Here we are in the middle of yet another bad economy. Technically it is not a recession as the GDP numbers were better than expected for the year of 2011, the Dow Jones has recovered its losses, and analysts are expecting a stronger 2012 for the banks. Yet if you ask the average Joe in the Detroit area and across the country, most are concerned about their own personal economic well-being. Is Greece going to successfully deal with their debt crisis? Is Congress ever going to function properly? Will the housing market recover? Will the banks start lending again? Will the labor market pick up pace to increase employment? All these and more are questions that loom within the minds of many across the country. However, are these questions the most appropriate questions to ask at this time?
When the world seems to be in total chaos and you feel as if you are losing an economic grip, the beautiful element of financial literacy is there are always factors you can control, regardless of the economic situation. So for the year of 2012, it is time to start asking the right questions which enable us to focus on those things that we can control. Here are a few basic questions you should be asking yourself for this year:
Are you spending less than you earn each month?
This sounds like a simple question but most in this country are not accomplishing this task and operating their household in a deficit mode because of excessive amounts of personal debt. Don't let another day go by this year without putting together a budget for your household that reflects less spending than your earnings.
Have you done everything possible to minimize your debt?
You would be surprised how few people actually take the time to assemble a strategy to eliminate their debt levels. This is the year that you must start your journey to being debt free; here are some simple steps.
1. Go to www.annualcreditreport.com and print a copy of your credit report.
2. Write down all the debt you see on your report from the largest debt on the top to the smallest. Make sure you organize the headings of each column to read the name of the creditor, telephone number, amount owed, total line of credit, interest rate, telephone number, minimum due, and any other information you feel is pertinent.
3. Call EACH creditor and attempt to negotiate both the amount owed and the interest rate.
4. With your budget you have already assembled, use any surplus to pay extra money on the smallest debt until it is completely paid off and then do the same for the next smallest debt owed. This is called the "snowballing" method.
Are you ensuring more of your purchases add to your net worth rather than decrease your net worth?
You should be putting yourself in a position to purchase more investments that add to your net worth, such as stocks, bonds, real estate, and savings accounts, where the interest works for you. You should be gradually eliminating as much wasteful spending as possible on items that depreciate (decrease in value), such as cars, clothes, material things and bad debt; these are items where the excessive interest works against you and your money disappears into "money heaven."
Are you doing all you can to minimize your taxes?
The top 400 income earners in the country have a tax rate of less than 17% because they are very proficient in maximizing tax loopholes. You have access to loopholes as well but they mean nothing if you are not taking advantage of them. Purchasing a home, maximizing tax-deferred savings accounts and that new business that you should have started long ago are great ways to take advantage of tax advantages. Plan properly and succeed at minimizing your taxes.
Is your social status more important than financial independence?
This question resonates to the heart of financial literacy. Rent-A-Center preys on those who desire to look good on the outside with instant gratification, while being financially strapped because of excessive fees and interest paid for material items. The Rush Card preys on those who want to look good by using a card with a Visa logo because that gives you "status," but those who hold it pay fees they can't afford and more than likely don't have a bank account which can help them accumulate wealth more effectively. Did you see the mob of people who were so desperate to purchase a pair of Jordan sneakers they trampled others upon opening the store doors? People waited in long lines for hours for the "privilege" of spending $200 for a pair of shoes that were perceived to add to their social status (and incidentally cost $5 to make.)
How much time, energy, and thought have you allocated to create ways to build wealth?
We must be real with ourselves in 2012. The jobs that once were will probably be never more. The companies that have been laying off have now discovered how to work more effectively with a smaller workforce by maximizing productivity from the current work pool and maximizing the use of technology. If you are amongst the unemployed, underemployed, or simply are looking for additional ways to increase streams of revenue, it is up to you to create opportunities for yourself.
• If you currently have expertise in a specific area, are not looking to acquire additional skill sets but were laid off, you might consider relocating in order to find employment with a firm looking to hire someone like you.
• If you are willing to invest the time and energy you might consider taking additional courses at the local community college or university to learn an entire new trade or skill set.
• If you are looking to create another stream of revenue you might consider doing some research on the needs in your community and creating a business that intersects your passion in life with the needs of your community.
None of these are quick, none of these are easy, none of these are without risk, and most likely you will have some setbacks. However, on the other side of your hard/smart work and effort lies empowerment for yourself and community.
I recently saw a graph that outlined a few employment scenarios. According to the graph, if we duplicate the BEST jobs creating year of the 1990s we won't return to full employment until 2017. We are in this for the long haul and there is no quick fix! The chickens have come home to roost as a result of the years of greed and excess on every level from the government, to corporations, and the people. While reality states that we will be in slow economy for some time, the bright side is that we can get out; we must, however, recognize that it will not be a quick turnaround. Let 2012 be the year where we ask the right questions, have the right mindset, and collectively do the right things that will benefit us and our communities. Let's begin the task of righting a ship that has been going in the wrong direction far too long! Let's get to work!