As a result, many consumers are looking at hybrids as a way to reduce their monthly gasoline bills.   However there are a number of factors to consider other than the increased fuel efficiency of a hybrid vehicle.  In addition, you want to select a hybrid that is within your budget and fits your transportation needs.

The good news for consumers is that there are numerous hybrid models compared to what was on the automotive market back in 2008, the last time gasoline prices spiked.   In 2008, I made the decision to purchase a hybrid.  I selected the 2008 Chevrolet Tahoe Hybrid.  The Tahoe Hybrid was awarded Green Car of the Year® by Green Car Journal.   The Green Car of the Year® program’s goal is to recognize environmental achievement in the auto industry that will bring more efficient and lower emission vehicles to our highways. It is not a competition of vehicles to determine which gets the highest fuel economy.

The Chevrolet Tahoe Hybrid was the perfect choice for our large family. I am 6’5″ with a wife and two teenagers  It dramatically lowered our annual fuel expenses.  The vehicle has exceeded the factory MPG ratings for city and highway driving.  It continues to deliver excellent fuel economy for a vehicle of its size and perfectly accommodates our large family.

If you are considering the purchase of a hybrid here are a few key considerations to help you make an informed decision regarding the cost vs. benefits of a hybrid.

Increased Costs offset by Increased Fuel Efficiency – This is a very important consideration for anyone considering purchasing a hybrid vehicle.  The hybrid system increases the costs over a traditional gasoline engine vehicle.    How long will it take to offset the additional hybrid costs due to an increase in fuel efficiency?

Additional Costs Incurred to Purchase A Vehicle – A new vehicle or a newer model vehicle than your current vehicle typically costs more than your current vehicle.  Therefore are you willing to spend thousands of dollars or incur a larger consumer debt and monthly payment to lower your monthly gasoline expense?

Auto Loans & Monthly payments – The interest costs for an auto loan will add thousands of dollars in additional expense to your automobile purchase.  This additional costs incurred by an auto loan may offset any savings you hope to incur over your current vehicle.

Increased insurance costs for a newer vehicle – It will also be important to speak with your insurance agent that handles your car insurance to get an estimate of the annual insurance premium for a newer vehicle.  Typically, the insurance costs will increase for newer and more expensive vehicles.

Greencar.com is an excellent resource for anyone looking for a fuel-efficient vehicle.  They have numerous articles, reviews, resources and information on a variety of hybrid and alternative fuel vehicles.

I hope you have enjoyed this article on hybrid vehicles to offset high gas prices.  If so, leave a comment.  In addition, please forward this to anyone you think might benefit from this short lesson on personal finances.

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Unfortunately, many hard working people end up broke and disappointed at the end of their career.  Why?  The answer is because all of their efforts were focused solely on increasing their income and careers versus building financial security.   This lack of focus on saving and investing dramatically impacts their ability to retire or the quality of life during retirement.

In addition, when an individual’s attention is focused solely on their income, they can end up increasing their lifestyle as a result of their increased compensation.  They want the instant gratification for working hard.  “Keeping up the Jones” is alive and well in this country and companies spend billions to have us buy into this mindset.  As a result, the increase in income is spent to support this new lifestyle.   I saw a saying recently that said “Affluenza:  Materialism in which one overworks to acquire stuff that adds to debt so one has to work harder.”  If this is the case, our country is facing an epidemic!

Conversely, individuals that are focused on saving and investing understand the value of their hard earned money.  They see money as tool or a means to an end to accomplish their goal of building their net worth and achieve financial independence.  In addition, they are unwilling to increase their lifestyle knowing it will impact their ability to fund their savings and reach their financial goals.  In the end it is their unrelenting commitment to spending less and saving more that allows them to achieve their financial goals and objectives.

Ultimately, the choice is ours.  We are responsible for the outcome of our lives.  We need to understand and accept that our choices have consequences.  Therefore, if we want to secure our financial future, we need to start making better financial decisions with our money.  We need to set solid financial goals, control our spending, limit our use of credit and set limits on our lifestyle choices.  We cannot afford to waste years or decades of our lives consuming our future.

