Budget Archives - AFCPE

Why I Use Tiller Money as a Financial Coach

Rachael Deleon — Mon, 10 May 2021 10:00:22 +0000

As a financial coach, people often ask me, “what’s the best tool for budgeting?”

And it’s a fair question! There are hundreds of budgeting tools out there, from free ones like Intuit’s Mint, to intricate tools like You Need a Budget (YNAB).

While everyone has their own opinion, my personal favorite tool for budgeting with clients and for managing my own budget is definitely Tiller Money.

What is Tiller Money?

Tiller Money is fairly unique among the budgeting tools. Rather than having an independent app, it pulls your transactions into a spreadsheet (either Microsoft Excel or Google Sheets) each day and helps you plan out and organize your finances from there.

So if you’re working with a client who absolutely hates spreadsheets . . . then Tiller Money may not be for them. But I’ve found that for most of my clients, Tiller Money is a flexible, collaborative, and intuitive way to keep track of money.

Tiller Money provides pre-built templates for monthly budgeting, tracking transactions, and monitoring account balances. And it provides innovative additional functionality, such as debt payoff plans, through free “Tiller Money Labs” templates and tools.

Using Tiller Money As a Financial Coach

My favorite part of Tiller Money is the ease with which you can review and plan out spending with a client.

Tiller Money provides a good setup for the client to get started and link their accounts. From there, the client can just share their spreadsheet with you via Google Sheets or Excel to collaborate.

When working with a client in Tiller Money, I start by helping them choose their budget categories and set achievable spending goals for their first month. From there, we review their actual spending vs. plan each month using Tiller Money’s pre-built Monthly Budget tool.

In addition to this budgeting functionality, I love helping clients set up automatic categorization using Tiller Money’s powerful “AutoCat” (automatic categorization) feature. My clients absolutely love “AutoCat” and find that it saves them time on categorizing transactions each month.

Taking Tiller Money to the Next Level

The beautiful thing about spreadsheets is their unlimited possibilities. Once my clients have their transaction and account balance data flowing into Tiller Money, I build custom sheets for them that help them stay on track towards their goals.

For example, I’ve built a custom spreadsheet tab for student loan paydown that shows a client their expected payoff date based on their monthly savings and payoff prioritization vs. other goals. Something like that simply isn’t possible in a less flexible tool like Mint.com. Even YNAB, heralded for its planning capabilities, doesn’t let you account for interest rates to determine a student loan payoff date.

I also use the client’s Tiller Money spreadsheet to help us track progress on their credit scores and on other goals we established at the outset. Seeing that progress over time is super motivating!

Finally, I’ve even started customizing the colors of the spreadsheet tabs to match Savings Academy, my brand. Clients say that they enjoy the cohesive feel of the “spreadsheet suite!”

Considerations Before Using Tiller Money

Cost and data linkages are two important considerations before recommending Tiller Money to clients.

Tiller Money costs $79/year after a 30-day free trial. I find that pricing very reasonable considering the value that my clients receive from using Tiller Money. However, I always give clients a heads up about the pricing when recommending Tiller Money.

If a client wants a free solution, you could recommend Mint instead. Though keep in mind that Mint makes money through ads, so your client will frequently see recommendations for credit cards and financial products that may not be ideal for them. In comparison, Tiller Money does not sell customer data to advertisers or third parties.

Data linkages are the second important consideration. Like most modern budgeting tools, Tiller Money pulls in your transaction data through a secure connection to your bank. That means clients will need to enter their bank logins when setting up Tiller Money.

The good news is that from my experience Tiller Money takes data security very seriously. For bank connections, they use Yodlee’s API, an encrypted industry-leading bank data aggregation service used by most of the major US banks.

Another thing to note is that account connections sometimes disconnect. This disconnection is caused by either:

The client having two-factor authentication at their banks, which requires that clients re-authenticate each time Tiller Money pulls new data.
A temporary connection issue with the bank.

The good news is Tiller Money customer support communicates excellently when these issues arise. And every budgeting tool that connects to banks runs into the same issues, so they’re not unique to Tiller Money. Over the next year Tiller Money is also moving towards a new Open Banking architecture with financial institutions which will improve the quality of data feeds while avoiding two-factor requests.

Is Tiller Money Worth Trying?

Despite the considerations I mentioned, I still highly recommend trying out Tiller Money. Start by setting it up for your own personal budget to get comfortable with using the software. Tiller Money includes a free trial.

Once you’re comfortable, choose one client to try Tiller Money with. Once that’s successful, gradually roll it out to other clients (or perhaps just your new clients). You’ll be an expert by the time you’ve fully rolled Tiller Money out! And if you’re struggling to figure out your Tiller Money workflow, the Financial Pros group in the Tiller Money Community is a handy resource. Just reach out to Tiller Money’s support team via chat for more details on gaining access to this group.

Using Tiller Money has transformed my coaching business. It has saved me time compared to the days when clients had to share their screen or manually enter information into a spreadsheet.

Most importantly, Tiller Money has allowed me deeper insights into my clients spending and saving – which is foundational to what we do as financial coaches!

