Where Do I Start?

Getting control of your finances can be a very difficult thing. It is messy. There are a lot of moving parts. It can even be downright terrifying! Relationships usually complicate things even more. You can easily feel completely overwhelmed. So you might find yourself asking, "Where do I start?" This is a great question because it shows you are ready to start.

First, unpack your financial baggage. Take a good long look over the last few months of bills, spending, and debts. Pull a copy of your credit report to make sure you aren't forgetting anything. Lay it all out and take a good look. At this point, one of two things will happen. You'll realize that things aren't as bad as you thought. Or your numbers are sobering because things are worse than you expected. Both of these reactions are alright. The important thing to remember is you need to know where you stand in order to do something about it.

Second, balance your budget. There are only two sides to the equation- Income and Outgo. If your expenses are more than your income, which is very common, there are only two things to consider- cut expenses or raise your income. Usually a combination of both is needed. The deeper you cut, the faster you can pay down debt.

Third, Prioritize your spending. This is essentially a budget- telling your money where to go. Start with food. How much money does it take you to buy groceries? I'm talking basic groceries, not pricey pre-packaged convenience foods. You would be surprised how much you can save just by meal planning, food prepping and shopping sales. Even if you have food allergies or special diet considerations, cooking at home is cheaper and healthier than eating out. It takes time and planning, but no matter what your circumstances, you can trim this expense. Next you want to pay for housing. This includes your rent or mortgage, all utilities and insurance. Transportation is next. Pay your car payment(s) and gas or buy your transportation pass. Last is clothing. Again we're talking basics. You would be surprised at what you can find gently used at your local thrift store. These are what form your four walls. If you can afford these, no matter how bleak your circumstances, you will live to fight another day because you've got a roof over your head, clothes on your back and food in your belly and a way to get to work.

Fourth, consider selling something. This can be a car that is ridiculously expensive. A good rule of thumb to sell is if your vehicles total more than half your annual income. Or sell extra stuff you don't use or need anymore. Have a big garage sale or sell items on Ebay, Craigslist, Facebook, Instagram or other online yard sale sites. The house is the last thing I would consider selling and that's only if the payment is half your takehome pay with no prospect of having your income increase dramatically.

The Fifth and final thing you need to know to get started is to keep going! If you are new to budgeting, give yourself a solid 90 days to get used to it. I guarantee there will be hard, horrible days, but I promise it's worth it. I've been there and can tell you there isn't a greater feeling than seeing the fruits of you labors.

Why Debt is Never a Good Thing

In today's world of easy credit, buy now- pay later consumerism, we are bombarded with debt every way we turn. This isn't surprising as selling debt as a product is quite profitable for companies. In many cases companies make more on debt payments from consumers than they do in actual product sales. Think about that next time your cashier asks if you want to save 10% on your purchase by opening a credit card.
On the other side of this are the giant retailers borrowing massive amounts of money to keep the status quo. We saw this a lot during the 2008 recession and subsequent housing bubble bursting. Those who failed to adapt or had loads of debt to begin with, went out of business when consumers stopped spending. With cutthroat competition and sometimes razor thin profit margins, debt becomes a millstone around the necks of retailers. Now a decade later it's all hitting the proverbial fan for these retailers. We're talking household names like Radio Shack already gone, while Sears and Kmart are both in a downward spiral. Toys R Us is next with complete closure happening in June.
You might be asking what this has to do with personal finance? Debt is normal, what's the big deal? Everyone has debt, so why does it matter if I borrow money for things I need and want? Don't buy into the myth that debt is a tool that smart people use to their advantage. The truth is whether it's personal or business- Debt only works until it doesn't. It's estimated that once a decade the average household faces some kind of major emergency. This means an extended job loss, illness, disability, accident or death that majorly impacts finances. It is not if, but when there is the slightest change in circumstances, debt can bring you (or that giant retailer) down. Remember that debt is risk. Debt is bondage. Debt limits your future. It is that pretty facade masking a house of cards that could fall at any moment. Is that really a path you are willing to take? Trust me. It is not. Having been down both roads, I can tell nothing equals the freedom of living debt free.

Clean Slate

Isn't it funny how life gets busy and time slips away from you? I've been thinking about writing another post for months, but never taken the time to actually sit down and do it... Until now! I've been watching a lot of YouTube lately (which is another reason I haven't been blogging), but several of the channels I watch on a regular basis are financial vloggers. They are all different ages and from different backgrounds and in different walks of life, but the one thing they have in common is a passion for getting out of debt, living frugally and being transparent about the good, the bad and the ugly on YouTube. Watching their stories has reignited my love for helping others win with money. While I prefer to write rather than vlog, I hope I can make a difference for you and your financial position. I want to start by getting back to basics, helping you start from scratch if necessary. A clean slate so to speak. I also want to talk about the deeply rooted emotions we all have about money. So stay tuned for some exciting things to come later this week!

