Silently Suffering

A couple of weeks ago I attended the NACA (National Association For Campus Activities) Conference in Nashville Tennessee.  NACA is where colleges and universities from all around the country come to one place to hire performances for their campus for the upcoming semester while at the same time attending beneficial educational workshops. The campus representatives who attend are mostly students accompanied by an advisor.  This was my first National NACA so 99% of the students and student affair professionals were meeting me for the first time.  Majority of the performances that are for hire at NACA are music acts, magic acts, comedy, lecturers, etc so what I have to offer is completely different and at first not easy to understand. That is why I wear a t-shirt that says “DEBT SUCKS” on it because that is what I am about, I am about showing students that they don’t have to die in debt like so many people before them. They actually can be different from their parents, grandparents, aunts, uncles, etc and get out of debt in a few years after graduation.   I did not start off my speaking career talking to college students but I actually started speaking to individuals who were in the average age range of 40-65yrs and the common sentence spoken at the end of my presentation no matter where I was at was “where were you when I was younger?”  It was said to me so much that I decided I need to go to where the people are younger and that is when I started speaking at colleges.  I went to NACA because it is the best way to get in front of a lot of universities and colleges in one place and when you are able to interact with close to 2500 people in a few days you are able to see a disturbing trend.

Students on a daily basis would walk past me, look at my shirt, and say DEBT does SUCK! Then I would speak to them one on one and quickly come to understand that their financial issues ran extremely deep and that they don’t even know where to start to get a handle of it.  A senior came up to me who was in $30,000 of debt which consisted of student loans, credit cards, and a car loan.  He said “we need you to come to our school, or better yet I just need your personal email because I need help.”  He went on to talk about he didn't know how he would pay off the debt after graduation and to make the situation more serious he had a baby on the way in June.  I met a young woman who wanted after graduation to work directly with young kids at risk and help them towards a more promising future, but she said that she would have to take a job that she didn't want to just to pay off the debt she had.  In her words “I will have to put off my dream for a few years until I can get a handle on my debt.” Another young lady stopped me in mid sentence and said “please don’t remind me of my debt.  I went to a different university before attending this one and racked up so much already.”  As she was speaking tears started to form in her eyes and I quickly told her it would be okay, but she shook her head and said “I don’t think so.”  I tried to help her in the two minutes we had to talk, but I could tell that she needed more and at this type of event that was not possible.

The examples go on and on, but the point of the stories above is that there are A LOT of students that are silently suffering because of debt and they need help, they need direction.  When I was in college which was not long ago no one cared about how much they owed because we all just said we will get to it after graduation, but these students don’t have the same care free option.  With tuition at some universities increasing as much as 40% since 2008 students are feeling the burden of debt before they graduate and to add insult to injury because of the 2008 recession the government has less money to give to universities for grants, etc.  When less money is coming in from the government then who makes up the difference in the money owed? That’s right, the student and their parents.  The good news is some universities are seeing the importance of financial literacy for their students and like the idea of someone who has been in massive debt, got out of it, and now is able to show others how to do the same. After NACA I recognized that I have to do a better job at explaining to Deans, Directors, Advisors, etc the importance of this information because there are students silently suffering and if they don’t go in the right direction they WILL BE graduates silently suffering who will be deep in debt living paycheck to paycheck and not the prosperous alumni that can give back to their alma mater.  My mission is to help as many college students as I can before they graduate so that they are able to live a life without debt.  A life without debt for these students will lead to a world that is changed for the better.

WHOLE NEW BALL GAME

Football and basketball season are in full gear!  A local football team Winston Salem State Rams just won the CIAA Championship and their basketball team as well as Wake Forests’ are hitting the hardwood running!  These players may be playing for college fans now, but some may be playing for fans in the professional arena in the near future.  Recently ESPN broadcasted its’ documentary “30 For 30 Broke” and it was about professional athletes who signed contracts for tens of millions of dollars and still ended up bankrupt and BROKE!  As I watched the documentary anger rose up in me, not because these athletes were wasting their money on toys, but because majority of the athletes had the money stolen from them by people they trusted.  I have known for years about millionaire athletes going broke such as Mike Tyson, Allen Iverson, Warren Sapp, Sheryl Swoops, etc but it wasn't until this documentary that it started to hit home.  The reason that it bothered me so much is that I know kids who could be in the same situation in a few years.  My husband has been coaching AAU (Amateur Athletic Union) boys’ basketball for six years now and the kids are seniors in high school.  Every one of these kids have signed to Division I schools for basketball and some of them have a real chance at making it to the NBA in a few years earning the same millions that these other athletes on this documentary lost.

