By Stephanie A. Walker Stradford and Eric Stradford
September 13, 2013 – AMWS - Since 2009, we have been on a quest to improve our finances and empower others to do the same. Most of us come from hard working parents or grandparents who lived from paycheck to paycheck.
Most of us desire the American Dream (or at least what it used to be) for ourselves, our children and grandchildren. But, too many of us are set in our ways and refuse to CHANGE our habits to make a difference in our life and, therefore, those we love. Get real! If you keep doing the same thing over and over, you will continue to get the same results.
Regardless of your circumstances, here are a few tips that will change your future. Just try it for one year. If it doesn’t improve your life, stop.
ADDICTIONS – If you have a negative habit which has turned into an addiction, whether it is abuse, bullying, smoking, alcohol, drugs, pornography, prostitution, or worse, GET HELP TODAY! It has cost you too much and your family has paid an enormous price. Don’t wait. Addictions are Big Financial Mistakes. Yes…it will be hard. No…it is not impossible. It is never too late for you to become a productive human being and use your story to make a positive difference in the lives of others.
SAVINGS – Pay yourself! Every time you get paid and every financial gift for your birthday or a holiday set aside a portion for your personal savings account. When you go to the store and have pocket change, set it aside in jar or vase for your savings. When you get rebate checks, save them! If you have money left over at the end of the month after paying your bills, move it to your savings account. You will not regret this action of fiscal responsibility and it will add up quickly.
CAR LOANS - A decade ago, the average term for a new car loan was 53 months. Now, according to Federal Reserve data, the average term is ten months longer which means more interest paid by the consumer. The longer the term, the more money you are wasting because a car is a depreciating asset. In just one year after your purchase, the value will usually be 30 to 50 percent lower, depending on the make, model and year.
Recommendation: Do not pay interest on a car for any longer than you must pay, depending on your down payment and income. And never, if possible, agree to a car loan for longer than 60 months. You are paying more and getting less for your money. If you cannot afford the payment under 60 months, you need to shop for a cheaper car.
Conversely, do not pay cash for the car unless it is a used small ticket item. Why? You can help your credit score by paying a short term auto loan on time. Select 36 months or less and pay ahead of the due date. If you have the funds to pay the car in full, put it in an interest bearing account so that you have the payment when due, and you are making money on your money. After one or two years, pay it off in full.
CREDIT CARDS – Don’t buy sales items on credit, unless you are going to pay the bill in full within 30 days or with no interest. According to Suze Orman, if you purchase $350 worth of merchandise at a 15 percent discount, your bill will be $298. But if the $298 goes onto your credit card at 20 percent interest and you pay only the minimum due each month (usually about 3 percent), it will take you two years and $67 in interest to pay it off.
CASH OR DEBIT – Pay cash or debit for most purchases, unless there is a benefit using credit (such as points for gas or travel). When you use credit, pay in full when the bill arrives. If you cannot afford to pay in full, you should decide in advance if the item is essential. If it is not essential, wait and save for it but do not make the purchase on credit. For instance, if you NEED new tires for the car, cannot pay cash or debit and must put it on credit, make the purchase and pay it off as soon as possible.
AUTO AND HOME INSURANCE - Do not select a low deductible on your auto or home insurance policy. Although it seems that you are limiting your immediate expenses with a low deductible, you should not report small claims which may increase your policy or cause your agent to drop you. When possible, meaning you have more than $1,000 in savings, elect for a $1,000 deductible and you may reduce your premium by 10 percent.
EDUCATION SAVINGS – If you have just had a baby, your child is in elementary school or not yet ready to graduate from high school, begin to set aside funds in a 529 plan or other savings account for higher education. Did you know that fewer than 40 percent of students graduate in four years? A fifth year can add 25 percent to the cost of higher education. So, you have a responsibility to encourage your child to become an academic achiever and score well on Advanced Placement tests. This action can reduce the required coursework in college, which reduces your costs.
The range of tuition is vast. However, a good estimate is between $10,000 and $60,000 per year. This is tuition and does not include books, a computer, furnishing the room, transportation costs, trips home for holidays and pocket money. If your child’s career requires a graduate degree or a doctorate, that bottom line drastically increases. Starting to save at birth or at a young age becomes critical as the costs for education increases. And, don’t dismiss FAFSA forms for financial aid, federal loans, and scholarships. Every penny counts!
COLLEGE – Your child or grandchild may want to go to a fantastic private college. However, did they work and save for their education? It is also possible that you did not create an education fund and private school is outside your price range. Also, take into consideration that every child does not have to go to a four-year college. There are good technical schools and community colleges, depending on the career choice. A college education can be valuable, but it makes absolutely no sense to accrue extensive debt in today’s economy. Your child may have a great degree, unable to find a job and must come back home to live in your basement! Suze Orman says, “I can't stress this enough: Do not deplete your retirement fund or mortgage your home to pay for college. That money needs to keep working for your future.”
Summary: We hope that these tips improve your life as much as it has ours. Please look for Part 2 of this series. Remember, faith is the substance of things hoped for, the evidence of things not seen. If you start today to improve your life and believe that ALL things are possible, within a few months, and certainly a year, you will see the evidence of your hard work and perseverance. Be blessed!
Research provided by Suze Orman