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PaPa’s Got A Brand New Bag: Part 1

January 4, 2007

 *Happy New Year!  It’s time to forget old bad habits and start new ones.  In fact, more than one-third of American will be making financial changes in the New Year (source: Money Magazine poll). Over the next two weeks, I’ll be giving you the hottest financial New Year’s resolutions.  In honor of the amazing life of the Godfather of Soul, this month I will be using James Brown songs (or the many songs that sampled him) to show these finance lessons. 

1.  Living From Pay Check to Pay Check –  “U Don’t Work, U Don’t Eat” (WC & the Maad Circle featuring Ice Cube, MC Eiht & Jay Dee, 1991, sampling James Brown’s “Stoned to the Bone,” 1957)

      No more trying to make a dollar out of fifteen cents, borrowing from Peter to pay Paul. This year, you will finally come up with a budget and stick to it (see resolution number 5 below for more on this).  You can’t afford to keep the status quo, and depending on “pay-day loans,” “check advances,” “early deposits,” “title loans,” and/or “tax-refund advances or anticipation loans” can be costly.  These programs “allow” you to borrow money with the promise of giving the lender an asset, like your paycheck or tax refund.  The fee charged for this ‘favor,’ however, can be very high.      
      How high?  As much as 15%-20% of your check!  According to a report issued by the National Consumer Law Center and the Consumer Federation of America, consumers paid an extra $1.24 billion just to get their tax refund checks faster (i.e., on average, by a mere week).  It’s no wonder the Consumer Federation of America calls this “legal loan sharking.”  
      If you find yourself in a financial bind, look for other cheaper ways to borrow the money and get in the discipline of looking at interest rates – the lower the better.

2.  Work-out – “Pump That Body” (Mr. Lee, 1990, sampling James Brown’s “Lowdown Popcorn”)

      This may not seem like a financial goal but it really is.  For most people, working out and losing weight costs money.  Whether joining a gym, paying for a personal trainer, buying diet food and aids – it all costs.  Check out my May 25, 2006 column, “Weight Loss,” on tax savings for medical procedure like gastric bypass surgery  Also, stay tune to next week’s column for an in-depth plan on how to budget your work out plan. 

 3.  No more Credit Cards – “Please, Please, Please” (James Brown, 1956)

      The Average American has seven credit cards. It starts out easy enough, you get a Visa or Mastercard, followed by an American Express or Discover card.  Then you get a store credit card; after all they were offering 10% off your purchase on the spot.  Before you know it, you have double-digit credit cards – many with interest rates over 20%.  You’re credit rich!  But unless your name really is P. Diddy, you’re probably money-poor.  The song should be called “Mo Credit, Mo Problems.” There is hope though. 

      You can get out of this vicious cycle, but it’s going to take will power and discipline.  Start out by getting rid of the credit cards with the highest interest rates.   Double up on payments or pay them off with cash advances from credit cards with lower interest rates.  Have a plan to get this done, even if it takes all year.  Get your credit cards down to a manageable number (like 3).  Try and use cards, like American Express, that will force you to pay off the entire balance and use other credit cards for true emergencies.   
4.  Read!  “Knowledge Is King” (Kool Mo Dee, 1989, sampling James Brown’s “Funky Drummer”, 1970)

      Get a book on taxes, finances, books-on-tape – something.  Make it your goal to have actually read a book on money this year, even if you just spend five minutes a day.  Remember, the more educated you are about these issues, the more likely you will be able to reach your financial goals.  My picks:
— For The Love of Money: The 411 To Taking Control of Your Taxes and Building Your Net Worth (by me, of course)

— Sister CEO, The Black Woman’s Guide To Starting Your Own Business by Cheryl D. Broussard

— About My Sister’s Business: The Black Woman’s Road Map to Successful Entrepreneurship by Fran Harris

— Girl, Get Your Money Straight: A Sister’s Guide to Healing Your Bank Account and Funding Your Dreams in 7 Simple Steps by Glinda Bridgforth
— Black Enterprise Guide to Investing By James A. Anderson

5.  Save, save, save –  “Money In The Bank” (Kool G Rap, featuring DJ Polo, 1976, sampling James Brown’s “Don’t Tell It, 1976)

      Yes, I’ve heard it all before – You were going to save this year, but by the end of January, the car needed new snow tires, your daughter needed new shoes, your cell phone was about to be cut off, and so the story goes.  By February you’re right back where you started.  Now is the year to break the cycle.  Check out my July 20, 2006 column, “Stormy Weather” on how to come up with a realistic budget that allows you to pay yourself first and start saving. 

Originally published for Lee Bailey’s EUR Web

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