Once the program was over I started to think that every other person watching probably was wondering to themselves “how could anyone lose millions of dollars?”  These athletes are just like everyone else who finds themselves in debt they just have more money to be in debt with.  People with hundreds or thousands of dollars are no different than these millionaire athletes when it comes to money management it is just to a different scale.  These athletes may have spent money buying new Bentleys, but the average middle class person is spending their money on a new BMW.  The millionaire athlete may have bought the mansion with the six extra bedrooms they didn't need, but the middle class homeowner is in the average household debt of $47,000 (credit cards, student loans, car loans, etc) and as a result they are falling behind on their mortgage, light bill, water bill, you name it and it is a late payment.  These athletes trusted the wrong accountants and financial advisors and all their money was misused or stolen, but the average middle class adult has purchased whole life insurance and their money is being misused just the same.

The problem is not the amount of money you make it is your behavior with that money (Financial Literacy) that gets you out of debt and creates generational wealth.  When we all learn that we don’t have to spend money we don’t have, buying stuff we don’t need to impress people we don’t like only then will wealth start to accumulate.  Majority of these athletes come from humble backgrounds so when they get these million dollar contracts they just sit back and let someone else handle their finances and it ends up costing them dearly.  Just like these athletes you have a salary that is much more than you had growing up and you have to be diligent on how you handle it or you could end up broke or worse just getting by for the rest of your life.  No one is going to care more about your finances than you will, so pay attention to what you spend and save whatever you can because only YOU can control your financial future!

IT WILL GET BETTER

My life’s purpose is to help people get out of debt and build generational wealth and I really love sharing the information I know with the working poor and the middle class because it will help them move up to the next level of the income bracket.  Lately I have been reading about how the income gap in America has widened and how the poor and middle class are suffering.  As I read these sometime heart breaking stories I say to myself “it will get better, it has to get better.”  Then I start to wonder what could be done to end this poverty problem and I am not talking about the homeless person you pass on the street, but that co-worker that has not eaten today because they want their kids to eat first.  How do we help those who are working as hard as they can and even with government assistance (which most don’t want) are still struggling to make ends meet?

I decided to take a look in the mirror and say what are you going to do with your gift to help those who are helping themselves, but still falling short?  The blog is a start, but not everyone is your friend on Facebook or Twitter and even more importantly most don’t have computers.  I do financial literacy presentations and workshops, but some of the people who need my help the most may not know about those events and may not have a car to get them there.  So what is the solution?  I think the solution is “it takes a village” and what I mean by that is those who attend my workshops to point out to them that I am only one person and I need them to take this information to family members, friends, co-workers, etc who they see working to make ends meet.  Even take the information to those middle class individuals who may not be struggling right now, but you see them making foolish decisions with their money that might land them in poverty with a job loss.  Sharing my information on financial literacy is a big step toward prosperity, but it is not nearly enough.  Here is where your gift comes into play and helps build up the village.

What do you do well?  I am not just talking about your 9-5, but what other talents do you have?  Are you someone who looks for a job and finds one in a month when the average is six?  Then show other job seekers your obvious superior methods for finding a career.  Are you someone who can cook anything put in front of you, make it delicious, and have leftovers for the rest of the week?  Your mission is to find those who are struggling to make the grocery budget stretch to the end of the month and show them how to cook low cost meals for their families that end up saving them money that could be used to pay a bill or better yet save for a rainy day!  Are you someone who is excellent in a subject such as math, english, etc?  Find those kids in your neighborhood (village) and help them out with their homework because it has been proven that the average college graduate will make $650,000 more in a lifetime than a high school graduate!  I think $650,000 would definitely move you up to a great tax bracket. As you can see we all can do our part to help others make it to that next level and you know what the best result out of all of this is that person you help will reach their hand down and help the next person and over time there will be no more working poor and the middle class will be thriving again.  IT WILL GET BETTER!  The real question that remains is what are you going to do to help your fellow man or woman?  They’re waiting! 

WHO DO YOU THINK YOU ARE?

