Thursday, February 13, 2020

Where to Begin


Steaks and Stems Producer Appreciation Night, Yorkton, Saskatchewan

Where to begin? 

Within the allotted timeframe of one hour, Elaine Froese, a Farm Family Business Coach, delivered a wealth of practical insights about finding fairness in farm transition to a banquet room filled with farm families and advisors. I would have been disappointed if I hadn’t hear Elaine speak.  It’s a struggle to condense her presentation, jam-packed with useful information, into a brief commentary…but it’s also reassuring to know anyone can access her valuable resources from her website. 


Right off the start, Elaine tied the importance of communication to action. Ironically, she referenced one cuisine served for the banquet meal and instructed her audience that the first step in making cabbage rolls (holubtsi) is to cook the rice.  You can talk all you want…but “Talk doesn’t cook rice.” This is especially true in a farm transition plan.  When members of the farm family openly share what F.A.I.R. looks like to them, then they are likely to find fairness in the farm transition. Elaine explained in detail about the importance of Financial transparency, Attitudes, Intent, and Roles (the acronym for F.A.I.R.).  For all of us, her online resource, Finding Fairness in Farm Transition, is extremely helpful.





During her presentation, Elaine shared several catchy coaching phrases.  (It’s comical and coincidental that Elaine’s last name, “Froese”, is pronounced as “Phrase”).  She has written a captivating blog called, The Froese (Phrase) That Pays.  One memorable message, which isn’t penciled on her list, but was part of her talk, is  “Someday is not a day on my calendar.”   Honestly, this message stresses the dangers of procrastination.  When we wait for that elusive “someday” to occur, an unexpected event may transpire before that day, wiping away and shattering any hopes of an anticipated dream or goal for our families and ourselves. Her advice is to change our approach about stating “I should”.  Here’s her example.

“Counselors use a term “don’t should on yourself”. Rather than saying, “I should talk to my son and his wife about their vision for this farm”, say “I am going to start having conversations about what is working for our family farm team, and what needs to change.”

At the Steaks and Stems Producer Appreciation Night in the city of Yorkton, Elaine posed this question, “What are your deepest fears?”  The audience could secretly respond with a text message to her cell phone.  Fears are real; and the natural inclination would have been to share them.  But at this event, her cell phone remained silent.  This was unlike a previous event when Elaine spoke to Alberta farmers who did not hold back.  Sometimes, we suppress our fears and prefer to put them on “ignore” rather than face them.  We know that’s not the ideal solution.  So what is?



The first step is to simply begin with the right toolsI often share my favorite quote: “Do not wait; the time will never be ‘just right’. Start where you stand and work with whatever tools you have at your command, and better tools will be found along the way.”  It so happens Elaine’s website offers a free Farm Family Toolkit filled with useful tools (documents) to help families communicate better and grow stronger on their farms. A great ending to one’s farm family story is a successful transition to the next generation. Let’s begin. 



Thursday, January 30, 2020

How Do We Choose



When someone tosses out a brainy quote, we are likely to pay attention. Ben Stein (an actor) shared the obvious – "The indispensable first step to getting the things you want out of life is this: decide what you want."  This sounds easy enough.  But I honestly see we often face some hard choices at different times in our lives.  We may have decided what we want but with a combination of only so much time and only so much money, how do we choose? 

If we had some ground rules (although they don’t necessarily need to be rules but rather helpful tips), we might be able to lessen the stress in the decision-making.   We are not talking about the decisions surrounding the types of coffees we drink or the different restaurants where we dine…but rather the hard choices, the ones that trip us up. Do we take an annual vacation or save for a down payment on our new home? Do we save for our children’s education or renovate our kitchen? Do we buy a new vehicle or pay down debt?   

Decision-making is quite complex.  Books have been written extensively on this subject; videos on the paradox of choice have been seen shared on TED Talks; and blogs from professionals have been posted about what successful people know about decision-making. All this information is overwhelming when our only desire is to ensure we choose the best option. 









Let’s toss out a few basic tips when you’re faced with a tough decision.

