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Is Self-Employment Right for You?

In today’s economy, the concept of self-employment is becoming increasingly popular. Some persons desire to become their own bosses in order to give birth to business ideas that they always dreamed about. Others are forced to create their own incomes, as the contracting job market does not provide many options.

Unfortunately, the road to successful self-employment is littered with many casualties along the way, with people who have seen their entrepreneurial dreams transform into financial nightmares. Whether self-employment is your choice or you have no alternatives, it’s important to first consider if you are ideally suited to the rigours of this lifestyle.

Let’s look at some of the key factors that can help you to decide if self-employment is right for you:

Do you have the right personal qualities?

True entrepreneurs possess a curious mix of courage and craziness; they are willing to defy all the odds and pursue their goals with unending passion and persistence. To succeed in the self-employment game, you must have a driving force inside you that keeps you going despite the rejections that will inevitably come from potential customers, especially in the early days.

Along with a thick skin, to survive as a self-employed person, you must have the discipline and fortitude to work long hours without complaint. If you think that being your own boss means immediately having more leisure time, you will be in for a rude awakening. Being organised and time-conscious are crucial traits that will allow you to make the most of limited resources.

Need ideas to create more money? CLICK HERE!

There really is no such thing as a self-made man or woman; successful business owners are created with the assistance of many behind-the-scenes people who provide them with support and guidance every step of the way. To enlist others to help you build your dream, you must be able to get along with all types of people, and have a genuine desire to see them succeed as well.

Do you have the required business skills?

Just like any other job, being a successful business owner requires technical know-how. Whether you are selling a product or a service, you must have attained a level of expertise in your chosen field, so that people will trust you. It’s also important to determine if your line of work is in demand — are people willing and able to pay you for your offerings?

It’s not enough to have knowledge on your products and services; you also need to understand the world of business. Many enterprises have failed because the owners were not competent in key areas such as marketing, negotiating, financing, communications and administration. Although you can hire others for these activities as the business grows, you have to get trained to handle them at the start-up stage.

The strength of your initial idea will ultimately direct the growth of your business, so it’s vital for you to be able to transfer your vision to others. Your leadership skills will play a huge role in marshalling others to produce, so this is a key area for you to develop. In today’s rapidly changing business environment, you will also need to devote a lot of time to strategic planning, as this will ensure that your vision remains fresh and relevant for the times.

Do you have adequate financial resources?

Some people go into business with the idea that by selling products or services, they will find a quick solution to their financial problems. They expect that a business will immediately provide for their personal needs, get them out of debt or supply the income for expensive acquisitions. It seems that they equate owning a business with winning the lottery!

The reality is that starting a business will cost you financially, as your operations probably won’t provide positive cash flow for a year or two. It is unadvisable to go into business without having savings to meet your personal bills, and enough funds to provide working capital for the first six months to one year. It’s been said that if you can’t handle going without an income for three or four months, then entrepreneurship is not the option for you.

Many business owners opt to borrow from a financial institution to deal with the start-up expenses. However, this source of financing can be risky, as the monthly loan payments can potentially cripple the operations, especially if it takes a while to gain customers and achieve consistent sales. If possible, try to raise capital from friends and family, liquidate assets to supply cash, or consider equity financing instead.

Self-employment will never be suitable for everyone; but if you have the desire, determination and drive to turn your business idea into a business system, then it could be a profitable and rewarding way of life.

Copyright © 2010 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, March 3, 2010

Money Milestones

Recently, a client asked me if I thought that she had achieved all the appropriate financial targets for her age. Like a concerned parent eagerly checking for the age-specific developmental achievements of a child, she was trying to assess if she had attained the money milestones that would indicate that she was on the right track.

However, just like children who progress at their own pace, each person is unique when it comes to their personal financial development. Some people seem to be born with the right genes for money, getting an early start on wealth creation by being consistent savers and savvy investors. Others appear to be slow learners, remaining deficient with their money skills until their later years.

Despite the disparity in development, there are basic money milestones that can be used as a guide to people’s financial health and well-being. Let’s examine some of the signposts to look for as you move along your financial life journey:

Age 20-35: Getting organised with money

You start this stage of your financial life cycle when you leave school and gain your first job. At this point you may be unsure of the right moves to make financially. Your income might barely be enough to cover your basic expenses, and you most likely would have to borrow to meet your short-term goals such as owning a car or furnishing your home. You might just be starting a family, which would increase your financial responsibilities.