Our Marathon to Debt Freedom

Today marked the 7th anniversary of our becoming debt free, so I thought it would be fun to share the story I originally shared on our family blog about the journey. It was a spectacular way to end the decade. Enjoy and Happy New Year!

December 31, 2009
Well everyone, It's official! we made our final student loan payment this morning and we are DEBT FREE!!! (well except that pesky mortgage). This is the story of the financial marathon we ran over the last 28 months paying off a grand total of $24,046.40!

In the summer of 2007 we were in a real pickle. That spring we had decided to replace some of the windows in our house and since we didn't quite have the money to pay for them we signed on for a 6 months same as cash loan. This was fine since we hadn't received our tax return yet and would easily have the money when it came due in September. Enter life happening. My husband's truck had some costly repairs that took a lot of the money. Then we made the stupid mistake of buying a laptop to work on a programming side job that when paid would easily cover it's cost. Well you can probably guess what happened, the deal fell through and he never finished the project because he never got paid. That summer we scrimped and saved every penny we could to put toward the looming window bill. I was not about to have a truck load of interest tacked on for not paying in full.

In July my best friend loaned me a book by Dave Ramsey called The Total Money Makeover. I being a financial geek absolutely devoured the book and was so ready to be done with borrowing money forever. This did not go over so well the hubs. He didn't see the point in not using our credit card to pay for everyday items and groceries because we payed off the bill every month and we got reward points for using it as well. He saw it as free money. I was tired of having no money left after the bill was paid. I found it very hard to control the budget and was always frustrated. Despite his misgivings about this new plan that I had for our future he went along with it. By September we had stopped using plastic and had the money to pay for our windows.

After we paid for the windows I couldn't wait to start attacking what remained of our car loan. We paid it off in May 2008, with the help of the stimulus check. By then I was expecting our second child and so we pushed pause on the snowball. Then in August when I was 6 months pregnant our air conditioner died. Fortunately, we were able to get a good deal on both a new AC and 2-stage furnace. Unfortunately, this cost $5100 and added 6 months to the process. In March of this year we finally were able to turn up the heat and attack our last debt- the dreaded student loan. When Jared graduated 6 years ago the balance was $13,750 and by March we had whittled it down to just under $9000. Our goal (well more my goal, hubs was just going with the flow but definitely more excited since we were closer) was to be debt free by Christmas. As you can see we missed that by a week. This is of course was because the events the end of April when our house flooded and we had another $1000 emergency called an insurance deductible.

I didn't think we'd make it by the end of the year until last week when we decided to sell my husband's truck.  This was our last big sacrifice to become debt free and so for the time being we will be a one car family. But since hubs carpools and I stay home during the day most of the time, we'll manage just fine. The truck will get it's own blog entry later. But for now we are basking in the FREEDOM that comes from not having any payments except a mortgage.

In summary, the last 28 months were some of the most grueling and tedious of my life. I really do feel like we've run a marathon but it was worth every hard step of the way to have this feeling of peace! Now I don't have to worry about how much we'll be able to put towards debt. The fun begins in seeing the fruits of our labors appear in the form of the savings account balance.

***Here are some key tips if you are looking for a way out of debt***

1. Switch to a cash system and stop using credit or debt cards for everyday purchases. Studies have shown, and I have learned from personal experience, that you spend on average 15% more using plastic. This was the major turning point for us in this process. Plus it makes it so much easier to balance the checkbook. When the money runs out you must stop spending. We only have 3 categories- groceries, eating out and clothing. I'm a big believer that this method works because it has removed the guilt I felt by spending money buying clothes even though we needed them. One caution- be realistic in what you truly need. It'll take a few months to get it down.

2. Sacrifice to win! One of Dave's sayings is 'Live like no one else, so later you can live like no one else'. In other words, cut back on things now temporarily so later you can have the freedom to truly do what you want with your money, instead of paying it all to some bank.

3. Keep going when the going gets tough. This process is long and sometimes hard but when you keep going and push through the pain, you reap the benefits. Don't let yourself be distracted by the new toy your neighbor has or the great vacation your co-worker just got back from.

4. Get on the same page as your spouse. This method makes you face the financial skeletons in your closet. If you are already fighting about money with your spouse, you may need marriage counseling to work through the issues. But your marriage will be stronger as a result. Again, it's worth it!

