Are you overwhelmed by the complexity of the family finances or are you just wanting to stay on the right track for life? These timeless truths from our resident financial guru, Anita Dasilva, will ensure you know how to organize your family's finances for success.
Guest Post by Home CEO™ Anita DaSilva
As a business owner in the financial industry, I pay special attention to the needs of my female client base because we are an under-served market. We are vast, complex and in NEED! Though we make over 80% of the buying decisions in our households, we don't invest in our futures or plan for life's events and biggest stressors.
They say that the five biggest stressors in life are as follows:
- Death of a spouse.
- Divorce/separation.
- Health issue.
- Work-life issue (job loss, restructure, retirement, etc).
- New event (new home purchase, new baby, relocating to new area, etc).
What these all scream to me is that we all fear change. Change is inevitable. We as Home CEOs™ need to expect it and leverage what we can control, which is our response. I like the KISS method when it comes to any topic that could make a clients eyes cross (Keep It So Simple). Ask yourself the following questions:
- Do I have my spouse insured for at least five times the income he brings home?
- Do I know what our credit scores are together and separate? And for that matter, do I understand what story my score is telling?
- Do I have a doctor that I visit regularly and that I can openly speak with about my life? Do I encourage my spouse to be the same way with his health and wellness?
- Do I continually stay educated on my industry and the economy around me? If economic change occurred, do I have a back-up plan?
- Do I embrace change? If not, how can I begin a journey to learn how to?
At any point, did you say "no" during that exercise? When you can identify your risks and prepare for the unexpected then nothing can interfere with your dreams. And getting started is easier than you think!
Just like your health, your finances can change unexpectedly and something that is healthy for your budget today can become a financial cancer tomorrow, if left unchecked. Think of your risks like a triangle: Home is the top point, followed by life and retirement. As a Home CEO™, keeping your house in order is a top priority. Make finances a priority and keep an eye on them.
1. Find your debt to income ratio.
Start by finding your debt to income ratio, knowing your credit score and finally, protecting your assets. Debt comes in a few different forms. To keep it simple, find the balances of these categories by month: household income, mortgage payment and revolving debt (student loans, car payments, home equity lines, child support, credit card payments, etc). Then divide all of your debts by the total income you bring in to find your debt to income ratio.
Is it below 36%? Don't panic if it's not, but understand that it should definitely be below 50% for your financial wellness. Home CEOs™ have got to get the family budget in order. Use a budget calculator to understand exactly where your money is going and get advice if you can't decide where to start trimming the frivolous expenses.
2. Know your credit score.
What's that all about? It's how lenders, banks, employers, insurance companies and others perceive you and charge you accordingly. Your individual credit score tells how you spend and save your money and also how you protect yourself and your assets.
3. Use credit and your credit cards properly.
Credit cards and cellular phone bills are the easiest way to wreck your credit. And bad credit is the number one problem that follows us from college into the years when our spending potential is at its peak. Manage your risks by educating your children too so that you can break the cycle for them right now! We learn our spending habits from our parents. Make cents for them by showing sense in your budget and your credit habits.
To find out how your revolving debt (credit cards) is affecting your credit score, determine how exposed your budget is due to your credit debt. Make a list of all of the credit cards you have and divide the amount that is owed by the amount that could be used. For example: If I owe $2,500 but my credit limit is $10,000, I am using 25% of my available credit. Like the debt to income ratio, if this goes beyond the 36%, you are headed for serious financial trouble. Whatever you do, do not go anywhere past the 50% range.
While no debt is a good thing, having revolving debt that you pay off each month, can help your credit score. There is a savvy way to let debt revolve without paying finance charges, all the while, maintaining or raising a healthy credit score. Use at least one card at least once per month and then pay the full balance when the bill comes. This way, the bank knows you understand credit and how it works. If you have lots of open lines that are never used or if you have one or two cards that have high balances you are communicating to the lending and financial world that you don't use credit wisely and that hurts your credit score.
“Luck? I don't know anything about luck. I've never banked on it, and I'm afraid of people who do. Luck to me is something else: Hard work -- and realizing what is opportunity and what isn't.” – Lucille Ball
4. Consider this, too.
Do you have a personal IRA? Have you started a college savings plan for your children? What are you waiting for! These things should already be a household expense that is budgeted in like milk and eggs and diapers. Have them directly withdrawn every month and forget about it. The sooner you start paying yourself, the sooner you can build wealth and a legacy for your family.what all three of your credit scores are and you should check them at least once per year. If you are a small business owner or conduct the bulk of your financial transactions online, you should check more frequently to protect yourself from identity theft. Some home insurers offer affordable coverage to protect against identity theft and fraud. All credit cards offer protection at a cost but the best bang for your buck is through your home insurance policy.
Three credit vendors you need to have on speed dial:
- Transunion 1-800-916-8800
- Experian 1-888-397-3742
- Equifax 1-888-766-0008
If you lose a credit card, a phone or feel your personal information has been compromised, put a watch and fraud alert on your credit immediately. Then you will have no need to worry that something could happen. Make sure that your score is secure.
I use www.myfico.com to keep track of my score. There are plenty of sites that claim to give you the reports for free but understand that is a gimmick. The average price per score is $29. This is a small price to pay, trust me.
5. Protect your assets.
Once you understand the story your credit score is telling, what's next? Protecting what is most important to you, your future and your dreams! The top of your pyramid is keeping the house in order but never forget the foundation that house is built on. You. If a major corporation lost its CEO unexpectedly, they have policies and safeguards in place to make sure that business still runs smoothly, that stock prices remain stable and investors don't panic and make hasty decisions that affect the strength of their organization. Shouldn't we have a similar plan in place? In this regard, insurance and financial planning are a must for a Home CEO™. Take the time to assess your worth and the worth of your spouse to the overall household and protect it.
Do you know the name of your insurance agent? If it's an 800 number, who is the expert that is helping you make some very important decisions for your family? If you read through the policy booklet (like the manual in your car), would you know what all the bells and whistles were? Would you understand what the best options are and how to choose the right type of policy?
Find a local agent that you visit regularly and who understands what is going on in your life and make your spouse join you on those visits. Review every type of coverage you have at least every other year and make sure your policies are changing with your family’s needs.
Don't pay more for your cable bill than you do for your life insurance program and don't expect your workplace HR department to choose for you. Make an educated decision by seeking an expert and realize that life insurance is integral to keeping your home stable no matter what life changes come sweeping through your door. The things that don't kill us can still make us ineligible for coverage. The cost of waiting is a high price when your health or circumstances change. Hey, we never get younger and since that is what the rates are based on, move this item to the top of the list quickly!
Home CEO™ Anita DaSilva is the owner of Anita DaSilva State Farm agency, headquartered in Bergen County, NJ. As a successful female entrepreneur in the insurance industry for over a decade, Anita has helped clients nationwide properly insure their life and assets. Politically and socially aware and active, Anita volunteers in her community and serves on several professional boards. For more information on financial resources and financial advice, you may contact Anita here.
