Posted on

GenRise Participates in Economic Empowerment Conference in Baltimore, MD

Written by Robby Thomas

On April 20th, 2018, visionary Dr Kenneth Robinson, Pastor of Dream Life Worship Center, in Randallstown and a host of leaders in business, government and non-profit sectors hosted an economic empowerment conference at Morgan State University Business Center. The two-day conference featured world re-known speakers and authorities on the issue of economic empowerment, wealth and human potential. Dr Robinson opened the conference with an overview that touched on the purpose of the gathering and shared some thoughts on what he hopes can be accomplished going forward. He stated that, “this is merely the beginning of a movement that will empower people all over the country.”

Les Brown addressed the conference, (in a way that only he can), by sharing with the audience the importance of being able to sell your story. Clark Atlanta University, Professor and author of “Think and Grow Rich a Black Choice”, Dr Dennis Kimbro, (one of the reasons I attended the conference), talked about the wealth choice and what makes the great great. And the phenomenal Dr Cindy Trimm,presented on understanding the concept of money.

There were 18 specific empowerment workshops available to attendees. They included real estate development, how to do a business plan, how to repair your credit, crowd funding, how to start a non-profit, home ownership and e-commerce for your business. The presenters were all knowledgeable and the workshops were very engaging.

One of the more unique groups to present at the conference were the Parris Construction Group LLC, a women-owned real estate development company based in Baltimore. With more than 20 years of real-estate construction experience under their belt, the company exhibited their grace and grit. Unlike similar companies in the space, Parris’s willingness to share their insights, experiences and expertise with the community about the real estate business sets them apart. Expert presenters included Lola Thompson, who provided content on “How to build a real estate investment business.” Lola was very knowledgeable on the subject and gave attendees a great overview of the various options for building a real-estate business, from turnkey to development. Presenter Lorette Farris, addressed the issue of raising capital through crowd funding. Ms Farris, occupies a rare skill set in this Fin Tec space as a crowdfunding expert, sharing insights on a relatively new phenomenon. Putting both key real estate pieces together certainly made for extremely relevant content, especially for the city of Baltimore. Parris Construction Group also showed their engagement savvy by offering a free 20-minute consultation to attendees from the workshops.

During the break between sessions, Baltimore’s Mayor Catherine Pugh, spoke at the conference sharing her vision for the city. Mayor Pugh shared her economic development strategy and discussed ways in which her administration intends to approach the challenges that Baltimore faces.

Mayor Catherine Pugh speaking at the conference

Although the conference was not at capacity attendance, the contingent that were represented took advantage of the opportunity to build their knowledge base and professional networks. One of the remarkable observations I made throughout the conference was the underlying emphasis placed on realizing our dreams and full human potential. This idea was seamlessly shared within the context of practicing our faith. Overall, what too often sounds like a contrived conversation in the context of faith, sounded much different in this faith-based economic empowerment effort. In fact it was refreshingly energizing and well…empowering. To the organizer’s credit, this event underscored a notion of economic empowerment that includes faith but was built on practical learning, strategizing and work.

Robby Thomas and Dr Dennis Kimbro

 

Dr Cindy Trimm and Robby Thomas

 

 

 

 

 

 

 

 

 

Posted on

Six Credit Building Steps To Improve Your Credit Score

Building step 1: Never miss payments

Just in case you’re wondering, the worst mistake you can make that negatively affects your credit rating is late payments. Based on FICO’s credit formula, your payment history accounts for 35% of your credit score. Your credit payments are reported by your creditors every 30 days to the credit bureau. Any disruption in your payment pattern sends your credit file into a frenzy causing your credit score to plummet. Building from a missed credit payment depends on the type of credit account in question. For example, a mortgage payment is weighted more heavily than a credit card in the FICO algorithm and therefore takes more time to recover from. Secondly, the higher the score the more a late payment would negatively affect you. A recent study shared on FICO’s Banking Analytics Blog, noted that a 30-day late mortgage payment can take anywhere from 9 months to three years to recover from. Recovery times differ depending on the individual credit score. Credit cards may take less time to re-build from. The best way to mitigate a history of late payments is to NEVER ever miss payments going forward.

