Are you sabotaging your own financial success? (part 1)

A quote goes “Your thoughts become your words; your words become your actions; your actions become your habits; your habits become your character and your character determines your success.” As I read this quote for the umpteenth time, I cannot help but to think about how this simple quote sums up the financial lives of most people.

You see I have determined that your financial success or failure today is the result of the financial decisions you made in the past and the habits that you have developed thus far. I know that may sound a little self-righteous but it is true. While I may consider myself an expert in matters of personal finance today, I have not always made good financial decisions. What I can say is that most people want to be successful in every aspect of their lives and especially financially. Let’s face it no one ever says that they would like to someday be to the point where they are deep in debt and living from paycheck to paycheck, but it happens more times than not.

So how does the tragedy that plagues’ most American families happen? What is the root cause of the epidemic of bankruptcy and financial failure that is so rampant in our society? Is it the current system that is in place, my answer is no? As you can tell by the title of this article, I believe that most people are the blame for their own current and their future financial success. So my question is are you sabotaging your own future financial success, are you keeping yourself from being the best that you can be financially, or are you somehow the victim of a system that is not designed to allow you to get ahead?

When it comes to achieving financial success, the habits that you have developed have you where you are today. I often share during one of my financial classes a memory that I have of my grandfather and me sitting on his front porch and I was telling him about how I was going to buy this item and buy that item, and how I was going to use a credit card to get the things that I wanted. Papa (my grandfather) turned to me and said “listen, what you need to remember is that you should always set a little money aside whenever you get money because you never know what’s going to happen.” In other words, I need to make sure that I saved money whenever I get money.

What a novel idea you mean that I should not spend every dime that I make, you mean I should exercise some discipline with my money and I should not spend money that I do not have. It was such simple advice, which could not be the key to financial success. After all, you are supposed to use other people’s money (OPM) to get ahead, so I thought. Today my views have changed, and they are now in line with what Papa was trying to tell me so many years ago. That is why I am asking the question do you have a habit of saving? The simple act of setting a small portion of any money you receive aside puts a hedge between you and life.

During any given day we make several financial decisions, the result of these decisions take us either closer to financial success or further away from it. The key is to make more decisions that take you closer to success and make less of the decisions that do not. By making the decision to save a portion of your income, you are setting yourself up for financial success. By not saving, you are sabotaging your financial future. Having a savings account with money in it empowers you to make better decisions when you are faced with a financial crisis.

I think I will stop there and allow you some time to think about what I have written. Next month in part two of this article I will share with you some specific ways that most people are sabotaging their own financial success with some of the decisions that they make every day. Until then spend some time looking at the current financial habits that you have developed over the years.

Should you Opt-in or Opt-out?

Imagine paying $30.24 for a kids chicken finger meal from Sonic Drive-in. That is exactly what can happen if you found yourself in the position of not having enough money in your checking account to cover the original purchase of $3.24. If you fall victim to your banks overdraft protection it will cost you more in the end. According to the banking industry trade group the American Bankers Association, banks charged an average of $27 per overdraft and pocketed an estimated $38.5 billion dollars in overdraft and insufficient fund fees in 2009. While these fees came from only a small percent of bank customers. Recently several consumer advocacy groups and lawmakers have petitioned the Federal Reserve to look into the current overdraft policies in place by many U.S. banks.

On November 12, 2009, the Federal Reserve Bank issued an amendment to Regulation E. The amendment became effective July 1, 2010 for new bank customers and will become in effect for existing bank customers on August 15, 2010. Regulation E sets forth rules, procedures and liabilities of financial institutions for electronic transfers (EFT); this regulation also governs the issuance and usage of debit cards.

You are probably saying at this point so what does this have to do with me, to honest a lot. You may or may not have noticed that your financial institution has been trying to get you to Opt-in. That is because of the recent amendment to Reg E on August 15, 2010 existing bank customers will have to decide whether they want the bank to cover their checking account with overdraft protection in case there is not enough money in the account at the time of purchase.

Up until this point, many bank customers have expressed aggravation, with the current practices of banks concerning their overdraft policies. Most consumers when asked said they do not understand how overdraft programs work according to a national poll by the Consumer Reports National Research Center.

Bottom line here is what you need to know, if you chose to opt-in you have to do so by the August 15 deadline. If you do not then your account will automatically be opted-out of overdraft protection. That means that if you attempt to make a purchase with your debit card and do not have enough money in your account to cover the purchase your purchase will be declined. The good news with is that your account will not ever be put in a negative situation. This does not apply to any automatic payments that are set up on your checking account such as rent or mortgage payments. Is this a good thing or a bad thing? That is for you to decide. I have been doing some research on the matter and I found some great articles on the subject that will be of assistance

http://moneyfor20s.about.com/od/managingyouraccounts/a/overdraft_prote.htm

http://nwnc.bbb.org/article/deadline-for-consumers-to-opt-in-for-overdraft-coverage-approaches-20494

Here is a link to a PowerPoint slide show from the American Bankers Association that does a good job of explaining the new regulation. Please consider the source it is for bankers.

http://www.aba.com/aba/documents/press/ReporterOverdraftBriefing52610.pdf