The Control Your Money: Own Your Life (™) Blog

January 2, 2024

January is Financial Wellness Month (Week 1)

January is Financial Wellness Month. Let 2024 be the year that you learn to Control Your Money: Own Your Life (™).

I will provide a step by step guide each week through the month to help you lay a foundation that will allow you to begin working towards financial stability and future financial security. The journey begins with you, and an assessment of your current financial situation. To plan how to move forward, you will have to paint a clear picture of your current finances by capturing all the data. This will allow you to make decisions and set priorities.

Over the five weeks in January, beginning today, take the following steps:

Week 1: Write down what you own and what you owe.

Week 2: Create an income and expense statement.

Week 3: Reflect on your priorities and create a budget.

Week 4: Get your credit report.

Week 5: Set realistic and achievable goals.

Ready to Control Your Money: Own Your Life? Let’s go!

Write down what you own and what you owe. This will help to benchmark where you are in terms of overall assets (what you own) and overall liabilities (what you owe).

What you own includes: cash on hand in checking and savings accounts, balances in retirement accounts, and the values of investments such as stock, a home or other real estate, a vehicle, jewelry, and other personal property such as furniture.

What you owe includes: outstanding balances on credit cards; personal, student, and auto loans and even utility bills. In addition, any outstanding balances on a mortgage or other real estate loan, as well as medical, tax debt, or unpaid judgments.

When you subtract the total of what you owe from the total of what you own, you have calculated your net worth. This answers the question of whether you can eliminate all your debt if you were to liquidate all your assets. Over time, as you begin to manage your money, and pay off your debt, you will begin to watch your net worth (your wealth) begin to grow.

Don’t be discouraged. Oftentimes, you will find that your liabilities (what you owe) exceed or if you’re lucky equal your assets (what you own) so that your net worth is negative or very small. But as mentioned earlier, proper money management will set you on the course of building your net worth, your wealth.

Next week, we will continue with an assessment of your current financial situation by creating an income and expense statement.

January 8, 2024

January is Financial Wellness Month (Week 2)

January is Financial Wellness Month. Last week you began your 2024 journey to Control Your Money: Own Your Life (™) by doing an initial assessment. This assessment gave you an overview of your financial picture by determining your net worth. You documented everything you own (assets), and everything you owe (liabilities).

Take Step 2 to assess your current financial picture, so that you can begin the planning phase, and layout a path to your financial stability and security. This week, prepare a monthly household income and expense statement. This is to capture all sources of income (money or resources coming in), and all expenses (all money going out, and what the payments are for). Just accurately capture the data. Make no judgments or decisions about the income or the expenses.

For income: Record monthly gross full or part-time salaries, alimony, child support and other regular sources of income or the value of resources such as monthly public or private benefits including SNAP, social security, disability, or other retirement income. Then record a monthly average of other sources of income which may vary each month such as occasional part-time work.

For expenses there are three basic types:

• Regular fixed monthly expenses such as rent, mortgage payments; auto, personal or student loan payments; insurance premiums and fixed expenses such as cell phone and internet. Include your income tax and other payroll withholdings.

• Regular but variable monthly expenses. These may change due to usage, such as utilities, phone bills based on data usage, food, and groceries. Record the average monthly payments for these expenses. For credit cards, record this month's required minimum monthly payment.

• Non-monthly recurring expenses such as back to school clothing and supplies, repairs, holiday, and birthday gifts. Approximate the annual amount and divide it by 12 for a monthly amount. This will allow you to think about setting aside money monthly for these expenditures where possible.

Next, calculate your total income and total expenses for the month. Subtract your expenses from your income. There are three possible outcomes:

• Income equals expenses,

• Expenses exceed your income, or

• Income exceeds your expenses.

The outcomes will determine your next steps in planning for your future financial security. You’ll be reviewing your expenses and making decisions based on your priorities. We will look at how to get to break even if your expenses exceed your income. If you are at break even, we will look at how to create a surplus. And if you have a surplus, we will look at how to accelerate debt payments, and increase savings and investments. This will enable you to create a financially secure future and begin building wealth.

January 16, 2024

January is Financial Wellness Month (Week 3)

In the first weeks of January, you took two steps to assess your current financial situation. One was calculating your net worth, a bird’s eye view of what you own (assets) and what you owe (liabilities). The other was a micro-view.  You recorded all sources of monthly income, monthly expenses, and payments and created an income and expense statement. In objectively capturing the data, you can easily analyze what’s happening each month by subtracting expenses from income. This will help you to determine if:

• Income equals expenses; you are at breakeven, or

• Expenses exceed your income; you have a deficit, or

• Income exceeds your expenses; you have a surplus.

This week, you will make decisions about your priorities by creating a budget. You will decide where every dollar of income will be allocated. Based on where you stand in the 3 possible outcomes above, you will take action to get from deficit to breakeven, from breakeven to creating a surplus, and from surplus to accelerating debt reduction, increasing savings and investments, establishing financial security, and building wealth.

