What I find so great about budgeting is once you realize that you control your wallet and not the other way around, only then can you really start breaking down the limitations on what you are capable of achieving. Yes, budgeting helps to keep you out of debt, but it is also there to put money aside for personal goals, whether it be relaxing on a beautiful beach enjoying our earthly treasures, taking those tango lessons that will foster a certain spice for life, or maybe something less comfortable such as starting your own business.
However, budgeting alone does not guarantee financial prosperity. This led me to really question people’s relationship to money, and how it either holds them back or helps them grow, just like any other relationship. What I have come to find is that there are three approaches to spending that exist regardless of how much money you have.
The development of these approaches is rooted in our personal relationship to money, which can most clearly be brought to light during moments when money is tight. Many people run through money like water. They spend on impulse and go into debt as a result of overlooking the severity of the situation. There are those, protective in nature, who decide to cut spending and compromise or hold off on goals, convincing themselves that one day things will get better. They spend enough to make ends meet, even put away a little bit for a rainy day. If something happens to their income, they tend to tighten their belt and spend less…they cancel their vacation or cut back on dinners out, just to manage. And lastly, there are those who view money not as a burden but as opportunities to achieve. They maintain their standard of living as the minimum and proactively find ways to see their goals through or face unexpected expenses, without falling into debt.
The last approach springs from a wealthy mentality. The first two types of people have either the mindset that they are not capable of making more than they do today or simply haven’t spent the time to find out. The “wealthy mentality” consists of looking for ways to make more money rather than finding ways to spend less. When something happens to their income or their expenses start to rise, their first thought isn’t “how can I cut cost”, but “how can I make more money?” I believe that this difference in belief can make a huge difference in why some are more financially successful compared to others.
The good news is that this approach can be followed by anyone. Think about it, if you were able to take away the boundaries on how much money you felt capable of making, how far would you go? It may be more within your reach than you think. That’s why my business is such a great tool for people in various economic situations. With my extensive experience, I can, not only guide you through understanding your finances, but also help you find new possibilities.
Monday, March 21, 2011A Web Site that Helps You Save Money – and Space
Hello fellow money handlers! I think the crisis in recent years has helped us develop strategies to reduce our spending and focus on where it really matters. Here is a way to do that and have fun at the same time! I have recently come across the web site, NeighborGoods, where its community promotes the continual use of already used goods. You know that thing you always felt too bad to throw away, hiding in the back of that kitchen cabinet or in a storage box in the basement or even worse…the garage, taking up perfectly good car space? This web site has paved the way for a new online community, where those items can be bought, sold, and even borrowed. I have discovered people on this site to provide anything from a vintage guitar to a cheese grater. Although, I doubt one was exchanged for the other. The point is, it can be! Photographs are posted by members, giving their “neighbors” an idea of what they’re getting into. They also provide the terms and conditions that neighbors borrowing must accept upon consideration.
The next time you decide to do a good house/apartment cleaning, I hope this message will be in the back of your head encouraging you to confront that fear of dealing with those mystery boxes you have stewing around, as I know we can all relate to. Clearing the load is just a mouse-click away, and the best part is you get to meet people, build the community you want by inviting your friends, and keep a little more money in your wallet while you’re at it. Happy savings!
Thursday, November 04, 2010First-Rate Customer Service
The other day I was walking with a friend of mine to a restaurant. As we were walking and talking, she opened her purse to take something out of her wallet and a bunch of receipts fell out as she struggled to keep everything. I expressed my concern on the welfare of her wallet and how she is treating it like a dumping ground!
I wondered how she can keep track of her money and her spending with things looking the way they did…then I started to think about her job and how she is really good at it. She is always on top of her clients’ files and is very successful at what she does. Why is it that she puts so much care in servicing other people but when it comes to her own life, the service is mediocre!
When it comes to business service why do we strive to provide the highest level of service and we expect to receive the same from others, but we just don’t dedicate the same amount of care and time in our own lives!
I ask you to demand first rate customer service when providing service to yourself; cleaning your apartment, making a meal, balancing your check book, spending time with your family, what ever it is, give 100% service and you will get a much happier customer!
Friday, September 17, 2010How To Get Out of Debt, Stay Out of Debt, and Live ProsperouslySince I began my business almost a year ago, I have been doing a lot of research to keep on top of current events as well as reading industry-related books. I recently finished a book called “How to get out of debt, stay out of debt, and live prosperously” by Jerrold Mundis, which I found interesting and I wanted to share with you.
This is an old book originally published in 1988 and later on revised in 2003. It’s a simple read, with many practical recommendations. The book talks about a change in lifestyle around your debt: which is to NOT to have any!
I began reading this book only for research reasons, but as I got into the book, the concept of not having debt and not using any credit cards in this time and age sounded very far-fetched. According to Mundis, even I had a debt problem since I had a recurring credit card debt, which I usually pay off each month.
Since I never tell my clients to do anything I wouldn’t do, I thought about an experiment of my own. The book recommends stop using credit cards immediately, so I did just that!
