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.

Controlling Impulse Spending.

Impulse spending will wreck your budget faster than the Ellen selfie went viral at the Academy awards.

Impulse spending (or impulse buying) is an unplanned decision to buy a product or service. Stores are notorious for placing items “just so” to increase your impulse spending.

Fredica knows that she is an impulse buyer. She knows she buys things she doesn’t need, just because it might be on sale or she has a coupon. She’s not alone.

The lure of impulse spending.
Did you know 90 percent of the time you go shopping you end up buying something that wasn’t on your list?

Yes, 90 PERCENT!

A survey showed that impulse buyers waste an average of $200 per month on items they don’t need.

But who can resist the lure of temptations like this: “Buy a bag of chips and get a jar of salsa for free.” Neither items are on your list, but hey, free salsa!

Or this: “Buy three 12 packs of soda for $12 OR one for $5.” NO ONE really “needs” soda. But here in ‘Merica, we do!

Retailers know that 88% of impulse buys are made because something is on sale. And 14% of impulse buys are food items, but something you probably didn’t need in the first place.

Impulse spending creates cluttered houses, busts our budget and packs on the pounds.

Plan to shop.
Retailers, especially grocery stores, rely on consumers to make impulse purchases. That’s why it’s super important to PLAN to shop. In fact, impulse buying increases 23% if the trip itself was unplanned!

Make a list and (this is the important part) STICK TO IT.

Planning to shop and sticking to only the items on your list can reduce impulse spending.

Take control.
We know it’s hard to control spending. Here’s our favorite ways to take three tips to help:

Give it 48 hours. If you still need that item, you can go back and get it, but only if it is in your budget. Chances are, you won’t.

Calculate how many hours you have to work to buy that item (really only works for larger purchases).

Go on a spending freeze. A spending freeze is where you don’t spend any money for a designated amount of time. Before you freak out and think you can’t do it, even a few days can help. A two-week spending freeze is common, but some people even try a month. Just Google “spending freeze” and you will find plenty of resources to get started.

Controlling your spending is hard, especially when it looks like everyone else is throwing money around like it’s the greatest thing since sliced bread. The ability to purchase things online doesn’t help either. Click, click, done! Congratulations! You just spent $78 on shoes you don’t need.

Take control now. The only person who can change your behavior is you.

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!

Don’t Be Such a Waste

Don’t be such a waste. Wasteful spender that is. Financial experts estimate Americans spend 10%-15% of their income on unnecessary items. (Read: Things you don’t need!) Or things like fees or services charges that are certainly avoidable.

We asked our Money Possible participants what they found they waste money on.

Fredica brings up a common one: cell phone. She says her monthly payment could be lower.

Lisa and Bryan admit wasting money on things like a soda at the gas station, or food and drinks at sporting events.

Fredica, Lisa and Bryan are in good company.

Unnecessary bills, fees, or or simply paying for a service you don’t need is at the top of the “money down the drain” list. So are “extras” at entertainment venues, like popcorn at the movies. At $5 a bag, that’s enough to pop your wallet!

Wasteful spending items can include any or all of the following, and can really add up:

• Memberships you don’t use (gym, Sam’s club)
• Late fees (pay your bills on time!)
• ATM service charges (use your financial institution’s ATM. Credit unions have a network of surcharge free ATMS…7,000 of them! Or at least take out a big chunk of money so you don’t have to use the ATM every week)
• Services you don’t use (check your bills – don’t use call waiting on your landline anymore? Who does? Get rid of it!)
• Unlimited data on a mobile device (only text your teenage daughter? Use a limited data plan to save money)
• Junk food (eat before you go!)

Need more money wasters? How about drinks and dessert when eating out? Those alone can tack on an extra $20 on your restaurant bill…and an extra $4 in tip…so really an extra $25! Sheesh!

