Even Your Kids Aren’t Safe From IDENTITY THEFT!

This week is National Protect Your Identity Week. Many think that identity theft could never happen to them. However, so many people have been victims, it’s not something you should ignore. The wildest story on identity theft, is the 9-year-old whose identity was stolen to create an $18,000 line of credit. Take note, not even your kids are safe from it.

What’s the threat, you might wonder. When your identity (social security, name, driver’s license, etc.) is used to secure credit and to make purchases, it is very difficult to prove that you were not involved. Lenders and creditors like to believe that they screen carefully when awarding credit, and that their practices are fool proof. What this means to you is that they think you are lying. You then have to prove that you do not have the property or items purchased or that you could not have been the one to make the purchase. It’s tricky.

Over 9 million people a year are victims, at an average cost of $4,849 to each individual. That number doesn’t include the many hours and extra dollars involved. Some consumers victimized by identity theft may lose out on job opportunities, or be denied loans for education, housing or cars because of negative information on their credit reports. In rare cases, they may even be arrested for crimes they did not commit.

Luckily, there are some easy ways to safeguard yourself from falling victim to identity theft. Once you know how your information can be stolen, you can protect it. According to the FTC, the number one way that thieves get information is by “dumpster diving”. They retrieve discarded documents that you throw away. Think about the way you go through your mail. Do you just put credit card offers, bank statements, tax returns and other data in the trash?

Shredding your documents is the safest way to prevent them from falling into the wrong hands. Personal shred machines are available at most office supply stores and are a good investment for your home. This Friday, however, you can bring up to three boxes of your personal documents for free shredding in celebration of National Protect Your Identity Week.

Kansas City Saves, a part of America Saves, involves over 50 local businesses that provide financial education resources to the community. Shred Time, Bank of the West, Essential Knowledge and many others have partnered to create this FREE event. Here is the information to attend:

Friday, October 23^rd.

Time: 5:00 – 9:00 AM

Place: Bank of the West, 6263 Nall Avenue Mission, KS 66202, located on Shawnee Mission Parkway.

Thou Shalt Save!

Jon Hanson is a new guest blogger for It’s Your Money.

Uncle Sam wants you! To have an IRA! Proposed in President Obama’s 2010 budget is a provision for automatic enrollment of employees in IRA’s for employers that do not offer traditional 401K plans.

The good:

• It encourages savings, and even though you can opt out,few will. Jennifer Monnin of Nationwide Insurance, at an October 2008 National Savings Forum I attended in D. C. for America Saves, says 95 percent of Nationwide employees do not opt out of their auto 401K.
• Cutting edge employers could add educational opportunities to the program and increase employee loyalty and stability. Employees with a financial plan and goals are less stressed and more productive.
• Employers with less than 10 employees would be exempt and employees that earn under $5,000 a year would not be counted, according to Stephen Miller of SHRM.

The bad:

• The matching contribution by the government is simply forced redistribution of taxpayers’ money. I would like to see the match be voluntary and by the employer.
• If you do not initiate the savings, will you learn anything?
• It could be a burden on employers: more burden, less jobs.

The New York Times offered this explanation of the government matching funds, “For households that earn under $65,000, the federal government will match savings up to $1,000 a year with a 50 percent tax credit. So if you saved $500, you would get $250 dropped directly into your I.R.A. This tax credit is refundable, which means you would get it regardless of how much you pay in federal taxes each year. The credit would phase out between $65,000 and $85,000 of household income or half of that if you are single.”

It takes legislation to bring it to reality: Read more: Automatic IRA Act of 2007 not final versions (S. �1141 �& H.R �2167). Other: CFED, Brookings, Heritage

Jon Hanson is the author Good Debt, Bad Debt and Gooddebt.com

A Best Bet Self-Improvement Book “… bracing, snappily written.”
– People Magazine

6 Ways to Save for the Holidays

During the holidays, it is so easy to get caught up in the spirit of the season and to overspend. So, here are my top 6 tips for planning ahead to stretch your dollar this season.

1. Start Saving Now. How many paydays do you have until the week before Christmas? How much will you be able to save out of each one? Add that up to determine your cash budget. If you already have planned ahead with a Christmas account, good for you! Add that to your cash budget. This total represents what you can afford to spend without going into debt.

