Super simple plan to save $63 this month

According to the Financial Industry Regulatory Authority (FINRA), nearly 60 percent of Kansans do not have a rainy day fund. That’s a whole lot of umbrellas we’re going to need in a downpour.

And 21 percent of us spent more than we earned last year!

This is probably why 30 percent of Americans are in debt collections.

It doesn’t have to be this way. Here’s a super simple plan to save $63 this month.

Just save.
Set a savings goal of $1.25 per week: $5 per month.

Generic vs. name brand.
Buy generic spaghetti sauce: $1.98 per month.
By switching from Classico spaghetti sauce to Wal-Mart’s Great Value spaghetti sauce, you can save $3.78 per month (based on using 66 oz of spaghetti sauce per month).

How we came up with $1.98 per month:
Classico: $3.82 for 44 oz, 0.08 per oz
Great Value: $3.50 for 66 oz, 0.05 per oz
If you use 66 oz per month, you’ll spend $5.28 per month using Classico or $3.30 per month using Great Value. Using a generic brand will save you almost $2 per month just on one item!

On-time payments.
Make your payments on time: $34.18 per month.
This one should be a no-brainer. The typical bank in Kansas charges $34.18 in late fees.

Lunch.
Twice a month, swap eating out lunches with brown bag lunches: $11.38 per month.
This is based on the Big Mac meal at McDonald’s which is $5.69 per meal. Here’s another example: If you ate out twice for lunch at Applebee’s, you’ll spend $16.98 (based on the cost of the classic + signature option lunch combo).

Dinner.
Order water instead of a soft drink twice during your dinners out this month: $4 per month.

Use a credit union.
Use a credit union instead of a traditional financial institution: $7 per month.
On average, a consumer can save $84 per year simply by using a Kansas credit union (or $159 per household). Divide $84 by 12, and you’ve saved $7 a month. And those late fees? If you bank at a credit union, you’ll reduce your late fee from $34.18 to $24.56, a savings of $9.62.

• Total savings per month: $63.54.

Seven Debt Warning Signs

CNNMoney reports “Americans have a debt problem.”

Yeah, well, we could have told you that.

Every third person in America  owes so much in payments, that their account is considered “in collections.”

The good news is the debt might only be $25. The bad news is the average amount owed is just over $5,000, with some debts as high as $125,000. The super duper bad news is delinquent debt can put your credit score in the toilet…for years…even if you’ve paid off the debt. And a wrecked credit score can hurt many things from employment opportunities to securing loans.

While it may seem that your debt crept up on you, there are warning signs…here are just seven of them:

1. You hide bills from others.
2. You use a credit card for most purchases, and only pay the minimal balance.
3. You have little or no savings.
4. You believe that checking account overdrafts are a normal part of everyone’s financial life.
5. You don’t know what your living expenses are because you have never tracked your spending.
6. The loss of a job in the household would cause an immediate financial crisis.
7. You borrow money from payday loan offices, pawnshops, or title loan companies.

More debt warning signs included in the Money Possible workbook. (pdf, page 13)

Need help getting your debt under control? Consider a credit union, where some offer financial education programs and have financial counselors on staff, or contact your local non-profit credit counseling agency like Kansas Consumer Credit Counseling Service.

100+ Reasons to Join the 100 Million.

We’ve talked a lot about the benefits of credit unions, but this post by Phroogal spells it out for you: 101 Reasons Why Credit Unions are Awesome.

Surely you can find one or two (or ten) reasons why you should consider a credit union, especially if your current financial home leaves you dreaming of better rates, fewer fees and smiling faces.

And if those 100 reasons aren’t enough, try asking the nearly 100 MILLION members worldwide why they are a member of a credit union. Here’s a cool site that showcases a sample of credit union members and their own personal “why.”

Hard to imagine what 100 million looks like? Check out the “What Does 100 Million Look Like” section for some fun, state-specific ways to measure 100 million.

[Here is the Kansas 100 million fact:
100 million people could eat for 840 days from the amount of wheat produced in Kansas in one year.]

Already a credit union member? Snap a selfie, post it to the site, and spread the word!

Need to find a credit union, or want to know more about credit unions before making the switch? A Smarter Choice is a great place to start, or if you are in Kansas, here’s some state specific information.

