Spending Plan – Making the tough choices

Now that you have taken the time to figure how you are spending your money it is time to make sure you are spending it where you want to. This is where it gets difficult… and why it is so important to remember your goals that we talked about in the first installment of this series.

Each person’s situation is different, but there are always surprises after you sit down and honestly track your variable expenses. For me, it was the daily mocha and the satellite TV bill. Another number that may shock you is what you pay annually for interest on debt service. In other words, what are you paying annually in interest on your credit cards? How about for that boat that is sitting in the yard, used just two or three times a year? How much do you spend for clothing or meals out? These are all easy first targets as you try to set a personal budget that will help you achieve your financial goals.

The first temptation is to set unrealistic expectations of how you will address changes to reduce your expenses. For example, if you spend $500 a year on that morning coffee, you are probably not going to eliminate that expense completely. Set a goal to only have coffee on Monday and Friday which will reduce the expense by $300. Now $300 is a substantial amount of money that can be applied to your financial goals like reducing debt service or building a savings account.

Many folks see the initial number and say that they are going to eliminate the expense entirely, that is just not realistic. The same goes with your cable bill. Unless you are on the verge of bankruptcy simply try to reduce these expenses. For example, you can drop the premium channels or the 250 channel package for the 100 channel package. It is all a matter of making reasonable changes to achieve your goals.

The biggest risk is that you make drastic changes that you cannot sustain and then you go out a make an unnecessary purchase because you just have to spend money…. Just remember to make decisions that will lead you to reaching your goals over a reasonable period of time. If you owe $25,000 and you want to get debt free and you make $40,000 a year, you will not achieve the goal in one year. It is just not possible. So, set a reasonable goal of reducing your debt by $5,000 per year so that you are debt free in 5 years. This is a goal that is achievable.

Now is time to pull out the pen and paper or whatever other tool that you have chosen to start developing a reasonable budget based on what you know about your income, your expenses, and your goals. The most important part is to write it down. Oh, by the way, you are not done tracking your expenses… now you need to track them to make sure you are moving closer to, instead of farther away from your goals.

The final segment of this series will address a budget check in and other resources in case you are having a hard time keeping on budget.

Why are you changing my loan payment due date?

Gene will return next time with a post in his spending plan series.

I am Tisha Oehmen, Chief Operations Officer here at Rogue Federal Credit Union. Gene asked me to answer a question we've been hearing a lot, "Why are you changing my loan payment due date?" It's a good question, but the answer might take a little explaining—so please, bear with me.

The first thing you need to know is that there was a piece of groundbreaking legislation passed this year called the Credit Card Accountability Responsibility and Disclosure Act of 2009. Its whole purpose is to help consumers take control of their finances and to stop the abusive tactics many credit card companies employed. It’s a well intentioned law that should help to make a positive difference for the average consumer. The good news is that your credit card at Rogue Credit Union already complies with all the new requirements from this regulation. However; (and there’s always a “however”) when the Act was being drafted, they expanded it from just applying to credit cards, to all open-end loans.

So what’s the difference you ask? An open-end loan is simply any loan in which a borrower may add to the principal without renegotiating the terms of the loan or apply for additional loans once a master application has been signed. That’s different than a closed-end loan, which is just what it sounds like – a loan that ends at a predetermined point in the future and the paperwork you sign is for only the one loan. You’ve seen these kinds of loans from banks on your mortgages and some automobile loans.

The sticky part comes because at credit unions in general, and ours in particular, we used to do most of our lending as open-ended. This meant you signed one master application, and then an advance voucher for any new loans. These open-end loans included car loans, boat loans, RV loans, and other installment-type loans.

Since the provisions of The Credit Card Act apply to all open-end loans, they apply to the majority of the loans at Rogue. One of the provisions of The Credit Card Act is that we provide you a billing notice at least 21 days in advance of your payment.

If your payment happens to be on the 28th of the month, you got lucky, because your month-end statement will provide you the appropriate billing notice. However, if your payment is due before the 28th of the month – we have to send you either a separate billing notice or we had to change your due date to be the 28th of the month.

Rogue has taken a blended approach to this predicament.

• For loans that will continue to be offered as an open-end product (lines of credit and home equities), we’re changing due dates to be on the 28th as of your September payment, so that your regular monthly statement will provide the appropriate disclosure. You can still make your payments on any day before the due date without any penalty – and we won’t be changing your automatic payment date, unless you’d like us to.


• For open-end installment-type loans (autos, boats, RVs, etc), we will send you the appropriate billing notice 21 days in advance of your payment due date. If you’d like to not receive the billing notice, all you have to do is stop by the credit union and sign a quick one page conversion document that will transfer your loan to a closed-end loan. The terms of your loan will be otherwise unchanged and it should take you less than 5 minutes from start to finish. Once you’ve signed the document, we’ll stop sending you billing notices!

So there you have it, over 600 words later…the answer to the question.

• Q: “Why are you changing my loan payment due date?”
• A: Because it’s an open-end loan and the Credit Card Accountability Responsibility and Disclosure Act of 2009 requires it.