helping us plan for the future for our daughter. But for now, if anyone wants to give me feedback on what you think about budgets, I love to hear.  Even if it’s just to prove to myself I’m the weird one.

Post your thoughts on our Facebook page and use #budgets before your comment so we can all follow the conversation.

No Debt Holidays

dreaming about summer holidayIt’s coming up to the summer holidays for us here in the UK and so holiday planning is in full swing. I’ve been listening to the Dave Ramsey Show podcast  recently, and his golden rule about borrowing.  He believes, ‘Cash is king, and being debt free has taken the place of a BMW as the status symbol of choice.’  And I know what he’d say about borrowing for holidays.

Those of you in North America might already know of Dave Ramsey.  He has a syndicated talk back radio show in which he dispenses money advice.  If you live in other parts of the world look for the ‘Dave Ramsey Show’ on iTunes or Stitcher. More often than not he berates his callers, My personal favourite  ‘Are you sure you want to do that?  That’s like inviting Murphy and his three cousins Broke, Desperate and Stupid to come live in your spare bedroom.’

I must admit in years gone by I’ve often invited Broke, Desperate and Stupid to live in my spare room.  I did the wrong thing of drawing money out of our house mortgage to fund a Cracking piggy bankfamily trip to Australia – my justification? the girls needed to see their mother’s homeland.  But not anymore.  Although I’d already started to come around to Dave’s way of thinking, even before I heard him he just helped confirm my on idiocy.

The problem I had, which maybe some of you can identify with is, wanting the holiday my income couldn’t afford. To quote Dave again I need to remember to ‘Act your wage.’   Off course I told myself it is for the greater good, that the family needs a break. That my daughter with additional needs deserves a fun holiday (which she does). But actually what she really deserves and needs more is a secure financial future.

My solution, not based on rational thought, was to take money from the mortgage or put it all on a credit card.  But it’s at times like these I should have done the maths. I should have taken out the fact sheet they gave us when we signed up for the mortgage; that we skipped Throwing Away Money into a binover because we just wanted to buy the house.  That small print that tells me  something like for every pound, dollar or euro your borrow, you will be paying back to the bank 2.4 times this.  That would have reminded me that the 3,000 holiday was really going to cost me 7,000+ when I had fully paid it back.

I should have remembered that credit cards aren’t the answer either.  Their annual interest rate is often close to 25%, which again adds extra charges to any holiday costs especially if I don’t manage to get it  paid off in full very quickly.

The answer is, and thankfully I am ready to accept it now , to save gradually throughout the year.  Budget.  Do what my parents’ did.  Put a set amount into a savings account depending on where we are planning to go so that when the time comes to book the holiday the money is there.

To be honest I have always believed in avoiding debt for anything other than to buy a home. But over time I started to ignored my inner voice telling me debt equals interest payments. I completely forgot that  interest payments are money I am not able to use towards helping my family and especially safeguarding the future of my daughter with additional needs.

In the long run, I know that to give my daughter the best I can means looking after myself ladder to the sky and successfinancially.  Before I help others I have to help myself. As Dave tells me very week ‘Live like no else today, so you can live like no else tomorrow’.

I’m not suggesting for one moment that you or I cancel holidays already booked but I am suggesting that we should all think before we put holidays on debt.  I need to think more before I act, to build long term financial security, so all the dreams I have for my daughter, with additional needs, to live an independent life are affordable dreams.