Often, when talking to people about the work I do, I tell them that I help people clear their credit card debt once and for all and never have to use a credit card again. For many that sounds like the definition of impossible! They have cleared their debt before, often many times, and know that it just goes back up again.
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Then, when I tell them about the process I use and explain that, if possible, I will get them to commit to not using their credit card at all until I see them next time, I see the horrified looks and panic setting in!

The reason for this is that, like so many people, their credit card is their security blanket! It’s what stands between them and financial disaster if the car breaks down, the child needs orthodontic work, the dog needs surgery, Christmas arrives, someone has a birthday, friends ask them out for dinner, they need a holiday etc etc! It is where they go for “money” when all else fails. I know this, I have done this, more times than I care to remember, but I also knows that it doesn’t work and only makes the situation worse.

I am not going to go into all the other reasons people use credit cards, like air points etc and the reasons why it is better and cheaper to use debit cards or better still cash! Today I am just talking about using them as your back up plan! I have been a bit facetious above with the “emergencies” people use their credit cards for, but I have either given them myself or heard them, and more, many times when people have told me that they only use them for emergencies.

Now, if you are reading this and thinking “but I do only use them for emergencies and then immediately pay them off in full” then fine. Whilst I do think that there is a better way, this message is not primarily for you, but read on because you might be interested in how you could do it differently.

I then go on to explain how I help them save their way out of debt, once and for all!  Doesn’t that sound good? Too good to be true? Not at all. If you follow the method which I teach you, which was developed by Karen McCall of the Financial Recovery Institute, that is exactly what you can do. I never ask people to cut up their credit cards, nor put them in a container of water in the freezer, I just ask them to trust the process, which has worked for thousands and thousands of people, and not use their credit cards until they see me again. As Karen says, “ if you want to get out of a hole, first you must stop digging”!

The other key steps are to pay the minimum on your credit card each month whilst building up a savings account, which we call a Periodic Savings account. Now I can hear all of you with financial backgrounds or those who pay off your credit cards in full every month, exclaiming that this will cost extra because of the interest. Yes, you are right but if you are someone who constantly uses your credit card and can never manage to always pay if off in full every month, then, trust me, this is a much cheaper way in the long run. Remember I teach you how to pay if off, in full, once and for all and to never have credit card debt ever again.

That’s because the Periodic Savings account becomes your security blanket; it’s where you go to get the money to pay the dentist, the vet, the restaurant, the holiday and Christmas! Using a formula I teach you, you can plan for all these and more, and know that you will always have the money available to cover all these events, without having to bring out the credit card. Once this is functioning well we also start another account which we call a “Safety Net” account and here you provide for coverage of all your expenses if you were to have an interruption in income.

So, if you would like to learn how to save your way out of debt, once and for all, use one of the methods below to contact me and we can have a coffee and discuss it further, to see if I can help you.

I’d love your comments about all of this and feel free to share it with your friends either by email or socially below.

Have a great week everyone and give it a try… Can you manage to not use your credit card for the next week?

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Do you spend a lot of time worrying about money? Does it interfere with your work life?
 
A recent arti12637931_scle in US News cited a study by McGraw Hill Federal Credit Union, which showed that in a survey of more than 1000 people, 36% of them said that they spent at least two hours a day either worrying about their finances or handling them. “…another study, “Stressed at Work,” from Bensinger, DuPont & Associates, an employee-assistance program provider, that suggests almost half of workers are so stressed out that it interferes with their ability to get their jobs done. About 44 percent of male respondents and 49 percent of female respondents said they had “difficulty concentrating” as a result of “personal problems and stress.” Meanwhile, Gallup’s 2013 State of the American Workplace report finds that 7 in 10 workers are not engaged with their work.”
 
If you are an employer this must make scary reading!
 
I was interested in the article, because I have been approached recently by an employer seeking assistance for one of their staff, who had a significant amount of debt and was very worried about it. It was agreed that they would pay for their employee to see me. We have met several times and have made some plans for dealing with their situation, which has eased her anxiety considerably. Even if she wasn’t worrying about her money situation at work ( and I’m certain she was!) she was losing sleep over it. This alone would have reduced her effectiveness at work.
 
So her company paying for her work with me will, I’m sure, be very cost effective. As well as improving her productivity it will also increase her company loyalty, because she appreciates how they have supported her personally.
 
Many companies now subsidise gym memberships; a good case can be made for also providing access to financial education and support. I have done several talks for companies to provide this. I am very happy to do it for your company as well; just give me a call.
 
