Growing Up Too Fast

Are we growing up too fast as a country?  I believe we are in the area of money.  My favorite person in my life is my grandmother, who lived to be 102.  It was only after she passed that I learned even more about her, who she was and what she and my grandfather went through.  Everything that they went through made them stronger and closer.  The thing I cherish the most about my grandmother is the memories, not the “stuff’ she gave me.

This generation of parents, just like the ones before us, just want to give our kids better than what we had.  And nowadays, that comes in the form of lots of “stuff”, trips and experiences that we simply cannot afford.  This causes us to use debt as a way of providing for our kids.  Our kids today are simply “spoiled”.  There is no other word for it.  But when we are handed everything and never have to work for it, it can actually hurt us more than it can help.  The lottery winner from this weekend, if he/she is not financially sound, will more than likely come out of this a loser instead of a winner.

I want to use my favorite word now – balance.  We have to find the balance between the past and the future.  I believe that technology and the things and opportunities that are available to us are awesome.  But we need to keep the money rules from the past (early 20th century) and use them to wisely obtain what we want to have.  The 80-10-10 rule still applies today and can be used to not only have “stuff”, but to become wealthy as well.

I would love to challenge you today to go “old school” for a year, or at least to the end of this year.  This means no more debt (debt cannot be the answer to the problem), using the 80-10-10 rule (10% give, 10%, save, and 80% spend), using cash to pay for everything, and being content with what you already have (this means you only buy what is necessary).

I hope you will take me up on my challenge.  I learned from my grandmother and my parents and it worked for me.  I am the living proof that “old school” still works today.

No Loan College

This past Friday, my husband and I experienced one of the proudest moments in a parent’s life:  the graduation of our son.  And one of the things we are the proudest of is how he went about getting his degree and where he is going next.  You see, when he graduated high school, he went to the local community college because everyone thought he should and he thought it was the next logical step.  So he began to take classes in what he thought he wanted to do when he finished school; it was a passion he had enjoyed all through high school.  However, as he began to get into some core classes, he realized that this wasn’t for him.  So he quit.  But instead of doing nothing with his life, he worked and tried to figure out what his passion was and what he wanted to be when he grew up.

When he had a better idea of where he wanted to go, he started community college again.  It took him a little while because he was working and going to school, but on Friday he graduated with his Associates degree in Business and will now be transferring to UNC to finish his degree.  And now when we talk to him, he knows exactly what he wants to be when he grows up.  He is 26.  Most kids don’t know what they want to do at 18 and if they go straight to college – a 4 year expensive college – then they are just wasting their money and yours.

So first I want to say encourage your kids in the right direction.  They should only go to college when they are ready and if they need it to do what they want to do.  They should never go just because “society” says they should.  And if they decide that college is right for them, they need to attend the right school in the best way so that they don’t graduate already 3 steps behind because they owe $50,000.  Here are just a few examples of what kids can do to avoid school loans altogether:

Start at Community College – The first 2 years of your degree is mostly spent on core courses.  The knowledge you gain is the same no matter where you get it.  So why not save a bunch of money and get what you need at your local community college.  You just need to make sure that the credits and the degree will transfer.  Where my son went, they had a program entitled “Transfer Students” which helped you get everything you needed to move on at the end of 2 years.

Go to an In-State State College – The least expensive 4 year colleges are the state schools and the least expensive for you will be attending one in your state.  Out of state fees are much more than in state fees.  You are going to school for knowledge and the knowledge is the same everywhere.   Most employers will not look at where you received your degree from but at what you did and learned while you were there.

Apply for Grants and Scholarships – You need to make it a job applying for every grant and scholarship you can find.  If you apply for a thousand and get 20, those are good odds and 20 can add up to a lot of money, even if they are only a couple of hundred dollars a piece.  Don’t pass over one just because it is only $100.  It all adds up and it is less money you have to pay.

