Fall into Financial Fitness

Leaves are changing colors and the crisp air is quickly approaching. As members of Team Savage we are all advocates of living healthy and fit lifestyles. However, along with being physically fit it is just as important to be financially fit as well. Discussing finances can always be a “gray area” topic I am sure many individuals (myself included) have found themselves either embarrassed to ask someone for help with when it comes to understanding money budgeting topics but counteractively then they end up creating further damage by not asking.

Don’t FALL into a financial frenzy… rather exercise financial fitness with some of these tips. Who knows after you apply a few of these tips you may even have a little extra cash to save for a future fitness show 

1. Know your Credit Score

FICO what? FICO the Fair Isaac Company is the company that created and computes this credit score. Although some companies calculate others this is the one that is primarily used. If you don’t know it- it is definitely something to put on your immediate “To Do List” When time permits check out AnnualCreditReport.com as you can download a FREE report! Your credit will follow you EVERYWHERE (mortgages, car loans, even potential job offers- yes some employers reserve the right to check potential candidates prior to hiring!). Just like with our diets- make sure you do what you can to keep it as clean as possible. One word of caution though the more often you have it checked within a certain timeframe the more points it goes down. However on the bright side some things can boost it without you even doing something harmful in the process such as; (paying down credit card debt, letting credit cards expire naturally, paying off a past due balance and keeping credit card accounts open versus closed- closing an account with an unpaid balance can be reported right to the Credit Bureau and negatively affect you).

2. Wants versus Needs (Conscious Spending)

Recently on the Columbus Savage Ambassador Facebook page they posted a very informative article titled “How to Become a Conscious Eater”. After reading it and engraining it into my mind about conscious food choices I need to be making on a daily basis, and me being the finance nerd I am, took a step back and thought this concept could also very much be applied to consumer spending! As we are all in 100% control of our eating habits and making conscious food choices we should all be practicing the same tactics with our daily spending! How often do you find yourself going out shopping for item X but coming home with items A-Z? I’ve been there too and it can end up costing you a lot more than you bargained for and also using money you probably don’t even have to spend (circling back to the credit/debit card debate). Just as in the Conscious Eater article poses the question with food, when you go on your next shopping trip you should be consciously asking yourself “Why am I buying this”.

Some other questions to ask yourself before you go out and buy that 10th pair of flip-flops…

“Will this help me achieve my 10% paycheck savings?”

“Do I really need these” (Want versus an absolute need)

“If I walk away from this purchase today will it make for a critical situation tomorrow?” (Probably not!)

“Practice the power of No” -No I do not need these as they will not help me in getting ahead with financial fitness.

3. Debit Cards: How depend are YOU?

Being a “little one” on Team Savage I know individuals in my age bracket are NOTORIOUSLY known as, I’d like to tag us, “Debit Card Debbies”. We just LOVE to swipe that card wherever we go! People claim it’s so much easier than handling cash. However using a debit card for every transaction you do on a daily basis can end up costing you more than you necessarily would have done had you had “physical cash” on hand. According to Tina Powis Dow, the Director of the Consumer Credit Counseling Service of Oakland, CA, she advises that, “although debit cards are great individuals must track their expenses. With cash it’s a lot easier because it’s either there or it’s not. With a piece of plastic the plastic it is not going to go away. So it feels physically like there’s something there even though you may have a negative balance in your account.” Not only could the balance potentially be negative (hello over-draft fees and FYI if it isn’t a declared “bank error” they will not be over-riding the fee!), but you end up spending more money on things that you normally would not have had you set aside a set cash limit for your week.

One exercise that I try to do once a month is to go debit free and set aside what I think is a good allowance for me for the week and once the cash is gone- I am not purchasing anything further. I then take that and compare it to what I normally do with my debit card. After completing this last week I spent 43% less utilizing just cash versus my debit card. Yes this is a self-discipline motivated task but don’t we do that all year round with maintaining these gorgeous physiques? Try it for yourself! However if you do prefer using a debit card daily here is a tip to track your expenses. Check out www.mint.com. This is a great tool that you can link to your checking account which categorizes how you are spending your cash and you can even set yourself daily/weekly limits (how fast do those daily Starbucks runs cost you) you’ll soon see!

Another great idea is to check out your bank of choice’s promotions with saving while spending. For example at Bank of America they have a “Keep the Change” program where every-time you use your debit card it automatically rounds up your purchase to the nearest dollar and transfers the difference from your checking account to your savings! For the 1st 3 months you are enrolled they will match it 100% up to $250. Definitely some “change” for a new suit/show registration, etc.! Other banks do similar programs- check with yours to see if you are eligible to enroll!

4. Saving versus Paying Down Debt

This is definitely a topic where the idea of what came first “the chicken or the egg” comes to mind. With today’s recession at the forefront of most Americans daily lives and debating whether to save versus pay down debt what it truly comes down to according to Cameron Huddleston a regular contributor of Kiplinger Magazine (if you aren’t familiar with the site may I suggest you add this to your favorites for easy to understand financial advice for all life stages www.kiplinger.com) it really depends on a person’s situation. If your company offers a cohesive 401k Plan alongside matching, your priority should be to put away as much as you can to take advantage of the matching – it ends up being a 100% return on your investment. Yes- it hurts on a weekly paycheck basis but in the long-run going without now will reap rewards later when you’ll need it the most.

The next big headache of most Americans is the repayment of student loans (I am right there with you on this!). Six months from the day you cross the stage and receive your $40,000+ a year diploma you will be receiving friendly reminders from your lending agencies about repayment. DO NOT ignore these as some students choose to do. Student loan debt will never go away and will follow you for the rest of your life. Not only will it follow you but it does have the potential to ruin your credit by not making your payments. Do not panic though- interest rates with federally backed loans generally tend to be around the 8% range which in comparison to private credit cards average APR of 26% is not that hard to deal with. If you are in an extreme pinch with cash still don’t avoid it. Call your lender and ask to be considered for loan deferment which really all it means is you get an extension of time to hold off the kick- off of repayment.

However keep in mind when you do choose deferment interest continues to accrue so make sure to keep this in track as well. Check out FinAid.org to see if you qualify for deferment. Another resource to check out if you have private loans is SimpleTuition.com which offers suggestions as to how to consolidate all of your loans under one hub. However in comparing repayment of credit cards versus student loans; it is a smart decision to pay off high interest bearing credit cards first and then tackle student loans as student loans you have more time to pay these back without paying stifling interest rates.

One manageable tip though for everyone (401k benefiters/student loan payees included) is to put away 10% of whatever amount you are taking home a week. It is a percentage that is affordable and does add up over time. Once you are in a more stable position 25% is the next percentage benchmark to try and achieve.

Good luck my financial fitness friends!

~Dana M. Lauro