Jill Russo Foster

I Challenge You to Track Your Spending

Have you ever written down a budget to see where your money is going? Well, we did this earlier this month and everything looks fine, meaning that we make more than we spend.

That means we can pay our bills – great! That’s check one. Check two – are we saving enough? No, we’re not, but where do we get the money? We won’t find extra money to save until we find out exactly where our money is going.

If you want to do this process with me, follow these steps:

1. Write down a couple of short and long term goals. (Just so you’ll be inspired to do the work.)

Short term goals can be planning for a vacation, buying a car, paying down debt, saving for something that you want, and starting an emergency fund.

Long term goals can be saving to purchase a home, saving for your children’s education, retirement planning, and paying off debt/mortgage. What are yours? Imagine what you want or need and write it down now.

2. Track every penny you spend. That means finding a way to record your spending as it happens.

Don’t wait until the end of the month and use your bank statement or receipts. A single store can fall under many spending categories and receipts don’t always list items by name (or by names that you can decipher). Don’t think for a minute that your grocery store trip can be lumped under food. You may buy your pet food there, as well as cleaning supplies, shampoo, or even magazines.

I know this sounds time consuming, but it’s worth it. You can carry a pen and pad with you and write down everything by hand. Another way to track your money is by using a phone app. Choose the way that works best for your lifestyle.

3. Write your totals in a budget worksheet to see where you stand. Once you see a month’s worth of numbers, than you can begin to analyze what is going on. With this clear picture, you can make changes – lower bills to save money, get rid of unused services, check out the competition to switch etc.

Tell me what you have discovered with this exercise. Next issue, I will tell you what we have changed.

Download my budget worksheet here.

The little purchases can break your budget

Have you ever wondered what happened to the cash in your wallet? You cashed a check or used the ATM and suddenly the money was gone!

If this is you, you are not alone. It’s the little spending that gets forgotten. It’s also the little spending that can break any budget and lessen the amount you have to save. A restaurant meal, a few coffees, a movie, some lottery tickets, and poof! The $60 dollars in your wallet is gone.

You have to know where you spend your money to make your goals a reality. This month my husband and I are tracking every penny we spend. That means we are writing down all the credit and debit card purchases, checks written, bills paid, ATM withdrawals, and cash spent.

How do we do it? Each day we come home and put it into a tracker. How you track your spending is up to you (written, spreadsheet, or online). Already at midmonth I can see some areas that need addressing.

Our next step is to make the changes we feel are needed, by cancelling services we don’t use, calling to see if there is another option, checking out the competition for pricing, etc.

Just like us, you will see areas that need changing. We had no idea we spent so much on little things that really aren’t that important to us. Then, it’s up to you to decide if you need to address that area or not. Through your efforts, you will be able to lessen some areas of spending and put the savings towards things you really feel are important.

All these little changes will add up to extra money you can put towards your financial goals.

Tracking your expenses is the first step to understanding your spending habits as they really are. If you want a copy of my tracking form, email me. You have to see your spending to believe – only when you believe will you make the necessary changes. Saving a few dollars here and there can help you make a big start on your emergency savings.

The Must-Have Documents to Prepare for Death

In the last few weeks, I have had several people talk with me about end-of-life financial planning. They’ve told me what they’ve done and what they’re stuck on.

I was at an anniversary party and one of the guests told me that he discussed his finances with his adult son for the first time. After reading one my Quick Tips articles, he took the initiative to map out his financial picture so his son would know where to find all the details if the worst happened.

In another conversation, a reader shared that she was having trouble choosing the right person to be the executor of her will. This can be a touchy decision for all of us. She wasn’t sure there was anyone in her family who could handle it. I suggested looking outside the family for a trusted friend or professional. She was able to think of someone, but her new dilemma is moving forward.

Lastly, I was coaching a woman in her early 30’s whose goal is financial security. Her husband recently passed away leaving her a single parent facing all of life’s challenges alone.

These are people in all stages of life dealing with the financial complications of death.

That brings me to today’s tip – the must-have documents.

Do you have a will?
Do you have a living will?
How about a healthcare agent?

You need these documents regardless of your age. Any estate attorney will be able to help you with preparing these documents, but here is some basic information to get you thinking:

Your Will – Who will be the executor of your estate? You should choose someone that you trust with the intimate details of your life. My suggestion is to think of a few people. If your first choice declines, you move onto the next until you find a willing partner who can handle the responsibility.

