Tag Archives: Financial Advice

4 Signs You Have a Spending Problem and How to Fix It

Posted on by
Reply

Cracking piggybank

One in five Americans spent more than what they earned in the last 12 months, according to a Federal Reserve Board survey. Some might be relying on credit or dipping into savings to cover their spending because they are having trouble making ends meet. And, some might be simply living beyond their means.

Regardless of the reason your spending exceeds your income – your overspending might be making it hard to pay bills, have money for emergencies, and save for the future. It could also lead to serious consequences, such as bankruptcy.

Here are five warning signs that indicate you are spending too much, how your overspending can hurt you, and how to get your spending under control:

1. You max out your credit cards and pay only the minimum.

If you’re maxing out your credit cards and can’t pay off your balances every month, it’s a sign that you’re relying on credit to supplement your income. Not only can this hurt your credit score, but it can also leave you in debt longer than necessary.

If a high percentage of your available credit is used — in other words, most of your cards are maxed out — the credit scoring agencies consider this to be a sign that you are overextended and will likely lower your credit score. A lower score will make it harder for you to get additional credit and might force you to pay higher rates on that credit.

Paying the minimum on your credit card won’t necessarily hurt your score, but it could take you a long time to pay off your debt and cost you extra money in interest. For example, if you had a $1,000 balance on a card with a 16% APR and made a minimum monthly payment of $25 on your balance, it would take nearly five years to pay off your debt. And, you’d pay about $440 in interest too.

2. You pay bills late.

About one out of 20 people with a credit file are at least 30 days late on a credit card or a non-mortgage account payment, according to an Urban Institute report.

Paying bills late because you don’t have the cash to cover them is a sign that you’re overspending. And it sends a red flag to your credit issuers, which could hike your interest rates or lower your credit limit, according to the National Foundation for Credit Counseling. You’ll also be hit with fees — which can add up quickly — and several late payments will hurt your credit score.

If you’re more than 180 days late on a payment, your debt typically is assigned to a collection agency or debt collector. Having debt in collections can lower your credit score and will remain on your credit report for seven years, according to myFICO.com. What’s worse is that your creditors or debt collectors could potentially sue you and be allowed to garnish you wages to pay the debt you owe.

3. You raid your retirement account.

You might think there’s no harm in borrowing from your retirement account because it’s your money. About 20% of 401(k) plan participants have taken a loan from their account, according to the Pencil Research Council Working Paper. You can borrow up to half of your 401(k) balance, up to a maximum of $50,000, but rarely is this a good idea.

If you borrow from your retirement account, you will have to pay yourself back with interest — which can be lower than the rate of return you would’ve gotten if you had left the money in the account. So really, you’re just shortchanging your retirement savings.

4. You borrow from friends and family.

If you have to turn to friends and family for money, it’s a sign that your overspending has left you financially strapped. You might think it’s a good way to get an interest-free loan, but being unable to pay back the loan can lead to tension and can affect your relationship.

How to Stop the Overspending Habit

If you’ve realized that you have an overspending problem, rest assured — there are different ways you can get your spending under control and create healthy spending habits.

1. Create a budget.

The first step to getting your spending under control is to create a budget. Take a close look at what you’re spending money on and ways to cut back.

2. Rely on cash.

By living on a cash or debit-only budget, you can curb the impulse to overspend. Set a budget for each shopping trip and only bring that much cash with you to avoid making impulse purchases.

3. Get help.

If you’re buried in debt and can’t curb your spending, your best option might be to get professional help. The National Foundation for Credit Counseling provides free and affordable debt counseling and other money management services. You can find an agency in your area through NFCC.org.

3 Tips for Getting Control Over Your Spending

Posted on by
Reply

Glamour purse fill with money isolated on white background

Two days after you receive your paycheck, do you wonder where all the money went? Is your closet full of clothing and other items that still have the tags on them? Then your spending habits may need some adjusting.

Many consumers aren’t saving enough for a rainy day. The U.S. personal savings rate has increased within the last 12 months (5.3% compared with 4.8% the year before), but there is still room for improvement. Approximately 44% of households across the nation have less than three months of savings, according to the Corporation for Enterprise Development’s 2015 Assets & Opportunity Scorecard. Furthermore, a recent Bankrate Money Pulse survey revealed that less than 4 in 10 people are capable of covering an emergency expense, and about 18% don’t have a budget.

If you’re struggling to control your spending, there are a few things you can do to break bad habits. Here are three tips for regaining your footing and getting back on the path toward financial health.

1. Carry Cash
One of the best ways to keep spending in check is to pay for most of your purchases with cash. When you rely on a credit or debit card, it’s easy to lose track of how much money you’re shelling out. Swiping your card is simple and can make you feel like you have more money than you really do. Cash, on the other hand, will allow you to see exactly what you’re spending. And when the cash runs out, you know it’s time to put your wallet down and stop making purchases for that day. Try your best to get out of the “buy now, pay later” mentality.

