Many times when people are working at correcting their financial status they focus their efforts in locating more money to pour over their personal finance issues. The solution for most is to get a part-time job now. However, I have not always been a fan of getting a part time job with but having a sure entrance and exit plan on working that 2nd job, because that 2nd job can easily become a necessity instead of a financial life preserver. Instead of just finding a part-time job that will hand you a few dollars to assist in making ends meet, explore making money by mixing activities you enjoy. Although I am a professional banker, I am also a certified personal trainer and this allows me time to exercise, maintain a free gym membership, meet people with like interests and oh yeah, and make some “extra” money. Although I make money from this “side” interest, I still manage finances as if that “side” job does not exist. If you start relying on the extra money then the side/voluntary job will become a necessity and not a luxury. Allow the 2nd job to free your main salary to address your main financial responsibilities and the extra money should be used for extras…such as additional retirement, short/long term disability insurance, a college savings, emergency funds, et cetera. Remember to use the 2nd job, and not let the 2nd job own you.

Okay, remember those numbers. Don’t know which numbers? Then go read, Getting Back on Track. The numbers of which I’m speaking represent your total monthly expenses / bills and your total monthly take home pay. Divide the monthly expense amount by the total income. That quotient (answer) will represent the percentage of your monthly income is committed to expenses each month and is called the debt to income. Example: $1500 monthly expenses divided by $2000 monthly income = 75% debt- to-income ratio. The debt to income should be in the area of 50%, however, many families live with that number closer to 75% and many times over 100%.

Review your expenses and make determinations if any of those monthly expenses can be reduced to allow for more monthly disposable income. Disposable income is money received that is not committed to paying a debt. We want to increase the disposable income, so that we can create a pool of “non-obligated” funds to be use to offset debts that weigh heavy on the monthly expenses because of high interest rates or maybe even drawn-out repayment plans. ..either way, the objective is to create some temporary financial breathing room. Once you have reduced your monthly payments to the lowest allowable level, you will be able to start aggressively paying debts you will later label as priority. Next we will talk about categorizing debts by priority and developing a strategy to eliminate more debt.

Well, it beginning of the 3rd month of the year and droves of people that promised to hit the gym and start a savings plan have decided to revert back to their old habits and abandon their New year’s resolutions until… next year. However, if you are reading this then you are still in the gym and serious about getting your personal finances in order. Well, the first thing to consider is where you stand right now. How much do you earn and to whom do you owe a portion of those earnings.add all those balances and monthly payments and write those figures down (we’ll come back to those numbers). But if you are like most, you cannot begin to imagine just how much you really owe and to whom you it. So the best two places to start is your mailbox and by requesting a credit report from each of the three major credit reporting bureaus (Equifax, Trans Union, Experian)
Don’t jump on the first free credit report offers you find. Many companies offer free credit reports, but then sign you to a monthly subscription commitment. And if you default on the monthly agreement or forget to cancel, they continue collection and ding your credit profile if you fail to satisfy your contract. Depending on the state in which you live, you may be entitled to one free report per year from each bureau. Go to the bureaus websites and explore the sites before signing up for anything….you may have to request the credit report by mail, but there’s more to do while you are waiting for your report in the mail (remember those numbers…we’ll get to them)
Be sure to review and compare the information from each of the 3 reports…yes, they do report different information. Discrepancies on your credit report should be disputed and documented with the reporting creditor. Make sure to maintain copious notes and meticulous records of any correspondence with creditors on all concerns and disputes…and request all resolutions “offered’ and/or ‘agreed upon’ in writing.

These credit reports will provide you access to your entire consumer debt history with an exception to living expenses…i.e. housing, utilities, food, clothing, et cetera. However, the credit report provides information you will use to gain a better idea of where you financially stand and which direction/s you should move first.