Therefore, the most important question we can ask ourselves is “when will step up and take control of our lives and our finances?  The answer can no longer be someday.  “Someday” is a day that never comes until it is too late to do anything to change the course of our lives.  “Someday” robs us of today.  “Someday” is a convenient way for us to settle for less in our lives and hold onto our dreams rather than act on them.  We tell ourselves that “someday” we will make it happen.   “Someday” we will take action to achieve our hopes, goals and dreams for our lives.  We use this convenient excuse because it allows us to rationalize settling for less today.  It allows us to believe that the timing is not right in our lives, and that “someday” the timing will be better.  We believe the day will come when we will have more money, more time and more resources.  The truth is there will never be a perfect time.

Therefore, the only answer is ”Today.”  Today is the day you must be willing to step up and start taking control of your life and your finances.  Today is the day you take control of your financial future.  You can do it!

I hope you have benefited from this post on Financial Literacy.  If so, leave a comment.  In addition, please forward this to anyone you think might benefit from this short lesson on personal finances.

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Therefore, we need to look for simple practical ways to change our driving habits, improve the fuel efficiency of our cars and reduce our daily driving.   There are a lot of online resources, articles and information.

Here is some money saving ideas to help you offset the cost of high gas prices from the site fueleconomy.gov.  fueleconomy.gov is the official U.S. government site for fuel economy information.  It is a great resource for anyone that is looking for practical tips and money saving ideas to reduce their monthly gas bill.

Driving Habits – One of the biggest factors impacting our overall fuel costs is our driving habits.  fueleconomy.gov states that erratic driving; rapid acceleration, rapid braking, etc. can lower your overall mileage at highway speeds by 33% and 5% around town.

Observe the Speed Limit – The site states that drivers can assume that each 5 mph you drive above 60 mph is like paying an additional $0.30 a gallon for gas.

Avoid Excessive Idling – Idling can use a quarter of a gallon of fuel per hour depending on engine size and air conditioner use.

Engine Properly Tuned – fueleconomy.gov states that a properly tuned vehicle can improve gas mileage by up to 4 percent  depending on the type of work or repairs.

Keep Tires Properly Inflated – Another simple and practical tip on the site is keeping your tires properly inflated.  Per the site, properly inflated tires can improve your gas mileage by up to 3.3%.

Planning & Combining Trips –  Here is another great idea from the site.  Fueleconomy.gov states that several short trips taken from a cold start can use twice as much fuel as a longer multipurpose trip covering the same distance.

Commuting & Carpooling – Daily commuting to work or school is typically the largest portion of our monthly gas expenses.  Fueleconomy.gov suggests that individuals try to stagger work hours to avoid peak rush hours, consider telecommuting.  In addition, carpools and ride-share programs can cut weekly fuel in half and save wear on your car if you take turns driving with other commuters.  Lastly, consider public transit as another alternative to reducing your fuel costs.

fueleconomy.gov is full of very useful information, facts and statistics to help Americans reduce their gas expenses.  The site also provides information on hybrid vehicles, alternative fuels,  car selection, etc.

Collectively these ideas could help to dramatically offset the high gas prices.  What are your money saving ideas to offset the high gas prices?  Leave a comment and share your thoughts.  

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In addition, a 401k employer sponsored retirement plan has numerous benefits and tax advantages that make it one of the best retirement planning options available to employees. Here is an overview of several of the key benefits of employer sponsored 401k retirement plans.

Pre-Tax Contributions – One of greatest benefits of a 401k retirement plan offered through your employer is the ability to set aside money from every paycheck prior to your payroll tax deductions.  This allows you to save a larger portion of your income since you a making a pre-tax contribution.   It also lowers your income taxes since your taxable income is reduced by the amount you contribute into an employee retirement account.

Tax- Deferred Growth – You are not required to pay taxes on your retirement account until you pull out the money.  Therefore, the money inside a 401k retirement plan will grow substantially faster than an after tax investment account.  This tax-deferred growth over 20-30 years can dramatically impact your overall account balance and your ability to retire.

Automatic Payroll Deductions – This is absolutely essential for anyone that wants to achieve their financial goals.  You must commit to paying yourself first. The easiest way to make that commitment is to set up a payroll deduction amount or percentage to be deducted from every paycheck.  This will ensure you remain committed to your financial goals.

Employer Matching Funds – Employers may offer to match a percentage of the funds an employee contributes to their retirement plan.  If so, this is essentially free money contributed to an employees retirement account every month for as long as they work for the company or the policy remains in effect.   Over time these matching fund contributions can significantly impact your overall account balance.