  1. Make a list of the pros and cons about one choice over the other with regards to the timelines and costs.
  2. Take your time in these decisions.  Rather than be impulsive, weigh all the information thoroughly and allow yourself space to think.  
  3. Prioritize the things on your list in order of importance.  You may be surprised you have a stronger desire to put one thing in first place rather than second.
  4. Talk about the choices with your spouse or partner and family especially if the decision impacts them.  Listen to their concerns and opinions. 
  5. Keep in mind you are only able to do the best with the financial resources you have available. Extending yourself into debt may not be the ideal solution to achieve your desired option.
  6. Ensure the things you want (your goals, dreams, and aspirations) are clear and concise.  You want to feel it, see it, catch it, and master it in your mind before you leap into the final pick.  
  7. Finally, acknowledge the proverb which tells us, “all things come to those who wait.” Being persistent and patient in saving for the things you want will pay off in the end.          

Decisions involve both logic and emotions.  Only you can make the best decision for your family and you.  You can invite professionals, family, and friends to weigh in with their skilled opinions and advice.  In the end, the decision will always be yours.  How you spend your time, financial resources, and other treasures, like your talents, is your choice.  The important parts are to trust your decision, move through the motion of following through with your plan, and then see the results unfold.  That’s how you get the things you want out of life. 

If you have an ideal technique to help with decision-making, let the rest of the world benefit by sharing your helpful tip in the comment section.


Thursday, January 16, 2020

You Got This





Elbert Hubbard said, “Self-discipline is the ability to make yourself do what you should do, when you should do it, whether you feel like it or not.” We can be good at self-discipline some of the time, most of the time, all the time, or the extreme--not at all.  But occasionally, having someone come along and say, “You got this!” is a dose of encouragement we all could use. 




At the beginning of a new year, we may be filled with enthusiasm. A whack of giddy-up and go is just what we need but…realistically, some things will drag us down.  In the heartland of the Canadian prairies, we become consumed by the extreme cold weather.  The frigid temperatures tend to suck our energy as we move about our day.  When we pick up a magazine or browse the newsfeed on the Internet, we are reminded of the list of resolutions pushed in our direction to motivate us to take action.  Rather than propel us forward, we remain frozen like popsicles. We are immobilized to take any kind of action…but we must.  Here’s why.  Time does not stand still. 





Our granddaughter, Layla, turned ten years old this month.  I shared with her my memory of the day she was born.  The first time I heard her cry, I knew she was real.  With each passing year, I am grateful to have pictures to remind us how quickly time passes.  We see the growth in her physical body and the development of her personality and character.  But there’s a hidden truth in “the lapse of time”.  The truth is screaming: make the most of it; use it wisely; make memories; and above all, don’t waste an opportunity.  Now, more than ever, we can stay in touch with Layla even though we are miles apart. Sending her a quick note or a snapshot tells her how much we love her. We have no excuse not to be a part of her life with the advances in technology.  Here’s where the importance of time transitions to our financial affairs. 





Do the things that matter most.  Someone once jokingly complained about their "First World Problems". The Oxford Dictionary defines these consortiums of problems as "A relatively trivial or minor problem or frustration (implying a contrast with serious problems such as those that may be experienced in the developing world)."  Most people living in Canada have an array of First World Problems.  But if the truth be told, these are inconveniences we have escalated into problems (for example, a slow internet connection).  We must sort and sift through our financial affairs to determine a potential hidden First World Real Problem (no wills, powers of attorney, or health care directives).  







When we are serious about being disciplined with our finances, we take a hard look at the "Financial Wheel of Life" and make time to address our concerns.  My take is we can't drive life on a flat tire.  Technically, we drive on a flat when we neglect to take action in specific areas.  Thankfully, we don't have to work on all the areas at the same time.  If we take small steps in each part of the financial wheel, we will get the job done.  These areas are:  Financial Management, Asset Management, Retirement Planning, Risk Management, Estate Planning, and Tax Planning.  When professional financial planners were asked about their New Year's Resolutions in this Reader's Digest article, their action steps fell into one of these six areas.  If it's on their list of resolutions, maybe we should consider following their lead.  Just in case, you need help, look outside your sphere for some motivation. 