2. Use a Spending Tracker
There are plenty of mobile phone apps and online web tools that can assist you with keeping tabs on your spending. If you’ve been slow to devise a budget, these technologies are a great way to get started.

3. Go on a Financial Fast
Resolve to cut out all of your spending for a certain period of time; it could be two weeks or one month, the timing is up to you. When you refrain from spending any money (except on necessities such as mortgage payments and groceries) you’ll quickly see what you can truly live without.

12 Ideas to Help You Stick to Your Budget

Posted on by
Reply

 

When cravings for pricey dinners out or new outfits hit, it can be hard to stick with your budgeting plan. Whether you’re trying to cut back on spending, or set aside major funds for a life goal like home ownership, it might be time to adopt some new money-savvy habits. These dozen ideas can help you become more disciplined about your spending.

1. Articulate your goals. 

For some people, there’s nothing more appealing than saving for a four-bedroom house with a white picket fence. Others dream of taking a trip around the world or purchasing a boat. Choosing your personal money goals makes it easier to work toward them. If you have a partner, then set aside some time to talk about your individual and joint goals to make sure you’re on the same page.

2. Create a spending plan.

Most people spend about 2/3 of their income on three essentials: food, housing, and transportation. Then there are debt payments, savings, household costs, and optional items like entertainment to consider. Create an annual budget by allocating spending goals for each category – and try to stick to it as best as you can.

3. Resist retailer advertisements.  

Stores are in the business of getting us to spend money, but if we know their tricks, we can better resist the temptation. Rewards cards, enticing smells (like cinnamon around the holidays) and short-term flash sales are a few techniques retailers use; being aware of them can make it easier to just say “no.”

4. Track your spending. ​

Keeping track of every expenditure over a two-week period can offer insight into unnecessary wastes, from restaurant meals to cab rides. You can use a pen and pencil or take advantage of free apps and online tools like Mint.com.

5. Negotiate prices. 

Prices are often a lot more negotiable than we think, even in department stores. If you’ve seen a lower price listed elsewhere, don’t hesitate to ask the store clerk if they can match it. The worst case scenario is getting a “no.”

6. Research big-ticket items online before visiting the store.

Product review sites, coupon code sites and online discount warehouses often provide information and insight into how (and where) to find the best deals. With the proliferation of free shipping codes, the lowest price is often online.

7. Don’t shy away from all debt.

While debt has earned a bad reputation in the wake of the subprime mortgage crisis, managing credit and even taking on some debt can be useful. Mortgages allow people to buy homes and student loans enable people to go to school. Evaluate your debt decisions by considering the pros and cons carefully.

8. Pay off high-interest rate debt quickly.

Credit card loans are among the highest interest rate debt around, averaging roughly 17%. Paying off credit cards as soon as possible can help reduce fees and interest rate charges that balloon over time.

9. Build a solid credit history. 

Lenders base their decisions on whether or not to loan consumers money, and at what rate – partially on their credit histories. That means consumers with a limited credit history (because they have few or no financial accounts) can have trouble taking on a mortgage. Pay bills on time, and be sure to have some accounts in your name.

10. Check your credit report.

Everyone is entitled to a free credit report once a year; you can get yours at annualcreditreport.com. Reviewing it gives you the chance to fix any mistakes that could be hurting your credit score.

11. Review account statements.

An unfamiliar charge on a credit card is often the first sign of identity theft. Review all mail from financial institutions carefully to make sure your accounts aren’t being misused. If you see an erroneous charge, contact your financial institution immediately.

12. Choose the best credit card for you.  

Credit card benefits vary widely. If you tend to carry a balance, it pays to find the card with the lowest interest rate possible. If you’re a frequent traveler, you might want an airline card or a card that comes with travel insurance. Comparison websites such as NerdWallet.com or CreditCards.com can help you find the best card for you.

Article Source: Kimberly Palmer for Money.USNews.com – http://money.usnews.com/money/personal-finance/articles/2015/06/16/12-ideas-to-help-you-stick-to-your-budget

 

8 Things You Should Do With Your Money Before the New Year

Posted on by
Reply

Checkbox 3DThe last thing we want to do right now while preparing for the upcoming holidays, is probably think about money. That’s what New Year’s resolutions are for, right? While it’s tempting to put off your finances until the New Year, you might miss some critical financial deadlines or lose the opportunity to save extra money. An end-of-year financial checklist gives you the opportunity to make changes and save before the clock strikes midnight on December 31st.

Here is a year-end financial planning checklist. Use these last few weeks to get your finances organized and under control — a great way to close out the year.

