Quotations of the Month March

"Credit buying is much like being drunk. The buzz happens immediately, and it gives you a lift. The hangover comes the day after." Dr. Joyce Brothers


"A creditor is worse than a slave-owner; for the master owns only your person, but a creditor owns your dignity, and can command it." Victor Hugo


"Promises make debt, and debt makes promises." Dutch Proverb


"The crown of the wise is their riches: but the foolishness of fools is folly." Proverbs 14:24

Tip of the Week March 18-25

Why Credit Cards Don't Pay

We've all seen the ads- get cash back, airline miles or bonus points by charging on your credit cards. This sounds like they are just dying to give you free money, right? The truth is that it's a marketing technique to get you spend more and pay them interest in the process. They do research and know that by purchasing with plastic you spend more than you would if you used cash. Adding the facts that you justify spending more (since you're getting rewarded) and the bulk of you not paying your balances off every month; you've been sucker punched by the credit card company.

The credit issuers aren't the only ones who have learned this. Have you noticed that over the last decade everyone and their dog takes credit cards? You might think this is because they want to make it 'easier' to pay for their customers. Yeah it might be easier but they do have to pay Visa or Mastercard 3-4% of the transaction amount. However what companies started realizing is that you spend more if they take your credit card, more so than the 3-4% they have to pay for the transaction. McDonalds did a study and concluded that their average credit card customer spent 40% more on their ticket than cash spenders. This was a jump from around $4 to $7 and the reason why they and all other fast food joints started accepting credit cards. That said, let's do some simple math. According to Smart Money Magazine, the average consumer spends 12-18% more using credit than cash. Even if you were half that conservative at 6-9%, are you really coming out ahead playing the reward program game? NO- because they are only giving you 3-5% on your money.

Homework:
For one month, use cash instead of credit cards to purchase everyday items like clothes, groceries and eating out. This not only keeps you on track with your budget, but you won't be paying for food that is long down the sewer when the credit card bill comes. The trick is to be realistic and that once the money runs out you don't just keep hitting the ATM. For more about this check out my archives about budgeting properly.

Tip of the Week March 11-18

Why Not Use Credit Cards for EVERYTHING?

I get asked this question quite a bit. Why not use credit cards for the cash back, reward points and airline miles? It's free money from the credit company and I pay mine off in full every month, so what's the big deal? To all those who ask these questions I will say, I used to believe that. I was very good about charging everything (including utilities) and then paying it off in full when the bill was due. I literally felt a sense of pride that I was somehow winning and swindling the credit card company out of all this 'free money'. There were a couple of major flaws with this behavior. First, I never felt like we were getting ahead because after the big credit card payment was made there wasn't any money left. Second, when there were unemployment issues, the bill couldn't be paid off in full. Thus being caught in an endless cycle. Sure we had stellar credit but we didn't have any money in the bank.

The truth is that credit card companies know exactly what they are doing by offering the various reward programs they do. These are skilled and very well researched decisions because they know that the vast majority of credit card bills are not paid off every month. They know that because you think you are getting rewarded, you will justify spending more and then not pay it off in full. Think about it, if they were losing money on these programs they would stop them immediately.

Homework: 
This week I want you to go over your credit card statements and uncover what you are really charging. Chances are the bulk of it is everyday spending like gas, groceries, eating out, entertainment and other fun things. Keep in mind what your real cost is for my tip next week. I'll talk more about how you really end up spending more by using plastic versus cash.

Tip of the Week February 25-March 4

What Should You do With Your Tax Refund?

I've been asked this question a lot lately. Since the first refunds should be arriving in the next couple of weeks, I thought this would be a good thing to discuss. As I established last week, it's not so great of a deal on your end if you get a tax refund. Sure it might seem like bonus money but it's either your money that you loaned the government interest free for the year or it's someone else's money. But enough about that, what do you do with the money if you are getting it?