What can be better than devouring a chocolate-dipped ice-cream cone, witnessing a beautiful sunset, or listening to a favorite song?  All these are indeed treasures. Most certainly, the greatest treasure (or motivator) comes when you receive the gift of words from someone who believes in you and your abilities. The value in encouragement is priceless.  No matter how difficult your tasks appear, they could always be worse, like eating alive frogTake heart. Take action...because "you got this!"

Thursday, January 2, 2020

A New Year Brings New Tax Changes







Both small and large tax savings lie in waiting for us to grasp. Some are handouts from the federal and provincial governments and others are strategies we have to put into practise.  Unfortunately, taxes are a way of life for Canadians.  Our tax dollars help to pay for government programs and services. On the flip side, we have financial goals and dreams, too, just like the government has theirs.  Every cent we can save for ours is invaluable. 
 
As always, it’s not a surprise to see the tax brackets modestly increase each year to adjust for inflation. But a much-welcomed surprise and an unusual adjustment is to the Basic Personal Amount (BPA)--what I refer to as our tax-free zone. For 2020, the proposed Basic Personal Amount is $13,229 whereby personal income tax does not apply on these first dollars of income. The bonus is these small tax-free gifts will continue in the forthcoming years. The Federal government’s intention is to increase the BPA over four years until the amount reaches $15,000 in 2023.

This year Canadians with income above this minimum threshold will hardly notice the difference. The tax savings will equate to $174 ($13,229-$12,069)x15%) when you compare the Basic Personal Amount in 2019 of $12,069 to the newly proposed $13,229.  The increased savings will come with time. 

The priceless suggestion is to make time to assess and analyze where your income will land, both on the federal and provincial ladders. This practice is most beneficial as one year ends and another begins.  The tax brackets help to pinpoint your marginal tax rates.  If you are conscious of saving for specific goals, I always encourage looking at the amount of income tax you have paid by year-end. 



Your last pay statement of the tax year or T4 information slip provides valuable information.  Seeing firsthand the amount of income tax deducted from your gross income may shock you into action and cause you to plan different strategies to keep some of your hard-earned dollars in your pockets.

During your working career, a useful and practical strategy is contributing money to an RRSP (Registered Retirement Savings Plan).  This is especially applicable when your income falls in the second tax bracket and higher. In the diagrams below, the ladder draws your attention to the fact that as your income increases so does your marginal tax rate.  All Canadians start at the bottom. 

The tax savings, derived with deposits to an RRSP, generates a tax refund for other financial goals.  This ripple effect creates a dual bonus.  As you save for your retirement, you have additional cash to pay down credit cards.

Here’s a basic example: 

All year, you have diligently saved $100 each week so by the end of the year, you have tucked away $5,200 in a daily savings account.  Now you are contemplating your goals for the year.  You stare at your retirement savings and credit card statements and wonder what to do.

One possible strategy is depositing your savings into an RRSP investment vehicle to reduce your taxable income for the year.  Once your tax return is filed, you receive a tax refund for your top-up contribution.  I choose to think of this as having your cake and eating it too. 

The math tells us.  Your annual income is $55,000 (which falls in the second tax bracket).  A contribution of $5,200 deposited to an RRSP refunds $1,066 ($5,200 x 20.5%). Now the refund can be applied towards your credit card.    The dual purpose is you have saved for your retirement and reduced your debt.  



This quick glance looked only at the federal side of taxable income and tax credits. Our provincial governments also offer different packages of tax rates and credits.  The tax savings exist on two levels.  The tax side to wise financial planning can be complicated.  With an array of tax planning incentives and strategies, you may need some assistance to decipher which apply to your family and you.  A new year always brings new tax changes to help us.  Ensure you make the best of a taxing situation with sound financial advice.    




Thursday, December 19, 2019

Does It Really Matter…




Every new year we promise ourselves to start, finish, or complete a task…only to fail miserably! We may begin yet never quite finish.  Sometimes, we remain stuck in the thinking-about-starting phase for a list of reasons (or perhaps excuses).  You know the typical resolutions: eat healthier, lose weight, stop smoking, or start exercising.  Then, the typical money ones are pay down debt and save for retirement.  Our intentions are to improve ourselves physically, mentally, emotionally, and spiritually. 

