Eat, Save, and Be Healthy

Many families have faced challenges with loss of income and/or extra expenses during this recession. Families are often called upon to help pay bills or provide necessities if they are not covering their own emergencies. So, the message about having a reserve fund of cash may not be a “hard sell” in these times. Coming up with the recommended 3-6 months’ worth of expenses can be challenging, however. That’s why financial advisers suggest that short-term savings should be built into the family’s regular budget, so that it can slowly build to a sum that could cover a medium-sized shock.

Whether you aim for the low end of 3 months or a higher amount will depend partly on accumulated income, job stability, health insurance coverage, sick leave and vacation benefits, and the calculated risk of break-down of the family’s equipment and systems such as vehicles, appliances, heating and air-conditioning, etc.

Setting aside some money regularly is an important habit and will provide the needed pool of money. Where will you put these savings? Because you may need to have access quickly, you should put in a “liquid” account — which means you can get it quickly without loss of value. Some choices are bank or credit union savings accounts, money market funds and short-term Certificates of Deposit (CDs). While these accounts earn very little, emergency funds should be set aside from your checking account so they are not readily available for spending on day-to-day items and will be there when needed. Talk with your family about what makes something an emergency that warrants spending from the account.

Even when you think that money is very tight, setting aside even a small amount may keep you from going into debt to cover an unexpected expense.

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Money management is an important skill to have and one that can have a deep impact on a relationship.  Many studies have shown that disagreement over money is one of the top 3 reasons that couples state when separating or getting a divorce.  Money is important to think about and deal with because it can be so intertwined with trust in your partner. Trust in all areas of a relationship is important, but areas of finance may be especially important, as money management can be a very sensitive topic for many people. Ultimately, if partners are not honest and open in the area of money, it can have a detrimental effect on the marriage. Partners may begin to distrust each other about future finances, and it may also affect trust in other areas of the relationship. The skills to manage one’s finances can be tricky, and it may not have been a skill you were taught growing up.

There is an Ohio State Extension program that was developed for individuals and couples seeking to learn better money management skills, entitled “Manage Your Money”.  This program has been turned into a FREE, interactive, distance learning course.

The skills that are covered include:

• ŸLesson 1:  Getting Started. This lesson focuses on individual and family values about money. It gives you some suggestions about ways to talk with your partner and family about money matters. You are asked to think about and develop some financial goals for the future. There are also suggestions and tools to help you start tracking your expenses.
• Lesson 2:  Where Does Your Money Go? This lesson discusses cash flow, income, and expenses. There are worksheets on which to write critical information about your income, what you owe (your credit use), and types of expenses (fixed, regular flexible, and occasional) so you have a better picture of your current financial standing.
• Lesson 3:  Stop Spending Leaks. This lesson will help you examine your spending habits to see if any problems exist. There are suggestions for changing spending practices and habits. Worksheets help you and other family members commit to a personal plan to change spending habits so funds can be used to reach important goals set in Lesson 1.
• Lesson 4:  How Much Credit Can You Afford? The focus in this lesson is on the pros and cons of using various types of consumer credit, wise credit management, and the importance of your credit history. There is a checklist to help you determine if you have some credit problems, and worksheets help you compare some credit alternatives.
• Lesson 5:  Develop Your Budget. Guidelines and worksheets for developing a written budget are the focus of this lesson. The guidelines and tools are intended to help you actually “plan” future use of income so you are in better control of day-to-day and longer-term finances.
• Lesson 6:  Your Net Worth and Financial Records. The first part of this lesson focuses on your net worth and how you own property. The second part will help you collect and organize your important financial records.

The course link is: http://go.osu.edu/mym.  Access is free of charge; new course participants only have to create a user account before accessing the course.  Consider the great benefits of better financial management to you and your family, and start the course today!

We’re surrounded by money information. Turn on the TV or radio, pick up a newspaper or magazine, search the web or look at social media sites…information is everywhere. How do we know what is credible and worth our attention? Where are we on our path to financial wellness?

Looking for information on line? Start with sites that end in .edu, .org, or .gov. Here’s a great one to begin with  <extension.org>, then search family, and personal finance. Lots of great information and you can even Ask An Expert!

To get you started, here are a few tips to getting your finances in order:

• First, catch your breath…start by evaluating where you are and where you want to be.
• Start small, but start.
• Look at your current spending patterns.
• Pull your credit report (www.annualcreditreport.com) and review it carefully, submitting corrections if needed.
• Start saving something today, no matter how small.
• Involve others – family, friends, co-workers. We all need cheer leaders to keep us focused.
• Make a commitment to learn something about money this month.
• Take a class (on-line or face-to-face).
• Read.
• Ask questions.
• Meet with a financial professional.

This month, there are also two e-books available to help you in your journey to financial wellness.  You can access them both here.

Make this the month that you begin…or continue…in this journey to financial health!

Happy Financial Literacy Month!

