Becoming Financially Empowered: WOW! talks with Hollis Colquhoun, Financial Advisor,CPFC, AFC

It is absolutely imperative, especially in today’s economy, that we get a handle on our finances. Sound daunting? If the thought of budgets and investments make your head spin I know someone you need to talk to.

Hollis Colquhoun is an accredited financial counselor with over twenty years experience in the financial industry. Along the way she recognized the lack of financial education among her female clients and decided to do something about it. Together with co-author Antoinette Babek, Hollis has written the ultimate financial primary for women; Women Empowering Themselves: A Financial Survival Guide (For Women at Risk of Drowning Financially Before, During and After Divorce)

Hollis has a special knack for demystifying the financial realm and guiding her reader through the steps of building a solid financial foundation. She recently answered a few questions especially for WOW!

WOW: Hello Hollis, I just finished reading your book, Women Empowering Themselves: A Financial Survival Guide and I am a huge fan!! It’s one of the most readable books on budgeting and finance that I have seen; I’m thrilled to be interviewing you for WOW!

We all have financial goals and in order to meet those goals we need to first understand where we are at…our worth. Can you share with us a concise explanation or formula on how to compute our worth?

Hollis: Technically net worth equals the value of your assets minus your debts. However a woman’s worth also encompasses her present and future earning capability as well as her current contribution to the household savings if she doesn’t have earned income. Women often believe that if they aren’t bringing home a paycheck they have no financial worth in a marriage, but that’s incorrect. Women bring a tremendous amount of value-added to the household. They perform many tasks that are worth a lot if they had to pay someone else to do them. Also a woman needs to understand the total value of her worth when constructing a financial plan for the future or a divorce settlement agreement.

WOW: I love that you bring “value-added” into the picture. That is so important to keep in mind, especially for stay-at-home moms or work-from-home people such as freelance writers, who make up a large percentage of our readership. Speaking of writing, what are some financial considerations a freelance writer should know before she goes into business?

Hollis: Whenever you decide to build a business or go into business for yourself you must first create a business plan. This plan should have estimated expenses: office rent, supplies, travel, marketing and publicity, dues, etc. There has to be research to develop a realistic plan; know the going rate for a freelancer or price of any other product that you’re trying to sell, understand your competitors and make a determination of what distinguishes you from the crowd.Once you have a plan that makes sense, set up a business entity for tax and liability purposes. If you’re working from home and have an office area, keep all business related expense receipts to get the proper IRS deductions for business expenses.

Ultimately you want to have enough net income from your business (revenue-expenses) to be able to pay yourself a reasonable salary. Frequently I counseled self-employed business owners and after we looked at their revenues and expenses then determined what they took home as income, the owners realized they were making $5 per hour. Maybe you can expect a start-up venture to lose money the first year but if you are expecting to live off of the business profits you must calculate how much money you need to survive and what your other income earning options are.

WOW: Important information to consider. With the recent economic turmoil I’ve met many women who either lost or left their careers. They maxed out their credit cards trying to keep their mortgages afloat and are now pursuing entrepreneurial endeavors (re: their writing passion) just to get some kind of income going. What plan can these women follow to increase their worth and actually have some kind of retirement?

Hollis: There many issues that are being addressed in this question. First, having expensive mortgage and credit card debt can translate to thousands of dollars in monthly payments. Being a writer and self-employed it will be difficult starting out to generate a consistent monthly income to cover basic expenses and debt payments. On freelance sites an article written may result in a few hundred dollars. Even if you could write 2-3 articles per week right off the bat (which is highly unlikely) at $400-600, that would equal to (pre-tax) $1700-2400 per month. Would that be enough to pay for everything? Probably not. The key to making business and income decisions when you know you have to pay for certain expenses (mortgage, utility, taxes, ins., food, credit cards) is to crunch the numbers in advance. Formulate your basic budget to get a total for essential expenses, then be realistic about your earning capability as a writer and/or part-time employee. What do you have to earn to survive? It may make more sense to research growth industries where jobs are available. If you can get training in a relatively short period of time and get hired full-time, you can have more income stability and work on writing, if that’s your passion, part-time.

The only way to be able to save for retirement is to have money left over after paying basic expenses. Anyone with earned income can start a Traditional or Roth IRA. In order to increase your net worth, as I said previously, your assets have to be growing faster relative to your liabilities. This is very difficult if you have mortgage and credit card debt that you can’t support. Check out Bankrate.com for financial information and calculators and look at this recent article on part-time jobs that are now available for decent pay.

WOW: This is one of the areas where your book really helps by offering charts to assist with figuring budgets, assets & liabilities, job options, housing options and more.

When it comes to putting some money away there are so many options, from the traditional savings account to interest bearing checking, HSAs, IRAs, 401Ks… What’s a gal to do? Can you share some guidelines with us to help us choose?

