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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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Know Thyself

KYM Money Management Success Strategies Institute begins Monday – January 9, 2017. Sign Up Today.

Know Thyself
By Dwight Harshaw, BBA, Personal Finance Counselor

Dwight Harshaw, BBA

Dwight Harshaw, BBA

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 emphasis on financial planning.

 

I was watching an Oprah rerun one afternoon when Iyanla Vanzant was her guest. I would describe Iyanla as a personal-spiritual empowerment guru. During the 1990s my wife and I purchased several of her books and recordings-for ourselves and others-and attended some of her lectures which were very helpful for personal growth, clarity and empowerment. In addition to being an author and lecturer, she is an ordained minister, attorney and a past featured expert on Oprah, and now has her own show on the Opra Winfrey Network (OWN), Iyanla, Fix My Life.

Earlier in her career at the height of her popularity, Iyanla landed her first television talk show. For her, the last decade of the 20th century was financially rewarding.  But then, Iyanla suffered devastating personal and financial setbacks. She lost her beloved daughter to cancer, her marriage to the love of her life dissolved, the television show was cancelled, and she lost her fortune which is the area of my focus. How did it happen?

She told Oprah that losing her money was the result of, “being a millionaire with a ghetto mentality.” She lost her money because her attitude about finance did not change with her neighborhood.   Before she had money, she spent all she earned. It took all she earned to live from week to week. When she became wealthy she continued living that way. The only relationship she had with money was spending it.

 

Woman with Shopping Bags --- Image by © Royalty-Free/Corbis

Woman with Shopping Bags — Image by © Royalty-Free/Corbis

 

What happened to Iyanla happens all the time however we marvel at those who have the farthest to fall. Her mistake was not paying attention to where her money was going and not watching the people that allowed her to fall. It is important to always know your current financial condition. If she had practiced that, she would not have spent money on a building instead of paying her taxes which led to the unraveling of her empire.

To know where you stand currently, simply gather and organize all of your financial information. That would include all things financial i.e.; check stubs, tax returns employee benefit information, insurance (all types), credit cards bills, mortgages, student loans, auto loans, retirement plans, and living expenses, just to name a few. Look at it, analyze it and determine if what you’re doing is in sync with your goals. If it isn’t, then you will have to make adjustments. Adjustments could be living by a budget, selling an asset or getting a second job.

You should always know your current financial condition if you want to be financially secure. Based on your condition you will be able to use the information to make wise decisions about your future.  If you find that this step is difficult for you, seek counsel from someone who has demonstrated financial wisdom or a financial planner that you feel comfortable with. It is important to know what you use your money for.

Iyanla has risen again financially because she is still a sought after speaker who has another powerful healing message to deliver, and she has a hit talk show on the OWN network.  She will likely make a second fortune and keep it.

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Crazy Checks

Thought for today:  All deception in the course of life is indeed nothing else but a lie reduced to practice, and falsehood passing from words into things.  – Robert Southey, British author, 1774-1843

 

Know Your Money
Monday – December 5, 2016
Crazy Checks
By Dwight Harshaw, BBA, Personal Finance Counselor 

 

Dwight Harshaw, BBA

Dwight Harshaw, BBA

We all receive them, mailings from credit card companies that contain checks-that were not ordered or requested. I must confess that I have used one. I’ve taken advantage of a zero percent transfer fee, no interest offer-which is rare today-to pay off the balance of another credit card that I could have paid anyway. I remember it felt good initially but for months afterwards, it was a burden to pay the loan back. Fortunately I was able to pay it back within the designated time period and suffered no repercussions from using it. I was lucky. Many are not.

The marketers of debt do all they can to entice us to use their crazy checks. The checks can be used to pay off debt, make purchases, or deposit money into bank accounts. The credit card companies want to make sure that we have money to spend-up to a defined limit because they are not crazy-with strings attached. The strings or terms for using the checks are not hidden. There is a time period in which the interest charged will be zero or very low, provided that you make your payments on time. There is a transfer fee that is capped at a nominal amount. They are almost like regular checks, right? Wrong!

 

Man Holding Forehead --- Image by © Royalty-Free/Corbis

Image by © Royalty-Free/Corbis

 

Many people use the checks, experience setbacks, and their terms change. A delayed or missed payment can cause you to pay more fees and high interest. It is all there in black and white in the terms and conditions, read it.

When you receive unsolicited checks in the mail from your bank or credit card company, tear them up. Using them is almost as bad as writing a hot check. They are not money substitutes, they are loans. They are a clever way for issuers to keep you in perpetual debt. It is too easy to overextend yourself. And when you are overextended you can’t build wealth.

 

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 emphasis on financial planning.

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In A Perfect World

Guest Contributor – Dwight Harshaw, BBA

Dwight Harshaw, BBA

Dwight Harshaw, BBA

 

Dwight Harshaw is a personal finance counselor and writer. He is also a Realtor with Access Realty, Inc. in Little Rock, Arkansas. He has a BBA from the University of Arkansas at Little Rock in Finance with emphasis on financial planning.

 

 

 

 

 

Know Your Money
Tuesday – September 16, 2014
In A Perfect World
By Guest Contributor
Dwight Harshaw, BBA

 

In a perfect world, one would work hard for a single company and retire. They would start at an entry level and work their way up the ladder. Health care would be no problem because it’s a part of a well deserved benefits package. Wages keep pace with the cost of living. Raises are scheduled and saving for retirement is automatic. In a perfect world, a middle class lifestyle and all of its accoutrements would be accessible without the fear of losing it. Upon retirement, savings, pension, and social security would allow for an elder status of dignity and financial independence. 

In a perfect world, wealth would be better distributed in the United States than it is now. The poor would be few, the rich would be less so, and there would be scores in between the two. Poverty would be on the decrease and our leaders in government would be working in the best interest for the most people. Building wealth and moving up into a higher wealth class would be no problem. 

Well, we don’t live in a perfect world. There is growing inequality in the way wealth is distributed in our country and the sooner one realizes their place-in that distribution-the better. One has to know where one is, to get to where one wants to be. 

What is wealth? Wealth is based on net worth. Net worth is determined by subtracting what is owed from the value of what is own.

 

Where is the wealth? 

According to census.gov there are 114,825,428 households in the United States. When synthesized with data from the Economic Policy Institute – The State of Working America 2011, we get the following: 

  • One percent or 1,114,825 households control 35.6% of the wealth;
  • Four percent or 4,593,017 households control the next 27.9%;
  • Fifteen percent or 17,223,814 households manage 23.7%;
  • While the bottom eighty percent or 91,860,342 control just 12.8% of the wealth.

 

Source: Inequality.org

Source: Inequality.org

 

 

The median household wealth in 2009 was $62,000. That means 57,412,714 households have more and 57,412,714 households have less than that amount of wealth. So somewhere almost in the middle of the bottom 80% is where the median can be found. 

What should be gathered from this information-many people aren’t as wealthy as they appear. Eight out of every 10 persons exist in the bottom 80%. There are people, who earn lots of money and have the best of everything materially, who are broke. They owe more than what their things are worth. Instead of looking like a million dollars by what is worn, driven, and lived in, ratchet it back and do what is necessary and no more. To move up from the bottom one must not only work hard but also manage one’s own finances well. That means goal settings, budgeting, investing, and saving more, while spending less. In an imperfect world, that is how wealth is built.

 

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