Next, think about what you own and who you want to leave it to. Be specific with your possessions and your choices. It’s really not enough to leave all your jewelry to your nieces. You don’t want your legacy to be a family feud over who gets the first pick. Your attorney will be able to get you a questionnaire to help you through the process.

Your Living Will – If you are incapable of making medical choices for yourself, what will happen to you? Yes, this is a difficult question to ask yourself, but you need to write your wishes out. That way you can make your own choices even if you can’t express them yourself.

Your Healthcare Agent –Do you want someone to be able to make your medical decisions when you are not capable? Then this is the document you need. Most hospitals will require you to have this before a procedure. This should be someone you trust to make the decisions you would want made.

Check with an attorney for guidance and start working on your must-have documents today.

Pay More than the Minimum

You know that little box on your credit card bill that tells you how long it will take to pay off the balance if you only pay the minimum due? Does it scare you? It should. You may be tired of hearing it, but I can’t tell you this enough. Pay more than the minimum.

Here are a few things you should know:

Let’s say you have a $10,000 balance at 12% interest and the minimum payment is $200 per month. You should know that if you stop using this credit card, and that means no more charging on this account, it will take you 70 months – almost 6 years – to pay off the balance and will cost you over $9,000 in interest.

Now think about this: Was whatever you purchased worth that additional cost?

Enough about that. You have debt. What are your options?

You could pay it off with your savings (I am not talking about retirement savings). But, chances are if you had the money in savings, you wouldn’t have made the charges.
You could figure out a way to get more income. Get a part-time job, turn a hobby into some extra cash, or sell items that you don’t need.
You could reduce your expenses. Mow your own lawn, cancel cable TV, stop eating out, etc. (Read my upcoming Quick Tips article on July 22nd for more information.)

Paying the balance off as quickly as possible is in your best interest. Let’s use my example above:

If you could increase your payments by $50, you would save 18 months of payments.
Increase it even more to $100 extra per month and you would cut the time to 41 months.
Pay $200 each month (that’s double the minimum) and you could have the balance paid in 29 months and only pay about $1,600 in interest versus the original $9,000.

Paying your credit card balances off as quickly as possible is a great thing. Make your new budget plan and get started.

How to Prepare for a Summer Power Outage

It’s summer – hurray! But with summer comes the possibility of storms and power outages. This has been a year of unpredictable weather. Are you prepared for whatever comes next?

These are things we have to think about.

Batteries: Needed for flashlights and/or lanterns, battery operated radio, etc.
Water: If you have well water, have water stored in containers (both drinking and for washing). Your pump will not work without electricity.
Non-perishable food: We all have some canned food, but could you make a meal with it? Do you have a manual can opener to use when the power is out?

The difference between winter and summer storms is the outside temperature. With this being summer, you have to think about preserving and using the food in your refrigerator and freezer.

How long will it last?
Do you have grill supplies handy to grill the food if necessary?
Do you own a cooler to store food if need be?

If you hear of a possible storm coming, take precautionary steps before it strikes.

Turn up the temperature in the fridge and freezer (food will last longer).
Fill up the gas tank on your car (gas stations can’t pump gas without electricity).
Get cash (if there are stores open they may not be able to accept credit cards).
Charge your electronics
Get bottled water if needed and be prepared to live without life’s conveniences.

The more you do to prepare, the better you will be able to weather the storm in your own home.

Why Financial Envy is a Waste of Time

Budget-bride You see this happen all the time. You are in a situation with other people and someone mentions his nice vacation plans. What is the first thing that pops into your head? Are you genuinely happy for him or do you automatically think about how much he’s spending (that includes jealous thoughts of the “he must be making more money than me” kind). You know what I mean.

But in the past few years, I have learned to stop comparing my financial situation with friends and family (I am getting better about this). I have come to realize that I am projecting my values and beliefs onto other people. What I think or believe about another person’s finances has no basis in reality. I am not in their shoes and don’t know what their situation is.

People spend money on things that are important to them. I know that some people may think I travel a lot. When one vacation ends, I am already planning the next. I personally always want to have a trip to look forward to. You might be thinking thoughts like “how can she afford it?” or “where does she get the money to travel?” You may even be envious. But you won’t know exactly how I make my little dreams come true because personal finances are just that – personal.

