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Young and in Debt

DebtI recently received an email from a reader of A Man Is Not A Plan about a situation so many young people get into during college and afterwards, credit card debt. As my reader, let’s call her Beth, put it, she truly believed that after college she would be RAKING IT IN! After all that was how the world was supposed to work.

For a while that was how the world worked, young people going into law or finance, banking and marketing were being offered fabulous salaries, but the catch here is that credit card debt is NEVER a good thing, no matter how much you earn and that is because, unless you pay off the balance each month you wind up paying so much more for the item you bought.

In an article by Rosemary Carlson, a professor of finance, she gives this example: Let’s look at just one card with a balance of $3,000 and an interest rate of 19%. Let’s assume you must make a minimum payment of 2.5% of the balance each month. That means the minimum payment is $75 per month. Of course, that minimum payment goes down as you pay off the balance, but that assumes you NEVER charge anything else on that card.

If all you ever pay is the minimum payment each month, it will take you 283 months (over 23 years!!) to pay off that $3000 and you will pay an additional amount of $4,729.44 in interest. This is NOT GOOD! And that’s just for one card!

So if Beth has more than one card and continues to charge, getting out of debt is incredibly difficult. Add student loans and a possible mortgage and the debt continues to add up.

Let’s break down Beth’s debt and see what can be done.

$2,500 – Interest rate of 9.99%
$2,300 – interest rate of 9.99%
   $700 – interest rate of 19.9%
$1,700 – interest rate of 15.9%
$7,500 – student loans 6.9%
$7,500 – student loans 9.75%
$300/mo – car loan

Salary $38,000 – $2,200/month after taxesdmp-debt-management-plan-dices-word-wooden-background-48833501

Beth, if you could dedicate 10% of your income or about $325 per month, you could have your cards paid off in 2 years. If you are really serious, you could take 20% or $650 per month and pay them all off in a year! At $2,200 take home, less your car and student loan payment and mortgage payment, that would leave you with $500 dollars per month for all other expenses. You have to decide what you can afford to do. But setting a goal and sticking to it is so very rewarding, and when you start to realize how long it takes to pay back a vacation you couldn’t afford, or a dinner or a new dress that you charged when you didn’t have the money, you may start to become more conscious about how you spend your money. You also may want to consider a part time job dedicated solely to paying off your debt.

The main thing is to make a commitment to yourself that you will think about a purchase before you buy it. If you don’t have the money, you have to learn to walk away and say no. Practicing mindful behavior is a basic tenet of yoga, and this includes thinking about how you spend your money. Your emotional health is tied to your financial health. There are many people completely stressed out by financial issues that affect their work, their marriage, their physical health and other relationships. The time to take control is now. Here is some incentive for paying your debt off sooner rather than later and in larger amounts.

If you only pay $50 per month on each credit card, it will take you 65 months, 58 months, 16 months and 45 months respectively for each of the 4 cards listed, based on the interest rates you stated. The interest payments will be $2000. (vs. about $600 if you pay your 4 credit cards off in a year!)

If you only pay $25 per month on each credit card it will take 211 months (that’s 17 years plus) , 172 months (14 years +), 38 months and 168 months 14 years, for a total amount of interest of $7475 vs $600 if you pay it off in one year. The banks get rich and you pay double, triple, quadruple, you get the idea. That is a high price to pay for items that you probably didn’t need anyway.

Good Luck, and please keep the questions, comments and situations coming and I will help make sense out of your financial situation.

Note: I really want to hear from you, but because I am a financial planner and what we say and the things we write are highly regulated, I may not be able to fully reply to your comments or questions. I have to submit my responses through my compliance department, so I plan to respond to broad inquiries and comments rather than personal questions. Email kathy@nullfishandassociates.com.

The Assessment Process, Part 2: Taking Control

ControlNow that you have kept your appointment with yourself (and with your partner, if you have one) I hope you feel lighter and more self-confident about your ability to take control of your financial life, now and for the future.  No matter what you found out about yourself, you can take the necessary steps to design a plan that works for you. 

Some things I hope you came away with are:

  • A belief in your own ability
  • A sense that you can overcome obstacles
  • Involvement & participation in your own life
  • A sense of independence (married or not)
  • No longer being kept (or keeping yourself) in the dark
  • Being empowered
  • Understanding that you are responsible for yourself

The big rewards for taking control of your financial life are primarily twofold:

  • No more fear
  • You’re a great role model for your daughters, sons, nieces, nephews and other young people you know

Think about living without fear.  It means no more sleepless nights, no more anxiety as you keep your head in the sand.  It means confidence that you are present in your own life and it means MOVING FORWARD.
Being a role model for your family means that a whole generation will grow understanding that they are responsible for themselves and that being in control is a wonderful feeling of freedom.

