If you're looking to gain control of your finances, the following articles can help. You can also find helpful calculators to help with your saving and spending habits.
Creating a budget
Putting together a household budget requires time and effort. We offer the following steps to create a budget:
Be a Spending Sleuth. Track every penny you spend for a month. Keep receipts and write everything down. This will be an eye-opening experience and will help you see where you can cut back.
Count Your Money. Determine the total amount of money coming in. Include only your take home pay (your salary minus taxes and deductions). Your income may also include tips, child support, investment income, etc.
Itemize, Categorize, Organize. Review the records and receipts you’ve been collecting over the last month. Categorize your spending using a budget sheet to understand what areas your spending your money in.
Set a goal. Set a realistic financial goal and develop your budget to achieve that goal. Subtract your monthly expenses from your monthly income. Find ways to cut spending and set limits on things such as entertainment expenses.
Save, Save, Save. Make one of your financial goals to save a certain dollar amount each month. Start an emergency fund if you don’t already have one. You never know when you may need it.
Stick to it. Keep track of your spending every month. Update your budget as expenses or incomes change. Once you achieve your financial goal, set another.
Seven Steps to Improve your Financial Situation
Displaying a sound understanding of financial literacy is key to managing debt, saving for future expenses and avoiding financial hazards like bankruptcy, defaults or foreclosures. Unfortunately, according to the Urban Institute, 35 percent of adults have a debt in collection reported in their credit files, which shows that handling finances responsibly can be easier said than done.
Following are seven steps you can take to start improving your financial situation today.
1. Set goals. It’s crucial to know what you want to achieve financially. Whether it’s saving a specific amount for a specific purchase, whittling down debt or simply building your long-term savings, you have to know what you want before you can create a plan to get there.
2. Create a budget. Speaking of a plan … your budget is the roadmap that will help you achieve your goals. It not only tells you the exact amount you’re spending on bills each month, it tells you what you have left over to put into savings and to spend on things you enjoy.
3. Use credit cards sparingly. Credit cards are great tools if used responsibly. They allow you to pay for unexpected expenses that don’t fit into your budget, while also building credit history, but they can also get you into trouble. It’s important to not charge more on credit than you are able to pay off each month and make monthly payments on time.
4. Save early and automatically. According to the Associated Press-NORC Center for Public Affairs Research, two-thirds of Americans would struggle to come up with $1,000 to cover an emergency. It is crucial to include paying yourself as part of your budget. Set aside a specific amount to automatically go into savings, then don’t touch it unless you have no other choice. Even saving $100 to $200 per month can add up quickly.
5. Pay down debts when you are able. If debts are weighing you down, make a plan to pay them down. After putting your budget together, try the snowball method. The snowball method is a debt strategy in which you make the minimum payment on all of your debts. Once the smallest debt is paid, you roll that monthly payment into the next smallest debt, repeating that action until all your debts are paid. Increasing the amount you’re paying on each debt helps you pay off debt more quickly, so you can start saving to achieve your other financial goals.
6. Review your credit report annually. Visit www.annualcreditreport.com to order a free credit report each year. It will help ensure that there are no mistakes in your credit history and protect you from identity theft.
7. Treat yourself (on occasion). Just because you are working to improve your financial situation, it doesn’t mean you have to lock yourself in a room to stop yourself from spending money. Take time out to occasionally spend money on yourself, whether it’s a shopping trip, a concert or something else you enjoy. Just make sure to include that expense in your budget.
Your credit score impacts all areas of your financial life, from getting approved for a credit card to the rate you qualify for on a mortgage. Not surprisingly, the higher your credit score, the better. So if you’re wondering how to improve your credit score, understanding the ins and outs of how it’s calculated can help you figure out how your actions impact your rating. Below, we’ve put together everything you need to know in order to improve your credit score.
What is a credit score?
A credit score is a number determined by a credit bureau that helps lenders assess how well you’ve managed your financial obligations.
What makes up a credit score?While there’s no single formula that determines a credit score, here are some categories and their relative importance.35% - Payment history - Do you consistently pay your bills on time?30% - Amounts owed - Try to use less than 30% of the credit available to you.15% - Length of credit history - Generally, longer is better.10% - Credit inquiries - Only hard inquiries, when you’re looking to open an account or take out a loan, count here.10% - Types of credit in use - This includes credit cards, student loans, mortgages and more.
What do the numbers mean?
The higher the score, the more likely you are to repay your obligations and the less you are seen as a financial risk to creditors, prospective employers and landlords. Most credit scores rank individuals on a scale from 300-850.
How can I affect my credit score?
While there’s no single formula that determines a credit score, here are some categories and their relative importance.
