Book Review: Get a Financial Life - Personal Finance in Your Twenties and Thirties

Here's a secret: One of my hobbies is to read personal finance blogs and news postings. My favorite blogs are  Man Vs. Debt: Sell your crap, Pay off your debt, Do what you love and Daily Worth and favorite money news site is CNN Money.  I enjoy gleaning tidbits of financial information from these sites. I have made some shifts in my spending and savings habits due to these articles; however it is difficult to get all of the information relevant to me (e.g. I don't own a home nor do I have children) in one consolidated place. This is where Get a Financial Life - Personal Finance in your Twenties and Thirties by Beth Kobliner steps in.Beth Kobliner, personal finance commentator and journalist as well as a member of the President's Advisory Council on Financial Capability, wrote Get a Financial Life in 1996 and completly updated the book for the new economy in 2009. She delves into every aspect of  finance and has great resource suggestions throughout her book. She beings with identifying strategies for dealing with debt, moves on to the ins and outs of investing, discusses buying a home and insurance policies and finally tax strategies.You can read the first chapter of her book here which is a cheat-sheet for the entire book. Definitely worth a look!This book holds an incredible wealth of knowledge so instead of reviewing every part I want to focus on key elements that stood out to me as well as point out tokens of information I have personally heard discussed among my peers.Key Elements that I will be Implementing:Debt Repayment Strategy

• Increase payments to my one and only credit card (pay off within 3 months)
• Use the debt snowball technique and add the credit card payment (once paid off) towards my car loan

Saving Strategy

• Call my credit card company to negotiate a lower APR
• Cut back on eating out (less Wegmans sushi and work cafe lunches for me..)
• Set up direct deposit to direct 10% of my take-home pay to my savings account (I'm building up 3-6 months worth of living expenses as an emergency fund)
• Contribute more to my 401(k) and consider opening a Roth IRA in a Socially Responsible investment category
• Take a defensive driving class to lower my auto insurance payment
• Pay at least $2,500 in interest on student loans this year (this amount can be deducted at tax time)

Insurance Strategy

• Ask my auto insurance agent about bundling in Renters Insurance
• Understand my Medical Insurance policy more fully (what exactly is covered in it?)

Resources to Comments I've heard from my friends:I've lost track of the lenders and amounts of my student loans.To locate your federal loans you can go to the National Student Loan Data System.I need to lower my student loan payments because I cannot afford them but I'm not sure how this will effect me long term. For useful calculators to determine how much more interest you will pay over the lifetime of your loan by lowering your payments now go to the U.S. Department of Education or the Smart Student Guide to Financial Aid websites.I have no idea what is on my credit report or how to find out.You are entitled to one free credit report each year. Go to Annual Credit Report to fill out the form and view your credit report. Be sure to check it for errors!To see your credit score you have to pay $16 at MyFICO. You may want to consider viewing your score if you are planning to buy a car or home soon.

Guest Blog: Financial Fun - The Envelope System

I am very excited for today's guest blog! I have always struggled with sticking to my budget so I welcome new systems with open arms. Today's guest blog is written by a quite organized Student Affairs Professional (check out her blog at College Forever!).----I have always loved being organized. As a nine year old, nothing made me happier than a freshly rearranged and reorganized room. Seeing all the organizational products at Ikea sets my heart a-flutter. Yes, this might make me seem like a weirdo, but at least I'm a well organized weirdo!Something that needed a major overhaul when I got my first big girl job was my bank account. Even though I had this job that paid me (slightly) more money than I earned as a grad student, I had no idea where it was going. Payday would come and go and I was just as broke as I was the week before. I started by asking my friends how they kept track of money. Word of warning to my student affairs friends out there, do not ask this question to any of your friends that are engineers. The answer will just make you feel bad about every life decision you have made that got you to a job you love with a paycheck you hate. From my friends, I heard about things like mint.com and having portions of your paycheck automatically deposit into certain accounts. I also tried looking things up online but had trouble finding anything that pertained to me. Mortgage? Child care? These are not concerns of mine at the moment. Finally, I heard about the "envelope system".What is the "envelope system"? Well, to start with, I don't know if it had a fancy name, this is just what I heard it referred to as so that's what I'm going to call it. Sorry if you are the inventor of the envelope system and are offended that I am not calling it by it's proper name. I would tell you to sue me, but I don't have a lawsuit envelope set aside....back to my original point! The envelope system allows you to create a budget with multiple categories that limits your spending.I'll walk you through step-by-step of how I set up my system. The very first thing I did was make a list of the things that I know I have to pay for every month that I can't or don't use cash for. This might include your rent, loan payments, utility bills, and prescription medications...ladies, I'm looking at you. Birth control isn't free yet! Subtract the cost of all of these things from your paycheck. If you already funnel some of that paycheck into savings, you're going to want to subtract that money too. What you have left is what you're going to work with for the rest of your budget.Next, make a list of the things you normally spend money on. This might include food, clothes, gas, entertainment...that's the best part of this - you can completely set it up for the things YOU spend money on. Play Magic: The Gathering? List that as a category. The second part of this step might take you some time. How much do you tend to spend on these categories? If you've been primarily using a credit or debit card for these purchases, go back and examine previous statements to see about how much you are spending. If you don't have a way to do this, track your spending for two or three months. You could just set some arbitrary numbers for yourself, but you will probably need to do some tweaking.Once you know about how much you spend in each category per month (or have picked random numbers), total it up. This number SHOULD be less than the number we figured out earlier (paycheck minus bills). If not, you might need to make cuts from somewhere. The goal is to spend less than you make so you can save some money for things like, oh, I don't know...a trip to Disney World?Alright, so now we're going to take a category. Let's say you have budgeted $100 a month for entertainment (eating out, sporting events, movies). Divide $100 by the amount of paychecks you bring home each month. Write that number down along with the category name on an envelope. Do this for the rest of your categories with one envelope for each category. Now add those numbers up. That is the amount that you will withdraw from your account IN CASH every pay day. You will then put the money into the proper envelopes. If an envelope runs out before payday, you shouldn't buy anything else from that category.And that's it! That's the envelope system!What I like about it is that it is so flexible. I already mentioned that you get to create the categories. Another thing you can do is decide what to do with money left over at the end of a pay period. If you use all of the money from a category in a pay period, you can make the choice to take cash from another envelope...say using "entertainment" money to pay for gas or groceries (however it probably shouldn't go the other way). This is also a system that is really basic so it doesn't matter if you make $20,000 a year or $250,000 a year. It could even work with children!The one thing I stress with any organizational system is that if it doesn't work for you, don't use it. You need to be able to keep up with it otherwise you will still be unorganized. There are other ways of budgeting out there, this is just one.