To begin this process, review your income and expense statement to make sure you have accurately captured every bit of income, and every expenditure or payment.

Your first allocation of income will be to make sure all your needs are covered - basic shelter, food, and clothing. For shelter, include the cost of utilities and expenses needed for safety, health, or management of daily activities such as a cell phone. Your next allocation will be to obligations that can cause damage to your credit score and report, result in collection actions, lawsuits, garnishment of wages, or freezing of your bank accounts. Your last allocation will be for your wants; we are not just talking about luxuries here. Anything which is not a need or will not cause harm is a want. That includes a reserve fund, savings, or retirement funds.

Let’s start with the most challenging position to be in, your expenses exceed income, and you have a deficit. The goal is to get to breakeven if possible. Steps to explore:

• Increase income—take on an additional job or a side gig, but realistically, you may encounter barriers such as childcare, the local economy, or skills required. Look into eligibility for public or private benefits such as SNAP, or subsidies that may free up dollars to pay other expenses, and or,

• Reduce or eliminate expenses—temporarily suspend services, supplement groceries with food bank visits, watch for coupons or discount promotions, check if a free wi-fi hotspot is available through the public library.

• Refinance debt to get a lower interest rate or longer payment term so monthly payments are lower if your credit is sound (you can always pay off the loan earlier when you have a surplus or unexpected funds like an income tax refund). Remember that if you are doing a credit card balance transfer, there is an initial 3 to 5% transfer fee (essentially upfront interest) and keep an eye on the end of the no or low interest promotion period.

• Negotiate with creditors to make monthly payments manageable. Explain your financial hardship. Make sure the payment plans are realistic. Ask for a moratorium on interest or that interest be waived. Try for a lower lump-sum settlement (less than the amount you owe) payable in manageable installments. (There may be an impact on your credit score, but you’re avoiding going into default, collections, lawsuits, and other more serious outcomes).

• Avoid taking on new debt or expenses.

If you are in a breakeven position, you’re still in a vulnerable position. One missed paycheck or an unexpected emergency can result in your world turning upside down. Your goal is to create a surplus so that you can build a reserve for emergencies, accelerate debt payment, start saving, etc. Explore:

• Increasing income and/or reducing or eliminating expenses. You may face barriers such as those mentioned earlier.

• Taking advantage of eligibility for any private or public benefits, or subsidies, and discounts.

• Shopping for alternative services at lower costs.

• Refinancing debt for lower interest rates and monthly payments if your credit is sound.

And if you’re in the enviable position of having a surplus, don’t rest on your laurels. Still consider increasing income, and/or reducing expenses to squeeze out more cash to build a reserve, accelerate and payoff debt, enhance savings and investments, save for children’s education or retirement, save for a purchase of a home, build security. Ultimately to Control Your Money: Own Your Life (™) is not just about paying the bills, it’s about building wealth.

January 23, 2024

January is Financial Wellness Month (Week 4)

Over the past three weeks you have successfully begun the groundwork for a financially secure future. You assessed your current situation by preparing a net worth statement depicting what you own and what you owe, and creating a monthly income and expense statement, capturing every bit of income and every expense or payment going out.

You started your plan for moving forward based on an analysis of your assessments. Working with what you can control, you created a budget. You set your priorities and made decisions about where every dollar of income should be allocated. First, you made sure your needs for survival, basic food, clothing, and shelter were covered. Then you turned your attention to the things that could cause future damage such as delinquencies, and collections resulting in possible lawsuits, garnishment of wages, or freezing of bank accounts.

With these two priorities under control, you can set your sights on your wants such as building an emergency reserve, retirement savings or investments, home ownership or simply a vacation. More on that next week when we tackle successful goal setting.

This week, you will focus on your credit. Credit impacts various aspects of our lives, and if not managed properly can be a major hindrance to your ability to achieve financial security. In the financial world, our character and trustworthiness are judged by our credit profile. This may mean that your dream job or promotions elude you. You may be denied a lease, a mortgage or auto loan if your credit is damaged. No one wants you near their money, or their clients’ money when you are perceived as being unable to handle your own money. Even worse, some may worry that you may be tempted to steal to deal with your own financial difficulties.

Where credit is offered, the terms will not be favorable. Higher interest rates, annual fees, upfront fees, security deposits mean overpaying for everything, and leaving you with less money to achieve your goals.

Your task this week will be to obtain your credit report from each of the 3 credit reporting agencies (Experian, Equifax, and Transunion) so that you examine what potential employers, lenders, and landlords see, and the basis on which they judge you. Free copies of your credit report can be obtained weekly at annualcreditreport.com, the site referred to by the Federal Trade Commission and the Consumer Financial Protection Bureau.

