Financial Fitness

Managing money is a life skill that everyone must learn. It's a skill that will help you meet financial obligations, avoid serious debt, use credit responsibly, buy a car and a home, create and stick to a household budget, save and invest wisely, and plan for a comfortable retirement. Good stuff!

Financial fitness won't guarantee happiness, but it surely will help you to avoid some major heartaches. The information on this page provides basic information that can help you to manage your personal finances successfully.

Managing Your Money 101 An introduction to the basics of financial fitness

First of all, remember, it's YOUR MONEY!

So often we as consumers forget that the time and effort we put into getting an education, working, developing relationships and building our lives is all about our own choices. But we seldom stop to think that every minute of every day; we are spending our own valuable resources in some way - maybe time, maybe money, maybe energy.

Consider this — you work at a rather low paying, part-time job, to help pay for your college education. Let's assume you make $6 per hour. You want to take a trip on Spring Break with your friends. You want to buy some new clothes to take on this trip, plus a beach towel and sun screen, and of course you'll need money for food and a place to stay. Say it all adds up to $200. How many hours of your hard work at $6 per hour will it take to make this happen? Wow... almost two (2) weeks at that 20 hour per week job just to take this trip! Lots of time and money and hard work for one trip! And that doesn't even take into consideration gas for the car and other expenses you may have between today and the day you leave for the beach!

Now relate this same scenario to all of life and you will begin to get a better picture of what all consumers are up against these days. You will do well to begin today getting a good grip on 9 powerful "knows" and "dos" for YOUR MONEY.

Remember, this is about YOUR MONEY, YOUR CHOICES, YOUR LIFE!

Nine Powerful "Knows" and "Dos" for Your Money

1. Sort out your values and those of others that may impact your personal financial situation.
2. Establish realistic goals that you would like to reach.
3. Determine the monthly net income that is available to you.
4. List your monthly estimated and adjusted expenses.
5. List all of the debts for which you are responsible.
6. Write down every daily expenditure that you make for one month
7. Look at your credit report at least once a year.
8. Set up a payday to payday spending plan.
9. Begin saving now.

1. Sort out your values and those of others that may impact your personal financial situation.

What is most important to you in life? Do you really know? This simple exercise can help you discover your priorities.

Pick up a packet of 3 x 5 cards. For several days, write down everything in the entire world that you think you may want — nice car, family with three kids, a graduate degree, a trip to the islands, a home in the burbs, a second home in the mountains, excellent health and fitness, early retirement, a life filled with peace and serenity, a huge diamond ring. That's it - be as extravagant as you like. Write down every single thing that comes to mind, one item on each card. Then, each day, go through the cards, keeping the ones that continue to grab you and say "yes, this is really what I want in my life"! Put aside those cards that seem to grow less important over time. Continue this process every day, until you whittle your pile down to about five cards. Most likely for this time of your life, those are your most important values.

Will these values change over time? Of course, people change. So repeat this exercise often to keep yourself focused on what is important to you. This will help you to determine exactly how you want to spend your valuable resources of time, money and energy on a daily basis. Soon you will find that you are able to make decisions and choices that get you what you want... because you now know what you want most!

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2. Establish realistic goals that you would like to reach.

Your values are the things in life that are most important to you. Your goals are the accomplishments or steps you must establish along the way to make your values become realities.

Goal setting is easy. Goal reaching is tough! Use this form to sort your goals into three major categories, short term, mid-term, and long term.

• Short term - those goals you can accomplish within about a year.
• Mid-term - those goals that can be accomplished in about five years.
• Long term - those goals that will take more than five years to accomplish.

List about five goals for each of the major categories. Be specific. Perhaps you would like to graduate from college within the next year, go to Hawaii within three (3) years, get married and have a child within five years. Hopefully your goals will be directly tied to the values you determined to be important to you. Keep your lists of goals along with your most important values cards. Adjust your goals based on those you reach and those you are still working on or determine to abandon or change.

Now you have built some of the beginning basics of your resource management! Congratulations! It's YOUR MONEY and you are well on your way to using it YOUR WAY!

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3. Determine the monthly net income that is available to you.

This is easy! Using our example, if you work 20 hours a month at $6 an hour, your monthly income is $120 per month. Or is it? Remember, other people are getting some of YOUR MONEY before it ever gets to you, like the government, and perhaps your employees if you receive benefits. So, determine what you can count on actually coming in, your net income. DO NOT count overtime or other potential income of which you are not certain. If these things come in, you can make adjustments. However, for the sake of realistic planning, only count income you know you will receive.

Keep this calculation of your monthly net income up-to-date and file it away with your lists of values and goals. At this point, it's a good idea to get all of these pieces of paper organized. Find a folder or a drawer and begin keeping your Money Management file. You will always have what you need to work with if you begin this simple process today.

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4. List your estimated monthly expenses.

