How to transform your attitude towards money challengesOct 19, 2013 | Leave your thoughts
Sociale needed answers to some tough financial questions. Everyone wants to be financially independent and debt-free but sometimes living within ones means is harder than charging that great pair of shoes to a 19.5% interest rate credit card. Debt causes individuals a lot of stress, but if managed properly, and within a budget, it is possible to be debt free! We sat down with Lama Farran, Personal Finance Coach and asked her our burning questions:
Sociale: Tell us about yourself and why you decided to start your own company.
Lama: Since I was a little girl, I knew that I wanted to work with money (I didn’t know the word “finance” at that time!) and I always thought that working at a bank would be the perfect place for me. So after finishing my masters in finance, I got 6 different positions, in 8 years at 2 different banks and none fulfilled me. Then, I went through a whole year of self-introspection, and my big AHA moment came: I want to work with money but most importantly I want to be of help to others. I have always been financially responsible myself and I’ve been doing a great job at creating my own budget spreadsheets for the past 15 years, so I realized that I want to teach others how to achieve this as well.
So here I am today, working with money while genuinely helping others, teaching them what I do best, without having a hidden agenda of selling them anything. At the end, I just had to create my own job to feel fulfilled.
Sociale: Living with debt seems like a never ending circle – how can people realistically get out of it?
Lama: You can either fake it or face it. What gets people in debt is the “fake it”, what gets them out is the “face it”. You have to stop the denial, be honest with yourself and most importantly have an action plan. A plan will be your roadmap to reach the “debt-free” side. It is definitely feasible but it takes commitment and discipline, and that’s what scares people of. But as they say, “no pain, no gain”.
Sociale: Why is it so important for women to be financially independent?
Lama: Traditionally, women were homemakers, so the person earning the income was the person making the financial decisions. Nowadays, a majority of women are in the work place, we earn our own money, and we have to be well equipped to make our own financial decisions. It is important for us to have good money management skills and not be left aside in the financial decisions.
Sociale: Do you suggest investing in a TFSA or in RRSP’s?
Lama: The simple answer is: it depends. One way to find out is to ask yourself “why am I putting this money aside?”. If you are saving to buy a car next year or to go on a trip in the near future, then definitely TFSA; if you are saving for a down payment on your next condo which you plan on buying in a few years, then RRSP might be a better option. If you are ready to forget about that money until you retire, then RRSP. It really comes down to the goal you are trying to reach with these savings.
Sociale: What do you recommend for people who want to start making more financially smart decisions?
Lama: The first step towards smart financial decisions is what I call Financial Self-Awareness. You have to be aware of where you stand today, numerically and psychologically. Let me explain. “Numerically” means you have to know your numbers: your assets, your debts, your interest rates, your cash inflows, your cash outflows,… “Psychologically” means you have to uncover your subconscious money beliefs which are driving your behaviors and your financial decisions without you even realizing it. From there, you have to see what is working for you and what is not.
I have to admit though, it is hard to evaluate yourself by yourself; this is where a money coach can help. I do numerous exercises with my clients to reach this self-awareness state. And I’m usually very straightforward when it comes to not being honest with yourself or making excuses for why you are in that situation. I believe it’s important for people to own their situation, take full responsibility for it and change the behaviors that got them there in the first place.
One of my favorite quotes is the one where Einstein says “We can’t solve problems by using the same kind of thinking we used when we created them.”
Sociale: How can someone reasonably stick to a budget when there are always so many unexpected expenses to deal with?
Lama: Sticking with a budget is not an easy task, but to help you achieve it, it is crucial to have an emergency fund. I recommend an emergency fund equivalent to at least 3-month worth of expenses. If you have such a fund, and a surprise expense comes up, you are not forced to blow your budget that month. So part of the money you set aside every month, there has to be a portion to build up your “rainy day” account.
Sociale: What should one pay off first; a low interest line of credit, or a high interest credit card?
Lama: I always make these decisions from a mathematical point of view: whatever costs me more in interest will get paid first.
Sociale: What are some money saving tricks that most people don’t know about?
Lama: 2 tricks come to mind. The first one is to sign up for loyalty programs, such as Air Miles or Esso Extra. They are free and you are shopping in certain places anyway, so might as well get points for it! All my car washes are free because I redeem the points I accumulate when filling up gas at Esso; with my Air Miles card, I had free movie tickets, free magazine subscriptions, free make-up,…
The second trick is to never pay your bills blindly and always check them for mistakes. I can’t even count the number of times I have found errors on my cell phone bill. One particular mistake kept showing on my bill for 7 months in a row and I had to call customer service 7 months in a row to get a credit. If I had not reviewed my bill prior to paying it and calling the company to correct it, I would’ve paid hundreds of dollars more for nothing.
Sociale: Can you explain what pay yourself first means?
Lama: Of course. You have to consider that you are your most urgent bill to pay. The logic behind this concept is if you wait until all your bills are paid, you will never get around to putting money aside.
So the day you receive your paycheck, you have to take a certain amount and put it in a separate account (like the emergency fund which we mentioned earlier). You determine with yourself the amount you are comfortable with; you can start with $25 and increase it with time. One way to ensure that you stick with it is to set up an automatic transfer, so you don’t have to think about it. And most importantly, make this account inaccessible from your ATM card to make it difficult to use it for your daily purchases.
Sociale: How many credit cards should one person have?
Lama: It comes down to how financially responsible you feel and how much you trust yourself with credit. I have seen people who don’t carry any cards because they are afraid they will abuse credit, so by precaution, they stay as far away from them as possible. So even 1 card in their hands would be too dangerous.
But you have others, who have 10 cards, pay them in full every month and never charge anything that they know they can’t afford.
So it’s really about how responsible you are using the cards you have.
Sociale: How can we better our credit score?
Lama: If you are in a situation where you have many credit cards and you are having trouble keeping up, make sure that you are at least paying your minimum payments ON TIME. Paying on time makes a huge difference in your credit score.
Sociale: How can we reach you for a one on one consultation?
Lama is hosting a 6-week course called “Understand and Heal your Relationship with Money” starting on Sunday November 3rd, 2013. For more information on how to transform your attitude towards money challenges, visit: http://maxworth-psysante.eventbrite.ca/
Grace Kim Photography
Tags: budget, credit, debt, finance, lama farran, maxworth, money, montreal, paycheck, rrsp, save, sociale, tfsa, workshop, workshops