YO U R F IN A N C E S
Control spending by
shopping “naked.” Leave
your cards at home and
bring no more than $10
or $20 in cash with you.
KAREN CHENEY
Y ou s h o u ld
sta rt by keeping a clo se eye on w here
yo u r m oney g o es.
S u re , y o u m a y th in k y o u h a v e a h a n d le
o n y o u r s p e n d in g . A fte r all, s o m e 5 0 p e r c e n t o r m o re o f
y o u r m o n e y p ro b a b ly g o e s to s u c h fix e d e x p e n s e s a s a
m o rtg a g e o r r e n t, in s u ra n c e , a c a r p a y m e n t, o r o th e r
lo a n s. Y ou c o u ld p ro b a b ly m a k e a c lo s e g u e s s o n y o u r
m o n th ly fo o d c o sts , u tilitie s , a n d o th e r r e g u la r b ills to o .
B u t w h a t a b o u t th e r e s t o f y o u r m o n e y ? “S o m a n y p e o p le
d o n ’t h a v e a c lu e w h a t th e y s p e n d ,” sa y s G le n d a K e m p le ,
a D a lla s fin a n c ia l p la n n e r.
W h y d o e s it m a tte r w h e r e e v e ry d im e g o e s? I t ’s
im p o s s ib le to c u t b a c k w ith o u t k n o w in g h o w y o u r c a s h
d is a p p e a rs in th e firs t p la c e . I f y o u tra c k y o u r s p e n d in g ,
y o u ’ll s e e th a t th e $5 y o u s p e n d h e r e a n d th e $ 2 y o u
s p e n d th e r e d o in d e e d a d d u p to m o re th a n c h u m p
c h a n g e . A s m y fa th e r-in -la w , a fa n o f o ld -fa s h io n e d
p h ra s e s , sa y s,
" S a v e pen n ies. Spend d o llars.”
I t ’s n o t
ju s t th a t s a v in g p e n n ie s e v e n tu a lly g e ts y o u m o re d o lla rs
to s p e n d . T h e b ig g e r id e a is th a t if y o u c u t b a c k o n
friv o lo u s th in g s , y o u c a n e n jo y s p e n d in g m o r e w h e r e it
re a lly m a tte rs . T h a t ’s th e e s s e n c e o f b u d g e tin g .
Y ou m a y still h a v e to p o s tp o n e a fe w b ig -tic k e t
e x p e n d itu r e s —lik e a fa m ily v a c a tio n , s e a s o n tic k e ts to
s e e y o u r fa v o rite te a m play, o r th a t lu x u ry c a r y o u ’ve
b e e n e y e in g . (I d id s a y th is w o u ld b e h a rd .) B u t y o u
s h o u ld
start by elim in atin g triv ia l, n eed less co sts—
a m id - a f te r n o o n d o u g h n u t, say, o r th o s e s m a ll, im p u ls e
p u rc h a s e s . P la n y o u r d a y s o th a t y o u b u n d le e r r a n d s a n d
u s e le ss g as. T a k e o n c h o re s lik e m o w in g th e la w n th a t
y o u m ig h t b e p a y in g s o m e o n e e ls e to d o . I f s h o p p in g is
o n e o f y o u r fa v o rite r e c re a tio n s , c o n tro l s p e n d in g b y
fo llo w in g fin a n c ia l p la n n e r D e e L e e ’s a d v ic e :
Shop
" n a k e d ”
— L e a v e y o u r c r e d it c a r d s a t h o m e a n d b rin g
o n ly $ 2 0 in c a s h w ith y o u . G o h o m e w h e n i t ’s s p e n t.
Y ou m a y a lso b e a b le to fre e u p e x tr a sa v in g s b y
refinancing yo u r m ortgage.“A
y e a r fro m n o w , i t ’s
u n c e r ta in th a t c o n d itio n s w ill b e a s fa v o ra b le ,” sa y s K e ith
G u m b in g c r, v ic e p r e s id e n t o f H S H A ss o c ia te s , th e
n a tio n ’s la rg e s t p u b lis h e r o f c o n s u m e r lo a n in fo rm a tio n .
“N o w is a g o o d tim e to a c t.” E v e n if y o u h a v e a n a d ju s t-
a b le ra te m o rtg a g e th a t is d u e to d r o p b e lo w th e 3 0 -y e a r-
fix e d le v el, c o n s id e r fix in g y o u r r a te a n y w a y , h e say s. I n
th e lo n g ru n , y o u ’re lik e ly to sa v e a b u n d le .