As promised a couple of weeks ago now, here is the link to request my article “How to get through Christmas and the Holidays without blowing out the credit cards!” Simply click on the Christmas tree. You will also be sent a Holiday planner from Karen McCall of the Financial Recovery Institute along with the spreadsheet to go with it.

Have a great week.
 

Sally Feinerman

Have you ever wondered just what a Money Coach does? If you have, well you are certainly not on your own! It is the number 1 question I get asked! Here comes an explanation:

Recently one of my clients, the inspirational Sally Feinerman, from www.fitnessfix.co.nz, made me a very generous offer. I could blog about her journey to financial clarity and simply having a better grasp on her finances, both personal and financial.

This is the first part of that story.

JP :- So Sally, can you tell me what drew you to seeking my help with your finances?

SF:- “Well I’m very goal driven and I wanted to be really clear about my finances so that I could set some goals. I had some debt with an overdraft, which I wanted to pay off. I also wanted to get my credit card bill under control. Basically, you actually helped me pay it off altogether. Also I went from having three credit cards to just one. I now only use it for my business. This has been so fantastic. My spending is now much more in the moment, rather than retrospective. Now, I am much more conscious of what I am spending and whether or not I can afford something. Before I just put it on the credit card and dealt with it later. So the really great thing is, that now it looks as though I will have all my debt paid off this year, which is just fantastic! It also looks as though I will be able to start saving this year and have a safety net, which is just awesome. So I just feel that I will be really on top of my finances and knowing exactly where I’m sitting. I think that the discipline of going online and updating my MoneyMinder, every day just shows me visually what I’m spending and that really helps me as well. Also with my spending plan, when I do spend money I don’t feel guilty about it. I had planned to buy that and the money has already been allocated for it and is sitting there ready. Rather than if you don’t know what you are spending then you always feel kind of guilty about spending.

JP:- also, equally, even if you did spend on something that you hadn’t planned it has a great mechanism, which allows you to go back and revise the plan to account for that purchase and still stay within the plan and not go into debt.

SF:- Yes, I find that when I have done my spending plan, I know that if I stick to it , this is where I’ll be at the end of the month. If I don’t spend it all I can also see how that will make me better off.

JP:- Do you update your spending plan most days?

SF:- Yes, I do. At the beginning I did a 30 day challenge where I had to do 5 things for 30 days and 1 of them was my MoneyMinder. So that got me into a really good habit of doing it everyday. I like to get up and just do it in the morning. I also find if I do it everyday it takes no time at all to do. We’ve just been away for a long weekend, with out internet access, so it took me a bit longer this morning!

JP:- In Financial Recovery we talk a lot about conscious spending and many of my clients say that the thing they most value about the process is how aware of their spending they’ve become. Did you find this?

SF:-Yes absolutely. We find we are making different choices too. We have just been away for a long weekend  road trip and instead of eating out all the time we made lots of our own food and had picnics etc. We just loved it. It saved us money, but also we were enjoying nature and could stop and eat where and when we liked.

JP:- we use the term “spending plan” rather than “budget” as it tends to have a more positive connotation. Just as in Weightwatchers – they use food plan rather than diet for the same reason. When I was at the peak of my overspending, if anyone mentioned that I should be on  a budget, I heard deprivation. That I was going to have stuff taken away from me. Since I have been on the Financial Recovery programme I don’t feel that, as I can choose to spend my money on anything I want. It’s my choice. As Mikelann Valtera says “you can have anything you want but not everything you want”, but it’s your choice! Did you have any sense of being  deprived when you started on this programme?

SF:- In the beginning, to be perfectly honest, I probably did, but I think now we do need to question what we spend. We have become such a consumer society that when you look at life more holistically as well and get back to grassroots you don’t need half of the stuff you go and buy and so I have to say that I don’t now and it is more rewarding now to look forward and see where I’m going rather than to look back and think about what I might be missing out on.

JP:- Fantastic. It is really key to have some mechanism that draws you away from the negative behaviour. It is great when, like you, people can have goals and focus on the positive even if it is further in the future, rather than the deprivation.

SF:-If you can get yourself into, or see yourself getting into, the positive that is really good. If you have done all the planning and tracking and can see your progress you can see where you are going and be looking forward to that.

JP:- The other thing which is very linked to that is..well I’ll give you a hypothetical situation. What if you were walking along somewhere and you saw a really nice top or dress or pants that you really liked, but you had not planned to buy any clothes this month? Can you tell me how you might deal with that situation? Or how it might be different from how it would have been before?

