The stock market has lost more than 5,000 points off of its 2007 high. Unemployment has spiked to 6.7 percent and appears to be climbing. The state has a budget deficit that would gag a yak. And the only bright spot — the decline in gas and oil prices — might be part of a deflationary spiral.
Happy New Year!
Now you have the background, let me ask a question. Who isn’t concerned with their financial situation? OK, you two stop reading. For the rest, this Dan’s for you.
If you are like any sane American these days, you are consumed by the mathematics of your life. I don’t mean quarterback ratings or your bowling score. I mean cash money — how to earn it, how much you have and how not to spend it.
As the saying goes: “Today is the first day of the rest of your life.” You are starting a new year. Get off your duff and get your financial life in order. You’ll thank me later.
Whether your name is Bill Gates or Joe the Plumber, you need to start out by knowing how much you have and how much you owe. Use a spreadsheet if you are computer savvy; a piece of paper if not. Make a list of all your major assets and how much they are worth — bank accounts, cash on hand, 401(k)s and mutual funds. To make it simple, just pick things that have an obvious cash value. Leave out your car, house and your “Star Wars” collectibles.
Now make a list of those icky debts — credit cards, student loans, debts to family, car payment, etc. Leave out your house for simplicity. Add each list and compare them. That’s your financial starting point. The odds are you are in the red. That’s bad.
The average U.S. credit card debt alone is $9,200 according to Cardweb.com. If you pay off $100 a month, it would take you almost eight years to pay that off without interest. So you have your work cut out for you.
Now figure out what you spend in a month. You can do a budget, but most of you won’t follow it. A simpler way is to check your recent bank and credit card statements and see who you paid and how much. Try to come up with a realistic monthly estimate. Count in the money you spend for lunch, lottery tickets and walking around money.
Now look at your paycheck. Is there any left over after all those bills? Can you keep spending that much money and start paying off those debts? Probably not.
So today’s lesson is to stop. Don’t stop spending, stop some of your spending. Start by cutting what you don’t use. Cut back cable, drop those magazines that pile up unread, stop your free-spending ways. Pay down the highest interest debts you have. Use the extra to pay down debt. When that’s done, start saving.
You probably won’t be finished in 2009, but if you listen, next New Year’s might be a lot happier.
Dan Gainor can be seen on the Fox Business Network. He is T. Boone Pickens fellow at the Media Research Center’s Business & Media Institute, a career journalist and media commentator. He can be reached at [email protected].