Building step 2: Lower Credit Utilization

High credit utilization is another mistake that negatively affects your credit rating. A credit card utilization rate above 30% would begin to drag down your credit score. You want to keep your credit utilization around 10%. In the case of high utilization, paying balances down is the best way to help improve your credit rating.   Carrying high balances sends the wrong message to the credit bureaus that you are cash strapped and living off credit. This in turn further hurts your credit score.  You’d also be paying double digit interest rates on those balances which increases your debt and makes it more difficult to pay off. Increasing your credit limit can be a short-term solution because it does in-fact decrease your utilization ratio, but this is not a solution for everyone. If you’re not disciplined about managing your credit accounts, a credit line increase can easily put you further in debt.  When it comes to building credit back up, don’t always settle for the quick fix, you’ll regret it later.

Building step 3: Don’t close older credit accounts

The FICO algorithm includes a category called “Average age of credit,” which represents 15% of your credit score. It essentially looks at the total “age” of each of your accounts or the number of years/months you’ve had an account and divides that number by the amount of accounts you have. The answer represents the “average age of your credit.” The higher the number, the more valuable it is to your credit rating. Which brings me to the point. Closing older established accounts on your profile would decrease the “average age of your credit” and ultimately hurt your credit score, especially if you’re trying to rebuild . If you must close an account, make sure it is not one of the older more established credit accounts. Secondly, if you close an account that negatively affects your credit utilization or lowers your available credit ratio, it can also prevent your from building your score back up.

Building step 4: Avoid co-signing or adding an authorized user.

There are various instances where cosigning a loan or adding an authorized user on your credit card is necessary.  It’s extremely important to be educated around the pros and cons of co-signing. Having spent more two decades in the banking industry, I’ve seen first-hand the problems that can occur when things don’t work out. The thing to always remember is that as a co-signer, you’re on the hook for that debt. Secondly, credit card companies for example, are not in the business of differentiating who did what when it comes to credit card balances.  Thirdly, some companies may not allow you to remove a person’s name from an account, even if you are the primary account holder.  You may have to refinance the entire loan/line and or re-apply for a new account altogether. Bottom line is the debt has to be paid. As stated earlier, if things don’t go as planned, make sure you’re not left holding someone else’s debt which can hurt your credit score. In case of a dispute with a co-signer, you can pursue a legal remedy through small claims court. Claim amounts can vary by state.

Building step 5:  Know your rights

Things like bankruptcy and foreclosure can impact your credit profile for years. The good news is, recovering from credit mistakes and rebuilding is time consuming but possible. More good news! All debt, with the exception of Federal student loans or Federal liens, have a statute of limitations. It’s really important that you know what they are. You can create your own DIY credit action plan to review, manage and monitor your credit in efforts to rebuild and recover.  As part of that plan you can get a free copy of your credit reports from annualcreditreport.com (All four bureaus) Equifax, Experian, Transunion and Innovis. A hard copy of your credit report will list when a debt is scheduled to fall off, including bankruptcy or foreclosure. In addition, to mitigate the negative, make sure you are building on the positive – your good active accounts. Never miss payments and keeping utilization rates down.

Building step 6: Beware of credit repair services 

The credit repair industry itself can be misleading and tough to navigate. According to the Credit Repair Organization Act, “companies that offer credit repair is prevented from demanding advance payment and are required to provide contracts in writing that gives consumers certain contract cancellation nights.”  If a credit repair companies is asking you for money upfront or want you to pay for a service they have yet to provide, they are breaking the law. I am sure there are legit companies out there providing a great service, but the industry is littered with many that make promises they are unable to fulfill. I hear stories from many of my workshop students, that have used companies who were ultimately unsuccessful in addressing their needs. That said, be aware of the quick fix schemes and be committed to building your credit score back up the right way.

 

Posted on

How to choose a credit counseling agency- 3 things to look for

Maybe you’re having difficulty keeping up with those monthly credit card bills. It could be student loans or even those old medical bills. Either way, you’re in way over your head and feel a bit overwhelmed. You may be looking for some direction in terms of managing your debt but, you’re not quite sure what to expect from a credit counseling agency. Here are three things you’ll need to look for from a credit counseling agency.

Make sure your credit counseling agency is accredited   

A legitimate credit counseling agency must be accredited. Non profit counseling agencies must obtain and maintain accreditation by the Council on Accreditation, Inc. (COA). COA is an independent third-party not-for-profit accrediting organization that review non-profits counseling agencies to ensure that they are compliant with respect to their practices. You can also cross-check the National Foundation for Credit Counselors (NFCC) before engaging with anyone who says they are a certified credit counselor.  Furthermore, do not hesitate to ask any counselor whether or not his/her agency is accredited. This should give you some sense of confidence that you’re making the right choice with a particular credit counseling agency and that your personal and confidential information will be handled in accordance with privacy laws.