In closing, an employer sponsored retirement plan like a 401k is the best place to start building wealth and securing your financial future.  The sooner you get started the better.    Every year you wait to start contributing money is a year you not only miss out on saving a portion of your income but also lose a year tax deferred growth.  Don’t wait until it is too late.    Tax deferred growth, combined with compound interest over 20-30 years, is the secret to building a substantial retirement account.   Therefore, the sooner you get started, the sooner you can retire.  

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A debt snowball plan is a debt reduction strategy that focuses on paying off individual debts one at a time starting with the smallest balance first.  In addition, minimum payments are made on all other debts to focus on paying as much money as possible on the smallest debt.  When the smallest debt is paid in full, the payment savings from that debt is applied to the next smallest debt with any additional money until it is paid off.  As a result, more money is continually freed up to accelerate the prepayment of consumer debt until every debt is paid in full.

Dr. Jon Wittwer of Vertex42 created and offers a free debt snowball calculator.  It is a simple but very effective spreadsheet that anyone can use.  It provides an easy to use calculator to enter all of your debts.  Once you have entered in all of your debts, you can review several different debt reduction strategies.   The most popular strategy is the Debt Snowball Plan.  However, you can also review the Debt Avalanche Plan.  The Debt Avalanche plan uses the same methodology but focuses on paying off debt with the highest interest rate first   You can also create payment schedules to track your progress.   The templates and payment schedules can easily be printed.

The free Vertex42 Debt Snowball Calculator is an incredible resource that can help anyone become debt free if they are committed to achieving the goal of debt free living.  Debt free living can be a reality for anyone at any age.

Here are some additional free resources and personal finance articles

3 Steps to Debt Free Living

Personal Budgets

How to Create an Emergency Fund

30 Day Financial Makeover

We hope you enjoyed this article.  If so, leave a comment.  You will also follow Fiscal Literacy on Twitter & Facebook or sign up via email to receive our free personal finance, news and updates.

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So why has there been very little talk in the non-financial media about the average price of gas rising 9% since the beginning of the year to $3.56 per gallon?  According to CNN, it marks the 13th consecutive increase in the average.  The momentum is clearly in an upward direction but how far will it go and what’s causing the increase?

Blame it on Iran

Most consumers know that the price of gasoline is affected by the price of oil but what many don’t know is that there are two main markets for oil. The WTI or West Texas Intermediate oil, also considered to be U.S. crude recently hit a high of more than $108 per barrel but much of America’s oil comes from Europe. This oil, called Brent Crude, has been above $120 for more than a year but recent concerns with Iran may change that.

Although there are 161 different types of oil that trade on the world’s markets, each are affected by a variety of factors including political concerns, wars, weather, and OPEC. Iran recently announced that they would stop exporting oil to French and British companies but the EU earlier announced that they would stop purchasing oil from Iran later in 2012. These European concerns have caused the price of both Brent and WTI to rise in price pushing gas prices higher.

Dan Dicker, oil trader, author, and frequent CNBC contributor believes that oil will return to its 2008 prices of $4 per gallon by the summer and Dicker, along with other analysts, believe that it may rise as high as $5.

Not Just Your Wallet

Although consumers look at energy prices in terms of their own finances, the overall economy is negatively affected too. Airlines, grocery stores, and other fuel dependent businesses will raise their prices and consumers will cut back on driving just as they did in 2008 possibly threatening the recovery that has returned some sense of optimism to the nation. For every one cent increase in gas prices, the United States economy loses $600 million in economic activity and with gas prices up much more than one cent per gallon, the negative effect on the nation’s fragile economy could be significant.

How to Save

The best way to save on gasoline is to cut down on driving but for many that is difficult. Carpooling and carefully planned trips are the best ways to cut fuel consumption but the U.S. Department of Energy wants consumers to know that keeping gas prices under control start with some simple, common sense actions.

Consumers are first advised to slow down. For each 5 miles per hour above 60 mph, the amount of extra fuel used is equal to a 24 cents per gallon increase in cost. Next, a properly tuned engine may save an equivalent of 15 cents per gallon and properly inflated tires may save up to 11 cents per gallon. Turn the air conditioner off whenever possible and use the recommended grade of motor oil,  resulting in a savings of 7 cents per gallon.

Finally, the Energy Department advises consumers to leave the road rage at home. Aggressive driving may cause a 33% increase in fuel charges on the highway and 5% while driving in town.

