It’s Not Rocket Science – Achieving Goals

December 7, 2010

As we prepare to wrap up another year, many people will once again be setting goals for the year ahead – count me among those people. If financial goals are among your resolutions, then the next logical question is, “How do you get there?” Read on for the answer.

First of all, don’t forget to be realistic when actually setting financial goals. You don’t have to shoot for the moon to make a difference in your finances. And remember that your goal doesn’t have to be about amassing large amounts of money. It can be as simple as putting a little cushion in place for splurge purchases.

Once you’ve set your goal, the first thing you want to do is write it down and post it where you’ll see it frequently. Is your goal to pay off your credit cards? How about a sticky note that says, “Debt-free = stress-free,” stuck to your credit card. The next time you are tempted to stray, you’ll have a solid reminder to make you think twice. If your goal is saving for something great like a tropical vacation, get out that beautiful photo of the beach and tape it to your computer monitor for motivation.

But beyond setting the goal, how do you get there? Once you’ve established a dollar-amount, break it down into time increments. Let’s continue with the credit card debt example.

Say your balance is $2,000 (which is closer to what the everyday American carries than the scary $8,000+ average often cited) and you’d like it gone in a year. Divided by 12, that’s about $167 per month needed to reach your goal. (I know this calculation doesn’t take interest into account, but I’m trying to keep it simple)

So how do you find an extra $170 or so in your monthly budget? There are some great tips in this blog post by my friend Andy, or you could try the standard ideas like packing your lunch, scaling back from a latte to a drip coffee with lots of milk, or cutting back on entertainment spending by ordering the drink special when out with friends instead of your expensive favorite cocktail.

Most important to achieving any financial goal is to make it automatic. Your credit card minimum payment may only be $75, but in your head, it must become $170 until the balance is $0.

If your goal is to save some money, set up an automatic transfer to your savings account each time you get paid. Just like you don’t miss a mortgage payment because it’s automatically withdrawn each month, you’ll find it much easier to save when it happens without your having to click a button each month.

Setting and achieving financial goals is not rocket science, and even the most strapped of us can make them happen. Keep it simple, be gentle with yourself if you get off track and celebrate the little victories.

Now it’s your turn: What are your goals for 2011? Mine include saving some splurge money for our tropical vacation in March and investing in continuing education to keep me sharp on personal finance topics. Please share your goals and any additional tips you have for getting there below in the comments.

Kelley C. Long is a Chicago-based financial coach who believes you shouldn’t have to have a million bucks to receive personalized financial advice. Check her out at www.kelleyclong.com.

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Three Tips for Smart Shopping This Holiday Season

November 23, 2010

I don’t know about you, but those years that I’ve been crazy enough to get up before dawn on Black Friday and wait in line for the doorbuster deals have also been the years that I’ve returned home with the greatest haul … for myself!

Throughout most of the year, I’m able to stave off the temptation to overspend on myself by avoiding casual strolls through Target or Ann Taylor. But this time of year, the siren song of big box stores and malls is at its peak. At some point, I’m going to have to hit the stores and face my temptress. On her territory.

So how to avoid being your own Santa during the time of year that the deals are the best and stores are pulling out all the stops to get you to buy, buy, buy? Try these tips and see if they don’t help you resist the pull of “To: Me, Love: Me” gifts.

Take a list: Much like going to the grocery store, it is much easier to stay within your budget if you make a list before hitting the mall and then stick to it. Map out your shopping trip ahead of time so that you don’t find yourself accidentally wandering into the handbag department at Macy’s when you should be shopping for your father. Shopping with a purpose saves time and money.

Take a friend: Join forces with another budget-minded friend and make a pact to keep each other from indulging. When you see your gal pal heading for the register with the centerpiece bowl you saw her admiring, kindly divert her path and remind her that she should simply add it to her wish list, then move to the next gift on your list.

Take your pick I’ve never been a fan of going cold turkey on anything, except for when my parents quit smoking five summers ago. But going cold turkey on shopping for fun is just like trying to give up chocolate for extended periods of time. It might work in the short term, but one day you’ll probably just snap and do more damage than if you’d allowed yourself a Fun Size Snickers bar each afternoon.

Same goes for shopping. Before you head out to the stores, pick one thing you really want and need, then make that part of your shopping mission. Is your scarf collection lacking the latest chunky cowl-neck beauty? Time to find one! Knowing you are allowed one treat will make it easier to resist those little, “Oh, that’s so cute! And the price!” voices that threaten to ruin your budget resolve.