The other side of comparing your finances is the presumption that you are somehow morally better or worse than others. Grim tales of credit card debt are all over the news, often mixed with stories of foreclosure and homelessness. You may feel good about yourself because your debt is lower, but do you know why the person on the news has the debt? Was it really insane overspending, or was it a medical emergency or a layoff. Maybe the credit cards were used as a last resort to pay bills?

I have heard it said that “to compare is to despair.” This thought process of judging others is detrimental to you. You have no idea whether another household spends more money than they have, is in debt to their eyeballs, or has planned ahead to achieve their desires. You don’t know how much they earn or how much they give to charity. It is much easier to judge someone else than look inward at your own spending habits.

In the budgeting process, people track their daily expenses to see how much they spend and in what category. This can be a great exercise. Once you see where your money is going, you can make life-changing decisions. Where do you want to spend? What do you want to save for?

There are no right or wrong answers. There are only personal choices. Maybe you choose electronics over vacations. Maybe you choose decorating and entertaining over both. Maybe you choose to give your children spectacular holidays or birthdays over everything else. These are the kind of choices your neighbors, friends and family members made when they did something that impressed you and made you envious. They simply chose to spend their money in a different way than you.

So the next time you see someone order an expensive meal at a five star restaurant, purchasing the latest greatest electronics, or buying a designer outfit, don’t judge them. Not only is the thought process destructive, but it is a total waste of your time.

CT increases taxes and fees on July 1, 2011

The new CT budget will take effect on July 1 and will be taking more money out of our already tight wallets. Some of the new changes include:

Sales tax will increase from 6% to 6.35%. You will no longer have the exemption for clothing under $50. (It seems as if there still will be a tax-free week coming up later in the summer on clothing.) Sales tax will increase on alcohol, cigarettes and hotel rooms. You will now pay sales tax on items that you did not before, such as manicures / pedicures, non-prescription drugs , vitamins and more.

State Income tax will increase and there will be changes to the current tax brackets (retroactive to January 1, 2011). The new income tax rates are 3%; 5%; 5.5%; 6.0%; 6.5% and 6.7% (see your accountant for information on your new tax bracket.)

Motor vehicle fees (driver’s licenses and car registrations) will be increased.

What can you do about this? Adjust your your spending.

As I tell my coaching clients, start by writing out your monthly budget. I know this is painful, but you have to know where you stand if you hope to make changes.

Don’ t forget all those expenses that you pay that aren’t monthly – license and registrations, activity fees for your children, classes, gifts etc.
If you still feel like something is missing, track your cash spending with a daily log. You will see where the cash in your wallet goes.

Once you have an accurate picture of your spending, you can look at the big picture and make the changes necessary to meet the additional costs of the new state budget.

Who handles the finances in your relationship?

I met a woman who asked me some questions when she found out what I do for a living. This subject is one that all of you should be aware of. You wouldn’t believe how many people this affects.

Are you married or in a relationship with joint finances? Even when couples share accounts, living space, or property, it’s typically one person who handles the finances in a relationship – paying the bills, savings, investing, etc. But, the other person shouldn’t be left in the dark.

Because this is your joint future, both should know what is going on and how to access the information at any time. The definition of the word joint is defined by Merriman-Webster as “united, joined, or sharing with others”.

Both of you should be making decisions together, understanding where you are today with your money and where you want to go for the future. You should both know the names of your banks and investments and how to access these accounts if you use an online account. Think of it this way, if the person handling the finances is not able to do it – what would happen? Could you put food on the table? Would the utilities be on?

Remember, too, that your children can see how the money is handled in your relationship. What you do, and don’t do, shows them just as much as what you tell them.

I also believe that each person needs to establish credit in their own name and if you are listed as a co-owner on the assets you should also be listed as a co-owner on the liabilities. What that means is that if you own a home (your name is on the deed) you should also be on the mortgage.

Many partners are left out of the finances. If that’s you, and something happens to the person who handles everything, you are going to have a difficult time. You may find that the bank accounts that you thought were joint are not. You may find that you thought you owned the home you live in, but you don’t. You may find that you need to open a credit card or take out a loan and you have no credit in your name.

All this happens more times than I can count. If this describes you, then you need to have a conversation today with your partner. You need to what know what assets you have, what liabilities you owe and have a plan for moving forward to achieve your goals. The first step is having this conversation.

