Financial Literacy Trivia: Credit

Subject: Credit
If used properly Credit can be your friend. If not used properly Credit can consume your life. Test your Credit knowledge, see if you can answer these 3 questions.

1. Name the three main credit bureaus

2. True or False?
    You should only check your credit when you want to apply for a loan.

3. Which of the following is NOT a way to maintain excellent credit.
    a. Pay your bills on time
    b. Space out new credit
    c. Do not run your credit often
    d. Make only the minimum payments

------------------------------------------------------------------------------------------
Answers:

1. Experian, Equifax and Transunion 

A credit bureau collects and stores credit information on consumers. Each has its own records and individual scores.

2. False

Check your credit once a year. If you have been a victim of identity theft, it is recommended to check your credit every 6 months.

3. (d) Make only the minimum payments

To maintain excellent credit it is important to actively use your credit and pay everything off in full every month.

Financial Literacy Trivia: Budget

There are many misconceptions when it comes to the topic of Budgets and budgeting. See if you can answer these 3 questions.

Subject: Budget

1. Good money management involves having enough money to cover all your __ __ __ __ __, while purchasing __ __ __ __ __ only when you have extra money to do so.

2. True or False?
A budget is only for those who are poor.

3. Which of the following are benefits to budgeting?
a. Control
b. Organization
c. More Money
d. Opportunities
e. All of the Above

------------------------------------------------------------------------------------------
Answers:

1. NEEDS / WANTS 

NEED: Something you must have for survival -- something you cannot live without. i.e Food, Clothing, and Shelter

WANT: Something you would like to have -- something not absolutely necessary for your survival, but that you would enjoy having. i.e. iPods, designer clothes, vacations, Xboxes

2. False

A budget is simply a plan for how to handle your money, a roadmap to give you the money to live the lifestyle you want. 

3. (e) All of the Above

Control - Knowing exactly how much money you have at any given point, put your in the financial driver's seat. 

Organization: Keeping your finances in order is vital, and having a financial plan keeps you organized. 

More Money: Working within a budget will leave you with more money every month. 

Opportunities: Sticking with your budget will open up many financial windows of opportunity. 

Financial Literacy Trivia: Saving

Test your financial knowledge with these trivia questions.

Subject: Saving

1. If your monthly expenses equal $1,000, What is the recommended amount to have in your Emergency Fund? 

2. True or False? 
    A Certificate of Deposit (CD) is an example of a savings product. 

3. Which of the following is NOT a way to save more money? 
    a. Earn more money
    b. Take out a loan
    c. Cut down expenses

------------------------------------------------------------------------------------------------------------
Answers: 

1. $3,000 - $6,000. 

Emergency Funds should equal three to six months of living expenses. 

2. True

A CD is a federally insured savings product that earn interest. You promise to keep you money in for a certain amount of time. Penalties typically apply to early withdrawal. 

3. (a) Take out a loan

Week # 16: Financial Challenge & More Savings Ideas

Week #16:
Deposit Amount: $16.00
Total Savings: $136.00

We are just about 1/3 of the way through 2013! This Financial Challenge is just one way you can add to your savings account. Here are some other alternative ways to put a little bit away over the year...

1. Power Hour
Put away your hourly wage once a week, every paycheck, or once a month.

Example: You make $12.00/hr.

If you put $12.00 into savings a week, you would have $624.00 at the end of the year
If you put $12.00 into savings each paycheck, you would have $312.00 at the end of the year
If you put $12.00 into savings each month, you would have $144.00 at the end of the year.

These amounts may not seem that big in comparison to following the 52 Week challenge, however every penny saved is a step in the right direction on the path to financial wellness. 

2. Percentage Savings
Put away a specific % of your income away once a week, every paycheck, or once a month.

Example: You Make $12.00/hr at a Full-Time Job. Your gross income is $480.00 per week.

If you put 5% into savings a week, which is $24.00 a week, you would have $1,248.00 at the end of the year.

An easy way to do this is to set-up direct deposit through your employer (if they allow) and have a certain percentage go directly into a savings account. If you don't ever see the money, then it doesn't seem like you are saving and before you know it, you have over $1,000 in your savings account.


3. Coin Collection
When ever you make a cash purchase and get coins for change, put that away in a coin bank. The amounts will add up fast. I tried this over a 6 month period when I was in college and saved over $200.00 in that short amount of time.

