Let’s talk worst case scenario first.  If you owe the government here are some things you can do to recover well…

• If you don’t have all of the money right now, the government does take payments.  So don’t be afraid to file if that is the case.  Just be honest about what your budget says you can afford and do your best to pay it off by April of 2013.  We don’t want this to linger very long.
• Estimate your withholdings with the “withholding calculator” at www.irs.gov. Then go to your payroll department and change your exemptions so enough money is getting taken out of each check.  It is best to plan ahead than find out you will owe again!
• Review your budget.  Make adjustments to your budget because now you need to live on less.  Find out what is unnecessary and reduce it or cut it out entirely.  Be sure your budget balances with the change in exemptions and/or your monthly payment to Uncle Sam.

If you always get a refund here are some suggestions to make the most of your money…

• Put some money in savings!  If you don’t have $1,000 in savings then you need to make that 1^st on your list of to dos.
• Pay off some debt!  List your debts smallest balance to largest balance and see how many you can pay off within your refund amount.
• Set aside money for any upcoming expenses (car repairs, non-monthly bills, etc).
• Have some fun!  Yes I said it!  Go out to dinner, take your kids to the museum, or buy something pretty for your home.  Of course, I don’t want you to spend all of the refund on fun but a little fun makes you feel like you got something extra.
• The best way to handle a refund though is to actually get it in your paycheck throughout the year.  If you received $2,400 from the government, I think it is better to get $200 more each month instead.  Go to www.irs.gov and estimate your withholdings with the “withholding calculator”. Then change your exemptions with your payroll department so you just break even.  Imagine having more money each month to pay down debt, save, or simply have fun!

Whether you have a refund or not I hope these tips will help you to be a better steward over your taxes this season.  Making smart decisions with your taxes can have a positive impact on your future.

Typically if you have old debt that hasn’t been paid on for more than 6 months I recommend you settle them.  But you must know that there can be consequences to doing that.  I believe the freedom of being debt-free is worth it though.  Let me explain…

Let’s say you have a $1000 debt that hasn’t been paid on for a year.  When you have the cash on hand you could settle that debt for $200 which means the creditor took a loss and you only paid $200.  You never have to deal with them again!  However, you may be responsible for reporting the $800 savings on your taxes as debt forgiven.  Which means your income for that year just went up by $800 and you now have to pay taxes on it.  If your tax bracket is 25% then you now owe the government $200 additional.  Therefore, in total for that debt you have paid $400.

It sounds unfair and some may wonder if the process is worth it.  I believe it is still worth it to pay off the debt.  You must protect your online reputation, pay the debts you owe, and make good on your commitments.  This is just a different way of going about it. The finish line is still there.  You just took a different route.  Knowing how the process works helps you develop your strategy for getting free.  Don’t allow the tax implication to stop you from your freedom.  Now go pay off that debt!

For years, Americans have overspent therefore, creating obscene amounts of personal debt. For the last several years we have had no choice but to tighten belts and spend less. Now that many people are back to work and/or getting raises, have we learned our lessons? Now is the time to get out and stay out of debt! Now is the time to save money for your future. Now is also the time to lay a solid foundation for your finances. You can do it if you keep that belt tightened just a little longer… Read more in a recent AZ Republic article Ericka Young was featured in…

To Your Success!

“There are so many different kinds of savings accounts and so many different institutions to choose from.  What kind of institution would you recommend and which type of savings account is best and will pay the most interest?”

First of all, you must understand that there are several reasons for saving money:

• Emergencies
• Large purchases
• Future goals (children’s college, retirement, etc)

I’ll explain the last one first.  Long-term savings is for goals that are at least 5 years away.  You could be planning for retirement, kids college education, a child’s wedding, etc.  No matter what the long-term savings is for, the general rule should be that you save it in mutual funds, stocks, etc only if you know you won’t need the money for at least 5 years.  The reason behind this is volatility in the stock market.  Over long periods of time the stock market is a great way to save for future endeavors.  You could see 10%, 12% or more in returns.  But if you need your money in a relatively short period of time you don’t want to pull funds out of the market during a potential down period.  Historically speaking, the stock market is a great way to invest for your future but you will have ups and downs so be prepared.  Understanding your risk tolerance and time horizon is critical to your long-term investment strategy.

A large purchase is something that will take less than 5 years to save for.  That means you are saving in a more stable type of account because you don’t want to run the risk of volatility in the market with money you will use soon.  Large purchases include: cars, household furniture, major car repairs, vacations, planned medical expenses, appliances, home down payment, etc.  I recommend saving for these items in a money market account.  Money market accounts typically earn more interest than the average savings account.  Basically if you don’t need it right away and the total amount you must spend won’t fit into your monthly budget then you must begin a regular savings for it until the amount you need is available IN CASH!

Saving for an emergency is vital and the critical first step in everyone’s financial plan.  You must keep $1,000 in the bank before beginning your debt reduction plan.  Once you have the $1,000 saved you move on to getting rid of all your debt except your mortgage.  Next you increase your $1,000 emergency fund to 3-6 months of expenses.  Here again I recommend using a money market account to save.  You earn higher interest, retain your principle deposits, can withdraw at any time, etc.  Some banks offer check writing privileges for minimum amounts.  You may need to keep a minimum balance, but this is savings right?  You want a minimum saved!  There usually are limitations on how many times you use the account, but the idea here is that you aren’t treating this account like a checking account.  There shouldn’t be an emergency or large purchase several times each month.

There are tons of banks to choose from when opening an account.  Online banking is making it much easier to sock away cash without leaving the comfort of your home.  Check out www.bankrate.com for rate comparisons between accounts. Make it a priority to save and your money will begin working for you!  Then later you don’t have to work so hard for your money!