We need to ask ourselves.  
               
Does it matter if I don’t lay off the sweet desserts?
               
Does it matter if I don’t stop smoking?
               
Does it matter if I don’t track how much money I spend?
               
Does it matter if I don’t save for my children’s education?

These questions likely trigger deep-seeded feelings of guilt.  When we don’t like this feeling, we suppress it by deferring the task to someday in the future. We would never want to make ourselves feel guilty on purpose. But you see this unpleasant feeling is a warning for us to take action.  You know what -- action wipes out guilt.  When we truthfully answer the question, we know the answer is a resounding “Yes”.  Does it matter? Of course, it does.  Everything we do matters.  We want to be, stay, and remain healthy in every dimension of our lives, financial, physical, intellectual, social, etc.

As I glance at my writings, I pondered, “Does it matter if I don’t write blogs about money management?” The answer thrown right back at me is “Yes”.  I hope I make a difference in at least one person’s financial well-being.  I hope they grow a healthy financial tree.  

We often jokingly say, “happy wife - happy life”.   Let’s take this and create a unique self-made motto, “Healthy financial tree - Wealthy me”.  This sounds a bit bizarre but if a play-on-words helps you remember why you need to do the right things, then it works.  We can’t dispute logic.



A financial tree is divided into three parts.  The top branches focus on taking care of the family’s needs first.     These items have a direct relationship to meeting a family’s needs if a catastrophic event occurs.
  • A Written Financial Plan
  • A Will and Estate Plan
  • Living Will and Power of Attorney
  • Insurance: Health, Disability, Life and Credit


The second part of a healthy financial tree is made up of the other items related specifically to money:
  • Pay yourself first
  • Registered Retirement Savings Plan (or Tax Free Savings Plans)
  • Pay your mortgage more frequently
  • Three months of savings
  • Credit:  Get it while you don’t need it
  • Registered Education Savings Plan for Children or Grandchildren

The third part, the roots, represents the type and amount of debt.  Debt will either make your tree flourish or stifle its growth.  “Good debt” often refers to mortgage or student loans. Building equity in your home or receiving an education to secure a well-paying job contributes to a person’s assets or ability to earn an income.  Excessive loans for any other purpose than these may jeopardize our financial health.  

All these branches are essential and impact your entire well-being.  Your stress is reduced when you have an action plan.  You control and drive your life.  

Your slate has been wiped clean of all unfulfilled promises.  Go ahead; create new and fresh promises with the intentions of following through.  If you’re stuck in “start” mode, focus on this favorite quote. “Do not wait, the time will never be ‘just right’.  Start where you stand, and work with whatever tools you may have at your command, and better tools will be found as you go along.” (George Herbert).

Thursday, December 5, 2019

Shoot Close Up For Impact


“Shoot close up for impact” (SCUFI) is a great technique for taking pictures. One I will always remember because I have seen the benefits.  I learned this technique and others from a great instructor, Greg Johnson (The Tornado Hunter), in a two-day photography workshop.  The application and impact of this strategy are shown throughout this writing!  

We often say, “A picture is worth a thousand words”.  Guess what? This also applies to our financial circumstances.  One snapshot speaks volumes about our present situation; and when we apply the “rinse and repeat” process every year, we can measure our progress…all because we use the following special technique. Really!  



The creation of the Balance Sheet, also referred to as a Net Worth Statement or Statement of Financial Position, lists all the assets (everything we own) and liabilities (everything we owe) at a specific time in a calendar year. This special approach enables us to calculate our net worth, the difference between our assets and liabilities.


CIFP The Canadian Institution of Financial Planning


We are having this conversation now because a new year is rapidly approaching.  Scheduling an appointment with ourselves to do this on the same date every year develops into a new worthwhile habit.  This financial snapshot provides insightful information and comes in handy...

