No More!

A divorce is final and a wife who always left the finances up to her husband is now left to fend for herself financially.  A husband for thirty years suddenly passes away from a heart attack and his widow has no idea where to start to put her life back together financially because she always let him pay the bills and invest on their behalf.   Both of these women and both of these situations I know personally. Both of these situations happen too often and women are always on the losing end!  When I write it is usually to inform the reader about how to manage their money better so that in the future they will have wealth and not debt.  Rarely do I write about subjects that are intense in nature, but as Women's history month is upon us I feel that I need to address an important issue that is affecting 4 in 10 households in the United States. 

Women are the primary breadwinners in 4 out of 10 households in America which means it is more important than ever for women to know how to manage their finances. Not only for themselves, but also for the children they have or hope to have. Whether a woman is married or not she has to be in control of her money! Gone are the days where a husband or a father would handle the finances of a wife or daughter. Whenever this took place in the past, all it did was leave that women in a vulnerable position with her finances if that father or husband died. More commonly today women are finding themselves in a divorce and completely lost afterwards because they spent their entire marriage letting their husband control the bank account and other financial matters. 

Today all of that CHANGES!  No longer as women will we sit on the sideline and wish that our finances just fall into place.  We will take the necessary steps needed to control our own money and stop letting our money control us!  So what can we do? First, we decide what we want in life. What goals do we have for our household in the short term (6-12 months) the intermediate (1-3 years) and long-term (5-10 years). These goals which I like to call dreams are the fire to our match and they are going to get us to where we want to be financially. When my family was $48,000 in debt we created our own dreams and we wrote them down on a piece of paper and put it up on the refrigerator so that it could be seen each and every day. Believe it or not that sheet of paper full of our dreams kept us focused the 2 1/2 years it took to pay off all $48,000 because every time that we wanted to buy something we didn’t need we would look at that sheet and say we want that dream more!  After women figure out what they want in their life going forward it is now time to take your head out the sand and figure out if you are in debt and if you are how much debt you are in. The only way that you can begin to become debt-free is to know who you owe money to and how much you owe them. Only then can you take action to pay off that debt!

Getting a spending plan (budget) down on paper is essential because you have to know how much money is coming in and going out each month so that you can start to make the needed adjustments. If a woman finds herself living paycheck to paycheck each month she can start her financial recovery by looking at her spending plan and seeing what she can cut out. Cutting out unnecessary expenses leaves money available in each paycheck to start paying off debt. If after cutting out all that you can in unnecessary expenses you still find yourself struggling financially then it is time to find extra income to pay off debt. That may mean adding extra job or selling anything that you can for the extra money. When we were getting out of debt we sold everything that we could. If people wanted to buy it, we would sell it to them!  We also found out what we were good at which was tennis and basketball and started training kids in each sport for $25/ hour!  Do whatever it takes to find the extra money to pay off what you owe!

Why is it important for ALL women to be debt-free and use their money to work for them and not someone else? The reason is that women on average make $.77 for every $1 a man makes, so we can’t afford not to be in control of our money! Even with the income disadvantage women can still come out on top by controlling their finances.  The secret is to make it up in your mind that you deserve better and you are going to do whatever it takes to get to that better!  No more spending money on stuff you don’t need! No more staying in debt because society said “that is how it will always be!” No more not having an emergency fund!  No more letting someone else tell you what to do with your hard earned money!  Today is the day you say “NO MORE!” 

NOT GOING ANYWHERE

NOT GOING ANYWHERE

A few months ago I read an article discussing the cost of state colleges and how if some of the colleges within a system were consolidated that it would save the state money.  For example in North Carolina there is UNC Chapel Hill, UNC Charlotte, UNC Pembroke, UNC Wilmington, UNC Greensboro, you get the picture. So instead of all of these Universities under one system the state would close a couple of them and incoming students would have to choose one of the Universities that were left after the cut.  Although this idea is provocative enough, what made me pause was that somehow HBCU’s were added to the conversation.  HBCU stands for Historically Black Colleges and Universities and I personally went to the one and only South Carolina State University.  The reason that I paused when the article mentioned HBCU’s is because these colleges and universities had nothing to do with the concept that the article was speaking of and it just seem like HBCU’s were added just as a suggestion that some of these schools whether they are part of the system or not can be shut down too because they are not needed.  I don’t usually step outside of financial literacy advice and I am not going to in this post either, but this article made me start thinking that HBCU’s and the students that attend them have the opportunity to be taken out of this conversation altogether and it starts with financial literacy.