Since I am a Dave Ramsey counselor my advice is the same as his. Start wherever you are in your baby step process. If you haven't started or have no idea what I'm talking about go here for more information. This program is boot camp tough and not for sissies. If you aren't ready, then what I'm going to say won't make a bit difference to you because you probably won't do it anyway. If however you are ready to step out of denial and change your life- keep reading. This is after all more about priorities than anything else.

Homework:
If you don't have anything in savings, start by putting $1000 away for emergencies. Remember it's not if but when you will need this money. Next if you still have refund left and are ready to dig out of your pit, use the rest of your money to pay down your debt snowball. This is not to say that you can't use any of it for having a bit of fun, but this depends on your situation and how serious you are about getting out of debt. If you are going to pay down debt only to run it up again later this year, then what's the point? You're in an endless cycle and you might as well blow your refund.

If you are going to spend some of the money on things other than saving and paying down debt be sure to prioritize. Is it something you really need like getting the car fixed, badly needed house repair, or a big bill that is coming due? Or is it a want like furniture, flooring or a gadget/toy? Maybe you are in the middle of a crisis or see one on the horizon. If this is the case, pile up the money into savings to weather the storm. Whatever your circumstances use prudence when making these decisions. The bottom line is if you don't have a plan or aren't intentional with your money you won't have any and you will always be wishing for that big refund.

Quotations of the Month February

"The hardest thing in the world to understand is the income tax."Albert Einstein


"Next to being shot at and missed, nothing is really quite as satisfying as an income tax refund." F.J. Raymond

"It's income tax time again, Americans: time to gather up those receipts, get out those tax forms, sharpen up that pencil, and stab yourself in the aorta." Dave Barry

A Tax Withholdings Case Study

Last month I had the opportunity to counsel one of my good friends and her husband with their finances.  Upon getting their numbers, one of the first thing I noticed was the very large gap in what I remember her telling me their approximate gross income was and what their take home pay actually ended up being.  Upon further investigation, we discovered that they had been over withholding their taxes by having way too few exemptions.  The result was that for the last several years they have been receiving an average $6-8K tax refund.  I had them adjust the number of exemptions they were claiming on their W-4 and we found an extra $400+ per month to bring home.  That's an extra $4800/year that they really need and that's not being loaned to the government interest free.  I can't tell you the relief that washed over them when they realized they weren't as bad off as they thought.  They were also appalled that they hadn't caught the discrepancy sooner.  They were caught in a vicious cycle of running up debt throughout the year only to try to knock some of it down when the tax refund came in.  Now they are thrilled to have one last big return and have a plan for that money to end the chaos.  Please take a lesson from this real-life example! Make the changes necessary today to take control of your financial destiny.

Tip of the Week February 18-25

Are you getting a tax refund?

The average tax return was a little over $3000 last year, according to CNN Money. This might seem like a really good thing to get money back from the government. I want you to think about this for a minute. One of two things are at play here, and sometimes both. You are either paying in too much money and thus receiving it back or you are receiving money that you didn't pay in the form of credits (earned income credit- EIC, child tax credit and such). Or like I said you are doing both and receiving a very large refund because you are not only paying too much but also receiving the credits.

The credits you really can't control since that's just how things are with the current tax system. You can however control how much you pay in. Here's a hint: if you are consistently qualifying for those credits, in particular the EIC, you should be paying very little if anything from your paycheck. This is because those credits offset any negligible amount you would need to pay. This would mean you make less than average household income ($49K/year) and have children. Add that to any other major deductions you may take- mortgage interest, charitable contributions, medical expenses, Roth IRA contributions. You could really get a bundle back...which isn't necessarily a good thing.

Homework:
So what do you do about this? If you are getting a refund I want you analyze why. Change your W-4 to reflect the proper amount of exemptions to claim. If you are unclear on this please see you tax consultant for the right number and/or talk with your HR director. This may be more or less than the number you come up with using the W-4 questionnaire. Also be sure to update it regularly when you have a change in income, number of dependents or life situation. Your goal should be to get the amount owed or refunded as close to zero as possible. After all who wants to loan the government money interest free for the year.