As you are finally getting the chance to make your own financial decisions, your focus should be on learning how to effectively manage your money. If you practise prudent money habits such as budgeting to live within your means, saving a percentage of your income, and not using debt to finance your lifestyle, then you will have set the right precedent for attaining important goals such as home ownership.

Age 35-50: Focusing on accumulating money

At this point, you should be more seasoned in money management. You may have obtained a home with the help of a mortgage, and if you have children, a large part of your earnings would be going towards meeting their needs. Your income should be sufficient to pay your bills, but you may not have adequate surplus funds to be invested towards major goals such as your children’s college tuition and retirement.

Want to learn how to ‘think and grow rich’? CLICK HERE!

Your main objectives at this stage should be to earn more money and invest your income to build wealth. If you are employed, look out for opportunities to earn part-time income by using your talents or providing products and services that meet people’s needs. Read books and take courses that can guide you on smart investment choices. Depending on your overall goals, you may need to consider starting your own business to increase your earning potential.

Age 50-65: Consolidating your financial position

As you grow older, you should be moving towards a position where your income sources are in excess of your spending needs. Your children should be finishing higher level education, or should already be able to support themselves. Major expenses such as car payments or a mortgage loan should be finished by the time you exit this stage of development.

If you had started saving towards retirement from your early working years, at this time you could concentrate on monitoring your investments to see if they are progressing according to plan. If not, you will have to put more emphasis on supplementing your income sources to address potential shortfalls in your nest egg. You also need to avoid money risks by ensuring that you have adequate insurance and steer clear of dubious investment schemes.

Post 65: Preserving and passing on wealth

In this retirement phase of your financial life cycle, you get to live off the accumulated wealth that you generated during your working years. You may choose to, or be forced to, continue working if your investments cannot meet your needs. While children’s expenses and mortgage payments should be a thing of the past, health-care costs may be one of your major concerns. You must also be mindful of the negative effects of inflation on the value of your nest egg.

You should already have made plans for passing on your estate, so review the beneficiaries on your insurance policies and ensure that your will reflects your current wishes. A power of attorney and other legal documents might be necessary in case of incapacitation. If you have amassed significant wealth, look at establishing a trust to preserve your money from excessive estate taxes.

What if your current position doesn’t fit into these suggested guidelines? If you’re almost 50 and haven’t even started the money management stage yet, all is not lost. You will have to put a lot of effort into learning the basic money principles and earning more income to make up for lost time.

Your Money is celebrating its own milestone today, as this issue marks the fourth anniversary of the column. Thanks to all my faithful readers for your comments and support and the Jamaica Observer for partnering with me to provide you with practical financial advice.

Copyright © 2010 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, February 25, 2010

The 3 Ms of Money Gone Caribbean!

It’s been really exciting seeing the development of the personal finance industry in Jamaica over the last eight years. As I write my memoirs about my past money mistakes and the strategies I used to turn around my financial situation, I remember the days when I felt like a lone voice in the wilderness, talking to people about the importance of proper financial habits.

Ever since I learned that the key to money success was all about knowing, understanding and doing the right things with money, I have been committed to spreading the ‘3 Ms of Money’ message - how to manage, multiply and maintain money.

Today, there are more institutions passing on information about the right money habits for success, although there’s still a lot of work to be done. It’s also encouraging to see the focus on financial literacy education in agencies around the Caribbean. I am actively building my audience in the Caribbean, and I have recently been included as a feature writer on the regional website http://financialliteracycaribbean.com.

I’m looking forward to taking the ‘3 Ms of Money’ all around the Caribbean very soon!

Keep being Financially S.M.A.R.T.

Time is of the Essence!

One of the realities of our current economic climate is that we are now forced to do more with fewer resources at our disposal. While our income loses value every month, our expenses grow almost exponentially. Layoffs and job work-hour cuts are reducing the size of the workforce, yet employees are being asked to produce more in less time.

As we continue to grapple with the financial challenges that this year will bring, it becomes even more crucial to manage the precious resource of our time. I often comfort my clients by explaining that they can always recreate lost wealth; but I can’t give the same guarantee about time because it’s not a renewable resource.

Many of us approach time as if it were an hourglass that will replenish itself with sand once we turn the instrument upside down. The reality is that once we use up all the seconds, minutes and hours in a day, we will never see them again.