Work and Cash Flow the Cost – If the parents can’t pay for school, that is okay.  There is no shame in that.  A young person can work hard all summer and pay for the next year out of that money.  They can also work while going to school.  I worked while I was in college and I think it helped me when I graduated.  It taught me the value of hard work and that not everything was going to be handed to me.

These are just a few of the main examples on how to go to college without student loans.  Student loans seem easy – “I’ll just sign now and worry about it later.”  But it isn’t that simple.  Student loans come with interest charges which means that if your schooling cost $20,000, you are going to end up paying $30,000 or more for that loan.  If you had done the steps above, you would pay less than $20,000 if you include grants and scholarships.  And the reality is you are not guaranteed a job when you graduate.  You may have to work at the mall for a while and that is okay, but not if you owe an extra $200-300 per month.

Bottom line - find your passion, decide if you need college, and if you do, attend wisely and let your graduation be a day of freedom, not the beginning of your debt journey.

#1 Money Myth

Do you know what the number one money myth is?  Well, of course, that is a matter of opinion, but in my experience, I believe it is this:  You must have debt to function financially.

This is a big myth and I want to bust it right here and now.  You can live a very good, normal and wealthy life without ever having debt.

First of all, if you never have debt, you will always have money.  Your income, whether great or small, is your greatest wealth building tool.  Therefore, if you waste your money on buying things without cash and spending large fees and interest for that privilege, you are giving away your most important financial tool.

Many people, old and young, live with the notion that you can’t make certain purchases without going into debt and this is simply not true.  Even people who don’t use credit cards believe that the only way to buy a nice car or a home or to go to college is with a loan.  And this is simply not true.  If you never have debt, you can save up and buy a nice car or home with cash or work and cash flow your way through college.  This may take longer than debt would, but that means the truth is a lack of patience not a lack of ability.  For me, debt was the easy way out.  I wanted something so I just used debt to get it and figured I would deal with it later.  But nothing worth having ever comes easy.  And a life debt free and financially free is definitely worth having.

The other main justification for debt is that you have to have a FICO score in order to have anything.  This is not true. A zero FICO score is more impressive than a high FICO score because it means you have used cash and wisdom to get the things you have.  The only way to achieve a zero FICO score is to not have debt.  A FICO score is equal to a “I use debt for my financial solutions” score.  Every element that makes up the FICO score involves the word debt and debt equals risk.  You must have debt to have a high FICO score, but a zero score should be your goal.  You can have everything that you want and need with a zero FICO score with the added bonus of having wealth as well.

So now that the myth that you must have debt to exist, financially speaking, has been busted, what is going to be your excuse for keeping your debt?  I hope you can’t find one because this will be the first step in getting rid of your debt once and for all.  No matter what your debt situation is currently, with time and hard work, you can obtain the ultimate goal of no debt, a zero FICO score, and wealth.  What could be better than that?

Why is Debt OK in America?

I had the distinct honor of being a guest on Dr. Carolyn Miller’s radio show last week, “Getting Good At Life”, and she asked me an interesting question.  Did I believe that debt was cultural?  I had never been asked it quite that way before.  I have heard and used words like accepted in society and normal, but never cultural.  Dr. Carolyn is a psychologist who has traveled to other countries and lives in a neighborhood where many cultures are represented.  She has witnessed first hand how someone can grow up in a culture without debt, move to America, and continue those principles in this country.  There are also people, like myself, who have lived some of their years here without debt. Therefore, we know that you can live in this great country and live a good life without debt.

So why is debt okay in America?  Why have we become a culture of debt, where we use debt for everything even when it is debt that causes us such stress?  This was brought to my attention just this weekend in my own family.  My stepchildren and my daughter have been raised in households with debt and without, exposing them to the stress of debt as well as the peace of no debt.  My oldest stepson and his wife have been married for almost three years with one child and one due next month.  Over the course of the last six months, we have observed them making very unwise decisions when it comes to money, but I noticed this weekend that everything they are doing (what I know will cause them stress and financial pain), they are doing just like so many other young couples.  And I keep wondering why?  I say it out loud and it sounds like there has to be a better way, yet they are hearing and believing that it is the best possible solution.