Another Opportunity to Share Financial Literacy

I was invited to share Financial Literacy information at an event next week. It's a community event that will feature na mea Hawai'i along with college support services for Native Hawaiian students. Because I want to reach the Wai'anae Community, which is predominantly Native Hawaiian, I saw this as an opportunity to collect data via a survey and also just talk candidly with people from the community about the need for financial literacy. I will also utilize this event as a way to share small bits of information about savings, budgets, and credit, and of course I will keep with the theme of the evening and include hua 'olelo hawai'i.

If you are available check out the Ka Lama Education Academy Na Mea Hawai'i Hawaiian Resource Night Event next week Wednesday, April 24, 2013 from 5:00pm -7:00pm at I.N.P.E.A.C.E Wai'anae Office 86-080 Farrington Highway Suite 201 (Behind Rent-A-Center/Hanaras - Upstairs from Waianae Dialysis). Please be sure to stop by and say hi.

52 Week Financial Challenge Updates

Financial Challenge Updates:

I apologize for not posting the reminders for the financial challenge deposits. Here is the current information:
Week #14
(04/05/2013)
Deposit: $14.00
Total: $105.00

Week #15
(04/12/2013)
Deposit: $15.00
Total: $120.00

Again, for those of you who have missed a week or stopped awhile ago. You can either catch up or just pick right up where we are now. For example, if you stopped in Week #10 and you have $55.00 in your Savings. Just start this friday with $16.00. Don't worry too much about catching up unless you have the means to do so, at the end of the year you would still have $1,313 even if you missed these past few weeks.

Increased Credit Card Spending = Stronger Economy... I beg to differ

I came across a headline that read "Hawaii credit and debit card spending up 11%" This is great for Banks and Credit Card Companies and HORRIBLE for consumers, like you and I. These numbers were based off of data from First Hawaiian Bank so of course the article goes on to talk about how Sales in Hawaii have gone up and the President of FHB is quoted as saying "This is a good indication that our economy is getting stronger." 

People are spending more money, great for businesses and the overall Hawaii economy. However, if people are using more and more credit cards to purchase items from these businesses, then what is that doing for the people of Hawaii? Putting our people in debt is what itʻs doing! And that is not right in my book. I would be happy to see a headline that reads "Sales in Hawaii are up, Meanwhile consumer credit card debt is at all time low!" Then our economy will be truly getting stronger. 

Second Financial Literacy Workshop in the books

This past Wednesday I was invited to share Financial Literacy and Education to a group of college interns who are a part of an Individual Development Account (IDA) program. This was the last of a series of classes that they were required to attend, so a supervisor for their program let me know that a lot of the students were interested in Investing.

I was excited that a group of 19-20 years old would be already thinking about investing. However, I am not an Investment Advisor and did not want to get too deep into Investing. I wanted to make sure that I gave them an overview of how to make sure you are in the position to invest and what a financial plan looks like. I shared information with them about facing financial fears, creating short term financial goals, the importance of a financial plan and a short introduction to savings products and investment types.

To make sure that the students understood why I am passionate about financial literacy, I wanted to take the opportunity to also share with them MY financial story. Majority of my financial blunders happened to me when I was in college, so I knew that sharing my story with them, might help them to think twice about their finances so that they donʻt make the mistakes that I did when I was their age. It was my first time sharing my story in a public setting, I was nervous about making myself vulnerable to a room of young students and their advisors (some I also know in my personal life). However, I felt that they listened to my story and were able to learn from what I shared with them.

This group provided great feedback about the presentation and also provided me information that will be useful in the development of my Financial Literacy Program. I really enjoyed sharing with this group and I look forward to working with this program again in the near future. Other opportunities have also come up for me to continue to share Financial Literacy and Education with other groups. I am excited what the future holds for me in this season of my life, and I am thankful for the many friends and family who are supporting me in this venture.

Sticking To Your Budget

So youʻve directed your money WHERE to go by creating a budget, youʻve told your money WHEN to go by scheduling your budget.....Now What?

Sticking To Your Budget
Like any plan, it means nothing without a little action put behind it. So now you must stick to your budget. This is the step where a lot of people start off real good and then one slip up and the budget is out the window. Kind of like going on a strict diet, you do well for a couple of weeks and then go to a party, pig out and thatʻs it....no more diet. The key word here is STRICT. Although a budget is meant to help you stay disciplined in the way you spend your money, a budget is not meant to RESTRICT you in any shape way or form. A budget is merely a way to make sure your financial obligations are met on time and that you have money available to do the things that you want to do, so you can live your life they way you wish.

If you find that you donʻt end up with a lot of money to do the things you want, this is where you have the opportunity to take inventory of what you are spending your money on and if it matches the lifestyle you wish to live. If it doesnʻt match, then work to get rid of the financial obligations that are holding you back. Keep in mind that the change wonʻt happen instantly, just like you wonʻt lose 40lbs in a week.

