You’re having a baby! And your first munchkin is anxiously awaiting the arrival of his new baby sister. You did everything you were supposed to do to get ready for baby: you kept your doctor’s appointments; took prenatal vitamins religiously; ate well; stayed away from cigarettes; put your feet up when you could; prayed. And you kept your firstborn involved, talking about the little bun in the oven and how he’d get to be a big boy and help his little sister figure things out as she grows up. The whole family is excited! Mom came to town to help when the baby comes. Any day now. The baby’s room is filled with hand-me-down furniture from the first one and all the gifts of baby supplies and clothes that you received at the baby showers – one at the office and one with family and friends – for this one. You know that what a child needs is a loving home with parents who provide for their needs, just like you had. To that end, you and your partner are more than capable. You both work, bringing in a combined $80- to $90,000 a year with overtime. You own your home and have family and friends all around you. There are good schools in your area. You and your family believe you have done everything necessary to be ready for when the baby comes, just like the last time. But even though you know from the first one that raising a child requires a sizable financial commitment, you never tried to budget for it. The one thing you haven’t considered in getting ready for either child’s arrival is how to prepare for the long-term financial responsibility of raising them.
In a Huffington Post article posted 8/18/14, it was reported that raising a child born in 2013 until the age of 18 would cost about $300,000 when adjusted for inflation. Housing is the largest expense, followed by child care and education, then food. How often is it that parents sit down and formalize a financial plan in preparation for the years to come after the baby is born? When the first one came to bless the world, did you and his father ever have a conversation about putting a plan together to protect the family’s financial future? If so, did you take it a step further to commit to some objectives then follow through on implementing them, consistently? Do you know how to go about these things? Or are you comfortable just seeing how it goes? Is there anything about the financial situation you grew up in that you would rather not repeat with your own children?
Housing is the largest expense related to raising a child. None of us want to think about this, but there may come a time when we are called back home earlier than expected. There are many children who have faced this reality, having to grow up with only one or neither parent because they passed away. Would your beautiful new baby girl and her older brother be able to stay in their home if one income or more was no longer there? At the end of those 18 years the children you raised through struggles and triumphs will be off to college or trade school. Who will pay for it? The time to figure this out and take action is now. Eighteen years sounds like a lot more time than it will be. And the more time you let go by before getting started on protecting your family’s future, the more (exponentially more) it will cost you when the time comes that the money will be needed.
Parents spend much time and energy first planning for the baby to arrive then doing all the things necessary to ensure the basic needs are in place to raise your children properly – food, clothing, shelter, education. But while you’re building a family it is important to ensure that it is grounded on a solid foundation. That is, a financial game plan based on income protection and savings and investments for emergencies and education and even retirement. I encourage you to capitalize on the advantage of time that is in your possession today. It doesn’t have to be the overwhelming or painfully sacrificial experience you may be imagining.
Feel free to comment and share your own insights and knowledge!
Two new shows on premium cable that are very relevant and insightful about this month’s Financial Fashionista theme are Ballers and Survivor’s Remorse. The former just completed airing its first season and the latter has just begun it’s second.
This month’s theme is: “There are a million ways to make a million dollars. The trick is, what do you do with it once you get it? It’s not what you make, it’s what you keep and grow.”
Ballers is about a retired NFL player turned financial adviser building an advisory business with a partner who urges him to “monitize” his friendships with the professional athletes in his circle. The show gives an insider’s look at the temptations, business opportunities and struggles – financial and otherwise – of today’s sports stars.
Survivor’s Remorse tells the tale of a newly minted NBA mogul and his family’s nouveaux riche lifestyle. His business manager is also his cousin, and works hard to be the voice of reason in his financial management. For example, he convinces the “baller” to give the relatives who moved with him to Atlanta paid positions in his company instead of handing out money indiscriminately.
There are 3 important messages these shows bring to light:
First and foremost, they’re topical. Recently there have been several stories of athletes who, despite having been eight- and nine-figure earners in their heyday, now struggle to pay the bills.
Secondly, they are cautionary tales for any newbie coming into a windfall. People on the outside looking in tend to look at the bells and whistles with wonder, and newly minted millionaires tend to love the attention. But these programs show us that there is more going on behind the scenes. Many ballers with flashy lifestyles are cash-poor. And it is easy for a fortune to evaporate if the person doesn’t manage spending properly.
