Out of the Red, Back to Black

From the moment I first met her at Alexia Vernon's Moxie Camp conference, I had an insta-crush on Jacquette Timmons. This woman is a radiant, positive powerhouse for good, and I feel fortunate to have crossed paths with her this year. Jacquette’s professional success impressed me -- she’s a frequent TV correspondent (CNN, Bloomberg Report), investment industry veteran of 24 years and a long-time private portfolio manager -- but it’s her commitment to personalizing, de-villainizing and visioning (yes visioning!) around debt management that really intrigued me.

As those of you who’ve been reading since the Suze Orman Knows We Exist days, I have major soft-spots for smart financial practices, for kick-ass people doing cool things, and for staying “out of the red.” When Jacquette mentioned she was launching a course around vision-based debt management, I was totally hooked -- and I knew that it (and she) would be the perfect resource to share with all of you.

With that, I turn it over to Jacquette to share more about how we can all be a little smarter about our finances, and get out of the red and back to black!

Out of the Red, Back to Black: Q&A With Jacquette Timmons

JB: What is the biggest misconception people have about debt?

Jacquette: Many people start and stop with the notion that debt is a numbers issue...it isn't! It's not just a financial issue; it's about so much more than the numbers and if you only focus your attention, time, and resources on the numbers, you may discover that you're working hard on the wrong thing! And this scenario could result in you paying a bigger price (financially & emotionally) than you realize.

JB: A lot of people experience shame and embarrassment around debt, or even just money management overall. What do you say to them?

First, I remind them that whether we're talking about debt or money management overall: money is never just about money. Part of your financial experience is always an equation that consists of the numbers/mechanics of money + psychology and emotions of money.

Second, especially as it pertains to debt, I'd say, "I understand." Debt has become the new "scarlet letter." Because of 2008 and its aftermath, there is now a prevailing presumption that all people with debt are irresponsible, unable to control their impulses. And that just isn't true. Do some people fall into that category? Absolutely! But there are a lot of people who have done all the right things and due to circumstances beyond their control (a prolonged period of unemployment - perhaps due to 2008; a significant dip in business; or an unexpected illness), they now find themselves behind the financial 8-ball trying to get back in front. External pressure and internal pressure can lead to feelings of shame, embarrassment, and guilt.

Third, I'd say, "Write it out." I know it sounds hokey but if you write out exactly what you're feeling, when that feeling surfaces, or who might trigger it, you can get a better handle on how to best manage it. For example, do you feel more tense when a bill collector calls? Ok. Why? Because it reminds me of what I don't have? Ok. Does that make you feel bad? Yes. Why? You'd continue this series of question, response, and "why?" until you reach the core reason for you reaction. And trust me, you'll know when you've reached this point. But reaching that point is critical; it is what will help you more clearly see what you have control over and to give yourself credit for the steps you're taking, no matter how small they may seem, to make things right.

JB: What mistakes do people typically make when managing their personal finances?

Jacquette: Many people simply have no clue. And I don't mean to be dismissive or to insult anyone's intelligence. But they lack financial self-awareness. They don't know what they have; what they tend to do with what they have; or why?

That translates into not knowing how much they earn (yes, there are people who have no clue about this); they don't know how much they spend and on what; they don't know anything about their investments, presuming they have any; and if they have debt, they may know the big picture number, but the details totally elude them. They are in effect, operating in a financial vacuum. However, without financial self-awareness financial leaks are more likely to go unnoticed and you're also likely to miss out on financial opportunities as well.

JB: What advice do you have for people with erratic incomes trying to create a realistic plan?

Jacquette: Ahh...this is always a toughy. For people with erratic incomes but steady expenses, it is even more critical to control your variable expenses and to save 5-10% more of your income during flush periods than you do when things are "normal." Now this presumes you know what a normal month or period looks like. But your "normal" becomes your baseline, and anytime you exceed that normal level of income, make sure to apply the 5-10% rule. Also, it helps to do scenario planning; this will help with a necessary mindset shift...to replace "a realistic plan" with "this is my baseline plan."

JB: What is the snowball effect and why you think it’s a key approach to paying off debt?

Jacquette: The snowball effect is a powerful and counter-intuitive way to approach paying off your debt! There are some who subscribe to the approach that says you list all of your debt and you tackle it beginning with the one that has the higher interest rate. The thought being: Pay off your higher interest debt first because it is costing you so much. And if you focused just on the numbers that definitely works. But if you focus on the psychological boost that comes from paying something off, then you need to follow the snowball effect.

With this approach, you list your debt and you tackle first the debt that has the lowest outstanding balance! So you pay the minimums on all the other debts except the one with the lowest balance -- on that one you pay a bit above the minimum until you get the balance down to zero. Then you apply the amount you were paying to this to the next debt, the new "lowest" balance debt. And, you continue this pattern until all of your debt is paid off!

JB: During the Moxie Camp workshop, you provided a really helpful exercise (that involved a circle divided into four parts) -- can we share that with LAC?

Jacquette: Absolutely! It's called the Financial Wheel. I use it with all my financial coaching clients, it's in my book - "Financial Intimacy," and I weave it into as many public speaking engagements as I can. The Financial Wheel exercise invites people to look at the four things any of us can do with money, which very broadly are: Earn, Save, Invest, Spend.

So, draw a circle and inside the circle draw a vertical and horizontal line. Label the upper left quadrant "Earn;" the upper right "Save;" the lower right "Invest;" and the lower left "Spend." I take people through a series of questions that helps them discover if they are living by design or by default. And because of our conditioning, most of us are living by default: meaning, we determine the elements of the save, invest, and spend categories based on what we earn. When if you flipped it, you'd be living by design!

Here's how: determine what you need to earn based on what you want to save, how you want to invest (and not just in assets but people and causes as well), and spend your money, and what would be required for there to be an even greater alignment with your values, goals, dreams and priorities.

The current gap between "living by default now" and "living by design in the future" is filled with insight, knowledge, wisdom, and clues on strategies to take, tools to use, and tips to employ.

More about Out of the Red, Back to Black

Out of the Red, Back to Black is Jacquette’s signature program for people feeling a bit overwhelmed and stressed about their debt. If you enter your email, you’ll get access to her free training video, even if you don’t enroll in the full course.

This course is for you if your debt is:

  • costing you time, money & emotional freedom
  • larger than you want
  • keeping you stuck, preventing you from making career & life-style choices you would otherwise make if debt wasn't part of your financial story
  • taking you much, much longer than you initially thought to pay off
  • causing feelings of frustration and maybe even a bit of shame (not necessarily the guilt-oriented kind of shame, but the shame of feeling "not enough")

Here's what you'll get:

  • 4 modules of audio + video content - all downloadable for easy access
  • PDF worksheets & checklists to help you to take action & stay the course
  • Private member's area with 24/7 access to your materials
  • Private online community for interaction with and accountability and support from other program members
  • And more...

Jacquette says, "If getting your finances in order was one of your 2012 goals and is one of your 2013 goals; if you now realize there's something more to the exercise of getting out debt aside from addressing the numbers, but just aren't too sure what that "something" is; then give yourself a gift of this program! I assure you...it will take the 'it sucks' factor out of your debt experience."

Click here to access the free training video and see if the full course is for you.

More about Jacquette

Jacquette M. TimmonsJacquette M. Timmons is known for leading thought-provoking conversations about money, choices, relationships, and life.

She is the author of Financial Intimacy: How to Create a Healthy Relationship with Your Money and Your Mate, the creator of the Financial Intimacy Conference and the founder and CEO of Sterling Investment Management, an investment education and financial coaching firm.