Make sure your credit counseling agency does not charge you fees  

Most credit counseling agencies are non-profit organizations that receive funding to provide counseling or debt management services to consumers. In other words they do not necessarily charge you a fee for counseling services. In addition, they are often incented by creditors since it’s in a creditor’s best interest to ensure their receivables (your debt) is collected. This scenario benefits everyone involved. Keep in mind however, once you sign an agreement with a credit counseling agency your monthly payments to each of your creditors will be processed through the agency usually electronically. You are also contractually obligated to follow through on the payment schedule. Once the agency receives your payment they in turn submit payments to each creditor on your behalf as agreed. Review your credit counseling options to ensure you’re not paying any fees.

Make sure that your credit counseling agency will actually save you money.  

Saving money is one of the major positives in choosing the right credit counseling agency. Because these agencies have the ability to negotiate with creditors to help lower your rates, payments, stop late fees and over-limit fees they are able to help save you money. You’ll be more likely to pay off your debt much faster. Another point here is that while you’re under agreement with the agency you will not be able to assume any new debt, which is not bad given that you’re still getting back on good financial footing. On the down side however, your credit score will be negatively impacted in the short term or while under the agreement. Reason being, consulting with a credit counseling agency is viewed as a red flag by creditors. They see it as one step away from bankruptcy. The silver lining in all this is that, as long as you are able with the help of the agency to get out of debt you’ll be in much better shape financially and your credit score will definitely improve over the longer term as well. The key is to ensure that you choose the right credit counseling agency to begin with.

Below are the links to a couple of accredited credit counseling agencies.

https://www.moneymanagement.org

http://www.consumercredit.com

 

 

 

Posted on

3 Reasons To Repair Your Own Credit

Even with many years of experience in the financial field, I still found it intimidating to deal with the issue of repairing my own credit.  After being on the verge of entrusting the process to credit repair professionals, I decided to take some initiative and learn about the credit scoring systems on my own. Here are three reasons I thought it was worth repairing  your own credit

Reason number 1)  Repairing your own credit is an educational investment

One of the best investments you can make during your lifetime is in your own education. Educating yourself around the use and management of credit is supremely important. Credit usage permeates every segment of our lives, from student loans to personal loans, and from auto loans to mortgages. And yet, many school/college curriculums do not cover this issue or households for that matter. Investing time and energy in this endeavor will not only save you money, it will help you make wiser credit choices in the future. It will also pay dividends as you become more knowledgeable about the credit game.

Reason number 2) Repairing your own credit helps you avoid  future mistakes

Not only is educating oneself empowering, but acquire new knowledge and practices which when applied can help prevent costly and repeated mistakes. The simplest way to break old negative habits is to formulate new positive ones. The beauty of learning new habits, is knowing that you would be less likely to recycle past errors. Stop going in circles. Take the time to understand the credit process and particularly how you can employ new positive practices to help rebuild your credit and credit score.

Reason number 3) Repairing your own credit can be financially rewarding

For families whom are be impacted by less than good credit, the financial cost to their households can be significant. For example, over the life of a 30-year mortgage, the cost can be tens of thousands more, versus borrowers with higher scores. Having bad credit can also cost you a great career opportunity or time and resources with credit repair services. That said, whether it’s applying for a job or not knowing how the usage of credit can be leveraged to build wealth, learning about credit affords you the opportunity to become better stewards of your financial life. Ultimately, we’re talking about taking back control of your financial life with respect to your credit. This intangible asset and proper understanding of its usage is a financial difference maker which can help you build a financial legacy if not greater levels of self-sufficiency.

 

 

 

Posted on

6 Lessons I’ve Learned About Money

Experience is a great teacher. And experiences with money can provide some of the most important lessons of all.  Have you ever said to yourself, “Man, I wish I had done this or that” or, “I wish I hadn’t done this or that,” you’re not alone.  It is very important that you take a moment to consider what is at the core of your relationship with money. I have. Learning about money can be life-changing and I have learned some amazing truths about money. Here are five important lessons about money.

