Mind Your Business

Mind Your Business Week of 1-15-2014

Do you ever sit around and wonder if you had made a different choice, how your life might have turned out if you had taken a different path? Many of us have wondered that a few times, I’m sure. But this week, one of my favorite friends and a great man in the political world passed. Arnold R. Pinkney, a nationally renowned business and political strategist, passed. What a loss, not only for his family, but to the world. Pinkney was a man who knew what it took to get people elected. You could walk into his headquarters and see the plans already mapped out on how he planned on getting the funds to make campaigns more productive. In this time of political candidates, one must have money to operate. For years, he was known as the partner in Pinkney Perry Insurance, a place that has been around for 50 years. In today’s economy, it’s important to cut costs but eliminating some things such as insurance is not a wise thing to do. Insurance is designed to protect you in the case of an accident but a few slip ups on trying to save money on insurance could really cause your financial health harm. For expenses you pay annually, such as insurance premiums, I want you to break them down into a monthly number. Just take the entire amount you pay annually and divide it by 12. Enter that on the right with the totals. You don’t need to break it down into weeks. We do this is because we really want to earmark that money for the premiums we have to pay and make sure we are planning for them. Saving money is something we should all learn how to do. But, it isn’t as simple as one would think. People try all kinds of ways to save money yet what’s important is to do it regularly and to make budgeting a habit. You can’t expect to just sock away thousands of dollars overnight. There are several steps you need to take before you can even think about investing in the stock market, retirement plans, or anything else above and beyond what you use for paying bills. I often hear people say, we do not have cable anymore or have eliminated a lot of the extra channels. The other day I heard someone say why not send individuals to get treatment for $3,000 instead of sending them to jail which cost $200,000 dollars. That’s a cost savings measure. We live in a different era now. When I was growing up, we had play clothes and school clothes. Those play clothes would last forever. If the knee of the pants got a hole in it, my mother cut them off to make shorts. If your long sleeve shirt got torn on the sleeve, she made it a short sleeve shirt. Yes, you need to have some money in your bank accounts before you can start pumping money into the stock market, real estate and mutual funds. Typically for a client, I would recommend that you have at least three months of expenses saved. You need that little nest egg for yourself just in case an unexpected expense or emergency comes up. What if the car breaks down? What if you need a new refrigerator? Where is that money going to come from? Use credit? That’s what most people think and that is why many people are in debt all the time. I really don’t want you to put yourself in a position where you must use credit cards to pay for things. Credit cards are great for emergencies, when you are out in the middle of nowhere and have no access to cash but they are a bad habit if you are unable to control yourself with them. A cash reserve is like any other investment goal. In fact, it is priority, number 1 for me. It precedes every other investment you will undertake and building a cash reserve is easy. If you already have a positive cash flow, you probably already have a reserve, unless you just go out and buy something fun when you see it then have a bit of money in your account. If you have the positive cash flow, you will want to maintain a three month reserve. Keep saving your excess money until you get there. Now that you have learned how to manage your money and have built a suitable cash reserve, you are ready to start with other goals, such as retirement, college, vacations, or any other goal you may have. At this point, you are really in a position to speak with a professional financial advisor to have them take care of your investments. So start thinking about 2014 as a year to do things different, make adjustments in your financial choices and become ready to accept change for the better.

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Write Wade at the Call & Post, 11800 Shaker Blvd., Cleveland, OH, 44120, or e-mail him at jwade@call-post.com.