Friday, March 29, 2013

Are You Car Rich and Cash Poor

Twelve millions Americans are unemployed. Florida has 327,528 foreclosures, California has 159,866 Illinois has 137,773; Georgia has 61,058 and Ohio 83,331.  According to Wards Auto Group, 14,785,936 autos were sold in the United States in 2012. According to the Wall Street Journal 612,953 cards were sold in February 2013, 106,601 SUVs, 250,631 cross-overs and 579,296 light-duty trucks totaling 1,549,481 vehicles sold in February alone. According to Huffington Post 46% of American die with no money.  These statistics show that Americans are still not saving and are continuing to go further into debt.

Are you afraid of having your car repossessed or admitting to yourself and others that you are having difficulty making your car payment? Are you making sacrifices just to make your car payment? Do you have a savings account or retirement account? Are you upside down on your car?  If so, you are car rich and cash poor.  It is not worth it.

Many Americans continue to buy expensive cars with monthly payments of $400 or more only to struggle to pay them a few months later.  Due to this, they are unable to plan for unexpected expenses and are unable to survive a financial crisis. Many live paycheck to paycheck and have little to no savings.  With the many economic crises it is important to spend less than you earn and consider downsizing your lifestyle to ensure you have money left over each month after you pay all of your bills and basic necessities.

I bought a new 4 door Hyundai Accent basic model for approximately $17,500 last August because my 14 year old car got totaled. It came with a 10 year or 100,000 mile warranty.  I get 31 miles per gallon.  It gets me from point A to point B and my payment is $288 per month with a 2.99% interest rate.  This is a comfortable payment that can be made without stress.  The car dealer told me many of his customers delayed purchasing a home and instead spent money buying a luxury car. This makes no sense to me. Cars depreciate as soon as you buy them.  Homes however have more value and can be an asset.  If you get into financial trouble and have equity in your home you can sell it and make a profit.  You cannot do the same with a car.

During an economic crisis it is best to have cash on hand in case you lose your job, get sick, lose medical coverage or have reduced income or benefits.  Here are 8 ways to stop being car rich and cash poor.

  1. Create a budget. Track your spending daily, weekly or monthly and see what areas you can reduce spending.
  2. Lower your payment. Refinance your monthly payment; purchase a cheaper car or a used car with no payment.
  3. Taxes.  You can only deduct expenses on your car for business purposes or if you purchase an energy-efficient car. 
  4. Interest. In some instances the interest on a car loan may be higher than a mortgage or other loan so it is best to pay the balance off as soon as possible. The ideal is to pay a car loan off in 3 years.
  5. Backup fund. Create an emergency fund to cover all of your monthly bills and expenses for 9-12 months.
  6. Income streams. Find additional ways to generate income such as a part-time job, selling new or unused items on eBay or Craigslist, investing in a franchise, starting a part-time or home-based business, have yard sales, bake sales, deliver newspapers – find something to do.  The ideal scenario is to work for yourself but until you build up enough cash reserve you may have to start out working for someone else.
  7. Invest. Invest in commodities such as pharmaceuticals, green companies, medical research companies, grocery stores, electronics stores, car manufacturers, information technology companies, corn, soy, wheat, coffee, orange juice, oil, cattle, sugar, cocoa, cotton, rice, rubber, barley, wool, oats, hogs, canola, adzuki beans, and minerals such as aluminum, copper, gold, silver, nickel, natural gas, platinum and zinc.
  8. Real estate. Invest in real estate. This requires good credit or bad credit and lot of cash.

Tuesday, March 26, 2013

Your Best Defense - A Budget

Many people know they should track their spending and create a budget or spending plan but don’t want to.  The thought of knowing how much money you actually owe, how much money you earn and how much money you actually spend each month is terrifying.  If you create a budget you will quickly see how you spend your money.  You won’t be able to hide it or run from it any longer.  If you know, other people may know too, yes those other people are your creditors who continue to call asking for a payment.

Many people are fearful of creating a budget and have good intentions by creating one but don’t stick to it.  To stick to creating a budget you have to view a budget as a tool to help you.  You are the only one who has to see your budget.  Many people today live paycheck to paycheck and are in mounds of debt, in some cases because they didn’t create a budget or didn’t stick to it.

