Hello and welcome to the first blog post of Empowering Life Changes, LLC. We exist to provide life coaching skills that allow our clients to experience the success of positive decision making, and to empower our clients to learn and maintain life-long healthy habits. In this first blog post we will be discussing financial freedom through budgeting, proper credit management, and money discipline. Most of us who grew up during the technology boom of the late 90’s didn’t learn much about balancing a checkbook, long-term financial planning, or even credit for that matter. However, we are still held to the same standard as the professionals in the various financial industries. In the next several paragraphs we’ll touch on some key topics to help jumpstart or maintain your financial independence.
Life Change 1: Identify your budget
Life Change 1 is meant to help you see how much money you have coming in and see where your money is going. As simple as it seems, a budget is a revolutionary tool that will help you track the value of your financial decisions. Below is a sample budget:
Car Payment: $300
Date night(s): ***
Credit Card: ***
Child Support: ***
Net income (Monthly): $2,800
Expenses: $2,240 (Less miscellaneous expenses)
As you begin to develop your budget, you will see that the numbers shift (either up or down), you may have additional expenses or fewer, and be sure to list your expenses from most important to least important. The above sample is of a monthly budget. When I first graduated from high school and made $800 a month, I had to budget based on 2-week intervals (the time frames that I got paid). This helped me identify which bills were due for each pay period, and I could edit payment dates so that I wasn’t overspending on either paycheck. Creditors and billing companies prefer to get paid; use that to your advantage when working out payment arrangements with them.
I recommend in the beginning that you track all of your purchases for 15-30 days. This will give you a realistic look at your spending habits (using your banking app to review your expenses). The last note here is that you don’t need to overextend yourself to get a bill paid. This doesn’t mean skipping out on your bills unnecessarily, but if you don’t have it, then you don’t have it. Call whomever you owe and work out an arrangement, don’t make people search for you (a lesson for later).
Life Change 2: How to be financially disciplined
Most of us know what we can and can’t afford. Often, through the lens of social media, we lose track of who we are and begin to adjust to the societal expectations we perceive. Consumerism (an obsession with buying material goods or items) leads many of us into debt through a temporary sense of fulfillment. Financial discipline goes beyond developing a budget; it means sticking to the budget, being able to say, “no, that purchase doesn’t align with my future goals,” and being able to recognize poor spending habits within yourself. Don’t be too hard on yourself here; you will find that you’re going to go outside of your budget from time to time. Excessively punishing yourself only degrades your mental capacity. The overall goal is to learn from our mistakes, use those lessons to make better decisions, and pass on our knowledge to others.
Financial discipline requires significant work upfront (especially for those of us who struggle with impulsivity). Generally, as we become more aware and efficient, we begin to release the reigns, and we can move through life with more certainty.
Life Change 3: Understanding credit
In its most simplistic form, we think of credit in credit cards, loans, and buying power. For the most part, this is a good base of understanding. Credit cards come in two forms: secure and unsecured. A secured credit card is typically for someone who has no established credit history, has a poor credit history, or is looking to rebuild their credit after a bankruptcy. The secure credit card requires the applicant to put down a certain amount of money (collateral), which becomes the established credit limit. You may (if the creditor allows) send additional checks to increase your credit limit; however, the creditor may deny the request. An unsecured credit card is given by a bank or financial institution with no collateral (think discover, capital one, chase bank, etc.). These cards come with a pre-set credit limit based on the applicant’s creditworthiness.
Credit Karma is an exceptional resource for discovering what is on your credit report, disputing inaccurate/outdated information, and learning more about the beneficial impact of credit on your life through the articles section (a second resource is Experian). Most of us can receive one free credit report per year from http://www.annualcreditreport.com. It is increasingly important to check on your credit report at least once a year to ensure you haven’t become the victim of a cyber-attack. In a future blog, we will revisit credit and dive deeper into interest rates, APR’s and other credit nuances.
This concludes the blog on financial habits. Three resources have been provided above as well as concise information to help you along the way. Constructive feedback is always welcomed and should be emailed to firstname.lastname@example.org. You can also leave a note here so that we can all chime in together. A practice that has served me well over the last several years is called the “After Action Debrief.” In the debrief, we go over what went well, what went wrong, and where we can improve. This is a tool that my squad and I used during my time in Louisville. Try to find at least three things in each category. Be mindful that we can continually improve, that we are constantly making mistakes, and that we are always capable of doing our best. As you explore your financial decision-making, ask yourself, “How are my spending habits good? How are my spending habits bad? How can my spending habits improve?”.