As we move forward with this blog, I will be talking about specific issues relating to women and how they can take control of their financial life.  Whether you are a single or married career woman, a stay at home mom, or a divorcee or widow, there are steps you can take to make sure your financial life is centered and free of stress.  I call it the HOLISTIC APPROACH to your financial life.

I hope you stay with me on this journey. I invite you to share your story with me via email at kathy@nullfishandassociates.com We can help each other help ourselves!

Note:  I really want to hear from you, but because I am a financial planner and what we say and the things we write are highly regulated, I may not be able to fully reply to your comments or questions.  I have to submit my responses through my compliance department, so I plan to respond to broad inquiries and comments rather than personal questions. kathy@nullfishandassociates.com

The Assessment Process – Part 1: You and Your Money

You and MoneyThe practice of yoga is integral to my life, physically the health benefits are well documented; it gives me a stronger, more flexible body as well as a way to relieve the stress of our daily lives which is good for the heart and mind.

It is also a way to connect with our inner self. The self that asks basic questions: What is my purpose, what am I connected to from the wider world and how do I achieve happiness?

Yoga is not competitive. It is about being present in your own life and living it the best way you can. It is NOT about who can stand the longest in tree pose, or bring their head closest to the mat.

Each class is like an assessment of where you are at that moment and the intention you set for today and your future.

To take care of yourself financially the process is not very different. It is about your life, where you are at the present moment and your goals for the future. Just as in yoga class where we assess our own strengths and vulnerabilities – in the same way you have to be honest with yourself about your financial situation.

Here are some things to think about:

thought• What does money mean to you? How do you see the role of money in your life? Is it a tool or something more?
• How do you feel about money, are you a spender or a saver? Do you want a lot of money, just enough or somewhere in the middle?
• What are your values, what is important to you?
• Where do you see yourself in 10, 15, 20 years?
• How do you want to be remembered? To your children, your friends, your community?

These questions are more ephemeral. Not the typical way we speak about money, but they are key to how you will proceed with your financial plan.
Once you know where you are and how you feel, you can begin to decide where you want to go, decide what your goals are. Those decisions become the basis of your financial plan.

More concrete questions you may want to ask yourself and then discuss with your spouse or significant other are:
What is my current financial situation?
• Am I just starting out in my career or am I somewhere in mid-career?
• Am I single? Have a partner? Children?
• Do I have savings? How much?
• What are my options to create more income if I want or need to?
• What is it I need to learn about my finances to move forward?
• What are my expenditures? What is fixed and what is discretionary
• How do I spend my money?

This is a big job. You need to do what we do in yoga class, set an intention for yourself and move toward it. So your first step is to set up an appointment with yourself or with your partner to answer these questions. Dig deep, breathe in, breathe out and focus. This is the hard work, but like all hard work it is incredibly rewarding. And just like in yoga, it is NOT a competition! Do not compare yourself to your neighbors, or your siblings or even your partner. Work from your own strengths. From your own heart’s desire. This is your life, make the most of it!

CONGRATULATIONS! This is the process of starting to take care of yourself.

The First Step in Learning to Take Care of Yourself: Start Where You Are

startIn an ideal world we all would have started as children and teens to begin to learn how to take care of ourselves. There are a dozens and dozens of magazines for young women that teach us how to dress well, find the best cut for our hair, line our eyes and blush our cheeks. But I don’t know of a single magazine for young people (girls and boys) that talks about how to take care of yourself financially. (I’ll share what I have done with my children in another blog.)

So now that we are grownups we find various ways to deal with our money, but many of them don’t really include the thought “I am responsible for myself”.

Many people live paycheck to paycheck. I don’t just mean not earning enough, I mean not looking at your paycheck as a part of your whole life. It’s the person who pays all their bills and then when there is something left over, “rewards” herself (or himself) with something she may want but not need (and that’s a whole other blog!). Consequently, the paycheck is gone till the next one comes around.

The idea is that our money should be part of a plan that we have developed to reach specific goals. You have all heard the pay yourself first strategy.

This is true if you are married, single, divorced or widowed. A paycheck can be household income from a partner’s salary, income from a career, a pension. Whatever, you need to take care of yourself by developing a life plan.

I hear you. But I’m in my 40’s, 50’s – how can I do that now?

