Money & Power: It's About the Budget

Financial coach Lynnette Khalfani-Cox, The Money Coach helps 23-year-old Aminah work up a budget that she can live (and save) with.

ESSENCE.COM Nov, 10, 2014
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[MUSIC] My name is Aminah Wilson and I'm 23 years old. My number one money problem is my student loan. She's got big goals, big dreams and a lot of financial challenges. Is the max. So the credit card is pretty much maxed out? Yeah, you can say so. Yeah. Okay. I have all these categories that I've listed here. We can kinda get a good sense of what your monthly bills are. Since you're telling me that your credit card is pretty much at its $2000 limit. Mm-hm. And that's telling me, okay, you're probably living a little bit above your means. So you have to spend less than you earn. The only way you're gonna know that is by literally writing down everything, itemizing all of your spending activities. What would you say you spend per month on clothes? $300. About $300? Mm-hm. Okay. And I get it that you might. Skip a month. Yeah. But maybe you might do more the next one or whatever. What else? Your credit card that you mentioned. You have that $2,000 balance, roughly. The minimum system is really a trap for you. It is? Yes. [LAUGH] Only because you're going to continue to pay interest Exactly. over a longer period of time. And each month that you continue to have a balance, interest is getting charged. So the student loan payments and then the credit card bill, auto insurance, gas. A lot of people now my age, they buy these expensive cars that they want, however me, I have a car that's running well. It's just something that I wanna be comfortable with. I would like to set a goal to move out, as far as for the new year, about January or February I would love to live on my own. How much do you think it would be in terms of apartment rent. Utilities, gas, electric. It will be about another thousand. About $1000 a month total? Yeah. Okay, you've heard of the concept of paying yourself first, right? Yeah. You're going to be given money through the government, you gotta give Uncle Sam his due, right? Mm-hm. You're gonna be paying the student loan companies. You're gonna be paying the credit card company. You're gonna be auto insurance company. What about paying yourself? As a target, it's a good idea to try to save 10% of your income. If you can save more, that's great. But at, at least try to save 10% of your income. [CROSSTALK] Okay. So. You probably have a negative net worth right now, given the student loan payments and the credit card debts, and you don't have more than $70,000 in assets. So currently you have a negative net worth. But that's okay. You're gonna build every time you. Push down those student loans every time you decrease that credit card debt. Is, even though you're still in the negative you're, you are actually building net worth. Okay. And the goal is to get you out of the red into the black. Yes. Okay. You are taking home based on what we've calculated thus far $2,400 a month. You're gonna save about $450, for the month. That's good. Yeah, that's, that's great. That's terrific. Alright. You know, this gives you a lot of flexibility. I have not asked you to cut back on a single thing. Yeah. Seriously, I, I said, I just asked you, what are you spending money on? I just say ooh, don't spend 300 dollars a month on clothes. I let you do that. If you like the idea of saving 450 dollars a month and if you do it for two months and you see 900 dollars of your savings or checking account and then you see 1350 dollars a month you're gonna say oh yeah. I like that. I like that. 30 days from now I see myself paying off. Not maybe my whole credit card. It would be nice, it would be wonderful. But half of it. And I see myself also saving more money than I have now. And I see myself being stable and budgeted, and not only paying off my bills but paying a little more than what I owe at the time.