Shine (20 page)

It’s time-out for the old, unwise emotion of “I want a man to take care of my bills.”

I’m not suggesting that a couple has to be financially equal. I could always handle someone I loved who came to me with a little baggage, and most good men would probably feel that way about a woman they loved. But, honey, I can just hear the man of your dreams saying, “Please don’t come into my life with a matched set of luggage upon luggage carrying $40,000 worth of Manolo Blahnik shoes; don’t come into my life with a rented apartment when you can’t even come up with the down payment to buy the apartment. I got to worry about this loan you have? I got to worry about your car note? I don’t need Louis Vuitton trunks coming into my life, here. That will bring such financial burdens into the relationship. Let’s not start off on very unequal footing.”

We all know you’re not attractive if your teeth are stained, you’re anorexic or obese, or your hair needs a serious washing. You’re even less attractive if you have bad credit, if you overspend, and if you can’t pay your own way if you had to. A huge part of preparing yourself for love is getting your financial house in order.

Case in point: I know so many people in the music industry who hang $250,000 diamond medallions around their necks—and they’re still renting rather than owning apartments. What,
what, WHAT
are you thinking, I want to ask.

On our first New Year’s together as husband and wife, Al and I sat on the beach in St. Bart’s and began to write out a plan: Al called it our business plan for life. It would consist of the goals and expectations our family—the two of us—would work on that year.

To help you do the same, I want to introduce you to Al Reynolds, my husband, former Wall Street banker, and the man who knows more than anyone else in my life about financial security. Today, he’s a financial management executive dedicated to extremely high-net-worth individuals, and he advises them on every aspect of their financial lives, from helping them buy their art and yachts, to personal security for couples and singles. He’s a financial doctor, a financial therapist, and a financial wizard. Most important, he advises me (with a great
team of other professionals) on my finances—you don’t think I’d entrust my own money to less than the best, do you? As I said, the best. He’s my expert on this subject.

So, I give this task to him: explain some of the tenets of a solid financial house to my readers. You’re in good hands.

Finances 101, According to
Al Scales Reynolds

From a very young age, I was always taught to have a plan, and that plan would serve as a road map to wherever I was going. It’s been the theme of my life, and I always work more on that road map—the process—than the actual goal. For example, if you tell me you want to be a banker, I’ll give you a short but good plan. It looks like this:

Every woman who hopes to be in a serious relationship one day ought to start with a road map. It will help her build wealth, protect it, organize it, spend it, save it, and share it wisely. If you’re single, start the road map with some serious thought about finances while following the game plan below; if you’re in a relationship, with your partner, indulge in the same kind of straight talk about money and goals.

The Road Maps

Take out three big sheets of paper: these will be morphed into your financial road maps. On the first sheet, write down…

Time frame: Next two to three years

• 1. What’s my goal?
  Put a price tag on this goal. If you want to live in Paris for a year, buy a house, have your own business, or whatever—figure out approximately how much it will cost for the next two to three years. (I didn’t say making this plan would be easy!) Do I want to have a job where I get a paycheck every Friday—or do I want to plan long-term for a career? Decide on a goal, a time frame, and figure out approximately how much it will cost to attain.
  
• 2. What are my present expenses?
  Put an approximate dollar figure on this: add up approximately what you spend for housing, entertainment, clothes, food, travel, medical expenses, insurance, paying off debts, gifts—whatever.
  
• 3. How much money will I need to accomplish my goal?
  Subtract number 2 from number 1, and add 20 percent for unexpected expenses, inflation, and prices that may rise. Your answer will approximate how much money you will need to meet your goal.
  
• 4. How much do I earn a year, now?
  Look hard at this figure. How much more money than you have now will you need to accomplish your goal?
  
• 5. What do I expect to be earning in the next two to three years?
  Jot this down.
  
• 6. What will I hopefully own at the end of that time?
  Be as detailed as you need to be.
  
• 7. What will I have accomplished? Can I meet my goal?
  

On the second sheet of paper, ask yourself the same questions as in the first time frame, only change the time frame to:

Time frame: Next four to seven years

Then, on the third sheet, asking the same questions, write:

Time frame: Next ten years plus…

It may take you several weeks to fill out these business plans, which cover at least the next ten years. Be realistic, and add a bit more to whatever your figures
come out to be in each category (things always cost more). Your answers will be your road map.

