I have a love hate relationship with insurance. It’s one of those things that you hate to have but love when you actually need it. Still you hope that you never have to use it which creates this love – hate relationship which leaves you feeling like you’re just throwing away money hoping that something doesn’t happen that requires you to use it.

These are the types of insurances policies that you absolutely need if you…

Own A Car: Auto Insurance

Drive to <insert destination here>?  Then you need auto insurance and there’s no way to get around it since all states mandate that you have it.  For most people, not being able to drive a car means not being able to earn a living.  Furthermore, should you get into an accident, then you’ll need auto insurance to cover your liability, medical expenses or other damages related to the accident.  Check out how to save money on auto insurance here.

Rent A Home: Rental Insurance

Many renters overlook this policy since it’s cheap and never think anything will actually happen to their property.  Just like homeowners a policy to cover their property, renters need this to cover theirs.  You may be thinking that if something happens to your property in your apartment or rental home that your landlord’s policy will cover it.  Not a chance.  The landlord’s insurance typically covers the physical properties of the home but not your personal belongings within the property itself.

Luckily, rental insurance is pretty cheap and can start as low as $10-$20 per month.

Own A Home: Homeowners Insurance

Like rental insurance, this policy is a must have if you own a home.  In fact, this is mandatory when you a home so this is not optional like rental insurance.  Think about it, if every appliance in your home stopped working, would you have the money to to fix all of them?  Or what if your home was damaged due to vandalism or some other issues that warranted laying out a wad of cash to make repairs?  This is where homeowners insurance comes in to play.  Homeowners insurance will pay for the repairs, a new place to live – temporarily, long term or if necessary, replacing the home itself.

Get Sick: Health Insurance

Without the proper medical insurance, you might as well be one fat medical bill away from declaring bankruptcy.  If you have an ongoing medical condition that requires the consistent care and oversight of a doctor, then you’ve probably seen the bills whether or not you have health insurance.  Even if you’re in pretty good health, changes are due to an accident or other health issue, you’ll need to see the doctor.  At the very least, get a policy that covers major medical issues to avoid a large bill at the end of your treatment.

Optional But Recommended Insurance Policies

Long Term Care Insurance

Many of us aren’t thinking about actually needing this type of policy but it’s best to think about it now rather than down the line when you need it.  Should you need long term care in a nursing home or hospice in your golden years then you’ll need this type of coverage to avoid draining your retirement fund or nest egg.  This policy allows you to maintain a peace of mind about this expense that you hope never to use but will be thankful that you do should you need it.

Disability Insurance

You probably have this insurance policy through your employer, but it is a good idea to check with HR to make sure that it is actually in force.  Make certain to find out how much it covers and if it does not cover 100% of your salary then you’ll need to purchase a supplemental disability policy.  Maybe you’re thinking that your emergency fund can cover an incident should you need it.  Have you factored in how long you might be out from work?  The accompanying portions of the medical bills that will be your responsibility? It’s better to cover those possibilities especially if you are the breadwinner to avoid depleting your emergency fund trying to keep up with the related expenses.  This type of policy is typically more expensive to obtain but well worth it should you ever need it.

Compare policies and be certain that you ask the right questions around the types of disabilities that are covered, waiting periods, premiums etc.

Ultimately you need to weigh which insurance policy is right for you and your situation.  In the end, if the situations apply, not owning one could cost you more in the long run and it’s better to be safe than sorry.

Do you own every policy on this list?  If no, why not? 

We’re now on Day 4 of Rock Your Finances.  If you’ve missed the previous articles in this series, you can catch up here:

1. Created A 1 Year Financial Plan
2. Identified Your Financial Weaknesses
3. Learned How To Track Every Penny 

Today’s task is pretty short and sweet but results in a huge payoff in that you avoid late fees and service interruptions.

The customary advice is to get a calendar, list your due dates and as you go throughout the month you then make arrangements to pay that bill.  I tend to think this method is outdated because with everything going on in your life, you now have to remember to review the calendar every day for every bill that needs to be paid?  That sounds tiresome just thinking about it!

Forget Conventional Wisdom

We’re in the new millennium with Bill Pay, automatic drafts or whatever automated method your bank or servicer may offer.   Whatever works for you, pick one and stick with it.  I  tend to prefer Bill Pay since I have control over when the money is actually removed from my account.  If for any reason I need to change the amount or pay date then I can log on and do just that.