Money lesson 1 – Money is a tool

Humans over time have made gradual steps toward the future with innovation and usage of tools. From tools used for hunting and gathering to those used for farming and trading. Money, as we understand it today is the world’s most ubiquitous tool. It is used for everything. Let’s be very clear about how value is ascribed to money. Printed money or fiat money, has no inherent value, it assumes value because it is a legal medium of exchange. Real money is backed by something of value, generally a precious metal such as gold. There should be a difference between how we value currency versus how we value what the currency represents. One of the keys to understanding money as a tool is to first understand what real money is. Once you’ve done that, take the time to strategically think through how best you can utilize this tool.

Money Lesson 2- Money Can Be Grown/Invested

In general, being employed is the primary way in which people earn wages (money) they exchange labor and time for wages. Wages/earnings equate to money. Money can also be grown or invested. Money in many ways can be represented as a seed (capital) where it can be planted or invested by an (investor) for the specific purpose of getting a return  a return (creating a profit). There are numerous ways to grow and invest money. Seek out which is the best option for you. Publications such as Forbes and Money are great resources to get more information on investing.

Money Lesson 3Money must be managed

Much like a craftsman perfecting his craft, it takes time to get better at managing money. To become more proficient requires time, work and dedication. There are some basic principles that can help you become more skilled in managing your money. For instance, learning how to budget and can help you develop positive habits that will serve you well over time. As your knowledge about managing money improves, it becomes easier to understand the more advanced concepts such as investing or planning for retirement. It all begins with having a basic understanding of managing your money.

Money Lesson 4- Money follows purpose.

One of the more important financial concepts I’ve learned is that, “money follows purpose.” Because money is a tool and has no will of its own, it can only do what it is “purposed” to do period. Let that sink in for a minute. One reason money often leaves your pocket or bank account and goes to a retail store is because those businesses have  a clearly defined purpose for your money. A business owner creates a purpose for your money by creating a product or service. In fact, that whole process has a very critical role to play in our economy. The real issue here is that you must be disciplined about creating a clear purpose for your money. It goes without saying that if you don’t someone else will.

Money Lesson 5Money amplifies who you are

We’ve often heard it said that, “people don’t change overnight.” There’s some truth to that statement. Winning the lottery won’t make anyone change who they’ve always been. They may change zip codes, but core values and beliefs are difficult to divest.  Money can create for us – “a blow horn effect.” A blow horn is a device often used to amplify human speech. For example, if you’ve been a compassionate person, chances are you’ll still be compassionate with more money. Likewise, if you’ve always been irresponsible with money, then more of the same can be expected. One way to handle this potential imbalance, is to focus on becoming better at managing your money. Understand that this tool will only amplify who you are.

Money Lesson 6Money is literally everywhere.

For many of the world’s citizens the thought, pursuit and business of money is all consuming. As a financial services professional, I often view the world through a financial lens. As a result, I understand that everything has financial worth…everything. Even things that we often take for granted such as trees and basic vegetation.  For every segment of human life, apart from a few indigenous tribes, “money matters.” Many of the world’s conflicts and crises in some way stem from an economic origin. Much like ancient times money as a medium of exchange is evolving. Paper money may not be entirely obsolete but it’s very likely the future of money will be different. In fact, it may already be here. Cryptocurrencies such as bitcoin are challenging the traditional notion of money and is already occupying a unique space in our world, thanks to new technology. The key lesson here is we live in a world where virtually everything on planet earth can be quantified, everything has a value and because everything has a value, although not always easily converted, it can in some way be equated to money.

Posted on

8 Reasons Why You Need A Budget

Image credit: istock.com
Budgeting

May 27th, 2017

Budgeting is one of the best practices you can use to effectively manage your household spending. Here are 8 Reasons Why You Need A Budget.

1) Order in the House (The Fundamental Importance of Budgeting)
One of the primary reasons you need a budget is to create a blueprint or a structural foundation to put your financial house in order.  A budget gives you a sense of your financial priorities and your hard earned money a sense of purpose. Without having a budget, your money habits could become chaotic, which can impact the entire household not to mention the “state of your union.” Another big reason you need a budget is to help keep your household focus on its priorities and reduce unnecessary stress.

2) Who’s controlling whom?
Do you control your money or does your money control you? That is the question. A budget can provide you timely and important insights about your spending. By taking a quick inventory of your spending habits you can learn a lot about yourself and make adjustments when necessary.  A budget helps keep you in the drivers seat.  Make sure you are controlling your money, as opposed to the other way around.  After all, you cannot make life decisions about your finances if you have no control. Don’t ever be at the mercy of your money.

