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Income Crisis

January 31, 2012 By Kathryn Leave a Comment

Did you find that when you put your income on a budget and spent it on paper before the month began that you had more expenses than income?

Let’s look at some ways to reduce expenses or raise your income.

Part-time or overtime work: It might be that until you get your debts paid off that you will need to take an extra job or work overtime in your current job to make ends meet. This will be a temporary situation if you concentrate on paying off debt as quickly as possible.

Sell Stuff: Is there anything around the home that could be sold to pay on debt or to pay extra on debt. How about your car? If  your vehicles, boats, etc. all add up to payments of more than half your take home pay then you may need to sell something.

Reduce Expenses: While you can’t reduce fixed expenses like your insurance, you can look at ways to make payments lower or at least more predictable. Does your utilities company have a monthly budget plan? Do you really need the cable or internet services that you currently have or could they be reduced. Do you have a land-line and a cell phone? Do you need both? Look at your expenses and ask yourself if you could do without, or reduce them some how. You may even try to et your interest payments reduced, if you have credit card debt.

It all comes down to paying attention to what you are spending and trying to find ways to increase your income, while paying off debt, so that you will get pointed in the right direction to become debt-free! In this way your income will work for you, and not the other way around.

Tim and Kathryn Gerken are Financial Coaches in Newcastle, WA. They serve their community in the greater Seattle area.

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Emergencies You Can See Coming

January 21, 2012 By Tim Leave a Comment

For a week, the local weather forecasters were hyping what was threatening to be the worst snowstorm in the Seattle area in at least a decade if not longer. Names like “Snowmageddon” and “Snowpocalypse” were bandied about as the front of the storm approached in seeming slow motion. The forecasters were right and the storm developed pretty much as they predicted. Schools closed, the streets covered with snow. At one point there were more than 200,000 people without power. The governor declared a state of “emergency”.

I think the use of the term “emergency” in this case is funny. Everyone knew (or should have known) it was coming. There was ample opportunity to get out and stock up on necessities before the storm arrived. Had the unprepared folks been ready, the emergency of this storm would have been at worst an inconvenience. It could even have been an adventure.

Real emergencies in our lives are those things we can’t see coming, but we know they will come when least expected. Things like the loss of job, extended illness or even car trouble can happen “out of the blue”. There isn’t the equivalent of Doppler Radar to tell us that kind of storm is on the way. What we do know is that in any 10-year period, the chances of suffering from a major negative event approach 80%. The time to start preparing for that event is now.

The how of preparing for that event is with an emergency fund. An emergency fund  is a sum of money equal to between three and six months of expenses. It is not an investment, rather it is insurance. Your emergency fund is kept separate from all other funds in a place where it is easy enough to get to should the need arise. A good choice might be separate savings account and a better choice might be a money-market account with check-writing privileges.

What will you do when an emergency comes? Will you go into debt “to cover it”? Do you have an emergency fund? Are you prepared for your own personal “Snowmageddon”?

Tim and Kathryn Gerken are Personal Financial Coaches in Newcastle, WA. They serve their community in the greater Seattle area.

Filed Under: Budgeting, Crisis Management, Financial Goals and Habits, Our Blog, Personal Finance Tagged With: , , , , , , ,

Is Your Money on a Roller Coaster?

November 26, 2011 By Kathryn Leave a Comment

It doesn’t really matter whether you live on a commission based job, a salary, are paid hourly or are living on a retirement income, by living below the level of what is brought in and by “fixing” your expense needs to that level then anything over that amount becomes a tool for wealth building.

Let’s look at three different scenarios to illustrate my point.

Joe makes an annual salary of $60,000. He has the potential to get bonuses and raises yearly. He is out of debt and has an emergency fund that would cover three months of expenses. If Joe is able to keep his expenses to a reasonable level and stays out of debt by saving for his purchases, he can easily invest any bonuses and future raises in salary that come his way and build wealth faster.

Rebeca is retired and receives an income of $40,000 per year from investments and Social security. Should she have a car payment, house payment and credit card debt? Obviously not. Being out of debt, she can live on $35,000 per year. She can save some of the remaining $5,000 of her income for health care emergencies and invest the rest to leave a legacy to her family. By living on less that she has, she creates options for her life instead of emergencies.

Chris is a real estate broker with a good track record for selling homes in the area. Even though he makes a good income, the commissions come in sporadically throughout the year. By living on a fixed budget, he knows how much he can spend each month. If one month is more prosperous, he can save the overage for a less prosperous month. This helps even out the financial roller coaster that comes with a commission based job. Doing so gives him an emotional peace because he knows he will be able to make his bills each month. If he lives on less than his yearly income he can invest and build wealth for downturns in the economy, when the housing market may not meet all his financial needs.

By living on a fixed budget, it stabilizes our financial lives and gets us pointed in the right direction to build wealth, have financial freedom and the options to use our income to help others.

Tim and Kathryn Gerken are Financial Coaches in Newcastle, WA. They serve their community in the greater Seattle area.

