QUESTION:

“This past year wasn’t only rough for the economy, it was a near disaster for me financially. I found myself late several times on my car payments and credit card bills, and I never seemed to have enough money on hand when I needed it—even for basics such as food and gas. I’ve ended up paying a lot of late fees, putting me in even more debt, and the credit card companies have raised my interest rates ridiculously high. I really want to get out of this mess and start fresh in 2010. What should I do?”

ANSWER:

It sounds like you’ve been “flying by the seat of your pants” when it comes to managing your money, and this is a sure-fire way to get into financial trouble. When you say you “found yourself late” on your bills, it tells me that you are not taking full ownership of your financial situation.

To move forward in a positive direction, you need to become obsessive about:

• Being realistic about what you can afford (Is my car or home too expensive for my income level? Am I spending too much money on frivolous items like eating out, unneeded clothing, or expensive entertainment?)

• Tracking your expenditures on a daily basis and cutting back where necessary

• Saving money in an emergency fund (in case of job layoff or extended illness)

All of these steps point to your need for a personal budget and financial plan. Why not begin anew in 2010 by making an appointment right away with a financial counselor or planner? NEA MB has teamed with the National Foundation for Credit Counseling (NFCC) to provide both free and very affordable financial tools and services to NEA members and their families. Either call the dedicated toll-free NEA member line at 1-866-479-NEA2 (6322) or visit the special Web page for NEA members at www.debtadvice.org/nea/

In the meantime, start by adopting the NFCC’s “Ten Commandments of Personal Financial Health:”

1. I open my bills the day they arrive.

     This may seem like common sense, but everyday people walk into one of our Agencies with grocery bags filled with unopened bills. Ignoring the problem won’t change anything, but facing the facts and developing a plan will.

2. I review my monthly creditor statement thoroughly.

     Consumers not only need to be aware of the amount they owe and payment due date, but should check their statement for unauthorized charges which could indicate ID theft, rate changes, credit limit changes, and any additional fees that might have been added on. Contact the issuer immediately if you observe anything out of the ordinary on your statement, or if the terms have changed.

3. I pay my bills on time.

     Late fees can be in the $40 range, and one late payment can ding your credit score by as much as 100 points. If you’re a procrastinator, travel, or are just plain unorganized, set up automatic bill paying to make sure you’re never late with a payment.

4. I record each check I write, along with any ATM withdrawals.

     Over-limit and Insufficient Funds fees can be as high as credit card late fees. Even if your financial institution allows you to exceed your balance, you’ll pay a hefty price for that courtesy. Record all transactions and know where you stand at all times.

5. I do not max out my credit card limits.

     Utilizing all of your available credit will likely backfire on you. Creditors like to see people responsibly manage their credit by using only 30 percent or less of what’s available. Maxing out your cards could indicate that you’re in financial distress and move you over into the risk category in the creditor’s eyes. That could equal higher rates and lower credit lines moving forward.

6. I track my spending and know where my money goes.

     You are relinquishing control of your financial future unless you have a keen awareness of your spending habits. Many people feel that having a budget would restrict them, but in reality a spending plan frees you to use your hard earned money exactly as you deem best. Track your spending for 30 days, organizing the results by category. Once you see your spending in black and white, it will put you in the financial driver’s seat where you belong.

7. I have at least one month’s income earmarked for emergencies.

     Unanticipated expenses have been known to wreck the best of budgets. Without a rainy day fund, when the emergency arises, you have to either pay for it by charging, often adding to an already burdensome debt load, or grab cash from another area, thus neglecting that payment. Start by putting 10 percent of each paycheck into an emergency account. At the end of a year, you’ll have a little more than one month’s income stashed away, which will be a welcome safety net.

8. I have three to six month’s income saved in the event I lose my job.

     Job losses have affected almost every employment sector, thus no one is immune from the pink slip. The time to prepare is now. Without a paycheck, cash is indeed king. Accumulating this much money can seem like a daunting task. However, no one has ever regretted having significant savings to fall back on during hard times. Recognize that you’re on a slippery slope if this element is not a part of your overall financial picture.

9. I have an annual insurance check-up.

     No one should be over-insured or under-insured. The way to avoid this is to review your policies once each year with your insurance agent. Make sure that you understand exactly what is covered and what isn’t, as the last thing you need in an emergency is a bad surprise. If you don’t understand the lingo, ask for further explanation. Inquire about ways to save on your overall insurance costs without sacrificing coverage.

10. I have a well thought out plan for tomorrow, and am executing it.

     People have short-term and long-term goals, and we need to plan for each. An example of a short-term goal is a summer vacation. Long-terms goals are things such as a college education for your children and your retirement. Such financial realities cannot be ignored, nor will they take care of themselves.