3) Got my mind on my money and my money on my mind
The third reason you need a budget, is because it helps disciplines our socio-psychological relationship to money. We all have socio-psychological relationship to money. Whether we have little or a lot we measure our lives and our standard of living by how much money we have or don’t have.  Overall, our obsession with money is ongoing and often moves between our wants and needs. Budgeting can help keep us focused on our needs as opposed to our wants.

4) Establishing financial discipline
The fourth reason you need a budget is because it can help you manage your money more effectively. It can help you build a strong base for your financial future. If you’re trying to build financial security there is very little chance of you getting there without understanding how to budget. Having and using a budget helps you establish that strong sense of  financial discipline.

5) Planning and Goal setting
The fifth reason you need budget is that it helps you to establish and achieve financial goals. By constantly reviewing your monthly financial picture you learn how best to approach you personal financial goals. You also learn what may be the best steps to take in realizing those goals. Without having any idea about your personal finances, it is very difficult to plan and execution on strategies toward goal achievement. Having a budget is very key to planning and goal setting.

6) Review and Manage expenses
Reason number six is that budgeting helps you to clearly define your expenses, whether they’re fixed, variable, monthly, quarterly or annual. Managing expenses is one of the key problem areas for many households. A budget is the ultimate tool which provides much needed insight on your expenses as you deliberate on key financial decisions.

7) Pennies add up
Having a budget brings with it an understanding that everything adds up. Remember the old cliché, “a penny saved is a penny earned.” The truth is small purchases add up, small fees add up and small savings add up as well…bottom line is everything adds up. Making sure you’re on the right side of the addition formula. And that you are clearing making the is our seventh reason to underscore the importance of budgeting.

8) It’s a family affair
And finally, the eight reason you need a budget is because it has enormous impact on your family, particularly over time. Budgeting makes a difference in terms of day-to-day living, saving for college, purchasing a new home, automobile or saving for retirement. Make it a group effort. Although budgeting may be seen as a bit restrictive for a family in the short-term, it can be super beneficial in the long run. In terms of engaging the family, make it fun.  Provide incentives for cooperation –such as a movie night, or pizza night or ice cream night—you get the point. This may be a good way to involve the fam, but just make sure that you account for those cool incentives, in your budget.

Click here for a free budget worksheet

Posted on

Understanding The Difference Between Saving and Investing

 

 

 

 

 

 

 

 

May 28th, 2017

Most of us have heard the terms,“saving” and “investing” at one point or another.  These terms are often referred to in the context of a financial conversation. Much like myself, you may have heard these terms as a child while listening in on adult conversation. As an adult however, I still found myself needing some clarification  on the differences between the two. Over the years, I have learned that they are two uniquely separate concepts.  And furthermore, getting a better understanding of the differences between savings and investing can be extremely valuable in promoting your financial well-being.

Saving
The word “saving” often brings to mind the act of putting money aside for the future…which is absolutely correct. By definition it is income not spent or as economic theory refers to it, “deferred consumption.” It is also important to note that “saving” differs from “savings.” Saving refers to the act of increasing one’s assets, whereas “savings” refers to one part of one’s assets (such as a CD or savings account). Some examples of saving methods include bank insured deposit accounts, such as savings and money market accounts, and non-bank insured accounts such as mutual funds. And, of course, there are other types of unconventional saving methods such as, saving or investment clubs.  The key is to find a method that is most suitable to you. One of the key differences between saving and investing is that savings tends to help prepare you for unforeseen and future expenses such as emergencies, college expenses, a down payment on a car or new home. This is primarily why savings needs to be fairly liquid. Many financial experts such as Dave Ramsey, recommend that households have an emergency fund of between 3-6 months worth of household expenses saved to deal with household emergencies.  As we all know – life happens. Having an emergency fund also helps to ensure that you’re not dipping into your general savings or other long term assets.
Click here to access savings tools that can help you acheive your saving objective(s)

Investing
The concept of investing involves more than just putting money aside for future expenses. It has direct impact on your long term financial goals. Investing is the step by step strategic process you engage to manage and maximize the assets you have acquired over your life. It takes into consideration a high level of insight and discipline when it comes to debt reduction, retirement planning, tax planning, wealth accumulation and personal interests. In sum, it is a key step in securing your personal legacy. Many experts refer to investing as the vehicle that, “allows your assets to work for you.” Although there are literally hundreds of ways in which to invest, having a clear understanding of your investment goals is critical to any investment strategy. Investing, is not always about money. For example, it can be viewed in the context of managing your time, getting an education, self-development, or even starting a business. The thing to remember is that investing is about maximizing your financial viability for the long haul. That said, learn to be patient and disciplined. Don’t be in a hurry. Follow your strategic plan, and be consistent as you work to achieve your investment goals.