My recommendation is for you to set aside some time for an activity that you normally never seem to have time for.  Think about your goals for 2012.  Did you commit to paying off some debt?  Well February 29^th is a good day to add up how much debt you have and determine how much extra you will put towards paying it off.  Is 2012 the year you decided to really commit to a budget?  Why don’t you make February 29^th the day you wrote out your March budget?

Personally, I have scheduled an appointment to get my business marketing back on track.  I am also spending some time watching an educational and inspiring movie with my daughters to celebrate black history month.

I know you may have to work.  I know the kids still need to go to school.  Yes I know that life must go on even though we have an extra day.  But this is 24 extra hours in our year!  What you do with it may change the course of your year dramatically!  Let’s use it wisely!

My advice to Kim, “You’ve had an income decrease of about 50 percent,” Ericka Young explained. She’s a certified financial coach of Tailor Made Budgets and is helping Kim and her family get back on their feet. “Make sure that you’re tracking your spending for all of your categories that you have on your budget,” Young urged Kim. “So we’ll be working on that as well.”

I look forward to working with Kim and her family. You can read the full story here and watch the video of the news segment.

Birgit: Ericka, as an entrepreneur, it must have been quite exciting to be invited to Channel 15 ABC News to share your expertise with their viewers, and not just on one segment, but 3 segments in the afternoon and the 10 PM edition.

Q: What was your first reaction when you heard the news that you were invited?

A: Surprise! It was completely unexpected! I was driving my daughter to a piano lesson when the reporter called me.  When I told my girls what the call was about they were so excited!  I was too, but I also wanted to remain neutral in case it didn’t work out.

Q: How did your family react? I’m sure your kids were excited.

A: Oh yes, my kids were very excited about seeing mommy on TV! They said “here is the superstar!” It makes me so happy to know that they are proud of mommy. I desire to be a role model to them with money and life.

Q: Did your family watch the show?

A: Yes my family watched the live TV segments but we were all in different places. My kids were with my aunt and cousin while I taped live at the station.

Q: Tell us a little about your experience of being on the set? Were you nervous?

A: When I walked into the station I was a bit star struck! I saw some of the familiar faces and started taking pictures like a giddy tourist! I was very nervous the first time they taped my Q&A. My heart was beating out of my chest! I calmed down though and followed Susan Casper’s lead.

Q: The viewers were able to chat live with you on the ABC 15 website. What was that experience like? Where there glitches?

A: The online chat was fun! I answered over 40 questions. Some questions were tough and heart-warming while others were easier and straight to the point. It was difficult to paraphrase what I would say in a 1 hour meeting into 2 or 3 sentences. Overall I would totally do it again!

Q: What was it like to be mentioned in the same sentence with Suze Orman? Do you do what she does? Or how do your services differ?

A: Yes it was crazy being in the same news segment with Suze Orman. She is a financial planner who is able to invest in securities for people. I help my clients create a budget to reach their financial goals like increasing savings or getting out of debt. You come to me first before you begin investing for the long-term.

Q: Why do you do what you do?

A: I was once one of my clients! When I had $60k in debt, no savings, and didn’t know how to get out. Even when we learned how to budget we went further into debt. I had to help myself and decided to share the tips, tools, and tricks to get out of debt. I love seeing others get free!

Q: What have you learned from this experience?

A: I learned that anything is possible! God gave me this opportunity and I am thankful!

Conclusion: It was a time for me to realize that anyone can accomplish just about anything, as long as you are committed to a successful outcome and invest yourself, the time and resources needed.

To read the the full story and the online viewer chat, go to ABC 15 News.

The benefits of change are numerous.  Let me tell you why…

• It proves you are alive.
• Nothing stays the same or gets boring.
• You are improving, growing, and learning.
• Others benefit when you change.
• Change reminds us that anything is possible.

2012 can be full of great opportunities if you will embrace change.  Many times we set goals, make New Year’s resolutions, or create ultimatums for ourselves when the New Year arrives.  Being so drastic can be disastrous.  What I’d like to propose is that you simply embrace change because only then will you actually achieve your goals or resolutions.  Open yourself up to new possibilities and be willing to create them for yourself.  Where it concerns your finances think about (and write down!) the transformation your budget will undertake when you are totally free of debt!  Then make the necessary changes to your budget now to get there.

See change can be good!  Think about what it will feel like to pay cash for a car!  If you have never done that before then it requires a change in behavior.  The New Year brings hope, excitement, and fresh look at what is possible.  This year commit to changing your outlook and you will in turn change your LIFE!

I wanted to share some of the things I learned while I was there. The things made me appreciate our country and the God that we serve.

• Freedom of religion is not to be taken lightly. I can praise my Heavenly Father anytime I want! Many times I will be in company when I do it too because more than 75% of Americans proclaim Christ. In China however, that number is less than 30% and finding a church is even more challenging.
• I learned that privacy is relative. In China, you never know who is watching your comings and goings. The government is highly involved in your life. In America, most of the time we can feel secure when we close our door at night. That isn’t the case everywhere.
• We are definitely a wealthy country. No matter what the dollar is worth, how the stocks perform, or what the unemployment rate is; we make a lot of money overall. Did you know that the average annual income in Beijing was $2715 in 2005? That is less than unemployment benefits in Arizona! No wonder they have shared living spaces, one child per family, and eat simply!

This holiday season I purpose to be thankful for God’s many blessings and look for ways to share that with others. Our trip to China was outstanding but also a fantastic reminder of how blessed we are. Not only is Jesus the reason for the season but frankly He must be the reason for everything. This Christmas make sure that everything you do has Christ at the center and helps others to acknowledge Him as well.

Merry Christmas!

Ericka