One tip I have to help you stick to your budget, is through accountability. If you created a couple or family budget then make sure everyoneʻs goals are aligned, and hold each other accountable for each persons actions. If someone does a good job by forgoing that extra stop at Starbucks a couple times a week. Acknowledge that victory. If someone goes a little overboard with an unplanned and unnecessary shopping trip, call them out on it as nicely as possible. Let them know that because they spent more than budgeted for a shopping trip, that there is an opportunity cost to that behavior, because that money was supposed to go towards something else.

If you created a personal budget, then find a trusted friend or family member who agrees to be your accountability partner. Let them know your goals and ask them to help you achieve them by checking in with you from time to time on how you are doing with following your budget.

At the beginning, following a budget will be difficult, youʻll have to make adjustments to your budget as you go through the first few month. Once you get the hang of it and your behavior with money is aligned with your budget, then you will see the fruits of your labor, by eventually reaching your financial goals.

Reconciling Your Budget Schedule

Previous Topic: Scheduling Your Budget (Part II) 

You now have a scheduled budget. You are almost done with the planning portion of budgeting and ready to get started MAKING it happen. The next step on the path to following your budget is to reconcile your budget schedule to make sure that you have enough money coming in at a specific time to accommodate the amount of money you need to use it.



Reconciling Your Budget Schedule

To begin, let's pretend to start the month with $0. Start from the top of your budget schedule and add each line to give you a balance after each transaction, as you would calculate a check register.
For example:

$0 Beginning Balance - $1924.00 Aloha Mortgage Company = -$1924.00 New Balance

You would continue this calculation all the way to the end of your budget schedule. The next line would be calculated as:

-$1924.00 New Balance + $250.00 Pampered Chef Income = $1674.00 New Balance

Here is what your schedule would now look like (New Balance is in the gray column):

As you can see, every place there is a negative (red) number is where this family has a cash flow issue. When creating a budget, you already made sure that you have enough money coming in to cover all your expenses. This step in the process reveals if you have enough money coming in at the RIGHT TIME to cover all your expenses when they are due.

Because we assumed they started the month off with a $0, that is why there is such large negative amounts. So when you actually put your budget to work for you, then you would begin with how much money you have before the 1st of the month. For this example we are going to say that this family begins the month with $1000.00. Here is what the budget will look like now:

Now our cash flow is looking better. There is a simple solution to this families cash flow problem that will even help them save interest on their mortgage, which could save them tens of thousands of dollars in the long run. My suggestion for this family is to make bi-monthly mortgage payments. Many mortgage companies offer this as an option. If not, you can still make partial payments, because as long as the balance due is paid before the due date then there is no problem. So, this family calls their mortgage company and works out a bi-monthly payment plan. They now owe $962.00 on the 1st and the 15th. 

Other solutions to cash flow problems is to move around when you say you will use money on variable expenses. Because these expenses have no strict due date, you have more flexibility to move this money around. 

After this family makes the mortgage adjustment to their budget schedule, there is only one cash flow issue (negative balance amount) remaining, which is after the tithing payment on the 19th. A solution to this issue is to move the spending of Household items from the 17th to the 20th, when there is income coming in from Ka Hana Inc. and the cash flow issue will be solved. The completed budget schedule now looks like this:

This family now has a completed Budget Schedule. And if you look at the ending balance at the end of the month, you will notice that the family should begin the following month with at least $1000.00. If the family follows this budget throughout the month, then they will not have to resort to using credit cards and will be able to pay all their bills on time. 

Once you have a budget schedule reconciled you can look at other areas where you can save a buck or two. The excess money each month can be used to pay off any debt faster. For the example family, I would suggest that they pay off their credit card balance with any excess monies they can trim from their budget. 

As you can see, creating a budget and preparing to follow a budget is a lengthy process that challenges you to face the way you spend your money as well as challenges you to think of solutions to ensure that you have the money when you need it. For many people, this is a difficult task to complete. But I assure you, that once you are at this point in the process the hardest point is sticking to your budget. To conclude the series and bring things to closure I will discuss issues with sticking to your budget and the concept of opportunity cost. 

Next Topic: Sticking To Your Budget

Scheduling Your Budget (Part II)

Here will we continue to learn how to follow our written budget by continuing to schedule our budget. So far weʻve scheduled 1.) the bills that have due dates and 2.) our expected wages. Now it is time to schedule variable expenses, fixed annual expenses, and other income.