If you know how much you earn, how much money you owe and how much money you spend you can change the direction of your life.  A budget helps you if you have an unexpected expense.  Since 2008 many people have had unexpected expenses. In 2010 the country experienced several fires, floods and earthquakes some in areas that were not expected.  If you did not have homeowner’s insurance to cover the damages that is example of unexpected expense. 

Create a budget by writing down everything you spend money on each week or during each month and subtract your income.  If the result is less than 10% of your monthly income you need to make some adjustments to your spending.  A balanced budget consists of: 15% transportation, 15% debt, 10% savings, 35% housing and 25% other expenses. 

Create an emergency fund to cover your total monthly expenses for 9-12 months.  Creating a budget will help you to reduce spending and prevent you from using credit cards to pay for purchases.  Use credit cards for emergencies only.

Develop financial goals when creating your budget. Financial goals provide motivation for you to work towards reaching that goal and provides a sense of accomplishment when the goal is met. Some examples of financial goals are: pay off a credit card, buy a home, start a business, take a vacation, etc.  A budget is your best defense against going into debt, living paycheck to paycheck and experiencing financial crises.  Here are 6 ways to create a budget and stick to it.

  1. Take accountability. Take accountability for your actions, don’t blame others for your current situation.  Learn how to be flexible and adjust to changes in your life.
  2. Use pen and paper, use a software tool like Quicken or Microsoft Money or use the envelope method.  Once you visually see where you are spending your money it will make it easier to reduce spending.
  3. Create goals. Write down a list of at least 5 financial goals. If you cannot achieve any or can only achieve 1 or 2 of your financial goals you need to make some changes in your spending habits. Write down a list of all of your debts.  Develop an action plan and beside each debt write down steps on how you can pay the debt off: reduce spending, use coupons, use money savings tips, earn extra income, etc.
  4. Pay off small bills first. Pay down any small bills and debt first.  Once all your small bills have been paid off start tackling the larger bills. Setup payment plans for bills you cannot pay off in full. Be sure the account balances are updated on your credit report.
  5. Support network. Surround yourself with at least three people who are doing better financially and gain financial advice from them.
  6. Seek professional help. Consult a financial coach, financial planner or advisor to help you create a budget or spending plan and provide recommendations to help you stay on track.

Saturday, March 23, 2013

15 Tips to Plan an Easter Meal on a Budget

Easter is a reminder that Spring has finally arrived and Winter has ended. I love the Spring season because the temperature starts to warm up and it is a gentle reminder that summer will soon be here.  During any holiday it is easy to spend money with all the advertisers, family and friends asking you to buy this or buy that. Resist the temptation to spend money that you don’t have, buy more than you need, or buy something you probably will not use simply because it is on sale.

You can enjoy a holiday meal without going into debt but it requires effective planning. Many people love getting together for a holiday but don’t love spending a lot of money to do it. Planning a meal for a holiday can be stressful with the decorations, desserts, cleaning, cooking, invitations, and setup.  You can still enjoy a holiday meal with family and friends, save money and eat healthy.

Remember the real reason for the holiday and focus on giving and being with your family. Comparison shop to see if you can find the item for a cheaper price at another store.  Don’t stress out over preparations.  Focus on giving a festive event that is memorable and everyone is happy. Here are 15 ways to plan an Easter meal on a budget:

  1. Plan ahead. Don't wait until the day before Easter to go shopping. Lines at the register are longer and the selection of items is limited.  Try shopping at least a week in advance or early in the morning.
  2. Make lists. Make a list of what you need and can afford to buy and stick to it. Make a list of what you need but can’t afford to buy and ask guests to bring those items.
  3. Menu.  Create a menu ahead of time and stick to it.  Consider low cost items for the menu such as potato salad, salads, sweet potatoes, casseroles, etc.
  4. Local shopping. Visit local vendors, farms or farmers markets to purchase meats, fruits and vegetables which will be less expensive than the grocery store.  Buy items in season, fresh is always better.
  5. Budget. Create a food budget and don’t go over that amount.
  6. Coupons. Know your prices and when items go on sale.  Use coupons on sale items. Shop at stores that offer double coupons and discounts for loyalty card members.
  7. Smaller meal. Consider having brunch instead of dinner to save money. Ask friends and family to bring a dish to help cut downs on costs.
  8. Side items. Buy ingredients for side dishes at least one week before you buy the meats.
  9. Drinks. Make your own non-alcoholic beverages such as tea or punch.
  10. Centerpieces. Make your own centerpieces for decorations.
  11. Condiments. Buy spices and condiments at the dollar store.
  12. Salad Dressing. Use olive oil instead of salad dressing for pasta dishes and salads.
  13. Make from scratch. Make you own bread, yogurt, pasta, soda, jelly, ice cream and desserts from scratch.
  14. Leftovers.  Freeze leftovers or take to work for lunch.
  15. Use cash. Pay for all items with cash to save money.

Wednesday, March 20, 2013

11 Ways to Deal with Adult Peer Pressure and Finances

Many Americans think peer pressure only affects children but it affects adults too.  Child peer pressure is more obvious but adult peer pressure can be subtle. Many adults may not even realize they have been victims of peer pressure. Many adults find themselves pressured into a lifestyle that requires them to give their family more and buy things they can’t really afford. This behavior results in financial disaster. The economic issues the country has experienced over the past few years has been scary – wars, the recession, the fiscal cliff, the sequestration, etc. and has caused people to make bad decisions based on emotion. Just because you have the money or access to credit to buy something doesn't mean you have to spend it.

Many adults have succumbed to financial peer pressure from family, co-workers, friends and their children which has wreaked havoc on their lives and caused them to ruin their credit, spend more than they earn and even resulted in filing for bankruptcy.

Your friends and family influence you and affect the way you view life. If your friends are materialistic and spend money, it’s easier for you to spend money.  It can be difficult to resist the urge to join them. Living a materialistic life or having lot of money does not bring happy, just look at the wealthy people. Many financial decisions are made to win the respect of people you think are sophisticated, popular or influential. Others seek acceptance, recognition, appreciation and compliments regarding their financial decisions.

Pressures are a normal part of life and adults have to learn how to effectively handle these pressures in a positive way. Some types of financial peer pressures are: pressure to go back to school, pressure to spend money, pressure to go to work events that usually require a cost and pressure to be in debt due to impulse spending. Dealing with financial issues can be very challenging, frustrating and stressful.

Many adults feel they work hard everyday and should be able to buy everything they want.  Sometimes you have to crawl before you walk and many items purchased have no value. Other adults feel pressure to give their children the life they didn’t have or for their children to be the best dressed or drive the nicest car.  When I was in school I was voted best dressed but no one remembers that when you get older. I can’t use it to get a job and I can’t use it to earn any money.  Those things are fun but only for a moment in time. Just like it may be exciting and fun to go on an expensive vacation, buy a luxury car or expensive home. But when reality sets in and you get the bill the next month you are reminded that you were living a fantasy and still have to go to work everyday.

Other adults are pressured to attend a certain college, join a certain membership group, live in a certain neighborhood, drive a certain car, shop at certain stores or eat at certain restaurants. I drove my last car for 14 years until it was totaled.  I would have kept driving it until the wheels fell off. I will do the same for my current car. It is better to buy what you can afford to ensure you can keep it than to buy something you can’t afford and lose it.  People who pressure you into spending more than you earn will also talk about you when you lose it all.

I was hounded by peer pressure the first few years about I bought my home. Some friends pressured me to buy a luxury car , some pressured me to buy a more expensive home, some pressured me to loan them money although they had no way to pay it back and some pressured me to get a housekeeper and list goes on and on. When the recession hit in 2008 everyone called and asked me how I was doing. I said fine, I’m not affected by the recession because I always spend less than I earn and I didn’t buy a luxury car or a more expensive home.  They all replied I know you are glad. No, I am smart. I didn’t yield to peer pressure. If I had, unfortunately none of them would have been able to help me financially.   