Tune in next time for “what to do with those numbers”

The list of items to which your kids wants to buy is beyond anything that you could ever have imagined, but now is the time to give them a dose of reality in the form of perspective and priority. Everything they want is not necessary and some items may have priority over others. This is not different than teaching your kids to stay clear of fire not just because its hot but because its dangerous to them and everyone around it. However, as your kids are chomping at the bit to hit the candy store, head to the bank and open a savings account. A savings account is a great tool to help them properly manage funds and is key to starting a good financial education. Always incentivize their bank visit efforts with a treat each to encourage increased visits to the bank. I offer an extra dollar or two if they schedule bank visits with me and even more if they walk to the bank to make ATM deposits. If the day is nice, bank visits for deposits are rewarded with ice cream…okay that’s for me, but you get the picture. I want them to associate dealing with their finances as a privilege and not a task or act of labor. Make a small, if not big, production of their opening this bank account by making conversation on the subject leading up to the day and moment and afterwards. Take pictures during their opening transaction and present them with a wallet or record book in which to record their transactions and later to illustrate account reconciliation with account statements and their personal records. Opening a bank account is great but using the account is a larg3e component to a good financial education. Make sure to call relatives (grandparents ) to inform them of the account, not to request money, but to develop healthy conversation with adults the kids like, so that there is a positive re-enforcement of the act of saving. Remember that placing the money in an intangible account may lead to a slight disappointment to a kid. They relate the bank to the last moment they had money in their hand…and now its gone with nothing to show for it, so some pictures, phone conversations with loved ones that use a bank and an account statement with a balance in their name can go a long way for a kid that’s nervous about where their money goes when they leave the bank.

Each time I earned some money as a little boy, my mother used to say to me…”that money is burning a hole in my pocket.” She was referring to my insatiable urge to spend my new found wealth on the first thing that offered itself for sale to me. I had no reason for earning the money other than to buy the items that were most appealing to me…such as candy and toys. However, as I became educated (and older) I realized there was much more to which my hard earned money could be applied. The same is the case with your kids. Point out the financial and economical aspects of educational lessons, such as history, everyday life and as well as the finances tied to their dreams and desires. Helping your kids to understand the cost (in a relation to money and time) will assist your children to begin setting goals that will make dreams more of a plan at an early age. Please DO NOT discourage any goals because dollar amounts are seemingly high, based on present financial conditions and experiences. We want our kids to think realistically about money, however, with a well structured and grounded financial sense , today’s kids will be able to go further than we ever thought because of an understanding of money of which we could only have imagined. A good place to start exploring the effects of money is a downtown shopping area or library…although there’s probably more on the internet…these physical areas provide tangible items to compare to real costs. Either way, try to interest your child in something other than candy and toys or at least exposed to the manufacturing or transportation aspects of their interests. You can even watch television and explain marketing and costs of a show’s production i.e. – actor’s pay, studio/real estate, electricity, satellites, etc. Try not to make every conversation about money, but do point out the financial basics, no different than you would make passing references to good and bad food choices.

Teaching kids to ride a bike is easy … if you have a bike for them to ride. Imagine trying to learn to ride a bike by only watching videos and with no bike to actually try your new found skill. So if you’re with me, then you can imagine to effectively educate your kids about money … it really helps to have some money for them. Remember, you don’t want to dilute their beginnings to a foundation to value money by just handing over a bunch of cash to your kids. You want them to understand there is a price/sacrifice for money and learn it’s not to be wasted. To help, provide your kids with opportunities to earn money. Create a “After-Chores Opportunity List.” This list will be chores around the house or neighborhood that are outside the realms of their daily/weekly chores. Possible jobs are picking up litter at the park, shining dad’s shoes, scrubbing the car tires, taking the trash out for a elderly neighbor….be creative and pay modestly. Paying large sums of money in a short period of time will not provide a realistic flow of money and may diminish the value and worth of the perception of “an honest day’s work and pay.” However, without getting too deep, let’s keep it simple and provide a method for your kid to earn some money, so that we can begin teaching some simple components of financial literacy and personal finance.