It’s time to stop wasting time

It’s alarming to see how easy it is for people to waste time with regard to their finances. How we choose to use our time can actually make the difference between financial success and failure. Here are some common examples of how people squander valuable time:

1. Focusing too much time on entertainment instead of becoming more productive.

I recently advised a colleague to listen to some training material that would help to upgrade his skills for a new venture that he was undertaking. He reluctantly responded that he wasn’t sure when he could get started because he was currently consumed with viewing a particular sporting competition on television.

You have to be clear about your priorities right now — don’t complain that you don’t have enough money to meet your bills and then spend countless hours playing Farmville on Facebook. In fact, this social networking application is one of my pet peeves, as I wish that users would actually get off their computers and plant some real vegetables instead! Spend more of your time looking for opportunities to earn more money.

Want to learn how to ‘think and grow rich’? CLICK HERE!

2. Procrastinating on starting a savings and investment plan.

Although most people are aware that they should be putting aside money for the future, many delay getting started on this process. Common complaints include, “I don’t have the time to go to a financial institution to open an investment account”, or “I want someone to handle all my investment decisions because I don’t have the time to learn how to do it for myself.”

If you are serious about growing your wealth, you have to put some time into achieving your goal. What’s the point of working overtime to build your employer’s fortune, and not making the effort to learn how to amass your own? Schedule some time in your day to read investing articles or surf the Internet for information; and take a day off if necessary to visit financial institutions to choose the right products for you.

Too many opportunities, not enough time

Some people have another type of time challenge. They are not wasting time with regard to earning and investing; in fact, they can’t find enough hours in the day to complete all their money-generating activities. A client recently shared with me that she was so focused on improving her financial position that she was burnt out by all the multiple jobs she was trying to do.

I understand this problem quite well. I have often wished that time would stand still to allow me to accomplish more. What can time-deprived go-getters do to be more efficient and productive with their time?

Francis Wade, management consultant of Framework Consulting, revealed some strategies to improve time utility. He noted that while many persons depend on gadgets such as a BlackBerry to manage their time, if they are unaware of the basic principles of time management, these tools may end up making them even less productive.

The key, Wade pointed out, is to use a time management system that regulates your time demands and your practices. He explained that time demands are the different things that you decide to do such as returning phone calls, attending meetings or replying to emails. When you make too many demands on your time, you can get stressed out from forgetting important tasks, working long hours without accomplishing much, and wishing that you could spend more time with family than on the job.

To get more out of your time, you need to apply seven core principles to convert time demands into actions. These include capturing and disposing of information effectively, getting rid of useless time demands, taking immediate action, and employing schedules and lists to manage activities. Wade, who offers time management workshops and coaching, provides more useful tips at fwconsulting.com/newhabitsja.

So whether you’re currently wasting precious time or trying to squeeze 25 work hours into one day, make an effort to learn the appropriate time management strategies to help you accomplish more and achieve your goals.

Copyright © 2010 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, February 18, 2010

More Money Lessons from the Animal Kingdom

A few months ago, I discussed the habits of some ordinary animals, noting that they had many positive lessons to teach us about being smart with money. From the lowly ant to the powerful racehorse, these creatures demonstrate determination and dedication in achieving their goals.

For the most part, the members of the animal kingdom are very disciplined and organised with their instinctual activities. However, I have researched some quirky animal behaviours that could be compared with the destructive habits that many us of have with money.

Here are a few actions that we do not want to emulate in our financial lives:

Don’t stick your head in the sand like an ostrich

It has been said that when frightened, ostriches will hide their heads in the sand to escape harm, but scientific study has debunked this saying as a myth. Although the speedy ostrich will first run away from danger, if it cannot move or defend itself, it will lay its head and neck flat on the ground to evade detection. As its upper body is the same colour as the sand in its natural habitat, it could easily be thought that the animal had stuck its head in the ground.

Although this action may only be an illusion for the ostrich, humans are sometimes guilty of trying to deal with their money troubles by figuratively ’sticking their heads in the sand’. Many people refuse to acknowledge that their finances are in shambles, and choose to pretend that their problems don’t exist.

Want to learn how to achieve your goals? CLICK HERE!

If your behaviour mimics the ostrich, it’s time to raise your head from off the ground. Stop living a charade by using credit cards to buy things you can’t afford, ignoring past due bills, or thinking that another loan will solve your shortfalls. Face up to your financial reality by making a realistic budget, cutting back on unnecessary spending and getting expert help to reduce your debt.