Many adults think they will be happy when they buy something, get a certain job or make a certain income. Happiness or success is not found in materials things, it is found within.  Unfortunately, too many adults believe living a certain lifestyle brings them status. Things that bring you status are: an executive position, influential power, and wealth.  Many also believe their job title gives them status.  Only those who are consistently recognized by name everywhere they go, those who the media flock to everywhere they go and those who can go for 5 years without working have status.  Everyone else is still working to get there.

Men try to outspend each other or buy the latest gadgets or cars. Women try to buy the latest shoes, purses, accessories or jewelry for the sake of saying I have Brand X purse or for the sake of a stranger saying, I like that bag or I want that bag.  Some even go so far as posting their purchases on social media.

Statistics show that 70% of Americans are living paycheck to paycheck and 96% of Americans retire or die broke.  Avoid trying to keep up with everyone else, stop trying to compete with others and don’t be jealous or envious of someone else’s success or financial prosperity. Everything is not what it appears to be and you don’t know a person’s journey that led them to where they are today.

In some instances when adults do not surrender to peer pressure: family, co-workers and friends will distance themselves; talk about you behind your back, recruit other to get you to yield, try to break you down emotionally and mentally, or try to scare you into surrendering. This may cause you to feel sad, angry, deceived, lonely, hurt and vindictive.

The saying birds of a feather flock together is true.  The people you surround yourself with are a reflection of you.  When you surround yourself with people who succumb to peer pressure, live a materialistic lifestyle, seek acceptance or approval and lack self-esteem you are acting in a weak state of mind. This type of behavior is toxic and leads to unhappiness, anxiety, depression, health issues and negative financial habits. Avoiding or not succumbing to peer pressure increases your faith and belief in your values system, increases your confidence, happiness and your spiritual growth.

If someone is trying to convince you to do something you don’t want to do or to ask you not to do something -  ask yourself why are they trying to convince me to do this, are they doing this, are they trying to live vicariously through me, are they jealous, what are their motives, will my actions benefit them, what is the cost for making this decision, will they stick around if my decision turns out bad, is this a wise decision and what are the consequences for making this decision? Here are 10 ways to deal with adult peer pressure regarding finances.

  1. Learn how to say no.
  2. Tell the person I appreciate your offer or suggestion but I politely decline.
  3. Look at the character of the person who is pressuring you and notice if their finances are out of whack, or if they are unhappy with the life – misery loves company.
  4. Trust your instincts.  If you feel like it will be a bad decision don’t do it.
  5. Comfort.  Always be comfortable with your choices.
  6. Encourage.  Encourage yourself and be your own cheerleader.
7.      Recognize. Recognize the peer pressure in your family, co-workers and social circles.
8.      Firm.  Be firm in your decisions and stick to them.
  1. Take a course.  Take a conflict-resolution course or read free articles on the internet to learn effective ways to deal with peer pressure that may result in a conflict or negative outcome.
  2. Defend. Don’t feel like you have to explain, justify or defend your position, you don’t. Silence says more than any words you can say. Sometimes I just give people a look and they know to leave the situation alone and they stop pressuring me.
  3. Pressure. Tell those pressuring you that you would appreciate it if they could be supportive and accept the decisions you make in your life.

Once you have compromised your values by surrendering to peer pressure, it becomes easier to do it again. When you stand up for yourself and stand firm on your beliefs you take a risk.  If you lose friends because you did not surrender to peer pressure they were not really your friends.  If people offer unsolicited advice it’s up to you to decide if you want to receive it and if you want to follow it.

You should never feel the need to be part of a group to feel better about yourself, to feel worthy or feel like you have value. Embrace your uniqueness, individuality and be comfortable with yourself and your life. You may not have the life you want but be happy where you currently are in your life. Be confident that the decisions you make are wise and are the best decisions for your life.

Remember none of the people pressuring you to do something or not do something are paying your bills and are probably doing worse than you.  Know that people are watching you even when you are not aware so always choose to make wise decisions. Remember you can’t control what people do and you can’t change people. You can be a positive influence and by making good financial decisions you can be an influence to your family, children and social circles.