Although home prices haven’t increased much and interest rates have remained steady over the past year, it’s still going to be a more expensive to buy a home soon. The Federal Housing Authority (FHA) has decided to increase the down payment requirements on the mortgage loans they guarantee/insure. This down payment was increased a year ago to its current level of 3.5% of the purchase price. (Ex. $100,000 purchase price X 3.5% =$3,500 down payment). Buyers can still obtain a mortgage for the 3.5% down payment, but they must meet a minimum credit score. Additionally, the FHA insurance premiums will increase on each loan and the amount a seller can contribute to offset the buyer’s closing costs will be reduced to 3% from 6%. FHA insures the majority of mortgage loans held by borrowers that would traditionally not qualify for a mortgage on more conventional mortgage loan routes…as called bank loans. FHA appears to be adopting more stringent guidelines for its borrowers, however, conventional loans generally require at least a 20% down payment and much higher credit scores. (Ex. $100,000 purchase price X 20% = $20,000 down payment). FHA is more lenient on past credit issues and is accepting of credit scores below 600.

The FTHB Credit of $8,000(and $6,500 for repeat homebuyers) will be expiring soon. Those wishing to utilize the tax credit need to enter into a home purchase contract by April 30, 2010 and fully close the loan by June 30, 2010. The homebuyer’s tax credit can be used to offset expenses for a home purchase from the down payment to improvements. (Don’t forget the up to $1,500 energy tax credit for all home owners that receive energy efficient upgrades or additions in their homes.)

Buying a home is a big step for most; however, when considering your housing options, while reviewing your housing budget, sometimes seemingly more expensive moves may prove to be the most financially astute decision. Example – I purchased my first home…through FHA…. as a fulltime working student because I couldn’t afford the increasing rent at the time. My rent was increasing from $780 to 840/month and I was barely making ends meet and going to school. I took my father’s advice and decided to buy a home. Although I had to come up with approximately $1700 to close my loan, my new mortgage payment was $340/month and I had created a tax deduction with my mortgage interest payments. As the years went by the property became a pool of equity and eventually rental income. As a college student, it was strenuous to come up with $1700, but the temporarily more expensive choice made financial sense.

If you remember asking your parents for money, then you probably have heard of the concept of money not growing on trees. However, translating the true value of money to kids is not as easy as the classic statement is to repeat to another generation. There are several methods of exposing money to a child and it really depends on the age of the child. There are some kids that will pick up financial literacy concepts faster than others, but be patient as simple exposure to these concepts can place their financial education at a further head start than most. Start by finding opportunities to make money around the house or your office. I offer my kids money for reading books on my “reading lists” after they complete a written and oral report. I also offer small cleaning jobs with an opportunity to receive a larger job with more pay, if the initial assignment is completed to our pre-agreed on level of satisfaction. The objective is to tie in effort and money and provide money saving opportunities. Once the kids have earned money in their possession, the concept of money value and the relation to money producing trees are right around the corner. Stay tuned for more.

Sharing is probably one of the most compassionate acts of the animal kingdom and kids are taught to share with others from the very beginning of their socialization. However, sharing can sometimes mean spending more money. And while spending money to share is not a bad thing, it is helpful to start with sharing to begin a child’s financial education …which can very easily turn into a self-centered activity if not taught early to include thinking about others..when earning and spending money. The entire of concept of earning money in a manner that helps others is argued each day in court, so I wouldn’t go too deep on this concept with a kid, but when teaching a kid to save money, it’s also important to teach them to keep in mind those with whom they would like to share. That sharing could be as extensive as a research project on contributing to an established charity or just buying grandma (or daddy) a muffin, with the money the kid has saved. The idea is that money is for the things you want and need, but that there is more to having money than one’s sole self gratification. Starting a savings plan with a personal finance goal is great, but putting the benefit of others into the goal can make the financial achievement mean that much more to a child and helps to build a good citizen.