Don’t be indecisive like a deer caught in the headlights

In parts of the world where unspoiled nature and modern civilisation intersect through miles of highways, the deer population is threatened by the animal’s unfortunate trait. If a deer encounters a car’s headlights when crossing the road in the night, it will stare into the beams, and remain frozen in place instead of moving out of the vehicle’s pathway. Every year thousands of accidents happen as a result of this strange behaviour.

I have observed many people acting in a similar way when it comes to their finances. When the stark reality of their money situation is explained to them, some persons become so stunned by the enormity of their challenges that they are unable to move. Although they have been given appropriate steps to achieve change, they remain paralysed until their financial house comes crashing down around them.

If you have been acting like a terrified deer, it’s time to accept your situation, stop focusing on the problem and start implementing solutions. Make a decision to go left or right, but don’t keep stationary by continuing to do what’s not working. If you need to find ways to earn extra money to dig out of debt or save for your impending retirement, get moving now!

Don’t follow the rest of the herd like a sheep

Sheep have got a bad reputation for being stupid animals that can’t think for themselves, as they mimic the actions of the rest of the flock without question. Unfortunately, they will follow the leader even if they might be heading into danger, such as the slaughterhouse. There was even a case in Turkey where 400 sheep died because they tagged along behind one sheep that tried to cross a 15-metre deep ravine.

While the sheep’s behaviour stems from their instinctive need to stay together for protection, many people imitate this herd mentality because of a lack of wisdom about investments. Recently, many persons threw caution to the wind and risked money they could not afford to lose into unregulated investment schemes. Even legitimate opportunities can bring big losses, when people follow the advice of friends and novices and enter into business deals that are ill-advised.

If you have jumped onto money-making bandwagons that have led you astray, it’s time to educate yourself about investing so that you can make informed decisions that are right for you. Your investment choices should always be made within the context of your financial goals, not what other people are doing. Learn about investing risks and don’t let greed take over, for as Warren Buffett advises, “Be fearful when others are greedy, and be greedy when others are fearful.”

There are several other eccentric animal habits that could serve as analogies for negative money behaviours practised by many people. Look around nature and see if you can identify some of these traits in yourself; and use your intellect over instinct to make positive changes towards your financial success.

Copyright © 2010 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, February 11, 2010

Developing Financial Literacy in Jamaica

Over the past eight years, I have been actively involved in writing, training and coaching on topics relating to financial education. Through interaction with thousands of Jamaicans from all walks of life, I have realised that the number one problem that prevents most people from achieving their financial goals is their lack of understanding of basic money principles.

Financial literacy is defined as the ability of individuals to make appropriate money decisions by learning the principles that relate to the management, growth and preservation of their money. When people are educated about the appropriate actions to take with their money, then they are more likely to save towards their goals, manage their debt, purchase assets such as a home, and make positive contributions to the economic development of the country.

Anecdotal evidence points to an overwhelming demand from Jamaicans for practical information on or about basic financial strategies such as budgeting, debt control, investing options and retirement and estate planning. Although some financial institutions have been offering public seminars to address some of these issues, their initiatives have been insufficient to meet the country’s requirements.

Want to learn how to ‘think and grow rich’? CLICK HERE!

There is now an urgent need to provide a coordinated national financial literacy programme to adequately disseminate critical information throughout all sectors of the Jamaican society. I often wonder why I learnt so many subjects in school that later proved irrelevant to my life, yet a crucial topic such as money management was never addressed in my primary to tertiary education.

Around the world, financial literacy education is an important focus of governmental agencies involved in finance. Let’s look at some of the programmes that have been developed in some other countries:

FDIC Money Smart Programme

The Federal Deposit Insurance Corporation (FDIC) was established In the United States to preserve and promote public confidence in the financial system by insuring deposits in banks and thrift institutions. In 2001, this independent agency of the US federal government developed a national financial education campaign called Money Smart, to “help individuals outside the financial mainstream develop financial skills and positive banking relationships.”

The FDIC collaborates with financial institutions, non-profit organisations, and community- and consumer-based groups to disseminate financial education using its Money Smart educational material which covers topics such as saving, borrowing, credit card management and home ownership. To date, the agency reports that it has distributed over 750,000 items of Money Smart curricula and has reached over 2.4 million consumers across the world.

NFLP in Trinidad & Tobago

The National Financial Literacy Programme (NFLP), launched in January 2007, is spearheaded by the Central Bank of Trinidad and Tobago. According to the NFLP’s website, the purpose of the programme is to develop “a nation of citizens who are conscious about and capable of managing their finances.” The NFLP’s aim is to change people’s beliefs, attitudes and behaviours around money issues, and give them the skills to function in a sophisticated financial environment.