SF:- Well, before I probably would have just got them anyway, if I really liked them. Now I would have to justify them to myself, that I could afford them or that I had them on my plan. If they weren’t on the plan then I wouldn’t get them.

JP:- that’s very good. Don’t let me put words into your mouth here, but before might you have just got them and put the expenditure onto your credit card if you couldn’t afford them at the time?

SF:- Yes, absolutely.

JP:- You said at the beginning that you are only using one credit card now. Has that made a real difference?

SF:- absolutely. I think that just knowing what I spend every day rather than just spending and then dreading the credit card bill coming in at the end of the month and then going “Oh my God, look how much money I spent last month!” Knowing that I’ve got to pay it and sort of being in fear of that bill coming in. Now that only one bill comes in a month and I know what I have spent because I have recorded it all, it’s never a shock.

JP:- Thanks for that Sally. I think that next time we should talk about how you now deal with things that come outside the normal monthly expenditure. I know, for example, that you have recently had a big overseas holiday. It will be really interesting to find out how you handled that and if it was any different from how you would have done it before.

Thanks, Sally, this has been really great. It will be useful for others who might be wondering how the process of working with me goes and if it’s for them.

 

Rainy day savings

I wrote this very early Monday morning and then had HUGE internet problems! Trust me you don’t want me to start on the saga!! Anyway this post was referencing Sunday’s Sunday Star Times. I think it has survived the few days even if it isn’t quite so topical:)

http://www.stuff.co.nz/business/money/7200255/Kiwi-families-trapped-by-debt

I don’t know how many of you read this article in yesterday’s Sunday Star Times(SST), or read it on the Stuff website, but it makes scary reading.

There were lots of horrifying statistics eg. “What has buried so many families is the level of household debt. In 1980, it accounted for 47 per cent of a family’s disposable income. Today, the debt mountain is equivalent to 143 per cent of disposable income.” That’s some shocking statistic!

However, I’m going to focus on the sidebar piece, from the SST “Sudden health scare sends family to the edge” The couple featured had been earning $130,000pa so were not poor. However, they had a mortgage, had two cars, and were sending their 3 children to private schools so their outgoings pretty well took care of their income!

Then, the husband became ill and had to reduce his hours, so they were now having to pay those same outgoings on $600 less a week! Unsurprisingly they couldn’t do it. They borrowed from family and began to use their credit card, which was ” …kept for emergencies in case their children got sick or injured started to be used for the weekly groceries.” …and so they were, and still are, trapped in the debt cycle merry-go-round.

The debt is now so high that they really don’t have enough to really live on, and I’m sure, are having to rely on more borrowing. And sadly, so it will go on until either they earn more money, or reduce their outgoings. That is, plainly, hard!!

Now there is a lot of information is this sidebar and lots I could comment on, but I want to focus on the emergency plan being a credit card! Simply put, that is a disaster waiting to happen, especially as with this couple, the disaster was a serious reduction in income.

I advise all my clients to have three savings accounts, one for  Periodic savings, one for a safety net, and lastly and often later, one for investments.  The periodic savings account should be used for all those  payments that don’t occur monthly and even if you don’t know when they are required you know they will be. In this case “…if  the children got sick or injured…”. Now I don’t have children but my general knowledge, combined with my nursing background tells me that this is not an “if” but a “when”!! Another example is when the car breaks down, you don’t know when it will happen, but if you own a car you know that one day it will! Usually at the most inconvenient time too! As Federation of Family Budgeting Services chief executive Raewyn Fox said, “…. easy access to credit was a trap that too many people fell into, without giving thought to the future and something tipping the balance and leaving them in a financially dangerous position. They organise their finances so tightly that a little shock can be a major thing – the car died, the fridge breaks down or the house needs repair. People might have been sensibly paying the regular bills, they haven’t allowed for the irregular ones.”

My colleague, Mikelann Valterra wrote an excellent blog on periodic savings. You can read it here http://www.seattlemoneycoach.com/creating-gloriously-boring-savings-and-a-money-ninja-trick-to-pull-it-off

There are a couple of other things that I think this couple, and anyone reading this and identifying with them, could and should do. The first is get help early; as soon as you think you might be getting into trouble. Send me an email, or find another Financial Recovery℠ counsellor here http://www.financialrecovery.com/?p=find-by-area. Help is also available from a number of community organisations, eg Federation of Family Budgeting Services. The other one is to look into insurances. I cannot advise you on this at all, but there are a variety of people who can. I did however write a blog on my own personal experience https://jillporter.wordpress.com/2011/03/23/do-you-really-…tion-insurance.