Why financial literacy?  Majority of HBCU’s don’t have large endowments and they depend on donations from alumni along with other resources, but with alumni comes the issue and also the solution.  HBCU’s mostly consist of African American students who come from lower to upper middle income families.  Usually they are able to attend college through student loans, grants and scholarships (academic and athletic) and without this aid a lot of the students would not be able to afford higher education.  So here is how financial literacy can take HBCU’s out of the “elimination conversation.”

If majority of students at these universities and colleges depend on financial aid then one financial mistake small or large could lead to these students dropping out of college.  A student getting a credit card owing as little as $300 can cause them to drop out of college because they have no way of paying that debt off.  Students can lose a grant and that could lead to dropping out.  I met one student at North Carolina Central that before the fall semester even started she found out that she had lost an $800 grant and she did not know how she was going to get the money so she could start classes the next week.  She asked her mother and her mother could not help because she was struggling herself and just like that here was a student with a bright future at risk of dropping out.  I know that there are a lot of stories just like this one at HBCU’s all around the country and the result is the same. Dropping out.  The student dropping out not only hurts them, but it takes future alumni dollars out of the system making the institution vulnerable.  All universities and colleges must start to educate their students on how to handle money so that students can finish college and attain great paying careers.  HBCU’s much teach students not to spend their refund check, not to get credit cards, and not worry about a credit score because little mistakes like these can lead to a student being financially unstable.

I am sure that there are administrators, professors, student affair professionals, deans and so on who are wondering why should we focus on financial literacy?  Because you can’t afford not to!  The goal of financial literacy is not only to keep retention rates up, but it is truly to benefit the HBCU after the student graduates.  The 2012 college graduate left school with an estimated $26,000 in student loan debt.  This does not include the possibility that the student also had credit card debt or a car loan.  If it is not taught in college that DEBT SUCKS and that once you graduate that you need to pay off ALL debt as fast as you can then you end up with generation after generation that just lives a little bit better than paycheck to paycheck.  Alumni that live like this financially DO NOT AND CAN NOT give back to their alma mater leaving the alma mater to fend for itself.  This may not have been a problem in the past, but with state governments more and more cutting back in the budget when it comes to higher education the dependence on donations from alumni will only become greater.  So as you can see current and future alumni are the issue but they are also the solution, but it starts with financial literacy being stressed to them while they are students.  Trust that not a lot of higher ed institutions are taking on this mission and maybe they don’t have to, but as a HBCU alumni I am here to tell you that you can’t afford not to.  It is time to get off the chopping block and to show the world that you are not going ANYWHERE!

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?

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?

Let’s Celebrate!

April is more than a month where we get to play practical jokes on unsuspected victims, it is also designated as Financial Literacy Month!  During Financial Literacy Month there are events taking place daily that attempt to educate the public about money management.  The goal is to help both young and old realize that Financial Literacy is nothing to be afraid of, but instead embraced and conquered.  I know that your own financial life can be overwhelming at times, but hopefully I can give you a few starting points that you can implement during the last thirteen days of April.  April is just the beginning, the idea is to keep going until you master your own financial life!

Steps:

1.    List your short (3-6 months), intermediate (3-5 yrs), and long term (10-15 yrs) goals for your life on a sheet of paper and put it on your refrigerator.

2.    Open a savings account and start saving a certain amount each paycheck. Even if it is $10 just save something!

3.    Write down all your debts both small and large. (Face the fear of knowing the total)

4.    Determine how much money you have coming in (paycheck) versus how much money is going out (bills). Write it all down on a piece of paper.

5.    From that piece of paper (budget) determine which are needs and which are wants.  Determine what can be cut back or cut out.

6.    Once you figure out in your budget where you can save money start adding that extra money to your smallest debt and pay it off fast! Then repeat with the next smallest debt until all debts are eliminated.

7.    Find an accountability partner.  Someone who will encourage you to keep going when times get tough and remind you of those goals you have on your refrigerator.

I know that personal money management can be overwhelming.  It can feel like you are trying to eat an entire elephant all at once. Just remember to take one piece at a time and eventually that elephant will be completely gone.  That is why I put seven steps instead of thirteen for these last thirteen days so you can take your time and get it done by or before April 30^th.  The steps are simple all you have to do is say to yourself “I am ready to make a change for the better in my financial life” and the rest will take care of itself.  Don’t give up; complete the journey because in the end all of the financial strife that use to be a part of your life will just look like a bad dream and all that will be left is financial success!

Will you take the first step TODAY?