Another benefit is if there is ever a dispute around if and when something was paid, then I have a copy of the check (online) that was cashed.  Finally, there’s little temptation knowing that the money is accounted for and not left idle until you get ready to pay the bill.

On the other hand, if you prefer to have the company draft the money directly from your account on a monthly basis then call and make the arrangements over the phone.

Lead Yourself Away From Temptation

Paying your bills as they become due leaves you open to temptation or simply forgetting to do so due to day to day stuff.  Once you set up your system to pay your bills automatically, make sure to review them once a month during your monthly finance review which we will discuss later in this series.

So there you have it, set it and forget it!  Throw away your calendar, and make everything automatic so that you can worry about more time intensive issues like reviewing all income streams which is the next article in our series.

Please share how you make sure your bills are paid on time below.  Do you use a calendar or do you make it automatic?

We’re now on Day 3 of Rock Your Finances.  By now you should have

1. Created A 1 Year Financial Plan
2. Identified Your Financial Weaknesses

Today we’ll be discussing how to track every penny that comes in and out of your account.  This is the only way that you’ll gain some insight on where your money has been and what it’s been up to.  What’s even better is that you’ll see how your spending habits have caused you to miss out on saving more or paying down debt.

Track Every Penny.  Every Dollar Has A Job

Yodlee or Mint

My favorite way to do this is to aggregate all of my financial accounts into Yodlee or Mint.  Once everything has been uploaded, I’m able to see all of my income and expenses broken down in a pie chart with each section containing the related expenses.  Here’s a breakdown from Moneycrashers:

Creating a Yodlee account is extremely simple and straightforward. You will need to select a user name and password, answer a few personal questions for security purposes, and you’re off!

 

Yodlee MoneyCenter allows you to upload accounts of any and every variety: checking, savings, investments, loans, 401k, pensions, credit cards, and any other account type you may have. You will need to enter your previously-existing online user name and password at each institution to properly add those accounts to your Yodlee account. As long as you can access your information online, you should have no issue adding your existing accounts.

 

Budgeting Tools
The budgeting tools at Yodlee include a monthly budget goal tracker where you can see how much you spend in different categories and set up long-term financial goals for those budget categories. There’s also a specific goal savings tool, a cash flow analysis, and a credit card utilization chart. If all of these are used in conjunction with one another, they add up to one heck of a budget tracking program.

With all of this information at your disposal for free, you should have no reason to avoid putting your finances in order any longer.

Spreadsheets Are Your Friend

If you’d prefer a spreadsheet there are several out there that will enable you to do this, however you’ll need to track your spending closely with this method.   I have friends that truly track every penny using a spreadsheet so it can be done.  Here are a few of my favorites:

In Donnie’s post, Budgeting with Google Docs, I found this awesome and well designed spreadsheet which breaks everything down by pay period.  The best part about this spreadsheet is that it calculates what’s left over as you load your expenses.  This is key information for those who need to know how much money they can blow once all bills are paid.  This helps you avoid nasty bank overdraft fees or that embarrassing trip to the restaurant where the waiter returns your card because it’s been declined.

Grab a copy here!

Myexceltemplates.com created this personal bi-weekly budget template lets you keep track of your bi-weekly income and expense according to your pay schedule.  I personally use a hacked version of this spreadsheet in addition to Yodlee which helps me track all expenses, income and any monies left over without a job or purpose.

Budgets Are Sexy, as always has a great resource of several budgeting templates, one of which I’m sure will suit your needs:

“Financial Snapshot & Budget” @ Budgets Are Sexy
Google Doc | Excel | Example (filled in) | More details

A colorful and easy way to track your budget and overall Financial Snapshot! Room to budget per paycheck, detail your net worth (if you want), credit card balances, savings funds, total income, and an extra budget just in case.

What’s Next?

Once you’ve reviewed the options above, set aside some time today to load your income and expenses over the last 30 days.

1. Choose a month that doesn’t have random expenses as with Thanksgiving or Christmas (extra high grocery bills anyone?  Christmas gifts much?).
2. Review the transactions and categorize them accordingly
3. Review your splurges and think about how best to use that money during the next pay period
4. Set up your budget within realistic limits and expectations.  If you’ve been spending $600 per month eating out then you may need to ramp that down to $300 this month and then $150 next month.  Going cold turkey rarely teaches discipline.