Well, I applaud you if you actually have taken the time to read this entire post. As you can see, this is why I am a geek, because I love this stuff. And that is why my next step is to become a trained financial counselor to help others along their journey. Hopefully this will happen in April. For now I just have one more thing to add.

WE'RE DEBT FREE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Giving- The most fun you will ever have with money!

When you think about it, there are only 3 basic things you can do with money- Spend it, Save it or Give it away. Of the 3, giving is definitely the most fun. Don't get me wrong, I get a rush when I buy something nice for myself and when I transfer money into savings. But these moments are fleeting. When we give, especially this time of year, it evokes only one emotion- pure joy! Think about it. To be able to bless someone else's life holds absolutely no comparison.

"Every man according as he purposeth in his heart, so let him give; not grudgingly or of necessity: For God loveth a cheerful giver." 
2 Corinthians 9:7

For me and my husband, this has become our driving force, our "why" we are responsible with money. Earlier this year we added a giving fund to our budget. This is separate from the tithe we give our church. We have it specifically for when we see someone in need and want to help. Let me tell you. It has been out of this world fun! More so than we ever thought possible. To make a difference in someone's life, and sometimes anonymously, has been one of the greatest joys we have known. So if you are searching for a greater purpose in life, try doing this. It will rock your world to bring a smile to another's face or tears to someone's eyes.

Stop Eating Your Retirement

One of the saddest things I see while helping people with their finances are those nearing retirement who have worked hard their entire lives and have absolutely nothing to show for it. What's worse is when I see young couples in their 20's or 30's spending everything, every month. I know what it's like to be this way. I remember rationalizing that it was okay because we weren't spending  more money than we had... Boy was I wrong. 

"There is treasure to be desired and oil in the dwelling of the wise; but a foolish man spendeth it all.” Proverbs 21:20

Luckily, I learned the value of this scripture in Proverbs while still in my 20's. It became my battle-cry for change. Living paycheck to paycheck was stressful and always made me feel like I was failing. I didn't put it all together until I realized what I thought was budgeting, really wasn't. Having a bit of money left at the end of the month is just luck, not a budget. A Budget is deliberately telling your money where to go. This means setting limits on how much you spend in certain categories (like eating out or fun activities) to make sure you can hit your goals. On the flip side, it also gives you permission to spend in areas that would previously cause stress. Clothing was this way for me. We would go a couple of months without buying anything and then all of sudden spent $100 or more. It always killed me. 

So where do you get started if you are sick and tired of this frustration? 

1~ There is no such thing as a perfect budget. It changes month to month and most of the time during the course of a month. 

2~ A budget is month specific- This month's income vs. expenses. You don't plan for the average of your utility bill. You plan for what it is that month. 

3~ Use cash for everyday expenses and categories that you have a hard time controlling. This is my secret budgeting weapon because it's simple. When the envelope is empty you stop spending until the next month or pay period. This is where creative meals with leftovers turns into a character building moment. I only have 4 cash categories- Groceries, Clothing, Eating out, and Baby. If you are leery of carrying cash, only get out what you need for that week or pay period. Over time it will get easier.

4~ If you are married, both of you need to give input AND agree on the budget. Nothing is worse for a marriage than for one partner to feel like the other came down from Mount Sinai with the budget on stone tablets. This also means that if you need to adjust something, you agree to change it together. No, this does not mean after the fact saying, "By the way, there was a really great sale on [fill in the blank]. I just had to get them even though we didn't have anything left in that category." If you are having trouble getting on the same page financially with your spouse, take some time to dream together. Something like, "You know, someday I really want to be able to visit..." or "Wouldn't you love to drive a... someday?" Or my personal favorite, "I can't wait to be able to just give crazy amounts of money to people in need!" Find that common ground and make that your "why". 

"If you have a strong enough why, you can get through almost any how."

I heard this quote earlier this week and knew I had to include it. The why is your motivation to keep going. Another great idea is to post pictures around your house to remind you why you are sacrificing X and Y now, to have Z later. If this doesn't work, you have more serious marriage problems that need to be addressed with a trained therapist or counselor. Trust me, we've been there and it will help.

5~ Once your budget is established and you are out of debt, use that extra money to invest. Even as little as $100/month can make all the difference. We're literally talking weekly pizza or latte money here.

Taking control of your money is hard. While paying off debt and learning to save is hard, it's a lot harder to be facing retirement trying to figure out how to live off of Social Security. So please stop eating your retirement! It makes for some awfully expensive poop down the road.

