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  MONEYSMARTLIFE.ORG EMPOWERING SUSTAINABLE FINANCIAL WELL-BEING IN WORKING CLASS FAMILIES
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    Mansa Musa Trusted Advisor First time home buyer

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    Mansa Musa is a homeownership counselor and homebuyer educator. He is currently the Principal at MoneySmartLife.org. He blogs and speaks on subjects of financial well-being and financial capability. Helping working class families live a sustainable MoneySmartLife through pragmatic solutions and behavior changes.

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Manage existing debts and Has access to potential resources | Financially Healthy Behavior

2/9/2020

 
man holding savings bank
Your behavior is one crucial factor that determines your financial well-being. It is not just what you know to do, but what you actually do that counts. Knowing you must save for retirement is different than saving for retirement. Knowledge should inform behavior not to be a substitute for it.
The next behavior in our look at six financially healthy behaviors is managing existing debt and has access to potential resources. This is your skills and ability to control your debt. And your capacity to generate outside resources in times of need. Let’s take a look at each.
Manages Existing Debts
  • “A manageable debt load is one in which the individual is able to keep up with associated debt obligations without experiencing significant stress.” This includes formal debts like credit cards, student loans, car loans, etc. It also includes informal debts to family, friends, and others in your social network.
  • Your debt load is different than your living expenses. Yes, they are all “bills that gotta be paid. True dat!” But living expenses are results of your living and consuming. In contrast, debt is a “voluntary” surrender of future time and earnings. Both are cost obligations, but here we are only talking about your debts.
  • The characteristics of a well-managed debt load are:
    • you are paying your bills on time, every time.
    • you have discretionary income left after debt service payments. Paying your “bills” shouldn’t take all your money.
    • your overall debt load is consistently being reduced.
  • Managing debt effectively in our consumer-based “buy now-pay later” advertising saturated ecosystem requires you to develop a visceral aversion to debt. Change your default programming to be against adding liabilities to your balance sheet. Refuse to encumber another minute of your future by promising payments. The best-managed debt is no debt at all.
  • How you pay your debts now impacts your future ability to borrow money from both formal and informal sources. A weak or erratic payment history limits your ability to borrow from those same sources again. While a good payment history will often be rewarded with an increased credit line and expedited access to resources.
Has Access To Potential Resources
  • In times of need, a person should be able to gather potential additional resources by calling on external formal and informal sources. Those sources determine your financial and social lines of credit, i.e., how much you can borrow. Potential social and economic resources should be cultivated before needing them.
  • People often depend on their social networks to help weather a shock even if when they have access to formal financial products. Social capital that can be converted into resources when needed is especially crucial for those with credit score challenges or less responsive financial institutions.
  • Your social network requires vetting. Who do you believe is part of your safety net? Who will you depend on and come through for you during tough times? Do they agree? Since reciprocity is often implied in these relationships, who regards you as part of their safety net. Do you agree?
Managing debt and cultivating credit lines are MoneySmartLife behaviors and skills necessary to acquire on your journey toward financial well-being.
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How to keep your money longer when paying your bills

1/19/2020

 
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There is a way to keep your money longer by using credit cards and autopay. I have been using this strategy successfully for several years. It has evened out my cash flow and put cash and rewards in my pocket. This strategy is only valid if you pay your credit card statement balance in full every month. Here how it works.
DATES are important. 
You need credit cards with different closing dates throughout the month. Credit card transactions are billed at set times called billing cycles. The last day of the billing cycle is the account statement closing date. The due date is the date by which you must pay your credit card statement balance. There is a grace period between the statement closing date and the payment due date. By law, the credit card company is required to offer a grace period of at least 21 days. This is the time from your statement closing date you get to make a payment before interest is charged on new purchases. That is 21 more days to keep your money.

