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.
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
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,
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
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
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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