“Habit is a cable; we weave a thread each day, and at last we cannot break it.” ~ Horace Mann

Have you ever taken time to really think about how you make decisions? Many of our choices seem to be made on automatic pilot. From food to finances to family dynamics, we tend to react with habitual behavior developed over a lifetime that may not serve us well.  There is no time like the present to discard destructive old habits for healthy new ones.  Listed below are eight different decision-making strategies from practicalmoneyskills.com that highlight the varied ways we make choices, and how using those strategies may be affecting you financially.

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According to a recent study released by the National Endowment for Financial Education three in 10 Americans say they have lied to their partner about financial matters.  This dishonesty can range from lying about small purchases to having secret bank accounts.  However little or small, financial matters are of critical importance to a relationship.

Taking this study into account, it may not be surprising that one of the top reasons partners mention for dissolving a relationship is because of money.  Financial trust and honesty in a relationship is just as important as trust in other areas.  Just as we might encourage a new couple to be honest about other areas of their life, it is important for partners to be able to be open and honest to each other about money.  Money is such a volatile issue, that if it goes undiscussed or if issues go unresolved, it can lead to major problems in the future.

One of the ways to begin to be open and honest with your partner is to develop a money management plan.  This includes being open and honest about where you are now financially, what are your financial goals for the future, and what is it going to take to get to those goals?

Ohio State Extension has an online study at home course that couples can go through if you are interested in working through some of these issues with your partner.  If you are one of those who is guilty of not always being honest with your partner, start anew and try to open dialogue about these issues today!

In January we often think more seriously about reducing our debt as we recover from holiday buying, make plans for the New Year, and think about paying taxes.   For people who owe multiple creditors, it can be challenging to keep up with the payments.  Sometimes there is not enough cash to pay all of them the amount needed every month.  In such circumstances, it pays to establish priorities.  Professionals suggest that some payments are more vital than others and give the following guidance:

Higher priority should be given to:

Protecting family well-being

• Rent or house payment
• Utilities
• Food
• Child care
• Health insurance

Protecting property

• Car loan(s)
• Other secured loans
• Home and car insurance

Preventing or responding to legal action

When it comes to distributing scarce dollars among credit card accounts or other unsecured loans, there are some useful strategies to consider.  First, stop adding to the debt load by using cash instead of credit for day-to-day purchases.  Set an amount that your budget will allow for paying down your debt.  Allocate that money to the various accounts.  If at all possible, pay the minimum monthly amount for each account in order to prevent extra charges and escalating interest rates.

In order to reduce your long-term costs, you may choose a strategy that is sometimes called the “snowball” approach.  That method involves allocating any extra money toward paying off one of the debts, and as that one is fully paid, shifting those dollars into the next one to speed up payment of that debt as well.   The choice of which one to begin with is yours, of course.  Personal finance professionals usually suggest that you start with the account that has the highest interest rate in order to get the biggest cost savings.   Another approach is to repay loans beginning with the one with the smallest amount owed to eliminate debts (and creditors) most quickly.

There is a very useful tool to help you assess your accounts and see how you can achieve success in reducing your debt.  The tool was created by Extension professionals and is free. PowerPay is available on the web.  You will have to register by putting in your name and email address and creating a user name and password.  Go to https://powerpay.org/ The instructions are simple and are included on the web site.

Behavior happens because it is something we have done over and over, i. e. it is a habit, OR it is something that we do because we have a reason for doing it.  Changing behavior, therefore, requires different strategies for these different types of behavior.  Researchers have studied intentional and habitual behavior and have some ideas about how we might make changes.

Behavior that is “new, untried and unlearned” happens as a result of intentions:  a person means to do it for some reason.  As the behavior is repeated, particularly if it takes place in the same context (at the same place, with the same people, etc.) the brain puts it into memory and the behavior becomes guided by habit, a state in which a person doesn’t have to think as much about it – it becomes automatic.  These habitual behaviors become triggered by certain stimuli as they are repeated, and we may find ourselves doing something that we didn’t intend to do.  The repeating of the action builds a memory that links the action with the context in which it takes place.  As a result, well-developed habits may become stronger forces causing behavior than either attitudes or intentions.

Habits have been studied in a number of situations and seem to have four qualities that make them automatic:  a lack of awareness of performing the behavior, difficulty in controlling the behavior, mental efficiency – being able to perform the behavior with little conscious thought, and performing the behavior without actually intending to do it.

Making New Year’s Resolutions work for you:

• Creating a new habit. If you want to add a positive behavior to your life, find a way to make it a habit.  This will build it into your brain as an automatic function and increase the odds of your keeping it up during the new year.  Repetition in a stable context (consistent in the way you do it, place in which it occurs, etc.) is important.  Eventually you don’t have to give it much thought and the stress of the action is reduced.  As you begin this strategy, your intentions take charge  – you will need to keep thinking about what you are doing and why until you have repeated it enough times that it begins to move into your memory as a habit.  Eventually it will become automatic and you will find yourself doing it often without thinking about it.

