Top Toolbar


Finance 101

Not all of us own stocks or bonds. Our biggest asset is usually our earning potential. To ensure you are financially healthy for years to come, you’ll want to realize that potential while you’re in the job market by utilizing your income-producing years to build a solid financial foundation.

Below you can review what steps to take to help put you on a sound financial footing.

Build an Emergency Fund

Conventional wisdom says you should have three to six months of income saved in case of a financial emergency. Having an emergency fund will not only cover you in the event of unemployment but also if you need to use unpaid medical leave to address a health issue related to your bleeding disorder. How do you know how much money you will need? You’ll have to start by calculating your monthly income and compare it to how much you spend each month.

Figuring out how to build an emergency fund isn’t always easy. In 2012, the personal savings rate dropped to 3.7%, meaning we save only 3.7% of our overall income. For people with bleeding disorders who sometimes have to deal with high medical expenses, such a savings can be dangerously low.

For more information on dealing with medical expenses, go to Living With Illness Tip Sheet—Finances.

The best approach is to start slow. Figuring out how much money you earn and how much to save should be easy.

Here are a few tips to getting started:

  • Look at your pay stubs for a month. Remember to include paid and unpaid leave in your calculations.
  • Spending is a little more difficult to calculate. Gather your credit card and bank statements, and start adding up all expenditures for the month (rent/mortgage, utilities, car payment, insurance, food, clothing, entertainment, etc).

Remember to include some padding in your monthly spending calculation because homes eventually need repairs, cars need to be maintained, and every once in a while you will have an unexpected and costly expense.

Pay Down Your Debt

Debt is a touchy issue. Americans owed an average of $54,000 per person in 2009. That includes credit cards, mortgages, car payments, student loans, and lines of credit. The average debt a person has when they file for bankruptcy is just $12,000, and more than 60% of all bankruptcies are medical bankruptcies— both good reasons to start eliminating debt as soon as possible.

The first step is to stop acquiring new debt. If possible, avoid using credit cards or just pay the total amount owed every single month (not the minimum balance) like a bill instead of a revolving line of credit. In extreme cases you might consider cutting up your credit cards, but it’s best not to cancel the account. Canceling a credit card may backfire because a significant portion of your credit score is determined by the amount of available credit you have. Canceling a card will reduce the amount of available credit you have and quite possibly lower your score. Debt repayment won’t work until you stop adding to the problem.

The second step is to come up with an overall debt reduction plan. You’ll need to squeeze out a little more money from your monthly income to dedicate toward debt payment so you can do more than just make minimum payments.

Here are some options to consider:

  • The avalanche.
    • Pay off highest-interest debts first and pay the minimum payment on the rest of your debt. Once the higher-interest debt is paid off, you then go down the line paying off the lower-interest debts
  • The snowball.
    • Pay off your smallest debts first to build momentum toward paying off the higher-interest debt last
  • The emotional cost approach.
    • Pay off debts with the highest emotional tolls first. Sometimes this means interest-free debts to family or high-interest debts. The point is to go after those that cause you the most stress

Keep the Money You Have

Finally, you’ll want to make sure to carefully check out all offers and solicitations for investments and labor to ensure that you’re not falling for scams. The Better Business Bureau, Snopes, your state Attorney General’s office, and other resources can help you check the background and validity of financial institutions and financial requests. While Web sites such as Angie’s List that rate businesses are good sources, word of mouth is the best way to ensure that any local contractors or businesses you hire are trustworthy.

Here are some important tips to remember to keep your money safe:

  • Don’t give out your Social Security number or contact information when requested from small businesses unless it is absolutely necessary.
  • If a creditor calls, question them carefully to ensure that they are who they say they are.
  • Don’t be afraid to forcefully say, No, if someone is applying intense pressure to force a sale.
  • If you think you may have been scammed, contact your state Attorney General’s office to report it.