Money Possible Produces Debt Destroyers

Raquel, Fredica and Lisa and Bryan made it. Sixteen weeks of rigorous budgeting and saving and heavy financial lifting.

OK, maybe not that intense…but our three families did make a commitment, met with a financial counselor and made major changes in their financial life. And lived to tell about it.

Here’s what they learned:

“Say no to frivolous spending.”
“Live within your means.”
“Don’t overwhelm yourself with credit.”

Each participant started out with a different financial issue. Lisa and Bryan wanted to bulk up their retirement savings. Fredica needed to control her spending. Raquel’s payday loans were spiraling out of control.

But the outcome for the three was the same: a lighter debt load, and more importantly, less stress in their lives.

The takeaway is that financial stress can cause problems in your daily life…which is in line with this recent survey that says employee financial problems or stress can reduce worker productivity.

What did our participants accomplish in 16 weeks? Here’s the skinny:

Lisa and Bryan

• paid off four of their credit cards
• learned the difference between needs and wants
• involved their children and developed a family budget

Fredica

• stopped using credit cards
• is paying down her existing credit card debt
• learned to live within her means, and work with what money she does have

Raquel

• paid down 30 percent of her debt
• is current on all her bills and has stopped using payday loans
• started an emergency fund

If you only remember one thing from this post, remember this: Your household budgets and finances are up to you. It’s a life-long process, not just something you can do once and be done.

But don’t feel like you need to do it alone. Get help from the Consumer Credit Counseling Service or a credit union. Financial education is a primary focus of Kansas credit unions, and credit unions nationwide. Credit unions promote financial fitness, and their goal is to make your financial life easier. Get started on your own by downloading the Money Possible Workbook.

Thank you to Lisa and Bryan, Fredica and Raquel for sharing their stories for the world to hear. Using a public venue to air your dirty laundry can be intimidating. These three credit union members took it in stride to promote the importance of financial literacy, and learned a little something along the way.

Turn $100 Into $1000

Daily Finance has a nice little series about saving a Grand by cutting $100 per month. It’s called the $1000 Savings Challenge and you can see all the posts here.

Cutting $1000 is about as easy as losing those last five pounds. It’s going to take time, effort and sacrifice, something we Americans seem to lack. And there’s no one size fits all solution either.

According to the article,  “Go after your biggest categories to find the most spending, and concentrate on monthly bills so that you’ll be saving money each and every month. Go over every bill, methodically, one at a time, category by category. Cut out what you don’t use, don’t really need, and then look for less expensive alternatives to what’s less….all you have to do is start now, start small and don’t try to be perfect.”

We have been saying all along that to become financially fit you must DO SOMETHING. Start somewhere. Make a change. No one else is going to do it for you. It is up to YOU.

Here is the list of posts. Read them all, or just read the ones that will benefit you the most.

• Part 10: When the Refi Fails, Rethink Repairs
• Part 9: Nibbling Away at the Family Food Bills
• Part 8: Life Insurance You Can Live With
• Part 7: Spending Smarter on Entertainment
• Part 6: Find Big Savings in Small Purchases
• Part, 5: Cutting the Hidden Costs of Work
• Part 4: Cutting the Cost of Kids
• A $1,000 Challenge Bonus: How to Buy a Car and Save a Bundle
• Part 3: Shrinking Your Car-Related Costs
• Part 2: Turning Down Your Utility Bills
• Part 1: Cleaning Your Financial ‘Junk Drawer’

Tips include looking through your bills with a fine tooth comb for “fees” or other things you didn’t sign up for. Research your credit card bill for those recurring items, and if you don’t use the service (gym membership?) get rid of it.

To save at work, consider talking to your employer and see if you can re-arrange your schedule to save on child care costs. Buy things like diapers in bulk at wholesale warehouses, but don’t get distracted by those “shiny non-essential items” like barbecue grills.

To put a stop to unnecessary spending, trim your bank ATM fees by switching to a credit union (with a network of surcharge free or low fee ATMs nationwide) or simply reduce the number of times you use the ATM by taking out more than you need. Of course, that only works if you can limit your spending, and don’t suffer from “Have Cash, Must Spend” syndrome.