So, if you haven’t already, at least set up a periodic savings account and regularly put money into it, so that when it does hit the fan, you are ready for it!

Do you have a periodic savings account? How do you operate it? Do you have a safety net account? How much do you think should be in that?

For a few weeks now I have been watching an ANZ bank ad on television, and questioning it.

You know the one with the young woman and the bubbles above her head… which say ” I deserve a little splurge”, “I’ll buy myself an early birthday present” “It won’t be on sale for ever” and “I’ve had a couple of hard weeks”.This is a link to the web version. https://comms.anz.co.nz/serioussaver.html?pid=mkt-pbr-ad-hp-jan12-serioussaver

This bit I really get. I used to use variations of each and every one of those statements, as justifications for my overspending and putting more “stuff” on my credit cards.  I knew a whole lot more I can tell you. So too do my clients now, those who are overspenders and/or chronic debtors! They know these excuses and variations of them eg. “I should be getting a bonus next month” ” I need this as I haven’t got anything to wear to Jo’s party, Sue’s wedding…” or whatever.

They are all examples of justifications or excuses for spending money when, on some level, we know that we shouldn’t, we know we can’t afford to and/or we know that other people probably wouldn’t be doing it if they were in the same place as us, financially that is.

The bit I don’t get is, that the person using those excuses would be drawn away from their overspending habits, by a savings account with a good interest rate and some other positive benefits.

Maybe some would see the error of their ways and start saving instead of spending, but I know I wouldn’t have  and nor would most of my clients. The reality is, that if you are an overspender or chronic debtor and using those justifications for your spending, in almost all cases you are struggling to pay your bills and debts and there is little money left over to save, if any.

The ANZ ad says ‘Saying no to temptation has never been so satisfying”. They may well be right; saving instead of spending is very satisfying. I just need a lot more convincing that the young woman in the ad, if she is using all those excuses for her spending, will be tempted by the prospect of saving and earning “up to” 4.5% interest. Taken altogether, those excuses spell to me a problem with overspending, which is not insignificant and requires some expert assistance.

I would be interested to hear your comments.

From my last post you have seen I recommend that, unless you pay your cards off in full each and every month, you use debit cards.

Now that’s all very fine but, what if you already have a credit card, or cards, which have balances on them which you can’t pay off in full. What do you do then?

The first thing I recommend is,  stop using your credit cards immediately. There is a saying which is very pertinent here:

” If you want to get yourself out of a hole, first you have to stop digging”.

In other words, you can’t hope to get your credit cards paid off, whilst you are still using them and increasing your debt. Once you stop using them, the amount you pay off them then actually starts to make a difference. How you go about paying them off was the topic of another post of mine http://wp.me/pDpjD-2p. Essentially I recommend that you pay the minimum off them, until you have savings that will cover all periodic expenses you have, or will have. As I say it is the subject of another post!

For those of you who are now saying ” This doesn’t help me, because I have to use my credit card just to buy my groceries or kids’ clothes”

OK, what I suggest for you is that at the beginning of each month, you sit down and draw up a spending plan for the month ahead. Now if you are really serious about paying off your credit card(s) for good, this plan should address all the real needs of your family, namely, shelter, food and essential clothing, but not include wants eg new flat screen TV etc!! Once you have this drawn up, if there is a gap between the money you bring in and the money required to fulfill those needs, that is the amount you may put on your credit card. This amount is planned, which is the key word. This does not mean that you can see a dress that you just love and buy it with your credit card. The dress is not a need, and it’s purchase is not planned. You would also benefit from seeking the assistance of a Financial Recovery℠ Counsellor. You will find a list of them here:-http://www.financialrecovery.com/?p=find-by-area

Do you draw up a spending plan or budget at the beginning of every month? Do you stick to it? I’d love to hear your experiences.

Today I was reading one of the blogs I follow  DailyWorth – Know Your Worth. and came across this gem:- BFB – best financial buddy!

MP Dunleavey (www.mpdunleavy.com), who is also a columnist for MSN Finance, talks about The G.O.O.D. (get out of debt!) secret – Save.

One of the tips she has to help you is getting a BFB to hold your hand.

What do you think? Would it help you? Do you keep your money worries to yourself?

I’d love to hear what you think or any experience you have had.

Mine has been, and continues to be, my Financial Recovery counsellor, Danielle Ray. (www.integrativefinancialcounseling.com) She has been invaluable.

PS MP’s other tips are fantastic too!