Quotations of the Month January

"Self-sabotage is when we say we want something and then go about making sure it does not happen." Alyce P. Cornyn-Selby


"A person's worst enemy can't wish on him what he can think up on his own." Yiddish Proverb


"I have never been contained except I made the prison." Mary Evans


"Whether you think you can, or you think you can't, you're absolutely right." Henry Ford

Tip of the Week January 28-February 4

Friends and Family Sabotage

I wanted to end the month talking about another important means of sabotage- friends and family. While trying to accomplish your financial goals, having a good support system around you is very important. For those of you who are single, friends are like a second family. If your friends or family are ridiculing you for the changes you're trying to make, it's pretty difficult to continue. There will always be someone in your life that will try to pull you down. Whether it's a friend, co-worker, or family member, you will have to evaluate your relationship with them. Your true friends will always stand by you and support you through thick and thin.

Homework:
When you're trying to lose weight, the last thing you need is a friend asking you to go eat ice cream. It's the same thing with your finances. Friends wanting you to go shopping, or go out to eat every day can really hurt. If after you have explained to them what you are trying to do, they scoff and continue to pester you or make fun of you for not going with them, then it may be time to evaluate the relationship. If your friendship is defined by spending money that you don't have, find a way to redefine it or separate from that person. Family members can be more difficult to deal with. You may have family traditions of going on a big vacation every year, or spending big on holidays and birthdays. Most of the time the majority of family members will understand, but there might be a few who are offended that you are choosing not to spend money you can't afford. In these cases, developing thick skin may be a necessity.

Tip of the Week January 21-28

Spousal Financial Sabotage
If there's one thing that is harder to deal with than self-sabotage, it's when your spouse sabotages your finances. Whether this is intentional or not it's a BIG problem. I see in it many of my friends, family & clients. So what can you do about it if you feel that you and your spouse are trying to row your financial oars in different directions? First you both have to realize that it's happening and how emotionally exhausting it is. Remember, financial problems are only the topic that you fight about, or the symptom to the real problem(s). Where there are money problems in a marriage there will always be a breakdown in communication, mis-trust, or lack of organization. Many times it's a combination of all three. It takes an enormous amount of effort to be on the same page financially, but the dividends pay back many fold every time. Like I told the couple I coached last night, if you can come together on your finances, you can do anything!


Homework:

For some of you, change will be instigated simply by having a heart to heart talk. Regardless of what your circumstances are, start with this. Put the kids to bed and really talk with your spouse. You'd be surprised how much this really helps. Your spouse may be totally unaware of how serious the situation is. This is a non-confrontational approach, so stop if it escalates. More of you will need a third party to intercede and help you through the issues. This should start with your local clergy or a good marriage counselor. If your spouse doesn't want to attend, go by yourself to get the support you need to deal with the situation. This is very serious stuff I'm talking about. These are the seeds that lead to divorce. If left alone and untreated, they will grow as a wedge and fester your marriage. There will come a point when one or the other of you will reach a breaking point, snap, and the marriage like Humpty-Dumpty won't be put back together again.

Tip of the Week January 14-21

Financial Self-Sabotage
Are you guilty of sabotaging yourself financially? If you answered no, then you are probably lying to yourself. We all have done it at times, I know I have. So how do you avoid the pit falls of self sabotage? Whether you are talking about becoming financially fit or physically fit, the solution is one in the same- permanently changing the behaviors that led to the anorexic savings and bloated debt loads. That's right, this is the reason why so few actually get the long term results that they want. Think about it, our brains are hard-wired to seek pleasure and shy away from pain. Delaying a purchase or telling yourself 'no, not right now' is painful, especially at first. Think of this as an exercise building strength and memory, only for your wallet.

