YOU’RE JUST A GIRL

I am sure all women at some point in time remember a boy saying to them “you’re just a girl!”  Whether it was the time everyone in the neighborhood was picking teams for tag football or even a little later in life when it was time to close that big business deal.  Not one time in any of those circumstances did we as little girls or women backed down from the challenge, in fact it made us even more determined to be the best!  Women have always been determined to even the playing field with men in every aspect of life making equality a top priority.  Unfortunately there is one area that is being neglected and that is finances.

This has been an ongoing problem for decades where women were not taking care of business when it came to their financial lives.  The problem looked solved in 2009 when women married and single started taking a more hands on approach to their personal finances as a result of the 2008 economic catastrophe.  Women were investing more, looking for ways to save money, and spending wisely from 2009-2011.  Obviously amnesia started to set in and the feeling of fear from 2008 had eroded because in 2012 women are beginning to return to their old ways and letting other people control their financial future.  This is dangerous in so many ways because times have changed drastically here in the U.S. and around the world. 

First and foremost women are outliving men at an average of five years!  I am sure if you look at your own life you can see the number is even larger than that.  Personally my grandmother outlived my grandfather by twenty years and my own father has been dead for fourteen years.  I promise you my mother who is coming up on sixty three if she is anything like her mother by the time it is all over she would have been without my father for thirty four plus years!  That is a long time to fend for yourself financially so you can see how it is imperative that women take control of their retirement savings, long term care insurance, etc.  Women who are married should know where all important papers are from insurance to bank account statements so that if they need them they can find it with no problem.  Something else that has changed is that women are getting married in their thirties and not their teens and twenties like their grandmothers did so they have to take control of their money. It is no way that a woman can go from eighteen to thirty years old without saving any money for the future and if they do they are setting themselves up for financial failure.  It is time for all women to stand up and take control of their financial futures!  You are NOT “Just a Girl!”

DEJA VU

“The second is that you really need a home equity line of credit if you don’t already have one. As with the case of the aforementioned unsinkable ship, sometimes the unforeseen happens and you need a financial safety net to fall back on. A home equity line is ideal for this purpose because it’s a pre-approved line of credit that doesn’t cost you a thing until you tap into it. Plus, you can borrow and pay it back again and again, as needed.”-Credit Union

This paragraph came from a credit union that I actually belong to and when I read it I thought I was hallucinating.  The same hallucination came the other day when I passed a home for sale and on the sign it said “zero down payment”.  Obviously I must be back in 2006 because lenders are offering the same financial options for mortgages that sent our economy off a cliff in 2008.  First with the zero down payment option, if a potential home buyer comes in to a lender to get a mortgage and does not have any money to put down this person more than likely does not have the available funds to pay a mortgage if the economy takes a turn for the worse again.  Let’s look at it a different way what if the borrower does have some money to put down, but decides to keep it in their savings because the lender said zero down.  What happens to this borrower is now they are placed in an 80/20 mortgage where 80% of the mortgage is a fixed rate and the 20% is usually interest only and unless the borrower pays extra each month the 20% portion of the mortgage never goes down.  That sounds like a raw deal if you ask me.  It is better to save 20% of the total mortgage before going to a lender and put it as a down payment.

Now to deal with the credit union promoting that everyone should have an equity line of credit.  Guess what people were doing before 2008 with their home equity line of credit they were taking money out to buy cars, go on vacations, send kids to college, buy second homes, put additions on their home, etc and then 2008 hit and their home values collapsed into a black hole.  Now these same borrowers because they took money out of their homes through an equity line of credit now had a house that was worth less than they owed.  Because of irresponsibility a lot of American homeowners could not refinance and to add insult to injury the economy was so bad that millions were laid off from their jobs and now could not afford their monthly house payments.  It was a domino effect that all started with lenders saying take out an equity line of credit just in case you need it.  I had an 80/20 mortgage in 2008 where the 20% represented the equity line of credit and you want to know what the lender did when the economy collapsed they took away the opportunity to take money out of that equity line.  I never missed a payment and yet they closed the line off.  I didn’t need the money, but it is interesting that now the credit union and I am sure banks are saying this equity line of credit can be used in an emergency when times get bad.

You know what else can be used in an emergency? An emergency fund and it does not have an interest rate attached to it!  Houses are not to be used as piggy banks so equity lines of credit are not needed in any circumstance.  Mortgages are to be paid off as quickly as possible so in retirement you don’t have to worry about losing your home because your monthly salary has been cut in half.  When any lender starts talking about zero down or equity line of credit politely look them in the eye and say no thank you because you are not a fan of DEJA VU!