Be patient during this process.  It’ll be challenging to look at where your money has been over the last few months but you’ll have a sense of relief because now you know better and you can start all over now.

What’s your favorite budgeting tool?  Spreadsheets or an account aggregation system?

Today we continue our series: 21 Days To Rock Your Finances with identifying your financial weaknesses.  This is day 2 of our series – Did you create your financial plan?  If so, then let’s move on to identifying your financial weaknesses.  Think of creating your financial plan and identifying your financial weaknesses as laying the groundwork for the tasks later in this series.  You wouldn’t jump into the deep end of a pool before taking swim lessons right?  Same rule applies here.

What prevents you from achieving your financial goals?

Success doesn’t have to mean paying off all of your debt in one year. It can simply mean taking baby steps to reduce the amount of money you send eating out. Avoiding trips to Target. Reducing mindless shopping habits which only further the raging spending addiction preventing you from seeing into the financial promised land. Those are all my Achilles’ heels, by the way.

What Or Who Gets In the Way?

Where do you most regret the money you spend? My pastor often says a man’s heart is where he spends his money (Luke 12:34). This rings true for me. When reviewing monthly transactions, I often saw where my money was going, as painful as it was to look at plainly in front of me. I kept saying to my self, “I spent what?!” There was a time when visiting Amazon.com and Target meant spending loads of money that I had no business spending.

Other financial transgressions meant spending more than I care to share eating out for no other reason than not wanting to cook that evening or choosing to eat instead of addressing how I was really feeling about a situation that upset me. The question I’d often asking myself is, “How did this help me towards my goals?” It didn’t help, as I had nothing to show for it but an empty plate or an item that I’d soon forget about once it arrived on my doorstep.

One day it all clicked.

This has taken some time. I’ve been writing my blog about money for a few years now. I finally connected how destructive my spending habits were in relation to my stated financial goals. I was sabotaging myself without really understanding why.

Everything changes with a decision

The same pastor I mentioned above also speaks about how many of the changes we need to make in life start with a decision, one decision to change the behavior and continuing to make that decision to stick with it. This might not — and often doesn’t — feel good, but if we’re to get to where we need to be then yes, it’s necessary.

Divorce yourself from your emotions

The pastor then goes on to tell us about the need to divorce ourselves from our emotions. And again, this rang true for me because shopping was almost like an addiction. I wasn’t shopping for clothes but more so for little things I needed, but if you know Amazon.com, you know it racks up! If I felt the desire to go out and buy something, I did so with no real thought about the connection between the purchase and my goal. I just knew that by buying this this item, it filled some unmet need within me.

In psychology, we talk about food and substance abuse addictions in the same way. The same rings true here, when sabotaging success for a momentary feeling of pleasure or fulfillment that never lasts.

It’s taken me some time to just decide not to visit Amazon.com. That was a huge victory for me since it’s just so convenient. I work a considerable distance from my home so I don’t really have the time go into stores, plus I don’t like shopping on the ground. Amazon Prime makes this really easy for me. If I order by noon, I will usually get my purchase by the next day. The cost? $3.99, or free if I choose the two-day option. As you can see this can get out of hand if you’re not careful. Now I add things to my cart and they stay there for weeks before making the purchase. My rule is to wait at least two weeks after adding something to the cart, and if I forget about it, I don’t need it.

Target is another beast. I won’t speculate about product placement marketing tactics in the store, because whatever they do in there works! I go in, and it never fails that I come out with way more than I need. As a result, I just don’t go there unless I absolutely have to, and these days my trips there are few and far between.

Has it been hard? Yep! But am I getting closer to my goal? Yes, and that feels even better.

Identifying these weaknesses will take introspection and honesty while making some hard decisions about how to change your spending habits. Deciding to take this on will be difficult but the results are worth it in the end.

To recap:

• Identify your “heart,” where you spend most of your money.
• Decide to change your heart from reckless spending to whatever financial goal you have in mind.
• Engage in serious introspection about why you spend the way you do. Are there other psychological needs that spending temporarily meets?
• Divorce yourself from the emotions which enable you to rationalize and accept destructive spending habits.

What are your financial weaknesses and how do you plan to tame it?

It’s a new year and we all have resolutions!  If you’re reading this blog, the it’s safe to guess that you have a few financial resolutions that you’d like to tackle this year.  Well, how about we take a look at tackling them in 21 days?  In this series, we’ll be giving you tips on how to rock your finances in 21 days. These include saving more, spending less and reducing debt just to name a few of the topics we’ll be covering.

