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More of Getting Financially Fit for 2013

Last week I promised that we’d talk about some specific small steps you can take to change your finances around. Why small steps? If it’s too big, your sub-conscious mind will revolt against huge goals which seem impossible to reach.

You’re not going to lose 60 lbs, but you can lose a pound a week. You won’t run the marathon this summer, but you can go for a 15 minute walk each day. You also won’t be debt free by March, but you can start on that journey with one step at a time.

Resolve to say no: Whether it’s to yourself when it comes to spending, to your kids, people at work, or anywhere else. It’s the one word that’ll change your financial life and overspending.

Set yourself a credit limit for the next month. Pick a dollar figure below which you’ll pay by debit card or cash. Maybe $20 or $30 bucks – that’s it. Anything below that, you’ll pay with real money, instead of running up debts. It’ll become a great habit and will cut down your credit card balance in huge ways.

Take your credit cards out of your wallet for two weeks. You don’t need them just to go to work and home. That way the temptation and impulse spending is gone. Take a $20 bill and hide it in your wallet or purse for an emergency. If it’s really for an emergency you’ll still have it in there in six months. With credit cards we spend 12 to 18% more than paying by debit card or cash. When you don’t have them on you, you can’t overspend.

Keep your car for another year. If you believe a cool car is a status symbol and a must-have, you’re doomed to be in debt for decades to come. Not to mention that almost 50% of people trade their vehicle and STILL owe more than it’s worth. The goal should be to drive a reliable vehicle that doesn’t have payments with it, which are killing your chances to save, or to get ahead financially.

Annual bills kill your budget, but they’re not a surprise. You know they’re coming – but you don’t have the money to pay them. Open a savings account and add up what you’ll need for next years’ Christmas bills, your property tax and car or home insurance. Divide it by 12, and put that amount away monthly. A small amount each month is doable, a huge bill sets you back months.

Pay off one bill. Minimum payments buy you another month – nothing more, and it’s treading water. Credit cards and debts are not your friend. They’re financial dream killers, suck money out of your pocket, and add a ton of stress to your life and your relationship. Take your smallest bill and put every dollar you can towards it while paying minimum payments on everything else. When it’s gone, you know it’s not coming back. If you want – and you should – take the next smallest and focus only on it. This step-up plan will get you debt free in less than half the time. It’s an entire section of the It’s Your Money book and will change your financial life forever.

Test drive these six suggestions for the next two weeks or the rest of the month. It’s not overwhelming and it’ll be easier than you think. Then you can choose to carry on with some or all of them for another month. By that time, it’ll be habit and part of your life. If nothing else, at least resolve to make this the year where you spend more time planning your finances than your vacation.

It’s time to start our “No Spend Week”

This started with a story in the Washington Post a couple of months ago about a lady name Kate Wheelock and her family who made it a 14 day plan (and did survive).

Now, we’re always ahead of the curve so don’t be surprised if you catch Oprah now doing the same thing. But remember – we were there first!

Our plan is to go through a full week without spending any money. No credit or debit cards and no need for cash – you won’t need any of it. Pay your regular bills such as your utilities and other monthly obligations but that’s it.
So today you’ll need to fill up your gas tank and get to the grocery store. Yes, that’s it. Then you can leave your cash, credit and debit cards at home for the week.

Now as I’m more experienced by two days, here’s a couple of things:

You have to make the tank of gas last. Plan your errands, don’t do them, or walk wherever you can.

If you have kids – get them involved. If possible, take them shopping with you so they can buy into the idea that what you buy is what you get – period. If not, you’re just being weird again. You can also have them play along. Yes, make it a game and not a pain and you’d be amazed how your attitude changes. Give them an envelope and every time you and your son or daughter agree that today you would have bought this or that for them, the cash goes into the envelope, instead.

Kids learn quickly and real cash in an envelope vs. the chocolate bar that’s long gone makes a big difference. They’re visual – the chocolate bar is barely remembered but the cash is still there – as is the lesson of foregone treats or spending results in REAL money. Maybe all of us could use that lesson a little more often…

You won’t be seeing the inside of a restaurant. That’s not a bad thing anyway as they are usually 20% food cost and 80% ambiance that you’re paying for.

That’s the hard one for me so I’m expecting Subway and Domino to be really hurting for a while. The food you have in the fridge or freezer does turn into meals! But now you have to think vs. just going back to the store!

Whether you do it to just see if you can, or to find out if you can make it for a week without all that extra (and 99% unnecessary) spending, let us know. There’s strength in numbers and perhaps you can share some of your insights.
If you’re a Christian like I am, consider doing it for Lent this year as we approach the Easter season. Lent is from the Anglo-Saxen word to lengthen.