For example, they just bought a new home without selling their old home.  In their defense, the home they were in would not be comfortable for them and two children in the long-term.  However, there was no big hurry to buy a house right away.  They used the interest rates as a justification, but rates have been low for a long time and a month or two would not have changed anything.  Now they are stuck with two mortgages and my son’s commute to work, which was 1 1/2 hours is now 2 hours each way (more gas and more time).  The old house has had a lot of showings, but instead of waiting it out even a week or two, they are feeling pressured to do a lease to own, which is a horrible option and should never be done because of the risk.  They are simply looking at the interest income, not the risk.  And now that they own a bigger home, they (in their minds) needed new furniture which they financed and justified because it was 0% interest (still a monthly payment). Every time they talk about any of this they keep saying “we can afford it”, including the two mortgages.  However, next month, when my daughter-in-law has the new baby, they will be without an income for almost a year.  They are both teachers so their income will basically be cut in half.  In addition to all of this, many times they make comments like “we can’t afford new shoes right now” which means they are strapped for the essentials.

I didn’t share this story to air our family business.  I shared it because my son’s story is so many American’s story.  I wonder right now how many of you are saying “they did what I would do” or have done the same thing they did.  20 years ago, I would have said that too.  What they are doing wouldn’t have even phased me.  It is the American way.  So to answer Dr. Carolyn’s question “Is debt cultural?”, absolutely. But when you look at the American debt culture, do you really want to be a part of it?  Do you want to be just like everyone else, broke, in debt, stressed out about money, not happy in you j-o-b, with no retirement or savings?  Or do you want to do what you know makes sense?  Do you really believe that carrying two mortgages on two normal salaries makes sense?  Do you really believe that being the bank for someone who couldn’t qualify for a typical mortgage makes sense?  Do you really believe that making payments on items such as furniture, appliances, and flooring makes sense?  Do you really believe that having any payments other than one mortgage on one salary with a new baby makes sense?

I love my children and it is that love that makes me want to shake them sometimes.  I really wish I knew why people can’t see stupid decisions, but if we could see them, we probably wouldn’t make as many.  I did stupid for so long, I never want to go back.  I hope everyday that my mess which has become my message will help someone before they go to far.  I challenge you to look at your debt and ask yourself “why do I think that this is okay”?  If the answer is because everyone else is doing it (cultural), then stop. If that is not your answer, I challenge you to look at what your life could look like without debt.  I am willing to bet that at the end you will find peace and less stress.

Let’s start a new culture today - one of cash, buying only what we have the money for, and saving for our futures, which are just around the corner.  Have a blessed week!

Red Flags to Indicate That Your Finances Are In Trouble

Most of what I teach and speak about is from personal experience.  And today’s topic is one of those times.  When we are in the middle of the storm, we are usually too stressed to know what is happening.  We are just trying to stay afloat and not drown.  This describes my financial life from about age 20 to age 30.  I started out in the world after college making decisions that everyone around me were making instead of making wise decisions.  And my boat just kept sinking further and further.

Unfortunately, as many of you know, I actually hit bottom by filing bankruptcy and then swore to myself to never end up there again.  Thus began my journey to financial freedom and what I do today.  One of my biggest goals, always, is to make sure I share knowledge and personal experience in hopes that you can decide to change your financial situation, if you need to, before hitting bottom.

As I look back, just like most bad times in our lives, I can see so many red flags that were there, but I couldn’t see them for the storm.  I want to share with you today some of my red flags in hopes that if you are experiencing any of these that you will decide today to do what you need to do to change your finances immediately. Here we go!

