Resolve to Boost Your Finances

Dec 15, 2014 ​

A new year; a fresh start

Setting goals to do more with your money makes it more likely to see results. Here are tips to help you set goals and live a healthier financial life.

Spend less.

Try to track where the money goes every month, and zero in on nonessential areas where you can cut back. Keep a money journal on an app, or on paper, or on a napkin – it doesn’t matter, as long as your method works for you. Once you see where it goes, you’ll be more motivated to stick to lists. Write down what you need to help you stay focused while shopping and avoid impulse purchases.
Preventing unnecessary expenses allows you to keep more money in your pocket. You can also track where your money goes by using FinanceWorks in Internet Banking.

Set a budget.

Look at your checking and credit card statements and list expenses on a worksheet. Find a method – scratch paper, digital tracking, automated – that works for you. Play with different formats until it’s something you regularly use. Here’s an example of a paper style that works for some. It’s a flexible tool to benefit you, not a rigid set of rules. FinanceWorks can also help you set a budget up.
If you’re spending more than you have coming in or aren’t saving enough to reach your goals, you’ll see it in front of you. Sometimes seeing where your money goes, on paper, helps to set priorities. Don’t forget to include an allowance for discretionary expenses, like shopping, eating out, and entertainment.

Save more.

The personal savings rate in the U.S. recently hit a new low of 4.9% of disposable income. That’s pretty low compared to 14.6% in 1975.
Your first savings goal should be to build an emergency fund in case of an unexpected setback. Ideally, you’ll want enough for 3-6 months of living expenses. Once that fund is where you want it, save toward other goals, such as a home or college. Automatic savings plans help a lot; they help you sock your cash away before you touch it. You can set up an automatic savings plan at your credit union; see a Financial Consultant at a branch near you to get started.
One easy way to save is to pay yourself first; treat yourself as a bill you must pay, and budget for yourself, along with the mortgage and utilities.

Pay off debt.

The returns of paying down debt are often greater than what you would get with saving. But not all debt is equal; organize your liabilities by the annual interest rate. Pay off the ones with the highest rates first. Analyze your financial situation here.
One way to get ahead is to adjust your payment habits: Pay on time and pay more than the minimum due. If you can, pay the entire balance.

Protect your credit.

Key things you can do to maintain a good credit score are to make timely payments, keep your debt low relative to your credit, and avoid applying for too much new credit. But according to the Federal Trade Commission, millions of Americans have errors on their credit reports that may be causing denied credit, higher interest rates and insurance premiums, or even costing them new jobs or promotions. Check your credit report for free every 12 months on AnnualCreditReport.com; dispute any errors you find.

Develop a long-term plan.

Long-term financial goals can take a back seat to current demands, making it difficult to set goals. However, if you don’t take time now to figure out how much you need for retirement, for example, you might not have enough to pay expenses when you’re no longer working. See a credit union retirement savings specialist for more information on what you can do to set up a realistic, effective plan.

Leverage Compound interest.

One of the best financial insights is the concept of compound interest. With just a little savings, you can harness time to make you more money. Here are two examples to bring this to life for you:
  • If you deposit $125 every month, with 0% interest, you’d have $22,500 after 15 years. But with a 2% interest, compounded monthly, you’d have $26,383. And that same $125 monthly deposit results in $33,675 with 5% interest.
  • The rule of 72 helps to find out how long it will take to double your money. Divide the interest rate by 72 to see how many years it will take to double your money. If you invest a certain amount at 8% interest, it will take 9 years to double your money (72 ÷ 8). Or, if you know how long you want it to take to double your money, divide the number of years into 72. Say you want to double your money in four years. You will need to invest it at 18% (72 ÷ 4).
See a Financial Consultant for your Credit Review (Make an Appointment) to assess your personal situation and find out about other ways to improve your finances. You can try this online financial fitness tool, or explore these financial calculators to plan and save. Or take advantage of your credit union’s financial education services and recurring workshops to learn practical information and take control of your financial future.

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Nusenda Credit Union. The Power of WE®.



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