The credit cards I use:
  1. Discover closing date 26th due date 21st of the following month
  2. MasterCard closing date 17th due date 14th of the next month
  3. Visa 6th due date 3rd of the next month
  4. I also use my wife’s cards if the closing date is more advantageous.
  5. Closing dates can vary by a few days based on the credit card billing cycles. For example, the 23-day billing cycle may have different closing dates after February, July, August. So don’t cut this too close. The credit card due date will always be the same.
You can often change your current due date if you contact your credit card issuer. Most will let you switch your due date. So if you already have multiple cards, you can spread the due dates and get started. Changing your due date will change your closing date by a corresponding number of days also.
All transactions since the last closing date will be included in your credit card statement. Credit card transactions are billed at set times called billing cycles. The last day of the billing cycle is the account statement closing date. You have a grace period between the statement closing date and the payment due date that’s roughly between 21 and 25 days, depending on the card you have. Your card has a grace period, The credit card company is legally required to offer a grace period of at least 21 days. This the time from when you get your statement to make a payment before interest is charged on new purchases.
  • DTE autopay on the 27th of the month. Statement closing date the 17th of the next month. The credit card due date is the 14th of the following month. 
  • Autopay DTE March 27. I get a credit card statement on April 17. Pay credit card in full on May 14. That is 47 days, I get to earn interest on my utility payment.
Resist temptation. You can’t spend the money on anything else. You must pay the credit card bill when its due.
I use this strategy with reward credit cards for cash back or travel rewards to help maximize the benefits. I love accumulating miles from paying for utilities. I use the same strategy for cell phones, cable/internet, streaming subscriptions, and natural gas.
If you actually deposit the deferred payments into an interest-bearing account, you may even see a modest gain over a year.
Other considerations 
Monitor your credit card statements carefully. Auto-pay amounts may change. I do not auto-pay my credit cards. This forces me to interact with the website to pay the bill. Therefore I get to monitor my statement before I make my payments.
Using this strategy will allow you to pay your bills on time and keep your money longer while doing it. 


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8 money tools available to most working-class people and how to use them effectively

12/15/2019

 
Financially Healthy Behaviors
1. Plans and prioritizes 2. Manages existing debt and has access to potential resources 3. USES AN EFFECTIVE RANGE OF FINANCIAL TOOLS 4.Builds and maintains reserves 5. Manages and recovers from financial shocks 6. Balances income and expenses
Continuing Series on the 6 Financially Healthy Behaviors
Often when it comes to money some of our behavior can subconsciously be influenced by our money habitudes or by one or more of the four external financial health influencers. This can result in frustration and missing your money goals.
Money is like food in a lot of ways. It is something that we consume and is necessary to live. Just as improper behavior in relation to food leaves you in ill-health; an improper relationship with money can prevent financial well-being. Crash diets and get rich schemes may provide short-lived results but without a fundamental behavior change the results will not last.
Here are 6 financially healthy behaviors working-class households can use in the journey to financial well-being. These 6 financially healthy behaviors will increase your financial capabilities and lower your money stress.
In no particular order of importance, the first financially healthy behavior is “uses an effective range of financial tools.” 
​
Ultimately the responsibility of learning how to manage money rest with the individualUltimately the responsibility of learning how to manage money rest with the individual
Since hominids roamed the Rift valley into the plains of Africa, effective use of tools gives a person the ability to alter an environment for their benefit. That is true for your money environment also. Each household operates within a larger economy. That larger economy creates an environment ranging from wholesome to toxic that generates irresistible forces that impact households. Altering that environment for your benefit through the effective use of some financial tools will help you succeed in your financial evolution.

Credit cards are a necessary part of life in 21st century America. They can be a bane or a blessing depending on ownership. By that I mean, “Do you own your credit cards or do your credit cards own you?” 
A well-managed credit card can provide increased monthly cash flow and lifestyle enhancements through rewards and other cardholder benefits. Cash advances can also be used as part of a last resort safety net or emergency fund. Credit cards should be proactively managed for rewards, utilization ratios, and annual limit increases.
Poorly managed credit cards lead to high-interest rate debt, stress, and a diminished lifestyle. This is like using a tool on yourself instead of on your circumstances. This is what happens to the undisciplined money managers and impulsive spenders. If this is your situation, there is hope. You don’t have to stay that way.

Everyone engages with the economy through Financial Services. These services and products are sold by a variety of entities. Accessing these services requires both prudence and due diligence. Buyer beware! There are many “trick and trap” instruments promoted to the ill-informed and desperate. Loans of all types can have such terms: Payday, Title, Student, Mortgage, Auto, etc. 
Strategically accessing capital when you need it is a good thing. Of course self-funding, though not always possible, would be the best course. There is nothing wrong with borrowing. But do so when it is the only option left. Borrowing should never be your first option. Do you really need to borrow? What are the terms? Can you maintain the payments even if your income is reduced?