Guest Contributor: Vineet Prasad, AFC®
Founder of Savings Academy
https://www.savingsacademy.com/

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6 Steps to Stay on Track Financially During Times of Separation

Rachael Deleon — Mon, 17 Dec 2018 18:53:28 +0000

Times of separation are hard on a family and relationships in many ways. One of the most challenging aspects of separation is how to handle the finances – how to budget and continue to make progress toward your financial goals. Service members (SM) experience this challenge on a regular basis which is why it is vital for couples to work together on a financial plan and budget to ensure progress is made and setbacks do not occur during periods of separation.

According to a 2014 article in the Journal of Financial Counseling and Planning (JFCP), regarding stress and financial well-being of SMs, the amount of debt SM’s carry is greater than the general public. In the study 27% reported having more than $10,000 in credit card debt, versus 16% of the general population (Bell, et. al., 2014). The challenge is how to tackle the debt and avoid accumulating more during times of separation.

Budgeting while separated can be difficult. Here are 6 things to consider:

Create a solid budget prior to the separation. Every dollar of income needs to have an assignment. There are even apps available that allow both of you to view the budget from your mobile device and always be on the same page.
Consider the amount of money the SM might spend while away on the mission. These expenses can be a budget killer. To solve this, predetermine a dollar amount as part of the budget that the deployed spouse is allowed to spend. It might be helpful to simply pull this amount out in cash every month and that is all the money the SM has available for the set period. The same could be said for the discretionary spending for the spouse and family back home as well. An envelope system is a great way to budget everyday spending.
Set financial goals together! This is very important. A time of separation, while stressful, can also net some extra income and it should be decided ahead of time how that money is going to be used. For example, separation pay should have an intended purpose, like to provide child care, lawn maintenance, debt reduction, etc. If you use this “extra” money for frivolous purposes, when a genuine need arises, then the money may no longer be available.
Decide how financial decisions are going to be made during a separation. Communications may be limited and as a couple you may not always be able to discuss financial decisions. Put a plan in place to handle these occurrences. For example; how much is one person allowed to spend on an emergency without discussing it first?
Don’t let emotional spending derail your progress toward financial goals. If emotional spending is an issue for you, please discuss these feelings with a friend or professional before going on a shopping spree to make yourself feel better. A lot of poor financial decisions are made during deployments and these decisions can have lasting implications.
Set financial goals together and stick to them. It is, when one spouse acts without consulting the other during a time of separation it can be very stressful on the relationship. Whether the goal is to save or get out of debt, be sure your financial goals are aligned.

This article focuses on members of the armed forces, but these six considerations can be easily applied to any couple who finds themselves in regular periods of separation. While it can be challenging to get out of debt, don’t let a separation slow your momentum!

Guest Contributor: Susan Pascoe, AFC^®

Sources

Bell, M. M., Nelson, J. S., Spann, S. M., Malloy, C. J., Britt, S. L., & Nelson Goff, B. S. (2014). The Impact of Financial Resources on Soldiers’ Well-Being. Journal of Financial Counseling and Planning, 25(1), 41-52. Retrieved from http://afcpe.org/assets/pdf/volume_25_1/04088_pg41-52.pdf

December 17, 2018

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Evaluate Yourself

Rachael Deleon — Mon, 15 Oct 2018 16:05:08 +0000

As a personal financial counselor, I am often asked to give an overview of the services I provide to Soldiers and Airmen in my area. Although I am grateful for the opportunity, I often find it difficult to persuade service members that they can benefit from financial counseling. Most of them think they are doing fine because they can make ends meet from month to month. To get them to think beyond the next month, I ask them to do a self-evaluation of their personal finances. Below are the four questions I ask the group. The four questions that can lead them to financial freedom.

1. Do you have a written budget that you maintain and follow every month?

“A budget is telling your money where to go, instead of wondering where it went.” I make sure service members know a budget is the foundation for everything they do with their personal finances. There are many tools and resources available to help create and maintain a budget, but they must pick and choose what works best for them.

2. Do you have enough money in savings to cover six months of your living expenses?

I usually hear giggles when this question is asked because so many service members feel this is an impossible task. To help service members see this as an actual need, I ask them, “What would you do if you had to get out of the military tomorrow and you no longer had any income?” Many service members are terrified by this question because they don’t know what they would do in this situation.

3. Are you completely debt-free or do you have a debt elimination/debt management plan in place to help you control your debt?

Many of them already know what it feels like to be overwhelmed by debt or know someone who had been consumed by debt. At this point, I just make sure they understand that debt will take control of them, if they don’t get control of it. know if they don’t get control of their debt, it will eventually take control of them.

4. Are you contributing enough money monthly into your retirement account to help you reach your financial goals?

I point out that everyone eventually gets to a point where they can no longer work and we will all need money during retirement to cover our monthly expenses. The earlier we start, the better, and this is because of the effect of compounding interest.

If everyone answers yes to all four questions, I tell the group good job and keep up the good work. But I remind them that they can still benefit from financial counseling if they want to discover what they can do even better.