When attempting to get out of debt you have to take actions you have never taken before and go places you have never been.  Sacrifice is the key word in becoming DEBT FREE and for many that is a brand new concept because before sacrificing to win financially sounded like punishment and abuse.  On the journey to getting out of debt I hit the problem of debt from all possible angles.  Of course our family found new ways to bring in additional income, but the most beneficial changes came from cutting back on certain items and services.  One area that I cut back on was clothing for not only me, but for the entire family.  I use to be the person who wore only name brand clothes and shoes and the same was true for my husband as well.  We had been dressing this way ever since we were in college.  That all changed once I was on unemployment and $48K in debt.

At that point shopping at Goodwill and consignment shops became a new hobby.  I could no longer justify spending $20+ on a pair of jeans or $40 on a pair of shoes because we didn’t have the funds to cover it.  For those of you who don’t know what Goodwill is it is a store that sells used clothes donated by others and the proceeds go to career training for individuals in need as well as other services.  Before I started shopping there I use to look down my nose at Goodwill and you wouldn’t catch me dead in there.  That all changed one day when I went to one of the local stores and seen multiple BMW’s and other luxury cars in the parking lot.  Before going in I said to myself the drivers in these cars must be here to donate clothing, but once I was inside I seen a couple of the ladies actually buying for themselves!  At that moment I realized that these women are just continuing the spending habits they had before they owned the luxury cars and there was no shame to them to be shopping at Goodwill.  This store was allowing them to save money in their clothing budget so they could spend in more important areas like college funds, retirement, and vacations.  Right then and there I said to myself “WHO DO YOU THINK YOU ARE?”  “These wealthy individuals don’t think they are so much better that they can’t shop in Goodwill why do you think you are?”  From that point on I have been finding great deals at Goodwill and consignment sales and tell you the truth it is those clothes that I get the most repeat compliments on. 

I attend consignment sales mostly for my son’s clothing and shoes because if you have kids you know that they don’t care if they drag their shoe until it is a hole at the toe.  They don’t care about crawling in the dirt until the jeans they are wearing are no longer recognizable.  That is exactly why their clothing shouldn’t cost you a lot of money.  I hate to see parents spend $100 on a pair of sneakers when they could just spend $8 or less at a consignment sale and put the rest in a 529 college fund.  Kids are not hard to impress in fact every time I bring home clothes or shoes from a consignment sale my son always says “mommy you got me some new shoes, thank you mommy!” They don’t care where the shoes come from as long as they light up and they can play outside in them.  We as adults are trying to impress other adults when we buy our kids expensive clothing and all we are doing is depleting our own bank accounts for the future.  When I was employed in my first pregnancy five years ago I bought all of my son’s items brand new. Brand new changing table, crib, stroller, car seat all of it was coming out of my bank account at full price.  I know I spent thousands of dollars before he was even born.  I am now eight months pregnant again, but this time I bought the stroller, car seats, changing table, diaper bag, bath tub, etc, from church consignment sales and saved thousands!  The point of all this rambling is that you don’t have to care what people say if they see you shopping at Goodwill or consignment sales because they may be laughing, but if they saw your bank account the laughing would surely stop!  I actually brag about the deals that I get now because I want people to know that there are more important things in life than clothes.  So the next time you find yourself sticking up your nose at Goodwill and consignment sales while at the same time in debt do what I did and say to yourself “WHO DO YOU THINK YOU ARE?”

Have you ever saved money by buying used clothes?

I Can’t Do That!

You would be amazed at how many people say that sentence when it comes to getting out of debt.  They say “I CAN’T” save an emergency fund, “I CAN’T” pay off my student loan, “I CAN’T” pay off my car loan, “I CAN’T” stop eating out or going on vacations. I CAN’T, I CAN’T, I CAN’T!  Every time I hear someone say those two words I think back to my childhood tennis coach David Lash who use to always respond when I said “I can’t” with the question “are you American?”  Confusingly I would say “yes” and then he would continue with “you need to understand as an American you are an Amer-I-CAN!”  It was simple, but it made sense.  He always instilled in me that I can do anything if I put my mind and energy into it. 

I recently learned of a single mother who had an annual salary of $21K and she paid off $17K in eighteen months!  This woman obviously erased “I Can’t” from her mindset and instead buckled down, cut back, and put all her extra money towards the debt.  She got to the point that she said to herself “ENOUGH IS ENOUGH” and she made a life altering change to her finances and as a result she is DEBT FREE!  People who don’t want to change their financial situation usually come up with all kind of excuses.  Excuses such as I don’t make enough money, I deserve a vacation because I work so hard, I don’t have time to cook so I need to go out to dinner, so on and so on.  What is really happening here is that the person has not reach the point of ENOUGH and they continue to pile on debt and when ENOUGH does come, the reality will set in of the opportunity lost because they continually said “I can’t”. 