The first 2 posts will address laying the groundwork for the rest of the tasks in this series.  Think of is as a warm up before bootcamp!

Today we start with creating a 1 year financial plan.  Creating a financial plan isn’t as hard as it sounds, though it may be difficult to see where you’ll be 1 year from now.  However, that’s exactly why we included this exercise.  Part of rocking your finances is being able to lay out and visualize where you’ll be in 1 year, 5 years and eventually 10 years.  Without the vision to direct your path, there’s no point in getting on the path to financial freedom.  Every path leading anywhere does just that, leads you somewhere.  Thus, this highlights the need for a financial plan.

Let’s get started.

What Are Your Goals?

Get Out Of Debt?

Save More?

Spend Less?

Get a notebook and list them.  Also, you can scroll down for a template which helps you do exactly what we ask here.

Create SMART Goals for Every Financial Goal

Now that we know about your goals, how will you get there?  For every financial goal you have, you’ll need to apply SMART goals.  Smart goals are: Specific, Measurable, Achievable, Realistic and Time Sensitive

MoneyManagement.org writes:

• S – Specific – What is the exact result you want to achieve? Be as specific as possible. Goals like “I want to make more money” sound nice but are really vague. By answering specifically how much money you want to make, you can be more detailed when setting your goal. For example, you could say, “I want to make $10,000 in the next 6 months.” That is a very specific, detailed goal.

 

• M – Measurable – What is a successful result? How will you know that you’ve reached your goal? When setting financial goals, measuring it should be relatively simple because there is generally a number associated with the goal. When there is some kind of number attached to it, you have something you can measure. You can track how you’re doing.

 

• A – Achievable – I’m all for dreaming big, but you have to ask yourself if your goal is realistic. “I want to be the first Jr. High student to play in the NBA” – sounds good; it’s even measurable and specific, but I don’t know how achievable it is. You have to balance between pushing yourself to accomplish a challenging goal but also making it realistic.

 

• R – Realistic-We edited this to reflect realistic instead of rewarding.  By default all goals are rewarding but for our purposes, it is more important to be realistic.  A realistic goal is one that will stretch you but not impossible. Completely cutting out all entertainment and eating out isn’t realistic for most.  But starting my reducing the amount of money spent in this area is more realistic.

 

• T – Trackable – What is your cut-off date for achieving this goal? There should be a set finish line, so you are pushing yourself to achieve your goal. Without a timeline for accomplishing the goal, it is very easy to get off track, and you just get to it when you get to it. A goal without a deadline is just a wish.

 

Next, we’ll write it down and make the vision plain!

Check out this template from David Bach which should give you more of a visual of what the plan should look like:

Take some time to create this plan before you move forward to the next step.  The next article in this series will cover:   tracking ever dollar that comes into your possession.  You’ll be surprised where they’ve been and what they’ve been up to!

The new year is around the corner and we’re all thinking about how to make better decisions so that we come out of top financially.  Take a look at the list below and incorporate a few, if not all into your daily financial life.  Commit to being a better steward of your finances and you will certainly reap the benefits.

