LaKesha Womack is a business expert, a talk radio host and an author on business and finance both in books and on her website. She spoke with us about making your finances work and some strategies to get it right.
What first piqued your interest in personal finance?
I became interested in personal finance when offered a position as a financial advisor with a prominent firm in the financial services industry. After studying for my securities license and becoming a licensed advisor, I realized that the average American is not as knowledgeable as they should be about comprehensive personal financial management - savings, investing and protection. Although my goal at the firm was to work with high net worth individuals, many of the people I knew personally did not fit that category and needed help with the basics like getting out of debt and sticking with a budget. My personal goal since then has been to help individuals become high net worth individuals by mastering the basics.
What personal finance lessons have you learned from being an author?
Count the cost - financial and opportunity!
As a self-published author, I am responsible for not only the production of my titles but also for the marketing of the books. I have learned to count the costs of everything. Some authors miss out on opportunities because of the financial cost, not realizing that the investment could yield greater opportunities in the future while others invest in opportunities that have no potential for a return. Also, I have learned to use my books as a leverage for speaking engagements. A group/organization may not be able to pay my full fee, but promoting my books and encouraging the attendees to purchase them often offsets the difference in the fee.
What are some of the surprises you found working for yourself?
Excellent time management skills can be the key to your success. Many people become entrepreneurs because they want the freedom that comes with self-employment; however, they fail to realize that you sometimes have to work ten times harder, wearing ten additional hats, when it is just you running the business. I have learned to work smarter instead of harder by prioritizing my tasks, leveraging relationships to outsource parts of projects and ensuring that I am focusing on the things that generate revenue and not just busy work.
Also, I have developed a love/hate relationship with technology. I love that it makes working from anywhere extremely convenient, but one day I was without internet because of problems with a cellular tower and realized just how dependent my business had become on technology.
When you're budgeting, what criteria do you use? What gets cut, what gets more money?
Three of the biggest mistakes that people make when budgeting are:
Budgeting themselves to zero. In their budget, they have an allocation for every dollar of income without accounting for miscellaneous items. I advise people to leave a cushion for miscellaneous expenses and emergencies because life happens.
Forgetting to include household and personal care items. Most budgets only factor in the major expenses like rent/mortgage, car payments, insurances, utilities, etc., without consideration for the little things that eat away at your budget like eating out, cleaning supplies, haircuts, etc. Track your spending for 30 days by writing down every dollar that you spend and base your budget off your actual spending and not just the major line items.
Applying for financing based off your net income instead of the gross. Most people apply for mortgages, cars and other big-ticket items by stating the highest amount of income - their gross - which will qualify them for a greater amount of whatever they are buying. However, applying based on your net income will qualify you for a purchase that will probably be more budget friendly in the long run and possibly allow you to save more.
Maintaining a home is my primary budget goal. All of the expenses related to the home and having safe transportation are the first priorities. I consider myself a savvy shopper and use lists to shop. I start at the Dollar Store, knowing which brands from there I trust, and then purchase the other items from a big box retailer. When I feel like procrastinating at work, I browse online for sales and make notes on my list where an item may be on sale so that I can compare prices while shopping to determine where an item can be purchased at the best price.
If you could go back in time and give yourself one piece of financial advice, what would it be?
If I could back in time, I would have started saving for retirement when I started my first job at 19. My goal is partial retirement by 60, but if I had started small, even at that age, I could have potentially retired fully at 60 with increased savings over time. For many young people, retirement seems so far away, but times flies and all the money you waste on items you didn't need or really didn't want could be fuel for your future goals.
What trends in personal finance should we be keeping an eye on?
Because of the recent economic downturn and credit not being as easily accessible, I have become fascinated with the alternative means people are using for financial services such as:
Prepaid and secured cards: Since many Americans can't get traditional credit cards, they are choosing prepaid cards to spend as they go and/or secured credit cards where they are essentially borrowing against their own money. Secured credit cards have become a great resource for people wanting to rebuild their credit since most prepaid cards do not report to the credit agencies. It seems these may become more popular than credit cards.
Same as cash financing: There remains a need in society for consumers to make major purchases as well as have major repairs to their homes and autos. I've noticed some businesses offer same as cash financing for short terms such as 90 days to encourage people with credit issues to use their services. Although they are taking a risk on those who cannot get traditional financing, I'm interested to see if their risk will be rewarded and the trend will continue.
Online banking: Electronic banking seems to become more and more popular, and it seems that fewer people are visiting bank branches. Many employers are paying with direct deposit, even on prepaid cards, so I am interested to see how traditional banks will continue to adapt and remain competitive.