Suze Orman's Action Plan (16 page)
Read Suze Orman's Action Plan Online
Authors: Suze Orman
Separate wants from needs.- Get over your guilt that you aren’t “providing” for your kids.
- Strike the word “deserve” from the conversation. What you deserve is irrelevant; what you can truly afford is all that counts.
- Try to negotiate better terms on a car loan you can’t keep up with.
- Be very careful when asked to cosign any loan, no matter how much you love the person who is asking for your help.
SITUATION:
You know your family needs to save more, but you have no idea where to start.
ACTION:
Get a grip on where your money is going. You can’t move forward building an honest financial life if you don’t first understand where you are today. I want you to slowly and carefully fill out the Household Cash Flow worksheet below. To do this, you need to first pull out a year’s worth of bank statements and credit card statements. The amount you put in the right-hand column should be the average cost for the past 12 months.
WEBSITE
ALERT:
A more extensive version of this worksheet is available for download on
www.suzeorman.com
.
| EXPENSES | MONTHLY COST |
| HOME | |
| MORTGAGE/RENT | |
| HOME EQUITY LOAN | |
| PROPERTY TAX | |
| INSURANCE | |
| MAINTENANCE | |
| UTILITIES | |
| Gas and Electric | |
| Heating | |
| Water | |
| Home Phone | |
| Cellphone | |
| Cable/TV | |
| Internet | |
| MAINTENANCE | |
| Repairs/Upgrades | |
| Gardener | |
| Snow Removal | |
| TOTAL MONTHLY HOME EXPENSES: | |
| FOOD | |
| Groceries | |
| Dining Out/Takeout | |
| Coffee | |
| TOTAL FOOD: | |
| CAR/TRANSPORTATION | |
| Car Loan #1 | |
| Car Loan #2 | |
| Gas | |
| Maintenance | |
| Tolls/Paid Parking | |
| Car Insurance (total all cars) | |
| Public Transportation | |
| TOTAL CAR COSTS: | |
| OTHER INSURANCE | |
| Health Insurance * | |
| Life Insurance * | |
| Disability Insurance * | |
| Long-Term-Care Insurance * | |
| Dental Insurance * | |
| TOTAL OTHER COSTS: | |
| MISC. SPENDING | |
| Child Care | |
| Private School Tuition | |
| Entertainment (Movies, DVD Rentals, Concerts, Sporting Events) | |
| Hair/Manicures/Pedicures | |
| Club Memberships | |
| Computer Equipment and Games | |
| Clothes | |
| Gifts | |
| Vacations | |
| Medical Copays and Out-of-Pocket Expenses | |
| Pet (Food and Vet) | |
| Media Subscriptions (Newspapers, Magazines, Online) | |
| Charitable Contributions | |
| Other | |
| Other | |
| Other | |
| TOTAL MISC. SPENDING: | |
| OTHER LOANS/DEBT | |
| Credit Card 1 | |
| Credit Card 2 | |
| Credit Card 3 | |
| Student Loan | |
| 401(k) Loan | |
| Bank/Personal Loan | |
| TOTAL OTHER DEBTS: | |
| MONTHLY SAVINGS/TAX PAYMENTS | |
| Emergency Savings Account | |
| 401(k) Contribution * | |
| IRA Contribution | |
| College Savings Fund | |
| Self-Employment Tax Payments | |
| TOTAL SAVINGS/TAX PAYMENTS: | |
| TOTAL EXPENSES (A): | |
*
If these items are taken out of your paycheck, they do not need to be itemized on this worksheet, which tallies expenses against take-home pay.
| INCOME | MONTHLY AMT. |
| After-Tax Pay | |
| Rental Income | |
| Dividend/Interest Income | |
| Social Security | |
| Retirement Income (401(k), IRA, and Pension) | |
| TOTAL INCOME (B): | |
| TOTAL INCOME–TOTAL EXPENSES (B–A): | |
SITUATION:
Your expenses are more than your income.
ACTION:
Circle every expense in your worksheet that is a “want.” It is imperative to separate expenses that are for true needs (health insurance, the electricity bill) from those that are not crucial for your family to function (gym membership, new clothes, computer games, etc.).
If you do not have an eight-month emergency savings fund, if you have credit card debt, and if you are not saving for retirement, you have no choice but to reduce and even eliminate many of the “wants” your family is spending money on.
This is not supposed to be a comfortable or easy exercise. Cutting down from four manicures a month to three is not going to get you where you need to go. Your financial security is buried in
those expenses. The more you are willing to curtail spending on those expenses, the more money you have to protect your family. The $25 you don’t mindlessly shell out to the kids every week when they head out to spend time with friends is $100 a month you have to put toward a term life insurance policy that protects them if anything were to happen to you. The $300 a month you don’t spend on the second (or third) car your family can do without is your future retirement security; put that much in a Roth IRA for 20 years and you will have more than $157,000, assuming your money grows at an annualized 7% rate.
SITUATION:
You feel guilty cutting back on what you’ve always provided for your family.
ACTION:
Decide once and for all if you want to indulge or protect your family.
It really is that simple. If you have credit card debt and no emergency savings, I have to tell you, you do not care about your family’s safety and security. All you care about is being the hero who doesn’t say no, the bottomless ATM for every desire, expectation, and wish your family has.
That is indulgent. And destructive. Let’s walk through this together. You look at your expense and income worksheet, get frustrated, and decide to just continue down the path of overspending. You ignore the fact that your credit card balance
keeps rising. You ignore the fact that you have no emergency savings. You ignore the fact that you have very little saved up for retirement. You ignore the fact that you don’t have health insurance because it is just too expensive.
And then you get laid off. Or you get sick. You can’t pay the mortgage, and you have no savings to help you in this time of emergency. So the downward spiral begins. You might even lose your home. All because you feel as if you must always give your kids everything they want—and right now. How does that indulge your kids?