Above all, remember the point behind all of this shopping madness – to show our love for family and friends by selecting that perfect something to remind them of our fondness when we can’t be there in person to show them. Embrace the joy of granting someone else’s wish and you’ll find the desire to find the next cool thing for you is a dimmed by how fulfilling it is to simply give.

 

Kelley C. Long is a Chicago-based financial coach who believes you shouldn’t have to have a million bucks to receive personalized financial advice. Check her out at www.kelleyclong.com.

November is the Best Time to Buy

November 9, 2010

When it comes to saving money and shopping for bargains, it’s a no-brainer that there are certain times of year that are better than others to shop for seasonal items. For example, you’re probably not going to score a smokin’ deal on a pair of winter boots in November. Best wait until after Christmas, when prices are slashed to make room for spring fashions.

Winter boots
Looking for a deluxe gas grill for your summer barbecues? You’ll pay top dollar in May. Waiting til August may limit the selection, but you could save up to half off the retail price and still celebrate Labor Day with deliciously grilled delights!

But did you know that there are better times of year to shop for non-seasonal items as well? I was delighted to learn this, and with a little advance planning or postponement of projects, it’s possible to save a bundle by being aware of the calendar.

November, it turns out, is the best time of year to buy kitchen appliances and power tools. So if you’re planning to while away the cold winter months with a home improvement project, prepare ahead of time and take advantage of the deals on sanders, power saws and even those stainless steel appliances you’ve been coveting.

See you at Home Depot!


Kelley C. Long is a Chicago-based financial coach who believes you shouldn’t have to have a million bucks to receive personal financial advice. Check her out at www.kelleyclong.com.

Financial Goals for the Real World

October 26, 2010

 

It’s in all the advertisements for financial service providers: “Let us help you achieve your goals!” “Your life. Anything is possible.” “Take charge of your financial future.” “What’s your dream?” “Together we’ll go far.” And the commercials with attractive silver-haired Baby Boomers sailing the ocean blue or chuckling over the Wall Street Journal while sipping coffee… does anyone really aspire to that?

 

beach

But the point is, without a bit of a dream behind them, financial goals can be as wishy-washy as a weight loss goal without a fitness and nutrition plan. You need motivation and some guidelines to stick with it or like a diet, the first chocolate cake you encounter will have you off the wagon and giving up.

But what does it really mean to set financial goals? What are your goals? Wait, you haven’t really thought about it? Many people don’t because they don’t think they are in a place to do so. They say things like, “I don’t have time or money for any new goals in my life.” Or, “Just getting the kids to and from school and putting food on the table while growing my career is enough of a goal for me!” Sound familiar?

So let me re-frame the question: If money wasn’t an issue, what would you do differently? Move to a different neighborhood? Go back to school? Go on a safari? Pay off your credit cards? Or even just hire a housekeeper? These are financial goals.

So go ahead, list them out. Then try to put a price on each goal. For example, a move to a different neighborhood could be as simple as the cost of moving: $2,000 for movers, $1,500 for a security deposit, $500 for those miscellaneous things that you always seem to need when you move like new wastebaskets and perhaps a small furniture piece.

For others it might require accumulating a down payment and getting your current home ready for sale. That’s going to require a bigger budget.

Not sure how much your goal will cost? Start doing some research. Call your community college to inquire about the average cost of a Master’s degree. Google “house cleaning” to find out what cleaning services in your area charge. Just doing the research and finding out a bit more about your “someday” dream will make it a touch more real and set you up to being closer to making it “today.”

And just like that, you’ve set some financial goals! With that out of the way, it makes it much easier to figure out how to achieve them. And trust me, it’s really not that difficult. I’ll be covering those steps in a future post, so stay tuned!

Financial Advice for the Ages

October 12, 2010

There are some personal finance rules of thumb that are set in stone across the board, no matter who you are, how much money you have or what your financial goals are. For example, whether you make $1,000 per month or are worth $10 million, you should have an emergency fund that equals a minimum of three months expenses.

But then there are also rules and suggestions that change as you age and (hopefully) earn more money. Depending on your situation, here are a few age-based tips to maximize your financial well-being.

Mid-twenties
At this age you’re probably still single, no kids, making pretty decent money, traveling a bit, pretty career-focused and not thinking too much about retirement. What essential steps should you be taking?

  1. Get debt-free and stay that way. Pay off your credit cards, student loans and car loan to get your credit score in tip-top shape for when you will inevitably want to qualify for the best mortgage rates.
  2. Take advantage of your employer’s 401k benefit. If you’re offered a match, put at LEAST the amount in there to maximize the match. Aim to defer at least 6% of your salary, 10% if you can afford it.
  3. Get your emergency fund in place ASAP. Start with only $25 per paycheck if you have to, but make it automatic, and once the money is in there it stays. You’ll be glad you have it if you lose your job or have an accident.