Determining monthly expenses can be a challenge, but don't become discouraged. Finding out what you really need or want to spend on a monthly basis is critical to managing YOUR MONEY.

You will most likely have expenses that fall into 3 categories:

• Fixed (FI) - those expenses that stay the same every month, such as a mortgage or rent, auto insurance, perhaps day care costs;

• Flexible (FL) - those expenses that change on a monthly basis, such as utility bills, food costs, gasoline costs;

• Periodic (PE) - those expenses that only occur occasionally, such as holiday/special occasion gifts, doctor or dentist visits, car repairs.

Use the Monthly Expense Form to list your expenses. Fill in all the items on the form that apply to your personal situation. In some cases, you won't know exactly what an expense will be - just estimate as best you can; you can always make adjustments later. Try to mark each expense on your Monthly Expense Form as Fixed (FI), Flexible (FL) or Periodic (PE).

As you complete this form, you may feel a sense of dread coming over you. Don't panic... this is normal. Most consumers really do not realize what they are spending every month. However, this is a crucial step in gaining control of YOUR MONEY and YOUR LIFE.

When you have finished as much of the Monthly Expense Form as you can, add up everything (be sure you determine the MONTHLY cost for each item) and place it in your Money Management file.

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5. List all of the debts for which you are responsible

There are not too many consumers who start college with no debt. Americans College costs make it necessary for many students and families of students to borrow money.

It is wise to begin keeping a record of all debt owed, payments made, and balances outstanding. This is sound money management, and it also helps you keep focused on where you are, financially, in regards to your values and goals.

Listing debt is relatively simple. Items that should or might be noted for each debt are:

• Name of credit grantor/lender or collection agency;

• Address of credit grantor/lender or collection agency;

• Telephone and fax numbers of credit grantor/lender or collection agency;

• The name of a representative with whom you have established a relationship, if such exists;

• Dates of all personal contacts (other than payments) with the credit grantor/lender or collection agency, who was spoken with, and a brief statement regarding the interaction;

• The balance owed to each credit grantor;

• The monthly or periodic payment to each credit grantor;

• The interest rate assigned to each debt;

• The estimated payoff date;

• Any other important and/or pertinent data that may be of interest at some future point in time.

Total the debt and also total the monthly obligation for all debts, and keep this information in your Money Management file.

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6. Write down every daily expenditure that you have for one entire month.

Go to the dollar store and buy a small spiral flip notebook to stick in your car, your pocket, your purse, or your backpack. Keep it handy!

Write down every single penny you spend every day for one month. If you put a quarter in a parking meter, write it down. If you run through the fast food drive-through, write it down. If you pay your cell phone bill, write it down. Write down absolutely everything you spend every day for one month straight. For most people, this exercise is a real eye opener. Your true spending habits will be revealed, and you may be motivated to change some of your behaviors and stick more closely to decisions and choices that support your values and goals.

Once you have recorded your expenditures for a month, go back to your Monthly Expense Form and make the appropriate adjustments based on what you now know and the changes you are motivated to make.

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7. Look at your credit report at least once a year

Residents of Georgia (and many other states) are eligible to receive two copies of their credit report from all three major credit reporting agencies every year.

Credit reporting agencies, or credit bureaus as they have been called, are simply repositories for information regarding your credit and how you pay your bills, as well as some additional personal and legal information. Credit reporting agencies receive information about you, your debts, and your payment history from the various creditors with whom you have done business or who have extended credit to you. Some creditors may report to all three of the major agencies while some may choose to only report to one or two. Therefore, it is imperative that you keep abreast of what information is being reported about you to all three agencies.

Credit reporting agencies DO NOT make or dictate your credit or credit rating or any score that may be assigned to you. Your credit rating or credit score is purely and simply a documented record of your bill paying behavior over time which the credit reporting agencies keep together for the purpose of determining credit worthiness in the future.

There is a lot you can learn from looking at your credit report. If you would like to receive copies of all three credit reports, print the Credit Report Request Form and send a copy to all three agencies listed, or call them and order it, or order it online.

Equifax Credit Information Services
PO Box 105496
Atlanta, GA 30348-5496
(770) 612-3200 (GA Residents)
800-997-2493
www.equifax.com

Experian
PO Box 9600
Allem, TX 75013
800--311-4769
www.experian.com

TransUnion Corporation
Consumer Disclosure Center
PO Box 1000
Chester, PA 19022
800-888-4213
www.transunion.com

When you receive your credit reports, you will also receive information explaining how to read and understand it. If you have further questions or need assistance with particular issues that need attention, that help is available through either the credit reporting agencies themselves or through the non-profit Consumer Credit Counseling Service (CCCS). Locate the CCCS office closest to you by visiting www.nfcc.org. These services offer assistance with credit report clarification at no or little charge. Certified Credit Counselors will sit down with you and look over credit reports to help you understand, challenge, or resolve any concerns that may arise. In addition, there is a great deal of assistance available to you regarding credit related issues at www.clarkhoward.com.

