Money is very tight in many families. We want so many things for our kids and for our family that it seems like there is never enough. This week, I had sessions with many clients who wanted to improve their financial situation. One of them earned $50,000 a year and owed $42,000. One was a single mother who had spent all her savings on tutoring. Another one spent a fortune on supplements and health professionals, and all the rest told me variation of the same story: money is tight.
Every family may reach a point in life when there is just not enough money to survive the next month. It is inevitable that some life circumstance will change the flow of money that we count on to manage our daily life.
If you go over your life and ask yourself when your supply of money was at risk or when it stopped entirely, you are likely to find that it happened a lot.
We were in this situation many times in our life. It happened when Gal’s company had a wave of redundancies, whenever his contract ended somewhere in the world and we had to move ourselves from one county to another (no income, lots of expenses), after September 11 2001, when Gal had cancer and took time to recover and when we had something big and special that ate into our savings, like going overseas to see our families. Every time we stopped working, our family was at risk of not having enough to pay the bills.
Saving for a rainy day was always our solution for those situations, but saving is never enough. Sometimes, a big wave comes along and wipes you out. Gal lost his job twice after we had bought a property. We are not fortunetellers.
No flight policy
Today, I want to talk about another strategy that has allowed us to manage the temporary lows and go back up financially. I learned this strategy from one of Gal’s plant managers.
His name was Don and he was asked to manage a huge manufacturing plant with 2,000 employees that was losing money quickly. His job was to improve the profitability of the plant enough to sell it.
When Don arrived, he introduced the “no flight policy”. He called all the department mangers to his office and said, “From now on, there’s no flights and no training”. The managers freaked out. It was a huge, international hi-tech company that did business all around the world. No flights meant they would not be able to do their job and no training meant they could not keep up with technology.
But Don was very determined and, in spite of the huge protest, he said in a calm voice, “From now on, there’s no flights and no training”. He also said that he wanted to approve every major expense personally.
This new policy made no sense at all. Why would a manager of his caliber occupy his mind with every expense? People were furious, but Don was not a usual person and in one year, he brought so much profit to the company that the company ended up keeping it, so everyone got to keep their jobs. His success was so phenomenal that the following year, the company sent him to do the same thing at another plant in a different county.
Do you think no one really flew? Do you think nobody got any training? Of course they did, as long as they could justify it well and convince Don it was good for the plant. So people thought 100 times before they spent money on anything and before they committed to flying anywhere and that saved the company millions of dollars.
I think Don was a genius.
Too many families try to get by using their credit cards to rent money (that is exactly what credit means), but that is not a solution. It only adds to the burden and can bring financial disaster. Families do not need to save millions, but if we use Don’s strategy, we can find things that are equivalent to flights and training. If we stop buying these for a few months (or seriously cut down), that will be enough to put some order into our financials and stop the flow of money out of our bank account.
How to implement a “No Flight Policy” in your family
- You have to be willing to walk the talk. It means you cannot enjoy your regular habits while others suffer. For a few months, Don did not fly either, and he was “the big boss”.
- Give up the desire to be loved by your kids at all costs. Your children may not be happy about your plan, but they will appreciate your efforts when they grow up and start having to save their own money. When you are in financial trouble, being loved by your kids and having a huge debt that is growing will only cause more friction in the long run. Stop it quickly. Get your priorities straight.
- Talk to your partner and decide on this strategy before introducing it to the kids. It may seem strange to you, but grownups find this strategy harder to implement than kids do, although many parents claim they cannot do it because “the kids won’t manage”. Children adapt. Get your partner on board first.
- Tell your kids the truth. There is no point lying to your children or giving them detailed description of your financial situation, but being honest and saying, “This is how much we earn, this is how much we use and we have to do something about it” is something that even a first grader will understand.
- Find cheaper places to buy the same things. When we did this, we only had to make small changes and suddenly we had a lot more money. Before we talked about it, I thought that going to the “green grocer” was cheaper than going to the supermarket. That was true, but after our discussion, I realized that going to the weekend/wholesale market was 50% from the grocer and did not take any more of my time.
- Discuss necessities and luxury with your kids and cut down on luxuries them for a few months. Get some ideas from the kids about saving money. When my kids were not happy, I showed them the budget and asked them to manage it for a month. It was enough to get them to stop thinking about themselves.
A list of family “flights” that can save you lots of money
- Eating out. Cook and eat at home for 3 months. It is healthier and probably costs a fifth of the price.
- Do not go to the mall at all for clothes shopping. No one will die from not buying another item. We have enough. We buy for the variety, but renting money to buy a pretty dress is a waste of money.
- Cut movies. Stay at home and watch TV instead, or stop watching TV and do something productive with that time. If you are desperate for some entertainment, go to the DVD shop on Tuesday (or whatever the cheap day is in your area), rent at the lowest price and save.
- Cancel or defer subscriptions and memberships. If you have a gym membership, take time off. Use a skipping rope, jog and do push-ups at home for a few months. If you have newspaper or magazine subscriptions, live without them for a while. There is enough bad news and negative messages about your body from other sources anyway. This should also free up some of your time.
- Stop private lessons. Sometimes, we need to send our kids to private tutoring, whether it is for school or for hobbies, like music. It is perfectly OK to say, “Sorry, kids, we just can’t afford this luxury”. If your kids really want something, they will be willing to pay for it from their own pocket or with their own work.
- Cut down on gifts. People are afraid others might think they have no money if they bring a small gift, but the truth is that if you have no money, it is better to be honest with yourself. Every time you use your credit card, spend your savings or take out a loan and give expensive gifts, you are borrowing money to make someone else feel better than you do.
- Cut holidays. Try to have a good time at home, invite friends over and send the kids on play dates. Go to the beach or a forest for hiking and spend the night at home to make your time off cheaper.
- Cut down on special food. People like rewarding themselves with special food. In our family, just looking at the supermarket bills showed us that if we stopped buying blueberries for 3 months, it would save us over $250. Blueberries are great and fun and healthy, but renting money to eat blueberries is silly, isn’t it?
- Stop buying cups of coffee. The girls who worked in the office with Eden used to buy 4-6 cups of coffee a day from a nearby cafe. Every time one of the girls went out, the rest asked her to buy them a coffee. Each cup was $3-4, which was $15-20 a day. In 3 months, they could each save well over $1,000.
- Stop buying your lunch at work. Bringing food from home is not free, but it is a quarter of the price of buying a simple meal outside, not to mention the health benefits.
- No pocket money for the kids. It is only fair that when money is tight, you cut your kids’ allowance. It is important that kids are not unaware, self-centered and inconsiderate. It is their part in helping make things better. In our family, we buy our kids all the necessities, so pocket money is all luxury by definition.
- Postpone big purchases. Try to distinguish between what you have to have and what you want to have. If the refrigerator is dead, buy a new one, but if your car is not the best, bear with this car for another 3 months.
- Cut down on facials, massages, manicures and haircuts. They are not necessities and it is a good idea to be a good role model. Giving one another a rub can be bonding and putting on simple creams and taking care of your own nails can be nearly as good as “the real thing”.
- Stop cigarettes and alcohol. These things are not good for you anyway and they cost a lot for a small reward. If you spend $13 on a pack of 20 cigarettes, for example, and you are a 20-a-day smoker, you are wasting $91 a week. That is nearly $1,200 in 3 months.
The good thing about this strategy is that soon enough, you discover that you can live with much less and that the extras build up very quickly. Saving is a great way to face some situations, but first, you need to stop the money from leaving your pocket, even if it means using drastic measures.
Only when you have spare money can you start saving.