Finally, The oil market is traditionally a volatile market that sees wide price swings making it difficult for analysts to forecast the future price of gas.  If they do reach the highs as predicted, they’re likely to return to more sustainable levels just as they did after the historic 2008 rise. Any investment made to counteract the rising price of gas should be for long term sustainable reasons instead of preparing for what could be a short term price rise or no price rise at all.

What are your thoughts on rising gas prices? How are they impacting you?  Leave a comment.  In addition, we hope you will also follow Fiscal Literacy on Twitter & Facebook or sign up via email to receive our free personal finance, news and updates.

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Therefore, our income tax refund provides us the perfect opportunity to use this lump sump payment to establish and fund our emergency fund.  Unfortunately, there are a million businesses all advertising and competing for our income tax refund.   As a result, it is very easy for us to be enticed into spending our income tax refund without ever considering the possibility of saving it for a rainy day or when an unforeseen or unplanned expenses occur in our life.

Without an emergency we must resort to using our credit cards or securing a consumer loan to cover the costs of these unforeseen expenses.  Unfortunately,  It is our lack of personal savings that forces us to use our credit cards or obtain a personal loan to pay for these unplanned expenses that we incur in our lives.  When we charge these expenses it dramatically impacts our overall debt, increase the costs of these expenses due to the interest we pay over time, and also reduces or eliminates our ability to save money.   An emergency fund is a simple but effective financial solution.

Therefore, maybe this year we want to consider saving our hard earned money from our income tax refund and using it to set up and establish our own emergency fund.   An emergency fund will provide us the peace of mind that we have some money set aside, a fall back plan in case of an emergency.  Why is this so important?  Because by eliminating the need to utilize credit cards for unforeseen expenses we can focus on limiting our use of credit.  By limiting our use of credit we can focus our efforts on becoming debt free and also fund our savings and retirement goals.

Here are some tips to help you set up and fund an Emergency Fund

How to Fund Your Emergency Fund Every Month – The key to funding your emergency fund is controlling your spending.  All of us can free up the cash we need to fund our emergency fund if we take the time to track all of our expenses for 30 days.  We can also look for creative ways to reduce our discretionary lifestyle expenses for lattes, dining out, shopping sprees, etc.  We can also look for ways to live more frugally.  If we are willing to make the effort,we can find enough cash to start funding our emergency fund every month.

How Much Cash?   Many experts recommend keeping three to six months living expenses in an emergency fund. This is the ultimate goal.  However, this may seem like an overwhelming goal to someone just getting started establishing an emergency fund.  The key is to start small with your income tax refund and then commit to a specific amount every month.  The most important point is to commit to establishing a cash cushion and funding it every month.  This discipline and commitment will pay significant dividends when an unforeseen or unexpected expense arises.

Where to Keep Your Cash – It is vitally important to set aside this cash in a separate account where you will not be tempted to spend it.  Remember, an emergency fund is only for unforeseen and unexpected expenses.  Therefore, this money must always be available for you to cover these expenses at anytime without using your credit cards.   Therefore, I suggest that you set up a separate account at a different financial institution from your normal bank accounts.  This will prevent you from easily transferring the money to another account.   Select an account type like a savings account or a money market account that does not put your money at risk.

We hope you have benefited from this article on emergency funds.  If so, leave a comment.  In addition,  we hope you will also follow Fiscal Literacy on Twitter & Facebook or sign up via email to receive our free personal finance, news and updates.

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The January existing-homes sales report released by the National Association of Realtors, NAR revealed that the median sales price declined to $154,700.  According to the NAR this is the lowest level since 2001.

In addition, Freddie Mac, reported that the national average mortgage rate for 30 year fixed rate conventional mortgage dropped to 3.92% in January.  This set a new record low for mortgage rates.  Mortgage rates have been tracked since 1971.

The combination of record low mortgage rates and a substantial decline in home prices have dramatically improved home affordability for potential homebuyers.

In addition, rental rates for homes and apartments have increased substantially as demand for rental property has increased over the last few years. As a result, mortgage payments for a comparable home may be lower than monthly rental rates.

Therefore, it may be time to buy a home.   If you are considering purchasing a home there are a number of factors that should be considered to ensure you are making an informed decision.   Here is a list of considerations for anyone who is considering purchasing a home including first time homebuyers.