3. Calculating Weekly/Bi-weekly Variable Expenses
For each variable account, think about when you need to spend the amounts in the budget and divide it accordingly.

Example A: 

This family does bi-weekly grocery shopping. Divide the total Grocery Budget amount by 2.

$400 Monthly Grocery Budget / 2 Shopping Trips per month = $200 Every 2 Weeks

Example B:

This family puts gas once a week. Divide the total Gas Budget Amount by the number of weeks in a month to give you a weekly gas budget amount.

$400 Monthly Gas Budget / 4 weeks per month = $100 Per Week

4. Scheduling Variable Expenses

Now we need to enter the amounts calculated in Step 3 into your schedule, according to the specific week you decide you need to spend that money. Be sure to keep in mind the times of the month where you have more bills due and try to be more conservative with your variable expenses during these times. 

Example A1:
To avoid the long lines at the grocery store around the 5th of the month, this family decides to go grocery shopping the second and last week of the month, budgeting themselves $200 each trip.

Example B1:
Fridays are the best days for this family to go to the Warehouse Store Gas Station (i.e. Costco/Samʻs) to fill up the tank. This family will schedule in their gas budget account every Friday for $100.00 each trip.

Complete this for all your variable budget accounts. 

Here is an example of what your budget may look like:

Notice the three entries on the bottom of the schedule. Because you do not know when you will want to spend money on Entertainment (i.e. Movies, Night at the Bar) and Other Expenses you cannot specify a date for these amounts; by placing them on your budget you are aware that you have allotted a certain amount for these things. 

The last entry, Fixed Annual Expenses is a total of all the expenses that you have to pay annually. Putting this amount into a savings or separate account will help to keep that amount secure until the due date for those expenses comes around. 

5. Scheduling any other sources of income

The last step before reconciling your budget schedule is to enter any amounts of other income. For the family in the example, this includes income from Pampered Chef, Maliaʻs portion of her cell bill that is on the family plan, and the money from Lani for carpooling during the week to work. 

You have now scheduled your budget. Next we will reconcile your budget schedule to make sure you have enough money WHEN you need it. 

Next Blog Topic: Reconciling Your Budget Schedule

Scheduling Your Budget (Part I)

Previous Blog Topic: Following Your Budget

Once you have created a written budget to tell your money WHERE to go, it is now time to tell your money WHEN to go. We often find ourselves living "paycheck to paycheck." We circle, highlight and mark our paydays on the calendar and look forward to them like they are National holidays.

Before I started following a budget, I used to count down the days til my next paycheck practically the day after I got paid. Now, I find myself not even realizing that it's a payday. My co-workers often tell me "Must be nice to have a lot of money that you don't even know when payday is!" Well, it's not that I have more money than them, because we get paid the same amount. It's that I already know where my money is going and when it is going to go because I gave my money clear directions on what to do and when to do it.

To begin following your budget, it helps to schedule your budget. Here are the beginning steps to scheduling your budget:

1. List your Fixed (monthly) and Fixed-Variable Expenses in order by due date. For example:

2. Add in your paydays in where they occur.

Take the time to quickly assess your budget at this point. Look at the amounts due between pay days. Does it look like you have any rough spots in the month? This family looks like they might be in a pinch towards the end of the month moving in to the beginning of the next month. Keep this part of the month in mind when continuing to schedule your budget in Part II. 

At this point, you have now begun to schedule your budget. In the next step you will schedule in your Fixed (Annual) and Variable Expenses into your budget. Because these amounts need to be spread out through the month and because you are putting aside amounts monthly for when those annual fixed expenses are due, Part II of Scheduling your budget will be more intensive.

Next Blog Topic: Scheduling Your Budget (Part II) 

Following Your Budget

Creating a budget is a process that takes time. It is in this process that you discover how youʻve been handling your relationship with money. Lots of emotions can be conjured up during this process, such as contentment, worry, disbelief, excitement, and the list goes on. These emotions are completely normal. Take those emotions and use them as fuel to continue on your financial journey. Remember any negative feelings and commit yourself to change your relationship with money so that you never have to feel that way again. Take those positive emotions and run with them and keep your focus on your financial goals.

Now that youʻve created a budget, you are a step closer to easing any financial worries and on the path to Financial Wellness. Now you must bring action to that budget and bring it to life. This is probably the most difficult for some families. However, if you donʻt actually FOLLOW your budget that you created, then your budget is merely numbers and letters on a piece of paper.

Many articles and books that discuss budgets, leave off at Step 5: Assigning Budget Amounts and just send you along your way. However, I know from first hand that telling your money where to go through a budget is only part of the equation. You now have to tell your money WHEN to go.