Financial Rules of Thumb

As you know I am reading Get a Financial Life by Beth Kobliner this week. I've only read the first few chapters of this book and I have gotten so much out of it already!In her book she lists the following Financial Rules of Thumb:

• The Debt Target: Your debt payments (not including your mortgage) should be less than 20% of your monthly take-home pay AND the unpaid balance on your consumer debt (credit cards, car loans - not your student or home loans) should be less than 20% of your annual take-home pay
• The Housing Target: Spend no more than 30% of your monthly take-home pay on rent or mortgage payments (I am solid with this rule!)
• The Savings Target: Save at least 10% of your take-home pay each month (I do this too!)

There is room for improvement for me with the Debt Target. I recently bought a 2010 Honda Fit Sport (which was direly needed as my 2000 Chevy Cavalier was literally falling apart) which has significantly increased my debt to income ratio. I am meeting the second half of the rule which is my total unpaid balance of consumer debt is less than 20% of my annual take-home pay (go me!). Ultimately I want to pay off all of my debt - so look for a post soon about a debt repayment plan.I am meeting Beth's Housing Target. In October I moved in with my lively friend Jackie. She had just bought her beautiful house and I was lucky enough to rent out "The West Wing" as we call it. I get my own bedroom, spare room and bathroom!I am right on-par with the recommended Savings Target. I transfer exactly 10% of my income into my savings account.Budget Complete!One of my financial goals this week is to create a budget. I am proud to say that I sat down tonight and completed it!! I used a basic Microsoft excel budget template and filled in February and March expenses/income from my debit card statements. It was quite an eye opener to see how much I have been spending on tea and coffee lately! Also, slacking on bringing my own lunch to work isn't helping matters either..Completing my budget is quite exciting but it has been a challenge for me to stick with it in the past. I am looking forward to The Envelope System guest blog this Saturday!

Tools for Financial Success

First I would like to begin by stating my financial goals for this week.

• Create a budget and stick with it
• Interview a financial advisor to determine a long term financial plan for myself - I will report back on the juicy knowledge I attain
• Implement The Envelope System (which will be discussed in a guest blog this week!)

I am using a whiteboard to remind me of my financial priorities. I find that keeping visual reminders of my goals keeps me focused. It keeps my head in the game - especially with topics, such as finance, that I find to be dry and boring.I will also be adding these goals to the tracking spreadsheet I created to determine how well I stay on track.Now to today's topic - Tools for Financial Success.Financial success begins when the correct tools are used in your financial planning. The backbone to financial planning is your budget. I know this may seem like a daunting task but trust me, once it's complete you will have a full understanding of where you can cut back and free up money for your big dreams (such as travel or buying a home).Here is Founder of Man Vs. Debt Adam Baker's motivating story of turning his financial life around:[vimeo 56944456 w=400 h=300]An online tracker to consider using is Mint. Mint is a personal finance tracking system and allows you to categorize your expenses, track your financial goals and create great charts and graphs. The system is quite easy to set up and use!Dave Ramsey is a financial guru and offers free downloadable budget forms if you are more of a pen and paper person. He also has a ton of financial strategy information, such as the Debt Snowball Plan, to become debt free.There are also free Microsoft budget templates for you to use.The main tool you will use to turn your financial life around is discovering your passion and your personal "Big Why". Why do you want to save money? What are your goals? Do you want to travel the world? Start a small business? Buy a home? Once you figure out your Big Why, I encourage you to create a header at the top of your budget sheet that states why financial planning is important to you. Bring life to your Big Why!

Self Love Week 2: Financial Fun!

This week's focus is going to be a fun one. Learning financial basics in your 20's and 30's! I will be interviewing a financial adviser, scouring online financial articles and reading this week's book "Get a Financial Life - Personal Finance in your Twenties and Thirties by Beth Kobliner.Building a solid financial foundation, goals and plan is essential to self love for two reasons:

• Alleviate money worries - freeing up mental space for enjoying life
• Free up money for your really important financial and life goals (i.e. Travel, Buying a Home, Freeing yourself from debt)

I will delve into building a budget, debt reduction plan, emergency savings and savings for life goals.For now I want you to pick up a small notebook (pick one that inspires you with your favorite colors/designs) and carry it with you at all times. This is where you will keep your financial journal for a minimum of 1 month. This will show you where you are spending your money and maybe encourage you to think twice before you drop 5 more dollars on your daily latte.<3Mae