Personal Budget  – It is absolutely critical to review your income and expenses to see if you are living within your net income or using credit to supplement your living expenses and lifestyle.   You can easily create a budget by tracking all of your income and expenses for a minimum of 30 days.   You can use this information to look for ways to save money for a down payment and closing costs or offset a portion of the mortgage payment.  In addition, you may also want to consider establishing a separate home savings account to cover unforeseen expenses, normal maintenance and home repairs that are a part of homeownership.  Here is a link an article on Personal Budgets.

Cash to Close – Down payment requirements for many loan programs have increased since the housing crisis.  However, there are still a number of loan programs like FHA that only require a 3.5% down payment.  In addition, there are closing costs that are part of a home purchase.   Closing costs are negotiable.  Therefore, you can ask the seller to pay your normal closing costs as part of any purchase offer subject to certain lending guidelines.  Here is a link to an article on FiscalLiteracy.com entitled Money Saving Tips for Homebuyers.   It provides information how to save thousands in closing costs on your home purchase.

Pre-Qualification – It is essential for anyone considering purchasing a home to meet with a mortgage professional to get pre-qualified for the mortgage prior to actually shopping for a home.  Homeownership is typically the largest purchase and a mortgage is also the largest expense most people make in their lives.   Therefore, it is absolutely essential to understand the impact that homeownership and a mortgage has on every area of your personal finances.   In addition, you want to ensure you select a sales price, loan amount, mortgage loan program, monthly payment, etc. that meets your personal financial goals, objectives and your budget.   A pre-qualification will also show a home seller that you are qualified to present an offer on their home.   More importantly, a prequalification letter from a mortgage lender will provide you the peace of mind that you are selecting a home you can afford and have been prequalified prior to shopping for a home.

Credit Score – All mortgage lenders use credit scores as part of the underwriting and loan approval process.  In addition, the lender will use your credit score to determine your interest rate for your mortgage loan.  Therefore, it is absolutely essential you have the highest credit score possible to ensure you get the lowest rate possible and the best loan terms available.   A review of your credit report is typically part of a mortgage pre-qualification.  Use this opportunity to review your credit scores and ask for input on how your credit score may impact your loan approval,  loan program choices, interest rate and monthly payment.

Estimated Length of Homeownership – This is an important consideration that is often overlooked by homebuyers.   However, it can have a significant impact on your finances.   You should determine or estimate how many years you may own a home.  Use this information to evaluate mortgage lending costs like origination fees.  It typically takes approximately 5 years to recoup the costs of paying a 1.00% origination with lower monthly payments.   More importantly, if you are making a small down payment and are planning on moving in less than five years you may not have enough equity to cover the expenses involved in selling your home.  You can ask a Realtor to provide you an estimate of the total costs to sell the home you are considering purchasing if you plan on selling in a few years.

Tax Benefits & Considerations – You should speak with a CPA or income tax professional to understand the possible tax benefits and considerations of homeownership.  Depending on your specific circumstances you may be able to lower your income taxes.  If so, speak with the CPA or income tax professional about the changing your W-4 withholding deductions with your employer.  If you can decrease your income taxes from the mortgage interest expense, property taxes, etc. you may want to consider adjusting your W-4 withholding amounts to have less withheld from your monthly paychecks.  This would increase your net take home pay without changing your estimated year-end income taxes.

In closing, 2012 may provide the best opportunity in years to purchase a home due to the record low mortgage rates and substantial reduction in home prices.  However, the ultimate decision to purchase a home should be made based on your individual financial goals and objectives.  Take the time to become educated and empowered to make an informed decision. Seek out trusted professionals to help you make an informed decision.

We hope you enjoyed this article on real estate and homeownership.  If so, please follow Fiscal Literacy on Twitter & Facebook or subscribe via email to receive free personal finance, news and updates.

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The Federal Housing Finance Authority (FHFA) along with FNMA & FHLMC has expanded the Home Affordable Refinance Program (HARP).  This program is designed to help underwater homeowners with conventional mortgages owned or guaranteed by FNMA or FHLMC.  It allows people to refinance to lower their interest rates and monthly payments.

This is great news for the millions homeowners that have been making their monthly payments but have been unable to refinance due to the decrease in their home values.  As a result of the decreased home values, they did not have sufficient equity to refinance their mortgages under the current lending guidelines.

