One of my Debt Free Divas community members just sent this question in about her finances - hope you find it helpful!

Q. I’m determined to get my finances on track this year and would welcome a few pointers on where to start. There’s so much information out there that it becomes confusing. I’m tired of feeling like my debts are overwhelming and I have no money available at the end of each month. What’s bothering me the most is that I don’t really know where my money’s going.

A. Congratulations on your commitment to get your finances in order! The cynics believe that New Year’s resolutions are meant to be broken but it doesn’t have to be that way. The truth is that it’s important to have a plan of action in place that’s simple and easy to follow. Remember, it’s the baby steps that lead to giant results. Okay, let’s talk about these 5 STEPS to a financially healthy new year!

• Set realistic goals – unattainable goals are a surefire way to set you up for failure. I emphasize the word “realistic” as you will build your confidence when you start to see positive results.
• Track your spending – this may seem tedious but it’s the only way you’ll be able to see where you precious dollars are really going. Many people like to remain vague so they don’t have to confess to the miscellaneous expenditures that are eating up their hard earned cash and preventing them from reaching their goals and dreams.
• Envelop system for budgeting – this is all about getting back to basics. Create an envelope for every category within your budget and when you receive your paycheck, allocate a percentage into each category. Generations before us successfully used this system and, in my opinion, it’s still one of the most powerful ways to create and stick to a budget. Believe me, it’s empowering to know where your money’s being spent and it will allow you to make necessary adjustments over time. More so, once the cash in a particular envelope has been depleted, you know you’ve hit your spending limit. As they say, proof is in the pudding!
• Progress not perfection – it’s all too tempting to set lofty, unattainable goals. Unfortunately, that usually results in taking your commitment to that goal from excitment to overwhelm and defeat. I like to remind people that any journey is more about making progress versus striving for perfection. You will find that focusing on progress will take a lot of pressure off of the task at hand. It’s also important that you have some fun and be willing to laugh as you learn!
• Save before you spend – consistently allocating a portion from each paycheck into a savings account (no matter how small the amount) will go a long way to build your money confidence and give you a sense of freedom. Usually, the #1 excuse for not doing this is that there isn’t enough money from each paycheck to save. This is where the envelope and tracking systems come into play as they will both allow you to determine where you’re spending your money that you could cut back on. It doesn’t matter what amount you start with - $25, $50 per month – what matters most is that you start. As you see your savings account balance start to grow, you’ll be inspired to find ways to free up more cash to save.

Embarking on these steps requires you to make a commitment to yourself. You might also consider finding a friend who wants to take these steps with you. The best way to creating a healthy relationship with money is to connect with other like minded people who are on the same journey. Although there will be discomfort along the way, believe me, the rewards will be many!

For answers to your questions about credit, debt elimination methods and smart money management - please email me at coach@debtfreediva.com

Initially, it was Frank McNamara of New York’s Hamilton Credit Corporation that come up with the idea of giving affluent businessmen a convenient way to charge some of their business related expenses.

In 1950, he issued the original Diners Club card. It was made of pasteboard with the customer’s name on one side and a list of twenty-seven restaurants that accepted it on the other. In 1955 the pasteboard card was replaced by one fabricated from plastic.

American Express began issuing cards in 1958 followed by The BankAmericard, issued by the Bank of America. Soon, smaller banks joined the BankAmericard system. In 1977 the card underwent a name change and became …continue reading the article titled Credit Cards, debt of a Nation

It’s that time of year again; soon you will have many sources popping up suggesting ways to spend your upcoming tax refund. Let’s put this in perspective.

First, tax refunds are not “found” money, but a return of money YOU overpaid into the tax system! The average refund check is somewhere around $2,200 and $2,400.

One of the first things that you should do, if you had no abnormal deductions for the year and anticipate that those deductions will remain the same in the future, is to change your withholdings so you don’t overpay in 2006. I have no idea why you would want to give someone (even the government) money to hold onto for a year with no interest being made off of that money.

An easy way to calculate this adjustment is to take your refund amount, divide it by twelve and adjust your withholdings accordingly. Your company’s payroll department can assist you in this process. By doing this, it could give you several hundred dollars …continue reading the article titled Tax refunds a good way to get out of debt

A debt elimination plan starts with an understanding of where your money is going. If you are ever going to become debt free or get ahead financially, you have to start with setting up a budget. I’m not talking about keeping a running tab in your head or doing your best “guesstimate”, we’ve all done that. I’m talking about taking the time to actually calculate every penny that is coming in and going out. It isn’t easy but once it is set up and you get into the routine, it’s easy to maintain and will give you a better perspective about your overall financial situation and allow you to gauge and plan towards the future.

It will take you about 2 hours so; set some time aside undisturbed, and get it done. You don’t have to do the information gathering all at once, start at the beginning of the month. Take a few moments out of each day and start gathering up the materials. Remind yourself that this is the year that I am going to become debt free. I’m going to eliminate my debt and invest in my future.

Treat yourself like a company. Get into the habit of looking at your own personal financial life as you would run a company. Manage your debt and expenses as well as the income coming in correctly and you will reap the rewards as a good CEO or fail as a bad one.

Once you have all of your information, commit to a day at the end of the month that you will put all of it to good use and set up that budget!

Here is what you will need: …continue reading the article titled Get Debt under control by setting up a budget first

When dealing with debt, stay calm and try to focus on the positives. If you are digging yourself into a hole, month after month, the simple solution is to stop digging. The real estate market in most places throughout the Country has created equity in peoples’ homes. Looser lending practices has also made it easier to borrow as much as 10% more that what your home is worth. But is consolidating all of your debt into one monthly payment the answer? Here are some things to look at when considering a debt consolidation loan:
…continue reading the article titled Debt consolidation loans - Good or bad for you?

This is a question that came in from one of my readers asking for advice on how to address money concerns with her husband as times are tough. Communicating about money at the best of times is not always easy. Read on to learn some tips for effective money communication…

Q. I listened to your radio show last weekend. My husband and I recently refinanced our home to consolidate several credit cards that we had allowed to run up after he had to take a pay cut at his job. We have always had difficulty communicating about money, and it has reached a point where he has completely shut off and all we do is argue if either of us brings up the subject. I am concerned because we have started to use the cards again, for everything from gas to groceries to department stores - and I am fearful that we are going down the path to destruction we just emerged from a few months ago. I truly believe our lack of communication is the root of the problem
…continue reading the article titled Communicating about MONEY to avoid marital woes!

Good question that i’m asked alot about!

Should you borrow from your 401(k) plan to payoff debts?

Some might argue that it makes sense as you’ll end up paying yourself back with interest.
If you have money problems, borrowing from your 401(k) plan may seem like an easy answer. In fact, in theory, it makes sense.

…continue reading the article titled Should I borrow from my 401(K) plan to payoff my debts?

Hopefully, you’ll never find yourself in this situation but it’s best to be in the know about what steps to take should so that you’re fully prepared! read on…
Dee Dee Sung, www.debtfreediva.com

1. notify your insurance company to apprise them of your situation and that you’ll be making a claim.

2. make an itemized and detailed list of what you’ve lost (include pictures of belongings, if possible - in fact, good to take digital pictures of your valuable possessions beforehand) with dollar values. This is why it’s advisable to keep a home inventory in a safe place.

…continue reading the article titled Protect your Finances should disaster strike!