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!

Eating Healthy On A Budget

With all the recent talk about Medicare not being around in the future it is becoming imperative that those age 50 and under start taking better care of themselves.  This can be a challenge on many fronts, but two that come to mind are exercise and diet.  Exercising becomes difficult for most because of the lack of will power and determination.  It has been many times I have attempted to get up in the morning to exercise only to roll back over and go back to sleep.  Another enemy of exercising is time.  With the busy world we live in it is becoming more impossible to go to the gym or run around a track.

Now food is a different story all together because majority of people can control what they put in their mouths.  Instead of me eating that piece of pork bacon I could choose turkey bacon or instead of that 200 calorie frappucino that I love I could have a nice glass of calorie free water.  People who try to eat healthy often do find themselves fighting an uphill battle thanks to the inexpensive food and quick service at fast food restaurants.  I can get a cheeseburger and 32oz Sweet Tea for $2 in less than a minute!  Unfortunately sticking to this kind of diet will have me at a hospital in the future fighting for my life.  On the other hand it is a perception out there that eating healthy can be expensive.  So how do you eat healthy on a budget?   James Davis, a reader of the blog recently shared with me a link to a blog about eating healthy on a budget and it gave different foods to eat that are nutritious and not expensive. The article pointed out that the best buys were bananas, watermelons, broccoli, romaine lettuce, turkey and tuna.  It also pointed to eggs, but I would leave those out since eggs lead to high cholesterol.

There are other tips that will help you to eat healthier food.  One option is to buy local at farmer markets where the food is fresh and always cheaper than the store.  Buying local helps you give back to your community as well.  Another option is to buy produce in season because this is when the food is at its lowest cost.  You find yourself paying higher prices when you crave strawberries, etc out of season.  Think about growing some of your own food in your yard if you have one.  A garden is a great stress reliever or even a fun project for the kids to help with.  Last, but not least have a meal plan when you go to the grocery store because if you are able to save on other items you have the option to buy even more nutritious items for your home!  Let me know how you save on the food that keeps you healthy.  Now I must get back to my spaghetti made with whole grain noodles, ground turkey, and turkey sausage!  

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! 

I HEAR THUNDER

The housing bubble that burst in 2008 has taken four years to recover.  Prices of homes that are selling are finally starting to rise again in most states.  Although that financial disaster has taken a turn for the better there is another storm that is moving in from the distance and that is student loan debt.  Student loan debt is sitting at $1 TRILLION dollars currently and with defaults at an all time high it is the next bubble that is ready to burst!  Just like the housing bubble not many people are paying attention to the warning signs and many don’t understand how dangerous the economy will get if this bubble burst.  Everyone will be affected if this bubble pops in fact no one will escape the aftermath.

First the borrowers who are not able to pay the current loans they have don’t have the luxury of filing bankruptcy like the homeowners did during the housing crisis.  These borrowers are going to get sued and their wages are going to be garnished making real life even more challenging.  Student loans never go away in fact they will take social security checks and tax refunds to pay off these loans.  Next the banks that lend the money to students are in the same predicament they were in with the housing bubble because a non paying student is the same as a non paying homeowner.  The banks are in the position again to be over leveraging themselves and putting their customers (account holders) in possible financial danger if these defaults continue to rise.  The $1 Trillion student loan debt is more than car loans and credit card debt combined so it presents a problem for these lending institutions.

Lastly, the universities are going to be hurt by this bubble and the sad part about it is that the universities think that if the bubble bursts they won’t be impacted.  The students who are borrowing money are getting federal loans which come from the government so what happens when those loans start to default?  The government takes a hit and stops putting out as many loans and grants for students to take advantage of for attending college.  As a result of this action on the part of the government universities have to find ways to make up the lost of those funds and also risk losing out on a potential Einstein because that Einstein can’t afford the high tuition.  As you can see a storm is upon us and we can hear the thunder, but are we going to let it reach us and we have no umbrella like the housing bubble or are we going to get inside and protect ourselves by doing our part to eliminate this debt.  You have been warned.

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?