Checking/Savings accounts are necessary to engage the economy. These deposit accounts give you access to cash and the ability to make payments. Your deposits are held securely until you access them through cash withdrawals, debit cards, wire transfers, or ATMs. Lack of access to these basic services has left many “unbanked” at the mercy of the unscrupulous and greedy. Those that do have access must be ever vigilant of fees and other balance reducing charges that are profit centers for some financial institutions.

Continuous financial education must be a value that you fully embrace. Thanks to Google, YouTube, MoneySmartLife.org, and a plethora of financial websites and books you can always be informed about your money. Being informed will help you make better decisions and plan for success. You don’t have to be an Accountant per se, but you should be fluent enough to discuss your situation with one.
Be aware when consuming financial information of its source and affiliations that may result in bias or steering. Look for objective sources of information like MoneySmartLife.org. This is not to say there isn’t great information on commercial sites. There most certainly is. Just be aware of whose paying the piper for the tune being played.

Investments are assets you have above your living expenses and emergency fund. They generally have a long term purpose or goal such as capital appreciation or income. Whether you engage a Financial Advisor or decide to go it alone, the basics must always be satisfied. Those are your time horizon, r
isk tolerance​, and the suitability of the investment. All three should be satisfied before you invest or engage an advisor.
The main thing investments should do is put you on the positive side of the interest equation. Which side of the interest equation is more characteristic of your money; paying it or receiving it?

Insurances are part of your risk management strategy and disaster recovery plan. Having appropriate coverages can help you offset a loss due to a covered event. Life, health, home, auto, business, renters insurance markets are highly competitive. This means you should regularly review your coverages and seek competitive quotes. Make sure whichever company you choose has a reputation for fairly paying claims.

Money paid in taxes doesn’t contribute to your wealth. Therefore utilizing available Tax Shelters lets you keep more of your money. Shelters don’t have to be elaborate but simply available such as charitable contributions, self-employment expenses, 401(k), HSA, or mortgage deduction. Paying taxes contributes to the quality of life. It is the irrefutable responsibility of every person to pay some taxes. But you should not pay more than you owe. As an American, my attitude toward all forms of taxation is the same. Tax evasion is a crime. Aggressive tax avoidance is our patriotic duty. Since tax law frequently changes this should be a part of your continuing education.

A Credit Score can be a tool. Maximize your credit score. Excellent credit (750++) will allow you to take advantage of sales incentives like sign and drive or 0% interest car loans. You will also get lower interest rates when you do borrow. Move your credit score up above 775 strategically and on purpose. 
Your ability to borrow should be viewed as part of your safety net. Your credit card cash advances and spending limits are criticalcomponents that can be managed to help mitigate some of the impacts of an emergency while buying you time. An excellent credit score can give you immediate access to additional money during an emergency. It is a MoneySmartLife strategy to responsibly and proactively expand your borrowing capacity annually. Just as your net worth expands annually so should your credit capacity.
These 8 money tools are available to most working-class people. Know how to use them capably. The cliche applies, "it is a poor worker who blames the tool." 
The World Bank defines “Financial capability as the internal capacity to act in one's best financial interest, given socioeconomic environmental conditions. It, therefore, encompasses the knowledge, attitudes, skills, and behaviors of consumers with regard to managing their resources and understanding, selecting, and making use of financial services that fit their needs.”


​Ultimately the responsibility of learning how to manage money rests with the individual. If you think somebody cares more about your money than you do; you have another think coming. Effectively using all available money tools is on you.

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Emergency Fund part of your safety net