Hollis: The first savings vehicle should be a regular emergency savings account with an insured bank or credit union. The account may not be paying much in interest but the key is accessibility in case you need it. Depending on your health and related out-of-pocket expenses, putting money into a Health Savings Account may be a good idea. That also is a function of your medical insurance coverage. IRAs, 401ks, Roth IRAs, 403bs, are all types of qualified (by the IRS) retirement accounts depending on where you work or how you earn your income. Without question, if you have money left over after paying expenses and contributing to emergency savings (this means looking closely at your debt and how much that is costing you in interest) the next most important thing is to save for your retirement. Over 75% of our country’s impoverished are elderly women.

These days most employers offer a 401k where you can contribute before-tax dollars, usually directly from your paycheck (most plans allow up to 8% of your salary) which results in lower taxable salary and tax-deferred income. The best part is when the employer matches part or all of your contribution. This is free money and you should be taking advantage of it. Keep in mind most 401k plans where the employer makes a contribution have a vesting period, meaning you won’t have ownership of all of the employer contributions right away. You may have 20% the first year, 40% the second year until you’ve been an employee for 5 years, then all of the employer’s contributions will become yours. If you are a contract employee, on commission or self-employed, there are several types of IRAs that you can set up. This is a big topic to cover here. The main directive is to save for emergencies, have HSAs if possible and if your health expenses are an issue, and to save for retirement. After that education savings accounts or 529 accounts may be a good idea if you have children and additional money for savings.

WOW: You’ve mentioned a very important point regarding our country’s “golden (and silver) girls” not having the means to financially support themselves. As women, we seem so eager to share the debt but seldom put the same effort into planning our own retirement. In Part III of your book you tackle the subject of joint debt. What would you say is the most common misperception women have regarding joint debt?

Hollis: Firstly, in general, women want to help their spouses or children so they agree to co-sign for a loan. They don’t fully realize that this means they could be solely responsible for the debt if the other person defaults or disappears. Secondly, women think that if they have joint debt with their husbands and they get divorced, their divorce settlement agreement will automatically change the status of their joint debt obligations. Frequently, settlement agreements state that the joint debt will be divided in half but in fact most creditors won’t agree to that. It’s better for them to have two people on the hook instead of just one, and they have the signed joint contract in their favor. The only sure way to deal with joint debt during a divorce is to close out the joint accounts and open new ones where the obligations are transferred into each individual’s name. During this process attention also has to be paid to the types of debt and the legal repercussions if the debt can’t be paid. In other words if the wife wants to keep the house and the mortgage debt and the husband gets the credit card debt, the wife could lose the house if the mortgage isn’t paid. If the husband can’t pay his credit card or unsecured debts he could potentially file for bankruptcy, maintain his living situation and eliminate those debts providing he meets the income and net worth criteria.

WOW: We really need to take care of ourselves by considering the “what if” factor, especially in unmarried partnerships which can make the financial detangling even more difficult.

Hollis, you and your co-author Antoinette have packed a wealth of information into a relatively small book. You have everything from forms needed for budgeting to resources on living assistance and financial help to recipes. What is your goal for this book; what do you hope the reader comes away with?

Hollis: Financial Empowerment. A new ailment has been diagnosed: Money Anxiety Disorder. Many women have it because they haven’t been financial partners in their marriage, don’t have the financial knowledge to be confident in making the money management decisions, and don’t understand their worth. Hopefully this book will let women know how financially powerful they are and give them the understanding of what they need to do to financially protect themselves.

WOW: I can tell you that it has quickly become my new best friend and is helping me get myself back on a financially stable track, so thank you for that.

What are you working on now?

Hollis: Antoinette and I are doing workshops to financially educate women. She is still a credit counselor for a nonprofit credit counseling agency and I am doing private credit counseling, working with financial advisers and collaborative law groups to promote basic financial education, promoting the book, writing articles and blogs online and generally giving women the tools to get their financial houses in order. In addition, my hobby is martial arts (I‘m a black belt in karate and taekwondo). My goal is to teach women (young and old) personal as well as financial empowerment and self-defense--I give self defense workshops as well. In the next few years, Antoinette and I would like to publish a financial survival guide geared toward young adults. (We are about halfway through the draft.)

WOW: You are a busy lady! I’ll be waiting for your next book so I can share it with all the young ones in the family. Hollis, thank you so much for chatting with us.

Visit Hollis Colquhoun to read more financial for more financial information or to sign up for her free newsletter.

Photo: Hollis Colquhoun (right) with co-author Antoinette Babek (left).

Bio: Hollis Colquhoun is an Accredited Financial Counselor and as a Certified Personal Finance Counselor. Over a two-year period, Hollis counseled thousands of clients who were drowning in debt and in need of financial guidance. She also conducted workshops on budgeting and credit for local community organizations and New Jersey State welfare-to-work programs. Hollis lives near the Jersey Shore, and when not working with local nonprofit organizations or promoting financial education for women, she pursues her interest in martial arts. She has a black belt in both karate and taekwondo.

Interview by Robyn Chausse