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The One Simple Habit That Can Help You Enjoy a Great Financial Future

June 26, 2017 debtmanagement

Do you want to work until you’re 67 ½?

We didn’t think so.

You’d probably prefer to retire early and this is possible, even if you’re currently close to dead broke.

The answer is to create one simple habit – planning ahead.

What statistics tell us

People who said they thought about retirement “a lot,” or even “a little” – got to retirement age with twice the amount of money as people who didn’t plan for retirement. This is according to a study done in 2007 by the Pension Research Council.

Here’s another fascinating statistic. Parents who had a plan as to how they would pay for their kids’ college education ended up saving 76% more than parents who saved for their child’s’ education but didn’t have an actual plan. This is according to Sally Mae’s 2016 report How America Saves for College 2016.

And a study done in 2015 by the Center for Financial Services Innovation (CFSI) found that U.S. families who plan for big emergency expenses were 10 times as likely to be healthy financially as those that don’t.

Financial health defined

How did the CFSI define financial health? It defined it as having retirement savings and an emergency fund, high credit scores, a sustainable debt load, and property, health, and life, insurance.

People who do plan don’t focus just on long-term goals, either. They also plan and save for near-term expenses such as those that will come up in the next week, or the next six months. The fact is that you can’t dream about having a future free of debt if you don’t first have a plan for paying tomorrow’s bills.

If you can’t plan because you’re too worried

If you’re so broke you’re having a hard time just coping with today’s expenses, it’s hard to plan. In fact, according to two college professors – one from Harvard and the other from Princeton – our brains are wired in such a way that we tend to make matters worse when we don’t have enough of what we require.

If you’re having a tough time making ends meet, you will be so focused on solving today’s problems you’ll actually have less mental energy available for much else. This preoccupation actually makes it more likely that you’ll forget things and make mistakes because you’re so preoccupied with immediate problems. For example, some people take out high-interest loans that make it even tougher for them to pay their next month’s bills. In fact, believe it or not, if you’re preoccupied with financial problems, your IQ can drop by as many as 13 points, which is about equivalent to being up all night. In addition, this can have a negative effect on our ability to control our impulses and resist temptation.

Find some breathing room

The two professors mentioned above have also said we need “slack,” or time that can lessen our cognitive loads. If you’re time-strapped, this could mean keeping open a couple of 30-minute slots during the day to deal with unexpected events. If you are financially strapped, “slack” means creating at least a small emergency fund. Having just a couple of hundred dollars put away could cover an insurance deductible or a car repair. But what’s really important is that this can ease the mental strain that comes from living from payday to payday.

Develop the saving habit

Once you’ve developed some slack in your financial life, you need to develop the habit of saving. What financial advisors say is that we need to pay ourselves first. This means saving some money each month or each payday before paying your bills. Households that are financially healthy often use other plans for saving money, such as banking all of one spouse’s income while living on the other’s. Other people say their tax refunds, bonuses, or money gifts.

The important thing is that just doing it’s more important than how you do it. Once you develop the savings habit, you can then begin planning – even if it’s for just a few weeks ahead.

In summary

Many financial articles stress that it’s important to not overspend today so you can be saving for the future. However, what people most often need is to save and plan for the near-future. When you do this, you should find it much easier to manage the long term.

Here’s Why to Have a Date With Your Money

May 24, 2017 debtmanagement

Do you think of your money as a friend or an enemy?

You really should think of it as a friend. After all, would an enemy pay your rent or mortgage? Would an enemy buy you a car or pay your utilities?

Money is not only a friend, it has superpowers. It can take you on vacations and even give you peace of mind.

Given the fact it’s such a good friend, why not ask it out on a date?

Have a recurring date

Get out your calendar and set a recurring date. This could be as frequently as once a month or just once a quarter. The idea here is to set aside time to brainstorm things you could do with your current cash flow to have more money. If you implant an idea about money in your subconscious, it will go to work in the background analyzing opportunities. It’s likely that you’ll notice and remember articles on investing. You might spot the opportunity for a business venture. You’ll find this happens almost automatically once you have that recurring date in place.

What to do pre-date

This may sound silly but you should dress up just as you would for any date. Put on your makeup or comb your hair and put on a nice shirt. The trick is to make this feel like a special occasion. Then, set your intentions for the next couple of hours. For example, you might say, “I am putting my finances in order, and I’m going to think creatively about money.”