The NFLP carries out primary school interventions and is currently working with their Ministry of Education to incorporate financial literacy in the secondary school curriculum. They have already trained over 200 teachers to impart the financial material in schools. Other initiatives include addressing the needs of persons with disabilities, with documents converted to Braille and sign language in their television advertisements. The NFLP has also developed financial literacy training material relevant to small and micro entrepreneurs.

ECCB’s Financial Literacy Programme

The Eastern Caribbean Central Bank (ECCB) has been playing the lead role in promoting financial education in the Eastern Caribbean Currency Union (ECCU). This union comprises seven countries including Antigua & Barbuda, St Lucia, Montserrat and Dominica. According to the ECCB, “educating the public about financial and economic matters is key to supporting the bank’s stability, growth and development objectives.”

The ECCB education initiative includes offering ten-week savings and investment courses teaching topics such as budgeting, understanding loan documents, avoiding financial scams and understanding wills; after-work seminars, a monthly financial newsletter; schools programmes with presentations, competitions and mentorship components; radio programmes; and financial month activities held every year in October.

CARTAC Financially Fit Campaign

The Caribbean Regional Technical Assistance Centre (CARTAC), a regional resource which provides training and assistance in economic management for member countries, is funded by international agencies such as the Canadian International Development Agency (CIDA), the Inter-American Development Bank (IDB) and the International Monetary Fund (IMF).

CARTAC recently launched its financial literacy website www.financialliteracycaribbean.com, which is designed to educate readers on financial terms and pertinent information to help them to increase wealth and prepare for unforeseen situations. The website provides practical guidance on topics such as budgeting, saving, risks and returns of investments, and estate planning; and also offers resources to assist Central Banks and other regional financial supervisory agencies.

Given their current emphasis on achieving positive economic changes, it’s now the perfect time for our local financial authorities to join with the over 60 countries around the world which have developed structured programmes to educate their citizens about basic financial principles.

Copyright © 2010 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, February 4, 2010

2010 Action Plan #3: Control Your Income

It wouldn’t be hard to predict that it’s going to be more difficult to make money in 2010. Employees and entrepreneurs alike are experiencing a decline in their earning power due to pay reductions, job layoffs, and consumer spending cuts. Investors who had previously benefited from lucrative profits in the money market now have to cope with decreasing returns.

How can you survive when you are not earning enough? Let’s look at some of the typical challenges that people are facing today and offer some possible solutions to these problems:

Situation: Your boss is cutting your work time to four days per week, and you stand to lose 20 per cent of your pay.

Don’t use that day to stay home and mope about your loss. Those extra hours away from your regular job can provide the perfect opportunity to take advantage of a business idea which you never had the time to pursue. If you hadn’t seen the need to create your own income before, get busy and brainstorm some ideas to earn extra money.

Your first goal is to replace your lost income. Break down your shortfall into a manageable figure; for example, if you stand to lose $10,000JMD per month, think of something you could do on your day off to earn $2,500JMD. Calculate how many customers you would need to reach your target. What service or product could you sell to 25 people in your community to earn $100JMD from each person?

Situation: You graduated from college with a management degree, but a year has passed and you’re still unable to find a job.

Widen the scope of your job search — don’t limit yourself to a typical managerial position. There are some fields that are always recruiting new persons, such as the life insurance industry, the army or the police force. You could actually find a satisfying career in the long term.

The reality is that we need more entrepreneurs in Jamaica to create job opportunities for new entrants in the job market. If you can’t find employment, then you may have to invent your own job. What skills and talents do you have that could provide an income? Many small businesses are contracting out their data entry, marketing, accounting and Internet correspondence needs; if you can supply these services, you may be in the money.

Situation: The company you worked for has closed down; your previous job was in a specialised field and there are few other businesses that utilise your area of expertise.

Need ideas to create more money? CLICK HERE!

If you’re facing a roadblock in securing another job, you may need to look far and wide to locate employment. The great news is that the Internet provides a virtual marketplace that can help you to link with a buyer for your services. Post your résumé on websites such as Monster.com or register with Elance.com or Odesk.com to find freelance work.

You could also examine the possibility of sharing your specialised knowledge with others. Is there a need for training courses or educational material in your area of expertise? Can you create a new service that would appeal to a wider retail market? For example, a geophysicist with extensive information on earthquake activity could hold seminars to teach people how to prepare for this natural disaster.