• Stressed out about money or fighting with your spouse – Are you always angry and not sure why?  Are you always fighting with your spouse and not sure why?  Odds are that you are stressed out, in one form or another, about money.  You may not even realize what the problem is.  If your finances are not healthy, it will cause you stress which will show up in every area of your life from kids to your job to dealing with people on a daily basis.
• Have a balance on your credit card – This is known as revolving credit.  Credit cards were originally designed for convenience, before debit/credit cards were available.  The original purpose of a credit card was to use it when you couldn’t use cash and then pay off the bill at the end of the month.  If you cannot pay off your bill every month, you cannot afford what you are buying and are spending money you do not have.  You are not financially healthy if you are spending more than you make and you will never have extra money if you keep this up.
• No emergency fund – If you do not have any emergency fund, you are living your life praying something doesn’t go wrong.  But one day life will happen and if you don’t have money set aside, you will have to use some form of debt (loan from family, pay-day loan, credit card, etc) to cover the emergency.  And all of these forms of debt are really bad and begin a vicious cycle you may never get out of.  Picture a hamster on a wheel.  This could be you.  At the very least, scrape together $1000 – $1500 and put it in a savings account for when life happens.  Make your ultimate goal to have a 6 month emergency fund, but start somewhere.
• Robbing Peter to pay Paul – This simply means you are spending more than you make.  If you have to use a credit card to pay a bill or buy groceries, this means you do not have money for even your basic needs.  Most of us, unless we have a special situation, make enough to provide for basic needs.  So what are you spending your money on that makes you unable to pay your bills with your income.  Use a spending journal (writing down every dime you spend) for a month or two and learn where your money is going.  Once you know and are aware, you can make the changes you need to stop robbing Peter to pay Paul.
• Using overdraft protection even once a month – If you are using your overdraft protection on your checking account even once a month, you are spending money you do not have.  First and foremost, cancel your overdraft protection immediately.  Go to your bank and tell them you want it removed from all of your accounts.  When I did this, my bank said “You realize if you don’t have the money, your transaction won’t go through.”  I replied, “If I am spending money I do not have, I should be told no.”  People are spending $100′s of dollars in fees every month using this crutch.  Remove the crutch.  Only spend money you actually have.  This may mean something has to wait, but so be it.
• If you can only get non-traditional loans and mortgages – I believe, from experience, that no loan is a “good” loan, but if you find yourself in a pickle and the only way out is a non-traditional loan such as a pay-day loan, borrowing from a friend or family member, needing a cosigner for your loan, and paying over the going rate of interest, then you obviously are financially unhealthy and you need to look for another way to solve your problem.  The same goes for mortgages and buying a house.  If the only way you can buy a house is using an interest only loan or a sub prime loan or a loan with a high interest rate, you are not ready to buy a house.  If you think there are only 2 choices to a situation, you are not looking hard enough.  Think outside of the box to find a solution that is healthy and not toxic.
• Having an attitude of “I will take care of it later” – Later always comes and most of the time we are not ready for it when it does.  My best example was with my taxes.  I needed more money per month to spend on my “stuff” so I lowered the amount of taxes being taken out of my check so my check would be bigger.  I thought “I will just take care of it in April.”  Well, April rolled around and I didn’t have the money to take care of it.  And before I knew it, a few years had gone by and I owed them $5000.  You do not want to owe the IRS or anybody for that matter.  If you can’t take care of life today, then your finances are probably unhealthy and need a change.
• Considering bankruptcy – I help people everyday who are considering bankruptcy to find another option and get out of debt on their own. Only about 10-20% of people considering bankruptcy actually have no other choice.  But if bankruptcy is even on your radar, you are financially unhealthy.

I know today’s blog is lengthy, but all of these red flags are very important.  I wish I had known what was happening as it was happening.  Hindsight is always 20/20, but it would be nicer if life was 20/20.  If you have even one of these red flags, decide to get financially healthy today.  If you need help getting started, you can always contact me.  Make 2013 your healthiest year yet.

Can You Be Wealthy?

Yes.