Next, set aside a limited amount of time. It would be a mistake to spend many hours pouring over your bills and end up feeling lost and overwhelmed. Three hours could be a good place to start.

Turn off your phone and maybe play some soft music to get in the mood.

Finally, make a list of the tasks that you want to perform that day.

The date itself

The first thing you need to do for your money date is assemble all your personal monthly and household expenses. Take a look at the previous month. What was your largest expenses? Do you foresee a big expense coming up in the future like a dental bill or car repair?

Check your transactions – credit cards, PayPal, checking account, purchases on Amazon, direct debits, etc. Mistakes can happen so look for overcharging or purchases that weren’t yours.
Think about your financial goals. You say you don’t have any yet? Then, sit down and define some. Is your goal to pay off your mortgage, save for a big trip, or a sabbatical year? It’s critical to visualize these goals and then track your progress.

Do you have stuff that doesn’t bring you any joy? If there’s something you haven’t used for 6-plus months, think about getting rid of it. You could donate, sell, or trash it.

Are there services like that health club membership you no longer use? Either cancel them or call the providers to see if you can get a better deal.

Think about side hustles or what you could do to earn extra money. We understand that Uber and Lyft can be good ways to do this, and that driving for Jimmy John’s can mean big money.

Look for things you can automate. Do you have an expense tracking app? Two of the best of these are Mint and Toshi. How about your bank? Does it offer options you have not yet used like automatic bill paying?

Finally, check out your investments to see if they need rebalancing. If you have not yet started investing, get to it.

Why hav a long-term relationship with your money

You don’t want your money date to be a one-night stand. It’s important to create a long-term relationship by doing things like reading money books. Keep in mind that you need to both enjoy and appreciate your money. Choose an activity or an item that you want to spend your money on that will give you a lot of pleasure. You’ll have more money coming so treat yourself to something like new athletic shoes or an expensive dinner with a loved one. It won’t exhaust your checking account if you do it just once a month, and it will enhance your life.

Lastly, pick a money or success goal for the upcoming month. This could be something as small as packing healthy food for your lunch instead of eating out. Or it might be something as big as a new outfit.

In conclusion

Having a recurring date with your money can be a very good thing. It can help you focus on your finances now and set your brain to working on them subconsciously. Your life and your money will thank you.

6 Things You Don’t Know About Money That Could Be Keeping You From Getting Rich

May 10, 2017 debtmanagement

John D. Rockefeller once said, “If your only goal is to become rich, you will never achieve it.” The thing about getting rich is that it can’t be pursued directly – just like success and happiness. If all you think about is getting rich, the odds are that once you make the money you will be unhappy.

There are some things about money you probably don’t know. But if you learn them, you’ll have a much better chance at building wealth.

1. Smart money is slow money

The world’s best money managers think slow before taking action. This is because if you want to make better money decisions, you need to take pauses. You may have seen movies like Wall Street where decisions and trades are made in just a matter of minutes but that’s not investing, it’s speculation. It takes time for the best investments to play out. They are not based on a single event or a single product. Take a lesson from Warren Buffett. He is slow to get in and even slower to get out. One of his best quotes is, “Our favorite holding period is forever.”

2. Money by itself is worthless

Money should never be an end in itself. It’s only valuable when it gets you something you want. Money touches many hands. You need to invest it, give it, or save it for a rainy day — assuming you don’t yet have money put aside. Another good way to use your money is to support a company or organization that’s especially meaningful to you. Money was meant to be exchanged, and not kept in one place. Don’t hoard it.

3. Building weath is boring

What we see on the Internet and on television is where someone had some kind of instant financial success story. The reason you see these stories is that they’re unusual. Watching a person earn tons of money over their lifetime is a bit like watching paint dry. There’s nothing exciting about it. The money is earned by a thousand moves, all of which are directed towards a long-term goal. In other words, you save money a little at a time. You invest it. Then, you receive dividends or income. You reinvest your proceeds and your earnings increase – year after year. There’s no drama and no shortcuts.