Situation: You are a self-employed hairdresser and many of your customers are cutting back on your services.

Consumers are now looking for better value for their money, so you have to respond to changing customer demands by giving more for less. One option is to offer frequent user specials, such as one free wash and set if your customer pays for three within one month.

Try to increase your business volume by designing a referral programme that will encourage existing customers to market your services for you. For example, you could offer a 25 per cent discount on services to anyone who brings a new customer.

Situation: You’re retired and you depend on the interest from your investments to pay your bills. Recent changes in the government paper market will reduce your income significantly.

If your earning source has decreased, you may be forced to find additional methods of generating an income. Don’t be disheartened by this development, as there are many retirees who are actually enjoying their ability to make money in areas that are exciting and fulfilling.

There are always available openings to work part-time if you have professional skills such as teaching or nursing. You could also look at providing consulting services or training persons in your field. Consider using your hobbies to create income; you could provide organic vegetables to the supermarket or sell ceramics or paintings at craft shows.

To succeed financially in 2010, you have to become more industrious and innovative in generating income. Don’t sit back and wait for someone else to make a job for you - get creative and do it yourself!

Copyright © 2010 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, January 28, 2010

Cherryl is a financial consultant and coach, founder of Financially S.M.A.R.T. Services. See more of her work at www.financiallyfreenetwork.com and www.financiallysmartonline.com. Contact Cherryl

2010 Action Plan #2: Control Your Debt

Your child’s tuition is three weeks overdue and you’re dreading another phone call from the school office. It’s not that you planned to be delinquent, but the front end of your car finally gave way last month, and all your money had to be channelled into emergency repairs. Desperately looking for an answer, you notice a newspaper advertisement for a payroll loan.

Convinced that this may be the answer to your problem, you call the financial company to get more details on the loan. You realise that you can access enough funds to not only pay the outstanding school fee, but to clear off your credit card and repay your cousin the money you borrowed eight months ago. In fact, you decide that you might as well take the opportunity to finally replace your worn living room sofa.

Does this scenario sound painfully familiar? If so, you’re not alone. For many cash-strapped consumers, borrowing money to finance budget shortfalls is standard operating procedure.

Indebtedness On The Increase

There is an alarming rise in the number of people who are choosing to turn to loans to bail themselves out of financial jams. However, running out of money to pay your bills is one of the worst possible reasons to get into debt. While a ‘quick-fix’ loan may temporarily ease your cash flow challenge, you’re creating a cycle that will only bring increased financial hardships.

As you have to pay back the loan with interest, borrowing will only increase your monthly obligations. In addition, redirecting your income into repaying debt will prevent you from saving towards important goals such as building an emergency fund, buying your own home or investing towards a retirement nest egg. Don’t hand over your future wealth to a loan company!

Need help with getting out of debt? CLICK HERE!

From experience, I know that trying to become debt-free is one of the most difficult aspects of money management, as it takes tremendous effort, discipline and sacrifice. Here is an action plan to help you to dig your way out of debt:

1. Assess Your Total Debt

Many people are so depressed about their unmanageable debt that they refuse to open their overdue bills or communicate with the lending agencies. You must first gather up your courage and find out your true state of affairs. Examine your bank statements or call the loan institutions to get the current loan figures. You will need to know details on the monthly repayments, total balances, time left to repay and the interest rates.

If you have multiple loans, capture all this information on the debt tracker form available under the financial tools section of www.financiallysmartonline.com. You should also include information on any collateral backing your loans. This will help you to keep track of your overall debt position on one sheet of paper.

2. Find Extra Funds To Pay Down Debt

Many people are crippled by debt because the monthly repayments are difficult to meet. Use your budget to manage your spending and ensure that your loans are paid consistently. Where possible, try to cut discretionary expenses such as entertainment or eating out, and use these funds as additional payments to reduce your loan balances.

Another option is to liquidate assets or sell your belongings. If your loan is secured by collateral such as a bank account or land, it might be necessary to sacrifice the resource in order to get rid of the monthly debt burden. Remember that you can always recreate wealth over time. Also look to raising cash by having a garage sale or letting go of valuable possessions.

3. Create A Debt-Reduction Strategy

If you have multiple loans, then you could try to consolidate all your bills to obtain a more affordable repayment amount over a longer period. While debt consolidation may seem to be a good solution, be cautious about the assets you use as loan collateral. Several loan agencies are promoting home equity loans to consolidate debt, but in these uncertain times it can be dangerous to risk your property in this way.