We live in a society where a lot of families are living paycheck to paycheck. I used to find myself pretty much counting down the days to the next payday, practically the day after I just got paid. Does this sound familiar to anyone? If so, Iʻm going to continue sharing easy manageable steps, except this time it will be on how to actually follow your budget. This will include scheduling your budget and reconciling your budget.

Next Blog Topic: Scheduling Your Budget

Creating a Budget -- Step 5: Defining Budget Amounts

Before we discuss the last step in creating a budget, letʻs review what we have covered so far: 

Step 1 (Part I) : Tracking Fixed and Fixed-Variable Expenses

Step 1 (PartII) : Tracking Variable Expenses

Step 2 : Tracking Income

Step 3: Comparing Income: Expenses

Step 4: Trimming the Fat

Now you are ready to move on the final step of creating a budget: 

Step 5: Defining Budget Amounts

In this step, we will use the information that we tracked and discussed in Steps 1-4 to set-up your budget amounts for the month. 

I find it easiest to use the amounts from the previous month as a starting point. When you start following your budget you can adjust the categories as you see fit. If you donʻt spend all that you budgeted in a particular category for that month, consider taking a little bit from that budget category to another that you could use a little wiggle room. 

If you discovered that you are spending more than your income, (Your Bottom Line Amount in Step 3 was in the negative) then use the reflections and assessments you made in Step 4 to assign reasonable amounts to those categories. 

Below is an example of what assigning amounts to budget categories might look like. For the most part, the amounts from the previous month were carried over into the budget amounts. Budget amounts that were adjusted are noted with a number. These new budget amounts accomodate for 60-70% of the previous months amounts. 

By cutting amounts for the notated categories, by following this budget there will now be a positive amount of money left each month instead of being in the hole and having to resort to the use of credit cards or not being able to pay your important bills. In this example, this family should have an extra $400 left at the end of the month. Thatʻs $4,800 a year. What could your family do with an extra $400 a month? 

Now that you know how much money you have to alloted to spend on specific categories, action needs to be brought to this budget. 

Next Blog Topic: Following a Budget

Congratulations! You have created a budget. 

Please feel free to contact me at saydeepojas@gmail.com for questions or help on creating a budget. 

Creating a Budget -- Step 4: Trimming the Fat

Previous Topic: Step 2: Tracking Your Income / Step 3: Comparing Income:Expenses

So far we have tracked expenses and income, as well as compared the two amounts to reveal if there is left over monies or if you need to cut back on your spending. The next step will look back at your expenses that you tracked in Step 1: Tracking Your Expenses (Part I) and (Part II) and see where you can trim excess spending.

Step 4: Trimming the Fat
This step involves really looking at the way you spend your money and assessing areas in which you could cut back. Whether or not Step 3 revealed a positive or negative amount, it is suggested to still review your past spending, you may end up with an even large amount of money left over at the end of the month which you can use towards reaching your life goals faster.

Trimming the fat comes before actually assigning amounts to different budget categories. Take this time to reflect on how youʻve been spending your money and think about your financial goals and what it will take to help you achieve those goals. If your goal is to have more money at the end of the month, instead of living paycheck to paycheck; then passing up on that weekly shopping spree might be a good place to start. To begin this reflection and assessment process letʻs start with needs vs wants.

Needs vs Wants

In this step is where distinguishing between Needs and Wants is important. Good money management involves having enough money to cover all your "needs," while purchasing "wants" only when you have extra money to do so. Let me first define these two concepts.

Needs - something you must have for survival -- something that you canʻt live without. Food, shelter, and clothing are examples of needs.

Wants - something you would like to have -- something not absolutely necessary for your survival, but that you would enjoy having. Examples of wants include iPods, designer clothes, vacations, Xboxes, or Rolex watches.

Variable Expenses
It is within your spending on your variable expenses, where your needs and wants will help to determine where you can cut some of your spending. You were asked in Part II of Step 1 to notate a N for Need and a W for Want. Begin with the category of your variable expenses that has the most Wʻs.

Letʻs take a look at our example:

The most Wʻs are found in the Entertainment Category. This is typically where families can cut costs. This family, spent $144.17 on entertainment in one month. With the rising cost of watching movies at a theatre it is very common for families to spend much more than amount this on entertainment. An alternative to spending large amounts on entertainment is to find fun and engaging activities to do with the family that are FREE. For example, going to the beach, borrowing a movie from the library or a friend to watch at home, or spending family time at the park.