There’s some advice about flexible spending accounts, reducing entertainment spending, buying a car and a bunch of other stuff, too. Some of it may not be for you. Some of it may be right up your alley.

Still don’t know where to start? Get help at a credit union or non-profit agency like Consumer Credit Counseling Service. And there’s always the Money Possible Workbook, which doesn’t take any time, effort or sacrifice. Just click the link. If that’s not an easy way to start, we don’t know what is.

The Freshman $30,000

We took an informal poll last month regarding your grade in financial literacy. The majority of US adults give themselves a C or lower in money smarts. Either smart people took our poll or you think you manage your money better than you do, because the majority of the respondents gave themselves a B. See the poll results.

In light of this being the graduation season, and the fact that we ran across a survey that said students wished they learned more financial management in school, this post will be about how kids (or their parents) can become be money smart at school.

Forget the “Freshman 15.” We need to worry about the “Freshman $30,000.” The average student graduates with close to $30,000 in debt. That’s a lot of financial weight.

Students are screaming for education in how to manage their money. Some states require a class in financial education to graduate, but many do not. And just ONE class? We all know it takes more than that to get through to a teenager!

This is where parents need to step up and teach their kids. Or find somewhere that can…like a credit union or consumer credit counseling service.

Here’s why: First-year college students required to take a financial literacy course in high school are more financially responsible than those students who didn’t take the class, a recent study found. This means they were more likely to pay credit card bills on time and less likely to go over their credit limit. Both of those add up to less debt. But just 17 states require a course. And ongoing education is critical.

Our friends at A Smarter Choice have some good tips to get students started on the right foot. Here is a scaled down version of their blog post Get Started on the Right Financial Footing.

Stay frugal. Be mindful of what you’re spending. Check with your gym, and cellphone and cable providers, to make sure you’re getting the best rates. Pack lunches from home. Have friends over for dinner and movies instead of going out.

Negotiate your pay. Starting out with a higher salary will mean higher earnings over the course of your career.

Build an emergency fund. Prepare for the unexpected by setting up an emergency savings account and have your paycheck directly deposited into that account. You should have three to six months of living expenses saved. For real.

Start saving for retirement now. If your job offers a 401(k) or similar retirement savings accounts, put money into it! Even better is if your employer offers to match a percentage of your contributions. Your 50 year-old-self will think you were super smart for doing that.

Pay down student loan debt. Know what you owe and contact your lender immediately–before the due date–if you’re going to miss a payment. Pay extra if you can.

Use credit appropriately. A strong credit history will pay off when you want to buy a house or purchase other big-ticket items (the new iPhone 6 doesn’t count). Here’s the biggest piece of advice that you don’t really want to hear: Don’t charge more than you can afford to pay off monthly! And please, pay your bill on time. Spending too much and having late payments can get you in a heap of trouble…and fast.

College students are smarter, but have more on their plate than in years past. Make financial education a requirement for them, and maybe as an adult, they’ll be shedding that $30,000 before swimsuit season.

Money Brain

There’s “mommy brain,” “senior moments” and “blonde moments.”

Well…now there’s “money brain.”

Experts say being a spender or saver depends on your brain. What you’ve been taught at home has something to do with it too, but in this post, we’re talking about that gray matter between your ears.

Recent research shows that while parents do have an effect on your financial habits, your brain’s chemistry plays a role too.

We won’t bore you with case studies, focus groups and medical gobbledygook, but here’s the deal: some of you get a thrill from instant gratification (buying that super cute pair of shoes NOW) and some of you get excited by “the deal” (think shopping sales or seeing your savings grow).

Think about it: When you get a free meal, doesn’t it taste better? Or if you find those super cute pair of shoes HALF OFF, aren’t they all that much cuter?

If you want to read the research, read The Psychology of Money-How Spending and Saving Habits are Programmed in Your Brain or The New Science Behind Your Spending Addiction.

Now that you know “you can’t help spending” … well, actually, you can…but if you feel you are one of those people like our friend Fredica (who had a spending problem, but now realizes she can control it) here’s some tips:

• Use cash. The simple act of seeing the dollars can help. A credit card is just a plastic card, right? You can’t see the money being spent until it’s too late (and $300 later).
• Use an ATM or branch office to withdraw your money, and make sure you get a balance inquiry. This helps you see your dwindling account.
• Never “put it on my tab.” Pay as you go so you keep track of how much you are spending. Wait…the only place we know of where you say “put it on my tab” is a bar, and you shouldn’t be wasting money there anyway.
• Don’t be swayed by “the big sale” or sales people! Remember that Friends episode when Joey bought all that stuff for his new apartment and racked up a major credit card bill?