Your Income is Your Greatest Tool

Last night as I was teaching a budgeting class, I was reminded how much your income really is your greatest wealth building tool. Did you know that the average annual income in this country is right around $50k? That means that for the average working adult making an average income over the course of a 40 year working lifetime will have about 2 million dollars pass through their hands. 2 million dollars! Imagine how much more that is when you make more. That's a lot of money to go through and have nothing but Social Security to live on. I don't know how many retired or nearly retired people I've met who look back at their financial lives with deep regret of what could have been.
If the money comes in on payday and then all goes right back out in the form of payments, will you really be able to effectively reach your goals? Even after the great financial losses of 7 years ago, today's world is still one of easy credit. Banks advertise, "If you have the dreams, We have the money!" That's the irony of it. Have you ever noticed the skyline of just about every city in America? It is dotted with big, tall buildings, even skyscrapers. In nearly every case, those skyscrapers are owned by banks. They make billions and billions of dollars annually all because we as a culture are not willing to save up to buy things ourselves. Instead we use their money and build their wealth, not our own.
So my advice today is to stop. Stop borrowing money to finance your "dreams". Stop mortgaging your future on the whims and fancies of today. There is great satisfaction and peace in saving up and paying for something with your own money. Cars drive differently. Furniture feels better. The grass truly looks greener when it doesn't have a payment attached.

Living Within Your Means

I am often asked what the #1 thing you can do to improve your finances. After thinking about it, the first thing that comes to mind is to live within your means. Not doing so is the root cause of much of the financial stress and heartache we go through. It can be really really hard to live within your means, but that doesn't negate the need for it. So to start off a new year I want to talk about how we can all do this better this year.
What does living within your means actually mean? Obviously, it means not spending more than you earn, but I want to take it a step further to include living on less than you earn. The goal shouldn't just be to live on the cusp of your income because at the end of the month, you'd have nothing to show for it. A good rule of thumb is to live on 80% or less of your income. This allows you to give 10% and save 10%. Some of you might be thinking right about now, "How am I supposed to do that? I can barely make it as it is." Chances are if this is the case, then you have been living on the edge or above your income for some time.
So here are some things you can start doing this month if you're in that boat.
1~Get organized. Read this for more specifics of getting organized. Financially speaking, it's a great place to start because a little organization goes a long way.
2~ Create a Budget. If you've never had a budget or let it slip in recent months, then do one today. Start with your income. No matter how much or little you make, the principles are the same. It needs to be month specific and realistic. Cover your four walls first (read this for details). Then debt payments, and/or savings & giving goals. Be sure to include non-monthly expenses because they can wreck your best laid plans. Remember there are only two sides of the equation- Income and Outgo. If something comes up, make adjustments.
3~Clean House. This might be literal if you're coming up short and need to sell some stuff or are looking for a part time job. Most likely there will be some categories you need to thin out to bridge the gap. This may include drastic cuts like selling a car or house that you're struggling to pay for. At the very least there will be little things that add up quickly, like buying a drink at the gas station or daily lunches. Maybe it even means trimming utilities and grocery bills by lowering energy usage and better menu planning to avoid eating out and impulse purchases. No matter the category, short term sacrifice is always worth long term gains.
4~Learn to just say no (to yourself and your kids). Children can be one of the biggest reasons for getting off track financially. Part of being a good parent is teaching your children that the world does not revolve around their wants. Even if you did have loads of extra money, do you really want to raise those kind of kids? Likewise, adults can behave like children by "needing" things too. Be realistic and remember that family needs and goals come first.
No matter where you are in your financial journey living within your means should be one of your top priorities.

Just a Reminder About Tax Day

With April 15th just around the corner, about half the country is preparing for and anticipating a large return. How large? The average so far this year is estimated at just over $3000. That comes out to $250/month. That's a lot of money that could otherwise be working for you and your goals every month. So how does this happen year after year? Think about it for a minute. Why would you want to purposely loan your hard earned money (interest free no less) to an entity as pathetically inefficient as the US Government? It makes no sense. Don't get me wrong, it's great to receive a large lump sum. The problem is many see it as free money to splurge and spend on things they want. Instead you should remember it's your money that you overpaid in the first place. I would suggest people do this for a few reasons: out of habit, a lack of knowledge and/or lack of financial discipline.
What should you do if you find yourself in this predicament? First find out why. If it is the first two reasons I listed then, it could be as simple as going to you HR manager and raise the number of withholdings on your W-4. I find the majority of people don't know how to accurately calculate right number for your situation. The IRS actually has a calculator online to help. Get started here. The simplified version is that the right number for you is calculated by several things including the number of dependents you claim, your tax bracket and how much you already withhold. Your tax adviser is also a wonderful resource to help you calculate this. Be sure to update this from year to year as your life changes.
If your reasoning is a lack of financial discipline or planning, then you have bigger problems. It's not a math problem, it's a behavior problem. Tell-tale signs include: using your tax return to bale you out of the debt created the rest of the year, failing to use the word 'no' often enough to you or your children, not working together with your spouse on financial goals, and not living within your means. All of these point to not having and/or following a budget. My warning if you find yourself in this group? Don't just fix the numbers unless and until you have the planning to back up what to do with that money as it comes to you throughout the year. Otherwise, you will have nothing to show for it and no large tax return coming. Remember, personal finance is neither perfect, nor constant. The trick is to keep reaching for your goals, even if you are derailed temporarily.

