The Daily Meaning
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Value and Context, Context and Value
Whenever we spend money, we shouldn't ask ourselves if we can afford it. We shouldn't ask ourselves if the price is low or high. We shouldn't ask ourselves if it's a need or a want. Those are fine questions to ask. The primary question we need to ask ourselves is how much value we are getting for the cost. If we're getting more value than the cost, it's probably worth the investment. If we're getting less value, probably not.
I'm particularly fond of one specific budgeting app. Well, let me clarify. They have two versions: one free and one paid. I'm fond of the paid version and severely dislike the free version. The paid version costs $80/year.
Whenever I meet with a new client interested in using an app or software for their budgeting, I highly recommend the paid version. Considering they are already paying me to coach them, the last thing they want to do is spend another $80/year on an app. I totally get it! However, I always add, "it will be the best $80 you ever spend."
It's not that I'm trying to get my client to spend money. Rather, I know how much value there is for their $80 investment. Going the premium version route will easily save them 18 hours per year (1.5 hours per month). More importantly, however, going the free route will likely end up with them giving up and quitting......which is a far worse outcome.
This brings me to the idea of value. If this $80 investment will save 18 hours per year, that works out to $4.44/hour. Is your time worth less than $5/hour? I didn't think so! Further, if this $80 investment could possibly be the make or break between you thriving financially and quitting in disgust, is it worth the investment? Ab-so-freaking-lutely! Put that way, it truly may be the best $80 you ever spend.
Whenever we spend money, we shouldn't ask ourselves if we can afford it. We shouldn't ask ourselves if the price is low or high. We shouldn't ask ourselves if it's a need or a want. Those are fine questions to ask. The primary question we need to ask ourselves is how much value we are getting for the cost. If we're getting more value than the cost, it's probably worth the investment. If we're getting less value, probably not.
But value is in the eyes of the beholder. We all perceive value differently, and value can also be contextual. Here's an example. You walk into a convenience store and see an array of bottled water products on the shelf. Some cost $.99, but another costs $5. The perceived value of that $5 water probably doesn't feel so great.
Later that day, you're watching your favorite baseball team at the ballpark. The sun is shining, it's 90 degrees out, and you're parched. That same $5 bottle of water suddenly becomes the best $5 you'll spend all day. The value changes when the context changes.
Back to the budgeting example. If someone is casually interested in budgeting but isn't really committed to making changes in their life, that $80 investment is like throwing money in the trash. On the other hand, if they are focused, determined, and ready to kick butt, that $80 investment may be the gateway to life change.
Context matters. Seek value.
Coke and Context
I was recently trading texts with an old high school friend. We usually text about NBA basketball, but other times we hit on parenting, work, relationships, and life. In this particular conversation, he mentioned the prevalence of drugs in his world. A bit confused, I started asking him some questions. He was saying things that I cannot relate to in any shape or form. He's my exact age, and we spent most of our childhoods living in the same tiny town, hanging with the same people. If I wasn't already disoriented enough, he dropped a comment that shook me, "Honestly, it's hard to meet a girl who doesn't do coke." That's a different type of relational challenge than I've struggled with.....to put it lightly.
I was recently trading texts with an old high school friend. We usually text about NBA basketball, but other times we hit on parenting, work, relationships, and life. In this particular conversation, he mentioned the prevalence of drugs in his world. A bit confused, I started asking him some questions. He was saying things that I cannot relate to in any shape or form. He's my exact age, and we spent most of our childhoods living in the same tiny town, hanging with the same people. If I wasn't already disoriented enough, he dropped a comment that shook me, "Honestly, it's hard to meet a girl who doesn't do coke." That's a different type of relational challenge than I've struggled with.....to put it lightly.
This is one of the beautiful parts about spending time with all types of people. The context of their lives can tremendously vary from one person to the next. It's wild to think about, sometimes. Whenever something happens to us, or we see/hear something, or we learn something new, we experience it through the context of our own journey. This is natural, and it's human nature. But it also limits our ability to see the bigger picture....and can prevent us from having empathy for others.
In our polarizing, black-and-white world, we leave little room for nuance or contextual answers. What's right for one family might not be suitable for another. This is where financial advice can go awry. We treat everything like it's carved into a stone tablet. If you do x, you're smart. If you do y, you're dumb. This type of mentality is causing some to sabotage their lives while leaving others completely paralyzed due to an internal conflict between what is "right" and what they know is probably a more fitting answer.
It's not uncommon for me to give one piece of advice to a family, then a few hours later give the total opposite advice to another. Context matters. Here's where I want to land the plane today. Regardless of who, where, and when you hear advice (financial or otherwise), look at it through the lens of your unique journey. The deliverer of the advice may be giving it through the lens of a different context, or perhaps their perspective is limited to their own tiny view of the world. It might be the best advice in the world......or not. There's no magic pills here. If all else fails, find a diverse group of people in your life to bounce ideas off. The collection of varying feedback you get will be telling, and valuable!
Debt Ceiling, Through a Different Lens
A few people recently asked me about the U.S. Federal Government debt ceiling situation. It’s definitely a hot-button issue in the news cycle, and many people have vastly different opinions about it. I find it helps to reframe the discussion and look at it as if the US government were just a family, using the same ratios as the government is dealing with. With that context, here we go!
A few people recently asked me about the U.S. Federal Government debt ceiling situation. It’s definitely a hot-button issue in the news cycle, and many people have vastly different opinions about it. I find it helps to reframe the discussion and look at it as if the US government were just a family, using the same ratios as the government is dealing with. With that context, here we go!
This couple has an annual household income of $269,000. It’s a pretty good income, for sure! However, their annual spending for needs and wants is closer to $361,000. Since they are $92,000 short and don’t have savings to pull from, they only have one viable option: put in on a credit card. They’ve been living off the credit card for many years now, having accumulated approximately $3.18M of credit card debt. Yikes! They know this probably isn’t the best approach, so they intend to do better in the future. But they always have enough money to pay the monthly payments, so they aren’t going to let it cramp their style right now.
Recognizing the need to have boundaries with their finances, they agreed they would never exceed $3.25M of credit card debt. They even shook on it and pinky swore! Never mind they’ve had this same discussion every few years for decades. They want to do better, but let’s face it, their annual spending is important! They don’t really see any other options right now than to borrow it, so they concede that’s what they need to do.
However, it’s causing a lot of tension in the marriage. Both spouses know they should do better but can’t agree on what to cut. One spouse wants to cut x, but the second spouse won’t budge on that category. The second spouse thinks they should cut y, but the first spouse is unwilling to let it go. Hence, they are at a stalemate. They certainly can’t stop making monthly payments on the debt (that would be irresponsible and reckless), so ultimately they will probably agree to increase their negotiated credit card debt ceiling. After all, they will definitely figure it out in the future…..or so they tell themselves. Thus, the madness continues.
Can you imagine if your friends, co-workers, or family laid that situation out over a dinner party? At best, you’d roll your eyes, and at worst, you’d tell them to get their crap together. But this is the exact situation we find ourselves in as a country. $2.69 trillion of annual tax revenues, $3.61 trillion of annual spending, and a $31.8 trillion debt balance. Last year alone we fell short of our budget by $920 billion dollars……which was funded by debt. Pure madness!!
We as families deserve better than this, and we as citizens deserve better from our leaders. While we can’t control what Congress does, we can control what happens under our own roofs. Let’s practice and model a better way. Maybe they will catch on someday……