By Amanda Humphrey The Daily News, Jacksonville, N.C.
WWR Article Summary (tl;dr) Rachel R. Gause, a financial consultant and owner of Personal Financial Change, LLC., shares her top tips for getting your finances in order.
The Daily News, Jacksonville, N.C.
A dozen women gathered at Jacksonville City Hall Saturday morning with a similar goal in mind: to learn how to manage their finances.
The four-hour class presented by Rachel R. Gause, a financial consultant and owner of Personal Financial Change, LLC., covered a variety of topics including getting out of debt and how to prevent credit report surprises.
Here are just a few things the retired Marine, who straightened out her own finances and now aims to help others, suggested:
1. Check your credit report at least annually. She suggested using annualcreditreport.com or creditkarma.com. "What you don't know can definitely hurt you."
2. Dispute errors. Gause suggested disputing errors found on your credit report, but to do so politely since attitude is typically met with attitude. To do so, visit experian.com or dispute.transunion.com.
3. Freeze access to your credit report which makes identity theft more difficult. To do so, visit freeze.equifax.com, experian.com/freeze or freeze.transunion.com. Just be sure to unfreeze it if you know a company is trying to check your credit.
4. Change your withholdings so you don't receive a large tax refund and you don't owe the government money come tax time. Visit irs.gov/individuals.com/IRS-Withholding-Calculator to see what your withholdings would need to be.
5. Avoid financial distractions. If you're looking to buy a car, purchase what you can afford to maintain and keep it. Don't use credit cards or, in the words of Dora the Explorer, "Swiper no swiping."
6. "Budget" may start with a "B" but it's not a curse word. Gause suggests budgeting as often as you are paid: monthly, biweekly or weekly. Reconcile your checking account and record every single transaction. The budget, she says, will make sure you know where your money is going and shows where you're overspending. For many, the grocery budget ends up being over simply because they're tired after doing the grocery shopping. "You're eating away your savings."
7. An ideal budget includes the following: Charity, 10-15 percent Savings, 10-15 percent Housing, 25-35 percent Utilities, 5-10 percent, Food, 5-15 percent Clothing, 2-7 percent Transportation, 10-15 percent Medical / Health, 5-10 percent Insurance, 10-25 percent Recreation, 5-10 percent Personal, 5-10 percent Debts, 5-10 percent
8. To do a quick budget, which shows how much you're spending on basic necessities, write down what you're spending for the month in each category, add up the eight boxes and total it.
9. Do a monthly cash flow plan. Write down your monthly take-home pay, write out your budget and add up each category. Subtract take-home pay from category totals. At the end, you should get zero (what isn't spent on tangible items or utilities can go to savings or paying off a debt item to make that happen).
10. Pay off your debt starting with the item with the smallest balance. For example, if you have three credit cards, a personal loan, a car loan and a student loan, pay off the item with the smallest balance first. Then pay the next item's monthly payment plus what you were paying on the first bill. By the end of the snowball, you're taking all of those monthly payments and paying it toward the biggest bill. Why not use a consolidation plan? Because then you're doing the same thing, but paying someone else to get it done.
11. Have an emergency fund for when Murphy's Law hits. Gause recommends having $500 to $1,000 in savings to start.
12. Have a sinking fund, or separate savings account, for things you know are coming such as a roof repair, replacing appliances, a vacation or wedding so you can save up over time for what would be a big cost to absorb at once.
13. Once out of debt other than your mortgage, build a three to six month emergency fund in case you ever lose your job.
14. From there, you can create a college fund for your kids and pay off your mortgage early with all the money you're saving from being out of debt.
15. Build your wealth. Part of Gause's goal now that she's down to just her mortgage is to teach others, including her own four children, how to give, save and spend.