As in yoga, take a deep breath, concentrate on that breath, let your mind become centered and focused and follow the words of one of my favorite authors on life and meditation, Pema Chodron. “Start where you are.”doStarting where you are if you are married or in a committed relationship but have opted out of your financial life it means sitting down with your partner and saying that it is time the two of you figure out where you are going financially and what has been done to date. That it is time to be an active partner.

If you are not in a relationship, it means sitting down with yourself and being very honest about your situation.

So here is where you begin, with a conversation with yourself.

Ask yourself what it is you want in your future? The answer is not just “a comfortable retirement”. Ask what that retirement looks like. Where are you living? Are you traveling, playing golf or tennis? Taking up yoga, painting dancing? Doing charitable work in your community? Pursuing a second career? Living in a different country? The possibilities are endless. Ask your significant other the same questions, it is important to take your partners plans into consideration.

Then ask yourself, “What do I have to do to get there?” Back up a bit. It’s not just about retirement goals; it’s about the next 5 years or 10 years too. It’s about your health ~ physically, spiritually and financially.

Here’s the hard part – you have to look at your income; now and in the future. You may have to adjust your goals or your income situation. If you are only going to earn $50,000 annually, you are not retiring to the south of France and making wine. That’s probably not what you really want to do anyhow.

Don’t panic! The reward here is that when you start to be true to yourself, take care of yourself, be honest with yourself, you become empowered and can do anything!

This is a lot to digest, so more in the next blog.

Note: I really want to hear from you, but because I am a financial planner and what we say and the things we write are highly regulated, I may not be able to fully reply to your comments or questions. I have to submit my responses through my compliance department, so I plan to respond to broad inquiries and comments rather than personal questions. I can be reached at kathy@nullfishandassociates.com

Learn to Take Care of Yourself … Even if You’re Married


Yoga-for-the-HeartI have told you that I am a certified yoga instructor.  My yoga practice has been a journey of discovery that has mirrored my journey of self-reliance.  It is about reaching into your mind and body to find your highest potential physically, mentally, spiritually and emotionally.

Yoga teaches you to understand that the mind and body are joined in union with each other.  You learn to take care of both your body your mind, and your spirit and so become responsible for yourself.  There is a great strength that comes from being in control of the only things we can control, our thoughts and our actions.

That statement is true whether you are married, single, divorced or widowed.  Being with a partner does not allow you to abdicate your responsibility to yourself and your future.  I cannot tell you the number of times I have met with a recently widowed woman who assumed that her late husband had taken care of everything only to find out that his plans were not in the best financial order and now she was not as financially secure as she thought. 

It happens because she thought her husband (who was kind and loving and generous) knew what he was doing and she didn’t have to bother with their finances.  After all he was the man, right?  Here’s a newsflash – not all men are financially savvy, but they won’t admit it to themselves and they won’t admit it to you.  So, they “go along” with what they are told by friends or advisors, never asking their questions and since you don’t question their decisions, bad things can happen when something goes wrong or they die.

If you are a married woman, think of that marriage as a business partnership in your life.  Whether you are working or you are able to stay at home with your children, be an ACTIVE PARTICIPANT in your financial life as a couple and a family. 

As a couple you should:

  • Clearly understand your total income
  • Decide on goals together – not just retirement goals but vacations, schools, types of houses, etc.
  • Set a realistic strategy to reach each of those goals
  • Re-think that strategy as life happens around you
  • If you have a financial advisor, go together and make sure he/she knows you are a team.
  • Discuss what you want to happen if either one of you died prematurely. One of the questions that is often asked at a funeral is, “I wonder if he had any life insurance?” I have been asked several times over my years as a Certified Financial Planner™ professional, by the wife, “Am I going to be okay?” The time to ask these questions of your spouse is now, not after they are gone.

You know, in this country money is still the last taboo, we would rather spill the beans to our friends about our sex lives, than speak about our money situation.  I’m not sure if this is a holdover from the days when to speak about money was rude and unmannered or if we are just so embarrassed about how little we actually know about our money. The effect is the same; we put our heads in the sand and cling to our ignorance.

Don’t be the wife I was in my first marriage. Dumping all that responsibility for your happiness and well being on even the best of men is not fair. Think of life as a little red wagon that you should both be pulling forward.

The truth is that marriage is not forever; death happens and so does divorce. When the unthinkable has never been spoken about, our future becomes precarious.

If you haven’t been an active participant, start now! Come back to this site, pass it along to your friends and we can all help each other find our strength.

Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to kathy@fishandassociates.com. Thank you. Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with Fish and Associates. Kestra IS and Kestra AS do not provide tax or legal advice.

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