You donʻt have to eliminate Entertainment, but in the next step we will assign amounts to the categories. For now, you can think about what a reasonable amount to spend on entertainment for your family would be.

The next category to look at from our example would be the Clothing Category. 

This is another category where families can often cut costs. Think back to what you needed the clothing for. Was it for work, for a party, just because you thought it was cute? Think about ways you can save money on clothing for your family. Accepting hand me downs for your kids, shopping at a thrift shop or discount store, or looking through the Sale and Clearance Rack for good bargains are great ways to cut back on clothing costs.

Again, you donʻt have to eliminate this category from your spending. Just remember to be mindful of the amounts that you are spending

Lastly, we will take a look at the Dining Out category.

I noted these transactions as both Need and Want. Many will argue that you NEED to eat, but is it necessary to eat out excessively when you could prepare a meal for a lot less at home (not to mention it would probably be a healthier option to cook)? Itʻs perfectly fine to enjoy a meal out from time to time. But if you find yourself drowning in bills and not being able to pay on time then think twice about dining out.

For busy families, dining out is a part of the routine. Just be mindful of your selection of eateries and eat at places that give you the most bang for your back.

Fixed and Fixed-Variable Expenses
Excess spending can also be found in your fixed and fixed-variable expenses. For example, when was the last time you evaluated your Auto Insurance Policy. Do you still need the same amounts of coverage? Are you taking advantage of all the discounts that your insurance provider offers? Have you shopped around for a policy through a different provider?

Your electric bill is also a place where families can save a buck or two. Hawaii Energy is a great resource to find ways on how to save money on your electric bill.


Take your time as your go through your transactions that you have tracked. A good question to ask yourself when purchasing something that is a want is, "What else could this money be used for?" This will help you determined if you still really WANT to make that purchase.

After looking at the way you spend you money you may be feeling a bit overwhelmed, or even defeated. Donʻt let it get you down, acknowledging the way you negatively spend money and making a commitment to change your spending behavior to be positive, is a giant step in the right direction.

Next Blog Topic: Step 5: Defining Budget Accounts

Creating a Budget -- Step 2: Tracking Your Income / Step 3: Comparing Income:Expenses

Previous Topic: Creating a Budget -- Step 1: Tracking Your Spending (Part II) 

Now that youʻve had the opportunity to look at how you spend your money. Weʻre going to explore where that money comes from and whatʻs your bottom line. You probably already know whether or not you have any money left at the end of the month. However, these next two steps will reveal exactly how much you have left. You will also discover if you need to cut back on your spending or if you have any monies left over that could be used to pay off debt faster, put into a Savings or to Invest

Step 2: Tracking Your Income
List how much money you take in each month from all sources. This includes but is not limited to the following:

-  Wages from work (even under the table income)
-  TANF (Temporary Assistance for Needy Families) also known as Welfare Cash Benefits
-  SNAP (Supplemental Nutrition Assistance Program) also known as Food Stamps or EBT
-  Section 8 Voucher
-  Income from Network Marketing Company (i.e. Avon, Thirty-One, Visalus, etc.)
-  Self- Employment Income
-  Social Security Payments
-  Disability Income
-  Settlement Payments
-  Unemployment Benefits
-  Lottery Winnings
-  Any money someone gives you on a regular basis (i.e. gas money for car pooling, if you have someone on your cell phone plan and they pay you cash to cover their portion of the bill)
- Any other source of income

List both Gross Income and Net Income amounts for each source of income. This step may be very easy for some who work one job and that is their only source of income. However, it is very common that many families supplement their wages with other income. Below is an example of what tracking your income may look like.

Hopefully the total net amount of your income from all sources is higher than your total expenses that you tracked in Step 1. The next step in creating a budget is to reconcile the differences in these amounts to reveal if you have enough money to meet the basics: housing, food, health care, and insurance. 

Step 3: Comparing Income:Expenses

1. Total your Expenses from Step 1, including Fixed, Fixed-Variable and Variable Expenses.
2. Subtract your total expenses from your total net income from Step 2.

If this number is positive, then you are doing a great job. Keep it up. You may want to consider investing that extra money or putting it into a savings product. Or if you have debt, use this extra money to pay down that debt.

If this number is negative, then the next step in creating a budget will be very important for you. In this step you will analyze your spending and trim the fat. Chances are if you are in the negative that you are resorting to the use of Credit Cards to pay your bills or expenses, incurring overdraft charges on your account, having to borrow money from others, or worst yet missing payments on your bills.

Below is what comparing your income to expenses may look like, from the examples that have been shared in Step 1 and Step 2.