First, review the reports for errors, and get them corrected right away. The credit reporting agencies are required to do an investigation into any items you dispute in their reports. This generally means they contact the creditor who furnished the information. If the furnisher fails to respond, the reporting agencies are required to delete the information. If the creditor says the information is correct, and you still dispute it, send the agencies a written explanation with details (cc’ing the creditor), including the name of the creditor and account number, and any documentation you have supporting your position. Your side of the story will be included in your credit report, while you continue to work with the creditor to resolve the issue.

Next, ask the agencies to remove outdated information, or debts that should not have been placed in the report. This includes debts that are more than 7 years old from the date of the 1st reported lateness; Chapter 7 bankruptcies over 10 years, and Chapter 13 bankruptcies over 7 years from filing the petition; medical debts under $500 (some states prohibit reporting any medical debts of their residents),judgments and liens.

Then review for debts that you might be able to settle or negotiate. Although these will continue to be on your report for a while, you will mitigate possible legal action against you. Also, once those debts are resolved, you will be able to improve your credit profile by paying your bills on time going forward. You can also consider getting a secured credit card, credit builder loan and other strategies to improve your credit score. In the long run, this will mean less expensive credit, access to funds in case of emergencies, removal of possible barriers to job and promotion opportunities, access to desired housing and other benefits. Overall, by removing the barriers to future goals, you open up possibilities to Control Your Money: Own Your Life (™) as you build towards your financial security.

January 30, 2024

January is Financial Wellness Month (Week 5)

In the first four weeks of January, you’ve laid the groundwork for the next step in your journey to Control Your Money: Own Your Life(™). In this final week of Financial Wellness Month, you will focus on setting goals, and creating a system so that you can successfully accomplish those goals.

Let’s review all the work you’ve done to get to this moment. In week one, you assessed your current financial situation by creating a net worth statement to determine what you own (assets) and what you owe (liabilities), and in week two, an income and expense statement to capture every dollar coming in and going out. For week three, you analyzed the income and expenses statement to determine where reductions could be made and whether there might be additional sources of income. You created a budget, taking control of your money by focusing and setting your priorities. You allocated every dollar coming in first to your needs of basic food, shelter, and clothing, then to items that should be addressed before they cause damage (going into collections, future lawsuits, etc.) and finally to your wants if additional funds were available.

In week four, you reviewed your credit by obtaining your free credit reports from www.annualcreditreport.com for the three credit reporting agencies, Experian, Equifax, and Transunion, making corrections, removing expired information, and disputing items. This begins to create a positive credit profile that may open doors to better employment and job promotion opportunities, lower interest rates, making funds available for emergencies and to manage cash flow. Having a good credit profile removes barriers to your future goals such as homeownership.

And now we turn to setting the goals that will guide your money decisions for the rest of the year. Start small. As each goal is met, create a new goal. Think about creating an emergency fund by saving enough to cover 2 weeks of household expenses, paying off the balances on one to two credit cards, calling creditors to work out a payment plan on defaulted debt or researching to find a less expensive cell phone or other service.

The key to successfully accomplishing your financial goals is to first convert the goal into specific financial terms and set a time frame in which to achieve the goal. Next, you will have to understand what actions are needed, and how and whether you can realistically take those actions. You will also have to find a way to measure or monitor your progress to keep yourself on track and accountable. By putting a system in place, you are setting yourself up for success and not failure.

You can use the well-known SMART acronym as a guide. Here’s an example:

• Specific: “I will pay off my Visa card balance of $500 with an interest rate of 17.5% and annual fee of $39 in 12 months.” Saying, “I will pay off my Visa card balance in a year,” is not specific enough. We need to know the interest rate and annual fee (if any) because it is part of the computation of the monthly payments for the ensuing 12 months to completely pay off the debt.

• Measurable: You’ll need to know the monthly payment amount required to pay off the balance within 12 months. You will know you’re on the path to success when you make the payment each month. If you miss a month, you’ll have to calculate the increased payment for the remaining months to reach the goal. Find a credit card payoff calculator online.

• Achievable or Actionable: This requires you to know what steps you will take to get the payments made. Will you set up autopay from your bank account? What expense(s) will you reduce or eliminate to squeeze out the monthly payment needed, or have you received a pay increase that can be applied?

• Realistic: No goal that you set will be successful unless the actions you plan to take are realistic. For example, if you cannot afford the monthly payment needed to clear the credit card balance in 12 months, modify the goal. Perhaps you can manage a smaller amount each month in which case, you adjust the time frame to 18 or 24 months. If you receive unexpected funds, you can apply them to shorten the repayment time.

• Time: Set the time frame in which the goal is to be achieved, or modify the time frame as required.

By putting a system in place so that you will know what must be done every day, every payroll period or every month will ensure that you succeed. But be flexible and adjust parameters as needed such as time frame, or method (example, applying a lump sum payment when an anticipated realistic income tax refund is received vs. monthly payments). Carefully and realistically laying out your goals, will allow you to reach the ultimate goal of financial security and allow you to Control Your Money: Own Your Life (™).