If someone answers no to any of my questions, I’ll make sure they know I am available to help them convert their no to a yes. The goal of this self-evaluation is to help potential clients see their need for your services. It is ineffective to tell a group of young service members that you can help them set up a budget and get out of debt without making a connection between what they want and what you can provide. These four thought provoking questions can help you bridge that gap and help your client achieve true financial freedom.

Guest Contributer: Cain Hill, AFC^®

May 02, 2017

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Does That Pet Fit Your Budget?

Rachael Deleon — Fri, 01 Dec 2017 18:52:23 +0000

Most people, at some point in their life, decide to get a pet. They see the puppy in the window or the horse in the show ring and fall in love. Before making such a purchase it is important to ensure that the budget has room to spare. Owning an animal is not only an emotional commitment, it is also a financial commitment. Once an animal is purchased, it cannot be thrown away like a piece of paper.

When considering a pet, it is important to consider upcoming events that may affect the budget – life events such as marriage, child, move, divorce, or job change. These situations can change the entire financial picture. While buying a betta fish may have minimal long-term financial consequences, buying a horse can cost you thousands of dollars annually for thirty years. Consider how the following expenses fit into each of those scenarios.

Initial Purchase

Although the initial price for a betta fish is a few dollars, the initial price for a horse is significant and can drastically vary. The price of a horse is determined by age, breed, bloodlines, color, conformation, and level of training.

Housing

While the betta fish’s living arrangement may cost $10, building a barn for a horse can cost as much as a human house. If the horse needs to be boarded elsewhere, this fee typically ranges from $200 to $500 per month. The type of shelter, amount of pasture, and other amenities can drive this price even higher.

Food

The betta fish can feed off the same small container of food for several months. A horse on the other hand requires a substantial amount of hay. Hay can be produced for as little as a dollar per small bale, but costs between $5 and $12 per small bale. This calculates out to $30 to $360 per month, if the horse is solely relying on hay. During summer months, grass can be substituted for hay. Expect to have at least 1 acre of quality grass to maintain a thousand pound horse. Depending on age and body build, feed may be added to the diet. A bag of feed costs $10 to $30 and typically lasts two to four weeks. A horse may also require certain supplements. Common supplements are used to improve joint and hoof health.

Medical Expenses

A betta fish does not require annual vaccinations. A horse requires different vaccinations depending on location. Horses are also more prone to getting injured or sick which can add to the yearly vet bill. If a male horse is purchased that has not been gelded, this is an expense to consider.

Equipment

Betta fish require minimal equipment. Horses require feeding equipment, grooming equipment, working equipment such as saddles and bridles, specialty equipment such as blankets, and travel equipment such as a truck and trailer.

Training

A betta fish does not need to be trained to be a pet. Depending on the horse’s current level of training, it may require additional training. Will a trainer need to be hired or is the owner knowledgeable enough to complete the training? This training fee may cost thousands of dollars.

Owning and caring for a pet can be a tremendously rewarding experience, but understanding the financial investment before becoming emotionally invested can limit unforeseen financial stress.

What budget considerations do you discuss with clients who are considering a pet?

Guest Contributor: April Meza, AFC^®

December 01, 2017

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Balancing Family & Finances: How to Let Your Budget Breathe Under Pressure

Rachael Deleon — Thu, 03 Aug 2017 14:46:25 +0000

“When I was your age…”

We’ve all heard the stories about walking to school uphill both ways in the snow. Or how gas used to cost $0.50 and a Coke cost $0.25. Cue the eye roll and move the conversation forward.

However, there’s another type of comparison story that isn’t always as easy to brush off. With many families are facing tight budgets, looming debt, job loss, underemployment, medical costs, or just a string of financial bad luck, pressures, and expectations from extended family and friends can quickly move from an eye roll to hurt or even guilt. Too often, family members will tell hardship stories from when they were your age and how they “pulled themselves up by their bootstraps” while still being able to fulfill all of their obligations. Now cue the financial guilt trip.

Today, inarguably, is very different from the days of the past. Yet, society protocol tells us that at a certain age we should have achieved a certain goal and be at a certain financial point: college degree; married; pets; house; children; vacations; and retirement – all while having the latest gadget and keeping up with the latest trends.

Families expect loved ones to travel for every holiday, birthday, and celebration; remember obscure celebrations; participate in gift exchanges; and, through it, all, keep everything even between the various branches of the family. If you spend the holidays with your in-laws instead of your Mom? Guilt. If your brother, who is in dire financial straits, attends an anniversary celebration and you do not? Guilt. Not to mention, there is now the perception that your brother must know some budgeting trick that you do not.

Odds are, he doesn’t know a trick. Like many of us, he is compromising his financial situation to avoid conflict with the family. It is the easiest thing to do. No one wants to be the topic of discussion during family gatherings or be the only one to miss out on a big event.