Click here for the 2017 Investment guide from forbes.com

 

Posted on

Building Savings Through Trust and Community

My wife and I were discussing a recent article. The article shared some of the unique ways families were able to save money. I shared with her one of the ways my grandmother had saved money in the Caribbean island of Trinidad and Tobago. She called it “sou sou” (check out this Essence Magazine article about it). The term and method I’ve learned came from the Yoruba people of western Africa. It was brought to the Caribbean by west African slaves. The method is not widely known in American culture. However, the concept is being practiced by many ethnic communities within the United States. Some practicing groups include Caribbean Americans, Asian Americans and Jewish Americans. Sou-sou is a savings club where each party pays an equal amount of funds into a collective pool. Each person then receives the total amount of the pool on a rotating basis. Payout schedules are set for either a weekly, bi-weekly, or monthly basis.

My wife, a business executive and the great granddaughter of sharecroppers from Louisiana, had a puzzled look on her face. I could sense something going on in her mind. What followed made it very clear of what was happening. She mentioned how deprived she felt that this knowledge was never shared within her ancestry.  She also felt that the knowledge would have made a significant difference in the lives of her family. Considering the large wealth disparity between the majority population and the descendants of slaves, I tend to agree. Our discussion led to a genuine sense of purpose that we should start a savings movement. We scheduled a family conference call and not long after started a family savings plan. A total of 15 individuals are participating.

The three things needed for a savings plan to work are trust, consistency and community. Traditionally, groups that used this savings method operated outside of banking systems. In some cases because banking systems were not accessible or available to them. What’s amazing about these groups is that for them, integrity and honor still matter. In these communities no one wants to risk getting a bad name or reputation. The method is a hassle free, cost effective way to not only save money, but raise capital to start a business as well. The savings concept is so rooted in some Asian communities that according to a study by UCLA sociology professor, Ivan Light, “75% of the members of the Korean American Garment Industry Association belonged to or had a family member belonging to a savings club or kye. And more than 36% said that at least part of their start-up capital came from a savings club or kye.”

Why should you take part? I like to think of this as a “NO INTEREST” loan of sorts. Instead of using a credit card or installment loan to borrow money, you have the benefit of receiving a lump sum of money without fees. For instance, if you were trying to save up $3K at the same pace of $250/month. How long would it take you to do so? Well, of course the answer is 12 months. But in this model, if you are the 1st person to receive the pool it will take you 1 month. If you are the 2nd person, it will take you 2 months…and so on. Only the person in last place will take 12 months to collect the pool.

Here’s an example of how it works.

Let’s say there are 12 participants each contributing $250 per month.

Month 1 = $3,000 in the pool

Recipient #1 gets the first $3,000 round (and can place in savings, pay off a bill, or pay cash for something they need, etc.

Recipient #1 (like everyone else) continues to pay $250 per month.

11 months to go…

Month 2 = $3,000 in the pool

Recipient #2 gets the $3,000 and continues to pay $250 per month for another 10 months…. you get the idea.

Saving money aside, one of the key benefits here is being able to build a strong sense of financial trust and community with those closest to you. For our family, we saw it as a great opportunity to reconnect and help each other.

Posted on

How to get out of debt and save

For anyone trying to get out of debt and save, finding ways to do both effectively is a major priority. If you’re opting to do it on your own, you must be both disciplined and creative. One do- it- yourself method involves reviewing your budget to create some wiggle room or cost savings which can then be applied towards your debt. The cost savings can help create what is known as a “debt reducer effect” What is a debt reducer effect? A debt reducer effect is simply the systematic application of funds saved from renegotiating your monthly expenses, which will be directed at paying down your debt. Here are a couple steps on how you can get out of debt and save money while on a budget.