Filed Under: Budgeting, Crisis Management, Financial Goals and Habits, Financial Planning and Priorities, Our Blog, Personal Finance Tagged With: , , , , ,

Break the Cycle

November 8, 2011 By Kathryn Leave a Comment

Who out there has made a bad decision with money? Speaker, author and radio show host Dave Ramsey has been know to say that if you are over twelve, you have made a bad decision with money sometime in your life. Really, we should all be raising our hands to that question. Sometimes bad decisions are made from lack of education about money and other times bad decisions are just a vicious cycle in which we find ourselves trapped. Believe it or not, there is a way to get out of the trap and to start making good decisions.

Here are a few steps to take to break the cycle:

  • Be aware that there is a cycle – this is the first step to change
  • Find an accountability partner or coach to help you make better choices
  • Create an emergency fund and have a spending plan to work from
  • Learn to say, “No … I can’t afford ___ right now“
  • Be deliberate about each decision and wait overnight before making any large purchases

Change doesn’t happen overnight. It is a deliberate step. You need to wake up each morning with a renewed attitude of discipline with your life and your money. Read. Educate yourself about money and create a path to get pointed in the right direction.

How have you changed your spending habits?

Tim and Kathryn Gerken are Financial Coaches in Newcastle, WA. They serve their community in the greater Seattle area.

Filed Under: Crisis Management, Financial Goals and Habits, Financial Planning and Priorities, Our Blog Tagged With: , , , ,

Living with Hills and Valleys

October 22, 2011 By Kathryn Leave a Comment

Did you know everyone in this world works on straight commission. We work and we get paid, we don’t work and we don’t get paid. That is commission. However, if you have a traditional commission based job, like Real Estate or sales, you need to be extra careful to have a spending plan for your irregular income.

You may be thinking, “How can I have a plan, when I don’t know how much I will have to spend?” If you have been in the commission based job long enough, you should have a general idea of how much you can count on each month or a base pay that you receive. For example, if you have a base pay of $2,000 per month plus commission, you can make a spending plan based on the $2,000. Then anything that you receive during the month over that $2,000 goes into your irregular spending plan.

The irregular spending plan is where you list your spending priorities. If you get one more dollar above the $2,000, this month where will it go? Your spending priorities should be in order of needs and not wants. Of course, I hope that food, housing, basic utilities and basic transportation are covered in the base pay fixed budget, but if they are not, these should be at the top of your list. Where the money runs out, you stop spending. Even if that mans you don’t pay the Visa bill this month. This is a typical valley month, one where you have too many expenses for your income.

A hill month is when you have more income than expenses. Obviously, hill months are what you are aiming for. During these months, it is important to save money for your valley months. A 3-6 month savings can help even out the hills and valleys of your financial landscape. Once that is in place and your debts are paid off you will be able to enjoy the fruits of your labor and have some extra items on your irregular spending plan that you can enjoy, like a vacation!

How do you plan for hills and valleys?

Tim and Kathryn Gerken are Financial Coaches in Newcastle, WA. They serve their community in the greater Seattle area.

Filed Under: Budgeting, Crisis Management, Financial Planning and Priorities, Our Blog, Personal Finance Tagged With: , , , , , , ,

Insurance:Life and Disability

July 26, 2011 By Kathryn 2 Comments

Your income is your most powerful wealth building tool. If your family loses your income due to disability or death, it could be devastating.

The good news is that once again insurance will transfer the risk of these high impact events and protect you and your family. There are many life insurance products out there that are marketed as investments. Even though these policies have a cash value built into them, they have a lousy rate of return. In addition, when you die, only the face value of the policy is paid and the “cash value” is kept by the insurance company. Term life insurance is a good idea while you are getting out of debt and building your savings. If you are committed to doing this then 20 year level-term insurance will allow you to pay a lower premium for much more coverage to allow to get out of debt faster and start investing the difference.

Disability insurance is usually provided through your work place. If it is, make sure you have the type that begins 3 to 6 months after your injury. Your emergency fund can help during the interim and you only want this insurance to catch the major long term events that you would not be able to cash flow from a 3 -6 month emergency fund.

Having both these types of insurance in place makes for a healthy financial package and will get you pointed in the right direction to financial stability.

Tim and Kathryn Gerken are Financial Coaches in Newcastle, WA. They serve the greater Seattle area.

Filed Under: Crisis Management, Financial Planning and Priorities, Our Blog, Personal Finance Tagged With: , , ,

Insurance: Home

July 19, 2011 By Tim Leave a Comment

Recently in our neighborhood here in Newcastle, we have had two house fires. Observing the aftermath of the damage, the displaced families and the lengthy repairs, it brings home the importance of having good homeowner’s insurance.

If you have an unexpected event involving your home, it is an emotionally and physically exhausting time. With good homeowner’s insurance covering the replacement cost of your home, it does not have to be a financially exhausting time as well. Insurance transfers the financial risk of a catastrophic event to your home from you to the insurance company. When unexpected events occur, having insurance in place gives you the peace of mind that you can rebuild and move forward without the financial stress associated with a major event.

Renters should also have insurance. A good family friend of ours was living in tempory housing between college terms. He did not have renter’s insurance and his house was burgled. He was out several thousands of dollars in electronics and other items. He will never be without renter’s insurance again. Learn from his mistakes and make sure that you are covered.

Review your homeowners or renters insurance every few years to make sure that the cost to rebuild or replace items is accurate and you will continue down your road to financial freedom.

Do you have a story to tell involving homeowner’s or renter’s insurance? Tell us about it!

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