Get Real!

A very dear friend of mine confided that she never balances her checkbook. She has overdraft protection and when things get too far out of hand she stops using her checking account, waits awhile and starts with what the bank says is her balance. All I could say was omigod.

She is a widow, and of course someone else used to handle the finances. She has very little idea what is owed to whom when and gets surprise bills all the time. This is not a time for us to be blindly spending our income.

So what to do? Pick a quiet evening, turn off the TV, the radio, the iPod, pour a glass of wine or beer if you need it and figure out where you stand. Unless you have a commission job you shouldn't have too much trouble figuring out your income. The problem is the outcome :) or the outgo to be more accurate. We're not going to be doing a financial statement here -- more like a cash flow statement.

So one column gets the monthly take home income(not gross paycheck- this is after all those monstrous deductions), the other gets your bills. List your mortgage/rent payment, condo fees, monthly grocery bills, and utility bills (gas, electric, water & telephone -- do not include cell phone or Internet). These are your necessities -- we can argue telephone later. Subtotal these, and subtract from your income. If at this point you don't have as much income as outgo you need to seek help immediately. You are in over your head and there's nothing I can say to help you.

If you still have money left- you now list your car loan if you have one, and all your credit cards- start with minimum amount due on these, and other bills you owe. Subtract from your income, how are you doing? Still money left? So far so good. Except if you are only able to make minimum payments on credit cards you are doing a juggling act. It will only take one small emergency and over you'll go.

How much do you owe those credit card companies? At what rates? With or without a government bailout credit will be tightening up soon and you will find yourself with a lowered credit card limit and higher interest rates. Give up those luxuries now ( and I do consider a latte at Starbucks a luxury) and get those cards paid off.

I saw Suzie Orzman on TV the other day and she was telling about a trip to the grocery store. In front of her was a woman with a basket full of halloween goodies. Suzie looked at the basket, looked at the woman and said -- Are all your credit cards paid in full? If not, put every bit of that back-- they are luxuries.

Start now to separate the necessities from the luxuries and take care of your personal business.