Resolve Not To Use Credit. How many times have you started a new year with debt from the holidays? Now is the time to steel yourself against impulse purchases, guilt gifts, and gifts for yourself. Make 2010 the year you don’t carry debt forward.

Make a gift plan (budget). How much will you allocate to each family member or friend? Divide up your funds so that you know exactly how much you can afford for each person. You may really want to buy your brother that new Blu Ray player, but can you afford it? Or should you be looking for something less expensive? Thinking through these purchases will really force you to stick to your budget.

Shop Smart. The key is to either shop early or shop last minute to get the best deals. If you can start early, you have the luxury of time, and can shop online. Google for coupons, and look for free shipping. Make sure to cross items off of your list as you find them.

Make Personal Gifts.  Typically less pricey than buying something, but it is appreciated just as much.

Make A New Gift Giving Tradition. This might be the year that you propose the adults in your family draw one name to buy for. Don’t be shy to suggest new ways to celebrate the holidays with your family. Now is the time to make these plans, though, before everyone else starts their shopping.

I promise that if you act now, you will spend less money and lose less sleep over the holidays.

What Will Happen When Frugal Isn’t Cool Anymore?

Lately, it seems that everywhere I turn, financial institutions and other organizations are boasting about the increase in the national savings rate. Personal spending is down sharply from 2007, while the national savings rate, which dipped below zero a few years ago, went above six per cent earlier this year, finds James Surowiecki of The New Yorker.

Up until October 2008, the U.S. was at a negative savings rate, which basically meant that, as a country, we spent more than we saved. With the availability of credit, and a strong economy, it was easy to adopt a “buy now, pay later” way of thinking. “There’s so much marketing pressure to spend and buy and have instant gratification. And if you can’t buy it now, put it on your credit card,” says Nancy Register, of the Consumer Federation of America.

In a recent blog post, Thomas J.Fox discussed the “Demise of Affluenza”. He cited a recent Consumer Reports survey that dubbed the new savings behavior intelligent thrift. With the unemployment rate rising, people have had to base their spending on needs rather than wants. Frugal is cool, only because there isn’t another choice. So, is the new savings rate truly indicative of changed behavior? Or, is this a fear mentality?

Once the economy improves, will this thrifty behavior continue? Or will many people simply return to their old ways of spending? History tells us that after 9/11 and the Great Depression, Americans went on a spending spree. Will this be the case for us? Or will the hard earned lessons of the past year pave the way for continued thriftiness?

For the sake of you, me, all Americans (and our nation) … I hope this time financial sensibility sticks around for good.

Reverse Mortgage Scams

Today, the Office of the Comptroller of the Currency (OCC) released a consumer advisory in regard to reverse mortgages. http://occ.gov/ftp/advisory/2009-2.pdf

This comes at a time when many mortgage companies are advertising heavily before major changes take effect October 1, 2009. The S.A.F.E. Act will require that all condominium units go through a HUD approval process for reverse mortgages. Loan originators are using that date to push deals through, which may not benefit the consumer. In essence, buyer beware.

What is a reverse mortgage? It is a type of mortgage that allows you to convert the equity in your home into cash. You must be sixty-two-years of age to qualify. Most seniors use the money for repairs, living expenses, etc.  Unfortunately, many seniors have been victims of several types of scams. Normally, they fall into one of three categories:

1. Charging for Free Information. Detailed information regarding consumer rights is available for free at HUD.org. Being an informed consumer is the best way to make sure you are not getting ripped off.
2. Disregard of Pre-Counseling Loan Services If a company tries to perform pre-counseling over the phone, be concerned. Legitimate organizations will either have a face to face meeting, or offer one through a third party.
3. Forgery. Never sign any paperwork with blanks that are incomplete. Never assign any checks to another party.

Ideally, reverse mortgages should be unnecessary when a solid financial plan is in place. The goal should be to have your mortgage paid off, and your retirement fully funded prior to reaching that stage in your life. These days, that is less and less the case.