Thirdly, both programs shed light on how personal relationships must be managed when large sums of money come into someone’s life, just as well as the money itself. But there is a contrast between the two plot lines on this issue: On Ballers, Vernon is an NFL player whose family is eager to live the good life and he supports them even though he cannot afford it. Vernon put his childhood friend, Reggie, in charge of managing his money. Although Reggie seems to mean well and goes to bat for his boy, and Vernon remained loyal to his friend, they eventually learn that Reggie is out of his depth.
Cam Calloway has his cousin running his business and because the family is so close-knit much of the drama that comes up is thwarted by the love they have for each other. Though Cam took his cousin’s advice and hired his family, it was not before insulting his abilities for a major mistake with an endorsement.
Take-away: If even the rich have to think about where there money is going, why don’t we? You don’t have to have a million dollar net worth to treat your personal finances like a business. You are the CEO of your financial situation. Think Me, Inc. Like any business have a budget, mission, strategy and implementation plan to succeed at your financial goals.
We’re nearing the end of summer. In some places the public school year has already begun. And do you know what that means? Christmas is around the corner! Sure, back-to-school season is almost over and parents are happy, I’m sure, for the relief on their wallet. But at the blink of an eye we’ll be gearing up again for that great shopping season that retailers and consumers alike wait all year for. In our debt-dependent, consumerist society we are most vulnerable to overspend during this time.
Christmas, for better and worse, can be a very emotional time. It raises sentimental feelings about family, friends and togetherness. Advertisers are masters at pushing those emotional buttons to create a strong impulse to buy things we often can’t afford to express to our loved ones how much we care. The best defense is to devise a solid plan and commit an iron will, now, to resist the temptation to overspend later. We certainly don’t want to experience another year paying off all the debt we accumulated in the name of the birth of our Lord!
Here are five things to do starting today to handle the next big shopping season like a boss!
- Make a List
List all of the people (individuals, organizations, charities, etc) for whom you would like to buy a gift. Write down everyone you can think of. You can pare down later.
2. Get Ideas
Get an idea of what each person/organization would want or appreciate. Write down all of these ideas next to the name. If you’re really organized use a spreadsheet! As you know, vendors will be throwing huge deals at us to get our business. This way you know what to zoom in on when your phone apps, inbox and mailbox gets inundated with offers.
3. Estimate the Cost
So now that you have your list and some ideas about what kind of gifts each recipient may like, you can begin to put a budget in place. Get estimates for the items. Yes there will be sales, discounts, rewards and cash back promotions, but it’s still useful to determine how much it could cost without those benefits. Give yourself a little cushion. The grand total will be your Target Christmas Shopping Allowance (TCSA).
4. Start a bank account
For the sole purpose of your Christmas budget. This way, it won’t get mixed up with other money. If you leave the Christmas funds in the same account that you shop and pay bills from it will be easy to have a memory lapse after a while and end up dipping into it. Also, it will be easier to see how well you’re progressing toward your TCSA by keeping these funds separate.
Now comes the hard part: consistent implementation. There are roughly three months between now and Christmas shopping season. How much money do you need to save each month to reach your TCSA, and by what specific date would you want to accomplish that savings goal?
Knowing how much money you will need, and by when, along with clear ideas on the types of gifts you want to focus on will hopefully give you some sense of control and reduce stress when the season is upon us. It will help with overall household budgeting as well because you aren’t waiting until the last minute to come up with a large sum of money. You get to pace yourself. And when the time comes you may be less likely to make hasty, financially wasteful gifting decisions.
On fleek: the quality of being perfect or on point; the combination of fly and sleek, synonymous with ‘on point’ (on top of things; in control of the situation) Source: http://www.urbandictionary.com
How to be on top of our finances and in control of our financial situation isn’t something that comes to most us naturally. Many of us don’t have parents and other mentors and influencers who have the knowledge and personal experience from which to impart any real financial wisdom. It’s one of the main areas of weakness in the public school curriculum. Money management, after all, is foundational to life itself but I have yet to hear of a high school or middle school that teaches kids how to handle money. We’re told to go to college or trade school and get a job but nothing about how to handle the money we will spend the majority of our time and energy to earn. So for the most part we’re left to figure things out as we go along, which is often a journey riddled with setbacks, stress and missed opportunities.
So what does it mean to have your finances ‘on point,’ or ‘on fleek?’ A high income? Loads of money in the bank? Certainly those things have the potential to make it a lot easier. But there’s the saying, “It’s not how much you make, it’s how much you keep.” Fortunes are made and lost every day. The specifics of what it will take to get in control of your financial situation is unique to you, however here is a good place to start.