Here are 6 ways to avoid being a family hot-topic and avoid getting yourself into a financial bind:

1. Create a Spending Plan: Whether you use a pen and paper or an app, having a spending plan in place will ensure that you are maximizing your financial potential. If you have debt obligations, you need to ensure that those obligations are being met. If there’s a reoccurring medical need, you’ll want to make sure to take care of it.

2. Prioritize: With your spending plan in place, now you can prioritize what you would like to achieve financially. Your spending plan is unique to you and your goals, whether it’s paying down debt, saving to travel, or taking up a hobby. Prioritizing your spending plan will allow you to meet your fixed monthly obligations and bills while saving for your goals.

3. Communicate: This can be very difficult as money is never an easy topic, but open communication is key to helping family understand your unique situation. If your budget is constrained, or you have more bills than you can handle, speak up. Making excuses about why you cannot attend a family function, or attending when you cannot afford the expense, will only further hurt yourself, and potentially others, in the long run. Your family ultimately wants what is best for you. It is your job to help them understand what is best for you.

4. Manage Expectations: Birthdays, holidays, and many other celebrations occur at the same time each year. If you know in advance that you won’t be able to attend an event, or that you cannot participate in gift giving, say so now. By providing advance notice, the party host can make proper arrangements for your absence or adjust plans to help you find a way to attend or participate.

5. Compromise: If you find it’s not feasible to travel to three different states or visit all of the extended family over all of the holidays, then compromise. Maybe your family plans one vacation where everyone meets at a central location. Or if you’re willing to host, invite your family to come to you. When there’s gift giving involved, and you simply do not have the extra funds for a material gift, offer a gift of service or time. Experiences are more memorable than things.

6. Be Guilt Free: There will be disappointment from the receiver of bad news. That’s to be expected. Recognize their disappointment and give yourself permission to forgive yourself. You know what is best for you and your situation. It is very intimidating to say no to the most important family celebration of the year, however; you are the best judge of your financial obligations. By incorporating the above steps, you may learn that those who are currently your biggest hinderers will turn out to be your biggest supporters.

Have you been faced with having to choose between your financial health and a family activity? What did you find most helpful in handling the situation?

Guest Contributor: Kara Schulte, AFC^®

August 03, 2017

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There’s an App for That!

Rachael Deleon — Fri, 02 Jun 2017 15:06:50 +0000

6 Tips to Help You Find Your Smartphone Budgeting App

These days I feel like I have an app for everything. Whether I’m grocery shopping, getting directions, or just killing time, I have an app that helps me with all these things. With all that time we spend on our smartphones, why not incorporate them into our budgets? We can no longer use excuses like “I don’t like excel”, “It’s too much work”, or “I don’t have the time”. These apps are quick and easy to use, so tracking how much you spent on that cup of coffee takes less time than playing a game of Angry Birds or checking your Twitter feed.

Luckily for smartphone users, there’s a variety of budgeting apps with a number of different features to meet your needs. Here are some things to consider when looking for a mobile budgeting tool.

Is it available for your phone platform?
Luckily, most apps can be used on both Apple and Android phones, but it’s always good to start by narrowing your search to apps that are compatible with your phone. Check to see if you can also access the app from your computer or tablet for more flexibility and ease of use.
Does the app cost money?
Some apps are free while others require an initial purchase or subscription fee. If the app costs money, read some reviews to see if it’s worth the value. Or even better, look for a free trial so you can try it out firsthand.
What do you want out of your app?
Do you only want it to record your purchases, or do you want it to keep track of your budget or bank accounts as well? Do you want the ability to customize your budget categories or pay bills? Think about what you are trying to accomplish. Do you want to save more, prevent overspending, or make sure you pay bills on time? Consider how the app and its features will help you achieve these goals. If you can’t find an app that does everything on your list, prioritize what’s important to you when making your final decision.
How much do you want to share?
Some apps require that you provide bank or financial service information. If you want to be able to check your bank balance or have your credit card purchases automatically recorded, then you will need to supply the app with account information. If an app does require you to share this information, do your research to ensure that they have appropriate security and whether or not they share your personal data. If you aren’t comfortable sharing this information, look for an app that allows to you input data manually and doesn’t require this information in order to operate.
Does the app allow for multiple users?
Decide if you want to share the budget app with other members of your household. It’s good to have everyone on the same page, but not everyone likes the same budgeting method. A shared budget can impact relationships in addition to just finances. Try and make the experience positive and ensure everyone involved communicates their financial goals, intensions, and habits.
Once selected, are you using the app?
After a few weeks, re-evaluate your financial progress. Is the app helping you reach your goals, or did you not even open it during the trial period? If you chose a more manual app, did you actually enter the data? Based on how well you did, you can decide if that particular app is for you. If not, don’t worry! Make a list of reasons why you did or did not like the app. Then see if there’s a better option available that incorporates the items on your list. There are plenty of other budgeting apps that can help you achieve your goals.

I wouldn’t suggest downloading multiple budgeting apps at once as it can become frustrating to enter the same data multiple times. Getting started takes time and effort. Don’t get discouraged if you become overwhelmed. Take a break or ask a family member for help so your budget is set up in a way that works for both of you. Remember, adhering to a budget is one of the best ways to help you achieve your financial goals!