Mid-thirties
If you’re a typical American, by this time you own a home, have 2.3 kids and are settled into a career that provides a solid income. You probably spend a lot of time at your kids’ events and have a couple of nice cars in the garage. Make sure you’re staying financial healthy by also doing the following:

  1. Keep socking that money into your 401k. Do NOT sacrifice retirement savings to pay for your kids’ education. They don’t give retirement scholarships or loans.
  2. But you should be saving for college if you can. Decide how much you do want to help (some people want their kids to pay for some to make sure they value the opportunity) then open a 529 account for each child with monthly automatic contributions. Also, make sure you’re matching any expensive extracurricular activity costs with college savings. If you can’t afford to save for college AND pay for select soccer or elite gymnastics, reconsider the high-end program. Chances are your child won’t be making a career out of it and while it might be a tough pill to swallow to drop down to a more affordable league, it will be a lesson in sacrifices and choices that won’t be forgotten.
  3. Make sure your emergency fund balance has been adjusted to cover increases in your expenses over time. Once you’ve reached the goal, keep up with the automatic monthly savings into a Roth IRA or money market savings account.

Mid-fifties
You survived toddlers and are now enjoying the final teen years with your kids, who are hopefully college-bound overachievers. You may be considering a second act career or wondering what the heck you’re going to do with your time once the last of your brood flies the nest. What else should you be thinking about?

  1. It’s probably time to really think about what retirement means to you, then putting that story into numbers. Most people these days aren’t really planning to live out their days on a golf course, but would like the flexibility to hit the links when they like while also staying engaged and active. Think about how the cost of your lifestyle will change and make sure you can weather that.
  2. Take a look at how your 401k (you’re still contributing, right?) is allocated. At this point you should only have about 50% of your funds in stocks, so make any updates to put the other 50% in solid bond funds or other fixed income instruments.
  3. Try to get your house paid off sooner rather than later. Your goal should be to retire completely debt-free.

As with all personal finance tips, these are simply general ideas based on what the “average” American deals with through life. Of course your situation is going to be different and you’ll make adjustments as needed according to what’s important to you. Above all, remember that the purpose of all of this is to simply allow you to enjoy life without having money as a barrier to pursuing your calling.

How’s Your Attitude?

September 9, 2010

Do you ever have one of those days when everything just seems to click? Like the stars have aligned perfectly and everything you touch is golden? For example, you’re on your way home from running morning errands when you notice a parking meter open right in front of the coffee shop. Perfect!

You decide to take your chances by not paying and run in to grab a quick cup. When you swipe your loyalty card you learn you’ve earned a free coffee so you don’t owe a dime, and you glimpse the meter maid approaching just as you pull away…a close call! Lucky day! Suddenly it seems you only have green lights and no traffic and you don’t forget anything at the grocery store and you wonder what else you can accomplish on this great day!

The thing is, you probably still sat at a couple red lights. And you might not have forgotten anything, but Trader Joe’s doesn’t sell frozen garlic bread or your special brand of soymilk, so you’re still going to have to go to the “normal” grocery store later. But these things don’t bother you like they might because you have the attitude that, “This is MY day.” Other days you might grump about having to shop at two stores, or notice how many pedestrians walk into traffic without looking, or become annoyed when your coffee drips on the seat of your car. But not today. Hakuna matata!

Sound familiar? Ever have those days? Did you ever examine it just a little more closely and realize that there wasn’t that much special about that day, it was really that you just happened to notice the good stuff? It turns out my mom was right. It really is all about your perspective or your ATTITUDE. It reminds me of the paragraph that hangs on the wall in her office by Charles R. Swindoll:

Attitude
“The longer I live, the more I realize the impact of attitude on life. Attitude, to me, is more important than facts. It is more important than the past, the education, the money, than circumstances, than failure, than successes, than what other people think or say or do. It is more important than appearance, giftedness or skill. It will make or break a company… a church… a home. The remarkable thing is we have a choice everyday regarding the attitude we will embrace for that day. We cannot change our past… we cannot change the fact that people will act in a certain way. We cannot change the inevitable. The only thing we can do is play on the one string we have, and that is our attitude. I am convinced that life is 10% what happens to me and 90% of how I react to it. And so it is with you… we are in charge of our Attitudes.”

So how’s your attitude today? I know I’m keeping mine on cue to notice the good stuff and try not to dwell on the bad stuff.

It All Adds Up!

August 31, 2010

Today I had the chance to engage in one of my favorite activities. It was coin-rolling day – the day my piggy bank won’t allow me to put another penny in, and I break out the paper coin rolls then head to the bank for a nice little bonus deposit to my checking account.

