Using a Financial Road Map: Tracking your Personal Spending

I was going through the contents of the glove box of our family vehicle the other day.  There—how quaint! —was a road map.  It was very worn, tattered in fact, evidence of the number of family trips we made over the years.  I spent a few minutes unfolding it and then tracing out the highways and side roads we followed.  Lots of miles!  Many good memories.  I then tried to fold it back up again and failing miserably tossed it in the recycle.

I am among those delighted with the advances in personal navigation.  I think maps are great, though, because they show so much detail of the land and geography.  Yes, I know that is nerdy but so I am.

That said I am among the converted when it comes to reliance on GPS.  How did we ever get along without it? 

I recall my first maps app, and of course there was a learning curve. I recall once setting it to follow the shortest route instead of fastest and wound up with a rather extended drive (albeit beautiful) from Gettysburg, Pennsylvania to Pittsburgh.  I recall the beauty of driving through the mountains but we had to wake the kids when we finally arrived at our hotel much later than planned.  So it goes.

Yet the law of unintended consequences does not stop because of the essential usefulness of technology. Have you noticed lately that in addition to distractions from driving while texting there seems to be an increase in distractions caused by driving by GPS?

No less than three times this last week drivers ahead of me have gone from the left turn lane, all the way to the right (or vice versa), across several lanes of traffic, basically ignoring oncoming traffic.  Sometimes I have noticed drivers who stop in the middle of the street looking about confused and then looking back to their GPS or phone.  A friend of mine swears one of their employees drove onto a lake (it was winter and it was frozen) because the dang thing told him to. 

I know the feeling.  “Greta Google” as I call the voice on “Google Maps” is commanding and I admit to feeling that momentary confusion as ‘she’ gives me a command that does not exactly compute.

But I digress.

All this is leading up to a question as to whether or not you track your spending each month or like most Americans you just sort of wing it without a road map?

I don’t have a recommended roadmap for you, but there are all sorts of tools and apps available to help budget and track your expenses.  I know I use one and find it very helpful in keeping track of where our hard-earned money goes.

If you do track your expenses, how do you fare compared to an ‘average’ American family?

The Bureau of Labor Statistics reports this is how an average American’s spending breaks down:

  • Average Household Income (pretax):                     $74,664
  • Average Annual Expenditures:                                 
    • Housing:                                                       $18,186 32.9%
    • Transportation:                                             $ 9,049                  15.8%
    • Food:                                                            $ 7,203                  12.6%
    • Personal insurance and Pensions:            $ 6,831                  11.9%
    • Healthcare:                                                  $ 4,612                  8.1%
    • Entertainment:                                             $ 2,913                  5.1%
    • Cash contributions:                                      $ 2,081                  3.6%
    • Apparel and Service:                                   $ 1,803                  3.1%
    • All other expenditures:                                 $ 3,933                  6.9%

An article posted on CNBC by Kathleen Elkins points out that only 1 in 3 Americans track their spending.  She also points out that we spend 61% of our money on the top three categories: housing, transportation and food. 

Does keeping track of spending help manage our finances better?  According to Elkins, keeping track of, and minimizing, spending, especially in the top three categories, can pay big dividends in the future. She cites one couple who built a $1 million portfolio by age 40 and a 26-year-old who banked $150,000 by age 24.  That is real money!

Now, not all of us can do this in quite the same way but having a financial road map can certainly smooth the road a bit and help keep us off the rocky back roads of life.   

 A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 14 years.  

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Understanding Your Debt and Managing Personal Finances

Receiving a letter or phone call from a collection agency can be both a scary and embarrassing moment.  It is not uncommon for people to ignore collection letters and phone calls simply because they are uncomfortable with the situation. The truth is no one wants to feel embarrassed; it is no fun at all. (How’s that for some good insight)?Receiving a letter or phone call from a collection agency can be both a scary and embarrassing moment.  It is not uncommon for people to ignore collection letters and phone calls simply because they are uncomfortable with the situation. The truth is no one wants to feel embarrassed; it is no fun at all. (How’s that for some good insight)?

Contrary to common beliefs, there is no “typical” debtor. People from all walks of life and socio-economic classes are susceptible to falling behind on their bills. The inability to pay debts can stem from a variety of causes; job loss, prolonged illness, and unforeseen injuries are three common reasons people cite as the cause of their past-due bills.

Another group of people fall behind simply because they have done a poor job budgeting, or have never been taught the importance of money management.

Regardless of the reason, you’ve fallen behind on your bills and have been contacted by a collection agency, now what?

The first thing you should do: Stay calm.

Remember, you are not alone.  Falling behind on your financial obligations is not uncommon in the United States.   Chances are a neighbor, friend, or family member has also been sent to collections at some point in time.