It is that simple, yet if it is that simple why aren’t we?  We all are born with the ability to obtain wealth, but most of us don’t.  You may be saying “Debbi, you don’t know me, I was born into poverty.  I do not have the ability to be wealthy.”  But that is not true.  We all have the ability to be wealthy, but most of us choose not to.  You can have $1.7 million at retirement just by investing $100 per month from age 25 to age 65.  We all can do this, so why don’t we.

Reason 1:  We don’t believe we can

If you don’t believe you can be wealthy, you won’t be.  You will not make financial decisions that will cause you to keep some of what you earn and invest it in your future.  If you believe more in your circumstances than in yourself, you will never see wealth.

Reason 2:  We don’t know how

Many of us are victims of our circumstances and we actually do not have the knowledge we need to become wealthy.  I didn’t know about the $100 a month thing until age 35.  If you want to be wealthy, gain knowledge and learn from wealthy people.  Not people pretending to be wealthy, but actual wealthy people.  You will be very surprised at what you learn and what it takes to be wealthy.

Reason 3:  We don’t know what wealthy is

Many of us believe that wealthy is a magic number and the number seems so far away, we believe we will never get there on our income.  But wealthy can be as simple as being able to do what you need or want to do, financially, when you need or want to.  This includes being able to retire when you are ready and live comfortably.

Reason 4:  We mortgage our future for “stuff”

You may think that the reason you are not wealthy is because you don’t make enough money.  But it is probably more about what you do with what you make than the actual number.  You can make $100,000 per year and spend $99,000 and never be wealthy.  But you can also make $35,000 per year and spend $25,000 and be wealthy.  You may not be on your way to wealthy because of the house you live in or the car you drive or even the clothes you wear.

Can you be wealthy?  Yes, you can, no matter who you are or what financial situation you were born in to.  Decide what wealthy would look like for you personally, decide what you need to change in order to reach this goal, and do it.  You can be wealthy.  Start today!

2013 – Your Year

Every January 1st, the calendar brings us a new year.  Many people use this date as a mark for a fresh start.  In reality, every minute is a new opportunity for a fresh start.  How many of you made New Year’s resolutions and today, 7 days later, have given up on them?  If so, do you think that you now have to wait until January 1, 2014 to make new resolutions (goals)?

This is simply not the case.  New Year’s resolutions (a.k.a. goals) should be ongoing and all year around.  And if you set a resolution and “fail” at it, you should keep trying until you get it right or adjust it, if need be.  You should always have immediate goals, short-term goals and long-term goals written out as a daily part of life.  And if you “fail” at a goal, simply start over, right then and there.  You do not have to wait until January 1st.

Here is an example.  A very common New Year’s resolution is to get out of debt.  So during January you pay a little extra on your debts, but then something happens and in February you just can’t come up with any extra.  Or maybe you have trouble coming up with extra in January.  Does this mean you are a failure?  Does this mean you have to wait until January 1, 2014 to begin to get out of debt?  Absolutely not.  Maybe you need to adjust your resolution (goal) to also include budgeting in order to find more money per month to put toward your debt.  Or maybe you just need to try again each month until you have extra to put towards your debt.  Or maybe you need to take a closer look at your personal finances in order to determine a plan for getting out of debt.  There are many options when you “fail” other than giving up.

A major key to helping you to make and keep your resolutions is to make sure that your resolutions are specific, have a plan, and are realistic.  You don’t simply say you want to get out of debt.  You need to decide how much you want to put toward your debt for the year and make it realistic.  Don’t say you want to pay off $10,000 in debt if all you have left over every month is $100.  But don’t set your goal at $500 either.  Maybe set a goal of $2000 and challenge yourself to make changes and reach your goal.

I want 2013 to be your year!  I want you to have the most financial success in 2013 that you have ever had.  I want you to write a best-selling story for 2013 in all areas of your life.  You are the author of your own story.  What happens in 2013 is up to you.  So set your resolutions (goals) and never give up.

Doing nothing will never move you forward!

Happy 2013!