Guest Writer: Calvin Russel Jr.
Many young adults apply for student and auto loans only to get denied because of a low credit score. Some of them have no idea how to build credit or how to start on the right path. That is usually when the parents come in. Some parents show their children how to build credit, some build it for them, and some tell their children to never build or worry about credit at all…..only to end up co-signing for them later because of it. I assume since you are reading this, you are far from the latter. Lets get started.
1. Add Them To Your Credit Card As Authorized Users
Adding your child to your credit card as an authorized user is the easiest way to help your child build credit. What makes this process so simple is that most credit card companies offer this as a free service for up to a certain amount of Authorized Users. First, an Authorized User is someone that is added to an account with limited access, and adding an additional card is optional. Keep in mind that when the bill comes every month, the payment history, balance, limit, and utilization will show on the primary and authorized users credit report. The beauty of this feature is that the authorized user score increases even without them having to do anything to the account. Be sure to check with your credit card company to find out more about the terms associated with your card.
2. Add Them To Your Auto Loan (Reverse Co-Signing)
Normally when a young adult is looking for a car, they go to a dealership with their parents in hopes that they will co-sign for them. Once the young adult is denied for the loan, the parent usually steps in and saves the day by becoming a Joint Applicant on the loan. This is called “Co-Signing.”
With “Reverse Co-Signing” a few different steps take place. This will only work if the parent is in the market for a vehicle and has at least a 640 credit score or higher. Here’s how it works:
1. The parent wants a car for themselves
2. The parent can get approved for the auto loan by themselves.
3. The parent adds the young adult to the loan even though the auto loan is for the parent.
4. The interest rate may increase as the joint applicant (the young adult) does not have any or light credit.
5. The parent makes all of the payments of course because the car is for the parent
6. That payment history shows on the young adults credit report.
7. Over time, those payments help create a healthy high credit score for the young adult.
8. When the young adult wants their own auto loan, the banks will more than likely say yes as they currently show a healthy payment history of another auto loan.
9.The young adult is happy with their new car and a co-signer was not needed during the process!
3. Add Them To Your Personal Loan
If a parent is looking to get a personal loan, they can add their young adult children as joint applicants as well. This process may require more paperwork, as a personal loan will go by income, W2’s, Bank Statements, and etc. In the long run, it will be well worth it and will add a healthy payment history to the young adults credit report.
4. Show Them How To Use A Credit Card Properly
Overall, the parent should know how to use a credit card properly but most importantly, to show their children and young adults how to do the same. This process can work for both retail credit cards and the normal bank issued credit cards as well. For the article I wrote on How Credit Cards Work, click here.
The Bottom Line
As a parent, you can see that there are multiple way to help your young adults build a high and strong credit score. I have seen all of these ways work in the best favor possible for the parent and young adult. There have been many cases in which I have seen scores as high as 760 and the young adult had no idea about their credit score being so high or how it got there in the first place.
Calvin Russell Jr is a Certified FICO Professional and the CEO & Founder of Simply Professional Credit Consultation. SP Credit Consultation has helped hundreds of people increase their credit scores, qualify for homes, cars, and lower interest rates with their personal, Step-By- Step Action Plans. Contact us today to learn more or email us at info@gosimplypro.com.
Category: Finances
Awe, summer is upon us and we have made it through the color of fall, the freeze of winter, and the unpredictability of spring. But summer is a whole different can of worms. A few things we know about summer is: it will be HOT, there will be block buster movie releases, our kids will be out of school, there will be countless road trips, weddings and family reunions documented on social media and our professional office environments may present a sliding scale of co-worker attendance who have opted to partake in the summer fun.
And then there is you. You and the spouse have talked about getting away for a trip or two throughout the year, but it never has happened.
Enter the stay-cation (the local vacation).
This year you are determined to not only to take some sort of vacation, but make a plan, keep the plan, and do it. Of course, because it is already July, Jamaica or Cozumel may not be in the budget, but there are a few things that can be done for the spontaneous and or budget conscious traveler.
