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Locals attend financial classes
Published September 3, 2008
ANGLETON — Patty DeLuna is a single mother getting by on a single income, and she wants to learn how to do more than just get by.
One of a half-dozen people attending the first session of a six-week financial stability course sponsored by the United Way of Brazoria County, the Brazoria resident was divorced two years ago. After recovering from the initial shock, she realized she needed a few lessons in financial planning.
“I want to learn how to save my money — learn what I can live without,” she said as her daughter, Danielle, 6, colored a picture. “I don’t want to be a renter all my life. I’d like to own a house so I can give it to her one day.”
DeLuna isn’t alone, financial planner and course teacher Kurt Zetah said. Half of all Americans don’t have enough money saved to pay one month’s worth of bills.
“The first rule is to understand where your money is going.” Zetah said. “If you don’t tell your money where to go, it will just go.”
Over the last few years, more of everyone’s money is going toward fuel, and that affects prices of almost all goods and services, said Donald Payne, Brazosport College assistant professor of economics.
“Gas prices lead to higher costs for clothing, food … basically everything,” Payne said.
Keeping an eye on family funds is the goal of the six-week course, United Way of Brazoria County Director of Community Services Gloria Luna said. Some people have bankers or other financial professionals to help them in planning. For those who don’t, the United Way courses take place quarterly, Luna said.
Families and single parents should have a minimum of $1,000 in an “emergency fund” in case their car breaks down or their child becomes ill, Zetah said. And all consumers should learn to control their debt.
“Develop a plan,” Zetah said. “Pay down debt. Then, instead of being afraid to pay your bills each month, you’ll look forward to making those payments because they’re saving you money.”
AREA ECONOMY
Brazoria County’s rate of inflation — the costs of goods and services used on a regular basis such as food, clothing and fuel — is up 5 percent over the last year. Area salaries are not rising as prices do, Payne said.
“Generally, when the economy is not doing well, businesses are not as likely to give pay increases,” he said.
The area economy is not in a recession, but there is a slowdown, he said. Instead of 5 percent growth, Brazoria County’s economy is growing at about 1 percent. While the slowdown leads to leaner home budgets, it also should be a sign for people to save as much as possible as a hedge against future problems, Payne said.
Unemployment in the county is at 5.3 percent, which is up slightly from last year but below the national average of 5.7 percent.
Currently, job losses are being seen in housing and construction but not general service work, he said.
“It doesn’t affect the average person,” Payne said. “If you’re a homebuilder or do some type of contract work, your business has slowed significantly in the county. Anyone in those fields is probably feeling the effects more than those who are not.”
And while retailers would like to lower their prices to sell more goods, they’re not able to do so since fuel prices drive everything, he said.
CREDIT CRUNCH
People might have to find other ways to tweak their budget, such as lowering the amount of money spent in interest, Zetah said.
Wealth isn’t so much about earning money as it is about saving it, he said. Once debt is eliminated, even people with smaller incomes can save money, worry less and live more comfortably.
Worry was a constant part of DeLuna’s life. Climbing gas prices, the soaring cost of food and political uncertainty were almost paralyzing.
“I cried for three months after I was divorced,” she said. “I didn’t like getting the pink copies of bills in the mail. I’m tired of having a bank account with nothing in it. I want to learn how to save. You never know if you’ll get laid off, and I want to have a plan.”
The most pervasive debt problems are high credit card balances, and 58 percent of holders carry a balance, according to the Federal Reserve. In 2004, credit card companies raked in $43 billion in late, over-the-limit and balance transfer fees, Zetah said.
One of the most-recognized ways to escape credit card debt is the “credit crunch,” according to financial planning information at the Web site About.com.
List all credit card balances, interest rates and minimum payments with the highest interest rate card first. Each month, pay the minimum balance on each card except the one with the highest rate, to which is paid the minimum balance plus the most money that can be spared.
Once that card is paid off, apply that amount to the next-highest rate card. When two cards are paid, apply the combined amount to the remaining cards until they’re all paid.
Some financial planners say to pay off the lowest balance card first, and that works, but a larger part of the money paid is interest.
If that sounds difficult, that’s because it is, Zetah said. At first.
“It’s not easy,” he said. “If it was, everybody would do it. When you have a plan to eliminate debt, it’s a lot easier. But you cannot get your finances under control unless everyone in the house agrees.”
And limit use of credit cards.
“If you have discipline, they can be OK,” he said. “If you don’t have discipline, don’t have a credit card.”
Once credit cards are paid off, stop using them. Debit cards now are accepted in place of credit cards for many transactions, so the “need” for credit cards to book flights or hotel rooms is gone, he said.
OTHER DEBTS
Home mortgages are necessary, but not necessarily for life. Paying an extra amount — any extra amount — can save thousands of dollars over the life of a mortgage, Zetah said.
Again, planning for that future and paying less in interest will help consumers make ends meet, Zetah said.
The majority of people will need a newer car in the next five years, but very few save for that inevitable purchase. Making a larger down payment, paying less interest by having a shorter term or not having a car payment at all will make a large difference in anyone’s life, Zetah said.
“There’s no such thing as good debt,” Zetah said. “List it, understand it, develop a plan and pay it off.”
That’s sound advice in any economic climate, Payne said. And, as with all economic changes, positive news is always possible, he said.
“I don’t have a crystal ball, but if gas prices continue to go down, that’s going to leave more income for consumers to spend on other products,” Payne said. “If they do go down, the economic slowdown will be short-lived. If they go up, we’re looking at a longer period of slower economic growth.
Single moms like DeLuna probably should plan for more of the same with a slight uptick. Reducing debt will help in any regard.
“The economy is going to stay stable,” Payne said. “The slow growth we’ve had over the summer and spring is going to continue through the winter.”
John Lowman covers Brazoria County for The Facts. Contact him at (979) 849-8581.
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COURSE SCHEDULE
Free courses take place quarterly. The current round is from 6:30 to 8 p.m. Thursdays at the United Way offices at 1212 N. Velasco in Angleton.
Last week: Introduction to Banking; Credit
This week: Checking accounts; Keep track of money
Sept. 11: Saving money; Consumer rights
Sept. 18: Credit scores; Making credit work
Sept. 25: Borrowing money; Home ownership
Oct. 2: Financial stability; useful tools
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