If you or someone you know is considering a reverse mortgage, remember to do your homework. Don’t consider a reverse mortgage that is tied to another financial product, like an annuity. And don’t agree to something you don’t fully understand. Your home is your greatest financial investment. Be careful.

Tips for Fall Savings

This week marked the first day of fall. It’s hard to believe that we’re already at that time of year, and that cold weather is right around the corner for most of us. In Kansas, we still have 70 degree days and thoughts of sleet and snow seem a million miles away. However, this is the perfect time to use that final warm weather to do some easy things around the house to save money.

Do you have a programmable thermostat? This is one of the best ways to save on your heating and cooling costs. Why pay for air conditioning on a cool day? Check with your local utility company, but KCPL offers a free programmable thermostat, valued at $300 if you sign up for their Energy Optimizer program. It’s all free, and the program claims to save homeowners 20% of their utility costs. Click here to learn about the KCPL program.

While you are at it, lower your thermostat 5 to 7 degrees at night. Your energy savings will increase as much as 3% – 5% for every degree the thermostat is below 68. This is easy to do with mild days and cool nights.

Clean or replace your furnace filters once a month or as needed.  Dirty filters can block warm air from the furnace and make it operate less efficiently, costing you money. Check online for cheap filters delivered direct to you. Check out websites like Furnace Filters Outlet which offer free shipping.

Weatherize your home by caulking and weather-stripping all exterior doors and windows. There are some inexpensive caulking tools at your local hardware store that are perfect for novices.

Another easy fix is to lock your windows to make the seal tighter and to eliminate drafts.

If you are really feeling the DIY spirit, wrap your water heater with an insulation jacket.  This will help the appliance retain heat by limiting the amount of heat lost to the air.

9 Ways to Earn Extra Money (and Still Keep Your Day Job)

There are really only two ways to get ahead financially; spend less and earn more. In this blog, I have talked a lot about how to spend less. However, this time I thought it important to talk about earning more. There are so many reasons why you might need more money right now: winter clothes for the kids, to pay down debt, to build up savings, to catch up. Life happens, and you may find yourself needing extra cash. Here is a list ways you can generate some extra income.

EBay
Clear out your basement and attic while making some money selling things you never use. There are millions of buyers around the world who search eBay for everything from CDs and VHS tapes (remember those?) to children’s clothes. With very little time invested, you can make some money on your old things.

Garage/Yard Sale
Not sure if Internet sites like eBay are right for you? Use a time-tested method for selling your things … garage/yard sales. For some great tips, visit Yard Sale Queen. Whatever you don’t sell, give to a charity or church. It feels good, and you will get a receipt for a tax write off.

Become a Guest Speaker
Do you have a business skill that people need? Do you find yourself giving out advice about a particular area? Business clubs like ABWA, ACA, BNI and others often pay for guest speakers. Write an outline of your presentation, and start calling networking clubs. Also, check your local community colleges for teaching opportunities.

Make and Sell Items
Do you have a craft or skill? A member of the Essential Knowledge team makes amazing items for pets. She sews these in her spare time, and sells them at area craft shows and makes $500 a day. If you paint, woodwork, or have another talent, look into places where you can sell your products.

Use your Secret Talents
Can you design a website, write a marketing plan, or offer a service? Freelance work is all around us, and easy to list on social networking sites. You may be surprised at the demand for your talents.

Pick up a Paper Route
This may not be as glamorous as the others, but it does pay well.

Become a Website Affiliate marketer
Set up affiliate agreements with online vendors, and do the marketing for them for a percentage of the sale. ShoeMoney has a free tutorial to get started.

Get a Part-Time Job
We all know that this is an option, but sometimes it is hard to schedule around your day job. However, if you have more time than you have money, it makes sense to get another steady income. Dave Ramsey will tell you to deliver pizzas, but don’t rule out bartending, waiting tables, or retail stores. Each type of business will offer different shifts or schedules.

Switch Banks
Financial institutions are very competitive right now, and many are offering cash incentives for new accounts. Do some research, and you can pick up an extra $100 for opening a new account. Just make sure to meet the minimum requirements, and plan on staying for awhile.

Do you have a great idea how to make extra money? Please share!