• Stopping unwanted behavior. Researchers suggest that stimulus control (changing the environment) is important for changing behavior that is a response to temptation.  Because the context (or environment) in which the behavior takes place provides the cues that trigger the behavior, avoiding that environment (such as the people, the places, sights and sounds, etc.) is usually necessary.  This strategy will help because you are not exposed to the temptation and reminded of the behavior.  You are stopping it before it starts.

• Breaking strong habits. Because old habits have been put into your brain so firmly, they require conscious effort to stop. Just changing your intentions is not enough for most people to break a strong habit. It requires vigilant monitoring of your behavior and intervening after the automatic response has been triggered – stopping it after it starts.  This strategy will require more awareness of what you are doing:  you will have to be on high alert for a while.  Each time the habit is triggered you will have to take action to stop it.  You will have to pay attention to break the automatic response.  If you can put into action a new behavior when you realize that you are doing the old unwanted one, a new habit can eventually replace the old one.

Sources:

Quinn, J. M., Pascoe, A., Wood, W. & Neal, D. T.  (2010). Can’t control yourself?  Monitor those bad habits.  Personality and Social Psychology Bulletin 36, 499-511.

Verplanken, B. (2006).  Beyond frequency:  Habit as mental construct.  British Journal of Social Psychology 45, 639-656.

Wood, W., Tam, L. & Witt, M. G.  (2005). Changing circumstances, disrupting habits.  Journal of Personality and Social Psychology 88, 918-933.

If you are like a lot of Americans, January is the worst month for you.  This is the time that all the credit card bills come in the mail for all the presents you bought in December.  The glow of the holidays has worn off, all the presents have been opened and used and the reality of the debt slaps you in the face.

The good news is- it doesn’t have to be this way!  You can start now to make a plan to remain free from holiday debt.  Remember that this is not just about you.  You are setting an example for your children and passing on your values about money.  What does it say to them if you buy more than you can afford and then spend all January and February worrying about how you will pay for it?  These are important tips for you, but they can also be important lessons to teach your children.  Help them, and you, have a stress free beginning to the new year!

1. Make a budget. Sit down now, in November, and think about how much you can afford to spend.  Keep in mind those last minute gifts for teachers, co-workers, or holiday parties.  Include even the little things in your budget.

2. Plan ahead. Planning includes your budget, but you can also make a list of the people you need to buy for and some ideas for presents.  This will give you a good way to map out your spending and go shopping with a plan! Be thoughtful about your gifts.  Is this toy something that my child will really play with enough to justify the cost?

3. Start saving early. Hopefully you have already been working on this, but if you haven’t, START SAVING NOW!  Use your budget to determine how much you will need to save from now until the holidays to be able to pay for the gifts you want to buy.

4. Be creative! Gifts do not always have to be things you buy from the store.  If you are crafty, consider giving something that you make.  Consider giving services or time– an hour of babysitting for your neighbor, or a special outing to your children.   Sometimes these thoughtful gifts can mean even more than something you pick up at the store.  This can also be a good gift idea for children to give.  Encourage them to think about services they can give rather than material gifts.

5. Everything in moderation. When we are buying gifts, especially for those we love, it is so easy to go overboard.  This is why it is important to think ahead of time of how much you have to spend and what you would like to give each person on your list.  If you go to the store with a plan you are much less likely to go overboard.

6. Shop Online. There are many websites that can help you compare prices on any item you are purchasing.  This allows you to “shop around” without having to do all the work.  Remember to include shipping when considering an online purchase as this cost can vary a lot from site to site (some sites include free shipping).

7. Use Cash. Cash is a powerful visual.  There is something that just feels different when you spend cash versus swiping a card.  This feeling can help you not overspend.  Also, if you go to the store with $100 cash to spend, it is impossible to spend more than $100.  This is another way to keep track of how much you are spending.  By using the cash that you saved for this purpose you will also save yourself from those credit card bills!

8. STICK TO YOUR PLAN.  This is the key to being debt-free.  Why invest all the time of making a plan if you do not have the discipline to stick to it!  It can be tough, but it will all be worth it when you get to January stress-free!

The small repeated expenses are the “budget busters” for many people.  It can be hard to know the impact of these small items on your overall expense picture without adding them up.

The eXtension Financial Security for All web site features a new calculator for estimating the annual cost of small repeated expenses.  Go to the link and enter your expenses for items such as coffee, sodas, lunches, gasoline that you purchase frequently.  The calculator will add up the items that you enter on a daily, weekly or monthly basis.  You can see the approximate annual cost.

The link to the Budget Calculator is  http://www.extension.org/pages/Budget_Calculator The link takes you to a short description of the calculator and then another link (https://share.extension.org/public/FSA/budget_calculator.swf) takes you directly to the calculator.   You can print your information or just review it online.

Barbara O’Neill, personal finance expert from Rutgers University offers a daily update on money topics via her Twitter account.

Check it out:  http://twitter.com/moneytalk1