1. Create Your Financial Plan  and spend some time each week developing and reviewing your plan to make it happen.  With every financial transaction, top of mind should be “how does this fit in with my financial goals?”.
2. Daily: Take 10 minutes to review your main accounts.  Make certain that all charges are accurate and review any purchases you may regret later.
3. Weekly:  Review all transactions to help you stay on track with your financial goals
4. Monthly:  Review your accounts to make sure that all bills were paid on time or are scheduled to be paid.  If the funds aren’t there then call the institution to alert them of an expected payment date or work out a payment plan
5. Quarterly:  When creating your financial plan, create milestones that benchmark your progress.  For example,  If your plan is to pay off $10,000 in 12 months then by month 3, you should have $2500 paid off.  If that doesn’t happen then it’s time to readjust the plan and move the goal or play catch up.
6. Write down your financial goals.  SMART Goals are the best way to orchestrate success in this area.
7. Set your finances on autopilot.  Set up every recurring expense using Bill Pay or via ACH draft.
8. Create a goal statement:  My intention is to ________________ in order to achieve financial freedom
9. Spend less than you earn
10. Save 20% of income for savings and retirement
11. Pay down non-mortgage debt to less than 15% of income
12. Think long term and spend time in fruitful investments for the future, for example: start a business
13. Read at least 1 personal finance book every month.  Keep abreast of emerging financial issues that impact your life.
14. Be mindful of emotional spending.  Shopping when you’re sad, mad or depressed often leads to purchases you’ll regret later.  Address the core issues, as emotional spending only slaps a temporary cover-up on the problem.
15. Spend more time with others who are where you want to be financially.  Doing this helps you compare and contrast how you operate with money in comparison to them while helping you make changes along the way.  As my pastor likes to say, seek those who have your solution and get away from those who have your problem.
16. Everyday, day dream and feel what it will be like when you reach your financial goals: debt free, 6-12 months of emergency fund savings-whatever it is-dream about it, talk about, write about it and make it happen.
17. Buy things that will last longer than it takes to finance them.  If you finance a TV (you really shouldn’t!), then it should last longer than the time it takes to pay it off.  This goes for anything, whatever you buy should still be useful 6 months from now.
18. Give back.  This can be with your time or money.  Spend time time giving back to others less fortunate than yourself.
19. De-clutter your finances.  What are some things that you’re paying for (magazine subscriptions, extra trips to the makeup counter, techie gadget impulse buys) that leech money you really need to hit your financial goals.
20. Spend time in the future.  Leave financial regrets in the past as they took place in order to teach you lessons for the future.
21. Financial problems teach you the life skill of problem solving.  If you can dig yourself out of financial ruin, then you’ll be surprised as how you face life’s other challenges.
22. Research account aggregation tools and commit to monitoring your money on a consistent basis.
23. Every dollar in your budget needs a job.  None should be idle and without purpose.
24. The coming financial year won’t be perfect.  But commit to learning from your mistakes to avoid making them again.
25. With financial freedom comes peace of mind.  Work towards this and see how everything else in your life falls into place.  Money problems are often the root of other difficulties in life including health and relationships with others.
26. Don’t compare your financial situation to others who are in a better position than you are.  Remember, like you they had to work to get where they are and if you take anything from their situation, it is that you can one day be financially free yourself.
27. Find peace with your financial past.  You may have had some situations that put you in a financial hole but the best part is as long as you’re alive today, you have another chance to make things right.
28. Make some hard decisions about your spending habits.  How will you Tame Your Achilles Heel?  The more insight you have into this area, the better decisions you’ll make.
29. Find ways to earn more money.  Developing multiple streams of income is key to financial freedom.
30. Your friends won’t bail you out of financial ruin if you continue to make bad decisions.  If spending money on happy hours, eating out and partying on the weekend take you away from your intended financial goals then it’s time to reassess how you spend your money and time.
31. Do the right thing!  Avoid “because I deserve it” and “I’m stressed and need retail therapy” purchases.  You’ll almost always regret them and they do nothing to fix the core issues.
32. Enjoy this time in your life.  There are many life lessons to be learned.  Spend this time not only about creating a budget but how you got here and the plan to move forward and not fall back.
33. Sell anything that you haven’t touched in 6-8 months and pay down debt or plug into savings.
34. Discuss your financial plans for the coming year with your partner or spouse.    Make sure you are both on board with goals and how you will address setbacks.  Commit to reviewing goals weekly, monthly and quarterly.
35. Start having weekly “family meetings” with each other (couples) and monthly with your children.  Part of these meetings will address family finances which discuss spending habits and financial goals.
36. Teach your children about the benefits of entrepreneurship.  Instead of another Elmo, PS3 or XBox, give them a gumball machine that they will own and operate.  This teaches them the inner workings of how a business is run while learning the world of business at a young age.
37. Give children gifts that will last long past the next birthday: create a college fund or add money to a college fund

What are some tips you have for leading a healthier financial life?

It’s that time of year again and we’re in the mindset where we begin to think about the things we’d like to do better next year.   Financial resolutions are often high on the list with much “spend less, save more” promises that never seem to quite make it past Valentines Day.

Plan For The Future

Create A Financial Plan:  Getting started with improving your finances requires first developing a plan for success.  A financial plan is the foundation upon which all your plans exist.  Without this plan, it’s impossible to have goal directed success as it relates to your finances.  This helps you decide whether that purchase you’re about to make coincides with your values and goals.  So in essence, it becomes the compass that helps you get to your wealthy destination.

Action:  Use this financial plan template to get started.  Fill it out as directed and then use it to guide your plans for the new year and beyond.