What budgeting apps do you use?

Guest Contributor: Jennifer Grudis Ader AFC^®

Image by file name “Budget Blog Photo.” Image source: https://pixabay.com/en/mobile-phone-money-banknotes-buy-1595731/

June 02, 2017

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Preparing For Baby: Expect the Unexpected

Rachael Deleon — Thu, 16 Jun 2016 15:37:26 +0000

Preparing for a baby is a challenge. Luckily, there are all types of websites to help guide you on what to expect when you’re about to become a parent. There are resources to advise you on the gadgets you’ll need and where to find the best deal, guidelines on how much money you might need during maternity or paternity leave and articles outlining the financial factors to consider if you want to be a stay-at-home parent.

If you’re already a parent and are expecting another child, you’re probably feeling like a pro at this whole preparation thing. You know what not to buy and what to buy more. You know how to make the grocery budget last longer and when and where to find the best deal on clothes. You may already be calculating if it’s worth going back to work now that you have multiple kids in daycare or if it’s more cost effective to stay at home.

Just when you felt prepared, you experience the expenses that no one told you about. These are the expenses that occur when your baby needs a little extra TLC than most.

Here are four unexpected expenses to consider when you’re expecting:

1. Change of Feeding Plans. For those who choose to do so, breastfeeding can be a great financial choice with added health benefits for mom and baby. However, for some, switching to formula is a necessity, and when it’s unexpected, it can bring a huge financial burden. The average 12oz can of formula is about $6, which seems minimal until you realize that you’ll need about 13 cans per month. If your baby requires a specialty formula, that cost will jump significantly. Then you must factor in the cost of bottles. More than likely you will try several different kinds until you find one that baby likes – for both bottles and formula.
2. Doctor appointments. Babies who need extra TLC often require additional specialty doctor appointments. Depending on where you live, as well as the type of insurance you have, you may have to travel some distance for these appointments or pay a portion of the visit. Overnight stays for appointments, as well as gas, add up very quickly.
3. Child Care for Other Children. If you have other children at home and you have a child who needs extra care, it may become necessary to seek childcare for your other children. From a part-time sitter just so you can go grocery shopping or to doctor appointments to full-time care in instances where multiple therapies or appointments take place weekly. Child care can become a large expense when not originally part of your plan.
4. Staying at home – when going back to work isn’t an option. When a baby needs extra care, it may become necessary to have a parent stay home. Some babies require specific care that a parent needs to provide, or the multiple doctor/therapy appointments become too much to work into a busy work schedule. Also, depending on the child’s particular needs, some childcare providers may not be able to care for a child Supporting a family on one income can magnify the additional costs required for a child needing extra care.

But, of course, we will do anything for our bundles of joy. So how can we prepare for unexpected expenses?

1. Save! Savings is key to preparing for all of the unexpected changes a new baby throws at you. A savings account will allow for extra travel money if your insurance doesn’t reimburse you for travel beyond a certain distance when seeing a specialist. A savings account will help you try out five different types of bottles before baby decides they finally like one. A savings account will help cover extra expenses while one parent remains at home.
2. Outside assistance. Ask your insurance if they assist with travel expenses incurred when traveling for specialty appointments. If you have to switch to formula, check with your doctor’s office to see if they can provide samples so you know which formula your child likes. Also, check with WIC or other local agencies for assistance with formula cost. If your child needs a specialty formula, see if it is covered by your insurance.
3. Build a support group. Whether it’s for financial assistance or mental support, it can be difficult to have a child who needs special attention. A great support group can help you relax and provide some relief that money cannot buy. Although it can be difficult to ask for financial assistance, you may be surprised at how many people are willing to help. Whether it’s a can of formula each month or splitting the cost of daycare, you never know until you ask.

What unexpected expenses did you experience with a new baby?

Guest Contributor: Kara Schulte, AFC ^®

June 16, 2016

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Money, Addictions & Assessments

Rachael Deleon — Wed, 01 Jun 2016 17:46:01 +0000

The most common reason for large credit card debt, unpaid bills, and lack of savings is the result of overspending, or not living within our means. While this is common knowledge in our society, why is it still such a struggle for so many Americans today? Why are we still seeing so many of our clients mismanaging their finances even after they have sought help? More importantly, what can we as financial counselors and educators do to help our clients understand the importance of living within their means and making it a healthy long term habit?

Is Forgetting that Easy?

I recently spoke with a couple who filed for bankruptcy only two years ago. At the time, the entire experience was emotionally and physically taxing for them. However, only a few years later, those negative emotions have been washed away like footprints in the sand. Over the last two years they continue to accumulate more debt, they struggle to pay those debts monthly and their spending habits have not changed. They are quickly headed in the same direction once again.

