Wednesday, April 11, 2012

April is Financial Literacy Month

Did you know that? I didn't until I was doing research on a different topic for the blog.

Money Management International is sponsering a Financial Literacy Month Challenge as well as guest bloggers on their Blogging for Change website which highlights each days "step". You can enter the Challenge for a chance to win $500 - you know I did!

I'm a bit behind on the steps, so lets kick this baby into overdrive to catch up, shall we?

Step 1: Commit to Change. Done!

Step 2: Assess Your Finanical Situation. I scored 12 points on their quiz, which "reflects a good effort to manage your money effectively. The 30 step plan can help determine changes that can be made to improve your financial well-being."
Step 3: Clearing Out Financial Clutter. I will give myself a pat on the back for being pretty organized; I usually alway toss receipts (except for major household purchases), I print & save our utility bills for one year to compare costs. I'm hit-or-miss on saving credit card statements. Lately, I've just been reviewing them online.We have a big bag of bills I need to get around to shredding then burning in our fire pit. I need to add our paystubs to the pile now that we've received our tax return. The blog post for day 3 lists an interesting tip about carrying three different registers - one for cash, one for your bank/debit card, and one for credit cards. The author also mentions people who struggle with their finances may need to document their spending for longer than a month (ugh!)

Step 4: Set Yourself Up for Success. I would consider myself the Family CFO, meaning I track and pay the majority of our household bills. Again, I'm pretty organized with our paperwork. We're half & half on automated payments- I should probably work towards full automatic payments. I couldn't view the webcast at work though, unfortunately.

Step 5: Get Copies of Your Credit Report. Done - over 40 pages!

Step 6: Clean Up Your Credit Report. Easy-peasy since there were no errors from the three reporting agencies.

Step 7: Make Your Money Count. Using their Income Worksheet Form, I calculated a monthly take home of $2,553.24 (a bit more than my previous estimates due to knocking down my retirement contributions in the short term).
Step 8: Identify Your Starting Point. I calculated my net worth at $1,130.87. Woo-hoo! In the positive! I didn't have the information on the balances in my pension & IRAs so I just estimated some rough numbers based on my last year & a half of contributions. I did not factor in our joint savings because I haven't recently contributed anything to it (whomp whomp)

Step 9: Passing the Debt Test. I answered "yes" to four questions:
  • Is an increasing percentage of my income going towards debt payments: yes, but that's because I'm riding the debt meteor
  • Is my savings cushion inadequate or nonexistent: bats- 1, savings account- 0
  • Are you at or near your credit limits: depends on your interpretation of "near", but I answered yes anyway
  • If you lost your job would you be under immediate financial strain: hell yes. this scenario gives me nightmares.

  • The guest blog posts lists "5 Great Reasons to Have Less Debt". They all sounds fabulous.

    Step 10: Set Your Priorities. When filling out the worksheet they provided, I could almost place each priority in the "need" catagory, but I decided to be reasonable. The blog tells you to "market to yourself" what your priorities are instead of letting the mass media market to you which I think is a really interesting concept.
  • Rank 1 (most important): Paying off unsecured debt; Making on-time payments on secure debt; Maintaining a savings account (all ranked as needs)
  • Rank 2 (semi-important): Buring a car (still more a want than a need), taking a vacation (want), having money for entertainment (want)
  • Rank 3 (not as important): Saving money for a down-payment on a house. Obviously, we already own a house, so we don't need a D.P. but we should work on increasing our home equity.

  • Step 11: Set financial goals. They use the acronym SMART:
  • S - "A smart goal is specific. It pinpoints something you want to change to achieve." (I want to pay off my credit cards before I turn 30.)
  • M - "A smart goal is measurable. You can measure or count a SMART goal."
  • A - "A smart goal is achievable. Setting goals too high can lead to frustration." (going to be hard, but achievable)
  • R - "A smart goal is rewarding. Reaching the goal should be a reward for your hard work."
  • T - "A smart goal is trackable. Set milestones and schedules for your goals." (first goal: Pay off Card 3 by July at latest)

  • That brings us up to date on our steps. Are you motivated to take the Challenge now? I'm actually kind of excited about it. I'm definitely a person motivated by challenges/experiences so this is right up my alley.

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