After reading Carl Richards simple but powerful book, The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money, I realized that a better title for my ebook would have been, The 10 Simple (But Not Easy) Truths About Money. As Richards says, “We often resist simple solutions because it requires us to change our behavior.” Thus, the behavior gap.

Richards displays a true understanding of human nature with his words, but also with his disarmingly simple sketches that portray powerful truths about people’s behavior around money. You will recognize yourself in many of them. With amazing insight into how our brains work, he uses real-life stories and humor to show how we are our own worst enemies when it comes to money management. He also offers up great advice on how to make better money decisions.

Some of my favorite “behavior gap” insights include:

• Investments don’t make mistakes. Investors do.
• Figure out which emotion is the bigger issue for you—fear or greed—and invest accordingly. You can’t have it both ways.
• Planning for your financial future is a balancing act rather than a single-minded pursuit of the highest return.
• There is no such thing as the best investment.
• Planning for your financial future is personal. A good plan will be unique to your situation.
• No one knows what the future holds.
• Our real task is getting to know ourselves and our goals, making choices aligned with those goals, and adapting to the surprises that are bound to come along.
• Financial decisions are almost always life decisions. Before you decide on your financial goals, you need to choose your life goals.
• Focus on your personal economy and stop worrying about the global one.
• Our deepest instincts will tell us that money doesn’t mean anything, it’s simply a tool to each our goals.

Two thoughts kept running through my head as I read Carl’s book: “I wish I had written this” and “All of my clients need to read this.” Even if you don’t have time to read the book, flip through and take in all the sketches. They tell the story of our behavior gap just as well and may just motivate you to stop doing dumb things with your money!

The recent Bay Bridge closure is a reminder that life is short and fragile. Photo by Michael Macor/San Francisco Chronicle

The moment I heard about the Bay Bridge near-catastrophe….I thought oh, my God, that could have been me, my husband, or any one of the many people I know and love who cross the Bridge regularly. As it turned out, I did know one of the people who was on the bridge that day.  Lucky for her – she walked away with 4 flat tires, a totaled car, and frazzled nerves – but she was alive.  We all admit that “life is short” but when we say this we are thinking of our normal life span and yes, it goes by too quickly. But life is also fragile and we have no control over so many things – including whether we’re driving on the Bay Bridge at the moment it collapses.

What we do have control over, is how we choose to live day by day, and also how we prepare for the inevitable day of our passing. There’s a reason why so many positive-thinking, self-help, spiritual guides suggest writing your own eulogy as a way to get inspired about how to live your life. This exercise forces you to think about how you want to be remembered….and if you are living that way now.  Many of us get caught up in the busyness of the day-to-day, and never step back to see if all that activity adds up to a life we are proud of.

Think for a second about those you’ll leave behind.  The kindest thing any of us can do for the people we love, who will inevitably be devastated by losing you,  is to plan and prepare. Execute a will and a trust. Decide who will be the best guardians of your children. Make sure the designated beneficiaries on your retirement accounts are up to date. See a financial advisor about life insurance- do you need it?  Let someone you trust know where the key to your safe deposit box is  and where to find the combination to your home safe ….store your important documents and make copies for a trusted friend or advisor.   Live lightly, when you buy stuff and store it, think about a loved one walking into a room or closet and having to decide whether to keep or toss, recycle or sell your belongings.

The Bay Bridge near catastrophe was scary and inconvenient but sometimes that’s what it takes to motivate us to make positive changes and to take care of business.

Take good care.

Money, unlike apples, doesn't grow on trees. Remember hearing that growing up? It's true.

A recent article in Barrons, “Boomer Consumer” got me thinking; first, about my own clients and their particular situations, and second, about a key point that rang true: “The recession has left the typical 18-to-49 year old far less flush than the average 50 plus consumer.”

My youngest client is 29 years old, the oldest is 70, with the average age 48 years old.

Cash Flow, Budgeting, Retirement
The primary reason my 20 and 30 year old clients hire me is to help them with debt management, cash flow and budgeting. While my boomer clients definitely have felt the pain of dropping portfolio and home values, most invested before the bubble years and hold less overpriced assets.  My boomer clients are concerned about retirement, but the younger generation is challenged with making ends meet every month and is disproportionately saddled with debt.

Gen X and Student Loans
So are my Gen X clients spoiled spendthrifts knowing that they can fall back on Mom and Dad if things get really tough?  Not from what I see. I see student loan debt (so called “good” debt) that won’t be paid off for 20-30 years, incomes that aren’t keeping up with inflation, jobs that are harder to find and keep, and credit card debt not due to excessive living, but to just living. The easy credit years certainly didn’t help this situation. Young people and students with no credit history were able to use credit indiscriminately, and they did.

To take just one piece of this story, let’s consider student loan debt. This is a huge problem and it has unfortunate echoes to another, familiar financial narrative taking place currently. In a special report in Business Week titled “Student Loans: A Bitter Financial Lesson”, journalist Emily Schmitt writes, “Mountains of student loan debt have an unsettling parallel to another one-time boom market: real estate.  Like those who took out big a mortgage to fund their “can’t miss” investments in pricey McMansions – only to find those homes suddenly dropping in value – those of us who took out student loans to pay for pricey degrees, now find our prospects of securing well-paying jobs with comfortable lifestyles, shrinking every day.”

It may seem like a good bet to go into debt to get a good education, but if the decent job with decent pay is not forthcoming, and the price of admission is tens of thousands of dollars in long term debt, then perhaps the initial proposition is flawed. The recession makes these kinds of decisions truly difficult.

Is Generation X Solvent Enough to be Marketed To?
The Barron’s article that inspired this blog post  is not directly about debt, it’s actually about advertising. (Of course, debt and advertising are very close cousins.) The piece – Boomer Consumer – points out that the advertising industry might be making a big mistake by continuing to focus on the youth market instead of the boomer market.  I have to agree, because until the younger generation is less saddled with debt, and able to repair their collective balance sheets, they’re not exactly an ideal target audience for advertisers. The good news here is that some of these Gen X’ers know they need help or they wouldn’t be hiring a financial planner.

So what’s my financial advice to a Gen X’er trying to make good financial decisions?

1.  The number one goal has to be to pay off your debt.

Start with the highest interest debt first – usually credit cards.
Deferring student loan payments seems like a good idea – but interest is not
deferred on private loans. Start paying these loans as soon as possible, even with
minimum payments.

If you have large amounts of student loan and credit card debt and are also
making a 401k or 403B contribution, consider temporarily discontinuing the
retirement contribution  – on the amount that is not being matched only. Always
contribute up to your employer match…it’s like free money.

2.  Consider your living arrangement.
Can you take on a roommate?
Can you live in a less expensive part of town?
Can you move to a city with a lower cost of living?

3. Watch your cash flow and work within a budget.

4. There are programs that can help grads pay student loans. Do some research, not everyone is
eligible:
Sponsorchange.org
Americorps
StudentLoanJustice.org

Also read:

Is a College Education Worth The Debt at NPR.org