Addiction

Frustrated, I cannot help but wonder what is the root of this problem? The couple understands what they have done wrong and knows what they need to do, so why do they continue to justify overspending? I believe the root cause is addiction to spending money. When it comes to spending money, they suffer from lack of willpower. According to Sternberg (2015, para. 1), the definition of addiction is “…a disease of the brain that causes dependence upon or a persistent, compulsive need to use a habit-forming substance or an irresistible urge to engage in an activity, despite harmful consequences.” Clearly, living beyond one’s means on a regular basis is an addiction for not only this couple, but for many Americans. With that in mind, how can we help our clients overcome this addiction? I believe we can get closer to a solution to this nationwide epidemic by utilizing our tools and resources in the field of financial counseling and education. But, exactly what tool(s) could aid us in this quest to help clients find financial success?

Behavior, Addictions, and Finances

Can behavior, addictions, and finances truly be used in the same sentence? Typically overspending has been categorized in impulse-control and/or obsessive-compulsive disorder models. However, more recently, overspending has been regarded in the behavioral addiction models. Among the medical field overspending is commonly referred to as oniomania, shopaholism, compulsive shopping, compulsive consumption, impulsive buying, compulsive buying, and compulsive spending (Aboujaoude et al., 2005, para. 1). There have been several assessments created to measure these issues. (It is important to note here that overspending is not strictly about the stereotype of buying clothes and shoes, but is much broader. Overspending can be any of the following: spending money on house renovations that are not absolutely necessary nor within budget, going on vacations by using credit cards, entertainment, or simply spending money on things that are more wants than needs on a regular basis.) Should we as financial practitioners utilize screening tools, such as the Bergen Shopping Addiction Scale (to name just one assessment option) with clients that demonstrate high risk factors? Should we even have the authority to do so?

Encouraging Positive Outcomes through Assessments

In certain situations, such as the couple mentioned earlier, I believe clients could benefit from such tools and we should have access to a universal assessment screening used among the field of financial practitioners. Conducting an assessment for high risk clients could prove beneficial for the treatment and ongoing issues of overspending. The clients that do fall into this category should be aware of it, and this is best done through education. Making clients aware of “addictive” spending behaviors can have valuable implications on their future financial success. Clients must learn to identify their spending patterns and understand that just because they were able to turn their finances around once does not mean they won’t be tempted to turn back to old habits. Like any addiction, temptation can be a continual struggle. Being consciously aware of this is the client’s best chance of turning an unhealthy addiction into healthy habits. I strongly believe that using an assessment tool could help many clients with the financial behavioral problems we often address when working with clients.

Please share your thoughts!

- What are your thoughts on categorizing over-spending as an addiction behavior and should professionals use assessments in the diagnosis and treatment of such conditions?

- Do you believe such a tool could help with this epidemic in America?

Guest Contributor: Sabrina Johnson, AFC^®

References

Aboujaoude, E., Andreassen, C.S., Bilder. R. M., Griffitchs, M D., Pallesen, S., Torsheim, T.

(September 2015). The Bergen Shopping Scale: Reliability and validity of a brief screening test. Frontiers in Psychology. Frontiers Research Foundation.

Alic PhD., M., Finley, K., Sternberg PhD., B.S., Willingham PhD., E.J. (2015). Addiction. The

Gale Encyclopedia of Medicine. Ed. Jacqueline L. Longe. 9 vols., 5^th ed. Detroit: Gale.

June 01, 2016

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Daily Due Diligence (D3)

Rachael Deleon — Wed, 04 May 2016 17:50:33 +0000

Author’s note: While recently counseling a soldier I discovered the conversation of investing was completely overridden by an ignorance of the “basics” – monthly budget adherence and awareness of where their money was really going. Hence the back to the basics discussion of daily (okay, weekly or monthly) due diligence was born.

Feast or Famine: Finances are a significant part of everyday decisions. Often, our money is only given intentional thought during urgent times of the year – taxes, holidays or vacations – paired with the moments when life forces us to evaluate our finances emergently – a family emergency or a flat tire. The suggestion is daily due diligence (D_3^TM), working on a piece of our finance puzzle regularly. Just as a diet or exercise requires daily effort, the thought that our finances do too should not seem shocking.

Case in Point: How many have created a household budget only to it file away? The price of gasoline can change daily. However, the budget we created once upon a time does not reflect this. Our budget should NOT be a static document, but one that mirrors the myriad of life events. How many financial counselors have experienced the answer; “I really don’t know how much I spend on__________.”? If creating a budget is the universal starting point when taking control of our finances, then the flexible classifications should be as accurate as possible.

The task of D_3^TM could seemingly be an unwelcome addition to our already full daily lives. A simple suggestion for making this necessity more manageable follows:

Track one item of significant expense a month.

First month’s challenge: How much do you actually spend on groceries? What is our household definition of groceries? Is this only the food our family consumes or does this include shampoo and dog food? In our budget, where is our daily cup of commute coffee located? Is it categorized groceries, eating out or not at all? Saving our receipts (even a cash purchase) for one month and totaling is not hours of contemplation. If groceries are already an expense that is a realistic number within your household, then try tracking total gasoline expense. The results may be surprising. Psychologists have long espoused the theory that “awareness of a behavior can create change”.

