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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When we were kids, one of the first practical jokes we learned to play on each other was to tell someone their zipper was down (or something was spilled on their shirt). When they would look down in alarm, the other person would say “made you look.”  The person being pranked usually acknowledged the joke with a sarcastic “ha-ha.” I don’t know if that joke is popular today; but I’m going to assume not because for the joke to work you would first have to use a crowbar to pry the cell phone out of the kid’s hand to redirect their eyes elsewhere (sorry about the social commentary).

 But young people today aren’t the only ones not paying attention. Adults are just as guilty when it comes to ignoring warnings, particularly financial ones. You can’t solve your problems if you won’t (a), look at them, or (b), acknowledge them.  People think if they just ignore the threatening letters, bills, or phone calls, money problems will cease to exist. Not looking means not having to deal with the problem. That started me thinking about times when I have physically closed my eyes to avoid looking at something, and I came up with the following short list:

• Roller coasters
• Scary parts of horror movies
• Seeing any body part exposed that is normally under the skin

Okay. All Right. Some of the things we fear are not rational; they may not make sense to others who aren’t afraid of those issues. But closing your eyes when it comes to finances, while understandable, is a form of denial. No one cares if I cover my eyes when I ride the Blue Streak at Cedar Point, but a lot of people care if you don’t pay your bills.  And they will not let you off the hook just because you don’t want to deal. They are going to be committed to “making you look.”

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“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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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.

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

Tips for saving money are posted on an easy-to-use web site featuring ideas by members of the web community.  The topics are Finance, Eco, Health, Tech, Shopping, Kids & Family, Car & Transit, Food, Vacation, At Home, At Work, and Miscellaneous.  Read the set of popular tips that flash on the screen or click on a topic link and view the tips by topic.  Posts come from across the globe.  Viewers may also sign up to vote for their favorite tips and add their ideas to the list.

The link is:

http://moderator.appspot.com/#16/e=3cfc

What are your tips for blog viewers that can save them money in the months ahead?  Add a comment to suggest ideas.

Recently, most of us have had many opportunities to consider the financial condition of our economy and how that impacts us.  For some of us, this is the time to change the way we have been managing our money.

But, altering our behavior is not easy.  In fact, changing money habits can be especially difficult. How we’ve always handled money feels familiar, comfortable, and predictable – not only to ourselves but also to those around us.  Family and friends often expect us to act and respond in certain ways and may even have vested interests in having things continue as they are.  Because family members and friends may feel uncomfortable when they see us trying to make changes, they may set up barriers – either subtle or obvious — to prevent change.  We may not be clear about how to implement change – what is a better way to manage?  Change is not easy or straightforward.  We may try things that don’t work so well for us, or we may get discouraged when our attempts fall short of what we desired.  One good source of information and suggested ways to start new money management practices is the following site:  http://www.extension.org/personal_finance In addition to the suggested practices and practical advice by experts found at extension.org, the research below provides guidance on setting and accomplishing financial goals.

Research sheds some light on how we might be most successful in changing financial behavior.

The first step in changing our money management is to set a goal – what do we want to achieve and by when?  Research studies have pointed to three main keys to increasing success in accomplishing your goals.  The first point is that goals should be  clear, narrowly focused, accomplished without much difficulty, and completed relatively soon (naming a specific date). Tip #1:  Set goals that are specific in terms of what you want, how much it might require of time, money and any other resources, and when you want to have it.

The second key to being successful in reaching your goals is to know why you have chosen the goal.  In the terminology of some psychologists today, “you need to own your goal.”  In other words, a goal should come from you for your purposes and NOT be handed down by someone else. It must fit with who you are and what you need and want, being realistic about your time and money resources, of course.

The goal may also have to be planned with others in your family or household. Everyone involved needs to be considered and everyone needs to feel ownership in, and commitment to, the goal in order for it to be accomplished.  Tip #2:  Set a goal that is one you want to achieve and know why you want to achieve it.

Having your goal defined and being sure you know why you have set it are two important contributors to goal success. The third key factor is having a specific plan to reach your goal. The action plan will need to have dates attached to it, so that you know when you will start, when you will reach certain milestones along the way, and when you will fully accomplish your goal.  Sometimes there are dates imposed by circumstances outside yourself, such as holidays, vacation dates, birthdays, graduation dates, weddings, etc.

The other important part of action planning is to recognize that you will have some distractions and temptations to use your time or money for things other than achieving your goal. These opportunities to spend now rather than save for the future come to everyone and most of us find it hard to avoid these temptations.  These enticements may prevent you from reaching your goal on time. It is easy to become discouraged when these things happen. However, if you plan for ways to avoid or recover from these disruptions, you can quickly get back on track. Tip #3:  Establish a target date and create a detailed plan of action to follow that will act as a guide to achieving your goal, including ways to overcome obstacles or temptations that could interfere with completing your goal.

References

Koestner, R., Lekes, N., Powers, T. A., & Chicoine, E. (2002).  Attaining Personal Goals:  Self Concordance Plus Implementation Intentions Equals Success.  Journal of Personality and Social Psychology, 83 (1), pp. 231-244.

Prochaska, J., Norcross, J., DiClemente, C. (1994) Changing for Good, New York: Avon Books.

Seiling, S. (1999) “Behavior Change and Money Management” in McKinney, C., Seiling, S., Little, F. and Varley, I.,  Pathways to Money 2000+, Section 1, pp. 18-23.