In the 1st century the Lenten season was originally six days, now it is the 40 days before Easter. I was actually inspired to make it two weeks after my Pastor’s sermon this past Sunday sharing his three items.

In the words of President Obama: Yes you can!

Join us and let’s stay in touch. Do remember that when you tell people why you brought lunch to work or the likes they’ll want to make fun of you. It’s always amazing how many and how often broke people want to give you financial advice!
Oh, and if you’re not participating: Why?

I don’t want to put you on the spot but is it that you’re afraid of what you’ll learn? Afraid to let go of those fancy coffees or impulse spending? Or afraid to fail? Come on – there’s no failure even if you make it one day! It’s between you and your wallet. It’s your money!

But would you at least give yourself a credit limit for a week? Make it $10 bucks and that’s all you can spend for the day. Gas, food, Tim Horton and everything…would that be something you’d consider?

Getting Financially Fit For 2008

The good news: It’s a new year! The chance to start over, to resolve to do better, to do more, or in the case of your payments and all that interest – to do a lot less.

The bad news? It’s likely that you’re already broke! How is that? Well, we spend more than 120% of our disposable income, half of us have no savings and almost 70% of us don’t make RRSP contributions. Why? Because every dollar we earn goes to make a long list of lenders really really rich, and there’s simply nothing left at the end of the month.

So when it comes to making some commitments about our debt, credit and all those bills, perhaps we should think small to make sure we set ourselves up for a win, and not a sure-fire let-down. But small doesn’t mean pointless, small just means some little steps you can actually keep, that’ll pay off big for 2008.

If you need additional motivation, remember that every $100 you don’t pay out making lenders rich is really about $150 or more. Why? Because you earn gross income, then all the deductions and tax come off your pay, and it’s only the net income that you have left over to pay bills.

So here are some more points, continuing our list from last week:

6. Set yourself a credit limit. If you won’t leave your credit cards at home for at least 90 days – pick a dollar figure below which you’ll pay by debit card or cash. Maybe $20 or $30 bucks – that’s it. But anything below that, you’ll spend with real money, instead of running up debts. It’ll become a great habit and will cut down your credit card balance in huge ways. After all, look at your statement. Almost all the charges are for pretty mickey mouse amounts that add up in huge debts – twenty bucks at a time.

7. Destroy your line of credit cheques and unhook the account from your bank card. Your line of credit was set up for emergencies and not for monthly bills. It’s too tempting to use the account if there are cheques around. Because when you use a line of credit for a monthly bill – the next bill will be here in thirty days, while you’re paying the last one off with interest over a year or more!

8. Close your overdraft. I know – it’s like being hooked on drugs. It’s so convenient and always there and you can’t live without it any more. Well, that’s what the banks were counting on, and where they make a huge amount of their profit. But it’s killing you. Just a $1,000 overdraft will cost you between $200 and $300 in interest and fees. It’s a one-time pain to cancel the overdraft, but it’s worth it.

9. Change to a credit card that isn’t a credit card. We’re now averaging three credit cards each, and it’s rising, while card issuers keep upping our limit to make sure we have much less chances of paying them off every month. With no grace period and over-limit charges, it’s a recipe for spending a ton of money needlessly. Get yourself an American Express Green card. That’s not a credit card – it’s a charge card. At the end of the month, there are no payments to make – the balance has to be paid off in full. Oh sure, the first month that’ll be painful. But after that, you’ll watch what you’re charging pretty carefully, and you’ll never ever have a credit card balance again. What’s that kind of financial freedom worth?

10. Contact the credit bureau to get a free copy of your credit report. Almost all lenders now base your interest rate on your credit report and its credit score. So you have to know what’s in there and whether there are errors on your file. The how-to is in the It’s Your Money book and will take under five minutes. Less than 30% of us ever look at our file and that can easily cost us two or three percent on everything we borrow. After all, knowing is always better than hoping.

11. Keep your car for another year. If you believe a cool car is a status symbol and a must-have, you’re doomed to be in debt for decades to come. Not to mention that almost 50% of people trade their vehicle and STILL owe more than it’s worth – that’s financial suicide when you take your extra debt and just roll it over to the next new car with interest for another five or six years. It makes things worse – much worse. And your car will never increase in value. So the goal should be to drive a reliable vehicle that doesn’t have payments with it which are killing your chances to save or get ahead financially. Imagine a couple of years without car payments and the huge financial advantage you’ll create for yourself. And remember: Those $400 car payments are actually more than $600 in gross earnings. If you can’t get a $600 raise this month – here’s a way to get it – you’ll just be giving it to yourself!