Ready to roll!

Ready to roll!

Call me a nerd, but I love coin-rolling day. Sorting quarters and dimes into neat little piles satisfies my organizational tendencies and rewards me with extra money I didn’t even miss. And it only takes 15 minutes – I kept track! You can sort your change while watching TV, listening to a podcast, or make it a family affair by getting the kids involved.

I had lots of help

I had lots of help

Back in the day when Suze Orman first hit the airwaves as a guest of the Oprah Show, she wisely suggested that one way to save money without even trying is by saving your change. OK, so maybe she wasn’t the first to think of it, but I remember seeing it and have been saving my change ever since. Do you? If not, I suggest you try.

What’s that? You don’t really spend that much cash? Well, I didn’t think I did either but even the little dollars here and there I use to buy coffee have produced enough change to add up. In fact, this little pile totaled $26 and I had several dollars left over that went back in the piggy bank since they weren’t complete coin rolls.

I know that doesn’t seem like much, but if it’s money you didn’t miss anyway, it adds up over time. Twenty-six bucks per month equals annual savings of $312, which is enough for cross-country airfare from most major airports! Think of it as a bonus vacation fund.

For complete disclosure, I have to share that when I arrived at the bank, the teller simply dumped all my neat little coin rolls into the electronic change counter. It turns out the banking centers in Chicago are a little more technologically advanced than those in Cincinnati! At least at my bank… I have to say, I’m a little bummed to learn this, as I actually like rolling my change. (Some banks charge for this service, so don’t toss those paper rolls yet!)

Regardless, my point remains: the next time you use cash for a purchase, use only dollars and pocket the change. You’ll be surprised how much money you “find!”

Note: No animals were harmed in the production of this blog post.

Lessons from Lollapalooza

August 10, 2010

Concert revelers

Last weekend at the ripe age of 32, I finally attended my first music festival, Lollapalooza 2010. I had an idea of what to expect, but also knew that I was in store for some surprises. Besides some fantastic live music (my favorites were Arcade Fire , DEVO and The National), I expected to be hot, sweaty and in close quarters with similarly affected strangers. I was not disappointed.

DEVO in concert

And as is typical of any event that attracts an average of 80,000 revelers per day, we observed our fair share of drunken idiots and had more than our fill of secondhand marijuana smoke. However, as I jostled my way past outlandishly dressed hipsters and dazed-looking frat boys, I also had a few pleasant realizations about this festival that I thought worth sharing.

Dressed for Lady Gaga

Green Music
First, despite hosting a record-breaking 240,000 concertgoers in Grant Park for the weekend, Lollapalooza was actually quite green and clean. How did they do this? Quite simply it turns out, with a genius play on people’s penchant for anything free. There were ‘Rock and Recycle’ tents scattered throughout the grounds, offering participants a free t-shirt and a chance to win a bike if they collected a garbage bag full of recyclables.

Whenever we finished a beer or Diet Coke, rather than crushing the cans and bottles into our backpacks to take home for recycling (yes, I’m that avid about recycling!), we just sought out one of those little worker bees and it was a win-win! I might be alone in thinking this was brilliant, but come on – aren’t we used to seeing people trashing concert grounds rather than cleaning them up? All it took was a measly free t-shirt. I love it.

Money Lesson (You know I had to have one!)
Second, as I observed my fellow music lovers shelling out $7 for a 16 oz. can of Bud Light, I was reminded again of a basic principle of personal finance that is often overlooked when people take an initial stab at budgeting: discretionary spending. Between the cost of public transportation, food, libations, and a commemorative t-shirt or two, the cost of attending Lollapalooza easily ran more than $100 per person for us. And that’s not including the cost of the ticket!

So just a friendly reminder that when you’re setting up your savings goals and establishing spending limits to be sure and build in some extra cash for events like concerts and festivals. They are much more enjoyable when you don’t have to stress over the excessive cost and I find them to be entirely worth the money in terms of living life to the fullest.

Day 3

Estate Planning Really IS For Everyone

July 5, 2010

A couple high profile stories have been published recently regarding the disposition of multi-million dollar estates, demonstrating the dire importance of having an updated last will in place. Most notable was a case involving the dispute of Sammy Davis, Jr.’s widow’s estate, in which Mrs. Davis’s assets (including rights to Sammy’s artistic property), were in danger of passing into the wrong hands. Luckily the LA County court decided in favor of Manny Davis, the survivor of Sammy and Altovise Davis because there was sufficient evidence supporting her self-drafted will.

