Financial Recovery Mini Plan
According to the U. S. Department of Commerce, in September 2009, the United States emerged from the longest economic slump since World War II (New York Times, October 30, 2009). If you were impacted by the recession, this long awaited potential economic recovery and your personal financial recovery may be linked. But, this good news will not automatically improve your financial condition. Your financial recovery may depend upon on one or more of the following:
- Your investment in yourself.
- The long term effectiveness of the government’s stimulus package.
- Consumer spending.
- The willingness of the private sector to hire more workers.
So, what can you do to strengthen your financial recovery? Consider these nine steps.
- Empower Your Financial Self
Empowering your “financial self” means taking control of your finances rather than letting your finances control you. Read more about finance and money management with a goal to understand and take action to improve your financial behavior. When you take the time to understand how money and financial processes work, you empower yourself and increase your ability to attract and retain wealth for yourself and your family. Making good financial decisions improves your credit score, avoids critical financial mistakes, and helps you plan for more prosperous living, stewardship and healthy retirement. Our Building Your Wealth basic financial education online course will give you some practical steps you can take to transform your financial future and well-being. Consider taking the course today.
- Know Your Strengths; Use Them to Get Paid What You Are Worth
Consider taking time out to rediscover your strengths, and then use them to get paid what you are worth. Typically, when people are doing a job that they are good at and are passionate about, they most likely excel at their work. This may lead to more rapid promotions and increases in earning power. You may be able to use your strengths, for example, to create consulting opportunities or even to start a small business that you operate from your home. There are many tools available to help you identify your strengths. One of them is a book called StrengthsFinder 2.0. It allows you to take a 20-minute online test that reveals your top five strengths. If you decide to buy this book, make sure you buy a new one to ensure you get a valid access code. You will need this to take the online test. For more information, visit strengthsfinder.com.
- Spend Less Than You Earn
When you spend less than you earn, you will be able to:
- Apply that extra income towards reducing your debt,
- Save money for emergencies, your retirement, and the like,
- Build your wealth, and
- Live a more stress-free life knowing that you are moving towards financial freedom, creating a cushion for emergencies, and preparing for your future.
Spending less than you earn, includes resisting the temptation to use your credit cards. Only carry one credit card to be used for identification and planned purchases that can be paid off within 30-60 days. Resist buying on impulse. Make most or all of your necessary purchases with cash or a debit card.
- Stick to a Budget
Develop or refine a family budget and explain it to all family members. Encourage children to help you think about ways to stick to the budget. You’ll find that children can be very creative and interested in money management when they are included in the financial planning process. When you stick to a budget, you spend less and track where your funds are spent. When you know where your money goes, you can manage your money better and make choices that align with your financial goals.
- Pay Yourself First
Even if you feel you have no money to save, make a commitment to save a few dollars every week or pay period. Don’t buy a cup of coffee, join a carpool or bike to work; don’t make unnecessary purchases and then place the saved money into an emergency fund savings account. You’ll be surprised to see how fast the savings grow. The typical rule of thumb is that you should have three to six month’s worth of your monthly expenses in an emergency fund. Involve your children and spouse in finding ways to save money and reduce spending. Place your savings in a high yielding savings account or money market funds.
- Hit the Pause Button on Spending and Pay Off Debts
Rather than spending your money on something new, consider paying off debts, especially those with high interest rates. Credit card debt is so expensive that most financial planners suggest that people first pay off their credit card debt. If you can, make more than the minimum monthly credit card payment. Consider setting up automatic payment deductions from your checking account to prevent late fees and extra charges. The lower your credit card balance, the better off you will be and the more money you will have in your pocket for other priorities. Remember, credit cards increase your debt--they are not an extension of your income. To learn how to use credit wisely, consider taking our Building Your Wealth online course.
Here are some tips on how to save money so that you can pay off your debt:
- Use cash instead of credit cards.
- Review your spending habits daily, and cut out unnecessary expenses.
- Only spend money on what you need to survive, such as rent or mortgage, food, and medicine.
- Opt for less expensive items over more expensive ones; and buy used instead of new when you can.
- Practice delayed gratification by waiting at least two weeks before you purchase an item on impulse.
- Obtain competitive bids for all needed services and repairs; ask family members, co-workers, and friends for referrals on where to purchase services or repairs at a reduced cost. You may get great purchasing tips that will save you both time and money.
For additional tips on how to save money, visit the Federal Trade Commission web site.
- Make Sacrifices
Practice making financial sacrifices to achieve your financial goals. For example, you may consider taking a vacation locally rather than one requiring airfare and hotel expenses for the entire family. When you make these sacrifices, use those savings to pay off your existing debt and/or add the savings to your emergency fund or retirement account.
- Work Your Network
When the going gets tough—the tough get going. Develop your own network of trusted financial advisors and friends who have overcome similar financial challenges. Learn as much as you can from your network of friends, co-workers, and advisors about how to grow and protect your wealth.
- Follow the Wealth for Life Principles
The Wealth for Life Principles were developed and published by the Black Enterprise Magazine researchers. They were developed by a group of nationally respected financial experts, economists, and civic leaders to assist underserved communities. The ten principles serve as a prescription for wealth empowerment for anyone seeking to improve their financial condition.
- I will live within my means.
- I will maximize my income potential through education and training.
- I will effectively manage my budget, credit, debt, and tax obligations.
- I will save at least 10% of my income.
- I will use homeownership as a foundation for building wealth.
- I will devise an investment plan for my retirement needs and children’s education.
- I will ensure that my entire family adheres to sensible money management principles.
- I will support the creation and growth of minority-owned businesses.
- I will guarantee my wealth is passed on to future generations through proper insurance and estate planning.
- I will strengthen my community through philanthropy.
Your financial recovery is just around the bend. Envision your success and take positive financial steps.
“Always bear in mind that your resolution to succeed is more important than any one thing.”
Abraham Lincoln (1809 – 1865)
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