Debit Cards are the New Cash Cow for Banks

The Credit Card Act that took effect this year, coupled with the recession, has created a void where many fees have been collected in the past. What pays banks more than penalty fees on credit cards? You may be surprised to learn that it is overdraft fees on debit cards.

Debit cards have been marketed as similar to an ATM. When the money is gone, you can’t make a transaction. However, since most are now endorsed by Visa, banks are covering transactions, and charging large fees when the transaction occurs on a negative account.

What does this mean to you? Even if you don’t have the funds to cover a transaction, it may still be approved. In which case, be prepared for your bank to charge you $20 or more for that transaction. Those fees can easily add up to more than is possible to cover. If you, or someone you know, is in this situation, contact your financial institution. You may have to opt out of the provided overdraft protection. But it’s worth it.

Debit cards are becoming more and more like a checkbook. Which is why it is more important now than ever, to reconcile those accounts on a regular basis. In this age of electronics, many people are relying heavily on bank balances as an indicator of funds available. Make sure to keep your own check register, or log of what you have spent, so that you don’t fall victim to one of these fees.

For more about the debate in Washington, Click Here to read the New York Times article published this week.

Successful Saving Starts with Making It a Priority

At a financial education workshop conducted by a member of the Essential Knowledge team, our representative met Shonda, a young woman who said she couldn’t ever save money.

Every time she saved an amount, said Shonda, she ended up having to spend that money on bills. She was certain that she would never be able to save anything for the future. She believed it, too. She had a whole list of reasons to support her belief. Even though she was sitting in a presentation titled “saving strategies,” she was there to prove it wasn’t possible. Our team hears this perspective often.

Spenders usually have great excuses. I even find myself believing them at first.  These arguments can be very convincing.

** I will save more when I get my debt paid off.

** I will start saving when I have money left over at the end of the month.

** I don’t make enough money.

Will there ever be extra money left over? Are you really motivated to pay off your debt to start saving?  For almost everyone there is always something that needs to be purchased or fixed. Putting saving at the end of the list means you might as well leave it off the list completely. It just becomes one of those wishes and dreams that you hope to get around to doing one day.

So what makes a successful saver?  Someone who has stopped putting energy into why saving can’t work and is focused on how to make it happen.

Successful savers know that saving must be a priority. Consider Lyndsey, who comes from a family of spenders. Her husband, on the other hand, comes from a family of strong savers. They went through our financial education program and discussed their shared saving goals. Now, when she feels like indulging in retail therapy, she reminds herself of their plans.

Save the excuses. That’s the best way to become a great saver. Stop justifying bad behavior, and make a change. Excuses interfere with our ability to accomplish any goal in life, including saving. Even before you go through the act of putting money into a savings account, you must decide that your desire to build your savings is stronger than your desire to spend.

Credit Card Changes in Effect Today

In May, President Obama signed into effect the Credit Card Accountability, Responsibility and Protection Act. The act was passed to protect current and future cardholders against unfair practices, and to standardize the industry. The first of three phases takes place today.

Billing – Prior to today, credit card companies were required to bill within 14 days of a payment due date. Now, cardholders are billed 21 days before the due date. This is good news for cardholders, especially if you travel or use online bill pay. You now have more time to get that payment in.

Rate Changes – Instead of 15 days to notify you of a rate change (which was sometimes retroactive), companies now must give you 45 days notice. I can’t tell you how important this is, based on scenarios I have seen in some families. For those that struggle to make the minimum payment, it is a real tragedy when the rate goes up drastically, because it increases that minimum payment.  Many have been forced into default. Now, the extra time gives consumers the ability to try to negotiate that rate, switch a balance to another card, or to pay off the balance.

Even better, if you disagree with the rate change, you now have the option to freeze your current rate. Your account will be closed to new charges, but you will have five years to pay off the balance.

What this means to you:

As a cardholder you are being given more time to deal with your creditor. However, don’t take this as a free pass to procrastinate. It is just as important to get those payments in on time, and to take action on rate increases. Use your time to your advantage and make decisions with your wallet.

7 Saving Tips for Back to School

So, school is right around the corner. If you are like most parents, you are probably trying to stretch your budget to get everything you need. Here are my 7 tips for saving money for back to school.