The idea of not using my credit cards for a day or two sounded nearly impossible. I put away my credit card and began living debt-free! The first day went pretty well with no major problems. But I thought that the worst of it would be the second and third day since I can push off emergency expenses only so far. But the second and third day came and went with not too much trouble. Soon I realized that I really don’t need to use money I don’t have… what a concept! What I found was the idea of not using my credit cards was more difficult than the actual act itself. I did use my debit card a bit more nervously, but I was able to keep things above water and I do feel less stressed about meeting my payments on time, and avoiding interest and penalty fees.
So, I guess there is life after credit cards after all! This is good news, especially these days. The new credit card debt reform that went into effect in February of this year, has improved some of the aggressive practices of the credit card companies but there are many things that consumers need to be aware of. One article that I found useful, What The New Credit Card Law Means For You, gives you a very easy to understand step-by-step detail of all the changes and what to look for.
I challenge you to do an experiment of your own, even if it is for just a day. I would love to know your experience!
Tuesday, March 23, 2010Should You Use a Debt Consolidation Service?
I am sure you have seen or heard many advertisements on credit consolidation and the thought might have crossed your mind: “Should I call them?” After all, your debt is increasing every day and things don’t seem to be improving any time soon. So, is debt consolidation the way to go?
There are benefits to using one of these services to assist you. For example, these services can:
- Reduce some of the stress by combining all your debt to one payment a month;
- Lower the interest rate on your current credit card accounts dramatically;
- Improve your cash flow by lowering your overall payments for each month;
- Eliminate late fees and penalties;
- Improve your credit score.
But keep in mind that it is not as great as it sounds, there are other factors that you should consider before you decide to use a debt consolidation service or not:
The debt doesn’t just go away!
Your debt is just consolidated into one pretty package. So whether you are paying one payment or 3 or 4, the amount you owe is the amount you owe. Unless the company is able to help you reduce your total debt, the amount you owe is there until it gets paid off.
A lower interest rate doesn’t mean you pay less interest
The debt consolidation companies are often able to reduce the interest rates on your current credit card accounts. You might be currently paying a 24% or even a 29% interest rate and they might be able to reduce it to 10% or even less. But if they have reduced your monthly payments and interest rates at the same time, then most likely you will be paying your debt for many years to come. If you were required to pay off your debt in 5 years before, now you might be paying it off in 15 or 20 years. More years to pay means more interest to pay. Here’s an illustration:
Let’s say you have $10,000 in debt with 24% interest rate and you pay $300 a month for less than 5 years. You will be paying a total of $6,060 in interest rates.
Now if you had the same debt of $10,000 with 10% interest rate you can pay as low as $120 a month for almost 12 years you will be paying a total of $6,875.
So as you can see, you will have a lower monthly payment and lower interest rate, but at the end of the 15 years you will have paid more in interest.
Of course the main factor is how much can you pay on a monthly basis. If you can increase your monthly payment from $120 to $150, it would have a major impact on the total interest you will be paying as well as how fast you can pay it off.
But don’t forget, you can also pick up the phone and talk to the credit card companies yourself. Let them know your situation and that you are not able to meet your debt obligations with the current high interest rates and that you are thinking about going through a debt consolidation agency. In many cases the credit card companies are able to reduce the interest rates for you directly.
False sense that things are fine
I am a big believer of fixing things at the root of the problem. If you find a quick fix to your accumulated debt, you aren’t looking at the underlying patterns that you have created in your life. The reason you are in debt is because you have lost control of your spending or your income is not matching your expenses. The more you can work on understanding how you got here, the better it is for you to learn to have a healthier relationship with your wallet. There was a bankruptcy repeat filings study done by John Golmant and Tom Ulrich for the Administrative Office of the U.S. Court where they analyzed 13 million bankruptcy filings. They found that 16% of the U.S. bankruptcy filings between 1993 to 2002 were repeat filings. In another study of Household Borrowing after Personal Bankruptcy, of those who had filed for bankruptcy, 89% had accumulated debt again and 16% had 60+ days delinquencies.
What these studies tell me is that even if one files for bankruptcy and clears away debt, studies shows that people still tend to go back to their old patterns of getting into debt… until they learn not to.
Learning the reasons behind your spending habits and debt accumulation patterns is the best way to ensure it won’t happen again.
Keep in mind the cost of debt consolidation
When analyzing all the plus and minuses of going through a debt consolidation agency, keep in mind that there is a fee for their services. Find out how much they charge; is it a flat up front fee or a monthly charge added to your payment plan? Knowing what the fees are will help you evaluate the cost / benefit ratio. Go back to the list above for all the benefits and the shortfalls of going with a debt consolidation service. Is the fee they are charging you worth it or not?
Sometimes the easy way might actually not be the best way. By learning how to deal with credit card companies, paying off your debt and improve your credit score yourself, you can build your self esteem. You can pay someone to fix the problem today or you can learn to for the rest of your life.
Have fun learning and let me know if I can help!