Ross: What… what’s that?
Joey: It’s my VISA bill. “Envelope one of two.” That can’t be good.

No Mr. Tribbiani, it’s not good.

Don’t buy things because they’re on sale. Buy them because they are a need.

• Know the difference between needs and wants. Read this “Needs vs Wants” from a recent post.
• We’ve said it before. Tell someone you are trying to control your spending. A good friend will stop you from buying too much. A great friend will buy it for you. JUST KIDDING. Don’t think we want you to be a charity case. A great friend will help you and may even suggest a financial counselor at a credit union or non-profit agency.

No matter if you are a spender or a saver, you brain has a lot to do with your money smarts, as well as the habits you learned early on in your fiscal career. The bottom line is all about control, and we know you can control your brain. Well, most of us can.

It’s a Family Affair

Finances are one of the leading causes of friction in family households.

Money can cause divorce.

It ruins the lives of your children (just ask any teenager who is denied money by a responsible parent).

It even causes jealousy with friends and neighbors, because we are all trying to keep up with the Joneses (who, by the way, are broke.)

This is where you can turn it around. Make money a regular conversation in your house, and not a fight. Your kids need to know what is going on. And don’t worry, your friends and neighbors don’t care what you do or don’t have. They just care that you’ll offer them a slice of pizza and a beer when you ask them to move that massive TV that you really shouldn’t have bought in the first place.

In our last post, we reported that adults aren’t making the grade in their financial knowledge. Don’t let this trickle down to your kids, or their kids, and their kid’s kids. Studies have shown the skills and habits you learn as a child, stick with you into adulthood. Don’t let debt be a habit in your family.

Sit down and really talk about your budget. Show your kids what amount is coming in, and what must go out. Kids need to learn now that they can’t always get what they want…and neither can you.

Lisa and Bryan showed their teenagers that more was going out than was coming in. They talked about the difference between needs and wants.

Their kids are fully on board. Even keeping Lisa and Bryan in check when they are out and about.

“Do you really need that purse, mom? Or do you just want it?”

Raquel’s family didn’t realize why she needed those payday loans. After a good discussion, they are helping with the budget and making sure everyone knows where the money is going.

Fredica already told us her children were looking out for her. As self-described impulse buyer, her kids were already on her. “Just because you have a coupon, doesn’t mean you buy it.”

But how can we teach our kids and families about money management, when many of us are struggling ourselves?

• Make financial literacy a priority in your household, and take it seriously.
• Prepare a budget and stick to it.
• Determine where you are a wasteful spender and Shut. It. Down.
• Talk honestly about needs and wants and respect your children and other family member’s opinions too. Let them each choose a splurge item, unless it’s a trip to Hollywood for them and their five friends to celebrate turning sweet 16. Giving your children and others the power to choose will help keep them on board.
• We’ve said it before. GET HELP! Many financial institutions like credit unions offer financial literacy assistance. Just watch this nifty interview with one of our super cool Kansas credit union financial counselors. And if your children are old enough, bring them with you! It will improve your household financial knowledge and may even strengthen your relationship with your kids.

Your financial knowledge helps you no matter where you are in life. It can help you live better and healthier, and ensure your children have a better, healthier future too.

The Payday Loan Trap

Did you know there are more payday loan establishments in the United States than McDonald’s and Burger King fast food restaurants COMBINED? Welcome to America, where we swipe our cards, spend our money and stuff our faces.

12 million Americans take out payday loans each year. That’s a lot, but it’s less than half of the 27 million Americans who eat McDonalds EVERY DAY! That’s a lot of burgers.

Raquel, our young mother, admits she stepped into the payday loan trap.

Payday loans are meant to be a quick fix, but consumers are finding these loans (or cash advances) are causing debt to become the next four-letter word. These loans are typically $500 or less and carry hefty fees. The problem is, most consumers, 80 percent of you, can’t pay off the first loan, so its rolled over or renewed within two weeks, turning that initial $500 into $1,500 before you can even say “super size it!”