From this example, you can quickly tell that this family needs to trim some fat. If this is the case for you, donʻt worry. This is why you are taking the time to gain control of your finances. This is also the time to start thinking about how you spend your money. The next step will help you see where you will reduce spending so that you can make this Bottom Line Total. 

Next Blog Topic: Step 4: Trimming the Fat

Creating a Budget -Step 1:Track Your Spending (Part II)

Previous Topic: Creating a Budget - Step 1: Track Your Spending (Part I)

Hopefully you found Step 1: Track Your Spending (Part I) easy to complete. Fixed and Fixed-Variable Expenses are typically the easiest to track because you get bills reminding you that you owe money to someone and there is normally a due date attached to those bills. Yes, Iʻm talking about those ones that come in the mail and you put them on the side without opening them, secretly wishing that they would magically disappear. On the other hand, if you have auto payments, then you might not have been aware of the exact amounts that you spend on these expenses every month. Hopefully, this exercise helped you be more mindful of this type of expenses.

The next part of Step One is to track your variable expenses. These are probably the most difficult to track because most of these expenses are made unconsciously with a swipe or handing over a $20 bill. These expenses add up very quickly and this is where most people donʻt realize how much they are spending on something like a daily cup of coffee, until you add up your spending over a period of time.

Step 1: Track Your Spending (Part (II)

3. Variable Expenses 
Variable expenses is everything else that you spend your money on. Again, this is probably the hardest to track. Here are a few ways to track variable expenses, select the one that is easiest for you:

Method: Bank Statement
If you are a swiper, meaning you mostly use your debit card to pay for things. This is the easiest way to track your variable spending. Get a copy of your bank statement for the last full month. For example, it is April 5th, so you would look at March's bank statement. Go through transaction by transaction and categorize your spending into like categories (Gas, Groceries*, Dining Out, Entertainment, Clothing, Etc.) Total your spending for each category.

Method: Receipts
If you use cash or a mixture of cash and debit card, and you keep your receipts. Then gather your receipts for the last full month. Go through each receipt and categorize your spending into like categories (Gas, Groceries*, Dining Out, Entertainment, Clothing, Etc.) Total your spending for each category.

Method: Journaling 
If you are not able to use bank statements or receipts to track your spending. Take the next month to journal how much you spend. There are smart phone apps to track your spending that will even allow you to select a spending category and will report the totals for each category. You can also just take a small notebook with you and log every transaction you make. This method takes a little more time than the others. But creating a budget is a process.

You can either hand write these amounts, but I find using an excel spreadsheet is easiest because it will do the calculations for you. If you donʻt have every transaction you made in the prior month, donʻt sweat it. Get as many as you can. The more you have, the more accurate picture you have our your spending habits.

Keep in mind as you go through your bank statement, receipts or as you journal look at what you are spending your money on. Is it a NEED or is it a WANT? You can also notate next to each transaction a (N) or a (W). All the W's is where you can trim your spending to be able to stay on budget. This will be discussed in a later step of Creating a Budget. 

Here is what tracking your Variable Expenses might look like:

Once this step is complete, you will be able to move on to
Step 2: Tracking your Income & Step 3: Comparing Income:Expenses

Note* If you receive SNAP Benefits (aka EBT or Food Stamps) be sure to still include the amount you spend on food in your tracking.

Creating a Budget -- Step 1: Track Your Spending (Part I)

As promised, I am giving you simple steps to creating your budget over the next few days. Creating a budget is a process. I will present this information by breaking down the entire process into manageble tasks.

I hope many of you will consider creating a budget and that you find these steps easy to complete. At any time you have questions or need assistance, please feel free to contact me at saydeepojas@gmail.com.

Today's topic will get you started on tracking your spending and begin evaluating how you've been handling your money.

Step 1: Track Your Spending (PART I)
Everyone has a limited amount of money available to spend. To be able to manage this money is important for financial success. There are different types of expenses to track Fixed, Fixed-Variable, and Variable.

1. Fixed Expenses - Start a list of the bills and their amounts that you pay the same exact amount every month. These expenses include but are not limited to the following:
     Rent/Mortgage
     Car Payment
     Insurance (Auto, Home, Life, etc)
     Credit Card






In addition, add to this list the bills that you pay on an Annual basis (or every 6 months). Divide the amount you owe by 12 to split the amounts evenly over the year. These fixed annual expense include but are not limited to the following:
     Car Registration
     Gym Membership

2. Fixed-Variable Expenses - The next bills to track are bills that you pay monthly, but the amounts vary from month to month. To figure out the amount, look at the amounts you've paid for these bills over the past 3-6 months and write down the average amount that you paid. These fixed-variable expenses include but are not limited to the following:
     Cell Phone
     Electric
     Water
     Credit Card (if you minimum monthly payments vary month to month)

You can hand write these amounts, but I find using an excel spreadsheet is easiest because it will do the calculations for you. Below is an example of what your spreadsheet may look like after tracking these two types of expenses.

