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Taking Back Financial Control

Taking Back Financial Control

Financial expert, Norm Champ gives advise for how to take control of your finances and get back on track.

A 2015 survey from the National Foundation for Credit

Counseling found that 4 in 10 American adults gave themselves a grade of C,

D, or F on their finance knowledge. One-third hadn’t saved anything

for retirement, another third had no savings, and 6 in 10 did

not have a budget. John Pelletier, executive director of the Center for

Financial Literacy at Champlain College, said of the survey, “Such

negative financial outcomes and low levels of consumer knowledge

and confidence make it crystal clear that financial literacy in

America should be a national priority.”

The basics of mastering money are not complicated, but our society

has buried them for so long they’ve become secrets.

We’re a nation of immigrants and pioneers, enriched by the honest

struggle of those who overcame slavery, poverty, and all manner

of the toughest odds. At our best, we are a nation that made

a better life through work and thrift to advance our children and

grandchildren to a stronger place.

Twentieth-century Americans built the world’s greatest job-creating

democracy. They didn’t do it with high-interest credit

cards and handouts or lottery tickets—or by scraping by on benefit

checks they didn’t need. They worked, they saved, they made smart

investments, and they practiced thrift.

But our best days are not necessarily behind us. The upside of

where we are now is that despite all the controversy, all the headlines,

all the bad news, our current economy continues to offer far

more job opportunities and sound investing options than our grandparents

would have dreamed of.

Financial peace of mind is closer than you think.

Debt Begets More Debt

Debit spending has become a way of life in America, and we have

begun passing it down as a cultural heritage. Some of our kids have credit cards before they have any

income. In 2017, 18 percent of kids aged 8 to 15 had credit cards.

There is a big difference between responsible and irresponsible

spending habits that parents pass along to their children. If done

responsibly, giving children/dependents a credit card can help them

build credit before they attain financial independence.

So whatever cycle of regulation and enforcement we are in, your

basic situation remains: you need to protect yourself against debt.

Once you have debt, you need to deal with it. If you have too much

debt to pay off, it may take several years and a lot of sacrifices to

reverse that.

Here are the steps to follow:

1. Stick to one credit card. Pay it off monthly. Use cash

whenever you can.

2. Become a smart car shopper. New cars depreciate faster

than a speeding Ferrari, so research the options: used, preowned,

and dealers’ test-drive vehicles.

3. Reduce your housing costs. Downsize if you can’t afford

your home. Take on a roommate. Buy a duplex (you’ll save

on taxes too).

4. Pay attention to your credit reports. You can probably get

your credit report for free from your bank. Credit reporting

agencies must also by law provide you with a free credit

report once a year.

5. Set an amount for discretionary spending each month.

Financial Literacy for Our Children  

Let’s say you’ve worked hard for a strong credit rating, and you

want to add your child as an authorized user on a credit card. Just

remember, the child will have the same spending power as you but

none of the financial responsibility for the bills.

If you have children at home, find ways to share what you know

about finance and saving money. After all, almost all kids are interested

in money.

Become a Net Worth Warrior

For all of us and our nation as a whole

to prosper, for our communities to begin to heal from the terrible

but all too familiar partisan rancor and hatred of recent years, to

protect the dreams of our children and grandchildren, we must slay

the debt monster and reassert our own economic freedom. We need

to drive the economy forward with a newly empowered citizenry

with its own positive net worth and minimum consumer debt.

We need to reverse the dangerous revival of easy-credit mortgages,

have more normal interest rates above zero, and encourage every

American to save—really save—for that first house. Imagine how

feeling economically secure and safe will ease the paranoia and fear

that runs rampant among all walks of our citizenry.

To read more from Norm Champ, check out his new book Mastering Money.

Summary
Article Name
Taking Back Financial Control
Author

Norm Champ is a senior partner in the Investment Funds Group at Kirkland & Ellis LLP and the former Director of the Division of Investment Management at the U.S. Securities and Exchange Commission. Under his leadership, the SEC restructured many of its operations and adopted a new rule to reform money market mutual funds. Champ has been a lecturer on investment management law at Harvard Law School since 2008. Champ’s previous book, published in 2017, is titled Going Public: My Adventures Inside the SEC and How to Prevent the Next Devastating Crisis. The book chronicles his experiences at the agency and how they shed light on the regulatory process and government policy making. Before joining the SEC, Champ was Executive Vice President and General Counsel of Chilton Investment Company, an investment adviser to long/short equity hedge funds and managed accounts. Prior to joining Chilton, Champ was at the law firm of Davis Polk & Wardwell. After law school. Champ clerked for the Honorable Charles S. Haight, Jr. of the U.S. District Court for the Southern District of New York. Champ has an A.B., summa cum laude, in History from Princeton University; an M.A. in War Studies from King’s College London, where he was a Fulbright Scholar; and a J.D., cum laude, from Harvard Law School.