Don’t despair. Try these alternatives to get you by in a pinch.

Credit unions.
Credit unions put people before profit, and as not-for-profit financial cooperatives (read: not-for-profit bank) they can offer low or no fees on some of their services. The credit union philosophy is “people helping people” so you can be sure that they won’t pull a fast one on you. Credit unions promote financial literacy too, and many have a financial counselor on staff that can help you re-evaluate your finances and put you on a path to smart money management skills. Many also conduct money management workshops for their members, free of charge.

You have to become a member first, which is easier than understanding what is said through a drive-thru speaker. Find a credit union near you at asmarterchoice.org.

Credit counseling help.
A financial counselor can’t help you if you need cash NOW, (kinda like an apple won’t satisfy that craving for chocolate), but if you are using payday loans, it’s probably a good idea to seek help with your financial situation, and eliminate the need for future payday loans. So join the crowd of roughly two million people who sought the help of a financial counselor last year.

A non-profit agency like Consumer Credit Counseling Service usually offers free money management help such as budget counseling, debt management planning, and mortgage default or rent delinquency counseling. In fact, our Money Possible participants are all meeting with a counselor from the Consumer Credit Counseling Service of Wichita.

Reduce spending in other areas.
If you stop hitting the McDonald’s drive-thru, wait until that epic movie is on pay-per-view and hold off buying that new iPhone, you might be able to take that quick cash place off speed dial. Don’t be fooled…it’s hard work, just like eating a salad instead of a Big Mac. But you’ll soon find that some of your “needs” are actually “wants” and you can go without them.

Negotiating your bills.
Talk to your credit card companies. Beg your utility company. Negotiate a payment plan. Most would rather keep you as a customer than lose you, and are willing to work with you. At least it’s worth a try.

Cash advance from a credit card.
We usually don’t condone using your credit card for cash, but the 25 to 30 percent interest rate you’ll be charged is far less than the fees and 300 percent to 500 percent interest on a payday loan. Yup…pay day loan places charge 300 to 500 percent interest plus fees!

Think on that for a minute. It’s not uncommon for a consumer to be charged $10 or $20 on every $100 borrowed. So, if you borrow $300, and the fee is $20 per $100, you’ll actually owe $360. Then, if you can’t pay that loan in two weeks, you’ll roll it over and pay another $60. So now you’ve paid $120 in fees to borrow $300. That equals 520 percent interest rate!

It’s America Saves Week!

America Saves week (February 24-March 1, 2014) is an annual event promoting good savings behavior and a chance for individuals to assess their own saving status.

Although the week focuses on saving, it’s a good reminder for you to take a long hard look at your financial plan (or lack of) and determine a game plan for you or your family.

According to a recent survey by America Saves, most Americans still face savings challenges. Only 35 percent of respondents were making “good” or ‘excellent” progress in their savings goals. That means two in three adults are making no progress or “fair” progress in their savings needs. Come on people…we need to switch those around!

Saving money is essential for your financial health. You can’t pay down debt if you don’t have any money left over at the end of the month. You can’t build up a solid cushion of money if you are constantly trying to manage your bills. It’s  like the hamster in the little hamster wheel…spinning around but not going anywhere.

Start with this post: 54 Ways to Save Money. Surely you can find something you can do…there’s more than 50 tips!

Here’s two of our favorites:

• Reduce credit card debt by $1,000. That $1,000 debt reduction will probably save you $150-200 a year, and much more if you’re paying penalty rates of 20-30%. (Read more about credit card debt and the amount of money people throw away on interest fees)
• Take the amount the item costs and divide it into your hourly wage. If it’s a $50 pair of shoes and you make $10 an hour, ask yourself, are those shoes really worth five long hours of work? It helps keep things in perspective. Maybe retail stores should start putting that information on price tags?

Credit unions are another good place to start. Many have financial counselors at your beck and call, who can put you in the driver’s seat of a good financial plan, and definitely not one that will have you running in circles. Credit unions focus on financial literacy and people, not making money. As not-for-profit organizations, any profit they make goes back to the people who use the credit union. Here is more information about credit unions.

In the meantime, stay tuned because we’ll be unveiling our participants next week.