4. You must study money

Unless you’re a highly unusual person you have a limited attention span. Plus, there are only 24 hours in a day, and they can go by in a flash. If you want to become truly rich, you need to dedicate energy and time to the task. If you’re not interested in learning deeply about money, or if you don’t have time to study it, then you’ll have to automate the steps you’ll need to get there as much as possible. You need to learn the basics of those processes. One of the worst mistakes you can make is to automate a process before you really understand it. Big accidents can happen this way. Don’t press “go” until you’ve read all the fine print.

5. You’ll need to learn to say no

Sometimes, the best thing you can do is nothing. You’ll find yourself tempted by a lot of bright, shiny objects begging for your money. One of the biggest keys to financial success is to say no to almost all those opportunities. The only exception to this is when the investment aligns with your core values like investing in a business you believe in. The critical thing is to understand your truest goals in life, and then align your financial actions with them.

6. Money requires an encouraging environment

You’ve learned the basics, changed your financial habits, and chosen the things you want to support with your money. That’s all well and good but you’ll fail if the people who surround you don’t support your new financial life. They may actually try to tear down what you build up. They’re not terrible people. It’s just that some people hate to see others succeed. If you find yourself surrounded by a bunch of naysayers, you may need to clear the decks. Look for new friends who live life frugally and blow their money sparingly.

In conclusion

The point of becoming wealthy isn’t to magnify you. It’s to provide opportunities – to help someone you love, to contribute more to your favorite charities, or to invest more in your future.

6 Important Tips for Dealing with Debt Collectors

February 20, 2017 debtmanagement

Most debt collectors are probably great husbands or wives, are good to their children, volunteer for good causes, and are nice all-around people – when they’re not at work.

Unfortunately, once these people go to work, all that niceness often vanishes. Debt collectors are almost always paid on a commission basis – or a percentage of whatever they can collect. This is serious motivation for them to say and do whatever is necessary to get you to pay up. In fact, if you’re contacted by a debt collector, the best way to think of it as if a German Shepherd has gotten ahold of your leg and won’t let go.

Of course, it’s easy to get that German Shepherd let go. All you need to do is pay the debt collector whatever he demands. And in some cases that might actually be your best option. But In most cases, it won’t be. So, you need to know these six good tips for dealing with a debt collector, especially if he comes becomes abusive.

1. Learn your rights

A few years ago, our Congress passed the Fair Debt Collection Practices Act (FDCPA). It spells out very specifically what debt collectors can and can’t do. If you’re being harassed by a debt collector, you need to know your rights. For example, debt collectors cannot contact you before 8 AM or after 9 PM at night. They also cannot contact you at work unless you’ve given them your permission. They can’t contact family members to discuss your debt, and theoretically, they can’t be abusive. Go to this site, to learn about your rights when it comes to debt collectors, so that you can stand up for yourself.

2. Make sure it’s really your debt

If you’ve never made a mistake in your life, you must be some kind of a Saint. And debt collection agencies are no Saints. When you’re first contacted by a collector, be sure to get the debt verified. The debt collector has 30 days to do this. If it turns out it’s not your debt, don’t dillydally. Get it fixed. A debt collector can put negative information on your credit reports that will stay there for seven years. This can affect your ability to get an auto loan, a mortgage, other loans or cheaper insurance.

3. Protect your bank accounts

If you refuse to pay a debt collection agency, it could sue you, and ask the court to freeze your checking or savings accounts. As you can imagine, this would have a very severe effect on your family finances. What experts advise is to create separate accounts for things such as disability checks or Social Security checks, as these are exempt and cannot be used for debt payments that have been court ordered. In fact, you should probably let a debt collector know if you have a bank account that contains only exempt funds.

4. Get a consumer lawyer

If you are served with a notice that a collection agency has sued you, be sure to get an attorney that specializes in consumer law. This is critically important because if the agency gets a judgment against you, it could garnish your wages. For example, a good attorney could find that the statute of limitations on your debt has expired, and that you’re no longer liable for it. If you can’t afford an attorney, at least show up in court because if you don’t, the creditor wins.

5. Record your conversations

If the collector makes threats or uses abusive you language then you need to record your conversations to document it. Some states won’t allow you to record a conversation unless you have the other party’s permission. You will need to check it out to see if this is true where you live. But if it’s allowed, record your conversations. In fact, it could be a good idea to tell the debt collector you’re recording the call even if you’re not. He’s less likely to be abusive if he thinks you are.

