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Her Story

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Her Story
By Dwight Harshaw, BBA, Personal Finance Counselor

Dwight Harshaw, BBA

Dwight Harshaw, BBA

Recently, a story came to light in my hometown about a 27 year old woman who was cited for a misdemeanor sex charge. She was caught by an undercover detective in a sting operation targeting escort services. It was her first night on the job. How did she get there? She said she lost a second job, she was going through a bankruptcy, and her wages were being garnished. Her financial problems overwhelmed her and drove her to making an unfortunate decision, which destroyed her young career. I don’t know her and this is not a condemnation. I have great empathy for her. I am captivated by her story because-before she resigned-she was a high school algebra teacher, with a master’s degree, in her fifth year of service. What happened?

I don’t know any more than what has been publicized but in looking and speculating about her situation through a personal finance lens, I think she may have found herself in the circumstance that a lot of young people and people in general are in; they are besieged with debt. The average college graduate is nearly $20,000 in debt. (Source: Demos.org, “The Economic State of Young America,” May 2008) Many have fallen prey to the constant stream of messages (advertising) that are designed to persuade people to value things (depreciating assets, junk) more than money (financial security). Once young graduates get their credentials and jobs, they want the material accoutrements that they believe they should have. On top of school loans and credit card debt, they pile on more debt. And then, there are the ordinary living expenses of life to contend with. Before they know it, they find themselves in unsustainable financial predicaments. More attention needs to be given to the importance of wealth building, especially at the start of a career.

 

Stylish Woman Dancing with Martini in Hand

 

Wealth Building

Wealth building is simply being knowledgeable about money and making it work for you more than it works for others. To become a wealth builder, there are 4 things you should do. You should steer clear of new debt, establish an emergency fund, pay off your student loan debt early-if you have any, and save for your long term future.

 

Avoid Debt

The young lady is bankrupt and suffering wage garnishment. When credit is so easy to obtain, it is hard to be responsible. We use it to buy non-financial things that give us temporary pleasure. We buy expensive wardrobes of which the styles come and go; we buy new cars which lose value as soon as the deal is done; and we purchase things that we simply don’t need, but the debt on those things goes on, long after the usefulness and excitement is over. Credit should be used responsibly-never! Okay rarely. Debt avoidance is a virtue.

 

Emergency Fund

If she had an emergency fund, she might not have been faced with a decision that put her career in jeopardy. An emergency fund is a fund dedicated specifically for extraordinary immediate crisis needs; it smoothes out a rough financial time. Car repairs, job lost, medical bills, household maintenance problems or things that cannot be paid for with out-of-pocket cash qualify as emergencies. It should be a priority to fund it with at least 1 to 2 thousand dollars initially and with 3 to 6 months of your take home pay ultimately.

 

Pay off student loan debt

Some are fortunate to not have student loan debt when college life is over. If that is not your fate, I have this advice; pay your loans off as soon as possible. Double your payments or add an extra amount to reduce the total interest and time that you will pay on your loan(s). Be sure to follow the protocol of the lender for early payoff. The sooner you pay off your student loan debt, the sooner you can get on with building wealth.

 

Retirement

The money you save early on in your career will be the most valuable when you retire. The elements of time, dollar cost averaging, and compounding are a wealth builder’s best friend. Save to the maximum level in tax advantaged retirement plans offered by your employer. If nothing is offered or you can afford to save more, establish a traditional or Roth IRA and fund it to the max or with as much as you can. Ultimately you want to save at least 15% of your annual income for the future because the burden of providing for your retirement is on your shoulders. The money you save early will be worth more and be more useful in the years to come than the value of any consumer item you may buy today.

Her story is all of our stories. All of us have made unwise financial decisions. On a positive note she is young, smart, and hopefully ambitious. She will recover over time and this will all be a distant memory. Time heals. When you find yourself off track financially, get back on. To be a wealth builder, remember this; it is wise to pay with cash rather than with credit, have money set aside for a crisis, pay your debt off early, and save for your long term future.