  • When we are applying for a loan including a mortgage,
  • When we are planning our retirement,
  • When we are developing our estate plan or writing our will,
  • When we are estimating our tax liability upon death,
  • When we are determining our life and property insurance needs,
  • When we are creating our wealth investment plan,
  • Or if we are resolving a divorce settlement.  


The initial commitment may be time-consuming but the effort will be valuable.  Once our first Net Worth Statement is created, only minor tweaks in following years will be required to keep the statement updated and current. 





The wheels of our progress will be clearly visible with each passing year and with the creation of a new balance sheet.  If we’re in a downward spiral and our net worth has decreased (rather than increased), then we know we are headed in the wrong direction and need to apply the brakes on “something”. 



You are invited to take a picture. Collect your financial information; list your assets and liabilities on a balance sheet; and then determine your net worth.  One client, who did this exercise, was astonished with the results.  He felt stressed by the impact of his newly-acquired car because he understood the impact of his newly-acquired car loan on paper.  He was dragged down with debt; and he could see clearly what changes he needed to implement. A financial picture is worth a thousand words. Here’s your opportunity to shoot close up for impact and see the results for yourself.

   






Thursday, November 21, 2019

The Missing Link





Even if you are not a football fan, you can relate to heartbreak.  Without a doubt, heartbreak manifests itself at the end of a football season.  It comes when a team doesn’t cross the goal line to score points in their favor.  After Sunday’s Western CFL Final, there is no scarcity of questions about “What happened” when our much-loved Saskatchewan Roughriders faced off against the Winnipeg Blue Bombers.  Three different times they were well-positioned for a touchdown and couldn’t cross that elusive line to score big even from only one and a half yard away.  You can also question, “How does this happen?”  The situation is tense; nerves are rattled; and confusion arises. The worst part is the number of attempts and the time on the game clock is limited.  You probably can see where I am going with this.

You may not realize it but we are playing the same kind of game.  It’s slightly different because we are not tossing or carrying a football across the goal line but we do have a goal in mind.  We are always playing and trying to score.  We make big plays to purchase a home, save for retirement, and pay down debt.  Guess what?  We have only so much time on our clock to do this.

I love the fact that the Canadian Football League (CFL) wraps up in November, the same month designated as Financial Literacy Month.  The connection between playing football and handling your finances is about creating winning strategies.  Neither of these are easy feats.  We need a well-designed game plan to execute winning drives to win football games; and we need well-designed financial plans to secure our future retirements.  Both require plans of action. 

Les Brown, a motivational speaker and author said, “Your goals are the roadmaps that guide you and show you what is possible for your life.”  With this said, once we know what we want, we need the roadmap.   Ironically, a first crucial step in the financial planning process is “Establish objectives.”  Then, we require the appropriate direction to reach our objectives (goals).  



           
In an article, How to Overcome Behavioural Barriers to Reach Your Goals, Dilip Soman, Canada Research Chair in Behavioural Sciences and Economics Director, explained there’s a common behavioural disconnect in the financial planning process:  even though you’re eager to reach your goals, it can be hard to motivate yourself to write a financial plan.

“For many,” he says, “retirement is far into the future and the link between getting a financial plan made and their future well-being is tenuous.”


No one should question whether they can or cannot retire at a future date.  The answer shows up in a financial plan. Much like a football playbook draws up winning plays where coaches and players run the play, test for results, and tweak if necessary, a financial plan resembles its twin.   




Although retirement may seem far off in the future for some or may feel right around the corner for others, the question hangs in the air whether we will be able to make this happen.  Will we be able to financially cross the goal line from working to retirement?  Do we have the link to help us make that decision? 

The opening chapter of 10 things I wish someone had told me about retirement presents an excerpt from the website of Insurance-Canada.

“Canadians need to realize that retirement is not a 20 – or 30-year vacation,” says Monique Tremblay, senior vice president of Savings and Segregated Funds for Desjardins Financial Security. “People need to change their behaviours and start planning for retirement as soon as possible – earlier than the average age of 35 years old.  It is understandable that the extent of the planning and savings must be in relation to the needs and financial capacity, but a simple plan is better than no plan at all,” adds Tremblay.  “Retirement planning is not just about RRSP contributions.  People also need to consider the social aspects of retirement and how that impacts their finances as well.” 