10/21/2019

 
Safety Net
Financial shocks are inevitable during a lifetime. “Stuff happens,” according to the PG-rated version of that cliche. When it does, my language is more NC-17. Nevertheless, happen it does. The most common financial shocks for working-class families are:
  • Medical
  • Major household and automotive repairs
  • Family emergencies, meaning anybody you would choose to help rather than pay your rent.
  • Criminal justice system interactions always cost money to win, lose, or draw.
  • Temporary loss of income through reduced hours or layoff.
An emergency fund is foundational for achieving financial well-being. Having one increases your capacity to absorb a financial shock. It enhances your resilience or ability to recover from the shock. To torture an analogy, in the prizefight of life, it is not that you got knockdown. Instead, it is how long you stay down and what you do after you get up that determines the outcome. An emergency fund can provide more solution options.
What is an emergency fund? It is a “liquidity buffer” between you and ruin. If you have very little saved — say $200 to $500 — each additional dollar you set aside dramatically reduces your likelihood of falling into financial hardship. It can be any of these items. Some are decidedly better options than others:
  •  Cash on hand
  • Liquid savings 
  • Readily sold assets such as jewelry, stocks, bonds, guns, collectibles, 401(k), your body and time, etc.
  • Credit Card Cash Advances
  • Food on hand
  • Family
  • Accounts receivables or anybody who owes you money and who is good for it now.
  • Credit Score
How much is enough for an emergency fund? Emergency funds are highly individualized. The answer depends on a variety of factors, including your health, your age, your temperament, dependents, housing situation, the stability of your job, your risk tolerance, and more. Just be mindful of the truism, “It’s better to have money and not need it; than to need it and not have it.” Your emergency fund can’t be too big. Its size may determine how it is stored but not its existence.
Forget the 3 to 6 months of take-home pay that is commonly parroted throughout financial media and literature. This goal is often unattainable for low-income wage earners. A more realistic minimum target is $2,467. A fund of this amount will be sufficient for most emergencies. Having such a fund stops you from getting stuck with short term remedies with long term consequences like being late on rent or borrowing from a payday lender. Often creating a cycle of cash draining late fees and prolonged financial insecurity.
Building an emergency fund is your #1 priority. You should well establish an emergency fund before you divert resources to the very prudent debt reduction strategy necessary for your long term success. You should continue or start making all minimum payments on time and continue to do so until your emergency is well funded.
Debt reduction is achieved by consistent application of payment to the principal balance. Having an emergency fund will let you maintain a good payment history so you won’t have to “rob Peter to pay Paul” when the inevitable happens. One missed credit card minimum payment can close off what may be a critical asset during a financial emergency and put a big hole in your safety net. Modified universal default terms may render a late payment to one lender a catastrophe in your creditworthiness regardless of your actual payment history.
​Your ability to borrow should be viewed as part of your safety net. It creates capacity and demonstrates financial capability. Your credit card cash advances and spending limits are critical components that can help mitigate some of the impacts of an emergency while buying you time. An excellent credit score can give you immediate access to additional money during an emergency. It is a MoneySmartLife strategy to responsibly and proactively expand your borrowing capacity annually. Just as your net worth expands annually, so should your credit capacity. They weave your safety net tighter and softer.

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5 Things to Do to Prepare for the Coming Recession

9/22/2019

 
Recession graph
  1. Aggressively save money now. Cash is King during a recession. Have as much of it on hand as prudent. Build your emergency fund. This prepares you to withstand “stuff happens” and seize the opportunities a recession always provides.
  2. Layup 30 days of food for your household. A loss of income can be softened by knowing how the family is going to eat. Having food on hand will allow using your money on other things.  Start by setting aside 3 days, then 7 days and finally 30 days. This food store is also used for disaster preparation and recovery due to weather events, natural disasters, and non-economic factors. Having a food reserve on hand is a MoneySmartLife strategy. This isn’t extreme prepping but it is being prepared.
  3. Start a profitable side hustle. The loss of income is how most working-class families are impacted by a recession. That loss of income, if sustained, also causes a loss of wealth. The loss of wealth has a more enduring impact and must be avoided. The best way to do this is by having multiple streams of income. Make sure that your entrepreneurial endeavors are recession-proof by providing products or services torecession-resistant businesses and their employees.
  4. Understand the difference between "wants" and "needs," then spend accordingly. Wants and needs are different for everyone. They are subjective and often emotionally driven. Despite those individual differences, everyone still spends in both categories. You may need a car to maintain your income. But the kind of car you purchase, beyond reliable transportation, is more a function of your wants. You know it’s a “want” rather than a “need” if you spend time justifying or rationalizing the upgrade.
  5. Maximize your credit score. Excellent credit will allow you to take advantage of recession heightened sales incentives and lower interest rates. Both borrowing and buying become cheaper in a recession. Having excellent credit will allow you to access these credit-driven opportunities. Move your credit score up above 775 strategically and on purpose. During a recession, having and managing credit cards can be a component of your safety net. If your score is bad or takes a hit, start the recovery process now.

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