Homework:
I want you to sit down with a sheet of paper and think of every reason that you use to sabotage your finances (you may even need two sheets of paper). What's your negative self-talk when it comes to the way you handle your money. This could be anything, 'I spend too much', 'I'm too busy to think about it', 'I don't make enough', 'I make more than enough so it doesn't matter', 'I'm in too deep', 'It's only this one time', 'I'm having a bad day'. The list could go on and on. Think on it long and hard. The point I want to reach is that these are ALL simply excuses. They are the symptoms, the surface. Next, I want you to go back through your list and answer, 'why?' to every excuse you came up with. Why you think X makes it okay in your mind to do Y. I guarantee that if you do this and really search for 'the why', you will get down to the deep rooted issues of what led you to where you are today. Until you know the real reasons you will never see any lasting results.

Tip of the Week January 7-14

Back to Basics!

This time of year is filled with lofty goal setting and getting out of debt usually tops the list. Of course this rarely just happens. And so I want you to think of this from a different approach. It's the simple little things that make up the fabric life is made of. The small choices we make everyday that determine the course your life takes. In the world of finance I think it's best known as 'the latte effect'. A few dollars here and there that make a big difference over the long haul. Making small and simple changes now, on a daily basis does the same thing. So let's get back to the basics and focus on those small things that really do make a difference in your financial lives.

Homework:
Choose one area of your finances or budget that could use some extra attention. What is the category that is always out of control or throwing you off? What is your weak spot or chink that if left unchecked will unbalance the whole thing? We've all got one! You probably know exactly what I'm talking about, so it's time to fess up. Regarding this one habit or issue, identify what you can do to change it. This might be something drastic or simple tweaking. The point is that you do something to address the situation. We all know the power of denial. So stop and take stock of what you need. Be realistic and specific and if you slip up, don't quit!

Quotes of the Month Dec 10-Jan 14

"There are no short cuts to anywhere worth going." Beverly Sills


"Change is very hard and we change only when the pain of [staying the] same is greater than the pain of change." Dave Ramsey More Than Enough


"You will find peace not by trying to escape your problems, but by confronting them courageously.  You will find peace not in denial, but in victory." J. Donald Walters

New Format for a New Year

I have decided to change things up a bit on my blogging format.  Instead of having a longish post about my tip of the week, I'm only going to have the tip (off to the right) in a more expanded form.  Also, instead of changing the quotations every week with the tip I'm going to leave them up for a whole month.   As a result the tips will have the same theme for the month to go along with the quotations.  I feel the need to streamline the process and not be bogged down with a long detailed post every week.  


Again, PLEASE leave your feedback if you want a specific topic covered or if you have a problem you need help with.  My goal is to give you the information and the encouragement you need to keep going no matter what your personal circumstances.  I want you to read my blog and feel refreshed, inspired and hopeful again.  If I have learned anything about personal finance it's exactly that- personal.  Let's face it, this is hard stuff we are talking about.  It's nice to read about in theory but when you start to apply things to your own life, you'll understand what I'm talking about when I say- IT'S REALLY HARD!  But almost in the same breath, I'll always tell you that the 'hard' is worth it in the end.  Happy New Year!  May 2011 be all that you want it to be!

Tip of the Month December 10-January 7

Be your own Catalyst for Change

Only when and if you have decided that you have had it up to your eyeballs with the way things are, will anything begin to change. Coming to the realization that you are sick and tired of it is perhaps the crossroads that you need. Don't shrink away from this. Be courageous in facing things head on. Having financial freedom and peace is priceless and worth the sacrifice to have!

Homework:
Work together with your spouse toward the new direction you want your lives to take. Learn the tools necessary to start and more importantly continue on the journey. Keep going when things get rough, because the results really are worth it.

Happy New Year!!!

A new year has begun!  Sorry for such the long break between posts.  Don't worry I have not fallen off the blogging wagon completely.  I just had a busy holiday season with my family and then have been sick over New Year's.  Please check back later this week for more about what I love best!

Time for A Change?

Chances are that you are part of the 7 in 10 American households living paycheck to paycheck.  The funny thing is that only about half of you recognize that you really do live paycheck to paycheck.  That is some serious denial going on.  Here are some signs that you are indeed living paycheck to paycheck.  You have no savings, you feel like you play catch up on payday, you have too much month at the end of the money, you are anxious about how you are going to pay for an upcoming bill and most importantly- if you lost that paycheck today, you would be in serious trouble.  I'm not trying to make you feel stupid or worthless, I just want you to have a dose of reality as ugly as that might be.


