Tips And Guide For Debt And Loan Management

That John Gray’s book Men Are from Mars, Women Are from Venus is one of the bestselling books of all time is strong evidence that the sexes have inherent differences. This is as true for money issues as it is for anything else.
A recent survey found that 34 percent of women and 35 percent of men admitted to having a hidden stash of cash their spouses don’t know about. Women reported socking away around $500; for men the amount was $1,000 to $5,000.
Compounding gender differences are other problems that make money peace a difficult thing to achieve at home. Even today, men usually make more money than their wives do and thus tend to wield the financial power in the relationship. In 1980, 88 percent of all women earned less money than their husbands; by 1990, that figure had dropped to 80 percent.
Further, all people have different money styles based upon beliefs and backgrounds.
The most common styles are

• The spender. This person spends money regardless of financial circumstances. Going into debt is no problem for the spender.

• The cheapskate. This tightwad is so afraid of losing money or going into debt that he deprives both himself and those around him of the joys that money can bring.

• The worrier. This person worries so much about money that he has a difficult time enjoying it, even when he has it.

• The free spirit. The free spirit is the opposite of the worrier. Bounced checks, late charges, and too many bills? No problem, dude!

• The dreamer. “Don’t you know that our lottery win will save the day?”

• The planner. The healthiest of all the styles, the planner plots out his financial future while trying to still enjoy the present.

The labels are not what matters; the important thing to realize is that partners have different money styles that must be accommodated. Maybe you and your mate are the same type, and maybe you’re not. A union of different types can cause a lot of money problems. On the other hand, different styles can also give you a balance you would otherwise not normally have.
David was a classic spender; his wife Ellen was a worrier. Whenever they would get some extra money, his first thought was to go shopping. She wanted to save every penny. She wanted every bill paid on time (even if it meant doing without), and he thought the bills could always wait a while.
David and Ellen fought constantly about money. After several years, they finally had a talk that made a difference. They sat down, admitted and discussed their respective money styles, figured what their joint core values were with regard to money, and created a plan of action that met those values. A bit of each of them went into the plan. He could spend some money (but not as much as he wanted), and she could save some (ditto). They merged their styles for the good of the whole.
David and Ellen’s styles, like those of many couples, were practically polar opposites. Merging styles, values, and attitudes is no easy task. Yet it is a necessary one.

Although each of the money styles has its strengths and weaknesses, you and your spouse need to combine the best of both. Combining the styles will help you teach your children some consistent values about money and enable you to put together a debt-reduction plan that you both agree with.
You absolutely need to compromise and come up with an agreeable joint plan that will accommodate both partners’ money needs. If you do not agree at the outset about how you are going to go about solving your money crisis, your chance of succeeding is quite poor. Solving this issue is critical to your financial health and may even save you from divorce. The number one reason for divorce is financial difficulties.
There are three key elements to this process:

Communication. Sit down with your partner and make an honest assessment of where you are financially and how both of your styles and family histories have contributed to the current state of affairs. Honestly admit what you have been doing right and what you have been doing wrong. Acknowledge both your own and your partner’s money strengths and weaknesses. Tell your spouse what you admire about his or her money style.
Get out whatever old grudges and resentments you have about money. Because this discussion will hopefully be the foundation of a new financial future, you had best get the past out of the way. Finally, tell your partner what the optimum result of your financial problem would look like to you. Lay it all on the table.
Compromise. Next, you must find some mutually agreeable middle ground. This is the negotiation phase of the discussion. Set some joint goals and agree in a general way on issues such as debt reduction, savings, investments, and bill-paying habits. Realize what you have been doing wrong and agree to what you will do differently in the future.
You need to set both short-term and long-term money and debt-reduction goals. Do you want to begin to invest a little bit of money in some mutual funds? Do you want to pay off two credit cards completely within a year? Where do you want to be financially in five years? Often money matters are so emotionally charged that it is difficult to have a rational discussion. If you are in that place, it may make sense to see a counselor to work through these issues.
Plan of action. The remainder of this book will help you with this part. You need to create a plan based upon your goals. The plan should specifically state what you both want to accomplish financially and when you plan to have each item completed. Your plan may look something like the following plan.

Sample Action Plan
Goal Completion date

1. Transfer all credit cards to card with lowest interest rate - 1 month
2. Save $1,000 - 6 months
3. Send kids to summer camp - 9 months
4. Pay off orthodontist bill - 1 year
5. Buy a new car - 1 year
6. Buy a rental property - 3 years

A plan of action that is based upon a frank and honest discussion and mutual values and goals and that includes something for everybody is a plan that has a great chance of success.