If none of the previous options are possible then you will have to pay off your loans one at a time. Use the debt tracker to sort your debt according to the size of the loan balances, with the smallest one first. If you have two loans with similar sizes, rank the one with the higher interest rate first.

While paying at least the minimum required on each loan, concentrate on paying off the debt with the smallest balance as quickly as possible. When that loan is repaid, apply the former monthly payment amount to the debt that is next in the ranking. You will speed up your debt reduction by being disciplined in using this strategy until all the loans are paid.

So for 2010, change your appetite for debt and strive to live within your means. However, it can be difficult to stay out of debt if your income is not enough to meet your needs. Next week we will provide the solution for this problem.

Copyright © 2010 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, January 21, 2010

2010 Action Plan #1: Control Your Spending

In recent times, while speaking to several persons about their money problems, I have detected a growing sense of desperation in their voices. Although many have not yet reached a stage of full-fledged panic, it is obvious that they are very worried about the current financial situation facing Jamaica.

“If I can’t make ends meet now,” a client asked perplexedly, “what’s going to happen to me when the full impact of the tax increases hits?”

I believe that good results can come out of every bad situation. The prevailing economic crisis has forced many of us to recognise that we can no longer be nonchalant or clueless about our financial condition. We have received a monetary wake-up call - it’s now time to take control of our finances!

Over the next three weeks, I will share with you an action plan that will help you to survive in these times, and set yourself on the right track to long-term financial success.

Start with a Spending Plan

The initial step in sorting out your finances is being very clear about what you do with your money. Gone are the days when you could casually say, “I had some money this morning, and now it’s all gone and I don’t know where it went.” Every dollar makes a difference now; you must be very careful in choosing where and what to spend your money on.

The following are directions to preparing a budget that will allow you to effectively plan for your expenses:

1. Identify Your Expenses

Most people are unaware of exactly how much they spend on a daily basis, much less over the course of a year. Being in control of your spending requires you to plan not only for the bills that are due in the current month, but also for those that crop up occasionally throughout the year.

Think about the following costs:

- Recurrent expenses such as utility bills, rent, transportation and food that occur regularly every month;

- Occasional expenses such as school fees, cooking gas, car insurance and property tax, that are certain to come, but don’t come due every month;

- Non-essential expenses such as clothing, personal care and entertainment, for which you should establish spending limits;

- Emergency expenses such as hospital visits, major vehicle repairs and natural disasters, for which you should make allowances in your budget.

2. Record Your Expenses

Download a personal budget at www.financiallysmartonline.com located under the financial tools section and put your expenses in the relevant categories. In order to fill out this budget properly, you will need to express all your expenses in average monthly figures.

- Multiply your daily expenses by 20 or 30 depending on the number of days you purchase the item, to get the monthly cost. For example, if you spend JMD$200 on lunch five days a week, your monthly cost is JMD$200 x 20 - JMD$4,000. If you spend JMD$150 on phone credit every day, your average monthly total is JMD$150 x 30 - JMD$4,500.

- Multiply your weekly expenses by four to arrive at a monthly figure. For example, if you buy JMD$3,000 worth of groceries every week, then the monthly amount is JMD$3,000 x 4 - JMD$12,000.

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- For occasional expenses, estimate the total amount you would spend for the year, and then divide this figure by 12 to get the average monthly cost. For example, if car repairs cost you approximately JMD$30,000 for the year, your monthly figure is JMD$30,000 / 12 - JMD$2,500.

3. Record Your Income

Record your monthly salary figure after any statutory deductions and pension payments have been taken from your pay. If you get paid daily, multiply your earnings by the number of days you work in a month; multiply weekly income amounts by four; fortnightly salaries should be multiplied by two. If your salary is not a set amount each month, put in an estimate of your lowest take-home pay.

Note: If salary deductions for loan payments or savings are taken out of your pay before you receive it, add these amounts back to the budgeted income figure.

4. Balance Your Budget

Subtract your total average expenses from your total monthly income. If you’re lucky enough to have excess income over your spending needs, then this surplus should be channelled into savings. If you really don’t have excess cash on hand, then go back over your budget - you may have forgotten to record some items such as lending money to friends.

However, if your expenses outweigh your income, you have a budget shortfall which must be addressed. Go back over your figures and try to trim non-essential expenses, conserve on utility bills and be more efficient in grocery shopping. If you’re still short after you have cut back as much as possible, the only option to balance your budget is to find practical ways to earn extra income.