My takeaway is we can’t fool ourselves into believing we can stop working because the calendar tells us it’s time.  We have reached the magic age.  We need to take a hard look at our potential retirement income to ensure we are not heartbroken when we discover we can’t afford to retire. We can take a lesson from the Riders' painful lost. 

In case you did not know, the Saskatchewan Roughriders faced the Winnipeg Blue Bombers last year in the Western CFL Final. Same teams. Same playoff game.  The Bombers came up with a win then to earn a trip to the Grey Cup but lost in the final showdown.  This year, Winnipeg pushed through their adversities and will try again for the prestigious title.  For the Riders, both losses evidently will cause them to look at their playbook and hunt for the missing link. Over these two years, changes were made to the coaching staff and the players but one thing stayed constant, the loyalty of the Rider fans.  Their support for their team is the best in the CFL.  When you think about your greatest fan, look no further than your CERTIFIED FINANCIAL PLANNER® professional to cheer and coach you onto a financial win.   Your missing link is the creation of your playbook, your financial plan.  Don’t you think it’s time you had one?  

Thursday, November 7, 2019

I Think I’ll Sit This One Out.

Medicine Hat Minor Hockey


It’s a tough conversation.  We create a fa├žade to show others we are living the good life.  As winter approaches (in fact it’s already arrived) the conversation around the office water cooler is happening.

               “So where are you going this winter for your holiday?”

Some people try to outdo each other with their winter destination plans or may do their best to pretend they can do so.  Others don’t have to pretend; they have saved money for their holiday. The concern is for those who haven’t. Their vacation getaway will be charged to their credit card to prove they can keep up the pace.

When will there be a time for the barriers to be removed and simply be honest? 

             “Our situation is a little tight now.  Our kids are in hockey; we need to purchase winter tires for the car; and our monthly utility bills have gone through the roof. And then there’s Christmas.”

               “I think we will sit this one out ~~no winter vacation for us this year.”   

Being honest about our financial circumstances isn’t something we practise very well.  No one likes to share their story about how tight their situation is but statistically new results are proving this is reality. The Globe and Mail printed this headline last week “As household debt reaches precarious levels, Canadians need to take control of their financial lives.    The article staged this important comment: The capacity to make smart decisions about personal finance is a critical skill for everyone. 

Maybe it's time to stop pretending and be realistic.  If we can't do things, buy things, go places, the best solution is stop and sit this out.  If we need someone to give us permission or better yet to lay the blame on someone else, just say, "My financial planner said, 'No more spending!'" 

Do you remember the days when your parents had to tell you, "No!  This is for your own good!"  Here's your chance.  Go ahead and assign responsibility to someone else especially if you can't take the  ridicule from family, friends, and coworkers about not "doing", "having", or "going" because it will cost money. 

The month of November is Financial Literacy Month.  This opportunity allows us to assess our reality and stop pretending. Playing charades about living the dream isn’t fun when we are drowning in debt.  If more people were honest, then more people would admit, “Me too!”    Peace of mind comes with having a plan of action to meet your short and long term plans. Our lists are individually unique and may be long. A young family with children–sporting activities and education plans.  A retired couple living on a fixed income–managing day-to-day living expenses and medical costs. Everyone--escalating utility and grocery bills.  

Borrowing the following message from the Globe and Mail article gives a plan of action. This can begin by encouraging open and honest conversations about our relationship with money. It’s an important way we can keep financial literacy top-of-mind with Canadians, and build the kind of financially security we all want, and our economy needs.



My stance: Everyone prefers to hide their personal struggles but that's not always the best strategy.  When we need help, the solution is ideally found from the wisdom of professionals.  Let's take a chance on them to see our way through our trouble spots.  This is one time you don't want to sit out.  This is the time you want to be part of the action. 

Thursday, October 24, 2019

Focus on What You Can Control





Many events seem totally out of our control; and that’s for good reason. Some things just are.