 

About Dwight Harshaw: Dwight Harshaw is a personal finance counselor, realtor and writer. He has a BBA from the University of Arkansas at Little Rock in Finance with an emphasis on financial planning.

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Copyright © 2016 CWR Media – All Rights Reserved

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Special Savings Series: Getting Started – Do You Have What It Takes?

Donell Edwards, Blogger

DONED2014 SmallAbout Donell Edwards: Donell Edwards is President of CWR Media and is also founder and publisher of The College World Reporter (CWR) magazine and CWR World News & Information Service.  He is also a professional speaker, freelance writer, and entrepreneur.

 

 

Know Your Money
Monday – May 12, 2014

Knowing Your Personal Finances
Special Savings Series:  Getting Started – Do You Have What It Takes?
By Donell Edwards

 

Good morning everyone!  This week we zero in on saving, following up on our special series last week on managing debt.  Hopefully, you are at a point in the process where you have begun to carefully monitor your spending on a regular basis, you are evaluating your spending and eliminating wasteful spending and overcoming bad habits, you have prepared and are rigidly following a realistic budget, and you have gotten your debt under control, or you are in the process of doing so.  These are all steps that must be in place and should be accomplished before seriously working to have a successful savings plan.  One other important step in the process is implementing an emergency fund, which we have discussed briefly in previous posts.

 

Our special series this week will discuss saving directly, as well as other aspects related to your success in establishing and maintaining a successful savings plan.

 

So, are you really ready to start saving?  Over the past two months we have talked about the importance of controlling spending, and the fact that in addition to having a realistic budget and doing the proper planning, it takes sacrifice, willpower, determination, and a willingness to change in order to successfully control spending.  Obviously, in order to save there must be funds to save.  Those funds should come from effectively managing the income that you have, implementing and closely following your budget, and paying down your debt.  As you pay down your debt or receive income occasionally from other sources, use that money for your savings.

 

The first savings project you should have is your emergency fund.  One of today’s Must Reads, Before You Start to Pay Off Debt…Do This,  discusses the importance of an emergency fund.  It is important that you have planned so that once you start saving there will not be anything to interrupt your regular contributions to your savings.  That is where your emergency fund comes in.  There will be unscheduled expenses like vehicle repairs, appliance repairs, home repairs, paying for insurance co-pays or deductibles, and a variety of other things.  An emergency fund allows you to continue to follow your budget and continue to save and care for those expenses.

 

 

Smiling African American businessman

 

 

Most experts recommend having an amount equal to six months living expenses in your emergency fund.  It is a good idea to do this in stages.  First set a goal to accumulate at least $1,000 in your emergency fund.  Do not spend this money for vacations or anything other than real emergencies.  Then as your next goal build that amount to 3 months living expenses.  Once you achieve that goal, then continue until you have 6 months living expenses.  After you reach 6 months living expenses continue to add to the fund until you feel comfortable that you have enough breathing room in case of a severe emergency.  And again, do not spend this money for anything other than emergencies.

 

As mentioned earlier, it will take sacrifice, willpower, and determination to stay with your savings plan.  But, if you are not a person who understands the importance of making sacrifices, if you do not already have willpower, and if you are not determined, how do you acquire these qualities.   In our other Must Read for today, 9 Ways to Harness Your Willpower to Save Money, writer Marilyn Lewis cites a comment from a book review in Mother Nature News from The Power of Habit by Charles Duhigg showing how habits begin with conscious choices, “Then we stopped making a choice, and the behavior became automatic. It’s a natural consequence of our neurology. And by understanding how it happens, you can rebuild those patterns in whichever way you choose.”  So, by repeatedly exercising self-restraint, resisting temptation, and making sacrifice, these choices become habits.  These qualities can be learned with time and effort.

 

So, do you have what it takes to become a saver?  If you don’t, now you know how to get it. 