The impetus for simple D_3^TM is to override the common feeling of “my money controls me/my decisions”, and replace them with “I control my money.” D_3^TM has the potential to open discussions of spending within a household, teach our children the beginning basics of money handling and most importantly, create a feeling of control, ownership, and peace of mind.

In future articles, I want expand on some D_3^TM techniques. Please share your suggestions and thoughts on regular financial maintenance.

Guest Contributor: Heather Baker, AFC^®, FINRA Foundation Military Spouse Fellowship Program Assistant

May 04, 2016

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Taking the First Step to Savings Success

Rachael Deleon — Wed, 24 Feb 2016 16:19:05 +0000

In May 2015, the Consumer Financial Protection Bureau (CFPB) launched its Financial Coaching Initiative, targeting recently-transitioned veterans and economically vulnerable consumers to help them with their financial goals. The program places 60 certified financial coaches at organizations around the country to provide individualized educational services.

A client shares her story about working with CFPB financial coach, Donna O’Connor, AFC^® candidate.

I began working with a financial coach in the summer of 2015. As a 26-year-old working professional I had very little understanding of the options available to me financially. I had been paying my bills and living month to month since graduating University with my Bachelors. In 2014 I took a new job and moved to Seattle, but in order to do this I maxed out my highest limit credit card to pay for moving expenses. I had tried to save for the move during the previous year but was unable to as I was making a low wage and my income went almost exclusively to bills. By the summer of 2015, when I started working with a financial coach, I was at the point where I felt that I was falling apart financially. I had more credit card debt than I could handle. I had missed payments that year due to not having the money to pay them, causing the minimum payments to increase to over $300. I had hit the point where I was panicking and had no idea what to do about it.

I was surprised to find how much easier it was to accomplish my goals when they were based on my personal wants and needs.

I was terrified for my first meeting with a financial coach as I felt embarrassed and vulnerable. Within the first 5 minutes of the meeting the fear was gone and I felt confident that I had made the right choice asking for help. I expected to be told what I should do to fix my financial problems but this was not the approach of the financial coaching program. Instead my coach asked questions that enabled me to come up with a financial plan on my own that fit my wants and needs. I was unsure if I’d be able to implement my financial plan in real life. I was surprised to find how much easier it was to accomplish my goals when they were based on my personal wants and needs. It has now been 8 months since I started working with my financial coach and I am impressed with myself at how much I have been able to accomplish. I have paid off all my collection debt and have been able to get all my credit cards back into good standing. My credit score has improved immensely and I feel confident that I have the skills to keep my finances stable. I have started a 401k and am excited to continue growing in my knowledge and financial abilities.

February 24, 2016

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What are your 2016 Holiday Plans?

Rachael Deleon — Mon, 01 Feb 2016 16:36:27 +0000

Yes, I know we just celebrated 2015 Holidays, but this is a great time to think about what went well, what didn’t, and how to make changes so that our 2016 Holiday can be successful without breaking the bank. While you are sifting through those holiday receipts and credit card statements, think about how you can do things differently or maybe even the same next time.

Who did you buy presents for during holidays? Did you buy gifts for people that were not in your original plan? Sometimes we feel obligated to purchase gifts for people who give us gifts. If this seems to happen to you every year, this is a good time to find bargains on little gifts that can be given as opportunities pop up.

Did you travel? Even trips across town can add up. Plan your shopping trips ahead of time by reviewing store ads for upcoming sales. This step will lower costs while also helping to reduce impulsive decisions while you are shopping.

Consider new holiday traditions. Did you have to buy for everyone in the family? Consider a grab bag gift exchange so that you are responsible for buying only one gift. Remember to set a spending limit.

Make a spending plan. Look at receipts and credit card statements to see where you spent your money. Do you think holiday 2016 will have similar expenditures? If so, now you can save on a weekly or monthly basis so that you can be prepared and not have to put expenses on credit.

Start a holiday planning checklist. It can include everything you need to buy, places you need to go, and people you need to see. The list will help you focus on holiday preparations one step at a time.

The 2016 Holiday season will be upon us before we know it. Starting preparations now and taking small steps will go a long way in helping us to enjoy the season.

Visit AmericaSavesWeek.org for more savings tips.

Guest Contributor: Elaine Harrison, AFC^®

February 01, 2016

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10 Financial Laws for Couples

Rachael Deleon — Wed, 06 Jan 2016 16:40:58 +0000

Just as there are traffic laws to keep cars safe on the road and road signs for clear communication, there are also financial laws which, when followed, will keep financial and relationship patterns open and flowing in a consistent, predictable pattern. But, breaking a financial law may mean getting blindsided, resulting in emotional and financial injuries.