It is called the Stay-cation or local vacay! And what a jewel it is indeed! Of course before you go running through your city streets claiming to indulge in one of these gems, some planning may be required for you and your family. Here are some tips on how to plan and pull off the ultimate in-town retreat!
- Decide the goal of the stay-cation. Whether it is to unplug and unwind, rekindle, catch-up, or cuddle up, between you and your spouse, this decision should be made and agreed to so that all agendas are cleared from interruption and all intentions are clarified from the beginning to avoid confusion.
- Decide where in-town you want to go (city or suburbs). This is big because this determines how far away you want to travel if you live in a bigger city or wouldn’t mind journeying an hour or two down the highway to feel like you’re in a new place. This is also important if you want just spouse to spouse time or family time, meaning if you have children to consider and may need a sitter you may not feel comfortable straying too far.
- Decide on activities. This is a biggie. What are the activities that you want to do together or as a family that you just haven’t had time for but would possibly do if you went a vacation elsewhere. Could it be going to the movies, indulging in a spa day, checking out an exhibit at a museum, going to a lounge to hear good music or check out a concert that will be in your area, or the simplest of them all just stay in bed all weekend with no agenda or schedule.
- Decide and commit on budget for activities and if possible plan ahead. Spontaneity is great but it’s not fun taking your spouse out of the house for a weekend and you have to remain on a super tight or low budget. There is nothing wrong with budgeting but for some people, they would prefer to do things at home if there is a constraint.
- Discuss strategy for childcare if applicable: will the child or children be in town during the summer, or will they be away with a friend or family member. This is important because if the child takes summer trips too it may be a good idea for spouse to vacay while the child is away.
- Decide the frequency of the stay-cation. Yes, frequency! With things such as time and budget constraints or childcare to consider, the stay action may the best and most feasible plan for family vacation or weekend getaways with your spouse. So with that in mind, the frequency is left up to you to decide. It could be one epic summer vacay weekend that you tackle a few bucket list items at a time, or it can be a commitment to break from the norm each quarter or season of the year to spend that QT with your baby, or it could be just one night once a month to just get away.
Again, it’s whatever you and the spouse decide, BUT whatever you decide make sure that the enthusiasm and/or willingness about your stay-cation choice is met equally from both sides! Happy Planning!
A husband and wife, at the most basic level, are a team. Man and wife become a special force of power when their minds come together in unity. At every stage in marriage, think of creative ways to divide and conquer in accordance with what God has called you both to do. A married couple must fight together in order to overcome the temptations of culture such as adultery, divorce, apathy, and even the average status quo. Here is a guide to becoming the best married team ever.
#1: Set a Game Plan
How can you win a game without a game plan? In the same way, how can you win in marriage if you have no idea what to conquer? Do you have business plans, ministries, college funds, financial goals, or anything else to plan for? If you answered yes to any of those questions, then you need to establish goals and make them measurable, establish roles and make them flexible, and establish expectations and make them attainable.
#2: Develop Yourself
In other words, continue reading the Bible. Spend time in prayer. Grow in your spiritual gifts. Surround yourself with strong, ambitious, like-minded people. Read books. Whatever you do, keep growing. If you’re not growing, you’re dropping the ball. You will hold your spouse back if their level of faith and mindset is a 10/10 and yours are a 2. Together, you both must develop in Spirit, in mind, in body, and in soul.
Not everyone is skilled to play quarter back. Not everyone is built to play center. Figure out what your calling is in marriage and in life, and hone in on it. Many times, your calling is intertwined with your spouse’s. If you’re operating at your full potential in your area of expertise, then your team will be better for it.
#3: Empower your Teammate
This is where many teams fail. They mistake their teammates for their opponents. They begin tearing them down with their words, their attitude, their lack of support, and their apathy. But, when you remember that your teammate’s success directly influences your success, you’ll do everything you can to ensure that they’re growing.