Try to stick to the map as closely as possible. Of course, things will change—you can’t predict everything, but now, at least, you have a road map. The following are some tips on how to get to where you’re going.

An Ordered Financial House—
If You Are Single

Finances play a huge role in relationships: no surprise that it’s the number one cause for divorce in America. There are so many emotions, so much anxiety and guesswork surrounding finances that if you don’t sit down to figure out a financial game plan by yourself before you have a serious partner, there’s going to be trouble.

Before you put your financial house in order as a couple, it makes eminent sense to deal with it as a single, right now, even before there’s a husband on the horizon. Get a handle on what works for you alone, and you’ll have far better “couple” judgment later on. What follows are some of the basics. I suggest you have:

An Emergency Exit Plan

It’s simple: every woman, rich or poor, ought to be in control of her own money. That offers her a sense of security right off the bat.

Even for starters, every woman should have an emergency exit plan. In most cities, for example, every building has an emergency exit or fire escape plan consisting of signage and fire extinguishers that will aid each occupant to get out of the building in case of disaster. Although a woman doesn’t anticipate that her house is going to burn down or her relationship is going to end, just in case that happens, she needs an exit plan.

The emergency exit plan consists of these things:

1. Establish credit.
   Credit cards should always be in your own name, and
   kept
   in your own name even after you marry. Establishing a sound
   credit identity is one of the best things you can do for your future husband.
   
2. Get out of debt.
   Getting your financial house in order isn’t about maxing out your credit by overcharging on those cards; it is about paying down the debt as soon as possible. Of course, it’s sometimes impossible to swing the whole balance, every month.
        So, here’s the trick to sensibly paying off credit cards: if you pay just the minimum your credit card asks for, you’ll
   never
   get free of Mastercard. Instead, look at your bill, find out the finance charge for that month, and add the minimum payment to it—then, let that be your minimum. If you can afford it, pay at least twice the minimum. If you get a bonus or a raise or birthday presents in the form of cash, take that money and send it straight to the credit company. Face it: it’s true that the average person making $30,000 to $50,000 a year uses her credit cards to live. It’s particularly important for her to manage finance charges responsibly, manage the interest she pays, and certainly, manage the amount she charges on those cards.
   
3. When you’re desperate, get help.
   Sometimes the debt seems just too big a mountain to climb. Think about asking for the services of a debt counselor. There are many nonprofit credit-counseling agencies created to help people climb out of onerous debts. They can get lenders to lower their rates, eliminate late fees, extend your payment terms, or settle for less on what you owe. Check out the Web site Myvsta.org.
   

• Other good Web sites and telephone numbers:
  
• CardWeb.com
  (800-344-7714). The Ram Research Company, for a small fee, will give you a list of banks offering credit cards with very low finance charges, low or no yearly fees, secured credit cards for a person who wants to rebuild her poor credit history, and other information.
  
• National Foundation for Consumer Credit
  (www.nfcc.org).
  
• If you’re having credit problems, this is a great Web site. The nonprofit foundation will act as a mediator between you and the creditor, and can often negotiate very comfortable settlements. The
  service may be free, but if not, it will not cost more than $50. The address is 8701 Georgia Avenue, Suite 601, Silver Spring, MD20910.
  
• Computer debt management.
  If you want to get your debt under control online, consider Quicken.com, which is a financial site dedicated to finding a way for you to get out of debt, and then plan your future finances—after you insert your financial information.
  
• Credit bureaus.
  These bureaus know everything about your credit, and they issue credit reports on you to anyone who asks. If you apply for a loan, a credit grantor will surely check out your credit report to decide whether or not you’re a good credit risk. You can call or write any of the bureaus to get a copy of your credit report and see what others will be reading about you (and what bad credit you may have to clean up). Some bureaus may charge you a fee. IMPORTANT: Credit bureaus often have the wrong information about you. You certainly will want to have that information erased from your record, which is another reason to check what they’re sending out about you. These are the three major credit bureaus:
  
• Equifax Credit Information Services (404-885-8000): For a copy of the report, write PO Box 740241, Atlanta, GA 30375-0241.
  
• Experian (800-354-5368): For a copy of their report, write Experian National Consumer Assistance Center, PO Box 2002, 701 Experian Parkway, Allen, TX 75013.
  