3 Things You Should Teach Your Child About Money

What do your children learn about money from watching you? I recently saw the movie Confessions of a Shopaholic. It starts off with a young girl in a shoe store, unhappy with her new, practical, sale-priced, boring, brown shoes. She remembers looking into other stores and seeing “A world where grown-up girls got what they wanted…They didn’t even need any money, they had magic cards.” The magic cards are credit cards, and when she grows up, she fulfills her dream by getting 12 of them. She soon finds out the cards aren’t so magical when she maxes them out and has to deal with the consequences.

Do your children think credit cards are the magic solution to their wants? If this is the message that is received, then they are on the path to being a slave to financial debt. There are three things that I believe children need to learn about money and credit at an early age.

1. Children need to learn how to spend less than they earn. In simple terms, a person making $100 a week needs to spend less than $100 per week. You can teach your children with their allowance or chore money and by using age-appropriate money lessons. Discuss the cost of an item in relation to their income, not yours. Talk about all the purchase options: buying full-price, waiting for a sale, buying used, borrowing, or renting from the library.

2. Children need to learn how to save for their wants. They need to learn how to plan and wait for the items they want. A great habit to get them into is taking a percentage of their money and saving it.

a. Talk about where to store their saved money. When they are small, use separate containers for saving and spending so they can see their money grow or disappear as they save and spend. When they are older, have them open a bank account to earn interest.

b. Use age-related items to start the savings conversations. Think about all the things they ask you for: iPods, game systems, their first car, or their career dreams (i.e. college). Don’t forget to discuss all the extras that go with their purchases. iPods need songs. Game systems need games. Cars need insurance, gas and maintenance. College expenses involve more than tuition. Instilling the habit of saving and planning will benefit them for a lifetime.

3. Children need to understand credit. Not just what credit is, but how it affects all their finances. You know that credit plays a major part in everyone’s lives, from employment to buying a car, from the credit terms you are offered to whether or not you will need a security deposit for your utilities. But, how do you explain that to a child?

a. Show him something he wants and ask, “Would you rather have it right now and pay $20 for it? Or would you rather wait 2 months, pay only $5 for it, and have more money to spend on other things you want.” Tell him that is what it’s like when you use credit. Credit always costs more. You get what you want right now, but you end up spending more and having less money.

b.You can also explain that when someone buys too many things with a credit card (and doesn’t have the money to pay it back), other people think less of that person and won’t give him a job or a place to live. Those are the consequences of bad credit in the simplest terms possible.

Don’t let your children learn the hard way. Being in tremendous debt is a terrible inheritance to pass on. Teach your children now so they can make proactive, informed choices throughout their lives. If you don’t know where to begin, get your copy of Cash, Credit and Your Finances: The Teen Years and read it along with your child.

What is the difference between a secured credit card and a pre-paid credit card?

Secured versus pre-paid credit – do you know what you’re getting? When I am giving a talk, I can see that many people don’t know the difference between them. Let me tell you the facts:

Secured Credit

With Secured Credit, the bank has placed a set amount of your own money in a special savings account that it controls. If you default on your debt, the bank can use the savings account to recover its losses. Your credit limit is always equal to the amount in the special savings account. Just like a traditional credit card, you will pay interest and receive a monthly bill.

A secured credit card is for someone who can’t get a traditional credit card. If you have bad credit or no credit at all, secured cards are a great way to establish your history. If you still don’t understand what a secured card is, think of it as a security deposit on a rental. The landlord holds that deposit and can keep it if you don’t pay.

As with any financial transaction, read the fine print before moving forward and make sure that the lender reports your information to the credit reporting agencies. Watch out for fees and make sure you understand them fully.

Pre-Paid Cards

With pre-paid credit cards, you simply load the card with money and use the card to make purchases. There are no bills or interest rates on purchases. The spending limit is always the current deposit balance on the card. In that sense, it works like a debit card, yet it has all the consumer protections of a credit card.

Pre-paid cards are often used as gifts and by people who want to avoid spending beyond their budget. You might use one on your next vacation or as a gift for your favorite college student. The consumer protections and the built-in spending limit make this card ideal for those two scenarios.

The fees can be expensive! Credit card companies make their money with the fees – activation fees, monthly fees, reload fees, etc. You might want to consider other alternatives for every day use.

Now you know the difference between them. Make sure you understand them and pick the right choice for you.