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5 steps to total financial control

Written by Dian Herdiana on 9:52 AM

Ebony, Jan, 2006 by Shirley Henderson

1. Be real about what you spend.

Gary Harris, a financial advisor and owner of GH Asset Management, LLC, in Chicago, says his clients usually know how much they spend for monthly expenses--such as their mortgage, car payment and insurance. However, many have no idea how much they are paying on what he calls "entertainment expenses." For example, if a couple eats out five days a week and spends $10 each, that adds up to a whopping $400 per month, money that can be set aside for investment planning.

Financial experts advise people to make a cash-flow projection so that they will know what they are spending on discretionary items. Every month use money management software, which can help track your spending habits.

2. Consult with an expert.

A financial professional can be helpful when you are trying to manage your money successfully. They can customize a financial plan for you and your needs and lifestyle, in addition to providing you with a credit analysis. Harris helped one client pay off a $30,000 credit card debt, which is a huge liability for most people.

3. Take control of your debt.

In January, most of us wish that we had cut up our credit cards because we overspent during the holidays. An option to a credit card is a debit card, which allows the money to be deducted directly from your bank account, so you are less likely to overspend. If you are overwhelmed by debt, seek help through a credit repair company. But make sure the company you choose is a not-for-profit company that offers debt management services and/or personal counseling for a small fee. Beware of scam credit repair companies that over charge customers.

4. Hake saving automatic.

How many times have you heard people complain about not being able to save money, even though they work every day? Financial experts suggest having the funds for savings deducted from your payroll check and placed into an account that you cannot easily access, such as an annuity account or CD. Start with saving 5 percent of your income and build up to 10 percent.

Many banks have automatic transfer forms that can start the financial ball rolling.

5. Consider the future.

One in three African-Americans has a single source of income and likely will rely on Social Security benefits when they retire from their jobs. That is usually not enough. African-American women especially should actively save money in a 401k account, which many companies offer, or an IRA account. Since women tend to outlive men and are more likely to face poverty, they usually lack the assets they will need to live comfortably after retirement. "We call them junior bag ladies," financial advisor Gary Harris says of women who don't set aside retirement funds. "They are not picking out of garbage cans now, but in the future many definitely will graduate to being bag ladies."

While the bag-lady scenario may seem both grim and extreme, it's not completely out of line. Money problems can snowball into serious debt due to overspending and lack of planning. However, there are several resources available to help you get your financial house in order. If you are unable to do it alone, hire a financial advisor. Also, some banks offer services designed to help clients get financially stable. By taking the right steps, you can accumulate money in the bank and keep creditors off your back.

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