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.

House Fever

Have you noticed the recent new wave of house fever that has hit?  Maybe it's just my area but people are jumping through hoops just to buy a house 1- because interest rates are at historic lows but 2- because house prices are also so low right now.  Could this be the beginning of a new problems?  Isn't people buying houses when they weren't ready one of the main reasons for the collapse?  Buying and owning a home is one of the biggest blessings.  However, if you do it when you're not ready it turns into a curse. Here's why.  Say you're the average American.  You have credit cards, a car payment (or two), and student loans from your college days.  Add getting married or a baby and you have a recipe for house fever.  Major life changes like marriage and children cause temporary brain damage in most.  I know it did for my husband and I when we had our first child.  Looking back it makes me sick to think of the mistakes we made.  In less than a year we bought a car, had a baby and then bought our first home with no money down, a whole lot of debt, and very little savings.  We thought we needed all that.  Man were we wrong!  We ended up broke and unable to reach our financial goals without some major sacrifice.  So I'm here to tell you, don't make the same mistakes.  We're still feeling the ripples from those choices many years later.

Here are my basic guidelines to home buying.  Do NOT buy a house unless you have achieved the following.
1~ Have a healthy down payment.  This is first for a reason.  If you don't have a down payment, you can't afford to buy a house. Period.  Doing so will come back to haunt you.  Trust me, I know from experience.  20% is ideal because you won't have to worry about PMI (private mortgage insurance).  After the housing bubble burst these rates have nearly doubled.  Depending what type of loan you have will determine the amount you pay monthly.  FHA and Conventional loans for instance have a graded rate you pay every month.  The more your down payment the lower the percentage.  With FHA loans however there is the added catch that you are required to pay the PMI for a minimum of 5 years and until you reach 78% LTV (loan to value).  Conventional loans will drop the PMI after you reach 80% LTV, even if it's been less than 5 years but you may be required to prove that with an appraisal.  VA loans are different. While they don't require a down payment and have no PMI strings, the interest rates are typically much higher (1-1.5% higher) than either FHA or Conventional loans and of course you have to be or be married to a Veteran or active Military/National Guard to qualify.  Think carefully before you sign up for this because you could very well get a better overall deal elsewhere.

2~ Be out of debt.  Having student loans, car payments and/or credit card debt hanging over your head when you buy a house is asking for trouble.  The added costs will stifle and further divide your focus and ability to pay down that debt, build an emergency fund, and save for retirement.  Furthermore, if you have a pile of debt, chances are you are less likely to have money to pay for basic repairs and breakdowns that are inevitable to come.

3~ Keep the payment no more than 25% of your take home pay.  Sure you'll qualify for much more than this because lenders look at your gross pay, not your net.  But think about it.  Going off your gross pay is deceptive since you don't actually see the money that goes to taxes, health insurance and other pre-tax expenses.  You may be able to go a bit above that number to include the property tax and home owner's insurance portion of your payment, but if you stay in that range you won't be at risk of being house poor.  Buying too much house stifles your financial goals just as much as debt can.

4~Get the lowest mortgage term you can.  Not only do you get a nice drop in interest rate by going to a 15 or 20 year mortgage but you get your house paid off sooner.

5~Don't buy a house unless you plan on living there for at least 5 years.  Don't buy within the first year of marriage, if you're in school or plan on going back to school.  Life is unpredictable, but if you know change is coming, don't make a long-term commitment.  Selling a house is expensive with Realtor fees, closing costs for you and possibly the buyer, whatever equity you do have can be eaten up quickly.  Plus, with today's market it might take a while to sell if you need to, depending on what area you're in.

I know this seems like a lot, but if you follow these 5 steps you won't regret any part of buying and owning a home.

Change Starts In Our Own Homes

It's been a while since I've taken time to blog.  I started a post last month but didn't have time to get back to it.  I'll finish and save that post for another time.  In light of the country being so close to being evenly split on the direction the country will take for the next 4 years, I thought those of us who are not enthusiastically looking forward to it need a reminder of perspective and truth.

Our nation was founded like no other nation in the history of the earth.  We have been through some pretty horrible things in our young 236 year existence.  We've been through a revolution, slavery, a civil war, stock market booms and crashes, women's suffrage, a great depression, jim crow laws, world wars and crises, terrorist attacks, and some whopper storms, tornadoes & earthquakes that nearly wiped cities off the map.  That's an awful lot!  Any or all of these could have at one time or another torn us to shreds, but it didn't.  While I'm not naive to the breadth of issues and problems facing this country (the fiscal cliff, tax increases for all, inflation on all fronts, trillions more in uncontrolled spending and debt, devaluation of the dollar, recession on the horizon, and eventual insolvency, to mention a few), I am choosing to be optimistic because the only way we'll wade through this is by rallying together around our founding document- The Constitution.  Politicians come and go, but the constitution remains.

