I had a most interesting week of personal finance presentations that I think we all could learn something from.
I was honored to speak at The Century Club of Rochester, a 109-year-old educational, cultural, and social club for women. My purposes were threefold. First, to bring them more up to speed on our hyper-consumer, debt is ok society, where the fastest growing demographic filing bankruptcy is Americans 65 and older. Second, to show them the lessons, tactics, and techniques that I teach in the schools, that could be helpful to their children and grandchildren. Third, to reinforce the responsible things they have done and are doing with their finances.
I asked those who attended to give me their most important financial tips and comments. Here are some of them, along with a few of my editorial comments.
$ A course in household economics should be required for every student before graduating from high school. This requires a disclaimer on my part. I did not put anyone up to this, but, if you are a regular reader, you know that I have been preaching this for 22 years now. From the feedback I get from students, I believe that this is more important than ever, and I hope that more school districts will realize this and act upon it.
$ Sit down with your family and make out a family budget, and be prepared sometimes to say, “We can’t afford it," and MEAN IT. We have so often discussed in this column, that “keeping up
with the Joneses” financial peer pressure is what I saw as the downfall of too many debtors that I interviewed when I was a bankruptcy judge. Here are two classic stories. First, one couple, with over $100,000 in credit card debt, went further into debt on their credit cards to take their grandson to Disneyworld, because his family couldn’t afford to take him, and “it wasn’t fair that he didn’t get to go like all the other kids.” Second, regarding the “mean it,” one man was shopping at the mall with his son, who found a video game that he wanted. The father said, we can’t afford it, and you don’t need it. The son said, “Why don’t you just put it on your credit card?" Your family is not always going to make it easy for you to do the right financial things, like sticking to your budget and avoiding unnecessary debt.
$ Before you make an expensive impulse purchase, walk away for a significant period of time to think it over. As we have discussed in this column, it is men who make more expensive impulse purchases, often electronics. Maybe this is yet another example of why men should listen more to women. Also, impulse buying is very easy when you are internet shopping, which is increasing every day. Perhaps, if it is an expensive want, put it in your cart, close out the site, and go back to it a day or so later, especially if you haven’t done all of your comparative shopping research.
$ When you are buying a house always put at least 20% down. You will avoid having to pay PMI, and you will be more “invested” in your “home,” not only financially, but emotionally, because you will have saved and sacrificed for it. Just to be clear, Private Mortgage Insurance is usually required on conventional mortgages with less than a 20% down payment. There are a number of less than 20% down payment options out there today, other than VA and USDA rural loans. Like many other times when it comes to finances and developing the right financial plan for you, there are some circumstances where one of those other options can make sense. For example, there is other higher interest rate debt that “needs” to be paid down, or where you can earn a higher after tax assured return than by putting the money into a down payment, paying PMI insurance, and paying a higher interest rate on the mortgage. The bottom line is, do the math and make sure you are making the right choice.
$ Make sure that you read and fully understand those “no interest” for a year or more big purchase agreements. As we have discussed in this column, if you don’t pay for the purchase in full before the end of the period (not even one day late), you will pay interest from the date of the purchase, often at the highest permissible interest rate. Also, remember that the total of the monthly payments may not pay off the purchase price in the interest-free period.
$ Save for things so that you can pay cash for them. You will appreciate the purchase more and the sacrifice that you made to save for it.
$ Pay off you credit card charges every month. It will eliminate a lot of unnecessary stress in your life.
$ Learn to live “below” your means, buy only what you need, and use up what you have before you buy more of it.
Great advice - Perhaps that is why they can “afford” to belong to the Century Club!
John Ninfo is a retired bankruptcy judge and the founder of the National CARE Financial Literacy Program. Find his previous weekly columns at http://www.mpnnow.com/search?text=Ninfo or at http://www.monroecopost.com/search?text=Ninfo.