A November 29, 2011 3^rd Quarter Negative Equity Report by CoreLogic revealed that approximately 10.7 million properties were underwater with negative equity.  The HARP program is only available to homeowners who mortgages are owned or guaranteed by Fannie Mae (FNMA) or Freddie Mac (FHLMC).  However, there are millions of home loans owned by FNMA & FHLMC that may qualify for this program.   One of the eligibility requirements is the mortgage must have been closed and sold to FNMA or FHLMC on or before May 31, 2009.  

Therefore, the first step is to determine who actually owns or guaranties your mortgage loan.  It is important to understand that the company that sends you your monthly mortgage statement may not own your mortgage.  They may only be servicing your mortgage by collecting your monthly payments.

To determine if FNMA or FHLMC actually owns or guarantees your mortgage you can log onto their individual websites and enter some basic information to determine if FNMA or FHLMC owns or guarantees your mortgage.  You will enter your information and hit search. If your loan is owned or guaranteed by one of these agencies it will produce a notification page.  Print this screen for your records.  You may need to provide your lender a copy of this form when applying for this program.   The great news is that you do not have to refinance with your existing lender so you can shop for the best rate and terms with a variety of  lenders.

Here is a link to each site.

Fannie Mae (FNMA)

http://www.fanniemae.com/loanlookup/

Freddie Mac (FHLMC)

https://ww3.freddiemac.com/corporate/

If your mortgage loan is owned or guaranteed by FNMA or FHLMC, you may be eligible to participate in the HARP 2.0 program.   Here are some highlights of the expanded HARP 2.0 program that are designed to help more homeowners qualify for this government program.

No Loan-To-Value Limits – This is the single biggest change that will impact the most homeowners.  Loan-to-value, LTV is calculated by dividing your loan amount by your appraised value.  There were loan-to-value limitations on the original program that prohibited people from refinancing.  HARP 2.0 does not have this limitation.   Therefore, more homeowners who have negative equity or are underwater may be able to take advantage of this program.

No Income Requirements – The lenders participating in this program may not require income verification for borrowers that have a good payment history.  However, there is a stipulation that requires income verification if the new mortgage payment is increasing by more than 20%.  This could occur if you chose a shorter loan term loan than you currently have.

No Asset or Reduced Asset Verification – Homeowners that occupy their homes as their primary residences may not have to provide any documentation on their liquid assets at the time the loan is submitted for loan approval.

Appraisal Waivers – Lenders may not require appraisals for borrowers that qualify for the HARP 2.0 program.

Participation in the HARP program is entirely voluntary by lenders.  In addition, it is also important to understand that the lenders participating in the HARP 2.0 program may impose additional income, asset, credit and appraisal guidelines beyond the HARP 2.0 Eligibility Guidelines as they each determine their own credit policy.   Therefore, it may beneficial to speak with several different lenders and discuss your specific circumstances to find best mortgage option.

This single greatest benefit that can help homeowners who qualify to refinance under this program is the ability to rebuild their home equity that was lost due to the housing and economic crisis.  People can choose to use the monthly savings from lowering their interest rate/payment to accelerate the prepayment of their mortgage loan without increasing their monthly payment from where it is currently.  For example if your current payment is $1400 and your new payment will be $1200, you could use the $200 a month savings and apply it to principle on a monthly basis.  This would dramatically accelerate the prepayment of the mortgage and also rebuild your equity.   The HARP 2.0 program is also encouraging homeowners to consider selecting a shorter loan term to accomplish the same goal of rebuilding their home equity.  However, each homeowner will need to evaluate what is the best loan program based on their own personal finances and how the payment will fit into their budget.

Here is a link to the government site for more information on the HARP program and other programs within the Making Homes Affordable program.

http://www.makinghomeaffordable.gov/

This article is intended for informational purposes only.  For specific program guidelines, eligibility and or other information please refer to the Making Home Affordable website or call their number  888-995-HOPE (4673) to speak with a HUD-approved housing counselor for free.

We hope you have benefited from this post on real estate and refinancing you home.  If so, please forward this article to anyone you think might benefit from this special government program.

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There has never been a more important time than now for each of us to work on educating and empowering ourselves to take control of our own financial future.  If we want take control of our own personal finances, we need to start with the things that we can control in our lives.  We cannot control the economy or the financial markets.

However, we can control our spending, limit our use of credit, set new financial goals, create a budget and look for creative ways to save money everyday to start rebuilding our finances.   Here are some simple tips to provide you some ideas on how you can start working on rebuilding your personal finances.

