Money Matters: Seven Steps to Survive and Thrive in Uncertain Economic Times

I get more mileage out of a quarter than an economy car gets out of a tank of gas. You see, I’m a born saver. On the other hand, my husband, Bob, is a born spender. He’s always had a great work ethic, but when he was a kid, his paper route money never saw the inside of his pocket. Because of some financial issues early in our marriage, we had $40,000 in consumer debt with little to nothing to show for it. We also had five children in seven years and I quit my job to stay at home with them. It may sound like a recipe for financial disaster—but it wasn’t.

Instead of giving into depression and despair, we decided to become proactive. We set up a budget and learned to stretch the value of a dollar. Fortunately, we were able to dig out of that debt in only two and a half years—it took a lot of work and discipline, but it was worth it! We learned lifelong financial skills and have  remained free of debt ever since.

Today, many families are facing the same issues that Bob and I faced when we were first married—paying bills, stretching paychecks, and still trying to maintain a reasonable quality of life. Consumer confidence isn’t very high these days, prices are rising and wages are remaining relatively constant.  If most families aren't concerned about losing their homes in uncertain times, they're certainly concerned about rising food and fuel costs, keeping their kids in clothes, or the freedom to go on vacation. But there are answers for those who are willing to do something about it. Here are seven basic tips to help you beware and prepare:

1. Be Diligent: FICOS (Fair Isaac Credit Scores) – Now is the time to improve your FICO. These scores can determine your auto insurance premiums, when and if you’ll get the job (employers are checking FICOS these days), and whether you pay a security deposit for utilities.  If you downsize a home or a vehicle, you’re also going to need to have an excellent FICO to get the best APR rates.  Improve your FICO in three easy steps
   • Pay your bills a day early by setting up payments online
   • Pay more than the minimum balance on your credit cards, which means you are paying down debt
   • Proportionality:  make sure that you don’t have more than 50 percent of the available credit charged on any one card (for example, $3,000 charged on a card with a $6,000 limit).
2. Be Smart: Save Your Money- From insurance to groceries, there are savvy ways to save at your fingertips (see the money savings tips on this web site). Start to implement these savings and you will create good saving discipline, which will prepare you for the inevitable highs and lows of the economy. Use the money you save to pay down debt and build short term savings. This prepares you and solidifies your financial picture.
3. Be a "B" Word Person - If you don't have the "B" word as part of your lifestyle, then yesterday was the day to start budgeting. Set one up with an online budgeting tool – there are several popular versions available online by searching under  key words like “budget calculator” or “budget tool.”  Make sure your budget has “fun” figured into it and isn’t so restrictive that it’s impossible to follow.
4. Be Careful: Recalculate Your GPS (Gross Personal Savings): As you are building savings and paying down debt, remember to recalculate your budget. Otherwise, all the money you save is just flying out the door.
5. Be A Planner With A Purpose - You can have all this good stuff on paper, but if you slap down the credit card to pay for a killer outfit, or buy a new boat during summer vacation—and you have consumer debt—then your plan is only a theory. For it to become REAL, you need to make it part of your daily life. This means your family starts to live with the plan and they don’t incur more debt. Your purpose is to live a life with more financial freedom in order to benefit your family’s future in the long run.
6. Beware: Debt Consolidation Companies: With rumors of economic uncertainty come an influx of those who want to "help" prepare you for the worst by consolidating your debt. However, many of the for profit debt counseling companies charge a hefty fee for their services, which is usually tacked onto your debt. Look for a non-profit debt consolidation company; the Federal Trade Commission has guidelines that can help you find the best organization for your debt needs. http://www.ftc.gov/bcp/conline/pubs/credit/fiscal.shtm
7. Be Aware: Refinancing to Pay Debt - As things begin to get tight, you might be tempted to get a HELOC (Home Equity Line of Credit) or refinance in order to pay your consumer debt. This isn’t a good idea if you’re using it to pay consumer debt and you haven’t learned the discipline of living on a budget. This kind of borrowing will only deteriorate the equity in your home and chances are really good you'll be right back in that HUGE boat load of debt by this time next year. The better option is to cut costs, budget, and only use a HELOC for home improvements.

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