There could be several reasons for being in this predicament.  Having career or medical issues, not knowing how to live differently and not having a plan are just a few.  Whatever the reason and no matter what your circumstances, you don't have to live like this anymore.  The key to unlocking a better future is change and that makes you the catalyst.  Only you can decide if you have had enough of the stress, pressure, and turmoil of living this way.  When you come to this crossroads you have a choice, either keep doing the same thing and getting the same results OR make a change (or several) that will lead you down a new path.  Sure, this new road seems scary and I won't lie to you, it will be hard at times.  You will even have setbacks and discouragements along the way.  But having traveled this road for the last 3+ years, I will tell you that I wouldn't go back to the way things were for anything.


If you don't know where to begin, start by realizing that you need to make a change.  If you are married, talk to your spouse about how you feel.  If your spouse doesn't feel the same way, get help from a third party clergy or counselor.  Not being on the same page with your spouse may be the biggest problem you are facing.  You will always be frustrated and never get anywhere if you are trying to row the same boat in different directions.  Work together to develop goals and a plan of how you are going to get there.  Gain the tools and knowledge to help you be successful in following that plan.  Get help when you need it.  Above all remember that this isn't a cake walk or a sprint.  Almost daily, I have to remind myself to think tortoise, NOT hare.

Tip & Quotes of the Week December 3-10

Being Content

Learning to be content with what you have instead of dwelling on what you don't have is a simple concept. It is probably the one thing that will keep your perspective in life. When we have gratitude in our hearts, we are content.

Homework:

Are you struggling with stuff-itis? The insatiable appetite to acquire because it is on sale, shopping makes you feel better, or because other people have it. If so, then you need a good dose of gratitude. The simple things in life are really what is important.

"But godliness with contentment is great gain. For we brought nothing into this world, and it is certain that we can carry nothing out. And having food and raiment let us therewith be content." 1 Timothy 6:6-8

"Do not spoil what you have by desiring what you have not; remember that what you now have was once among the things you only hoped for." Epicurus

"We tend to forget that happiness doesn't come as a result of getting something we don't have, but rather of recognizing and appreciating what we do have." Frederick Keonig

The Gift of Contentedness

I hope you all had a great Thanksgiving Weekend and are starting off the holiday season in the spirit of thanks and giving.  At my house we are fans of Veggietales.  If you have never seen Veggietales I would highly recommend it because of the great moral lessons they teach.  My favorite is Madame Blueberry.  It's about about a blueberry who is 'blue' because of all the things that she wants and doesn't have.  Yet after buying everything she could ever dream of from the local Stuffmart, she still isn't happy.  Seeing a poor but content asparagus family who has love and gratitude makes her realize that things won't make her happy, having true gratitude will.  I know this is just a simple cartoon, but the lesson is the same.  Things will never fill a hole you have in your heart.  No matter how much money you spend you will always want more.  Happiness doesn't depend upon your worldly wealth or possessions, it's determined by your attitude.  It is very difficult to have gratitude if you are always thinking about what you don't have.  Instead of comparing your situation to others, remember and be grateful for the things that you do have.  Being truly content is the best gift you can give to yourself and teach your children and grandchildren this Christmas.

Tip & Quotes of the Week November 19-December 3

Get Organized!

Is lack of organization holding you back from achieving your financial goals? Something so simple can make a huge difference in how you view your finances. Not having a system that works for you to: pay your bills, track your income, expenses, and investments, and project cash-flow can be costly. Avoid these mistakes by having a plan and getting organized today.

Homework:

Choose a software program, form, or website that you like and keeps you and your money organized. Don't choose something so complicated that you don't understand it or something so time consuming that you don't use it. The simpler the better as long as it does the job.

"You will either learn to manage money, or the lack of it will always manage you." Dave Ramsey

"If you lack the courage to start, you have already finished."Unknown

"If you aim at nothing, you hit it every time." Zig Ziglar