Top 3 Ways to Get Your Finances On Fleek, Starting Today!
1. Keep Your Receipts.
Do you withdraw cash from the ATM and a day or two later you have no idea what you did with it? Do you impulse shop on a regular basis? Do you go to a store for one thing and end up getting ten? Do you buy things simply because they’re “cheap” or a “great deal?” In our capitalist society it’s easy to fall into these pitfalls. One small, “insignificant” purchase here, another one there, and in a couple of days or so your wallet is light again.
Or do you purchase with your debit card on a regular basis? I have broken myself out of the habit of never having cash, for two main reasons: 1) obviously there are times when I actually do need greenbacks to pay for something, but 2) paying with a debit card, just as with a credit card, can give the feeling that you have more money than you really do. There’s a pain factor in having to reach into your wallet or purse and remove that money from your person and hand it over. Swiping a card doesn’t involve as much deliberate thought – you don’t literally see the money leaving you. Worst yet, it is easier to walk away without a receipt because we assume the transaction will appear on our statement.
Homework: For 30 days get a receipt for every single purchase, no matter how small, and even purchases that are unusual/one-time; don’t leave anything out. Keep the receipts in a folder dedicated to that purpose. At the end of the month – or throughout the month if you’re a very organized person – categorize them. For example: gas; toiletries; eating out; transportation; coffee; breakfast; personal care; entertainment; etc. At the end of the month add up each category then add them all up for a grand total. You will repeat this 2 more times (come back for Part 2).
It is imperative that you understand what your spending habits are and where your money is going before you can truly be in control of your finances. Just as how pulling out cash forces you to face the reality of the depletion of your bank account, collecting receipts forces you to view your spending in a concrete way, unlike just keeping it in your head.
2. Know Your Worth
Your “net worth,” that is. Your Net Worth is a number that measures your personal financial condition. Knowing this number will give you a baseline for your financial life. It will provide a frame of reference for gauging the progress of getting your finances on fleek as you learn, implement those lessons, make adjustments, and improve. In a nutshell, you want to get to a place where this number continues to go up, or at the very least does not go back too often. How do I calculate my net worth, you ask? Simple: your assets – your liabilities.
What are assets? Things you own that are of value; things you can sell. Approximate what they are worth, realistically. It’s easy to look up similar items on eBay, craigslist and elsewhere on the web to see what others are willing to pay for similar things.
What are liabilities? Your financial responsibilities. Debts and obligations. Ex., student loans, credit cards, personal loans, medical bills, etc.
There are several advantages to knowing your Net Worth. It paints a very realistic picture of your financial situation in the here and now. It gives an idea how far or not you have to go to at least breaking even. Life is like a business, you want to operate at a profit. In addition, seeing the big picture can make tackling the details much more manageable. And it can impart more of a sense of purpose to keeping track of receipts, discussed above (more on that later). For people with families of their own, the net worth can give a general idea of how much of a financial burden your family would be left with if, God forbid, you take your last breath before being able to get on solid financial footing.
3. Honor Your Commitments Reputation is everything. And honor cannot be compartmentalized. You’re either honorable and trustworthy or you’re not.
The worst thing you can do is destroy your financial reputation. This isn’t about being perfect; it’s about the journey to a clean slate. Your net worth, discussed above, includes all debts and obligations and that isn’t just about credit cards and student loans. Have you borrowed money or other resources from family and friends that you haven’t begun to return? Have you asked for something with the promise to repay in one way or another but have yet to follow up with action? These are things that will hurt you in the long run financially. Not only will your loved ones no longer trust you, but the circle of people you will be able to rely on if and/or when things get even worse will disappear when word gets around.
It doesn’t take much to keep your reputation stellar as you get your money on point. All you have to do is be your word. Say what you’ll do then do it. Don’t over-shoot how much you can accomplish. Be honest about your capabilities and then be disciplined in keeping in integrity. If a wrench gets thrown into your path, let your creditors know up front then state by when you will be able to get back on track. Even with institutions, as long as you consistently exhibit the intention to repay, you can keep some of the pressure off. Pay what you can afford and do it on a regular basis: monthly or bi-weekly until you get to a point where you can do more.
***What tips and tricks do you use to keep your finances on fleek? Respond below!