A reputable collection agency will work with you, not against you.  It is important to acknowledge the collection agency and contact them regarding the debt in question.  As a consumer, you have 30 days to dispute certain facts, so it is important to figure out if this debt is yours ASAP.

Once you have established that the debt in question is, in fact, yours do your best to make a payment in a timely manner.  Not all debts are the same; one bill may be for $60 and another $6,000.  If the balance is low, try to take care of it with one payment.  Paying off an old bill feels good, and it’s one less thing to worry about.

Now for that dreaded debt you simply cannot afford to pay all at once.  For some people this amount may be $600,  for others $6,000.  Whatever the number may be for you, it is important to make an effort to pay down your balance.  Contacting the collection agency and setting up a payment plan can stop the phone calls and letters and potentially prevent your credit rating from being harmed.

A recent poll conducted by Harris Interactive found that 57% of U.S. households lived without creating a budget for themselves.

There are some great budgeting resources available online.  I suggest finding one of these sites (I like Nerdwallet. Here is a great post of theirs called Budgeting 101) and planning out your monthly budget.  You may be surprised to find out how you are spending your money.

If you find yourself behind on your bills or cannot afford to pay them, it is important to be proactive. Rather than sticking your head in the sand, utilize all the resources out there, and work with the agency trying to collect the debt. You may be surprised by how helpful a reputable collection agency can be for you. For more information about paying off your debt check out this great resource: Ask Doctor Debt!

Good luck, and remember… it is never too late to improve your credit rating or personal finances.

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 14 years

Excessive Debt is Bad: Did You Miss Financial Literacy Month?

Two weeks ago, my friend and colleague Lisa Brammer wrote a great blog about financial literacy (read her blog here) and included a brief quiz of basic financial concepts.  If you took the quiz, did you pass?  Many of us did not, and frankly there is a big price to pay for our lack of basic financial literacy and judgement.

National consumer debt is bad, and getting worse. Those of you who pay attention to such things know that consumer debt is at historic levels.  That includes all types of debt:  mortgage, credit card, auto loan and especially student loans.  The New York Federal Reserve will release its first quarter report on consumer debt in the next few weeks and I would bet bratwursts to Francs we will set yet another record.

Paired with the fact that the majority of us don’t have enough money to even cover one month of our living expenses, let alone a major emergency, our individual financial portraits are, frankly, pretty awful.

So, yes, excessive debt is bad.

So why does this fact seem to attract little attention these days?  When the New York Fed releases its report there are typically cursory news reports about the records we are setting. One can almost hear the cluck, cluck, cluck of the reporter’s tongue citing how bad debt has become.  Shame on you American consumers!

Yet, it seems that when the economy is good, we tend to ignore the consequences of being radically overextended.  With unemployment low, and wages steady if not rising, we pretty much have the cash from pay check to paycheck to pay off our debt.

So how do we change this? 

Events like Financial Literacy Month are good to call attention to the tools and resources available to help us right our financial ships.  Unfortunately, it may take a fairly catastrophic event, like a recession, to really get our attention enough to actually change our habits. 

Yet, sometimes it is just a matter of taking small steps to climb that big mountain.  Google “Financial Literacy” and you will find a ton of resources to help educate and get direction to correct financial peril. 

One such resource I found was actually a government site: www.mymoney.gov.  To quote the website about what the purpose of it is:

“This website is a product of the Congressionally chartered Federal Financial Literacy and Education Commission, which is made up of more than 20 Federal entities that are coordinating and collaborating to strengthen financial capability and increase access to financial services for all Americans.”

What I found interesting is that this is really a simple web site for young, middle aged and older Americans to find basic tools to build their financial literacy. 

They built the site around what they call the “My Money Five,”:

  • EARN – Make the most of what you earn by understanding your pay and benefits.
  • SAVE & INVEST – It’s never too early to start saving for future goals such as a house or retirement, even by saving small amounts.
  • PROTECT – Taking precautions about your financial situation, accumulate emergency savings, and have the right insurance.
  • SPEND – Be sure you are getting a good value, especially with big purchases, by shopping around and comparing prices and products.
  • BORROW – Borrowing money can enable some essential purchases and builds credit, but interest costs can be expenses. And, if you borrow too much, you will have a large debt to be repaid.

Included on each page are simple suggestions for understanding our financial levers.  They also include tools like tax withholding calculators, links to free credit reports, sample budgeting worksheets, tips to protect your personal information and more.

In her blog Lisa points out some good news that younger consumers are improving their financial literacy.  Schools certainly are doing more to prepare students to face financial reality once they become part of the working world. Yet, knowing versus doing are two separate things.  The allure of easy credit is certainly seductive and more attractive than the dull, but critical, discipline of personal financial management.  As our debt picture stands right now it will take a monumental effort to change this situation.  Yet, even a few small steps today can improve our chances of avoiding financial catastrophe. 

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded innorthern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 14 years.