Guest post by Miranda Harwell, Executive Director of the Community Financial Education Foundation
My journey in life has taken me many places in 29 years. I have been small town drama queen, a broke college student, an underpaid young Capitol Hill staffer, a wife and finally a newly single young professional starting over again. One constant theme has been making the most of my limited means and living well along the way.
Over a year ago, I started the Community Financial Education Foundation (CFEF), a non-profit dedicated to educating the Americans by teaching meaningful financial life skills and encouraging positive financial behavior. With little knowledge of financial matters and questionable financial behavior of my own, I knew starting this was going to be a challenge in many ways and it all started with changing my own financial behavior.
he phrase “knowledge is power” is one of those cliché terms that annoying online college commercials used to dupe us into earning our Associates’ degree in Fashion Merchandising. However, after a year of researching the ways credit cards work, discovering the meaning of “compound interest” and paying off all personal debt (sans my 2006 gas guzzler), I understand the meaning of the phrase and can offer you ten smart tips for Finance Friday.
1) Find a financial adviser, invest and plan for retirement.
This may seem like questionable advice, considering the current state of the markets. However, seeking expert advice and investing in individual retirement accounts (IRAs) can pay off lucratively – over the long-term. You should always balance your investments with an IRA or Roth IRA. These retirement accounts allow you to invest after taxes (traditional IRA) or before taxes (Roth IRA).
But, remember ladies, these accounts are INDIVIDUAL Retirement Accounts. A huge mistake I made was allowing my EX to invest our savings into a Roth IRA. Sounded like a great idea at the time. During the big D, and don’t mean Dallas, I learned my name was nowhere on that account and I was out $3,000. Young, dumb, and stupid.
2) Invest in Real Estate
As a military spouse, your life may seem like a never-ending stream of moves. Once you and your hubby get settled in a place and will certainly be there for the next three years, take the plunge and buy your own place. Renting is convenient and has that no strings attached feeling. But, consider every month you write that rent check as you paying your landlord’s mortgage and giving him a couple extra clams each month to take his kids to the movies. Plus, there are great tax advantages to owning a home. If you don’t understand this now, take the time to learn more about it because it will cost you more by not knowing.
Tips from a Reformed Shopaholic:
- Play it safe. You may be able to afford that larger house with the garden tub, but don’t. It is not worth it. Buy a condo or starter home that is not going to leave you strapped at end of each month. Plus, if you move, that home will be a great rental house – which means someone else pays your mortgage and you build equity.
- ONLY use a 15 or 30 year fixed mortgage product. ARMS, Balloons, and all that other trash may sound tempting, but we have all learned what they do to people. Hello, Housing Crisis!
3) Car buying
Never lease or buy new. I am a firm believer in getting a slightly used vehicle with a little mileage and a couple years left on the warrantee. Let the “new car” buyer take the depreciation hit when they drive it off the lot. You will enjoy lower monthly payments and a nice car.
4) Credit Cards
I got my first credit card on my way into a University of Georgia football game when I was 19. MBNA was giving away free t-shirts to every person signing up for a new card. Two years later, I still had that UGA t-shirt, along with an amazing wardrobe and a credit card balance of $4,000.
Lucky for me, I was able to pay off that hefty debt, but, there was a point, during which I was barely paying the minimum balance, which happens to be a recipe for disaster. Credit card companies love to make credit easy for you to get and will often extend your line of credit, “as a courtesy.” Well, how nice of them. Now they can raise your interest rate and really make you pay.
Tips from a Reformed Shopaholic:
- If you carry a balance; never, only pay the minimum balance. Make paying your balance off your highest priority.
- Call your credit card company and ask them to lower your APR. Odds are they will. If they don’t shop around and find a card that allows you the transfer your balance with a 0% or low APR.
- You do not need more than one credit card, period. Pay those store cards off and cut them up. You are totally over it.
5) Restaurants, and going out
I hate eating out. Why? Because, I just paid a ridiculous price for something that may or may not have been worth it, and all I have to show for it is my amazing jeans, now slightly tighter. Plus, that glass of wine I paid $12 dollars for is on sale at Harris Teeter for $14.99. Total outrage.
Eating out can be fun, convenient and a great escape from the dishes. But why not try to cook an interesting and host a fabulous casual dinner party with friends. Plus, you will wind up eating much healthier eating in. And cut out the bar tab at your local watering hole, ask everyone to bring their favorite bottle and host your own dance party in the living room.
Bonus tip – to whet your appetite for next week’s Part II, I will give you a little homework. Visit my website to sign up for my Borrow Smart America program. You can’t expect to become a reformed shopaholic until you start getting smart about the financial system and about your own financial situation. Complete the free online program and you’ll not only learn how to save, budget and repair your credit, but you’ll also qualify for a free gift – Quicken Software donated to us by Intuit to help your reformation transformation.