Get out of debt and save through budgeting

The first thing you’ll need to do is review your budget by revisiting each line item. Take a critical look at where you may be able to save money. That’s correct, save money. The goal is to squeeze as much cash out of your existing budget to create a reasonable monthly amount you can apply towards your debt. I know this sounds virtually impossible. Keep in mind that everything is negotiable. This is where the rubber meets the road. Consider this scenario: You’re the CEO of “You, Inc.,” and “You, Inc.,” is in trouble. You, Inc., has been operating in the red for a few years and the time has come to make some tough decisions. Ultimately, the company must do some significant cost cutting or risk losing everything. What do you do? Well…you’d take out the hatchet and do what’s necessary to avoid losing everything. Of course, you’d weigh the pros and cons on which items must go, which is easier said than done. The bottom line is it’s not supposed to be easy, but as the CEO you have to make the tough decisions. Much like this CEO scenario, getting out of debt on your own will be one of the toughest things you’ll ever have to do. As the scenario suggested, if you don’t cut expenses you could possibly lose everything. Here are some suggestions on where you can begin to get out of debt and save.  

Renegotiating expenses to get out of debt and save

With the everything is negotiable mindset, begin to look at your monthly expenses. For example, some of your larger monthly expenses include housing expenses, rent or mortgage payments. These are contractual obligations and will not change during the life of the contract, however, upon the expiration of your rental agreement you could consider moving to a less expensive apartment to save money, (until your debt is paid off).  If your mortgage rate and monthly payment are high and you’re able to refinance your mortgage for a lower rate and payment, you’d be able to save on that as well. You can also look at your monthly auto payment to see whether it may be in your best interest to sell your car, trade it in or perhaps refinance your auto loan (if you are able to and, it in fact saves you money). Consider that you could be saving money on monthly auto insurance payments also. Do the math. See whether selling your car and using public transportation—or ride-share services such as Uber or Lyft—may help save you money and free up additional funds which can be re-applied toward getting out of debt and building more savings. You may also want to look deeper at other monthly expenses such as phone or cable plans which you can downgrade or modify to save additional money. And, of course, eliminate activities or unplanned expenses that negatively impact you. Get into the “weeds” of the needs and wants of your household. And when I say household, I mean household. Everyone has to participate.  This is not an overnight process, nor is it easy to accomplish. In fact, it will and should impact your lifestyle for a while. It could be 24-36 months or more depending on the amount of debt you’re in. Here are a few things to remember. First, taking charge of your financial life is one of the most empowering activities you could ever engage. Secondly, speaking from experience, you can live on much less that you believe you can. Thirdly, by instilling the self-discipline now, you are establishing a solid foundation that can help you get out of debt and save.

Maximizing your savings by putting it to work

Once you have made the adjustments needed to realize some savings, you can immediately put those funds to work.  Beginning with the smallest debt account first, you can begin to slowly apply payments toward that debt. Even if you were only able to apply a small amount of funds saved from the review and renegotiation process, that amount applied directly to your debt significantly accelerates debt reduction. Let’s say it was $300 per month.  That’s $3,600 annually or $10,800 in 36 months. In addition, you may also be able to apply additional income such as work bonuses or your annual tax refund to further accelerate paying off your debt. You want to utilize every opportunity to get out of debt and save. The bottom line is, it can be done if you stay on the path. What’s more gratifying than being able to get out of debt on your own. (Ok maybe getting a million-dollar check.) You’d also be saving yourself the cruel irony of borrowing to get out of debt. Once your debt is paid, you can shift priorities on your budget and dedicate funds to build up an emergency fund and or retirement savings.

Posted on

4 Key Concepts That Teach Children About Money

Understanding and promoting the importance of financial literacy has been a part of our national dialogue for well over 200 years. Consider this letter written by John Adams to Thomas Jefferson recognizing the need for financial literacy, “All the perplexities, confusions, and distresses in America arise, not from defects in their constitution or confederation, not from a want of honor or virtue, so much as from downright ignorance of the nature of coin, credit, and circulation.” That letter was dated August 23, 1787. Here we are 230 years later—occupying the most sophisticated age the world has ever known—and that statement couldn’t be more relevant. Though it is safe to assume that John Adam’s words related more to the nation than to specific individuals, it is poignant as to the power of his convictions, that solving some of our social ills require a unique understanding of money. The awful truth is that the average household is often ill equipped to sufficiently educate their children about money. In many instances parents themselves may have come from a background where they were not exposed to a conceptual understanding about money.