Quotations of the Month: Fall

"On the path that leads to growth, the only things that will ever stand between you and the success you seek, is you." Joe Mechlinski

"The only way to make sense out of change is to plunge into it, move with it, and join the dance." Alan Watts

"Courage is the discovery you may not win, and trying when you know you can fail." Tom Krause

Are Student Loans Really Worth It?

If you read this blog or know me at all, you know that I always am advocating for avoiding debt and paying it off as quickly as possible if you do have it.  Student debt is no exception in my book.  Other 'financial advisers' and even friends and family will justify it with you as 'necessary' or an 'investment in your future'.  While that might be true with regards to getting an education, the debt so easily taken on is not.  I came across an article today citing a study verifying the fact that it makes you poorer than those who do not get student loans.
When you get student loans, most of the time all you think about is how much it will end up costing monthly over the life of the loan.  What you fail to take into account is what it does to your overall financial picture.  It ends up being much bigger of a toll than how much you end up paying.  For instance, what do you lose by making those payments instead of investing more in retirement or a house?  Suddenly, you realize that you're not just losing what you're paying out every month, you're losing hundreds of thousands of dollars in compound interest over that time.  When you look at things in this light, I don't know how you could go through with it, no matter how much you want it or think you need it.
Now that you are sufficiently sick about that, let me remind you about some of the other pitfalls of student loans.  Student loans aren't like ordinary consumer debt.  They are with you forever, until paid or you die. Period.  They are in the same class as IRS debt because they survive bankruptcy.  Another huge thing to consider is that you might not finish college or your graduate degree.  Nearly half of all undergrads drop out before completing their degree and an even smaller number actually finish on time, costing much more as well.  Graduate degrees don't fair much better.  Even in fields with the lowest drop-out rates 1/3 still don't finish.  If there's anything worse than having a pile of student debt, it's having that debt AND no degree to go with it.
For these reasons, don't go into debt for an undergraduate degree.  If you want to seek a graduate degree, be creative with how you pay for it.  Find a company who offers tuition reimbursement.  If you want to go to medical school, did you know the army will pay for every penny? This is with the condition that for so many years afterward you'll work for them at a reduced pay.  I think that's definitely worth considering for $250,000 of free tuition.
Sometimes it even means you delay your education goals.  I have some rock star friends who are currently cash-flowing an MBA program.  Instead of just going into $60,000-$80,000 in debt, they planned for it for many years.  They lived super frugally while they had 2 incomes and continued when they had their first child and she stayed home.  We're talking no eating out, no cable, no internet at times, no expensive shinny new cell phone plan, shopping at thrift stores, minimal gifts, etc.  As a result, they bought a house on a short sale with a sizable down payment, fixed it up, and lived there for a few years.  When they were ready to go for it, they sold the house, moved into an apartment (with 2 almost 3 children) and are using the money to pay for school.  They have completely broken the mold on this subject, but are reaping the benefits of being so.  Their sacrifice and hard work in the short term will make them multi-millionaires in the long term.
Personally, I know how hard it is to resist using student loans for easy money.  I also know how hard it is to pay them off.  When my husband graduated from college nearly 10 years ago we had almost $14,000 of student loan debt.  This might not seem like a lot compared the national average, but it was hard for us.  We were broke.  It took him 6 months to find a job in his field, which he then lost 4 months later and then was unemployed for 4 1/2 months.  It was a very stressful time, but we battled through it and continued to make the minimum payment.  Over the next few years we made the mistake of going into more debt.  We bought a car, had our first child and bought a house stretching us even further.  By the time we got our act together, we still owed over $10,000.  But, by the time we were aggressively attacking it, we paid off the last $8,900 in just 10 months.  As an added curve ball, a few months into those 10 months our house flooded and we had an insurance deductible to pay for.  So we ended up selling our second car to get us back on track.
My point in telling you both of these stories is to give you encouragement that it can be done.  Whether you have $10,000 in student loans or $100,000- KEEP GOING!  Work extra jobs, cut back as much as you can.  Sacrifice, hard work and above all patience will always pay big dividends down the road.
So what's the bottom line?  If you don't have student loans, don't get them or certainly don't take them on lightly.  If you already have them, get on a plan to pay them off as soon as possible.  Don't be lulled by tax deductions and low interest rates.  It's always worth it to work as hard as you can to pay them off quickly.  I have coached couples and have friends and family from both ends of the spectrum and have seen the heart ache that comes from student loans, and triumph that comes from a lack thereof.
I leave you with a few things to consider if you are still considering taking out student loans:
1-Think long and hard about it.  Maybe the timing is not right.
2- Make sure you get that degree.
3- Know that it will stunt your financial potential to some degree.
4- Don't get a case of 'Docitis'.  After you graduate and get a job, live like you're still a broke college student and plow through those loans as fast as you can.  This means no fancy cars, vacations and house.  The faster you can get them paid off the faster you can get your future back on track.