If they miss a shot, cover for them. If they make the wrong play, then improvise with them. Encourage them. Challenge them. Build them up. Take responsibility for all that they fail at and all that they accomplish. Don’t ever blame them for the team’s failure. Your spouse is a reflection of you. If your spouse isn’t playing good and hard, then ask yourself, “What am I doing to empower my teammate?”
#4: Play by the Rules
You could play a mean game with your partner or you could make a bunch of fouls and forfeit your chance for victory. In order to play clean and win big, you must treat every disagreement, argument, and bump in the road with love and care. You’re only giving leverage to the enemy if you decide to belittle your spouse when emotions are running high, or to threaten divorce every time life gets hard.
Play by the rules: Forgive easily. Keep no record of wrongs. Treat your spouse the way you’d want to be treated. And in all circumstances, approach your spouse with love and respect.
If you aren’t already functioning as a team or are just beginning your journey as a team, remember that becoming a good team will take time. Take the time to learn your spouse’s strengths and weaknesses; this will help you understand how to be the best and most supportive teammate for them. If you want to win the game, it’s time to start acting like a team!
Saving your money is the key to growing financially. Saving helps you grow because it stops you from falling into debt and also frees up money that can propel you forward (e.g. investing). And, when it comes to saving, there’s no better time to start than when things are fresh and new as newlyweds.
As important as saving is, most couples just simply don’t do it. The truth is, without the encouragement and focus to stay motivated; giving up on your savings goals can become way too easy. So, how do newlyweds overcome this financial hurdle?
Here’s a little secret to success: couples that are specific with their savings goals have a higher chance of actually achieving them. Tell me this: would you be more motivated to save just to see the numbers in your account climb higher, or to be able to take that trip to Hawaii happening next spring? Being able to see the benefit of you saving can help you say “no” to some of the right-now purchases so that you can say “yes” to the larger reward that you’re saving for. In order to be motivated to reach your goal, the goal must be clearly defined and a goal you are actually motivated to achieve.
So, here are 8 really good and (really specific!) savings goals for newlyweds who want to rock their money, meet their goals, and start off strong!
#1 Emergency Stash
Probably the most important of them all: the emergency fund. Nothing sets you back more quickly than a very large surprise-expense. You can’t predict every cost that will pop up, but you can set aside a generic amount to protect your budget, off-set the unexpected cost, and make sure you don’t have to dip into your funds for other things, such as that trip to Hawaii!
Generally, most couples try to save at least 3-6 months of their living expenses; some do more and some do less, but general you want to keep a base of at least $1,000-$2,000. The amount should be based upon your specific situation and what works for your family.
#2 Credit Card Debt
Was your wedding over budget? Are you still paying on those spending sprees from college? Credit card balances have a bad habit of lingering. But, paying them off can free up money for some of the more fun savings goals that are important for your future. And, when you pay them off, you aren’t throwing away money towards interest rates.
Hint: paying more than your minimum payment will help you quickly pay off this debt (but you have stop using the card first).
#3 Student Loan Debt
I’m not just calling this out because I’m paying off $180,000 in 3 years . I truly believe that all debt should be paid off because we have so much more that we can do with our money. I mean, I thought of 8 things just for this post! I also believe that no matter how high your debt, when you can commit to paying more than your minimum payment consistently, you can do some serious damage to your student loans.
#4 Getaways / Family Trips
One mistake many couples make is being all work and no play. We have to start to making time and setting aside money for fun. We need those trips to revitalize us! So, make sure you start planning for these trips now so you can make them happen. It may be expensive to travel, but if you plan a year or even two years out, you can go anywhere. Plus, planning them together is a lot of fun!
Also, it’s really easy to price -out a trip beforehand, even if it’s just an estimate. And, if you work with a free travel agent, it’s even easier. You can check out how we went to Costa Rica on a budget here.
#5 Baby Fund
We don’t have kids yet, but we want to be as prepared as possible when we’re ready for them. I know, I know, you can never be fully ready for kids, but that doesn’t mean we can’t try our best to be prepared as much as possible ahead of time!
