Credit Wise
(featured column)

How to Make Financial Dreams a Reality

by Jennifer Wallis

It’s the beginning of 2008 and you have a whole year of possibilities stretched out in front of you. Hopefully by now, you’ve already made and broken any resolutions that weren’t going to stick. It’s a great time to get serious about any changes that you want to make in your life. Take a step back and look honestly at your financial position. Are you happy with where you are? Do you have debt that keeps you up at night? Are you going through life with your fingers crossed, just praying that nothing will go wrong since you have no savings? Now is the time to set some realistic goals and develop a plan to get you where you want to go.  More...

You may not even know what an ideal financial situation looks like. Even though there are many variations, most people who are in control of their finances have little or no credit card debt, they have money in an emergency savings fund and put in more each month, they pay cash for most items, they save up and pay cash for major purchases (except maybe cars and houses), they don’t worry about how they are going to pay their bills, they pay everything on-time, they save for retirement, and they invest their money. When they do finance items, they get the best interest rates and don’t have to worry about being denied. They weigh major purchases carefully and don’t typically make impulse purchases. They don’t buy things just to keep up with the neighbors because they don’t spend beyond what their income allows.

While that may seem like an unattainable dream, it isn’t as far away as you might think. Very few financially secure people became that way because they won the lottery or had that money handed to them. Many have even faced the same concerns you are facing right now. The difference is that one day, they got serious about changing their lives and they did it. Are you ready to do it, too? Here are some of the most common financial complaints plaguing American households along with advice on how to get out of that financial rut and make 2008 great!

“I’m spinning my wheels” Do you feel like no matter how hard you work, you are constantly worried about money and can’t seem to make progress? Try doing a complete financial analysis to see if your problem is not having enough income, spending too much or both. If you don’t know where to start, many websites have programs that can help. Many non-profit credit counseling agencies offer free or low cost counseling to help you get a glimpse of your complete financial picture. To find one near you, contact the National Foundation for Credit Counseling at www.debtadvice.org. If you’d rather try it alone, figure exactly what your take home pay is. Then, review living expenses and estimate your spending. Then, add up any debts that you have. Take living expenses plus debt and subtract that from your income. Are you upside down? Once you know where your money is going, you’ll have a much better idea of how to plug the leaks and where to cut.

“I’m tired of owing credit card debt” The exhilaration that can accompany buying things you want with credit cards quickly fades. Then, you’re left worrying about how you will pay it back. Maybe you didn’t buy anything but had to use your credit cards to pay for medical bills or other emergencies. If your interest rates are high, even if you make the minimum payment, you still may only pay a few dollars on the principal balance. Most of your payment just pays the interest. It can seem like you’re on a human size hamster wheel and there is nothing you can do to change it. The truth is that you can do everything to change it. First, stop charging. Just leave your credit cards at home. Next, see if you can get your interest rates as low as possible. Call your credit card company and just ask them to lower your rates. See my article on how to negotiate lower interest rates. A non-profit credit counselor may also be able to help you get your rates reduced. Then, pay as much as you can every month. It will seem like a slow process at first but before you know it, one by one, that cards will be paid off.

“I have no savings safety net” Many people live paycheck to paycheck with little or no savings. If the air conditioner goes out or they get a flat tire, they end up charging or getting a loan to pay for repairs. It’s risky to work without a net. Start saving money today. I know that you are going to say that you don’t have any money to save. Just start small. Practice putting something in savings and leaving it there. Even if it’s $10 per month (most of us can find easily $10 a month), just start saving. Increase the amount when you can. Before you know it, something will go wrong and you can just pull the money out of savings to pay for it.

‘I can’t seem to pay things on-time” For some, they may have the money to pay their bills, they just can’t seem to get organized. In just a few hours, you can organize your bill paying and it will be easy to stick with it. First, take a calendar and write down when you get paid. Then, take all of your bills and write down when they are due. Do you have more bills coming out of one check or are they evenly spaced? If necessary, ask your creditors to move your due dates if they all fall at the same time. Then, go online to your bank and set up every creditor on bill pay. Most banks offer this service for free. You don’t even have to pay for stamps or checks! Then, every time you get paid, go home and pay every bill that will be due until you get paid again. This will ensure that everything will be paid on-time or early. This will also let you know exactly how much you have to last you to the next payday. Once you get ahead of the game instead of constantly playing catch-up, it will relieve a lot of stress. You also won’t have to worry about those costly late fees. If you don’t want to use the online bill paying option, organize your bills by payday and mail all of the payments on your payday. There is no reason to wait until the due date.

“I need to save more for retirement” You’ve probably seen that funny retirement commercial where one moment Fabio is steering the gondola and the next, he’s old and gray. Life doesn’t happen that fast but its close. The commercial makes a good point. We put off saving for retirement and then, we find ourselves needing to retire but unable to afford it. The truth is that the earlier you start, the more you will have when you retire due to the magic of compound interest. If your employer offers a 401k or 403b retirement plan, you are literally throwing money away but not utilizing it. Many employers will match what you put in, up to a certain percentage. It’s like giving yourself an instant raise. What’s even cooler is that the money you put in is pre-tax. That means that you won’t see a dollar for dollar reduction in your take home pay. Chances are, you won’t even notice that the money is missing from your check.

Sometimes it can seem that you will never achieve your dreams. It seems that there is too much work to be done to make them a reality. One of my favorite quotes is “The journey of a thousand miles begins with one step” by Lao Tzu. Your financial journey begins the same way. Just start today and stay on track. Before you know it, you will look back and see how far you’ve come.

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Copyright © 2008 by Jennifer Wallis. All rights reserved.

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