Shop at home: It wasn’t so long ago that school just ended. Chances are, your child brought home a hodgepodge of supplies at the end of the year. Comb your home to see what you already have on your school’s list. Check those junk drawers, and you will be surprised how many things you have already.

Shop early or shop late: These are the best times to save money. Now that school is upon us, you can find items moved for clearance. Prices will continue to go down until and after school begins. Although the must have brand name items may be gone, what’s left will be cheap.

Stick to the list: Your child will want specialty items. Keep to the essentials.

Set a budget: You can typically get everything you need for $25. If your child wants a higher priced item, negotiate on another item to stay in budget.

Don’t buy fall clothes: The stores may have jeans and sweaters on display, but you won’t need those items for several months. By then, they will be on sale. Remember clothes are seasonal: Don’t get sucked into a new fall wardrobe just yet. We won’t feel cool or cold weather for awhile.

Buy summer clothing cheap: Pick up clearance summer items in a size that your child could also wear next spring.

Save on the basics: Now is the time to get deals on short sleeve t-shirts and other basics that can transition to fall. These items are close to the cheapest they will be all year.

Feeling Fear about the Future of Your Money?

Essential Knowledge interacts with many people through our programs. Fear is everywhere. It is in the air we breathe and the water we drink. As a result, people are jumping to some pretty crazy decisions. Recently, one of our team members shared this personal rule she sticks to:

In times of great change, change as little as possible. What does this mean? When craziness is all around you, do not hit the panic button. Sure you should look at your overall financial picture, but be smart about it.

This means not to give in to Money Madness. Here are three ways to avoid doing so…

Do NOT put your money in your mattress! Now is not the time to take money out of your bank and keep it at home, unless your bank is not FDIC insured. Despite the rumors, banks will continue to be the best way to house your money for checking and savings.

Do NOT withdraw your money from your investments completely. Too many people are concerned that because the stock market is shrinking, that they are better off holding onto their money in a savings account or at home. This is a simple question of math. If you have five years or more until retirement, your best bet is to keep that money invested. The taxes and penalties to withdraw those funds will most likely never be made up in the interest on a savings account. You may want to visit with your advisor to talk about your risk tolerance and make changes along those lines.

Do NOT be late paying your bills. Now, if you are unemployed, this statement may not apply to you. However, if you are gainfully employed, make sure that your payments are made on time. Most major credit card companies are increasing interest and fees to make up for default losses. Do not give your creditors an excuse to rack up additional charges on your accounts. Need to make a budget? Go to www.essentialknowledge.com/resources.

Is Now the Time to Refinance?

The radio is full of commercials offering 4% interest rates, no closing costs, and many other dream offers. But there are some things you should know. First of all, not surprisingly about 90% of advertised lending offers are only for those with PERFECT credit, PERFECT home values, etc. The reality is that we all know if it sounds too good to be true, it is.

So, where should you start?

Do the Math. Figure closing costs and overall savings. There are always closing costs and someone has to pay for them, most likely you. This will be several thousand dollars. If a new loan is going to make sense, then you need to be in the house longer than it takes to break even on those costs. For example, you are initiating a new loan, which will save you $200 a month, and your closing costs are $3000. It will take you 15 months to break even on those costs. Does that make sense? If you finance those costs into the loan, it will take even longer due to the interest you will pay. Click here for a refinance breakeven calculator.

What is your real savings? Your lender should be able show you what your real interest totals. Compare this to what you have left on your current loan.

Are you extending the term of your loan? If you only have ten years left on your mortgage, and you are refinancing for another thirty years, is this your best option? If you are close to retirement age, then extending the loan may not make sense. Take a look at your overall financial goals.

Are you financing old debt into the new loan? While rolling credit card debt into your mortgage can help with short term cash flow, are you committed to making the changes in your life to make sure that the credit card debt doesn’t accumulate again? Over 70% of the people who consolidate their debt end up replacing that with new debt.

Do you trust your lender? There is a huge increase in refinance and loan modification scams. In fact, the FDIC has new literature out just to address this issue. You can find out about the common scams here. At the end of the day, you should understand your new loan so well that you could explain it to someone else. When you do, you may realize that a refinance just doesn’t make sense right now.