• Trans Union Corporation (800-888-4213): For a copy of their report, write 760 W. Sproul Rd., PO Box 390, Springfield, PA 19064.
  

Whatever you do, however you do it—get that financial house in order by eliminating major credit card debt. The man of your dreams may appear momentarily, and if he’s not Chris Rock, and he takes a look at a debt-ridden woman (cute as she may be), he may think you’re a bad risk.

When you’ve done so, you have a good start on your emergency exit plan.

I’ve said you should avoid credit card debt. Is my wife contradicting me? No.

She’s right-on. If there’s anything you should go into debt for, it’s your education. Star did just that, and it increased her earning power enormously. The happiest day of her life came when she paid off those college loans, but her fairy-tale life wouldn’t have happened without that education. Your education and training are your biggest assets.

Consider a bank loan, consider borrowing against the equity you may have in your home, and certainly consider applying for financial aid, which you can pay off as your earning power increases. Investigate lending institutions, including your credit union, to discover good lending rates; a good Internet source for checking out interest rates on bank loans is www.bankrate.com.

• 4. Save as much as you can.
  Figure to save 15 percent of your income, at least. You’ll be happy you did. Once you get in the habit of saving, it doesn’t hurt a bit. I strongly advise that after you pay your bills, you should pay yourself. If you’re an independent woman, and you have ten bills for the month, the eleventh bill should be your own.
  Translated, that means that you give yourself a present and put a portion of what’s left into a savings account. It builds up.
  
• 5. Invest carefully.
  After a while, piggy banks just don’t do it. Your emergency exit plan (not to mention your living plan) is absolutely dependent on interest-bearing savings or brokerage accounts you build up in your own name.
  

• Invest in the market? Should you buy a mutual fund or an individual stock? (It’s the mutual fund, every time!)
  
• Should you hit the bond market?
  
• Should you diversify or put all your eggs in one solid basket?
  
• Should you take or reinvest your dividends?
  

You’ve absolutely got to educate yourself in this field. There are dozens of books on the market and even more experts on television, in your own bank, and in print who only want to help you think your way through to financial solvency. Don’t listen slavishly to any one source, but become familiar with all the possibilities.

• 6. Need a specialist?
  For not very much money, you can even hire a financial consultant, whose job it is to build your money through asset allocation, evaluating your risk tolerance, and devising an investment strategy. Such a person can do as much or as little as you like. Some pick out the actual investments and manage your funds daily. Others meet or talk with you periodically just to make sure you understand how your portfolio is doing. You don’t have to be rich to hire a financial planner, but remember, a consultant who gets paid a percentage on the growing amount of your portfolio is a better deal than one who is paid for every investment and change of investment he makes on your behalf. Guess why? You know the answer. The consultant who gets paid for every change is going to make a whole lot of changes whether or not they’re good for you.
       Here’s my special tip on investments: keep it simple (plain vanilla stocks and bonds are the safest) and leave the other exotic stuff like options on futures and commodities to the Donald.
  
• 7. Come to the love of your life with thoughts about financial solvency.
  This is a big one. A woman who comes into marriage with a mind full of mush, saying, “Take care of my money, it’s yours, I’m yours,” is really a fool and inviting trouble. Dumbness about money is never cute and is a liability in the marriage, right off.
       One of my biggest crusades now is teaching women how to manage their own money. Money management should be a requirement in school curriculums. The national debt is so high because too many kids stay kids throughout their adult life when it comes to finances.
       
  It’s imperative that you be grown-up about the money you make and hope to make; it’s essential that you learn—before you tie the knot—how you wish to deal with finances. Come into marriage with ideas and beliefs. They can be wrong ideas, but at least they start dialogues and sharing about how finances should be handled. Such a dialogue can be whimsical and have little real substance, but it still gives couples a framework for how to begin. We don’t have near enough money talk—money is almost taboo as a discussion topic, just as sex used to be. But if you dream together about a financial future, set goals, and make plans together, your chances of a loving marriage are so enhanced.
  
• 8. Buy your home.
  The single most important thing any woman can do to prepare herself for financial soundness is to purchase her own home or apartment.
       
  Home ownership is almost the way America defines citizenship. If you own a home, you pay real estate taxes, and as long as you pay taxes, you have a vote within the municipality in which you live, a say in education in your area, a say in construction, a say in city hall, a say in the way you live your life. Financially, you build equity in yourself. Here are more advantages to home ownership: