Money Smarts for the Real World

July 20, 2011

Get Tough and Get Going

After taking some summer R&R, I am back and ready to add a fresh dimension to $mart Talk in the way of a challenge.  The Finding Financial Strength article this week asks, "What Are You Waiting For?" It also gives the beginning steps you need to take to end financial procrastination.  First, be honest about what your situation is.  What financial project do you keep wanting to start, but you still haven't done the job  (e.g., rolling over an old 401K into an IRA; starting a college fund, etc.)?  What have you let go?  What bills are out of control?  How much debt are you really in and what is it costing you every month?  Next, identify what you want.  What do you need to have financial security?  What are your short-term and long-term goals? Third, purge your fears.  What is that nagging voice in your ear?  What does it say that holds you back from meeting these challenges?  Now it's time to slay these dragons.  What advice would you give a friend in the same situation?  Detach yourself from the anxiety you may feel, and try to solve the problems.  Now you have action steps.  You get bonus points if you put a specific time frame to these steps.  So, what are waiting for?  Get to it!


arrow up The Up Side of the Down Side

 Times are tough may get tougher still as federal, state, and local governments try to deal with balancing budgets, stimulating the economy and creating jobs.  By August 1, 2011, Congress will need to raise the debt ceiling so that the U.S. does not default on its debts.  The housing market, which needs to recover before the economy can truly progress, is still weakening, with no real near-term end in sight. Of course, until our debt and deficit problems are alleviated, it will be difficult for the housing market to recover, as no one wants to borrow money in spite of low rates.  Globally, the picture is bleak, as well, as Europe is dealing with its own hot mess in Greece that threatens the entire health of the European Union. 


Uncertainty is uncomfortable and scary; we like to know what's coming around the bend before it hits us in the face, not after it has knocked us on our butts.  In spite of this angst and fear, there is cause to be hopeful.  I choose to look at what we're going to do differently, how we will be smarter and more selective, and how our values will be what will guide us more and more.  Am I just being a cockeyed-optimist?  Perhaps, but here is what I see:

1.  Uncertainty can be a motivator.  Instead of wringing their hands, some people will do whatever they can to take some control.  Instead of putting off dealing with their finances, they are determined to do something.  That may mean drawing up a budget, paying off credit card debt, setting up an IRA, getting wills and life insurance in place, increasing the emergency fund, starting an investment plan for college costs, or reviewing spending habits.  A stronger citizen bolsters the economy. Click here to read more .


Finding Financial Strength:

What are you Waiting For?

No matter how many people I speak with, or what their financial situation is I've noticed a common theme when it comes to handling money: procrastination. Now sometimes people procrastinate because they're afraid of making a mistake, and sometimes they're overwhelmed and not sure what to do, and other times it's just a case of "putting off" for tomorrow what they should do today.

Why all this delay? If your car was having trouble, you would get it to the shop fast. If your refrigerator died, you'd run out and buy a new one. It's simple: the immediate damage of procrastinating with your finances isn't felt until the future and seldom do you get a "bill" for what the delays cost you. But, make no mistake; failing to take control of your money is like letting your garden grow without tending to it. The garden will get overgrown, and while some things may blossom, much will be wasted. So, how can you fight this tendency? Have a plan and a time table and stick with it. Here are some tips to get you started.

1. Be honest. Take a good look at what your situation is. If you have credit card debt, how much is it? On what cards? What are the rates? If you have savings/investments, where are they (in IRAs, company-sponsored retirement plans, taxable accounts, the bank)? How are they invested? Do you have an allocation actually set in place (60% stocks/40% bonds and cash, for example)?

2. What do you want? In a perfect world, what would your situation look like? No debt? $50,000 saved? An Emergency Fund? A college fund? A vacation home? Your own business? Write it down, even if it seems outrageous.

3. What is holding you back? Now, look at what stands in your way. Some responses might be: "The market is crazy; I have no time to do it; we don't make enough money; or I am overwhelmed!" 

4. Overcome your objections. Now you need to switch hats on this one. Pretend a friend has come to you with answers to the first three questions above, and is looking for advice. Get out of personalizing the problems and look at them objectively. What would you advise? Would you suggest ways to trim the budget? Would you suggest putting aside a set amount every month? Be as helpful as you would really be if you were speaking to your best friend.  Don't forget to visit ATI Investment Consulting, Inc.'s website for calculators  to help you in planning a myriad of investment goals.

There, you have a start. You have outlined your problems, priorities and wishes. You have even given yourself an outline of steps you need to take. Now, what are you waiting for?



$mart Question

My husband is an only child and keeps telling me that we will be OK for retirement because he stands to inherit his parents' estate. We are saving for retirement ourselves, but just the minimum ($5,000 each into an IRA and 3% into our 401K plans at work to get the match).  It makes me uneasy to think about relying on my in-laws to fund our retirement -- am I worrying needlessly?

Money equals freedom and the ability to choose.  To be dependent on someone else for money dilutes the "freedom" aspect.  First off, his parents may have other plans for their money -- known or unknown.  They could live a long time or be faced with a debilitating disease that requires special care or treatment.  They may have charities that they want to donate to; the point is the money is theirs.  They may need every penny of it in retirement.  It is your job to provide for yourselves; someone else's money should never factor into your strategy.You and your husband have started to build your own retirement savings.  Why not concentrate your efforts there, and have the control and pride that comes from doing it yourself?  Work toward contributing the maximum to your respective 401Ks.  Keep up the annual contributions to your IRAs and, as you each reach age 50, take advantage of the "catch-up" provision which allows you to make a $6,000 contribution to your IRAs.  You'll feel more at ease if you tackle what you can control, instead of worrying if someone is going to give you something, which is beyond your control.  

In This Issue
The Up Side of the Down Side
Finding Financial Strength
$mart Question
$mart Move
$mart Move:

Manage Your Debt and Save Big



Consolidating your debt is only half of the battle. You still need a plan to get your debt paid in full. The Accelerated Debt Payoff Calculator on ATI Investment Consulting, Inc.'s website can show you the impact of fast- forwarding your debt payoff efforts. The process is simple; just apply a portion of your consolidated loan's monthly payment savings to the consolidated loan's balance. You can save hundreds, even thousands in interest and shave years off of your loan!   Every day you delay costs you money.  Click on the calculator link above to see how much you can save by consolidating your debt at a lower rate and aggressively paying it off.

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