September 5, 2008

• How are you Managing your Finances as a Single?

  We continue our series From Dorm Room to Altar (click to read past entries) with Brian's entry on Finance. Brian loves business and financial topics, going so far as to start some businesses of his own! He also is highly involved in a kids ministry at his church. He's an interesting Xangan that most of you don't know, and so I'm pleased to bring his writings to my site. Visit his Xanga here.
  

  How are you managing your finances as a single?

  The world revolves around
  money; obtaining, spending, saving and giving it. It affects nearly every area
  of our lives. Indeed, survey after survey says that money is one of the most
  contentious issues in marriage. What better way to prepare for marriage than to
  be on firm financial footing with good money habits in place? As a
  Christ-follower, I believe we are to be good stewards of everything God has
  entrusted to us. Regardless of religious beliefs, now is always the best
  time to establish sound money management
  practices.

  See how you line up on the
  Financial Health Checklist below:

  1)     Do you have a
  budget? A
  budget is THE absolute essential for most efficiently managing your money. You want to be able to tell your
  money where to go rather than the other way around. Spend and save
  intentionally. There are many great systems out there. Find one that works for
  you: the envelopes budgeting system, MS Money
  or similar software; and for you engineers and business grads, Excel
  works great too. If interested in an Excel budget template, please contact me.
  A budget, or spend plan, forms the basis for being able to build financial
  goals. When can I afford a new car? When will I have enough for a house down
  payment? How much of a ring can I afford? It is not only a tool to use
  month-to-month to see how you’re doing. It is a tool that can be used to project
  into the future where you will be financially and when. I project my budget
  out through 2010. It motivates me to stick to my budget, so I can see that if I
  follow my budget I will be able to buy a new car for cash at the end of 2010,
  for example.

  2)     Do you have an
  emergency fund?
  Have a minimum of $1000 set aside for emergencies. If you don’t have it,
  get it fast…less than 30 days, work overtime, sell stuff, cut all non-essentials, whatever is necessary. With rare
  exception, anyone with a full-time job can do it in that time frame. In fact,
  during this month a small group of readers on my blog have entered into “Great Depression
  Mode” for September to bolster emergency funds or
  free up additional cash for other things. Several of my recent entries have
  touched on preparing for going bare bones and blogging will continue throughout
  the month on the topic. After you have $1000, aim for saving three months
  worth of expenses to set aside in a separate account. Don’t be in a
  situation where it’s necessary to go into debt to pay for an emergency that you
  should have been preparing for all along.

  3)     Do you have a
  list of every debt you currently have? Lay every debt out on paper with the payoff
  amount, interest rate, penalties for paying off early (if applicable) and the
  minimum payment amount. What better time to pay down debt than when you’re
  single! Common advice
  says to pay off the lowest amount first and then snowball what was being
  paid on that small debt into the next bigger debt until all the debt is wiped
  out. There may be some merit in paying off the highest
  interest rate debt first, but there are definite psychological benefits
  to eliminating the number of people/businesses to whom you owe money. If you
  have significant debt, look into ways to reducing the interest rates. If
  you have paid your credit card on time for the last 6 months, call up the 1-800
  # on the back of your card and ask if they can reduce the interest rate. Most
  of the time they will. All it takes is a phone call. If it’s a struggle to pay
  current debts, my very best advice is to run towards your creditors
  rather than away from them. By calling them and showing a willingness to pay
  and being honest about your current situation, they are going to work with you
  and are often open to waiving fees, reducing interest rates or lowering
  payments. Paying off debt is one thing, but
  be sure to take care of the
  cause of the debt problem (overspending) rather than just the symptom (high
  interest payments) or else you’ll be back in the same boat in the future.

  4)     Do you save
  automatically?
  Take savings right off the top rather than what’s left over at the end of the
  month. The best way to do this is automate. Have it pulled right from
  your paycheck if possible. Have it pulled right from your bank account
  otherwise. Typically it’s best to have at least three different savings pots:
  1) emergency fund build-up, 2) retirement and 3) major purchases (car, house,
  ring). A high priority should be given to debt repayment, but not necessarily
  to the neglect of all other
  savings areas (especially if an employer offers matching
  funds for retirement contributions). The best solution is typically a
  combination of paying extra down on debt while addressing at least one of the
  savings areas.

  Crown
  Financial Ministries
  is a Christian-based organization I highly respect. They have financial coaches
  across the country who
  are trained volunteers that
  are willing to help with your specific situation to help keep you on track
  toward true financial freedom. If you are
  interested in speaking with a coach free of charge in your area, visit this link: http://www.crown.org/ForChurch/Solutions/MMCoaching/MMCoachingMain.aspx

  If you have a good handle
  on each of the four areas mentioned above, you have set yourself up for
  success. Personal financial management is my passion. If I can help with
  specific resources or you have a specific situation or question to run by me, I
  am thrilled to help out where I can.

  Thanks Brian! Yes, we still have yet ANOTHER guest author for Sunday, so check for that. I'm taking a big break when this is done. Visit Brian here if you liked the post!
  

  • 9:42 pm
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