Next Blog Topic: Step 2: Track Your Spending (PART II)

The "B" Word -- Budget

BUDGET!
Yes, the dreaded "B" word. Often times when people hear the word "Budget" they think of being cheap, pinching pennies, or being the other "B" word -- Broke. Many people do not like to budget their money, because they feel restricted, they feel deprived or even feel poor.

If you think about it, the most successful businesses wouldn't be successful if they didn't follow a budget. So why not apply the practice of creating and following a budget to your personal life? A Budget is simply a plan for how to handle your money, a road map to give you the money you need to live the lifestyle you want. (Real Money Experience, NFEC).

There are also many benefits to budgeting, which includes being in Control of your money and being in the financial driver's seat. Budgeting also keeps you Organized, having a financial plan helps you to stay in control and also helps to not miss out on important payment deadlines or over drafting your checking account. Believe it or not, working within a budget can leave you with More Money every month. Lastly, sticking with your budget will open up many financial windows of Opportunity. I don't know about you, being in control and organized helps me to be less stressed, and more money and opportunity, sure I'll take some!



So how do you make a budget? Because creating a budget can seem intimidating I will spend the next few days giving simple steps on how to get started with a budget. Keep in mind creating a budget is a process. Take it step by step. A small investment of your time will return you great rewards.

Note* If you are married or share expenses with a significant other, it is VERY important that both of you are on board to create a budget.

Tomorrow's Blog Topic: Step1: Track Your Spending

What income category are you in?

The Wai'anae Coast is often considered a high poverty area. The terms poverty and low-income are often attached to the residents along the coast. What actually constitutes poverty? How little do you have to make in order to be considered low-income?

Hopefully this will help others understand the different income categories. To know if you qualify or do not qualify for different services, it is important to know what income category you and your family are in.

Below is the current 2013 Federal Poverty Guidelines for Hawaii
(As of January 24, 2013):

Add $4,620 for each additional person

In Hawaii, the average person per household is 2.93. We will round up and look at the family size of 3 to illustrate an example.

Extreme Poverty is defined as 50% of the Poverty Level. Therefore, from the chart above a family of 3 would have to make $11,235 per year to be considered in extreme poverty. This translates to a family that receives $936.25 per month before taxes.

Poverty is defined at 100% of the Poverty Level. Therefore, from the chart above a family of 3 would have to make $22,470 per year to be considered in poverty. This translates to a family that makes $1872.50 per month before taxes.

Low-Income is defined at 200% of the Poverty Level. Therefore, from the chart above a family of 3 would have to make $44,490 per year to be considered in poverty. This translates to a family that makes $3745 per month before taxes.

To put things in to perspective, according to current Census information, the median household income for the State of Hawaii is $67,116.00

So where does your family fall in all of this?

1. Calculate your annual income before taxes
2. Compare your income amounts to that of the chart above

Please keep in mind that these are income levels categorized by the Federal Government. These guidelines will determine eligibilty for services such as WIC, SNAP (foodstamps), TANF (welfare), MedQuest, etc.

Although, my purpose of sharing Financial Literacy is to help families rise out of poverty. However, there are times where accessing services will allow you to use your other income to pay off debt, save for a home and through time be able to rise out of poverty. These families will then no longer qualify for these services and benefits, however my hope is to equip families with the knowledge and skills to be able to sustain themselves without those services.

For help calculating your Family's Income please feel free to email me at saydeepojas@gmail.com. 

Happy National Financial Literacy Month

April 1st marks the beginning of National Financial Literacy Month.
In 2004, the U.S. Senate passed Resolution 316 that officially recognizes the month of April as National Financial Literacy Month. Hawaii's own Senator Daniel Akaka was one of the 22 Senators that sponsored the measure to highlight the need to promote financial literacy in our homes, schools, workplaces, and communities.

In 2011, Senator Akaka was quoted in Hawaii 24/7 saying “Increased financial literacy provides people with the tools they need to make responsible decisions for themselves and their families. Many individuals are struggling to understand our increasingly complex economic system."

In recognition of National Financial Literacy Month, I will be posting daily blog posts in regards to Financial Literacy.