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.
