Should Your Finances be on Cruise Control?

Finances on Cruise Control

Do you enjoy road trips? It is one of my favorite ways to go on vacation, and at least once a year my wife and I take such a trip.

To avoid the strain on our own vehicles, we usually rent a car. For a long road trip, one of the must-have features for that car is of course cruise control, which allows me to set the speed at a fixed amount.

On those long portions of the trip, it is nice to put something on “automatic” and out of your mind.

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The Danger of Finances on Cruise Control

In some instances, putting some elements of your finances on cruise control or “automatic” can be a good thing.

For example, if you are working on developing your savings habits, it might be a good idea to setup an auto-draft from your checking account to your savings account each month.

Or, if you want to make sure you are consistently saving for retirement or college expenses, an automatic transaction to your investment account would be a good option.

However, putting things on “cruise control” with your finances could also present a problem. That recently happened to me with our home insurance policy.

We had been with the same home insurance company for almost 20 years even through our move from Round Rock to Frisco. In all that time, I really did not have a reason to complain about coverage or service.

I also got into the habit of receiving the annual policy renewal letter on-line as opposed to receiving the paper version.

So far, nothing wrong with any of that. It saved me time, it minimized the amount of paper I had to file, etc.

But here is where I ran into trouble:  Two years ago, I received the notice of renewal but I honestly gave it only a cursory review.

There was a big cost increase in the insurance premium and even though I saw it, I did not really process it.

It really did not hit me until I received a notice from my mortgage company with the corresponding increase in the monthly escrow amount.

I was a bit surprised, and of course, our monthly budget had to be adjusted. So even though we could handle the change, the fact that I had let something like that slip by me, left me with a bad taste.

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Lesson Learned: Automate Your Finances but Don’t Disengage

So what did I learn? Well, I always tell you that you have pay attention to your money in all aspects. I had to apply that lesson to myself. Again.

This past December, when I received the annual renewal policy for our home insurance, I did a more detailed review. This time there was no major increase, no major surprise.

However, I took it one step further. I decided to look for other options with insurance to see if we could do better with coverage and get more value for the cost.

I contacted a trusted insurance agent and he reviewed our needs for both home and auto insurance.

I was pleasantly surprised that I could save about $400 annually combined between our home and auto insurance premiums. All I had to do was to take the time to ask for different options.

I made the switch and I am glad I took that step. Reviewing your insurance needs is just one example of looking at your overall financial plan.

So regularly, take a moment to review what you are spending on different areas of your budget (food, internet service, phone service, etc.). Take the extra step to look for alternative options.

You may end up not changing anything, but then again, you could find savings and more bang for your buck.

Now, where is that cable bill?

Year End Financial Checklist

Year End Financial ChecklistCan you believe we are near the end of the year already?

Time flies and I am sure that if you are like me,  you are looking forward to the holiday celebrations and some well deserved rest.

However, before the year runs out, I wanted to give you a year end financial checklist.

The great Zig Ziglar said: “It’s true. Spectacular preparation precedes spectacular performance.

These actions will help you prepare to  start the new year on the right foot with your finances:

1. Check your Credit Report

Have you checked your credit report lately? This is something you should do at least once a year.

According to the Federal Trade Commission (FTC):

A credit report includes information on where you live, how you pay your bills, and whether you’ve been sued, arrested, or filed for bankruptcy.

Nationwide consumer reporting companies sell the information in your report to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.

The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months.

So take the time to request a copy of your credit report.

  • You can order your free annual credit report online at annualcreditreport.com, by calling 1-877-322-8228, or by completing the Annual Credit Report Request Form and mailing it to:
    • Annual Credit Report Request Service
    • P.O. Box 105281
    • Atlanta, GA 30348-5281
  • Get a report from each one of the agencies.
    • They are supposed to cover the same information but there can be differences.
    • In some cases entries in one report will not show up on the other reports.
  • In case you cannot get a copy of your report from the online website, proceed with the phone call or complete the form to request via  mail.
    • Just make sure you get your hands on that report.
    • If I had done this, I would have taken the steps to correct the problem before starting the mortgage refinance.
  • Review your report for any inaccurate entries.
    • Keep in mind that only entries that are inaccurate can be removed from the report.
    • Don’t fall for scams that promise to “clean-up your credit”.
  • If you find any inaccurate entries, contact the appropriate credit reporting agency.
    • Send a letter via certified mail, return receipt requested detailing the inaccuracies.
    • Consumer reporting agencies must correct or delete inaccurate, incomplete, or unverifiable information.
    • Inaccurate, incomplete or unverifiable information must be removed or corrected, usually within 30 days.
    • Additional information can be found at the FTC website.