Next week we will look at strategies to control your debt in these tough economic times.

Copyright © 2010 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, January 14, 2010

Cherryl is a financial consultant and coach, founder of Financially S.M.A.R.T. Services. See more of her work at www.financiallyfreenetwork.com and www.financiallysmartonline.com. Contact Cherryl

We Will Rise Again in 2010!

Most of us welcomed in 2010 with sighs of relief; giving thanks that the challenges of the past year were finally behind us. However, despite offering best wishes to friends and family, we may actually doubt that the aspiration “Have a Prosperous New Year” can be realised over the next 12 months.

Even if we managed to ignore the discussions about Jamaica’s economic crisis during the festive season, reality was abruptly thrust upon us on January 1 when the new tax increases were implemented. As I noted the dramatic jump in petrol prices, it became even more obvious to me that we were in for a financially challenging time this year.

The pragmatists and pessimists are warning us about impending job losses, increasing poverty levels and inevitable social upheavals. At the same time, some business and political leaders are declaring that Jamaica is poised to benefit from myriad opportunities that always abound in periods of crisis. Where does our future really lie?

Jamaica - A Paradox of Possibilities

In some respects, the country’s economic woes are mirrored in the financial problems of many Jamaicans. The development of the country and its residents is being crippled by inadequate productive output to meet basic needs; overwhelming debt incurred for irresponsible consumption; and the absence of enlightened planning for future goals.

Is it any wonder that individually and collectively we are worried about our economic prospects?

Ironically, while we wallow in our monetary mess, the rest of the world is fascinated with Jamaica. Hundreds of thousands of people want to participate in the excitement and energy that we bring to the fields of music, sports, food, fashion and culture. However, while other countries are reaping financial windfalls from our brand, here in Jamaica we seem to be incapable of fully taking advantage of our opportunities.

Changing Attitudes and Actions

As we enter into a new decade, we cannot continue to operate as we have in the past. Although we are demanding better fiscal management from those in charge, we need to realise that our personal financial practices have a direct bearing on the success or failure of the country as a whole.

As we search for solutions, it is important to note that efforts of our government ministers and big business owners will not be enough to take us out of this crisis. Jamaica will only be able to survive the coming challenges if each and every one of us starts to transform our thoughts, words and deeds towards achieving financial progress.

It’s now the perfect time to decide to make a difference in 2010. Here are some practical steps that you can take that will create a ripple effect on the overall economy:

1.  Be Honest About Your Financial Situation

It’s time to stop pretending that everything is okay financially. If you have no clue about how much money you require to pay your bills, take the time to prepare a proper budget. You can download one at www.financiallysmartonline.com in the financial tools section. Examine your spending habits - are there areas where you’re wasting money? Be realistic about your income - do you need to earn more?

2. Manage Your Debt Effectively

It’s time to stop depending on debt to cover your budgetary shortfalls. Borrowing money for consumer needs must be your last resort, not your first choice. Too much of your future wealth has already been squandered in making interest payments for frivolous purchases that fade away. Let your mantra be: ‘If I don’t earn it, I can’t spend it.’

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3.  Use Your Resources Efficiently

It’s time to stop wasting precious minutes in unproductive activity. There are 24 hours in a day, how many of them do you use to generate an income? Are you sitting on your talents and assets instead of figuring out how you can earn from them? Focus on becoming more profitable by learning how to make more money this year.

4.  Plan For long-Terms Goal

It’s time to stop focusing only on your short term needs. Start creating a vision for your future - what kind of lifestyle do you want for yourself and your family? You must establish action plans for home ownership, children’s education and retirement, even if you’re not sure where the money will come from yet.

5.  Focus On Possibilities Instead of Problems

It’s time to stop complaining about money. Yes, you may have serious financial challenges; but instead of feeling sorry for yourself, be determined to find a way out. If you’re feeling afraid or confused about your finances, get help from a professional advisor and make every effort to implement the recommended solutions.

So let us resolve to become financially responsible by being more introspective, industrious and innovative. Just like the mythological phoenix which emerged from the ashes, we will rise again in 2010!

Copyright © 2010 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, January 7, 2010

Cherryl is a financial consultant and coach, founder of Financially S.M.A.R.T. Services. See more of her work at www.financiallyfreenetwork.com and www.financiallysmartonline.com. Contact Cherryl

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