Shannon’s Financially Naked Session
At the Financial Gym, we call the first time our clients meet with their financial trainers and share all of their financial details the financially naked session. It’s typically a meeting where a lot of clients start out anxious and honestly a number of people avoid joining the financial gym out of the fear and shame they have around their money situation and I want to tell you that no matter what your situation you shouldn’t feel that way. The only reason you could possibly feel like that is if you’re not willing to do anything about changing your money situation. To help anyone out there who may be feeling bad about their financial situation, today, I’m going to let you know you’re not alone. Today, I’m sharing with you my financial situation ALL of the numbers and all of the details. As I said on the show, I have been just about all of our clients at some point in my adult life and you’re about to find out why. Joining me to hear all the dirt is one of my all time favorite trainers at the gym, Joy.
What are we drinking?
Joy — Boda Box Rosé
Shannon — Simply Lemonade and vodka with a splash of club soda
Podcast Notes
Joy, one of the financial trainers, was invited on the show to interview Shannon for her financially naked session. Joy works remotely for the Financial Gym.
At the Financial Gym, the first session clients go through is called a Financially Naked session. The trainers give clients a sense of acceptance and no judgement. The trainers care about where you want to go.
Shannon was a business major in college and her goal was to make a lot of money. She started at Bank of America, in investment banking, in Florida right after college, making $55,000 (18 years ago) and she earned a $10,000 bonus the first year. Her financial decisions were never a problem, because she would just make more money. She paid off her car with her first bonus, and then four months later she bought a new car.
Shannon identifies with all of her clients, because she has been in their seat.
Shannon kept getting promoted and worked her way to $200,000 a year. She still felt like she wasn’t making enough, because she knew people who made $600,000 a year.
She left the bank in June 2008, because her total compensation (pay plus bonus) had been the same for three years and went to work for a hedge fund in NYC. Her salary was $110,000 but she had the potential for bigger bonuses.
By December 2008, the hedge fund industry had changed completely, and her bonus potential was severely limited. This was when Shannon realized how much she counted on her bonuses to pay for her credit card balances.
Two years later, Shannon got a call from the bank to come back to work. She didn’t want to leave the hedge fund, but she was able to negotiate a $250,000 total compensation package. At that point, they moved from their apartment at $4,000 a month in rent to an apartment on Bill’s school campus for $300 a month. They had extra income and used it for trips ($6,000 for Disney World), parties, and other things instead of saving it.
Will started interviewing for kindergarten and the school recommended he have a neuropsychological test, which cost $3,500, and found he had ADHD. After that, they had bills for the psychiatrist, psychologists, etc.
Don’t spend money before you have it! Will was accepted to his dad’s school, so they were able to stay on campus and save for a house.
At the same time Shannon took a pay cut to became a Merrill Lynch advisor, at $110,000 and 100% commission after that. Shannon was receiving notes home from teachers everyday about her highly energetic child.
After a conversation with Will at age 5, after two months in school, she knew she had to move him to a different school. She found a rental home ($4,500 a month) in a school district that would be better suited for Will.
They liked the school so much they decided to buy a house in the school district. They were originally approved for $750,000, and bought a house for $620,000. The down payment was $120,000, and they were close to $100,000 between their savings and a gift. Bill took $10,000 from his IRA, and Shannon took out $10,000 from hers. When they got to closing they found some issues with the house and they needed another $10,000 for taxes. They covered the difference with their 401(k), for a total of $30,000 for closing. Their mortgage was $4,200 a month: $2,100 was for mortgage and interest and $2,000 was for taxes. In addition, HOA fees were close to $700 a month.
They closed on their house the first week of July, and two weeks later Shannon decided to quit Merrill Lynch and start the Gym. She planned to finance the Gym with her retirement account.
When they filed taxes the next year, they had an extra $60,000 in income from their borrowing and ended up with a $30,000 tax bill. She didn’t have enough loss on her business to offset the taxes.