If you are in an undesirable mortgage are you going to take advantage of the low rates and refinance?

Will That Be Debit Or Credit?

Recently I returned from speaking at a conference that was solely filled with college women.  I spoke at 4:45PM which meant that I had time in the morning to go to a workshop.  I chose to go to another financial literacy workshop just to see what would be covered.  The speaker was doing great, she was talking about saving money, and doing a budget, but then the workshop took a turn for the worse.  She started talking about credit cards and not just talking about them, but actually being their biggest advocate.  I was squirming in my seat fuming over the advice she was giving these young ladies.  She started off by saying how she has own a credit card since she was eighteen so she has been using credit cards for twenty years.  From there she told them they need a credit card to book a hotel room, rent a car, and to build credit so later they can get a mortgage.  By this time I had launched into the orbit of anger because as financial speakers we were here to show these ladies how to start their lives on a financial strong foot and here this advice was about to put them in a debt trap!  Most of these college students are already in student loan debt so why tell them to borrow more money by using credit cards? 

To address the above lie about everyone needs a credit card I will start out by saying any transaction that a person uses a credit card for a debit card can be used.  With the hotel room and rental car booking you can give your debit card and the only difference is that the hotel or rental company will put a hold on the card or go ahead and take the amount from your bank account.  Some say to me I can’t afford to have them put a hold on my card!  My reply to that is “you should not be staying in a hotel or renting a car if the money is not readily available.”  How about the statement that you need to use a credit card to build credit so you can get a mortgage?  Also a lie because if you actually go to a company that underwrites mortgages they will look at more than a credit score and you will get approved.  They look at how long you have been at your current place of employment, do you pay other bills on time, do you have a 20% down payment, etc.  They look at the whole person instead of at a number and let’s talk about that number.  Your FICO score is a ridiculous score to care about if you are trying to win financially.  Look it up online and see what it represents.  35% represents how long you have been paying on DEBT, 30% is based on the DEBT you owe, 15% is the length of DEBT history, 10% is based on new DEBT, and 10% is based on types of DEBT used.  Why should anybody care about a score that keeps you from being wealthy because you are always paying YOUR money to someone else? 

Now some people think they can stump me by saying that they have a credit card that has no annual fee and that they pay their bill off each month so they never are penalized with the interest rate or late fee.  What they don’t realize is that it has been proven that people with credit cards spend 40% more than if they would have used their own cash.  So they are still losing with that credit card.  Here is an example in my own life.  I use to work for a company that gave every employee a credit card for company expenses and so I thought I would be smart and pay the annual fee and rack up points off their money.  I wanted to use my points for a free flight and so this is how the credit card company gets over.  I had to spend $25,000 to get the 25,000 points needed for the free flight not to mention the $80 annual fee that paid at the beginning of the year.  $25,000 for a flight, I don’t think that is a fair trade.  Neither you nor I can outsmart the credit card companies and that is why they are a billion dollar industry.  Be smart with your money and next time say debit please!

Does this post change your outlook on credit cards?

THIS OR THAT?

There are so many choices in life especially when it comes to finances.  These choices can lead to wealth or they can lead to a continuous cycle of just enough to get by.  One of those choices that everyone will make in their life at least if they don’t live in a major metro city like New York where transit rules is when to buy a car.  Not only when to buy a car, but how to pay for that car.  If you only look at car commercials you would think the only option a person had was to finance the car they wanted.  Why do these commercials only show how you can get a car payment or a lease?  Because that is where the car dealership or the bank can soak all the extra money out of you in the form of interest.  The car companies are clever with their commercials because they make the person watching the commercials feel that they NEED that car and that the car will raise their status in the world.  Unfortunately it actually does the opposite.

After looking at a few of these car commercials, I have seen monthly payments of $399, $569, even one that was $749.  Who would pay $749 a month for a piece of scrap metal?  That is the rate of a two bedroom apartment in the south and you can actually live in an apartment!  I use to be part of the car loan crowd in 2007 when my husband and I signed our names to a $20,000 car loan for a Chrysler 300.  The car company appealed to our desire to impress others.  As a result of this vanity my husband and I landed on the wrong side of “this or that”.  We chose this (car loan) and missed out on that (paying off a college loan fast).  See we also had a $25,000 college loan as part of our debt and if we were smart instead throwing our money away each month in the form of a car payment ($400) we could have been paying that student loan off.  It got to a point when I looked in the driveway at that car all I could see was a missed opportunity to be debt free!  Just like us whenever you choose a car payment you are missing out on a brighter future financially because you are spending money that could be used for something more valuable like investing.  For example take our $400 car payment that we paid on for two years.  If we would have invested that same amount over the same period in a mutual fund that has a 10% return on investment then our family would have over $10,000.  If we would have stayed on the loan company’s five year schedule and invested that same amount we would have saved over $30,000!  When I seen these numbers I decided to pay off the Chrysler and to only pay cash for used cars in the future.  I also found out that millionaires only drive used cars and let others take the depreciation hit by buying new.  