Being Patient

Yesterday I made the mistake of going over different scenarios from past financial decisions had my husband and I made different choices.  The results made me sick.  I could do nothing but shake my head at the what ifs.  Now it's all hindsight and water under the bridge because it's done, but what should you do if you're faced with important decisions?  Here's a few things to keep in mind while making these decisions.

1~ Be patient with yourself and your situation.  I list this first because too many times we get restless and impatient, wanting to do something with your finances that will impact you for years.  These include buying or selling a house, car or any other expensive item.  Don't ever be in such a hurry that you rush into something you don't fully understand.

2~ Take a step back (and a deep breath).  Making any major financial decisions when under stress or strong emotion is never a good thing.

3~ Always live within your means.  No exceptions. Period.  

4~ Don't buy too much house or car.  While houses are assets and generally go up in value, cars are not.  They go down in value and if you can't afford the depreciation, don't buy it.  Stick with a car that's a few years old and reliable.  Buy a house that you can comfortably make the payments, and then some, to pay it off faster.

5~ Avoid debt at all costs.  With the exception of a home and possibly some graduate level degrees, DO NOT go into debt.  It's not worth it.  Debt stifles your ability to build wealth and invest in your future.  Cost versus benefit rarely tip the scales in favor of taking out loans of any kind.  Most of the time that means sacrificing now for future rewards.

6~ Keep going.  When you feel bogged down by where you are at, just remember to keep going!  It's not a sprint, it's a marathon and you're not racing against anyone but yourself.  As long as you keep putting one foot in front of the other you'll eventually get to where you want to be.

I promise that if you practice these things, not only will you will save yourself much grief, trouble and regret, but you will soar and be able to accomplish your dreams.

The Importance of Life Insurance

In the last few months I have heard of several young mothers or fathers dying suddenly and leaving their children and surviving spouse behind in a terrible situation because they did not have any or enough life insurance.  In particular, stay-at-home moms.  I've seen mothers go to the hospital to have a baby or have routine surgery and not come out again.  It's absolutely tragic!  But it's made even worse because they didn't have life insurance.  So I'm taking this opportunity to plead with you, PLEASE take the time to get the proper amount and type of life insurance.  It would be hard enough for your loved ones to lose you, but don't complicate things by leaving them in a lurch.  I'm not going to go into great detail because I did that a few years ago.  Here's what I said then.  So briefly, I'll sum up.

1~  You need life insurance if anyone is depending on your income or services.  This automatically includes parents, whether they work outside the home or not.
2~ Avoid Whole Life, Universal or any similar products.  They are a rip off.  If you have one of these policies don't cancel it until you have a term policy in place first.
3~ Find a good term policy for 20-30 years, depending on how old you are.  If you're doing what I teach to do with your money by the time the policy expires, you'll be out of debt, you'll be well invested towards retirement, your house will be paid off, and your kids will be grown and out of the house.  Essentially, you'll be self-insured, so you won't need it.
4~ Get a policy that is 8-10 times your income.  So if you make $50,000/year, then you need a $500,000 policy.
5~ Don't rely on what your work offers.  Often times their rates are more expensive than you can get elsewhere and they don't offer enough for you.  Plus, what happens when you don't work there anymore?  You're suddenly not insured.
6~ If you are a parent, be sure to get a $5,000-10,000 child rider on your policy.  They are only a few dollars more a month and are enough to cover burial expenses if anything should happen.