 

Must Reads:

Before You Start to Pay Off Debt… Do This
http://www.enemyofdebt.com/2014/01/before-you-start-to-pay-off-debt-do-this/

 

9 Ways to Harness Your Willpower to Save Money
http://blog.credit.com/2014/02/9-ways-to-harness-your-willpower-to-save-money-75365/

 

 

If you have questions or need help we are just an email away.  Send your questions to Info@KnowYourMoneyGlobal.com

 

We Would Like To Hear From You.  Are There Any Brave Souls Out There Willing To Share?
If you would like to share with our readers how “bad” spending habits have affected you, anonymously or otherwise, for our upcoming special, “Confessions Of Spendaholics,” please send your experience to comments@knowyourmoneyglobal.com.

 

Follow us on Twitter for more information about personal money management
https://twitter.com/Kn0wY0urM0ney

 

Disclaimer:  I have a Bachelor of Business Administration degree but I am not a financial adviser. However, I have acquired years of knowledge about personal money management through my life experience working through my own personal finances that allows me to share that knowledge with readers of Know Your Money. The Know Your Money Blog posts written by me are my own common sense observations and opinions and are for informational use only. Although my blog includes contributions from experienced financial professionals, please make your own financial decisions based on personal research or contact a financial adviser.

 

Copyright © 2014 CWR Media – All Rights Reserved

 

 

Starting An Emergency Fund: The Challenges

Donell Edwards, Blogger

DONED2014 SmallAbout Donell Edwards: Donell Edwards is President of CWR Media and is also founder and publisher of The College World Reporter (CWR) magazine and CWR World News & Information Service.  He is also a professional speaker, freelance writer, and entrepreneur.

 

 

 

We’re Celebrating Financial Literacy Month

  

Know Your Money
Wednesday – April 30, 2014

Knowing Your Personal Finances
Starting An Emergency Fund:  The Challenges
By Donell Edwards

Starting an emergency fund is a must to ensure personal financial stability.  However, there may be a number of challenges for some in taking the steps necessary to set up an emergency fund.  We will discuss those in today’s post, in addition to why an emergency fund is so important.

Life is filled with surprises and all of them are not good.  Loss of employment, injuries, accidents, deaths, births, fires, health issues, family problems, floods, tornadoes, burglaries, and a plethora of other surprises can cause havoc on a person’s budget and personal finances.

Although there is no way to have a contingency plan for every unexpected life event, it is wise to plan for the unexpected in such a way that it provides us with the maximum protection available.

Building an emergency fund so that we have money available and ready when a major vehicle expense occurs, or an appliance needs to be replaced, or when health issues cause unexpected expenses, or when for various reasons we may become unemployed, or a number of other things that may happen, an emergency fund will help us through these situations without experiencing financial disaster.

However, in order to start an emergency fund takes sacrifice, just like we discussed in our post yesterday.  It means reducing or eliminating some of the things we do and enjoy.  It means finding ways to save on purchases and always being conscious of the need to spend wisely.

 

Father and Children Sitting by Bay

 

 

So, the major obstacles to getting started are our views of spending and our willingness to change, and being willing to make sacrifices.  Some also have to contend with not having enough income to get started.  If you are in that position we encourage you to continue working to get to the point where you can start an emergency fund, and until then, whenever you do have anything that you can set aside get in the habit of saving.  Begin changing your mentality about money and spending.

There are a variety of opinions on how much should be put into an emergency fund, whether to pay off debt first, how to get started, etc.  We offer three articles for you to consider in our Must Reads at the end of this article.   The key point is to use what works best for you, but make sure that you do start an emergency fund.

Another question is where to save the money in your emergency fund.  I am not a fan of savings accounts because the interest is too low, and with many banks, if you do not read the fine print you will get hit with all kind of charges and will actually lose money instead of earning interest.

However, getting started, using a savings account may be your best option.  I do recommend looking into saving with a credit union first rather than a bank.  The interest rates for many credit unions is higher than with banks.  Another option is looking into purchasing Certificates of Deposit (CDs).  Check with your bank or financial adviser and compare the interest on CDs with the interest on savings accounts and decide which is best for you.

