Monetary discipline encouraged for 2011

Financial advisors, and consumers that modified spending habits in 2010, agree that personal financial security in 2011 will come to those that watch their routines.

Certified Financial Planner Louis Scatigna, author of The Financial Physician, has stated that one’s fiscal health, following two years of the hardest economic downturn since the Great Depression, could be boosted regardless of income by changing monetary habits in 2011.

“Most people think their financial problems revolve around not earning enough money to make ends meet,” Scatigna said in an e-mail statement. “The truth is that everyone can improve their financial health … and they don’t have to make a dime more than they are making today.”

Scatigna and other financial experts stressed this week that the starting point for individuals and families is to calculate their net worth n no matter how depressing it might appear on the surface.

Once net worth is determined, prepare a budget that includes not just big items like mortgage and car payments, but what is spent even on groceries and treats like gourmet coffee, or the cost of eating lunch out every day compared to carrying a lunch.

All financial advisors noted that to make a budget balance most people would have to eliminate items that fit into a category of want rather than a need.

After the budget is made, develop a management plan. If a person is single, he or she should have a given time to sit down, go over the bills and look at the opportunities to place leftover cash into savings n whether that is an investment package or a couple of dollars put away in the sugar bowl.

For couples, working together on family finances should be done so both spouses know what is happening to the money. This will develop the discipline of planning and saving and could prevent many tense relationships.

Coming into the New Year consumers appear to be getting smarter. Experts claim that most people are increasingly aware of what finances they have beyond numbers on a paycheck and are doing what they can to protect their interests.

“People are figuring out how to save money,” said Arlen Ledet, resident manager with Morgan Stanley in Houma. “[Consumers have started to] project their expenses during the year to make sure they’re covered. Then when they have the leftover they are being real careful with it.”

Ledet deals mostly with people who can afford to save n meaning they have enough disposable income to put some away for the future without having to sacrifice a couple of meals every day. But even for those that many would still consider affluent, changing times means changing habits.

“I think 2011 will make people think about retirement and taxes more than they ever have before,” Ledet said. “The government has done a good job of kicking us out of banks. Right now you’ve got to go almost two years to get any kind of return on an interest rate, and the five-year treasury [bond] is still yielding 1.96 percent. With that going on it means people are living off short-term investments or making less than 1 percent on their CDs. So [savers and investors] are looking at other income ideas, dividend paying stocks and other things.”

Ledet is one of many financial experts who have agreed that the face of retirement has changed for those that thought they could save their way into prosperity. And even then, generating new income, financial discipline and watching spending habits has taken the place of any expectation of afternoons relaxing on a front porch rocking chair while sipping on sweet tea.

On the other end of the economic spectrum, Rick Lovell, owner of Thibodaux Finance, said most of his customers are people living paycheck to paycheck. Lovell offered a warning about getting into debt one cannot afford.

“Credit cards have a way of helping people through tough times, but in the long run it hurts them more than helps them. Credit cards and payday loans pull [people] down further,” Lovell said.

Lovell said many consumers are concerned only with if they can afford monthly payments and have not taken into account the long-range cost of revolving and extending debt.

“What’s kind of upsetting, and we see it from time to time, is a man will come in and borrow $1,500 to take his family to Disney [World]. Ten or 12 days later he’s home but when next summer comes around he is still paying for that trip,” Lovell said.

Financial experts note that bad spending habits are not isolated to people in any given economic bracket, and that the one consistent element that led to a massive recession is how Americans over extended themselves financially. It is a hard lesson from which consumers should have learned something.

The U.S. Census Bureau has reported that consumers carried more than $886 billion in credit card debt during 2010. By contrast, 40 years ago that debt was at $8 billion in today’s money.

Today, many consumers either by choice or financial loss are changing their practices. The U.S. Department of Commerce reported that in 2010 the personal saving rate was at 6.4 percent n the highest it had been for more than a year. One third of Americans said that they no longer have or use credit cards. And consumers were lowering expenses at a rate of 0.08 percent n which is actually an improvement from the previous year. However, it must be noted that a good portion of that debt reduction was the result of consumers defaulting on loans or falling into bankruptcy.

Some consumers insist that they are learning from the experience of others or their own misfortune to change their ways.

“The biggest thing I’ve done this year is I didn’t use any credit cards. Everything was [paid with] cash. Even Christmas shopping,” said Houma resident Suzanne Crochet. This consumer also said that like increasing numbers of people when she goes to the grocery store she takes a list and buys only what is on the list. Crochet confirmed that by being a little more financially disciplined her dollars go farther and finances do not seem as tight.

Scatigna said that by learning about money and how commerce works consumers could avoid many costly mistakes and be more satisfied with their standards of living. “We now live in frugal times and must adjust our behavior in order to survive and become financially healthy,” he said.

Suzanne Crochet of Houma checks over her shopping list before making the grocery rounds at Rouses Market. Crochet said that shopping with a list and not using credit cards has saved her family money during the past year and she intends to keep that discipline going into 2011. MIKE NIXON – TRI-PARISH TIMES