Tuesday, July 6, 2010

Managing Family Finances

I spoke with Steve Cordasco, financial wizard and host of the radio show The Big Money on 1210 AM radio in Philadelphia. Here are a few of the tidbits he shared:

How can a family calculate how much money they should keep in savings?
I usually suggest keeping at least six months of your income in savings. If you have a job that’s vulnerable, keep one year of income in savings.

For someone with a job that may be at risk, how should they prepare in case the worst happens?
Cut their expenses down big time. Areas where you can do that include eating out less – food is your major component. Work hard to try to get your insurance costs down without giving up coverage, by shopping around. Reduce energy costs in your home by adjusting the thermostat. If you’re driving a long distance, get a carpool or take the train. Pack a lunch – you’d be surprised how much that cuts out.

If you have lost your job, what should your priorities be if you are unable to pay all your bills?
You should definitely communicate with the companies you have bills with and let them know what your situation is. Ask if there’s a way to negotiate an easier payment system. It’s never going to be one phone call. You need to be relentless. Today more and more companies are open to that, especially if you are proactive in doing it. Life necessity items must be paid – your health premiums, shelter, the things you need to live day to day, you need to pay first. They can turn the cable off and repossess the car, and you’ll still find a way to manage.

Part of the American dream is that each generation strives to be more successful than their parents. Is that changing for today’s young generation?
Ultimately, it may not be that the generation coming out of college has to have as much stuff as their parents. Maybe their quality of life will be something that’s much more simple than this craziness that you’ve got to have more. Maybe the mindset of letting people borrow and continue to buy even though they don’t have the money will shift with this generation. In the end, are they not doing as well as the generation before them? I would say they are probably going to be in a better place.

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