Items that help your credit score:
Consistently pay bills on time and in full.
Keep your revolving account balances around or below 30% of your credit limit.
Items that hurt your credit score:
Fail to pay even the minimum on credit cards and loans.
File for bankruptcy or have an account turned over to a collection agency.
Apply for a lot of credit or exceed your current account limits.
Where can I get my credit score and report?
The three major credit bureaus produce credit reports and you can request one free report annually from each. Visit AnnualCreditReport.com or call 877.322.8228 for more information.
Do's and don'ts of credit
The way you use credit can affect your ability to borrow money in the future. It is important to use credit responsibly and avoid the mistakes that can push a credit score in the wrong direction.
Four do's of credit
DO begin with credit cards. Credit cards are an easy way to start building your credit history. Opening a credit card and using it responsibly will show lenders that they are not at risk in approving you for loans. Contact us to learn about credit card options available.
DO charge some expenses on credit cards each month. Just having credit cards will only take your credit score so far. You have to use them and pay your monthly bills to establish a credit history. While credit cards come in handy when unexpected expenses come up, charging a small amount each month that you can pay off consistently will put you on a path to responsible credit card use.
DO pay off balances each month. Building a positive credit history is much easier when you are not carrying balances on credit cards. Paying the full balance off each month will not only help your credit score, but it will also help you stick to a budget.
DO check your credit report each year. There are three nationwide credit reporting agencies — Experian, Equifax and TransUnion. Ordering free annual credit reports from www.annualcreditreport.com will help ensure that there are no mistakes in your credit history while helping to protect you from identity theft.
Four don’ts of credit
DON’T open too many credit cards. While a few credit cards can help you build a positive credit history, having too many could have the opposite effect, particularly if some of them are high-interest store credit cards. The more cards you have, the more difficult they will be to manage, and the higher the likelihood that you may overextend yourself. Limit yourself to three to five credit cards.
DON’T pay bills late. Because credit scores measure your ability to pay bills, nothing will drop a credit score faster than not paying bills on time.
DON’T fall into the interest-free trap. Many stores – selling everything from electronics to furniture and even cars – offer interest-free financing. While zero interest is an attractive incentive, it can also give you a false sense of security that you’re able to afford more than your budget allows. Also, many interest-free plans last for a set amount of time. If the balance is not paid in full before the promotional offer expires, the financing will revert to a higher interest rate.
DON’T keep all of your money in a checking account. Keeping all of your money in a checking account can create problems. It can cause you to spend more than you want because the funds are readily available. Keep what you need to cover monthly expenses in checking and consistently deposit the rest into a savings account. That way you can ensure that you will have a resource to tap into when unexpected expenses occur and that money will work for you by earning interest.
Financial tips for new college graduates
More than 70 percent of college graduates began their career owing more than $37,000 in student loans in 2017. Considering the additional living expenses college graduates face post-college, we recommend the following financial tips:
Live within your means. Supporting yourself can be expensive, and you can quickly find yourself struggling financially if you don’t take time to create a budget. Calculate the amount of money you’re taking home after taxes, then figure out how much money you need to pay your current obligations while contributing to your savings. Be sure to factor in recurring expenses such as student loans, monthly rent, utilities, groceries, transportation expenses and car loans.
Pay bills on time. Missed payments can hurt your credit history for up to seven years and can affect your ability to get loans, the interest rates you pay and your ability to get a job or rent an apartment. Pay your existing obligations first before spending money on “wants.” Consider setting up automatic payments for regular expenses like student loans, car payments and phone bills. Take advantage of any reminders or notification features. You can also contact creditors and lenders to request a different monthly due date from the one provided in the loan contract (e.g., switching from the first of the month to the 15th).
Avoid racking up too much debt. Understand the responsibilities and benefits of credit. Shop around for a card that best suits your needs, and spend only what you can afford to pay back. Credit is a great tool, but only if you use it responsibly.
Plan for retirement. It may seem odd since you’re just beginning your career, but now is the best time to start planning for your retirement. Contribute to retirement accounts like a Roth IRA or your employer’s 401(k), especially if there is a company match. Invest enough to qualify for your company’s full match – it’s free money that adds up to a significant chunk of change over the years. Automatic retirement contributions quickly become part of your financial lifestyle without having to plan for them.
Prepare for emergencies. Hardships can happen in a split second. Start an emergency fund and do your best to set aside the equivalent of three to six months’ worth of living expenses. Start saving immediately, no matter how small the amount. Make saving a part of your lifestyle with automatic payroll deductions or automatic transfers from checking to savings. Put your tax refund toward saving instead of an impulse buy.