Going “Beyond the Debt Cycle”

Zebert L. BrownThere are several reasons people fall into debt – a job lose, severe illness or series injury, divorce, death of a loved one, poor spending habits or plain old careless with their money.  Regardless of the reason why, the question each person asks once they find themselves in debt is “how do I get out”?

As I read over the various blogs that cover personal financial management, each mentions the following as important first steps towards resolving your debt woes:

  1. Acknowledging that you have a debt problem; and,

  2. Start a budget.

Both are prudent first steps, yet both can be very difficult steps to take.

Most people who find themselves in debt are afraid to admit they’re having difficulty managing their finances properly.  Simply put:  pride gets in the way.  At our core, we don’t want to be viewed as a failure. However, by acknowledging that you need help managing the household finances, you’re seeking the assistance you need to think through financial matters that not only impact yourself but your entire family.  As explain in chapters 1 and 2 of my book (see byline below), your family should be involved in the budgeting process so that everyone understands your household’s financial situation  and helps to keep things on track.  But what if you’re single?  Where should you turn for help?  As mentioned in a previous blogpost, “10 Tips to Improving Your Financial Literacy,” agencies such as Consumer Credit Counseling, your local community college or your bank can all be of assistance.

Acknowledging you’re having difficulty managing your household finances may be easier than drafting and maintaining a budget, however.  The reason most people don’t like living with a budget is  they believe budgets are too restrictive.  I certainly use to think that way.  It wasn’t until my wife and I realized we were starting to miss payments to our creditors and beginning to bounces checks that we realized we needed to do something different about managing our household finances.  As we sat down with our bills, recent bank statements and our cash receipts and began the first rough draft of our budget, we began to see a couple of patterns emerge.  First, we were spending way too much on dining out (for lunch mostly).  Second, we were relying on memory to ensure one of us was paying specific bills on time.  Once we were able to see how negative spending habits and a lack of focus were hurting our bottom line, we were able to draft a well-constructed budget plan that took both our input into account. We also realized that we need to forecast our spending beyond the next paycheck to tackle any unforeseen circumstances that might crop up.  By forecasting our expenditures 3-6 months out, we were able to absorb added short-term expenses without significantly impacting our long-term financial goals.  And that brings me to a broader point concerning your budget:  it’s merely a tool to help you manage your money as you see fit.  Nothing more, nothing less.

Use your budget to help keep track of your earnings, expenditures and long-term financial goals.  I want to emphasize that last part.  I think it’s important for people to understand that your budget shouldn’t be a static document.  I should change as the circumstances of your life changes.  Furthermore, just because you may have to cut back and live within your means (or below them) in order to get your finances on track doesn’t mean you have to always go without.  You can – and should – incorporate leisure time activities into your budget plan. Such activities could be as inexpensive as planning a special family meal once a week or renting your favorite movies including everyone’s favorite snacks.  My point is, such leisure time activities don’t have to be extravagant.  Just plan ahead and be creative again taking input from your family.  Unfortunately, many consumers believe that “keeping up with the Jones’” – image – is more important than living debt-free.  To some, debt is just another part of life.  But I would argue that living debt-free is a better way of life because you’re in control.  Instead of being dictated to as to how to spend your money, you get to call the shots.  And wouldn’t you rather be in control of your financial future than having someone else control it for you?

Another aspect of your budget plan should be personal investments.  While most financial counselors suggest waiting until you’ve gotten your debts under control, I would suggest that you start by putting as much money as you can into an interest-barring savings account  and build up your savings over time when you can afford to save more.  The point here is to pay yourself first!  After all, you work hard for your money.  Shouldn’t you receive the benefit of its use besides just paying bills?

If you’re struggling with debt, take the first steps towards getting out of debt today by acknowledging your debt woes, seeking assistance and drafting well-constructed budget plan.  Try to forecasts your expenditures for the long-term, and don’t forget to include personal investments and leisure time activities into your budget plan.  Your family, your sanity and your financial future will thank you for it.

That’s my blogpost for this week.  Join the discussion and post your comments below.  And don’t forget to tune in next week where I’ll once again share more ways you can break the debt cycle and then go…beyond.

Zebert L. Brown is the author of Break the Debt Cycle in 3 Simple Steps and a 16 year Navy veteran with specialties in administrative management, career development and public relations.  Follow him on Facebook and Twitter.

Financial Literacy…How Important Is It?

LeeHeadShot4   Financial literacy has quickly become the hot new buzz term in personal financial management, but what does it truly mean?

Financial literacy refers to having a basic understanding of how money works, as well as, how to apply knowledge and skills in financial managment to make well informed decisions concerning personal financial matters.  How you earn money, manage money, invests money or donate money to help others are all part of financial literacy.  The more knowledgeable you are about basic financial principles, the better financial decisions you are able to make.

In the wake of the Great Recession, there’s been a lot of finger pointing going on where people of all stripes have played “the blame game” where personal finance meets personal responsibility.  While it is true that many consumers acted irresponsibly taking on more debt than they could afford, it’s also true that commercial entities took on more risk than they could reasonable manage.  Nonetheless, this isn’t about whose more at fault for the present state of our nation’s economy.  It’s about what you can do to take control of your personal economy.  The truth is that for over a generation our nation has fostered a culture of consumption and debt, and that culture has led consumers to take on more debt obligations than they could reasonable afford.

