Top Money Questions Answered by a Financial Counselor
Jun 10, 2014
CCCS, Financial Tips for Families, Free Financial Education
When it comes to money and financial management, there are all sorts of questions that need answering. Part of what FamilyMeans offers to people aside from Debt Management Programs and more direct Financial Solutions is financial education for everyday life. Some popular and easy to overlook questions are the topic of our blog post today, answered by one of FamilyMeans' experience Financial Counselors, Lana Brown:
SHOULD I TRANSFER FINANCIAL BALANCES?
The offers to transfer your financial burdens are coming less and less often these days than in years past when they seemed to flood our mailboxes. This doesn’t mean that the allure of borrowing money for next to nothing now, in the HOPES of paying it off in a short time, is any less appealing. While this may seem like a smart move, let's look at the reality of it though. If you truly feel the money you borrow will be repaid in full before the expiration, by all means do this! BUT, if you know finance charges (which may be at higher rates than you currently have) will appear in six months, the real smart move is to make a financial plan to repay TODAY. It is important to break the mindset of always transferring your debt.
SHOULD I LEND MONEY TO FRIENDS?
Have you lived through this scenario before? “A friend wants to borrow money from me for a motorcycle. We’re good friends and I know they will repay me. I just need some help setting up some terms for repayment.” Turn and run for the door! Do not lend a friend money for a motorcycle or anything else. The best thing you can do is refer the friend to a lending institution – bank, credit union, his Grandpa – and let them deny them. THEN have a conversation about why they are a bad risk and why the established lenders are not willing to risk offering them a loan. If they won't, then why should you? The friend needs to learn about becoming responsible with their own money and establishing credit. If this honesty breaks the friendship, then it maybe wasn’t that strong to start. Wouldn’t you rather say, “Our friendship ended because I wouldn’t loan them money” instead of “Our friendship ended because they didn’t repay me and I had to keep hounding them?" If not, then you're out $7,000 AND a friend!
SHOULD I CO-SIGN A LOAN FOR SOMEONE?
Here's another possible familiar scenario: “My granddaughter asked me to co-sign a car loan for her. What are my responsibilities?” Short answer – You will be responsible for repaying this loan if your granddaughter defaults. Can you do that? If not, don’t co-sign! Certainly, people believe others will do their best to repay, but sometimes people lose income and not be able to pay. The granddaughter may be involved in an accident and see no reason to repay a loan for a vehicle she cannot afford to repair and can no longer drive. This happens very often. If someone needs a co-signer, they are not considered a good risk by the lender. This person needs to save for a down payment, plus show consistent savings in the amount of a car payment and then a bank or credit union will look at them more favorably without needing a co-signer. If you want to help her, buy her an old beat up car while she gets in a better financial position. Make her responsible for all costs associated with the old car. In thise case, you are only getting her some interim wheels while she works hard to get better ones.
HOW DO I BALANCE MY LUXURY SPENDING?
Prioritize your spending. Even though everyone has varying priorities, only a few main priorities truly exist – shelter, some utilities associated with that shelter, food, clean clothing. We live in a world of luxury. Luxury which the media has turned into necessity. So many wants have turned into needs. My teen needs a cell phone. Did cell phones exist when you were young? My teen won’t wear clothes unless they are of this label. Did you even know what a label was if it wasn’t Wrangler or Keds? My kids complain when it’s too hot. Did your home even have air conditioning when you were a kid? When money is really tight, pay the housing, keep the utilities on for the refrigerator, cooking, and washing people and clothing. Grow your own food or buy food you have to cook on the stove, not heat up in the microwave. These are the necessities of life, along with kissing your loved ones "Good night."
Looking for more financial education tips? Contact FamilyMeans' Financial Solutions team to learn more.