Set a specific time each week to update your finances. Some couples choose a Thursday evening, giving them visibility to their finances prior to the weekend so they can decide whether to go out for a date night or enjoy an inexpensive date at home. Others may choose a Saturday morning before doing their weekly grocery shopping. No matter what day is best for you, do not let more than 10 days go by without updating or you risk breaking Law #3.
Spouse weekly update. One spouse can update the finances and pay the bills if one is better at it or likes to do it (See Law #1). However, both spouses need to participate in a weekly finance update, where both see what bills are already paid, what bills still need to be paid, how much is left over and give input if you are on track with your goals. This can take as little as 5 minutes. This keeps the relationship equal. Otherwise, if one spouse controls they money and how it is spent, the exchange can evolve into a parent-childrelationship that jeopardizes a couples’ well-being, as one day the “child” grows up and eventually leaves the home (or in this case, the relationship).
Know your balance before you go shopping. Most couples overspend because they do not realize their balance is low. For large purchases, wait 24 hours first before making the purchase and always compare 3 of the same items before making the purchase.
Set a cost limit on purchases & consult your spouse if the amount is over your limit. (Example: Limit is $50. If item is over $50, rule is to talk with spouse and come to agreement before purchasing.)
Personal spending money. Each spouse needs to have a personal allowance each paycheck or each month to spend any way s/he would like—even if it is $5 when things are tight.
Housing Rule of 28. Housing will be among your greatest expenses. Set a goal not to spend more than 28% of your gross monthly income for housing, rent or mortgage payments. (Gross amount is all income before taxes are taken out). Do not spend more than 36% of your monthly paycheck for a housing payment; otherwise, you will quickly go into debt with all other expenses. Calculate this amount to know what you can afford in a monthly payment BEFORE you go house shopping. Do not leave this amount for the bank or realtor to decide for you. When we shopped for our first home, we felt a lot of pressure to exceed this amount from sellers, loan agents, and realtors – it almost made me doubt this rule. However, thanks to a confirmation call with my AFC^® colleagues, we stuck to the Rule of 28, kept looking for houses in our price range and we found it! Thus, when the torrential waves of economic difficulties came, we could afford our housing payments when so many others had to sell. Stick to this guideline. You will not regret it. (Example: Paycheck= $3,000 gross income per month x .28 = $840 or less for rent or mortgage payment per month. How much gross monthly income do I need to make to cover a $1,800 house payment? $1,800 divided by .28 = $6,430 per month.
Car Loan Rule of 10. Do not spend more than 10% of gross monthly income on car loans. This is for TOTAL car loans together. Example: $3,000 x .10 = $300 or less for one car loan. For two cars, this would be $150 each or any combination to equal $300 total.
Extra money. Have a plan before it comes. Together, write down your larger needs then wants in order of priority. So when extra money comes in, such as tax return or job bonus, you both are on the same page as to where the money goes first. This way, disagreements, high emotions, and power struggles are avoided. (Example: “Our first priority is to save $_____ for an emergency fund, then, to pay off the credit cards 1 & 2 for $_____, then save $_____ for the vacation, then save $_____for down payment on house”).
Reduce or pay off personal debt before marriage. Get out of debt as much as possible before marriage. Work hard to pay off all personal credit cards and debts before marriage. Debt is a heavy liability in a new marriage so consider it very carefully if your future spouse has a lot of debt. Debts such as credit cards and personal loans with few or no assets to show for it may indicate a spending/emotional problem which needs to be addressed before marriage.
Vocabulary and Conversation. When talking to a spouse about finances, never say: “This is my money, I earned it, and I say how it is spent.” How money is spent is decided together as a couple. If spending habits need to change, use words to explain your perspective:
1. “I feel there is something we need to address.”
2. “We might consider waiting 24 hours before making that purchase.”
3. “I wonder what we can do to decrease our expenses and increase our income to find ways to pay down our debt.”
4. “I noticed that you paid for everyone at the restaurant last night, could you help me understand why you chose to take the bill when things are so tight for us right now?”
Bonus: Overcoming Financial Disagreements. When discussing a financial concern, write the name of the difficulty down on a large piece of paper. Place the paper between the both of you. Now list all frustrations about the problem around the name of the problem. Done? Now turn over the paper and brainstorm ALL possible solutions on the back randomly–the goal is 25. Don’t dismiss your partner’s suggestions, even if it seems ridiculous. Simply list all possible solutions. The paper represents the problem; it does not represent you or the other person as the problem. Direct all focus, energy, solution and even negative emotion to the paper that is the problem, not toward the other person. Then, together, circle the top three (3) possible solutions. Now take a break and let ideas settle and agree on and set a time that you will come back within 3– 24 hours. This will give you time to gather financial or other information to help solidify a solution. At the appointed time, counsel together again to resolve the issue. It may take more than one sitting to reach a solution. An AFC^® (Accredited Financial Counselor) is a tremendous resource to offer financial insights that have not been previously considered and can also help keep the conversation focused, open and equal.

Best wishes in all your future financial endeavors!

Guest Contributor: Shara Young is a graduate of USU, an AFC^® for the past 15 years and a previous military spouse, contributing to Family Support Centers and financial education classes in Idaho, California, and Virginia. Her At-A-Glance Budgeting Technique is published in Financial First Aid by Alena C. Johnson and helps couples work together to keep finances open, updated and transparent. She currently teaches financial education classes to women, couples, groups and families in Utah, USA.

January 06, 2016

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