Are You in a DEBT CYCLE?

“I don’t need any help with my finances, I am getting by just fine.” That may be true. For many, however, the simple act of getting by can very easily fall into a cycle of debt that can lead to bankruptcy, foreclosure and more.

Sherry attended one of our workshop classes with a desire to improve her finances, but also an attitude of defensiveness about her situation. She waited until after the class, to convince our presenter that my presentation didn’t apply to her. Five months later, we saw her again. This time she waited to talk to us for a different reason … she had gotten sick, and had gone through several rounds of antibiotics. The doctor visits and prescriptions that she had to pay meant that other bills had to be neglected. After several months she was still trying to catch up, only now, she was dodging creditors, and in danger of losing her vehicle. She was using credit cards to get by, but now was maxed out and had no options.

What is a debt cycle? It is a pattern in spending and debt that occurs when expenses exceed monthly income. Credit is used to cover the difference. The new payment of additional debt even further exceeds income. The individual continues to borrow money until the entire thing implodes.

Here are the warning signs that you are susceptible to the debt cycle:

1. You have no Emergency Fund or Savings
2. You are unclear about your financial situation
3. You struggle each month to make ends meet

The two largest contributors to the cycle of debt are the lack of an emergency fund, and spending in excess of income. Things do come up. You will have unanticipated expenses (emergencies) that occur like medical co-pays, car repairs, school projects, etc. It is vital to have the money set aside to pay for those things when they happen. Without an emergency fund, you are forced to sacrifice payment on another bill, starting the cycle of debt.

So, what can you do to protect yourself?  First of all, make a budget. If you don’t have one, please use our free budget calculator or worksheet.  Second, make sure that you are spending less than you make. Next, make sure that you have an Emergency Fund in place. To begin with, work hard to get your emergency fund to $500. To find out how much your total emergency fund should be for your household, click here for an online calculator.

Sherry’s situation can be avoided. Take care of yourself first, by saving. When you do have an emergency fund, it feels like less of an issue when you can pay for it and move on with your life.

Is Your Relationship Dealing with “Financial Cheating”?

Money is the number one reason for divorce. How does that happen? Typically, relationships are eroded through financial infidelity. Cheating with money occurs in 1 out of 3 marriages, destroying trust in its wake. This can have just as much of an impact on your relationship as any other type of infidelity. A lie unravels the emotional connection, which is the foundation of a relationship. In the 2005 Harris poll, 96% of those surveyed stated that it was the obligation of each partner to be honest about expenditures.

Is this impacting your relationship? Here are some of the signs. Do you (or your spouse):
– Hide new clothes in the back of the closet, or the trunk of the car
– Lie about purchases, and how much money was spent
– Use shopping as a form of therapy
– Have a secret credit card

Recognize where this behavior comes from. Was this a part of your childhood? How did this behavior impact your parents and family? What were some of the long term effects? What can you do to prevent this in your home?

One of our program users recently had several “aha” moments about her childhood. Her parents always fought about money. Her mother is a spender, who frequently used credit cards to their limit. It is hard to say whether the arguments started because of the credit card use, or the credit card use started because of the arguments. Typically, her mother would hide those purchases, hide credit card statements, and was evasive about spending. Their marriage was always on the brink of divorce and financial ruin. As an adult, Jennifer fights the urge to spend when she is unhappy. What keeps her on track, is remembering those arguments, and how hurtful they were to her father. She is motivated to stay on track as a commitment to her husband.

If you see this problem in your own relationship, talk with your spouse. Before you can change your bad habits you must first identify them clearly. Make a commitment to be completely honest about all income and expenses. Just like any other issue, communication is the key to overcoming this issue and building a strong relationship with a successful financial future.

How to Pay off Debt: Comparing Popular Debt Reduction Methods

We all want to pay off credit card debt, and ideally be debt free. However, what is the best way to get there? I will compare two methods, and give you some feedback so that you can decide which debt plan works for you. Both of these scenarios assume that you are already paying the minimum for all cards, and can afford to pay additional money each month. I probably don’t need to mention this, but if you are struggling to pay the minimums, then that should be your primary focus.