Budgeting

Develop a budget or spending plan that actually works for you based on where you are right now.  Don’t go cold turkey if you know that won’t work for you.  Instead, try reducing your spending in critical areas slowly until it “feels right”.  One mistake we often make us cutting these out cold turkey which actually backfires down the road.  Unless you have really good discipline, slowly but surely wins this race.

Action:  Get started here!  Need a budget template?  Check these awesome budgeting templates from Budgets Are Sexy.

• Take a look at your spending over the last 3-6 months by aggregating your accounts into Yodlee
• Check where you’ve fallen short, for example spending $500 on happy hours and eating out which leads to your account being overdrawn, well you might want to start there.
• Decide how much you need to cut back in each category.  Start off with $250 for the above-mentioned example.
• Create a new budget based on the template you select here.
• Use the next 2 weeks to test drive your budget.  Review your spending weekly to determine where you need to tweak things a bit.  This is an ongoing process, but as you go along, it gets easier.

Get Your Credit In Check

Check your Credit for errors, collections, judgements, late payments and possible liens.  If necessary, start the credit repair process in order to remove derogatory items.  Sign up for a credit monitoring service that will allow you to consistently and actively manage your credit so that you aren’t blindsided when applying for new credit down the road.

Develop a plan to begin the credit repair process

Decide which debts you will pay off and what other accounts need negotiation around a new payment plan for settlement or removing late payments in exchange for paying off the whole balance.  Tip:  If the account has already reported on your credit report, call when you have enough to pay half, more than half or the whole balance.  This way you have leverage and better able to negotiate removal of the derogatory information.  This agreement must be given to you in writing.

Action:

• Check your credit report.  There’s always a section which lists your creditor’s contact information.  Call them to discuss the account and what possible remedies are available to you.
• For the accounts that you have decided to pay off.  Check out these debt reduction strategies and see which one works for you.  The debt snowball method tends to be the most popular but it may not work or be appropriate for every situation.

Schedule Time With Your Money

Set up a time to review the above-mentioned tasks every week.  Staying on top of these issues develops a habit that you’ll need in order to cultivate financial discipline.

What are your financial resolutions for next year?  How have you fallen short this year and how to you plan to change things next year?

With the new year upon us in a few weeks, you may be thinking about jump starting your finances.  This is pretty common as people tend to engage in a review of their financial life around this time of year in an effort to make resolutions.

Your financial plan may be one of those elusive resolutions and you may be even thinking, “5 years is too long for me to “plan” but in reality it isn’t.  We aren’t addressing what to do when you reach retirement or any other really long term goal.  Think of 5 years as the standard.

Check out the following tips on how to create a financial plan you can stick with!

Create A Foundation:  Discover Your Values

What are your financial values?  Do you want to get out or stay out of debt?  Would you like to travel more or start/ramp up a hobby?  Own a home?  Start a business?  Answering and incorporating these into your financial plan will help you set up a foundation which guides your plan through the end.

Develop A Few Concrete Financial Goals

SMART goals apply here.  Specific, Measurable, Achievable, Realistic and Time Specific.

SMART Goals Overview

Specific

• Start off by being specific in your goal. Clearly define what you are going to do. Include the what, why and how.

Measurable

• You must be able to measure your goal in order to manage it. I will pay an extra $200 towards my credit card is better than I want to be debt free.

Attainable

• Your goal must be attainable, although it should stretch you to reach the goal. You can’t possibly pay down $19,000 in debt when you only earn $15,000 for the year.

Realistic

• A realistic goal is one that will stretch you but not impossible. Completely cutting out all entertainment and eating out isn’t realistic for most.  But starting my reducing the amount of money spent in this area is more realistic.

Timely

• A timely goal will give you a clear target to work towards. You may choose a week, a month, a year, just make sure that the time is realistic.

Save $1000-$5000 for an emergency fund. 

This is only to be used in emergencies and may vary depending on your lifestyle and needs.  So it’s OK if you need to save more like $2500.  If you have a larger family and expenses, then $5000 may be a more comfortable number for your situation.

Pay Down Debt, Avoid Digging Deeper In Debt and Save for 1 Month’s Living Expenses

Check out these debt reduction strategies and see which one works for you.  The debt snowball method tends to be the most popular but it may not work or be appropriate for every situation.

Save towards 6 months of living expenses

Once your debt has been paid off, work towards saving 6 months of living expenses.  Most “personal finance experts” recommend a minimum of 3 but given the economic factors, let’s go with 6.

Start Investing In Long Term Goals

This can include retirement, college education, owning a home or anything that warrants a longer term investment of time and money.  One thing to note which goes against Dave Ramsey’s advice in this area, put your retirement ahead of your child’s college fund.  Check out the following compelling reasons from Christian Personal Finance:

1. You have only one chance to fund your retirement.
2. You will force your children to set their own priorities.
3. Success is not guaranteed by a piece of paper.
4. Your child might not graduate.
5. Your child may need to support you in your senior years.

 

Think hard about whether or not it will be a worthy endeavor to save for your child’s college education.

Create a will

Make certain that you create a will so that your affairs are in order upon your passing.  This is a topic no one really wants to visit until it is too late but doing this now will put your mind at ease.

Check out this template from David Bach which should give you more of a visual of what the plan should look like:

(click to enlarge)

My personal financial plan:

• Become debt-free with the exception of a mortgage and student loans.  Both are pretty large and unless I hit the lottery then, I’m stuck.
• Save for a $60,000 emergency fund.
• Work towards at least $100k in retirement savings which I am behind on due to debt
• Reduce my expenses to the minimum, just above bare minimum.  I still want to travel and enjoy life, but there are a lot of extras right now I can stand to do without that don’t necessarily enrich my life.  I’d like to spend money in more meaningful areas of  my life that will create lasting memories.

Have you created a financial plan?  If not, what has stopped you from creating one?   If you do have one, what are the values and goals that drive your financial plan?

With the threat of a double dip recession on the horizon I’ve had many friends ask how to function in a financially efficient manner due to the recent loss of a job.  I often refer to this as “Safe Mode”.  The Windows PC types probably know this as the moment your computer may crash so it operate using only the essentials.

This should be your goal if you recently lost or are about to lose a job with nary an emergency fund in site.

First you should have a family meeting to get on the same page about the following cuts that will need to be made.  Don’t come up with a plan and put it in place without helping each member of your family understand the rationale.  This helps to ease the shock while engendering a team spirit about how you will get through this together.  If you’re single, skip this part.

Downsizing:  Different Strokes for Different Folks

What you do in this area depends on if you’re single, married and if married, how many children you have.  If you’re single and currently renting an apartment then downsize to renting a room, getting a roommate or even a studio.  This may also work if you’re a couple with no children.

If you have young children then you may want to downsize to where the children share a room in a 2BR or they share a space in a 1BR.

If you have older children then they may need to share a bedroom with you, the parent or share a space in the living room/dining room areas.

And, before you write and tell me how your kids need space to run and play, don’t.  We’re discussing the need to stay above the recession tide and your kids having a space to run and play in the house isn’t  priority at this stage in the game.  This especially applies if you have very young children.  They do not need their own bedroom. This isn’t about keeping up appearances to your children or family.  This is about saving money and being able to literally keep food on the table.This is often a very uncomfortable reality for many but the sooner you embrace it the sooner you will move past it and understand that this is only temporary.

Finding Work

If you don’t have a FT job, you can get a job at a supermarket, library, fast food place etc.  I often get the screw face when I tell folks this as if the money isn’t just as green.  Get over it.  While in grad school I walked dogs for a living and went on several mystery shopping trips during the week because I wanted to have my own money coming into our household.  Right now, no job is beneath you unless it is just morally unacceptable.

Until you get back on your feet, get in where you fit in.  Walk dogs, pick up trash, do someone’s laundry, babysit, start a business – there are endless options for bringing in money.  Many people are out of work and your perfect job may not be there right now.  Until then, take what you can get and rebuild little by little.

What Should I Cut From My Budget?

This will largely depend on your streams of income.  How much, how often etc etc

• Eating out-You should under no circumstances be eating out if you’ve lost your job and have no income coming into your hands.  Eating out would be a no no as you should be sticking to eating at home on a low budget.  Try Aldi as a great alternative to high priced supermarket brands:
• Food budget basics include:
• Water
• Lemons/Lime (flavor the water or lemonade)
• Rice
• Canned food: soups, beans, peas, veggies etc
• Pasta: Ramen Noodles, regular pasta
• Bread
• Chicken
• Ground turkey (very versatile)
• No red meat, too expensive
• Hair salon-Do I really need to explain this?  Get a hair dryer and your favorite shampoo/conditioner and make it work!  Youtube gurus offer up a lot of advice around how to style your hair sans salon visit.
• Cell phone-This is tricky.  My advice here is if you have a laptop and regular access to WIFI (local library, Panera Bread, McDonalds) then you don’t need a cell phone.  With the advent of Google Voice and Skype, you can easily make phone calls to prospective employers.  If you have to have a cell phone then Safe Link may be an option as this is available to those who are already in Food Stamps or Medicaid.
• Car-I would give this up if you live in a fairly “metro-friendly” area.  If you have access to buses and subways then give up the car.  There’s expenses like gas, insurance, repairs and/or a car note that you don’t absolutely need right now.  Sell it and relieve yourself of the monthly expense.  Opt for a bike share or using a service like ZipCar when necessary.
• Makeup/Hair Supplies-You’d be surprised what you can go without when you’re dead broke.  I know some of you must have your make up and hair but I won’t tell you yes on this one.  Mascara, eyeliner and lip gloss sure.  But a full run at the Mac counter?  Nope.
• Health care-If you need to go to the doctor and can’t afford health insurance, a federally funded health center is a great option.  This is often missed when discussing alternatives to health insurance so take a look here:
• You pay what you can afford, based on your income. Health centers provide
  1. checkups when you’re well
  2. treatment when you’re sick
  3. complete care when you’re pregnant
  4. immunizations and checkups for your children
  5. dental care and prescription drugs for your family
  6. mental health and substance abuse care if you need it

Cut Everything, But Need Help Making Ends Meet?

Check with your local social service agency and related nonprofits in your area.  There’s a program called TANF-Temporary (cash) Assistance for Needy Families which gives cash assistance to families with children based on income. Check your state for income guidelines.

There are other food banks like ShareDC.org which gives families 2 bags of groceries for $23 or free if you volunteer for 2-4 hours with their organization.

Check with local clergy for cash and food assistance.  They can also be a good source for referrals in the area around social service needs.

Check your budget to determine what you may be hiding.  Often times we gloss over things we would never dare cut but when we’re operating in emergency mode, those budget items need a 2nd look.

Credit?  Should I Pay Creditors

If you can afford to do so, yes, pay the very minimums to save your credit.  Call your creditors and explain your situation and they may be able to work out a plan with you.  If you can get on the disability payments which pay your premium if you lose your job then do so. Ask your creditor if this is available before you tell them you can’t pay.  Get on that plan, usually pennies ($1.67?) per month which they add to your balance.

However, if you have to choose between eating/shelter and paying a bank, then I choose eating and shelter.  The bank will be fine until you get back on your feet.

This is a scary time for many people due to the sputtering economy.  It’s time to buckle down and spend only what is absolutely necessary.  Take a look at your budget and determine what is critically essential to your well being.  That would be food, shelter and access to health care should you need it.

How do you/would you function when in safe mode?  What would you cut?  What would you keep?

As of December 31, 2009, 2009 will be the year that was, not what 2010 will be.  I’ve gotten so many messages from readers pouring out their hearts about how horrible 2009 was partnered with the insecurity of what 2010 will bring.

STOP!

Stop being sad/angry/mad/ about what 2009 wasnt and make plans for what 2010 will be.

I know that 2009 sucked majorly for some of you, and it was probably your worst year ever on record in your short live but do not make that the blue print for 2010.

Jobs were lost.

Families torn apart.

Business deals went sour.

Businesses went belly up.

Banks….well..some died.

Michael Jackson died (the news of his death almost shut down Google)

Hope was lost and the possibility that life could get any better seems grim.  Just remember that even at your lowest point in life, the only place to go is up.  I don’t know the specifics of your situation but in the spirit of the holidays, be thankful you’re able to be in a place where you have the opportunity to receive this messages and chart your plan to start over in 2010.

You have that much.

An opportunity to start over.  So what will you do with it?

Find a job?  Develop a better work ethic?  Go back to school?  Be a better partner? Mother?  Father?

Whatever it is, just do it.

Make your move and get through it, 2010 is upon us and it’s surely NOT waiting for you to stop moping around the house.

PS-I totally realize that this isnt your typical personal finance article but I felt like sharing this with you guys today.

Remember…….one stiletto at a time.

So what are your financial plans for 2010?  I fell way off the marker but it was also my best year financially so for that I am thankful.