There are so many mommy bloggers who have spoken in detail about their expenses, along with other great resources and mommy-tips. This article seems to list every possible thing you can buy for baby. It’s a great resource to pick and choose what you’ll need, and get a good sense of cost.
My philosophy is to always pick a goal that works for your situation. If you’re not yet pregnant and have a year or two to save, you may want to shoot for the higher amount. If you’re 4 months away from baby arriving, put away what you can. Any amount you save will be more than if you saved nothing at all!
#6 New Car/House
I’m about that cash life. So, when hubby and I buy a car within the next year or so, we plan to buy with cash. I can’t pay off this student loan debt only to go back into debt for a car. I believe if you plan for any purchase early enough, you can save for it. If you know you’ll need a car within the next 1-2 years, don’t let anything stop you from prioritizing this as a savings goal. If a house is in your future, don’t just bank on getting the largest home loan (sorry, pun intended).
Save for the entire purchase (yes, that includes a house!), or save as much as you can to reduce the amount you have to borrow. It all depends on how long you’re able to save, and how consistent you are with putting money away.
#7 Kid’s college fund
If baby is already here and you want him or her to go to college without the massive student loans, one way is to start saving for their education now.
There are savings/investment plans that I recommend you discuss with a certified Financial Professional (e.g. the 529 College Savings Plan is extremely popular…you can read more on it here).
#8 Early retirement
Most people don’t want to work forever, but few put extra money toward early retirement (or even regular retirement). I want to work as few years as possible, or at least have the freedom to quit and travel the world. Yep, I’m talking the type of financial freedom where you can never work another day in your life because your money makes money (in interest).
Investing is really the only way to get here. If you invest a certain amount over the course of 20-30 years, you can have a serious nest egg depending on how the market performs. Again, I recommend you speak with a trusted Certified Financial Planner for your options, your risk, and what it will take to reach your goals.
At the end of the day, you can’t go wrong with any of the above savings goals. But, it can be overwhelming if you try to tackle them all at once. I like to use the simple rule of 1-3 money goals at a time. Depending on the amount, you may just want to go hard on one. Focusing your money on fewer goals helps you see greater progress; and this is important for building momentum and keeping at it. Most importantly, get started! If you don’t ever start saving, you can’t ever reap the benefits of saving!
So, what savings goal/s is your household focusing on?
Think about the money goals you set in January. Remember how excited you were to have a plan to get out of debt, save for that big trip, car, or house? You were so excited to finally see financial progress, that you welcomed the challenges and sacrifices required to achieve those goals. Turning down those random trips felt easier and cutting out fast food purchases, a breeze.
But now we’re a few months in, and keeping up this strict behavior to reach your goals is starting to feel impossible. Or maybe you’ve put in the work, but circumstances beyond your control have set you back.
How do you motivate yourself through times of stagnation?
Let me show you how I deal.
I’m in year 2 of a 3-year journey to pay off $180,000 of student debt. To reach this goal requires me to be very strict with where my money goes. Most “treat myself” spending is out the window. I have very little room for random trips, fast food stops, or anything random for that matter (you’ll be surprised at what you can accomplish when you’re just more purposeful with your money). Needless to say, this behavior isn’t easy. But with the grace of God, I made it through a full year.
At the end of year 1, I knocked out $80,000 in student debt. I celebrated, patting myself on the back, because it felt like a HUGE accomplishment. But the excitement soon left as I thought, “Man, I have 2 MORE YEARS of this?” The thought of 2 more years of living on such a tight budget felt impossible, and I started to question if it was even worth it.
But giving up is never an option for me (confessions of an overachiever!), so I had to (and continuously have to) find ways to motivate myself, and refocus.
Here’s what I do:
#1 I focus more on why I’m doing it
I’m pressed to pay off $180,000 in 3 years, so that I can be free of debt before my husband and I grow our family. The money that is currently going toward my debt would be much better served going toward our children’s tuition and other family savings, especially investments.
I also need to be debt free for our long-term goal of being financially independent. This is the point where we’re able to live off of the interest that our money earns (from investments). We want to be able to give, travel, and enjoy life without being set back financially or worried about making ends meet.