1. The Snowball method works this way:

• List your debts from the smallest balance to the largest balance.
• Apply extra money to the smallest balance until it is paid off. For instance, if you have a debt of $150, with a minimum of $10, pay the minimum plus extra payments ($50 for example) until it is paid in full.
• Use that missing payment amount (the minimum of $10 plus the additional $50 you were paying) to apply to the debt with the next largest balance.
• When the second debt is paid, use the missing payments from those two debts toward the third.
• Continue that process to continue to pay more and more towards the largest debts until the last one is paid.

2. The alternate method is to attack the debts with the highest interest this way:

• List your debts from the highest interest rate to the lowest interest rate.
• Pay extra money to the first debt until it is gone.
• Use that missing payment toward the next debt on the list.

Take a look at the calculator I used for an actual comparison between the two approaches:

So, which method is right for you? Obviously, you can save more money by paying off the highest interest rate first. However, if you know that you struggle to stay motivated in your plan to pay off debt, the Snowball method will give you the personal satisfaction of accomplishing smaller goals. Either way, the fact that you are tackling your debt will be your ultimate reward. Click here to use my free calculator to compare these two debt strategies for your situation.

Overcome Budgeting Obstacles

We have all heard the old quote: “Success is a journey, not a destination”. This definitely applies to budgeting. When we teach people how to budget, our team often gets the same question … “I have tried to budget in the past, but it didn’t work. What am I doing wrong?” Many people have tried different types of budgeting techniques, only to abandon them quickly.

Use discipline. A budget does mean prioritizing your spending. For some, this is very difficult at first. You will find that it gets easier as you do it often. When you find yourself tempted to purchase something you don’t necessarily need, but you decide against buying it and instead pad your emergency savings account, you will have succeeded with this step.

Be patient. Just like a diet, don’t expect to get it right the first time. Setbacks are normal. I recommend that you set up a monthly budget, and create a spending plan for each week of that month. If you find that you can’t stick to it weekly, then create a daily plan. Click here for these resources, or click on the resource tab of this blog.

Play as a team. If you are married, then expect the process to take longer than if you were single. You each have your own spending personalities and needs that will affect your decisions. With a new household budget, you should have weekly meetings to discuss the budget. This may seem like a lot, but it is important to get into the habit. Once you find that your budget runs on auto pilot, fewer meetings are needed.

Depending on the goals and objectives you set, your journey will actually not end for many years. Managing your finances is a lifelong commitment. Remember to enjoy it, keeping your eyes on the horizon because, believe it or not, you will get there. It may not be easy, but (get ready for another cliche) … nothing worth having ever is.

Start A Budget

At Essential Knowledge, we actually don’t use the word “budget”. We think spending plan is more appropriate. It seems less confining, and more empowering. Whichever term you use, the result is the same. A budget is a plan for your money. And the amount of money you have is not important  whether your bank account has millions of dollars or tens of dollars, having a workable solution for spending is critical.

How do I start? Well, you can’t know where you are going, unless you know where you have been. You can do this one of two ways … you can start tracking your expenses for thirty days; or, you can pull up your most recent bank history online, and do a thirty day review. Use this expense worksheet for free. List every expense in the right category. Total each category to see your total spending. You probably know the exact amount of your car payment and housing, but you will probably be surprised what you spent in other areas.

Does your income exceed your expenses? This seems like a silly question, but it is vital. If it does not exceed your expenses, then you are probably using credit to cover the difference. Your immediate goal should be to cut your expenses in order to cash flow each month.

If your income does exceed your expenses, then decide what you want to accomplish. Do you want to save more money? Do you want to be more disciplined each month? Are you starting a retirement account, or adding to one? Determine what you want to save each month, based on the goal.

Evaluate your spending. You will see some things that you absolutely need, such as food, healthcare, housing and transportation. You will also see things that you just wanted, such as 150 channels of digital cable. The key is to find what you really need, and compare that to what you really want. Obviously, you need to eat, and have a roof over your head. But, could you live somewhere less expensive, or take your lunch to work?

Start with the easy things. Accomplishing small steps is satisfying and will motivate you to do more.

Each month, look for ways to save money in your budget. You will be amazed what you can do, regardless of your monthly income. Check back with me, too, for other ways to save.