After Monday’s election results my heart was filled with sadness over the great division Canada is currently experiencing. The East against the West.  The urban cities against the rural communities.  The Liberals against the Conservatives.  Most Canadians thought the election campaigns, the “ugliest” in history, created a divided nation.  I have to agree. People were picking apart others’ flaws and parties’ platforms and policies.  Overall, as Canadians we should be grateful to live in a country which gives us the greatest freedom to choose and feel in control of our choices.  Where we live – where we work – where we worship – who we love – what we do – all rest with us.  


Hail-beaten canola swaths

The concerns for most farmers now are focused on completing this year’s harvest and crossing the “Finish Line”. The heavy frosts, shortened days, and definitely cooler temperatures do not permit the grain to dry down a smidgen.   Peace of mind and logic dictates what’s in our control and what’s not.  As they wrestle with the adverse weather conditions, farmers feel pinned down.  However, the hail, rain, and snow which delayed the harvest were out of everyone's control.  



We fret; we whine; we stew; maybe we even plot an inappropriate course of action in the face of our problems. People who are smarter than I am, shine a fresh perspective on a better way of dealing with problems.  In his book, The 7 Habits of Highly Effective People, Stephen R. Covey spells out effective life principles.

This list of habits falls under the separate umbrella of Private Victory, Public Victory, and Renewal. 

Habit 1:  Be Proactive (Principles of Personal Vision)

Habit 2:  Begin with the End in Mind (Principles of Personal Leadership)

Habit 3:  Put First Things First (Principles of Personal Management)

Habit 4:  Think Win/Win (Principles of Interpersonal Leadership)

Habit 5:  Seek First to Understand, Then to Be Understood (Principles of Empathetic Communication)

Habit 6:  Synergize (Principles of Creative Cooperation)

Habit 7:  Sharpen the Saw (Principles of Balanced Self Renewal) 




Dr. Covey identifies our Circle of Concern and Circle of Influence.  Like he mentions, “We each have a wide range of concerns-our health, our children, problems at work, the national debt, nuclear war.”  But he wisely states, “As we look at those things within our Circle of Concern, it becomes apparent that there are some things over which we have no real control and others that we can do something about. We could identify those concerns in the latter group by circumscribing them with a smaller Circle of Influence.” 

He explains in detail the best way to handle our problems is to first identify them by appropriately placing them in their respective area: direct, indirect, or no control. 

Stephen R. Covey writes:

The problems we face fall in one of three areas:  direct control (problems involving our own behavior); indirect control (problems involving other people’s behavior); or no control (problems we can do nothing about, such as our past or situational realities).  The proactive approach puts the first step in the solution of all three kinds of problems with our present Circle of Influence.

Direct control problems are solved by working on our habits.  They are obviously within our Circle of Influence.  These are “Private Victories” of Habits 1, 2, and 3.

Indirect control problems are solved by changing our methods of influence.  These are the “Public Victories” of Habits 4, 5, and 6.  I have personally identified over 30 separate methods of human influence—as separate as empathy is from confrontation, as separate as example is from persuasion.  Most people have only three or four of these methods in their repertoire, starting usually with reasoning, and if that doesn’t work, moving to flight or fight.  How liberating it is to accept the idea that I can learn new methods of human influence instead of constantly trying to use old ineffective methods to “shape up” someone else!

No control problems involve taking the responsibility to change the line on the bottom of our face – to smile, to genuinely and peacefully accept these problems and learn to live with them, even though we don’t like them.  In this way, we do not empower these problems to control us.  We share in the spirit embodied in the Alcoholics Anonymous prayer, “Lord, give me the courage to change the things which can and ought to be changed, the serenity to accept the things which cannot be changed, and the wisdom to know the difference.”

Whether a problem is direct, indirect, or no control, we have in our hands the first step to the solution.  Changing our habits, changing our methods of influence and changing the way we see our no control problems are all within our Circle of Influence.

His summation and encouragement are helpful when we face any problems-financial or otherwise.  Dr. Covey has given me food for thought to use when I am in a fretful state.  My hope is this assists you too.