"With a weaker social safety net, middle-income American families have to be very careful," says Jennifer Openshaw, host of ABC Radio's Winning Advice. "They need to make sure that one calamity—a lost job or a healthcare problem, or example—doesn't send them into bankruptcy."
For that reason, Openshaw, who founded the Women's Financial Network, has been focusing on financial advice for average American families, those whose annual household income is around the U.S. median of $43,500 (as last measured by the Census Bureau for 2003). Given the fact that the cost of preparing the average financial plan is $2,000, "those families have little access to affordable financial advice," she says.
There are a few simple things such families can do, according to Openshaw, to help shore up their finances, build wealth, plan for retirement, and prevent an unexpected development from landing them in bankruptcy court.
First, she says, take responsibility for your finances now, not later.
"Put it in the same category as going to the dentist or the doctor." That includes checking and adjusting your spending, earning, and saving.
As for spending, "Calamities put people into bankruptcy, but so does overspending," she says. Because of greater access to credit, many people are spending more than they earn. So get on a budget. Cutting out even the smallest unnecessary expenses—Openshaw mentions bottled water—can make a big difference at the end of the year. And try to spend your money on appreciating assets like real estate, instead of depreciating ones, like big-screen TVs and pick-up trucks.
"Real estate is the 21st-century path to riches," says Openshaw. "Even with all the talk about a housing bubble, there are still great deals out there, but you have to dig deep to find the right investment." Once you've invested, you can enjoy the tax benefits and the extra source of income that real estate can provide.
As for saving, put it at the top of the budget you draw up, and make it automatic, perhaps with a paycheck withdrawal. "The old adage is that you should be saving 10 percent of your income, but of course the more the better," says Openshaw. "And make a rule that whenever you come into extra money—an inheritance, a bonus at work—80 percent of it gets saved."
As for earning, "Start a business, there's no better way to create wealth," advises Openshaw. She points out that owning your own business has the following potential benefits.
It can put you in charge of your own destiny.
It can give provide unanticipated tax benefits.
It can give you a meaningful career for your second or third stage of life.
It can give you something to pass on to your children.
There's much more, including a free budget kit (with a $4.95 shipping charge) on Openshaw's website, winningadvice.com.