The rich are different than the rest of us. Not only do they think about money differently than most people, but also, for the most part, they teach their children different values about money. Rich people tend to teach their kids about saving and investing; the poor and middle class usually teach their children about spending and debting. Your children are your opportunity to break the familial money cycle of which you are an unwitting participant.
Teaching your kids the right way to deal with money has the added bonus of reinforcing what you are now learning. Showing them how to deal intelligently with money helps you do the same. Concentrate on three main areas when it comes to young kids and money: earning, saving, and spending.

How do you teach your kids good money values? Remember what you were taught and do the exact opposite! We’re just joking. Children need to learn that money is good and that it can be their friend if they treat it with respect. For instance, it is helpful to show children that one of the reasons you go to work every day is to make money, which is good. They need to see the connection between work, the money it generates, and what that money can be used for. Lily never saw this connection growing up. Her single mother struggled for every dollar. Lily recalls one particular day when she was about nine years old and her mom was complaining about a lack of money. “Mom,” Lily said, “just go to the bank.” “What?” her mother replied. “Just go to the bank, and they hand you money.” Lily and her mother had a good laugh about this comment years later. Probably the best way to teach children the value of money and work is to allow them to earn some money at home. We advocate paying children for jobs they would not normally do. This way, they learn that “fun” money comes from extra work. Children also need to learn that work is not just about making money, but that money sure is a great benefit of a job well done.
Jerry Seinfeld once said this about money and work: “I never consider the money. That’s the most financially sound approach you can take in business. When you don’t consider the money, then you can make the right choice. And the right choice always leads to money.”
Consider the following ideas when you hire your children:

• Tell them what you want done, but let them figure out how to accomplish the task. This should foster independence, a desire to do a good job, and a better appreciation of the financial rewards of their work.

• Pay by the job.

• Evaluate their performance. Praise a job well done and consider a small “bonus” for exceptional work.

After your kids have earned some money, the next trick is to teach them the value of saving some of it. The problem is that saving money for its own sake, or for a rainy day, or to invest is just too amorphous a concept for most young kids to understand. Instead, find something they want to buy that is too “expensive.” Then show them that by saving their money, they could get it. Imagine the difference in what they will learn if you teach them to save and spend versus if you taught them to charge and spend! The idea, at least initially, is to just get them into the habit of saving. You have that habit, don’t you?
For instance, your six-year-old daughter may want a special Barbie that costs $20. Put her to work and show her that if she saves some of her earnings, then she could buy that Barbie in three weeks.
Saving money will then equal Barbie. Now that’s a powerful connection for any six-year-old girl!
Imagine the difference if she has to work and save to get that special Barbie versus if dad pulls out the credit card and charges it to see the smile on his precious daughter’s face. Sometimes, love means having to say no.
Although a piggy bank for savings is a nice idea, a savings account is better. A piggy bank is just too easy to dip into. A trip to the bank, though, is a special event. The feeling of importance and mastery your child will feel when she goes to deposit some money in her own account will surely pay dividends in more ways than one.

Spending, the final frontier. “Teach them how to spend,” you say. “Now you’re talking, spending is the easy part.” We agree. Teaching someone to become an intelligent consumer, one who respects his hard earned and long-saved dollar, is easy compared to breaking a lifetime of bad habits.
Teach your kids the things about shopping that you had to learn the hard way. Always keep the receipt. Find out what the store’s return policy is. Read the label. Compare prices. Look for sales. The most expensive item is not always the best. Name brands cost more. The picture on the box always looks better. Television commercials are not always 100 percent truthful. Read the fine print. There is nothing wrong with buying at a consignment or second-hand store.

It is never too late to begin to teach your children the right way to deal with money. It should help them to avoid some of the mistakes you have made and will also help reinforce your new ways.
Experts agree that there are certain things you can do to teach your children to be financially literate. Among the things most often cited are: Start early, encourage saving, give allowances, pay for chores, teach them about shopping, buy them a good money book for kids, show them how to invest in the future by buying a stock, make finances fun, and remember to have family discussions about money.
Teens have special money issues that younger kids don’t share. They need to be financially prepared to go out into the world. They need to be taught such simple things as how a write a check and how to balance a checkbook. They also need to be made aware of just how easy it is to go into debt but how difficult it is to get out of debt.
Credit card companies target high school graduates with incentives and card applications. Make sure your teenagers know about the credit card trap and how to avoid it. Teenagers should be made aware of the following:

• They will be solicited with an introductory interest rate, but it will jump, and many credit card interest rates are well above 15 percent.

• Charging up a storm is easy, but maxing out the card and paying the minimum payment ensures that the card will never be paid off.

• Late fees and penalties make a credit card balance difficult to reduce.

• The smart way to use a credit card is to pay it off every month. Teaching teens to be respectful of money and fearful of debt is one of the best parting gifts you can give them before they leave home.