I remember when I was in high school one of the mandatory courses I had to take as a senior before I could graduate was Government and Economics – or “civics” as some like to call it.  Aside from learning how our government worked, this course also taught the basics in financial management. I admit it hasn’t always been easy for me to apply those financial skills I learned back then in my every-day life as a consumer, but I do try to live by the sound teachings I learned from that mandatory course back in my high school days and I can honestly say that in applying those teaches I’ve managed to make a few prudent financial decisions along the way.

I say this to make a point:  financial literacy is something that has to be taught! You can’t just pick it up as you go along. Granted, certain aspects of financial literacy are rooted in common sense, i.e., don’t spend more than you earn, but true financial literacy requires having a keen understanding of various aspects of consumer finance, such as, how to properly calculate interest rates whether it’s the Annual Percentage Rate (APR) on a credit card, the interest rate on an Adjustable Rate Mortgage (ARM) or simple compound interest earned on a savings account.  Knowing how to “do the math” properly can help you to make better buying decisions that are sure to affect your bottom line.

It’s a fact that wages have remained flat for many Americans. As such, our overall buying power gradually decreases over time with inflation.  Unfortunately, the only alternative many consumers have to made up the difference between what they earn and what they’d like to afford is to put more and more of their purchases on their credit card, or take out a home equity loan or a line of credit against their home.  Is there any wonder then why so many people are living paycheck-to-paycheck or that fewer households have anything in savings or that many ordinary people are unable to invest because they just don’t have the extra capital to do so?  The only way to change things is for consumers to return to using sound financial principles, and it begins with implementing one common sense practice – drafting a budget and maintain it regularly.

No matter who you are, what you do or what side of the economic divide you’re on every financial planner, credit counselor or tax accountant will tell you that unless you maintain a budget on a regular basis, you’ll never know where you’re money’s going, where the excesses are, what you can do realistically to cut back on expenses or how much of your hard earned money you can put to work earning you money.

Improving your financial literacy is key to becoming a better steward of our money and will also help you to make better financial decisions.  As you consider your financial literacy skills, ask yourself the following questions:

What steps have you taken to become more financial literate?

What’s the worst financial mistake you’ve ever made and what did you learn from it?

What’s the best financial decision you’ve ever made and how did the decision improve your net worth?

What advice would you give to your partner, spouse or child concerning how to invest in their financial future?

That’s my blogpost for this week.  Become part of the discussion by posting your comments below.  And don’t forget to tune in next week where I’ll once again share more ways you can break the debt cycle and then go…beyond.

Zebert L. Brown is the author of the book, Break the Debt Cycle in 3 Simple Steps He is also a 16 year Navy veteran with specialties in administrative management, career development and public relations.  Like him on Facebook and follow him Twitter.

Hello, Blogosphere!

LeeHeadShot4  I’ve wanted to say that for a long time and I’m happy that day has finally arrived. Since this is my introductory blog post, it’s only fitting that I provide a little background as to why I’m so excited to be starting my blog.

After the U.S. economy took a nose dive in 2008, I began to pay close attention to what was happening to the personal economies of hard working people such as yourself all across the country. I would read the headlines and follow story after story of families whose lives had been turned upside down mainly because a father or a mother – or sometimes both – lost their job and eventually their home because the main source of income was gone and their savings dried up. As sad as such stories were, I realized there was little I could do to help these people in their immediate situation. Even if some of them did managed to find new jobs, they’d still have their unpaid debts to deal with.  I mean, when was the last time you had a debt collector graciously wipe your slate clean? It just doesn’t happen. Still, I was left wondering how could I help?

As I kept abreast of the storylines involving home foreclosures, rising health care costs, rising student loan debt, income inequality, low-savings rates and dwindling retirement accounts by Average Joe’s like you and me, I decided to start digging deeper into these types of issues. At first it was to protect my own self interest – I didn’t want any of those things to suddenly happen to me if I could help it. But then it occurred to me!  With all the information I had gathered and the experience I’d gained keeping my own household afloat throughout the Great Recession, I could write a book based on the lessons I’d learned in personal financial management.

The title of my book is “Break the Debt Cycle in 3 Simple Steps”.  I wrote it specifically for individuals who are struggling with debt and want to learn how to take control of their personal economy, eliminate debt and start building lasting wealth. And that is what brings me to your computer screen today.

Although there are several books and countless blogs on the subject of personal finance, one thing I’ve noticed is that most give the same cookie cutter advice. I try to go beyond the debt cycle and provide information you can use to save money, protect your assets and get started in investing. That’s the level of content I plan to bring to my blog aptly named, “Beyond the Debt Cycle”.

So, I hope you’ll stay tuned for my weekly blog posts and help to make this an environment where good advice and shared experiences can make a difference in the lives of ordinary people just like you. Together, let’s get more hard working Americans to break the cycle of debt and then go beyond.

See you next week.