Focusing on why I’m doing it gives me the will to keep fighting for it.
#2 I remember how far I’ve come
Year 1 of my student debt journey may have been hard, but when I look at the result, it was well worth it! Before year 1 I owed $180,000. After year 1 I owed closer to $100,000. This was progress, and I needed to focus more on that progress.
This isn’t too hard to understand, right? Focusing on the progress you’ve made makes you feel good, like you can do so much more (which you can!). And focusing on the difficulties makes you feel bad, and you ask yourself, “Why would I go through this again? Maybe this isn’t for me.” You and I both know where we need to place our focus 🙂 .
Remembering how far I’ve come feeds my momentum, as I push through.
#3 I identify the main barriers holding me back, and I adjust
It’s great to focus on my year 1 progress, but I didn’t want to completely ignore what made it so tough. If possible, I want to make these next 2 years easier, to increase my chances of sticking to my goal.
One of the tough things about year 1 of my student debt journey was balancing my student goals with my contribution to our family goals. I don’t want my marriage feeling the burden of my student debt goals. Given how hard my husband, Tyrone, and I work, I want us to be able to do some of the things we love (and need) to do to enjoy ourselves.
To help with this balance, Tyrone and I sat down at the end of 2014 and planned out our 2015. We talked through any major trips we’re hoping for, as well as our expectations around “date nights,” dining out, and other regular spending. Thinking about these things ahead of time, gave me a better idea of how much to set aside regularly, so that it wouldn’t be a constant fight between what goes toward my student debt and what goes toward our other goals. I now have regular amounts going toward our emergency fund, travel fund, and other items we aligned on. And yes, it required that I slightly decrease what goes toward my student debt, but it’s more realistic, which means it increases my chances of sticking to it!
Addressing and adjusting for my barriers increases my chances of success.
I used my personal journey just as an example, but I encourage you to try these same 3 tips before you give up on your money goal(s):
1. Focus on why you’re doing it
2. Remember how far you’ve come
3. Identify the barrier and adjust for it
Remember, “slow progress” is better than “no progress,” and “no progress” is simply an opportunity to adjust. You can make it happen!
P.S. If you’re on your own student debt journey, I encourage you to download my free toolkit that helps you set a strategy, find more money to put toward the student debt, and track your progress.
The excitement of the New Year has come and gone, and now you’re ready to see progress on all of the awesome goals you set for the year.
The two of you do everything you’re supposed to. You agree to focus on one goal at a time, you set an amount, a deadline, and you both make “per paycheck” commitments. But as the paychecks come, you just can’t seem to find the money you promised to set aside. Or maybe unexpected cost increases (like gas/utilities) or emergencies (like car maintenance) are making that financial goal feel impossible!
It’s so important to see progress, so that you don’t give up in the middle of your goals. We may not be able to increase our income (yet!), but we can do more with what we have. We can’t stop the unexpected from happening, but we can prepare ourselves so that when it does, we can bounce back.
My husband and I organize our money using multiple accounts. Not only has it made it easier to see progress in our finances, but we can quickly recognize where we need to adjust when the unexpected happens.
Here’s what we do and how it helps.
We organize our day-to-day spending with 2 accounts: bills & “fun” money
Most couples’ day-to-day spend can be bucketed into 3 major categories: bills, necessities, and “fun.” It’s so critical to know how much you spend on each, so that you know where to cut back to feed your financial goals (read more about these spending categories).
But after doing the work to track your spending in each area, you don’t want to throw it all away by having your bills/necessities and fun money in one account.
Can you imagine always having to remember how much of your total balance is for bills/necessities and how much is for fun? It sounds tough and usually doesn’t work. We end up spending bill money on fun items, or vice versa. Of course bills and necessities will always come before fun, but the beauty in separating the two is that it becomes obvious when a bill increases. So even though you may have to cut into your fun money this month, you can better dictate how to adjust for next month (e.g. less fun stuff).