I have seen first hand the struggle and heart ache that is left behind when a family loses a parent or a child suddenly.  Funerals are expensive and can easily exceed $10,000.  If you don't have insurance, how would your family pay for that?  I've seen families struggle to pay for proper headstones of a lost loved ones.  If that weren't hard enough, listen up you stay-at-home moms.  Think about all the things you do for your family-you're the cook, housekeeper, day care and chauffeur, to name a few.  How would your husband do and pay for all those things if something happened to you?  Likewise, to you fathers.  What would happen to your wife and kids if your income suddenly was gone?

Bottom line, be responsible to those you love and get life insurance.  Whether your a one or two income home, you need it if you have others counting on you.  It doesn't take much to set up, but makes all the difference when you need it.  Don't wait another day.  Do it now!

Quotations of the Month: July

"Your life is the sum result of all the choices you make, both consciously and unconsciously. If you can control the process of choosing, you can take control of all aspects of your life. You can find the freedom that comes from being in charge of yourself."~Robert F. Bennett

"The greatest waste in the world is the difference between what we are and what we become." Ben Herbster

Caught in the Middle

I was talking to my neighbor yesterday about the delicate balancing act between paying off your home, saving for college and saving for retirement.  She posed the question that I'm sure you have asked yourself, "How do you do it all?"  It got me thinking about all of you who are caught in the middle between saving for yourself and your kids' future.  How do you plan?

There are a couple of things you need to take care of before you'll be ready to juggle these well.

1~ Be completely out of debt, except for the house

2~ Have 3-6 months of expenses in an emergency fund

Not having an emergency fund or having debt payments detract and distract you from your savings goals.  It's a lot harder to juggle 4 or 5 balls than it is to juggle 3.  You end up feeling spread too thin and discouraged.  It's easier to tackle one thing at a time.  If you have a pile of debt, it's hard to save for anything, period.  The last thing you want to do is to borrow from your retirement or kids' college fund to cover an emergency.  If this sounds really simple and unsophisticated, it is.  But once you are out of debt and have that emergency fund, you have two less things pulling you away from your goals.  Remember, there is great power in focus.

Once you are focused, it becomes a question of priority.  Ideally, you do it all at once- retirement, college, and pay off the house early.  But if you have to choose, put your retirement first.  This will always trump saving for anything else.  It's like the reminder we get when we fly, about the oxygen mask; always secure yours first before helping others.  After retirement is taken care of and depending on what phase of life you're in will determine if you're more aggressive with college, the house or other goals.

One last note on college savings.  If you do have the resources and desire to also save for college, set limits.  Decide what you can and are willing to pay for.  Let your kids know early and often that they will be expected to work hard to get scholarships and get a job while in school.  You may choose to limit the funds to pay for an in-state college or university instead of a costly private school.  Remember, companies hire more based on experience, work ethic, and attitude than they do from where you went to school.  Besides, who wants to raise pampered trust fund babies? I don't, and I wouldn't no matter how much money we had.  Looking back on my own college experience; the lessons of discipline, hard work and seeing something through to the end were just as important as the content itself.

Quotations of the Month: May/June

"You are never too old to set another goal or to dream a new dream." ~C.S. Lewis

"Success consists of going from failure to failure without loss of enthusiasm." ~Winston Churchill

"Either you run the day or the day runs you." ~Jim Rohn

What I Really Do?

If you're like most people, you might see I'm a Financial Counselor and wonder, "What is that?"  So, I thought I would answer that.  Let's start with what I'm not.  I'm not a Financial Planner.  I don't sell insurance, investments or other financial products.  I can give basic advice on these topics, but I don't market them.  I'm not an accountant.  While I posses basic accounting skills, I'm not for hire as a financial manager (which someone once wanted me to do for their personal finances).  I'm not a magician and don't sell magic wands to make everything go away.  Anyone who tells you they can, run the other way because they are lying.  What I do is the real deal.  A long term, crock-pot solution, not a microwave quick-fix.

I think the word that describes me best is Teacher.  I teach you how to manage your own finances and be in control of and improve your financial life.  I teach how to live on less than you make so you can pay off debt, build savings and plan for a future.  I can lead you through difficult financial decisions or situations that affect your future.  Most importantly, I can teach you how to have peace of mind in your finances.  If you feel like you're drowning in your finances, struggling to make progress and feel stuck, or just not maximizing your potential, I can help.  I can create a customized plan to help any of these situations.  Everything I do is completely private and confidential.  I help those struggling to become better and those who are average to become exceptional.  My goal is to give you hope and help for your future.