Set New Financial Goals – Millions of families have experienced financial setbacks as a result of the housing and economic crisis.  Therefore, it is essential that we spend some time evaluating our current finances and work on establishing some new financial goals.  It is vitally important that we have specific written financial goals that inspire us to take action to achieve them each and every day.  All of us have the ability to rebuild our finances and secure our financial future when we become inspired and committed to achieving our financial goals.   This is an area of our finances where we should consider seeking out the input and guidance of a professional.  An experienced professional can help us set specific financial goals and develop a plan based on our input.

Control Our Spending – We live in a consumer driven world that encourages spending in a million different ways.  Many of our spending habits revolve around our lifestyle choices, choices that we make every day or week without ever considering the impact of these choices on our overall finances.   However, over time our spending habits have a significant impact on our personal finances.  The good news is that a large portion of our spending is discretionary.  Therefore, we can have an immediate impact on our personal savings by controlling our spending.  This is the first step to rebuilding our personal finances and our financial future.   The single best way to get an accurate idea of your spending habits is to track every dollar you spend for 30 – 60 days.   This is a simple exercise that can produce significant financial breakthroughs with our personal finances.

Limit Our Use of Credit – Our debt is a reflection of our spending habits.   Therefore, if we start limiting or controlling our spending we will minimize our use of credit.   Minimizing or eliminating the use of credit is critical if we want to rebuild our financial future.  The most dramatic way to eliminate the use of credit and control your spending is a credit card fast.  It is exactly what the name implies.  You eliminate the use of credit and rely solely on cash for all of your purchases.  This “cash only” exercise will make you stop and consider each purchase based on your available cash as opposed to simply swiping a credit card for any and all purchases.

Refinance Debt – Interest rates are at their lowest levels in decades due to the sustained housing and economic crisis.   Therefore, there has never been a better opportunity than now to work on refinancing your mortgage debt, consumer debt, etc.   If you are a homeowner, the record low rates provide an opportunity to dramatically lower your monthly payments.  As a result, you could use the monthly savings to dramatically accelerate the prepayment of your mortgage loan and re-build your home equity that has been lost due to the housing and economic crisis.   You could also use the monthly savings to payoff any consumer debt, fund savings and retirement plans, etc.   If you have consumer debt, auto loans, student loans, etc., use this opportunity to shop around for lower rates to refinance your consumer debt.  Every dollar you save in interest is a dollar you can use to pay yourself.

Rebuild and Protect Credit Rating – Credit Scores today are not only used for obtaining financing, but also for employment, insurance, renting a home, etc.  Therefore, if we are truly committed to rebuilding our financial future, we will start with rebuilding, repairing and protecting our credit rating.   The first step is to pull a copy of your credit report and review it for any errors or unresolved issues.  If there are issues that need to be corrected, take immediate action by contacting the credit reporting agencies and/or the specific creditors to rectify the problems.  If you are unable to resolve these issues on your own, seek out help from a reputable non-profit or agency.   It is also very important to understand how and what impacts your credit score.  There is an interview with a credit expert on FiscalLiteracy.com that provides some great information to help you understand what is in your report.  You can find the interview under the Radio Show tab.

Fund an Emergency Fund – An emergency fund is a separate fund that is established and set aside solely to be used for the purpose of covering unforeseen expenses that come up in everyday life.  An emergency fund will keep us from using a credit card to cover these expenses.   As a result, we will limit our use of credit and minimize the risk of increasing our debt to cover these unplanned expenses.   The typical guideline for an emergency fund is 3-6 months of your normal living expenses.   Get started immediately by setting up a separate account, and be committed to funding it on a regular basis.  In addition, consider having a garage sale or selling items online to generate some immediate cash to fund your emergency fund.

Resume Retirement Contributions – It is absolutely critical to fully fund your retirement plan each and every year.  You cannot afford to postpone your retirement goals. The only way to reach your retirement and financial goals is by building your assets and savings over many years.   If you have an employer sponsored retirement plan that provides matching funds ensure you are contributing an amount that matches their percentage of matching contributions.  If you do not have an employer sponsored retirement plan, meet with a financial professional to establish an individual retirement account.   The most important point is to make the commitment to contribute money to your retirement every month until you reach your retirement or specific financial goals for your retirement account.

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