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2. Assess Your Insurance Needs

As you work on your financial plan, I also want you to consider the need to manage the risks to your finances by evaluating the role of insurance in your financial plan.

What is the role of insurance? In simple terms, insurance is the tool that is designed to protect you and your family against what might happen.

Ensure you have the right type of insurance and the right coverage to protect your financial plan.

3. Check Your Retirement Plan

Understand how your plan is progressing and make adjustments as needed.

Even with all the focus on personal finances today, planning for retirement is one area where we continue to come up short.

The good news is that you can do better than average. Seven years ago, I was part of those statistics but now I have a plan that is yielding good results.

Here is how I am preparing for retirement.

4. Prepare a Will

Do you have a will? If not, you are among 50% of Americans with children who have neglected this important step.

So what are some of your reasons for not dealing with this issue? You might think it is costly (it is not), or complex (it is not), or that simply you don’t have anything to leave to anyone so you don’t need a will (oh but you do).

Or you might just not want to think about your own mortality.

However, the reality is that we will all face death and the sooner you face that fact, the better off you will be.

So here are the 3 Reasons you should prepare a will:

  1. Because it puts you in control:
    • If you die without a will, the state takes over deciding what happens with your property.
    • The state already has too much say in what happens in our private lives.
    • There is no wisdom in leaving the disposition of your assets to the government.
  2. Because it is simple and cost effective:
    • You don’t need a high priced estate lawyer to do this. For most of us it is really a simple process.
    • Personally I used an online service that provided my wife and I with the required state specific forms for our wills.
    • It just took a few hours and less than $50 and we are able to put our last wishes on paper.
  3. Because it shows love for your family:
    • Imagine if something were to happen to you. In the midst of the grief and sorrow of losing you, your family also has to deal with the legal ramifications of what to do with your assets.
    • Don’t leave a problem behind. Love your family to the end by taking care of your will preparation today.

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5. Get on a Budget

I have always told you, the budget is the key to your financial success.

If you can’t control your money, you can’t build savings, you can’t pay-off debt, you can’t plan for the future.

Make 2015 your best financial year by starting to get control of your money today!!!

What other steps could you take this month to help you make progress with your money in 2015?

7 Principles For Financial Success

How are you building your financial household? Is what you are doing working? Do you see positive results?

Our family has been on a financial transformation journey for a little over 9 years now and I have had some time to reflect on how far we have come.

We have experienced the rewards of applying God-given, time-tested principles for winning with your finances.

I wanted to share these 7 Principles for Financial Success with you today because I firmly believe you too can win with your money if you are diligent in applying them.

If you want to know more, you can check my e-book in which I share more about how these principles have changed our lives.

If you are winning with money, I would love to hear how have you applied these or other principles to succeed. Share those blessings with others!

“The law of the Lord is perfect, restoring the soul; The testimony of the Lord is sure, making wise the simple.”
Psalm 19:7

7 Principles for Financial Success

10 Goals for Your Money in 2014

10 Goals For Your Money in 2014Well here we are. It’s the last month of 2013. I want to be one of the very first to wish you a very Merry Christmas.

And before we get too busy with the hustle and bustle of the holiday season, let me ask you a question. How did you do with your money goals this year?

Yes, yes. I know I am meddling a little bit. By the way, I am asking myself that question as well. At the beginning of 2013 I set 4 specific goals for our finances this year. We are going to end up meeting 2 of them, getting close on a third one, and missing one completely.

I don’t want to be the Grinch who stole Christmas but this is a very busy season for all of us. Time will get away from you and me and in less than 30 days a New Year will start. I want you to have a plan and a set of objectives for your money.

Nothing ever gets done well without a plan and a target and that includes the management of your finances. Your money goals should be specific, measurable, realistic, and include a target date.

So, without any further delay here are 10 Goals for Your Money in 2014:

Budget

  1. Live on a monthly budget for 90 days (Jan-Mar 2014). If you have never lived on a budget before, it will take you about 3 months to master this new skill.
  2. Start using a cash envelope for one of your spending categories (e.g. groceries) in January. Using cash helps you control your spending. Cash is finite but when we use plastic, we tend to spend more.