I use to be one of those closet “I can’t” people when it came to my finances, but then I was slapped in the face with a lay off from my career.  Right then and there I had to grow up and realize that when I use to say “I can’t” I really was saying “I don’t want to” because in my mind it was an inconvenience to the life I was use to living.  I would have to stop eating out, buying new clothes, new shoes, going on vacations, etc if I wanted to truly get out of debt and live a prosperous life.  Everyone has a choice to make when it comes to their own finances and the first decision has to be to stop saying “I can’t” and replace it with “I CAN!”

If you are still in debt, after reading this will you move from “I can't” to “I can” and change your financial future?

When Will We Ever Learn?

I am sure you have heard the definition of insanity, but in case you have not the gist of it is “doing the same thing over and over again and expecting a different outcome”.  Between the years of 2000 and 2008 America was flying high above the rest of the world and everyone was prospering, at least it appeared that way.  The prosperity that majority of Americans were displaying was actually an illusion.  The reason is simple and complex at the same time.  During this time there was a housing boom and everyone who could breathe or spell their name was able to qualify for a mortgage.  Credit was flowing freely from banks and individuals as well as companies could borrow to the max.  If people had equity in their home they would cash it out to buy cars, go on trips, pay for college, start businesses, etc.  All majority of Americans did for these eight years was spend money they didn’t have and live the illusion of the “good life”.  Want to know what Americans didn’t do in those eight years?  SAVE!!!  During the same period there were times when the savings rate was in the negative meaning that people were spending more money than they were bringing home in income.  Everyone thought this illusion of prosperity would continue, that their home values would continue to rise, and that banks would continue to lend, but then 2008 arrived and the magician revealed that the past few years was all a trick and the unfortunate treat was upon us.

In 2008 the economy collapsed and a snowball of catastrophes hit America from all sides.  The “why” behind the collapse is complex, but a broad overview would be this: Banks were like the Americans giving out more money than they had on hand and dealing in risky business practices.  Banks gave mortgages to people who eventually would not be able to afford them.  Homeowners mortgage rates started to rise and as an added insult companies were laying off people left and right and so there was no income to go to paying for the mortgages that these banks were so carelessly handing out earlier in the decade.  The banks being so heavily invested in these mortgages started dropping like flies, the most famous one being Lehman Brothers.  I still remember the night I was looking at CNBC watching the employees coming to empty out their offices, such a sad sight.  Americans were losing their jobs, homes, cars, retirement savings, and families.  As a result of all this loss behavior started to change.  People went from spending all they had to saving everything they could. In fact the savings rate was at an all time high of 4.2% (of disposable income) in December 2009 and it appeared that Americans had learned their lesson and had turned away from habits of the past.  You can say that the insanity had disappeared, but not so fast as of February 2012 the savings rate is back in decline (3.7%) and Americans are heading right back to the habit of spending more than they bring home in income.

  

I am sure you are asking the question why would people go back into this insanity?  Why would people go back to car loans, buying expensive shoes, going on trips, taking out home equity loans, etc?  The only answer that I can come up with is that people are starting to feel safe again, because the economy is improving and jobs are coming back, but that does not mean that you should run right back to the edge of the cliff with your finances.  We all have to learn our lesson from how we felt in 2008.  That uncertainty made us change our habits and we have to resist the urge to go back.  When the economy went off a cliff in 2008 a month later I was laid off by Pfizer and my family was in $48,000 worth of DEBT.  We had to change our behavior towards our finances or become a casualty of the economy and another statistic.  That is exactly what we did, we stopped borrowing money and paid off everything.  We also built up an eight month emergency fund of expenses because we are determined to never let the American economy affect our personal economy again.  If the economy ever decides to take a nose dive again we will be ready this time.  Insanity is NO LONGER welcomed at our home!

Have your finances become a victim of insanity?

So What Do I Do?

Last Wednesday I discussed in depth the types of insurances that should be avoided.  Two of which are life insurance on a child and whole life or cash value insurance.  What I did not discuss in that post is what insurance you should get as an individual.  Term Life Insurance is the best option for individuals because it is has a low monthly cost with high amounts in case of death ($500k, $1million).  Depending on your needs you can get 10, 20, 30 year Term Life Insurance and depending on what you choose that is the time the insurance will be in place.  For example you can sign up for a 30 year $1million Term Life Insurance policy.  Most people ask me what if I live past 30 years what am I going to do then?  The point of the policy is to give you the cushion of insurance while you get out of debt and save up enough inheritance that when you do die which might be in 50+years your family will have enough money to bury you and still have money left over to distribute as you see fit in your Will.