We now only drive paid for cars and as a result money that used to go to car payments is now going to saving for the future.  If you have a car payment you have to ask yourself “this or that” and realize what you are missing out on.  Do you have a car payment and there’s no extra money to save for retirement, for college education, or insurance then it is time to say do I want “This” a car payment on something that goes down in value everyday or “That” a financial future where there is no struggle and your family has generational wealth?

DREAM DEFERRED

Dreams are what fuel us day to day.  Dreams are there to give us hope for a better tomorrow. But what happens when those dreams are deferred? Our parents and grandparents dealt with many life situations that may have put their dreams on hold.  These life situations were unavoidable and had to be dealt with accordingly.  With our grandparents and great grandparents they were part of surviving the Great Depression so they had to do what was needed to make sure their family didn’t starve.  They may have had dreams, but priorities came first and so the dreams were deferred.  Our parents went through the civil rights era whether it was the right to be seen as an equal no matter the race or to be taken seriously in the workplace as a woman; because of these limitations dreams were sometimes forcibly deferred.  Racism kept individuals from becoming doctors, lawyers, professors, etc.  Little girls were taught that they could only go into certain professions such as teachers, secretaries, etc and that the higher paying careers should be left to men. That they should just be focused on being a great wife, mother, and glorified house cleaner.  For our parents it was prejudice that deferred the dreams of so many.

What are the reasons that dreams have been deferred for our generation?  Even though we just went through the Great Recession it definitely could not hold a torch to the Great Depression.  Although there is still racism and sexism out in the world it is nowhere near what was going on through the sixties and seventies.  Today more than ever anyone can be anything that they want to be.  There is nothing holding them back, but themselves.  Education is free and if you want to work hard no one is going to keep you from doing that.  There are so many stories about individuals who come from the most desperate situations and they go on to be highly successful people who end up helping others reach their own potential.  So what could be holding our dreams back?  The answer is complex while simple at the same time.  It is this generation’s debt vs. income ratio as well as our behavior toward money in general. 

There is so much complaining every day on social media and out in public about how everyone hates their job.  Continuously people say “Thank God it’s Friday” and “Oh no it’s Monday” and so it is apparent that millions of people are not living their dream at least when it comes to their job.  So why don’t they just quit the job they hate so much, go after their dream, and live happily ever after?  It’s simple, they need the paycheck.  Why do they need the paycheck because they have debt that is not going to magically disappear.  There is too much debt compared to the amount of income coming in so walking away from a paying job could lead to a financial catastrophe.  Even though this is a huge problem for the individual it can be handled and this individual could still go and live out their dreams, but here is the difficult part: Behavior.  Although people want to live out their dreams, those dreams are not powerful enough to convince them to stop spending money and adding on to the debt in their life and so as a result dreams are deferred.  People go through life doing what they don’t want to just for a needed paycheck and when retirement comes they look back on their life with sadness because they spent eight hours a day, five days a week, for forty years doing something they hated. 

Dreams don’t have to be deferred anymore!  We all can make a decision today to say an interesting word to ourselves and that word is NO! NO to spending money that should be going to paying down debt.  NO to friends and family members who want us to spend money we don’t have on stuff we don’t need.  NO to working a job that is not our calling just because we need a paycheck.  It is time to take the steps needed to get out of debt so that you can live out that dream.  Do you want to help others in need, do you want to start your own charity, how about travel the world and take pictures that could change the way others look at the world?  Those dreams whatever they may be are still alive in you, but your behavior towards money has to change in order for those dreams to come to reality.  Sacrifice for that dream has to start today and although people may pressure you and even laugh at you while you are getting out of debt once you are living your dream and they are still in a job that they hate the laughter surely will stop.

