September Financial Fitness Challenge--Stay Off the Budget Trouble D List

by Susan Tiffany, CCUFC

In the past few years, none of us has had to look far to find reasons for falling short of our financial goals. If you haven't lost a job you know someone who has, maybe in your own household. Most of us have made financial adjustments, some of them major, to acknowledge the realities of living through a serious recession.

But don't just let the economy become a scapegoat. Look closer at your finances and see if your personal situation is as perilous as you think.

The D list

This message is not for those people who are genuinely suffering from the economy; it's for those who are tempted to let the struggling economy become an excuse for staying stuck.

Here are five common behaviors that can sabotage your financial goals:

• Deny. Teresa is a smart shopper; she only buys on sale. She loves online shopping networks, especially when they offer payment plans that let her stretch a purchase out over several months. Right now, she's paying off a computer and a really special 18k gold necklace. Oh, and she bought a set of living room furniture on a "0% for 12 months" deal—but the months have passed and now she has to pay the total in just two months. She's pleased that she made such good buys—while she's ignoring her ever-growing debt balance. Teresa is in denial.

• Deserve. Blake has been working extra hours because his company had to lay off several employees during the recession. He feels guilty for not spending as much time with his family as he'd like, but he's making up for it: Blake took his wife and their three kids to an upscale resort for a long weekend in the spring. They had such a good time, they went again last month. Sure, the bills are piling up, but Blake thinks he's entitled to some down time.

• Deprive. Coco is a sharp money manager and an aggressive saver. She has a restrictive budget and keeps to it without fail. This has been going on since she got out of school three years ago. Last month, she impulsively bought a new car, loaded with every imaginable toy and perk. It's much more car than she ever thought she'd buy, and she's already wincing at her payments. She just couldn't take being deprived by such a lean budget anymore.

• Defer. Ted is pretty responsible with his money, too. At least he always pays the minimum on his credit cards. His brother suggested Ted could make more headway if he paid off the bills more aggressively. Ted figures he's doing well enough, why stress? He's deferring making serious moves, postponing getting real control of his spending.
  All money is for spending. The question is, when?

• Default. Lori is like so many other people these days—works hard, plays hard, always busy. She's owned her own house for seven years. She knows that mortgage rates have dropped a lot since she bought her place, but who has time to check out that kind of stuff? She's satisfied to keep to her current loan agreement, staying in default mode with established habits and not examining them for possible improvements.

The solution for all these kinds of financial sabotage is fairly simple: Pay 'attention' to what you're doing. That's how you move from the D list to the A list.

You're in charge

In each of these cases, our consumer friends can take simple steps to turn things around.

• Teresa can stop shopping and play catch up. All her sale shopping is discretionary spending—things she can do without or wait to save enough money to buy. She can learn to take as much satisfaction in being bill-free as she does now in buying smart. Once her bills are caught up and she's paying cash for her special buys, she can really take credit for being a smart shopper. She won't be in denial anymore.

• Blake is right—he does deserve some down time. But if he finds it at the expense of his peace of mind, he won't really enjoy it—it will only ratchet up his stress even more. Blake and the family can be more inventive by enjoying a 'staycation,' and exploring his home town and finding other less costly ways to unwind. The memories his family makes will last a lot longer than the old vacation bills.

• Coco is so conscientious about her budget that she forgets an important element: Your budget has to include some fun or you won't stick to it for long. An alternative term for budget is spending plan—that's because, frankly, all money is for spending. The only question is, when? Coco can continue to honor her budget while adding things that make life rewarding. It might be a ticket to the opera, or a weekend camping trip, or a special dinner out once in a while. That treat will be different for each spender—the key is to treat yourself well, within your spending plan.

• Ted is coasting with his minimum payments, and in money management that's the same as falling behind. He can step it up by using the power pay method of paying off his credit cards. This lets you attack your credit card bills with the same amount of money you're already paying, but makes the most of your payments. He can also see if he qualifies for a lower rate credit card from his credit union. Ted can get control of those bills in much less time than he thinks.
  Coasting, in money management, is the same as falling behind.

• Lori is in default mode, relying on the status quo because she's so preoccupied with all the demands in her busy life. Lori has an enviable credit score, a fair amount of equity in her house already, and a job she believes is secure. That makes her an ideal candidate for a mortgage refinance while mortgage rates are at all-time lows. Lori can talk to her credit union home loan specialist and see how she might benefit by seizing today's low interest rates.

If you recognize yourself in any of these stories, or feel stuck in a money management situation, ask for a referral to a financial coach at your credit union. Sometimes all it takes to make a change is identifying the problem.

Financial Fitness Challenge

The people at your credit union bring you this Web site and other tools, such as credit counseling, to help you make the most of your financial resources. In 2010, the Financial Fitness Challenge continues to look at ways you can make better financial habits no matter what condition the economy is in.

Each month we randomly select five winners to receive $50 Visa gift cards; we choose each month's winners only from that month's entries, so enter often. Remember to register for the Financial Fitness Challenge.

ST
Susan Tiffany, CCUFC
askem@cuna.coop

Published September 1, 2010

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