Another concern that older individuals come to me with is that they think Term Life is only for younger people and that they would not be able to afford it.  I went on a popular insurance website quoted a 50yr old woman for a $500K 20yr policy in very good health for $85 in good health $93.  Also I looked up a 70yr old woman $100K 10yr policy in good health and it is $104 so it is doable.  All that you need to do is the homework and get the best possible Term Life Policy premium you can find.  Another question that I get asked on this type of insurance is how much should I insure myself for?  I always tell them at least 10X your annual income because this will allow your widow if you have one to invest the amount as well as live off of it.  Take me for example I have a $500k 20 year term policy because that is enough money to pay off our home, send both kids to college,  bury me, and still have more than enough to replace my annual income.  Everyone will have different needs so only you can make the decision on the policy needed.  If you are married each person needs to have a separate policy and a Will in place to execute your wishes.

The other insurance that you need to consider if you are 60 years old and up is Long Term Care Insurance.  What this insurance guarantees is that you won’t go broke after a couple years in a nursing home.  There are nursing homes that cost $40K+ a year and that price can definitely eat up a nest egg quickly.  Where couples run into problems is that the husband goes into the nursing home first uses up all the retirement savings and when it is time for the wife to go in usually after the husband has passed away there is no money left and she ends up in a Medicaid/Medicare nursing home.  If you have ever visited anyone in this type of facility you know it is somewhere you don’t want to spend your last years.  With Long Term Care Insurance you also have the opportunity to stay at your home for a short amount of time and someone can come in for minor tasks such as taking vitals for your physician, help with feeding, clothing, and bathing.  Once your health deteriorates to a certain point you will have to go to a nursing facility.  Long Term Care Insurance is vital for anyone over the age of 60 and should be purchased immediately.

After reading both posts on types of insurance what will you be doing differently so that your family is taken care of once you are gone?

IN CASE OF AN EMERGENCY, BREAK GLASS!

Most individuals do not know what to do if an emergency came into their life.  They tend to break the glass and use whatever is inside?  Usually what is inside is a credit card or a bank loan because the individual is not ready when life happens.  The problem with this tactic is that it leads to an endless cycle of debt that keeps the person from achieving generational wealth.  The main reason that someone would have to turn to debt to cover an emergency is because they were not prepared in the first place.  An emergency fund is essential in building wealth because it turns potential catastrophe into an inconvenience and it erases stress from the situation. 

I always advise clients to have at least an emergency fund of $1000 if they are trying to get out of debt and four to six months emergency fund if they are out of debt.  Once I make this request I usually get the following request, “How am I going to find $1000 to put into an emergency fund?”  Once I have this push back I have to point out to the individual that it is not going to be simple and they will have to sacrifice to get this emergency fund fully funded.  If they are serious about getting out of debt they soon realize that life as they know it has to change temporarily in order to get ahead.  I must admit that it is a fair question that they put before me about the “HOW” and so I make sure I give them various money finding options to get them started.

Journey to $1000:

   1. Sell everything and anything: I am actually about to list a living room set on Craigslist for $1500 and if it sells I would have my emergency fund with one sell if I was in debt.  Also most households have more televisions than people living there.  SELL THEM! You get the picture sell, sell, sell.

   2.Cut off some services: house phones are ancient so if you have a cell phone cut the house phone off and add the savings to your quest for $1000.  Cable TV is also not a necessity when you are getting out of debt so cancel that service and save over $100 a month.  Haven’t been to the gym in the month? Get rid of the membership!

   3.Don’t eat out at all.  I am talking about all restaurants big and small.  No McDonalds, Burger King, Wendy’s, etc.

   4.The shopping mall and retail store are not your friends if you are in debt.  Wear the clothes and shoes you already have in your closet and don’t buy new items!

    5.Have multiple yard sales.  It is unusually warm right now so why not get an early start on selling some items out of your home.  If this weekend is too soon start getting out the items that you would like to sell and put them all together so that they are ready to sell in the summer months.

These five suggestions are just scratching the surface of what an individual can do to get the emergency fund fully funded over the next couple of months, but in order for this to be possible the person has to be sick and tired of being sick and tired and is ready for a change.  It won’t be easy, but I promise it will be worth it!

How would you come up with a quick $1000?

Till next Wednesday!