This starts in our own homes as individuals.  We must remember that our rights and hope come from God, not government.  Change only happens when we make it happen.  So if you haven't already, start paying attention to your money!  Individual financial freedom is only the start of a greater wave of national freedom unrivaled in our history.  Choose today to make the changes necessary to experience this freedom for yourselves, it will be worth it!

One last thing:  In light of the devastation caused by Hurricane Sandy, I am going to start a new section on the blog called emergency preparedness and self-reliance.  To me, this is just as important as being fiscally prepared.

Quotations of the Month September/October

"I am what I am today because of the choices I made yesterday."~Eleanor Roosevelt

"My success was not based so much on any great intelligence but on great common sense." ~Helen Gurley Brown

"Arriving at one goal is the starting point to another." ~John Dewey

Financial Crisis

Are you or someone you know dealing with a financial crisis or have one coming on the horizon?  If so, this post is for you.  There are many things that can precipitate such an event.  Anything major like a job loss, severe income reduction, injury, or personal crises such as divorce, or death of a loved one can cause it.  But also something as ordinary as chronically overspending, not paying attention and being sloppy with your handling of money can too.  No matter how you got into the mess or whose fault it may be, the fact remains you are there and there is nothing you can do but go forward.  So what can you do going forward to minimize the damage?

1.  Do NOT under any circumstances completely ignore phone calls, letters and demands.  This will only make things worse.  Set boundaries as to how often you will talk to them.  Once every week or two is usually sufficient unless something suddenly changes.  Having good communication with them can actually slow down or stop their proceedings until you can work out a deal and get back on your feet.  Ignoring them will only speed up the process and lead to wage garnishments, which will cause further damage.

2.  Establish good communication with the lenders, collectors and/or attorneys you're dealing with.  Be up front and completely honest with them.  Share your budget with them if necessary to show you are serious about solving the problem.  It will take some doing but you will eventually find someone who will work with you, even if that means being sued and talking to the attorney in charge.  This holds true if you facing foreclosure, repossession, lawsuits or wage garnishments.

3.  Decide what you are going to do.  No matter what you're facing you have to decide whether you are going to fight to keep the house or car you're behind on or let it go.  If you decide to let it go, try to sell the item before it gets taken by the lender.  A short sale is better on your credit than a foreclosure and it's better than just walking away.  If your car is repossessed they will sell it at auction for a fraction of what it's worth and then come after you for the difference.

Here are some guidelines to decide:

If you weren't behind can you reasonably afford it?
Do you really need the item? Or can you downsize to a cheaper vehicle or living situation?
Can you work out a deal to catch up the payments?
Does keeping it stress you out more than letting it go?

Depending on how you honestly answered these questions then as painful as it may be, you may need to consider letting it go.  Every case is different and what's best for one might not be the best for another.  Just  remember two things.  One, relationships are more important than a house or car, and two, do your best because that's all you can do.  It will be stressful and take a lot a work but you will eventually come out the other side.

Choices

Eleanor Roosevelt said, "I am what I am today because of choices I made yesterday."  This got me thinking about the choices my husband and I have made over our 10 year marriage, and our lives before that.  All of them, both good and not so good, have made a difference for where we are today.  I know I've written about his before but I want to share it again.  5 years ago we made the major decision to get out of debt.  At the time we had student loans, a car payment, and a home improvement loan.  It wasn't an easy road to pay that off, but we made the choice month after grueling month to work toward that goal.  Yes, we had some financial set-backs.  Our air conditioner died and had to be replaced, we had our second child, and our house flooded.  Even in the nearly 3 years since we got out of debt we've had challenges.  Our third child spent 2 weeks in the NICU, my husband totaled our van and then earlier this year we took a significant loss to sell our home that was too small for our family.  My point of sharing this is not to toot my own horn or say, "wo is me" because everyone has successes and challenges. My point is that we are an average family with an average income and if we can do it, you can too!  Choices add up. What we did yesterday is manifest today and what we chose today will determine our tomorrow.

Quotations of the Month August

"Progress means getting nearer to the place you want to be. And if you have taken a wrong turn, then to go forward does not get you any nearer. If you are on the wrong road, progress means doing an about-turn and walking back to the right road; and in that case the man who turns back soonest is the most progressive man." ~C.S. Lewis

"Even a mistake may turn out to be the one thing necessary to a worthwhile achievement." ~Henry Ford

"Don't judge each day by the harvest you reap but by the seeds that you plant." ~Robert Louis Stevenson