From the Counselor's Desk

Posted on January 18th, 2012 by James Lupori |

We are living through an incredibly turbulent economic period in our history. I see this every day in my work as a financial counselor here at Verity Credit Union. The fact is many Americans have not taken the prudent steps to alter their spending/savings habits. As it turns out, old habits are hard to break and many people continued to spend well beyond their means in spite of the lackluster economy. This is why, on average, members are coming to me with $40,000 in credit card debt, along with delinquent mortgages and car payments. Ouch!

I try to focus members on the fundamentals of “money management” which have been around for a long time. There’s really nothing new about the idea that we should all “live below our means.” The problem is that most people don’t sit down to formulate a personal/family financial strategy. People simply wing-it and suffer the consequences. That’s why I thought it would be helpful to offer you a short list of “action items” you can start working on today to help get you on the right track for 2012. Are you ready? Here goes:

1. Get Started – First and foremost promise yourself that you’re going to have fun examining your financial universe. My members experience a huge sense of satisfaction when they take control over their finances. It helps to think like a budget detective. If pretending you’re “The Pink Panther works,” that’s great!
2. Get Organized – Make a commitment to set up a space and a time, preferably one hour, once a week during which you will organize and examine your “data” (e.g. paystubs, receipts, utilities, credit card statements, tracking sheets, etc). Imagine you’re the CEO of your own company (aren’t you?) and your objective is to realize a profit in the long-term.
3. Get a Budget Worksheet – Next, find a basic budgeting sheet to work with. In my experience, if you haven’t done a budget recently (or ever!) over-thinking the numbers is de-motivating and you’ll give up. All I want you to do for now is get a rough idea about your budget. Gather together all the information you can on your monthly income and expenditures and fill in the blanks. Here’s a basic budget worksheet from About.com.
4. Get a Perspective – I find that people rarely know where all their money goes. I also know that people must work through this process of adjusting their numbers several times before they get a true perspective of their spending. So, at this point I want you to simply take a careful look at the “categories” of spending and see if things make sense. Some categories represent “fixed” costs such as your rent/mortgage, utilities, etc. However, it is to the other (often huge) category of discretionary spending that we now turn…
5. Get the ‘Tracking’ Bug – Here’s where the rubber really hits the budget-road: After you’ve worked with your budget for a couple of weeks, I want you to implement the most powerful budgeting tool ever: start tracking your spending! This applies to all of your discretionary purchases. Keep track of every single penny you spend on food for the next month. I like people to start with food because it’s part of our budget that we have a bit of control over AND, it’s where most families delude themselves about their spending! Carry a small notebook in which you can write down your cash expenditures and make sure you keep all your receipts. You can then use those numbers to more accurately fill in your budget. I guarantee that once you’ve mastered the art of tracking in this category, you’ll find it much easier to tackle clothes, sundries and all the other things you like to spend your money on!

Ultimately, the purpose of these first five steps is to put you on the road to financial stability. In future posts I want to discuss, in greater detail, how to be a more educated consumer, how to deal with financial problems and, hopefully, help you have some money left over at the end of the month!

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