You must remember that my teaching can only take you so far.  While I'll lead you and cheer you on all the way to the finish line, the work and progress to get there is up to you.  There is nothing more satisfying than seeing a client completely change their lives because they took control of their finances.  They even look, act and feel different.  I've had the privilege of counseling everyone from young newlyweds and college kids to mature and retired couples; those with very modest, fixed incomes to those well into 6 figures and everywhere in between.  While I prefer to meet in person, I can do long distances via Skype.  So if you are ready and willing, I'm here for you.

Budgeting: Stay on Target Month After Month

Have you ever had a month or even a series of months where things are just off when it comes to your budget?  I know I have.  Life happens, things come up that threaten to tip your balancing skills.  Maybe you've just lost the patience or the drive to keep going when the light at the end of the tunnel seems so far away.  If you're like me you need a tune up once in a while to keep moving forward.  So what should you do to stay on top of your game when budgeting becomes mundane?  

1~ Breathe.  Recognize that life happens, a lot sometimes.  Even when you feel like you've been knocked to your knees, it's important to take a deep breath before continuing.  No matter what you're going through, it will not last forever.  It might not seem like it now, but if you keep pushing you will eventually break through to the other side.  Don't let life's detours make you quit.  Instead, enjoy the windy path along the way.

2~ Remind yourself of the big picture.  Accomplishing your financial goals is a marathon, not a sprint.  Big goals, like getting out of debt, saving for a house, kids college, or retirement happens one day, one step at a time.  Taking the time to remember where you are headed and why will give you an extra pep in your step.

3~Don't get distracted by your wants.  Sure you can throw in wants sometimes to spice things up, but don't make it a habit or you'll lose momentum.  This is another reason why it's so important to have a blow category in your budget.  It needs to be enough that you can blow off steam, but not so much that it derails your goal efforts.  

4~Make it a game.  When my husband and I were getting out of debt, we made it a game to see how much extra we could glean to put towards a bill.  As a result there were months where we made a double, triple, or even quadruple car payments or student loans.  It becomes addictive almost and feels great to see the progress you are making.  We are doing the same thing now that we are saving for a down payment for a new home.

5~Put daily reminders around the house, car, work to help you remember.  Maybe it's a picture of what you are trying to do.  I always encourage my clients to do this because a visual reminder helps a lot when you feel bogged down.

6~ Remember to always budget for those non-monthly expenses.  They can quickly become budget busters and also throw you off track.  Here's my post about that from last year.

With rare exception, change happens gradually, not overnight.  It only happens when the pain of staying the same is greater than the pain of change.  If you keep these 6 steps in mind, the mundane will be revitalized again and you will see that change over time.

Quotations of the Month: December/January

"Freedom's enemies are waste, lethargy, indifference, immorality, and the insidious attitude of something for nothing."~William Arthur Ward

"Hold yourself responsible for higher than anybody else expects of you." ~Henry Ward Beecher

January Budget Doldrums

Now that we are 3 weeks into the new year, I'm sure if you made a resolution to do better with your money, your enthusiasm is starting to wain.  Have no fear!  I'm here for a mid-month pep talk.  First of all, remember a couple of things.  Change doesn't happen overnight and it's the little things that add up to be big.  Start by taking baby steps.  You can get anywhere by taking baby steps, right?  So here's a few steps you can follow if you're new to the game. 

1~ Lay out your entire budget- Income vs. Expenses.  Let it all hang out, flab and all.  This won't be pretty but you need to know what you spend on everything from debt payments to gas and groceries.  Don't forget little things like activities for the kids, lunches, and pet supplies.  Chances are you're going to feel anxious and overwhelmed by this, especially if what goes out is more than what comes in.  

2~ Cut it in half.  If doing an entire month is too much, start with a pay period instead.  This is a great way to break things off into bite sized pieces.  This is what I do and it's become super easy.

3~ Remember your four walls ALWAYS come first.  Read here for more about that.  These big pieces always go into place first so you don't have to worry about what you're going to eat, or if the electricity is going to be shut off.

4~ Choose one area that you want to change right now.  Maybe you'll start using cash for everyday expenses instead of credit or debit cards.  Maybe it's cutting back on dining out.   Maybe you need to shop around for insurance because it's been a while since you've looked.  Maybe it's even as simple as menu planning to save on your impulse grocery spending.  Regardless, find something that you can start today.  Once you've mastered that one thing, choose another.

5~ Remember to take one day at a time.  There's nothing more discouraging than feeling like you're stuck.  Taking baby steps one day at a time helps.  Life is never perfect and neither is budgeting.  But if you keep at it, you will achieve your goals.