We have individual accounts, for individual spending
I can feel everyone tense up already 🙂 . A married couple with separate accounts? Call the church police! Okay, I’m dramatic. But in all seriousness, I do believe it is important to have money as individuals, because there are things you still spend on as an individual, even when you’re married. There are many who take “becoming one” very literally, but what is most important is that you are one spiritually. When it comes to money, it is more important that you are one with your financial goals, than to simply merge all of your money into one account. Unorganized money is money not doing what you need it to.
The hubby and I went the route of keeping our individual accounts. So each month the majority of our money goes toward our joint accounts (our joint bill and spending accounts are our primary accounts), but our “individual allowance” is left in our individual accounts. We’re still open and honest about our individual accounts. It’s just another way to organize our money.
If having individual accounts isn’t your thing, you can try withdrawing your personal allowance as cash and using Dave Ramsey’s envelop method. I personal find it difficult to track your spending with cash, but you have to do what works for you. Remember we’re organizing our money so that we’re not spending on what we didn’t plan to. I don’t want to overspend on myself, and have it cut into our family goals. I’m all about seeing progress on the plans that we have for our money.
We organize our savings into categories: for example, emergency and travel
Capital One has been awesome with our savings account because they allow us to have multiple categories. So although we have one account, we can contribute to our emergency fund separately from our travel fund. Similar to our bills and fun money, we do this so that we’re not, for example, traveling with our emergency money. Your categories may be different based on your goals, but separating them will make planning (and seeing progress) much easier.
To sum up my tips: know where you spend. Know where you want to spend, and organize your money in a way that will help you get there. These habits will help you see greater progress in 2015. They will also force you to plan ahead and think about those major expenses you expect throughout the year. This leaves you in a better position when emergencies arise. Remember, the goal is make it easy to see progress and to know how to adjust when the unexpected happens.
I love the New Year, especially as a coach. I really enjoy hearing about people’s 2015 plans for their money, and nothing makes me happier than seeing people achieve those plans!
But what breaks my heart is seeing financial goals pass like many other resolutions. I never want people to stay in the same place, when I know they deserve financial growth.
Those who struggle to see growth may have very complex situations outside of their control, but the majority of them are married to one or more of the below excuses. But I’m here to retire these phrases in 2015. I’m retiring them, so that you can see greater financial progress in 2015.
#1 “A budget is not for me, it’s too restricting”
The popular misconception is that living on a budget is limiting. I usually hear it right before they say, “I want to enjoy my hard work”. And I totally get it. We work hard Monday through Friday, so who wants to limit their spending after all of that? Well I’ll tell you who, people who want to have money!
Budgeting does limit what you spend, but it limits what you spend so that you’re sure to spend on things that will make your future easier (savings and investments). What you don’t want to do is enjoy all of your hard work now, and have to work even harder when you’re older and ready to retire.
Instead view your budget as a means to get you to a brighter future (here’s a free one for you to try out).
#2 “I don’t have enough money to save”
The beauty of budgeting is that it allows you to know where you’re money is going, so that you can make sure some of it goes toward healthy items, like savings. If you don’t budget, you end up spending on other stuff, and you never will have money for saving.
Those who save aren’t able to because they have a lot of free money lying around. They’re able to save because they force themselves to. They spend less in other areas.
Realizing the control you have over your money, and the control you have to exercise over your money will open the doors for financial growth.
#3 “Don’t worry, it’ll just work out”
This is probably one of the worst phrases you can say about your money. And it’s not an attack on faith. Trust me, I know that God’s mercy, grace, favor, and purpose for my life is the ONLY reason why I am where I am. But I also know that God is not an ATM that gives funds at your request.
Either I can wait for God to work it out while I continue to spend frivolously with no regard for my future, or I can take the steps necessary to make sure that when He does it, I’m ready to receive it. I choose the latter every time. I take the steps in the natural to show God that He can trust me with a little, and however much more He wants to bless me with in the future J.
There’s nothing wrong with having faith that God will work it out, but we must align our actions with our faith.