Another word of caution.  The purpose of the emergency fund is to help in case of actual emergencies.  It is not a savings account for vacations, for major purchases, or anything other than real emergencies.  So, money put in the emergency fund should be left there until an emergency occurs. 

 

As Financial Literacy Month comes to an end, we are reviewing Money Management International’s Thirty Steps to Financial Wellness.   Today we review steps 21 through 30.

  • Document your spending
  • Identify ways to reduce spending
  • Save money on groceries
  • Share a tip for change
  • Document your desired spending
  • Protect yourself by performing financial check-ups
  • Understand the cost of credit
  • Assemble a financial team
  • Appreciate the benefits
  • Moving forward

 

If you have questions or need help we are just an email away.  Send your questions to Info@KnowYourMoneyGlobal.com

 

We Would Like To Hear From You.  Are There Any Brave Souls Out There Willing To Share?
If you would like to share with our readers how “bad” spending habits have affected you, anonymously or otherwise, for our upcoming special, “Confessions Of Spendaholics,” please send your experience to comments@knowyourmoneyglobal.com.

 

Must Reads:

How Much Money Do I Need In An Emergency Fund?
http://tinyurl.com/kymemergencyfundamount

 

Emergency Fund or Debt Repayment First
http://ht.ly/teqpV

 

Before You Start to Pay Off Debt … Do This
http://www.enemyofdebt.com/2014/01/before-you-start-to-pay-off-debt-do-this/

 

Follow us on Twitter for more information about personal money management
https://twitter.com/Kn0wY0urM0ney

 

Disclaimer: I have a Bachelor of Business Administration degree but I am not a financial adviser. However, I have acquired years of knowledge about personal money management through my life experience working through my own personal finances that allows me to share that knowledge with readers of Know Your Money. The Know Money Blog posts written by me are my common sense observations and opinions and are for informational use only. Although my blog includes contributions from experienced financial professionals, please make your own financial decisions based on personal research or contact a financial adviser.

 

Copyright © 2014 CWR Media – All Rights Reserved

 

 

Knowing Your Personal Finances: Are You Ready To Save?

Donell Edwards, Blogger

DONED2014 SmallAbout Donell Edwards: Donell Edwards is President of CWR Media and is also founder and publisher of The College World Reporter (CWR) magazine and CWR World News & Information Service.  He is also a professional speaker, freelance writer, and entrepreneur.

   

 

We’re Celebrating Financial Literacy Month

People Dancing at a Discotheque

 

Know Your Money
Wednesday – April 23, 2014

Knowing Your Personal Finances: Are You Ready To Save?
By Donell Edwards

 

For weeks now we have discussed knowing your personal finances by making a thorough evaluation of debts and expenses to determine just what condition your finances are in.  We have also strongly recommended that you use some method to monitor spending on a regular basis each day and identify any wasteful spending habits and eliminate them.  We have discussed the importance of acknowledging the need for help if your assessment indicates your finances are out of control, and it is apparent that you lack the knowledge or the will to correct matters by yourself.  

 

We have also emphasized the need to have the willingness to make behavioral changes in one’s thinking, methods, and approach to money management. It has been less than two months since this blog was launched, and in that short span of time many are no doubt still working on all of the things mentioned above.  

 

But as we have previously mentioned, everyone is at a different level financially, and will fall into one of three categories: (1.)  Those in dire need for help and who are living from paycheck-to-paycheck.  (2.)  Those who are managing and have a little money left after paying bills each month but who could do better.  (3.)  And those who are in great shape and just need to continue to monitor things and build on their success.

 

So, are you ready to save?  Your current level will determine if you are ready to move on now to saving, or if you still have work to do to bring your spending under control, stay within your budget, and continue to work to eliminate your debt.  What we suggest is that as you pay off a debt, take the money you were using to pay that debt and apply it to another debt, and continue this process until all of your debt is eliminated.  The trick is not to incur any additional debt while you are doing this.