T o q u a lify fo r a n e w m o rtg a g e , y o u ’ll n e e d to p ro v e y o u
a re c r e d it w o rth y , w a r n s G u m b in g e r. I n th e p a s t, y o u
c o u ld g e t a w a y w ith h a v in g d e b t e q u a l to 5 0 p e r c e n t o r
m o re o f y o u r in c o m e . N o w d o n ’t e x p e c t to re fin a n c e if
y o u r m o n th ly d e b t e x c e e d s 4 0 p e r c e n t o f y o u r m o n th ly
in c o m e . I f y o u r d e b t is h ig h , u s e y o u r in c re a s e d s a v in g s to
p a y it d o w n .
T h e best in vestm en t you can m ake right
now is to trim a n y h ig h -in te rest credit card debt.
O n c e y o u h a v e a h a n d le o n y o u r d e b t,
fu n nel yo u r
extra sa v in g s into an em ergency fu n d .
W ith th e
e c o n o m ic e n v ir o n m e n t a s s to rm y a s it is n o w , a ra in y d a y
fu n d is c ritic a l. T h e ru le o f th u m b is th a t a tw o -in c o m e
c o u p le s h o u ld h a v e th r e e m o n th s w o r th o f liv in g
e x p e n s e s in a n e m e rg e n c y fu n d . T h is m o n e y s h o u ld b e
tu c k e d in a s a fe p la c e lik e a h ig h - in te r e s t s a v in g s a c c o u n t
o r a m o n e y m a r k e t f u n d —n o t in m o re v o la tile s to c k s o r
h a r d - to - liq u id a te re a l e s ta te . I f y o u ’re in a o n e -in c o m e
fam ily , try to sa v e a s m u c h a s s ix m o n th s o f e x p e n s e s in a
c a s h a c c o u n t.
W h ile y o u ’re s to c k in g u p o n e m e rg e n c y fu n d s ,
co n sid e r opening a line of credit at yo u r bank.
T h a t w a y
if y o u lo s e y o u r jo b a n d d o n ’t h a v e e n o u g h sa v in g s, y o u
c a n fall b a c k o n h o m e e q u ity —n o t c r e d it c a r d s —to p a y
b ills. I f y o u w a it u n til y o u g e t a p in k s lip to a p p ly fo r a
h o m e e q u ity lo a n , y o u lik e ly w o n ’t q u alify .
W ork harder and sm arte r to keep yo u r jo b .
“F in d
o p p o r tu n itie s to h a v e a p o s itiv e im p a c t o n th e b o tto m
lin e ,” sa y s N a n c y C o lla m e r, c a r e e r c o n s u lta n t a n d
f o u n d e r o f
LayofpSurvivalGuide.com.
“S ta y v isib le . I f
y o u ’r e te le c o m m u tin g , y o u n e e d to s p e n d a little m o re
tim e a t th e o ffice. F a c e -tim e s till m a tte rs .” S h e a lso u rg e s
p e o p le to s ta r t n e tw o r k in g n o w —b e fo re g e ttin g la id off.
“P e o p le w ill fe e l m o re c o m fo rta b le m e e tin g w ith y o u if
y o u a re e m p lo y e d ,” s h e say s.
F in a lly ,
keep sa vin g fo r yo u r lo ng-term g o als
lik e
r e tir e m e n t a n d c o lle g e , e v e n if i t ’s o n ly a little b it. D o n ’t
p a c k it in a lto g e th e r, s a y s K e m p le . “C o n tin u e p u ttin g
m o n e y in y o u r 4 0 1 (k ).” O f c o u rs e , i t ’s h a r d to in v e s t fo r
th e f u tu r e w h e n th e m a r k e t is d o w n . Y ou m a y w a n t to r u n
to C D s a n d b a n k sa v in g s a c c o u n ts —w h ic h a re s o u n d
p la c e s to s ta s h y o u r e m e rg e n c y f u n d s —b u t n o t y o u r
s a v in g s fo r lo n g -te rm g o a ls. So, th in k o f to d a y ’s m a rk e t as
a b ig sa le . “N o w is th e tim e to buy,” a s s e rts K e m p le . I f y o u
d o th e s e th in g s , y o u ’ll b e s a fe to d a y a n d in th e fu tu re . G5)
166
OCTOBFR 2008 BETTER HOMES AND GARDENS