My first career I use to love, but eventually it went south and I was no longer happy, but I could not quit because our family was $45,000 in debt.  I was stuck going through the motions each day just so our family debt could be paid.  I became fed up one day and decided that I had a dream and that job wasn’t it so I worked on getting out of debt and as a result life became unlimited.  When you have NO DEBT you can start to do what you want to do because you are not depending on anyone else for your livelihood.  Dreams start to come true and make room for new dreams that change the world for the better.  When retirement comes you look back on your life and can honestly say you lived a life fulfilled!  Only you can make your dreams come true!

Do you see debt as a hindrance to your dreams?

Read the Fine Print

It is that time of year again where impatient seniors are waiting to cross that stage and grab their diploma!  These young people see their graduation as the end of childhood while actually it is the beginning of real life, real adult life, because decisions are being made that are going to affect them for years or even decades to come.  One crucial decision that is being made on their behalf is financial aid.  Parents all around the country have applied for financial aid for their child’s college of choice and by now have received a response.  Each college or university have their own form to fill out as well as their own award letter that they send back to each family and because every school is different some families end up being confused about the amount of “free” money that is actually being given.

When parents receive the financial aid letter a lot of times they see the final number which might say for a $32,000 a year tuition they were awarded $22,000, but if they read the FINE PRINT the parents actually still have to borrow $15,000 in loans.  The $22K they tend to see as the award usually has the amount of loans needed on behalf of the student in order for them to attend that university.  When parents figure this out sometimes it is too late to make an adjustment and the parents end up borrowing tens of thousands of dollars in the student’s name.  This is why the national student loan debt is topping $1 trillion dollars.  There is not enough financial aid available like in the past so more students are going into debt to go to their dream school.

Parents do have a few options if they are stuck with sticker shock when the award letter arrives.  First they can appeal the university for more financial aid, because most schools keep an appeal fund on the side for just that purpose.  They are more likely to accept the parent’s appeal if there is a comparable college offering the student more money.  Also make sure that when filling out the financial aid that you provide as much information as possible so that your child receives the best possible offer from the university.  The other option that is probably the best option and that is have your child choose a college that you the parent can afford without too much financial aid and if the child receives financial aid it is just icing on the cake.  One side note when I say a college you can afford I mean that the money has already been saved and you don’t have to tap credit cards, home equity, or any retirement funds.  Remember always read the fine print, it could save your child a future with debt!

Have you ran into sticker shock when dealing with financial aid?

Don’t Leave Home Without It!

This blog post was going to be on a completely different subject until my daughter decided to enter this world three weeks ahead of schedule.  All the events that led up to her coming early got me to thinking about personal health insurance and how important it is to have for every individual no matter what age.  The reason that I recommend health insurance for everyone is that one of the most common reasons for bankruptcy is overwhelming medical bills.  Overwhelming can span from a few thousand dollars to tens of thousands of dollars and when people don’t have health insurance they are on the hook legally for every cent.  This second pregnancy with my daughter was filled with extra doctor visits, multiple sonograms, and a maternity emergency room visit two days before she was born. 

Today I received the benefit statements from all of the extra visits excluding the ER visits and they totaled close to $600 and these were all office visits in the last month!  Thank goodness for health insurance because I did not have to pay a dime.  I have yet to receive the bill for the ER visit and her birth, but I know because of the insurance that I don’t have to pay the entire bill, but maybe a tenth of it.  If I didn’t have health insurance her birth alone would cost me at least $10,000!  That type of money you can’t come up with overnight and the hospital expects to be paid as soon as possible for any service and when people don’t pay up the hospital ends up suing and winning.  Eventually the person will end up filing for bankruptcy because they can’t pay.  As far as health insurance goes the age group that goes without it the most are the younger generations ages 18-35 mainly because young people think they have a long time before chronic illnesses hit their body.  They would rather save the monthly insurance premium and use the money elsewhere.  That is a big mistake!  If you can’t afford health insurance currently as a young person it is time to re-evaluate your priorities.  If you have a cell phone, or home internet, cable, etc you may want to cut one of those services off or all of them off and pick out some health insurance because it is to dangerous financially not to have insurance on board. 

In the past two years I have known four people under the age of 32 who have had either a stroke, heart attack, or cancer and I don’t know what their insurance coverage was at the time, but if they didn’t have it they could easily be in the bankruptcy stage by now.  For example the cost of treating a heart attack is $40,000 and that does not include the treatment that it will take such as more doctor visits and extra medication that will follow for the rest of that person’s life.  The cost of treating cancer is even more so there is no reason to take the chance of not having health insurance.  Remember DON’T LEAVE HOME WITHOUT IT!

If you don’t have insurance what are you risking financially by not having it?