#4 “Yea, I can loan it to you”
I know this one is tough for a lot of people. Kind, compassionate hearts want to help everyone who is in a bind, but if it consistently stops you from reaching your goals, you have to learn to say “no”.
This is especially true if you’re a first generation game changer. If your parents and parents’ parents struggled living paycheck to paycheck, you have a lot of pressure. But be wise in how and how often you help because you have the opportunity to significantly shift finances for future generations. Someone has to break the cycle.
#5 “But I want our kids to have more than what I had growing up”
We all want our kids to have a better future. But what does that look like? Is it more and better clothes, shoes, games, phones, jewelry? Or is it educational funds, savings accounts, and the opportunity to not have to go into debt? New things aren’t bad, but you don’t want to sacrifice their future for their right now. And it’s extremely important to teach them what to value (the younger the better!).
Make sure some of the spending on your kids is toward financial goals that will teach them strong money values and give them a more promising future (see 5 Lessons to Teach Our Kids About Debt).
2015 can be an awesome year with a plan. If you don’t yet have one, see how I can help!
I write quite a bit on the importance of budgeting. You budget so that you can free up money to save, invest, and/or put toward other financial goals. I even told a story of two types of spenders: one who plans ahead and the other who spends it all (check it out here). But I’m often asked, “What do you do when you plan ahead, but your wife spends it all?”
So here are five approaches you can use to help your wife who loves to spend:
#1 Start with realistic expectations
Let’s say you’re used to saving 50% of your income, while your wife saves 0%. Your goal may be for your household to continue that 50% savings rate, but it’s not realistic…at least not immediately.
Right or wrong aside, it will be difficult for your wife to make such drastic changes in spending habits overnight. This doesn’t mean you lose sight of the goal, but it should encourage you to set smaller milestones. These milestones are what you’ll want to communicate to her.
#2 Be as specific as possible about your budget
If you’re wife is a big spender, chances are she rarely had to think about her spending throughout her life. Going from not thinking about her spending, to knowing exactly how much to cut and where, can be overwhelming.
Instead of giving her the heavy task of “not spending so much”, make it clear. Have an idea of where she overspends and by how much she can cut back the next month, or next year. You can then communicate a more specific plan to your wife.
For example, “instead of spending $500 on dining out next month, let’s target $300. This would be about $75 per week”
Your wife now has a clearer idea of what she can do to cut back her spending on dining out. When you have a clear goal, you have a greater chance of achieving it.
Learn more about how to track your spending and how to cut your spending.
#3 Shift the focus from right now to the future
The ideas of saving and investing are all about the future. They require up front sacrifice, but the sacrifice is worth it because the savers/investors remind themselves of what the future will look like once they succeed.
Big spenders, on the other hand, spend the way they do because they’re focused more on the present than the future. They spend money on what will make them feel good now, and the future is “out of sight, out of mind. But you can shift this thinking by painting a clear picture of what you’re future could look like, and reminding her of this future as encouragement. Remember, clearer goals are more attainable.
This of course assumes she shares your financial goals for the future. If she does not, then you’ll want to shift your focus to aligning on a set of goals with your wife.
#4 Speak to her insecurities
Retail therapy is no joke. Many spenders purchase their way into confidence and status. What drives your wife’s spending? Did she grow up poor, and now makes every attempt to have nice things? Maybe she grew up in a household where if you didn’t have certain things, you were less than. There are a lot of insecurities that can drive our purchase decisions. You’ll want to understand these, so that you can address them appropriately (even if it’s not through direct communication).
#5 Make it fun, reward yourselves (frugally!)
Most of us make more progress when there are small rewards along the way. And for larger goals that require years of discipline and commitment, you’ll want to throw in a few goodies to celebrate progress and encourage perseverance.
The point is to understand what drives your wife’s spending behavior, give her a clear idea of what she can do to help your household reach your goals, and make it a little fun along the way. Remember to give her a little room to make mistakes, and watch your path to financial freedom get a lot smoother.