 

Savings

  1. Finish your emergency fund by the end of March 2014. If you still have consumer debt, you should have $1,000 in a beginner’s emergency fund. If you are out of consumer debt, you need 3-6 months of expenses in your fully funded emergency fund.
  2. If you are out of consumer debt and have your fully funded emergency fund, ensure you are contributing 15% of your annual income into retirement by the end of 2014.

 

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Debt

  1. Try living without using a credit card for 90 days (Jan-Mar 2014). If you are on a budget, and living on less than you make, you don’t need a credit card.
  2. Pay off your 3 smallest debts in your debt snowball by the end of June 2014.
  3. Review your credit report by the end of January 2014. You can get a free copy of your credit report from each of the 3 credit bureaus once a year.

 

Protecting the Household

  1. Complete an insurance needs assessment by the end of April 2014. There are 7 types of insurance that are required to protect your financial household. Make sure you have the right coverage to protect yourself and your family.
  2. Complete the preparation of a will by the end of February 2014. If you have a will, review it for any changes required due to any changes in your family situation.

 

Stewardship/Giving

  1. If you are a Christian, begin tithing to your local church this year. For a Christian, this is not a salvation issue, it’s an obedience issue. If you are already tithing, look for ways to increase your giving. If you are not a person of faith, you can still find someone who needs your help. Ensure giving it’s an element of your financial plan for 2014.

 

I have given you some ideas for goals that cover all areas of your financial plan. But remember: it’s your money and it’s your life. So it’s up to you.

Make adjustments to the items on this list and add to the list. But please, don’t begin 2014 without a plan for your money. Do it today!

Question: What other financial goals would you like to meet in 2014?

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Life after Debt: Building Up Your Financial Household

House under Construction

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 By wisdom a house is built, And by understanding it is established;
And by knowledge the rooms are filled with all precious and pleasant riches.
Proverbs 24:3-4 (NASB)

Last week I began a short mini-series on what happens after you get out of consumer debt. I wanted to discuss where you need to apply all that energy and focused intensity you used to get out of debt.

If you recall, I equated a financial wellness, as a journey in three stages that are analogous to the building of  a home: laying down a firm foundation, building up your financial household, and letting the trees grow.

Today I want to cover stage 2: building up your financial household. After you get out of debt your next step, to strengthen your financial position. You want to focus on increasing your savings and managing the risks to your finances.

Savings

Savings fall in three major categories: emergencies, large purchases, and wealth building. Just like when you are building a home, some rooms will have higher priority than others. In the list below, I would personally pay initial attention to items 1 & 2.

  1. Increase your initial emergency fund ($1,000) so you can cover 3-6 months of your monthly expenses.
  2. Start saving for retirement (15% of your annual household income) and college expenses if you have children.
  3. If you don’t own a home, this might be a good time to start saving for a down payment that will cover 20% of the purchase price. If you own a home maybe it’s time to save for that renovation project you have been putting off for a while. Or you could start paying extra on the mortgage principal so you can retire that mortgage earlier.
  4. Is it time to replace one of your vehicles? Well, start saving now so you can buy a nice, reliable, used car with cash a few months from now. Stay away from car loans and car leases. Remember, the name of the game is to stay out of debt.
  5. How about saving money for some fun? You know, the financial wealth journey has to include some stops for fun and rewarding your hard work. You don’t have to wait until you are in your 80s for that cruise around the world. How about saving for a short weekend getaway or a 2 week vacation? And don’t forget about saving for Christmas!

 

Risk Management

The skill of managing risks is essential because life happens. We don’t’ control many things that happen to us, but we can control how we prepare for them.

  1. Review your insurance needs. It’s time to make sure you are prepared for what might happen. You need to properly transfer that risk to someone else via the wise use of insurance.
  2. Prepare a will. We all come into this world with a limited time. You need to be sure that you leave accurate instructions for your loved ones when your time comes.
  3. Get into the habit of checking your credit report with regularity. Each of the 3 Credit Bureaus is required by law to provide you with a free copy of your report every year. You could end up with 3 free reports each year (one from each bureau). Pay attention to your financial reputation.

 

 Question: Where do you need to put more focus today on your finances, savings or risk management?

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