Here’s another, and it sounds stupid. But you can waste $100 a year on electronics that are plugged in when not in use. Just don’t pull the plug on that annoying clock that you have to set every time the electricity goes out. It’s not worth it.

And by all means, pay those dang bills on time! Get your act together, organize your household expenses and budget and never pay a late fee. It’s just money down the drain.

Need more?
Yahoo Finance: Ways to Waste Your Money

Budgeting: Not as hard as it looks!

Why is it that the right thing to do is always the hardest? Like not eating that double fudge chocolate brownie warm from the oven. Like breaking up with that person whose laugh drives you insane and you know it just won’t work out with. But when it comes to budgeting, you can’t use the old ‘it’s me, not you’ excuse.

So why don’t we do it? Is it because we don’t like to see the hard reality staring back at us? Or that it takes a little thought and planning? Whatever the reason, we promise you that making and sticking to a budget isn’t as hard as it looks. (Check out the ‘Basic Money Management’ section of our Money Possible Workbook)

Our participants are well on their way to destroying their debt. But guess what? They all started by making a budget. While some were budget newbies, others had tried before.

Lisa and Bryan said, “We did have a budget before. However, it was hard to stick to when unexpected things would show up.” We know, how can you plan for the unexpected? Having a little cushion in your budget will help keep you on track for the long haul.

Fredica and Raquel never had a structured budget.

Fredica, “just mapped out what was owed and the due date.” That’s a good start, but planning for the future requires long term budgeting and goals.

Raquel’s method was, “to pay with what you have and pay the most important things, rent, utilities, medicines, daycare, etc.  I think the hardest part is trying to find and figure out EVERYTHING that you owe, and what to start with first.” Getting everything down on paper (or the computer) makes your budget tangible. From there, you can begin determining what next steps to take to destroy your debt.

So here are three easy steps to get you started:

1. Identify how you’re spending your money now.
2. Evaluate your current spending and set long-term financial goals.
3. Track your spending monthly and adjust if necessary.

Join our participants and follow along – you, too, can be on your way to destroying your debt. As for your relationship woes, just do it already! It really isn’t you, we promise.

View the television segments.

Follow along on twitter: #moneypossible

Meet the Participants

“I need to pay down loans.”
“We want to save for retirement.”
” It’s hard to control my spending.”

Sound familiar? These are the challenges facing our three Money Possible families, and the issues affecting millions of Americans who want to take control of their finances.

Each family has agreed to tell their story, and show that getting control of their money isn’t hard, it just takes dedication and a little self-control (of course, self-control is a whole other problem for us Americans…evident by our super-size nation…and we’re not just talking about food!)

Meet the participants
Raquel
Raquel is married and a mother of two young children.

In her 30s, her goal is to pay down payday loans, and learn to save.

Lisa and Bryan
In their 40s, Lisa and Bryan want to save for retirement.

They have three older children. They need to learn to say “no” and live within their means.

Fredica
A divorced mother of four in her 50s, Fredica wants to control impulse spending.

She always wants to save enough to buy a house.

Follow these Wichita area credit union members’ stories here, and every Tuesday on KAKE-TV’s (Channel 10, ABC) 4 p.m. newscast. Follow the hashtag #moneypossible.

Let’s face it…with Americans $11 trillion in debt and struggling with saving money, many of you can probably benefit from following them and learning from their successes and their challenges.

Who hasn’t had loans to pay back? Who doesn’t need to save a little (or a lot) more for retirement? And who isn’t plagued by the temptations at the grocery store?  By following Raquel, Fredica and Lisa and Bryan, they will show us that we can do it. We can destroy our debt.

This program highlights the need for consumer financial education, as well as the value of credit unions as strong financial partners. The campaign aims to give consumers tips and explain that there are resources available to those who need extra help.

Money Possible Participant Sneak Peek

Last week we posted pictures from our first video and photo shoot.