Shannon and Bill each put $15,000 on their credit cards. Her mother-in-law lent them some money they used for the higher interest card. Prior to this, they didn’t have credit card balances they couldn’t pay off. On average, they had about $5,000 on credit cards per month.
Shannon had two credit cards that each had $20,000 limits. After two years of starting the Gym, they were both maxed out. She originally had $250,000 in her 401(k) and she used it all to fund the Gym. During this time, they got their expenses under control, but she wasn’t making any money. She was ready to go back to the bank to fix their finances, but Bill convinced her to keep going and offered her his retirement account.
Shannon converted a life insurance policy when she left Merrill Lynch, worth $750,000 ($36 a month), so she felt some peace for her family, since she was using up her retirement fund.
Two years in, her former boss gave her the first $100,000 for the Gym. She gave herself $5,000 per month to live on and has never made less in her life. The numbers still didn’t add up. One of her utility bills during a bad winter was $1,100.
Around this time, Shannon went through her divorce, and she couldn’t afford an attorney. She kept the house and her mom moved in. Her mom didn’t help out as much as Shannon had expected.
The next year, things started spiraling and Shannon made minimum payments on everything and would use that credit to pay for things she needed. She was completely maxed out and figured she would sell the Gym eventually. She learned last year that it will take a few more years for the Gym to be sellable.
After raising more money for the Gym, Shannon raised her income to $100,000. She and Bill looked at getting a home equity line to pay down some bills, but they were declined. Shannon was at 100% utilization on her credit cards and she believes that was the deciding factor.
Shannon’s mom moved out in December 2017, and in January 2018 she sat down and decided she needed to sell the house. Her expenses were cut and she didn’t want to sacrifice at the Gym to give herself a raise.
They decided to stay in her son’s school district and find a rental house. The realtor said they could list the house as is for $680,000, or paint it and do a few other things and list it for $729,000. Shannon didn’t have a way to pay a painter. Her dad lent her $8,000 for the paint and deposit on a new place. After two days on the market, they received a full price offer on their house. Shannon was able to find a duplex for $2,700 a month. Prior to this, her fixed housing cost was $5,000.
Two weeks ago Shannon moved into the new place, and one week ago, she closed on her house. At that time Shannon had about $50,000 in credit card debt. After she received her check, Shannon paid off all except $5,000 or $6,000, because she is going to get a balance transfer card. She opened a Betterment account and invested $15,000 to start. She opened up a high-yield savings account with another $15,000.
Her average monthly expenses will now be around $5,000. For a six month emergency fund, she will need $30,000. She invests her Betterment account at 90% stocks and 10% bonds.
Shannon set up $1,000 a month to go to Betterment, and she moved money to travel savings so she can take her son to Universal Studios. Shannon put $3,000 in an Oh Shit fund.
When the numbers don’t work out, you only have two choices: massive expense shift or massive income shift. There really is no magic. It is tough no matter how you look at it.
Working a financial plan is totally doable - you just need to make the decision.
A lot of times solopreneurs and entrepreneurs have debt and shame around that debt. When you are building a business, it can get uncomfortable. Shannon is not ashamed of her finances from the point she became aware she needed to change. She is practicing everything she tells her clients.
Most people don’t live a financially perfect life. There are a lot of emotional challenges with money.
If you reach out to the Gym, you may get some difficult advice that you don’t want to hear, but you need to hear. Shannon and her trainers get where their clients have been and want to help them. They are not emotionally tied to these decisions and can offer disinterested/interested third party advice. They give real, practical financial advice.
If you’ve ever thought about joining the Financial Gym to either enhance your financial situation, like our financially fit clients, or improve your financial situation, like a number of our clients, there really is no better time than now. This Fall, I need to raise $5-7 million dollars to keep growing the gym and something investors want to see are lots of clients in the gym. We have a goal to reach 1,000 clients by the end of the summer and I really need your help. We’re offering all sorts of deals and incentives, so I hope you schedule a free warm up call at financialgym.com to find out more and get started on your financial journey with my amazing team of financial trainers.