Before we leave this topic, be aware that there are many predators out there today who would love to steal your identity and therefore ruin your credit and potentially your life for a very long time. Identity thieves do not care about you or what you might suffer, but are only concerned about themselves and what they can gain by taking on the identity of individuals who are unaware of what is happening often until absolute credit chaos has broken out. There are many great tips for protecting yourself from identity theft at consumer.georgia.gov.

In addition, be aware of companies that promise to "fix" your credit or sell you a package to help you "fix" your own credit. The only way a consumer will ever "fix" his or her credit is by consistently making full and timely payments on all debts over time. Although this may take some time to accomplish, debts did not happen overnight and neither will the "fix". But, with time, consistency, determination, and wise planning, the "fix" will become reality.

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8. Set up a payday to payday spending plan

You are now ready to establish a Payday Spending Plan.

Begin by listing all of your unique monthly expenses (which now should be adjusted based on your adjusted expenses on your Monthly Expense Form) on the Payday Spending Plan. Some categories typical for most consumers are already listed on this form to show you how this works. Take your own Monthly Expense Form and your Debt Listing and complete the Payday Spending Plan with all of your own expenses and debts listed down the second left hand column. In the far left hand column, list the dates or timeframes that relate to that particular expense or debt payment (i.e.: 1st, 15th, 25th, weekly, monthly, etc). Across the top of the form, list all of your payday dates for one month only. Under the payday dates in the "Received" line(s) enter your anticipated net income for those paydays. Now you can cross-reference the dates/timeframes that expenses and debts are due with your paydays as they come up. So, as you approach the 15th payday, for instance, you will look to the far left, select all expense/debt payments that will be made between the 15th and the next payday, and write the amount due to be paid in that space under the payday column.

Using the Payday Spending Plan, you can project out for a period of time and begin to see how you can make progress on debts, adjust for periodic expenses or expenses you were not anticipating at all, and also have a comprehensive quick look at your finances at any point in time. Over the months, you will begin to build a great form of documentation for all of your financial activities that relate to personal spending and planning. Add one more step and you will virtually always feel very in control of YOUR MONEY. When a bill arrives, write the amount of the payment due on your Payday Spending Plan and then place it in your Money Management file. You will have a quick and ready reference for amounts and dates due for bills rather than continually rummaging through a pile of envelopes and papers. For expenses and bills for which you do not actually receive a bill, list or estimate those amounts approximately one month ahead of time and you will begin to know what to anticipate as you become intimately involved in the real flow of YOUR MONEY.

What if a totally unexpected expense comes up? Often a car repair or doctor bill can seem to throw you off completely. Never fear... you are now able to look ahead and anticipate the effect that paying for that expense by cash or credit will have on your Payday Spending Plan. As you become more accustomed to relying on this form, you will learn what risks you can and cannot take and still maintain the money flow that works effectively for you.

Good luck with this final step in YOUR MONEY planning! Reaching this step successfully and gaining confidence in using the Payday Spending Plan will make a huge difference in how you feel about YOUR MONEY!

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9. Begin saving now

Now it is time to go to the bookstore, library, and Internet and do research on saving, investing, and wealth building. Also, be sure to sit down with your Human Resources representative at work and learn about how you can take advantage of all the financial opportunities offered to you there. At this point, the sky is the limit when it comes to YOUR MONEY!

Meanwhile, here are a few small – and effective – savings activities that you can begin today.

• Designate a special box, jar or container of some kind where you can keep all of your pocket change. Beginning today, DO NOT EVER spend pocket change that you receive in any transaction! You will be pleasantly surprised to find that you will be "saving" approximately $5 - 8 per week once you begin this simple habit. That adds up to $260 by the end of the year. Want to take a short trip? There you go!

• If you already save your pocket change, accept this challenge. Every time you break a bill larger than $1, place every remaining $1 bill in an envelope in a drawer somewhere out of your sight. Force yourself not to touch this money! It is just amazing how much you will save between your pocket change and these $1 bills over a month's time. If you already save all of your $1's, then the next challenge is to never again break anything smaller than a $10 bill. (In other words, save all your fives.)

Once you are saving in these "little" ways, you will have the itch to save and will be well on your way to investigating savings vehicles with more long-term impact such as those offered through your employer, the stock market, and other financial services. The pure momentum and empowerment of understanding how money grows itself through compounding interest will motivate you even more to learn about and participate in long-term savings programs that will benefit you and your family for years to come!

All of these exercises and suggestions may seem cumbersome and like they would take forever to accomplish. Not so! Start today and you will be well on your way within a month. If you need help or would like support as you navigate this process, contact any CCCS by visiting www.nfcc.org or contact your school Financial Aid Office for assistance.

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