Sammy Davis, Jr.
The more interesting case involves the relatively unknown drama behind the estate of Stieg Larsson, author of the wildly popular Millennium trilogy that began with “The Girl With the Dragon Tattoo.” Larsson passed away unexpectedly in 2004 at age 50 without a will, leaving his long time live-in girlfriend, Eva Gabrielsson with nothing. He had written the trilogy as a means to provide retirement income to himself and Gabrielsson but died before the books became a sensation. Control of his literary legacy went to his estranged father and brother by Swedish law, who are reaping the benefits of the delayed success of the books.

Dragon Tattoo
As these cases demonstrate, the signing of a will can make all the difference in ensuring your wishes are carried out should you die unexpectedly. And while these stories involve extraordinary wealth and pop culture influence, they also demonstrate why it is necessary to take care of this important step in your family’s well being. Not having a will in place leaves control of the disposition of your assets and possibly your children to the state in which you reside. It also makes a sad and difficult time for your survivors even more painful, as your wishes may not be realized.

Most people put off drafting a will for a couple reasons. First, they think it is wildly expensive and time consuming, so they procrastinate in favor of when they have more time and money to deal with it. While the process can be lengthy depending on the complications of your situation (second marriage, step-kids or a small business to name a few), most estate planning attorneys these days offer a “package” price, where you know what it will cost before you get started.

If you still think that can be a drag, try Legal Zoom, which offers a fill-in-the-blanks will starting at just $69. As the Sammy Davis, Jr. case demonstrates, these wills contain the necessary legalese to stand in court. But again, if you have a more complicated estate I suggest engaging a qualified attorney who can help you address issues you may not be aware of.

The other reason I find people avoid the process is that they just don’t want to consider their own mortality. They figure they don’t really need a will until they start collecting Social Security. I get this. I cried while typing out my burial wishes to be included with my will. The last thing I want to contemplate is where I want my ashes spread. But someday it’s going to be done, and avoiding painful thoughts of what will most certainly be is not a valid excuse to leave your kids at risk of becoming wards of the state.

If you don’t have a will, do you know what would happen to your family if you were to die unexpectedly? Depending on the state you live in, your estate may not pass 100% to your surviving spouse (or your parents if you are single). And even if it did, dying “intestate,” which literally means “not making a will,” is a much more burdensome and expensive process than if you had a will stating your intentions. And if you’re not married but have kids or a significant other, the result can be even more devastating for your loved ones.

As Benjamin Franklin so famously said, “… in this world, nothing can be said to be certain, except death and taxes.”

Myth-busters: No such things as “healthy” debt

June 21, 2010

Clients often ask me to recommend a “healthy” credit card balance that they should carry in order to boost their credit score. Contrary to popular belief (a belief created out of confusion and no doubt encouraged by the credit card industry), the answer is $0. You do not need to carry a credit card balance in order to demonstrate good credit history.

That’s not to say that you shouldn’t have credit cards or that you shouldn’t use them. Having them and using them responsibly are what helps keep your credit score high, and while carrying a low balance doesn’t always hurt your score, it doesn’t help it either. In fact carrying a balance that is too close to your limit can hurt and with high interest rates and fees it is certainly not the best way to maintain financial health. Let me explain.

When a lender, like a mortgage company or auto finance department, looks at your credit report, they are looking for the likelihood that you will pay them back if they give you a loan. Other parties also use them to protect against making a bad deal, like landlords who use them to judge whether you will pay rent or cell phone companies that want to determine whether you will actually pay for the airtime you use.

Even employers will sometimes request your credit history for insight into whether you are a responsible person. For example, if you consistently pay your electric bill late or have a history of running over your credit limit, chances are you may also be chronically late for work or distracted by personal financial issues on the job.

The reason that it is important to have a couple credit cards (two cards issued by major financial institutions like VISA or American Express will suffice) and to use them occasionally is to demonstrate what credit examiners are seeking: that you can be trusted with credit and that you will pay it back on time. Just make sure you pay your balance off each month and you will enjoy life debt-free!

Another way to ensure that you maintain the best credit score possible is to review your credit report at least annually, which you can do for free. Go to www.annualcreditreport.com to print your credit report from all three credit-reporting agencies and review each agency’s report for accuracy. If you find any errors, take the proper steps to correct them. Each agency tells you how to do this on their respective websites.

Things that could bring your score down include credit card accounts that are at or near their credit limit, unpaid bills from your past or too many examinations into your history in the recent future. If you have these items on your report and they are legitimate, you should take action to fix them. Pay down the high-balance cards (and stop using them until they are paid off), pay off any overdue bills and stop applying for credit at every opportunity. It will take time (up to seven years for some items), but eventually your score will improve.