Here’s a sneak peek profile of each (we’ll reveal their headshots later):

• Single mom of three, 50-ish, administrative worker who rents a home.
• Married couple with three children, 40-ish, owns their home.
• Married mom in her 30s with two young children, works in education, renting a home.

Here is some insight into why they applied to be a Money Possible participant:

“I need to stop spending and buying. If it’s on sale, I know someone who can use it.”
We’ve all fallen victim to the merciless “sale” tactics or “I have a coupon” mentality. Stick to a list to deter impulse buying.

“I’ve tried other programs, but without talking to someone regularly, I have not stayed on track to save for retirement.”
Ah, this one is accountability. Telling someone (and it can even be your friend or neighbor) your goals and struggles can be just the thing you need to stay on track.

“I need to save so I don’t have to turn to payday loans…if I have it, I spend it, down to the cent.”
Is your cash burning a hole in your pocket? Gone shopping “just to see” if you need anything? Saving money is hard, and takes dedication and self-control. Set up an automatic transfer so you don’t “see” how much is being taken out of your account, or give it to a trusted friend for safe keeping.

Do these scenarios sound familiar? They should. Money management is at the top of  “things I need to do” for the majority of Americans. And it’s not something that can be delegated to the “honey-do” list.

Remember, you’ll be able to follow our participants by watching weekly television segments on KAKE-TV…we’ll post the television schedule soon.

Behind the Scenes of Money Possible

It’s always fun to go “behind the scenes” … kinda makes you feel like you have a backstage pass at a Justin Timberlake concert.

We begged asked our Money Possible participants to meet for a quick (and by quick we mean three hours) video and photo shoot/financial literacy class/get to know you session on an icy Saturday. They were all kind enough to show up, and what’s even better, they were early!

What a fantastic group of participants. They did everything we asked…even with lights and a camera in their face.

The interview.

We thought this was cool. It’s a jar of cut up credit cards.

Group session.

Needs vs. wants.

Scary Statistic: “We have more payday loan locations than McDonald’s Wendy’s and Burger King combined.”

Stay tuned, we’ll reveal a little bit more about our participants next time.

Money Possible Participant Update

Our “call to apply” was a success! We received more than 15 applications from credit union members, ready to destroy their debt. The Kansas Credit Union Association is in the process of finalizing the nitty gritty details with each participant.

We are keeping the identities of our Money Possible participants under wraps until the week of January 27, so you’ll have to hold onto your hat for just a few more weeks.

Money Possible segments will begin airing on KAKE-TV (ABC, Channel 10) Tuesday, March 4 so be sure and set that DVR up to record. Are you one of those people who don’t have “regular” TV? No worries…these segments will be available online at momseveryday.com. If you don’t have that “Interweb” thing that Al Gore invented, well, we can’t help you with that one.

Segments will include live interviews once a month, as well as weekly participant updates so you can cheer our participants on, or give a sympathetic nod when things aren’t going their way. Because you know you’ve been there too.

For those with the attention span of a Twitter user, 15 second Destroy Debt tips will air throughout the duration of the campaign. And speaking of Twitter, you can stalk, I mean follow along along at #moneypossible. The best part is you don’t even have to leave your couch to learn tips and tricks that even the most financially challenged person can use. Score!

In the meantime, our participants will be meeting with Consumer Credit Counseling Service to assess the best way to destroy their household debt.

Wait, back up the truck, Chuck. Just finding out about this Money Possible thingy? Here’s the short story: It’s a consumer financial literacy campaign supported by the Kansas Credit Union Association and in partnership with Kansas credit unions and the Kansas Consumer Credit Counseling Service. Read more about the Money Possible: Destroy Debt campaign.

If you want to participate but don’t want to air your dirty laundry, free Money Possible packets will be available during the campaign at Wichita area credit unions to anyone who asks.

Still have a burning question? Contact Melissa Baptista, Research and Development Director, Kansas Credit Union Association, (800) 362-2076, ext. 3016.