6. Get any agreement in writing

Don’t send in any payments until the agreement you’ve made with the debt collector is in writing and signed by a representative of the collection agency. As part of the agreement, you should also try to get the collector to agree to report your debt as “settled for full amount due,” or similar wording. If not, it will be reported as “settled for less than full amount due”settlement,” or something comparable and this will have a very negative effect on your credit and your credit score.

11 Incredibly Simple Things You Could do to Get Out of Debt

February 13, 2017 debtmanagement

How would it feel to be debt-free? We’re guessing you’d feel pretty darn good. There’d be no more the stress of dealing with creditors, no more trying to remember which payments to make on what day of the month, and most important, your entire paycheck would be yours – no more sharing it with your creditors.

If you’ve been trying to pay off your debts, you may have already done the big stuff like selling your house and downsizing, or getting rid of that travel trailer. But have you forgotten some of the small, simple things you could do to become debt free? Or maybe you’re stuck. You have a few ideas but just can’t get those creative juices flowing.

Well, take heart. Here are 11 almost ridiculously simple things you could do to get out of debt.

1. Begin couponing

If you have a favorite supermarket, be sure to sign up for its emails. You’ll then get a steady stream of money-saving coupons, some of which will actually be for stuff you buy on a regular basis. There are also sites like coupons.com, dailycoupon.com, retailmenot.com, zulily.com, and shopathome.com, where you can download printable coupons. Then, build your meals around them.

2. Cut that cable

If it feels like your cable bill just gets bigger every year, that’s not your imagination. America’s cable companies just keep increasing their fees. Technology has gotten to the point where there’s just no reason to subscribe to cable anymore. You could get an antenna for less than $50 that will get you all your local stations – free. Add a couple of subscriptions like Netflix, and Amazon Prime Video, and you should be able to should get all the programming your heart desires and for less than $25 a month.

3. Quit eating out

How often does your family eat out? Let us say you eat out just twice a week, and that you spend $40 on a meal. That’s $320 a month. Eat in those two days you’ve been eating out and that’s $320 a month you could use towards debt reduction.

4. Learn to love the word “no”

When it comes to saving money there’s just no word more powerful than the word “no” when it comes to your money. It’s one you need to learn to love. Make it a critical part of your vocabulary. Embrace it. It’s a word you’ll be saying very often when it comes to your spending. No matter how much you want that new blouse or that new billfold, just say “no.” Ditto 23that new fishing rod or smart phone.

5. Avoid expensive hobbies

Do you have an expensive hobby like golf? That can easily cost you $200 a month. Do you collect expensive football or baseball cards or antique greeting cards? Then, stop playing golf, or sell all those cards. Use the money to either pay down debt or to help fund your kids’ college education.

6. Sell a car

Is yours a two-car family? Maybe it doesn’t really need to be. If the payment on one of those cars is the US average of $400 a month, then sell it and bank the $400, which is really $4600 a year. We’re pretty sure that putting $400 a month towards paying off your debts would get you debt free a lot faster.

7. Freeze your credit cards

Yes, we really mean it. Freeze all your credit cards in a block of ice except for maybe one with a low limit and keep it available for an emergency. Some experts say you should shred your cards, but we prefer the block of ice method as your cards would still be there to use when you get debt-free.

8. Sell stuff

If your family is typical you have a bunch of stuff sitting in your garage, attic, or basement that’s just gathering dust. Put it on eBay or Craigslist and sell it. You might be surprised at how much you get for stuff you think of as just one step above junk. Or, even better, if you have a skill for making things, put it to use by making stuff and selling it online.

9. Merge your bank accounts

If you’re married, do you and your spouse have separate bank accounts? Merge them. There’s no reason the two of you shouldn’t be able to share one account. You’ll save money, and it will simplify your household accounting.

10. Use your local library

Do you remember libraries? They’re places where you can get books free, which is a lot cheaper than buying from Amazon.com. If your library system is like ours, you might even be able to check out, and download e-books, and then read them on your tablet.

11. Don’t invest

We understand this is a shocking one. But once you become debt free, don’t invest your new-found money in the market. Start putting 15% of your gross income into a retirement plan, instead. That could be a 401(k) if your employer offers one, or if not, a traditional or Roth IRA. Then, invest that money in something safe and sound like an index fund.