Having worked in the financial field for over two decades, I saw up close that many individuals do not have financial knowledge that extends beyond owning a savings or checking account. Because money permeates every aspect of our lives, whether it’s shopping, recreating, planning for college, looking for a job, getting married, purchasing a new car, home or retiring, it warrants special focus and attention.Over my career I have observed four key age appropriate concepts that can help guide the parent/child money conversation.

Financial Literacy for Kids –

Concept 1: Budgeting

One of the ways parents can communicate the concept of budgeting to their children is by using the term in conversation. Children are curious and spontaneous by nature and will give parents ample opportunities to talk about money, especially when the conversation begins with, “mom/dad can I have?” By using such opportunities to set expectations with your child that the family is on a budget and will have to plan for purchase, (even if you can afford it) is one way to introduce your child to the concept of budgeting. This is not a no… it’s more of a let’s review this request. Budgeting, as interpreted by your child, can be eventually perceived as a unique family value. Secondly, use the opportunity of providing an allowance to your child to familiarize them with the practice of budgeting. It could be as simple as teaching them how to plan for what they want as well as how to save for longer term goals, such as Mother’s or Father’s Day gifts. Just like any other educational concept, the earlier children are exposed to them, the more likely they become proficient later in life.

Financial Literacy for Kids –

Concept 2: Credit

Understanding credit, how it works and how it should be managed is currently a priority on the nation’s Financial Literacy agenda. With trillions of dollars in both student loan and credit card debt negatively impacting millions of Americans, it begs the question whether thing’s would be different if people knew more about credit much earlier in life. It is critically important to not only create a foundation of understanding for our children on the management of credit, but to also help them avoid the pitfalls of being in lifelong debt. A simple exercise: use a one dollar coin and several pennies on the kitchen table to demonstrate how one dollar borrowed at 7 percent interest can be visually represented. I have a feeling this exercise will work just as well with chocolate chip cookies.

Financial Literacy for Kids –

Concept 3: Savings

Kids are generally not instinctive about preparing for the future. Such planning comes with insight and maturity. It is the responsibility of parents to teach children how to plan. One of the first steps to take in that regard is to practice what you preach. It is much easier to show your child than to give them a lecture.  Although the lesson here is fairly simple to communicate, it is easier said than done. That said, kids love a challenge, so perhaps you can incent them to save a percentage of their income for a specific reward.  For example, every hundred dollars they save you give an additional twenty to their savings fund. The goal of course is to encourage saving versus indiscriminate spending. Be creative, find ways to engage your children to save at least 10 percent of their income.

Financial Literacy for Kids –

Concept 4: Investing

Before children get old enough to work part-time or assert their independence socially and financially. It would serve them well to be familiar with the key financial principle of investing. Broadly defined investing is expending money with the expectation of achieving a profit or material result by putting it into financial schemes, shares, or property, or by using it to develop a commercial venture. However, in the context of a middle or high schooler for example, investing could be time invested in studies, to secure better academic scholarship opportunities and ultimately better college and career opportunities. Parents must be wise enough to link the concept of investing to matters where children can relate. For example, kids are engaged in the world of social media and mobile technology. Those platforms provide a great segue into an investment discussion as it relates to the producers of those products and services. Talk to them about the unique opportunity to not only be a consumer of great technology but how to also invest in something you use or enjoy by becoming part owner through stock purchasing. Plant the seed that investing can be a great vehicle to goals achievement and financial wellbeing.

These four concepts are constant throughout our entire financial lives. Both adults and children should have a good understanding of these 4 key concepts about money. The goal should be to promote the principles of financial discipline. We all know how critical it is for kids to formulate strong social footing, but we should all recognize the importance of developing strong economic footing as well.

The Community Connection

For many families in the low and moderate income demographic, non-profits and faith-based organizations have become important surrogates in bridging the knowledge divide for both parents and children as it relates to understanding money. One example would be the recent partnership between Operation HOPE, a major international financial literacy organization, and the Church of God in Christ, Inc., a 6-million-member denomination.  Their joint initiative seeks to provide Financial Literacy programing across the nation through their network of local churches. In addition, many local banks in partnership with the Federal Deposit Insurance Company (FDIC) also provide a Financial Literacy Curriculum called Money Smart, a financial education curriculum designed to help low and moderate income households. Parents can seek out these organizations either locally or via the internet to learn more about their financial education programs and how they can be accessed either locally or remotely. The Consumer Financial Protection Bureau is also a great financial education resource for both adults and youth. They provide a host of both printed and webinar content in their resource library.