 

That is where saving and having an emergency fund becomes so important.  There will be unexpected things that happen in your life that require money.  If you are not prepared those things may take money away from bills that you are paying, or may require you to have to take on additional debt.  This is a vicious cycle that seems to repeat itself and keep many people from making any progress.  That is where better planning and exercising self-control is important.  But having an emergency fund helps eliminate this problem or at least reduce the impact.

 

If you are at a level where you have already begun saving, we applaud you and your efforts.  We encourage you to continue to do so.  

 

Most experts recommend having at least 3 to 6 months living expenses in your emergency fund.  This should be a separate savings account from any other savings that you have.  Although some reading this may be in a financial position where you think this is impossible for you to do, it is an achievable goal.  

 

I was listening to the radio a few months ago and heard about a fantastic way for people who have very little money to set aside to save can save $1,378 in a year.  Then, this process may be repeated over and over again, or modified to increase the amounts and save more.  The idea is to get in the habit of saving.  To convince yourself that you can save.

 

I did some research after hearing about this saving method and discovered an outstanding blogger, Lisa Bedford, and her blog, The Survival Mom – http://thesurvivalmom.com/. Monica shared information on her blog about an interesting saving method known as the 52 Week Challenge.  

 

The way it works is that you start with $1 on week one.  Then you add a dollar and save $2 on week two, and continue adding a dollar each week until you reach week 52 and save $52, which is the most you will save in any week.  This makes saving affordable, and allows you to progressively increase your savings with reasonable amounts that even those who are struggling can afford.  You can and will find a way to eliminate spending on some things in order to find the few dollars required to use this plan, and at the end of the year you will have $1,378.

 

Although this is far less than 3 to 6 months of living expenses for most, it is a start and that is what this is all about, developing the habit of saving.  Developing the belief in yourself that you can save.  Making saving a part of your life just like breathing.

 

I recommend setting a goal to save at least $1,000, or in this case, $1,378.  Then set a goal to reach $2,000 next, and continue adding a thousand at a time, unless you can do more, until you have saved 3 to 6 months of living expenses.  This has to be money that you will not touch unless there is a major life issue that can only be taken care of by using some of the money in your emergency fund.  

 

In a perfect world this money would be totally off limits for any use until the goal is reached, and that should be your goal.  But we do not live in a perfect world and things will occur and you may have to use some of the money.  The key is to be committed to avoiding the use of the money in the emergency fund you are building unless it is absolutely necessary, and then working to replace what was removed in addition to what you are currently saving as quickly as possible.

 

There are three very good articles about saving in our “Must Read” section at the end of this post.  We strongly recommend that you read those for more detailed information about saving and building an emergency fund.

 

Also, if you have not reviewed the Thirty Steps to Financial Wellness program at the Money Management International website and have included this in your routine to improve your personal money management, make sure that you do.  There is no better time than now, since this is Financial Literacy Month. Have a wonderful day.   

 

If you have questions or need help we are just an email away.  Send your questions to Info@KnowYourMoneyGlobal.com  

 

We Would Like To Hear From You.  Are There Any Brave Souls Out There Willing To Share? If you would like to share with our readers how “bad” spending habits have affected you, anonymously or otherwise, for our upcoming special, “Confessions Of Spendaholics,” please send your experience to comments@knowyourmoneyglobal.com.  

 

 

Must Reads For Savers:

Establish an Emergency Savings Account

http://tinyurl.com/kymemergencysavings  

 

Weekly Savings Plan:  How to Save Money Even If You’re Broke

http://www.monicaonmoney.com/how-to-save-money-even-if-youre-broke/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MonicaOnMoney+%28Monica+on+Money%29

 

10 Ways to Save Money When You Make the Minimum Wage

http://blog.credit.com/2014/03/10-ways-to-save-money-when-you-make-minimum-wage-79066/  

 

Follow us on Twitter for more information about personal money management https://twitter.com/Kn0wY0urM0ney

 

Copyright © 2014 CWR Media – All Rights Reserved