1. Look over your spending.

Ideally, you’ve been tracking your spending all year. What were your spending patterns? Did you go over or under in a certain category? Take a look at what you actually spent vs. what you had budgeted for. Do you need to change your expectations? Review your financial goals from last year and consider whether they will work for you in the coming year and make the necessary adjustments. If you paid off a loan, see if you can redirect that money into a paying off another debt or adding to a savings or retirement account. Don’t let the money get eaten up by miscellaneous expenses. If you don’t have a budget, start one now. Mint.com, Level and Check are all good free budgeting tools with features to help you create a budget from scratch, track your spending, and set financial goals.

2. Order your free credit report.

You’re entitled to one free yearly credit report from each of the three major credit reporting bureaus: Equifax, Experian, and TransUnion. Get a report now so you know where you stand before heading into the new year. Look over your report and check for errors or negative information. If your credit history could use some improvement, make this the year you get back on track.

3. Get your credit cards in check.

That means checking your balances, rates, and cash back or other rewards. Make a large payment if you are carrying debt and have extra money to do so. If you can’t pay down a chunk of the debt you accumulated this year, create a debt repayment plan that will get it down next year.

4. Make an extra mortgage payment.

Making just one extra mortgage payment each year can cut your loan down by years, saving you possibly thousands in interest. Also, making an extra mortgage payment means you may be able to claim an extra month of mortgage interest deductions this year. If you can’t afford an extra payment, try to make January’s payment before the first of the month. If the payment gets credited before January 1, it may still be tax-break eligible.

5. Review your insurance plans.

Look over your health, life, homeowner’s/renter’s, and car insurance plans. Do you need to adjust your coverage, premiums, or add any dependents? Do you need to purchase new coverage, like life insurance or disability? Did you get married, have a baby, or buy a house? Do you have any changes coming in the new year that you need to plan for? Those life events all trigger insurance changes.

PS: If you answered yes to any of those questions, you might need to make changes to your W-2, too.

6. Automate everything.

It’s time to finally automate your bills and savings. The more you can automate, the easier your finances will be. Automating helps you pay your bills on time and maintain a regular savings plan. This is also a good time to cancel any automatic subscriptions you aren’t using: video and music streaming, magazines, premium subscriptions, etc.

7. Make a tax-deductible charitable contribution.

If you are going to itemize deductions on your tax return, consider making a charitable contribution to a cause you believe in. The donation must be made to a qualifying organization and the tax benefit only saves you a fraction of what you donate, but you’ll be supporting a good cause to end the year.

8. Use your Flexible Savings Account.

If you have a Flexible Spending Account for healthcare or other qualifying expenses, now is the time to submit any outstanding claims. This is also the perfect time to make any year-end doctor appointments.

If you get your finances in order at the end of the year, it can only help you get more organized for the coming one!

Don’t forget to stop in to have your annual financial checkup before the year ends, or to kick off the beginning of the new year! Here at First Financial, we encourage our members to come in at least once a year to sit down with a representative at any one of our branches to make sure you are currently placed in the correct Rewards First tier for you, and also that you are receiving the best value, products and services based on your financial situation. Give us a call at 732.312.1500 or stop in to see us today!

Personal Finance: 5 Areas You Shouldn’t Ignore

Posted on by
Reply

piggy bank savings - top viewPersonal finance is not just something to think about now and then, such as when you review your bank statement – it affects your life on a daily basis. Ask yourself how well prepared you are in each of the 5 personal finance items below, and how you might be able to do better.

1. Credit and Debt

If you have significant credit card debt, you should pay it down as quickly as you can. Fortunately, it can be done. One good strategy is tackling your highest-interest-rate debt first. Switching to paying for most things with cash instead of credit cards can also help by reining in spending.

Beyond that, you need to strive for a spotless credit report and strong credit score. Check your credit report regularly, have errors fixed, and build a high score. Healthy credit is a key aspect of personal finance.

2. Insurance

Yes, you might have home insurance, car insurance, and health insurance, but how about life insurance if anyone relies on your income? How about renter’s insurance if you rent your home or apartment? This personal finance category also includes umbrella insurance that offers excess liability protection, which insures you against lawsuits. Disability insurance can protect your income stream in case you become unable to work. Long-term care insurance can support you if you need to be cared for at home or in an assisted-living facility for a while. It’s well worth exploring, as you’re more likely to need it than you might expect, and buying it while you’re relatively young can save you money in the long run.

3. Real Estate

This personal finance category includes buying a home, owning and maintaining one, and selling it at some point. To do well in this category, you need to maintain a strong credit rating and qualify for a low-interest-rate mortgage. You might opt for a 15-year mortgage to build equity faster. It’s important to take good care of your home but you should also think twice before embarking on expensive remodelings that might not let you recoup most of their cost.

It’s also smart to consider refinancing your mortgage at some point. Conventional wisdom suggests that it’s smart to do so when you can snag an interest rate about 1 percentage point lower than your current one. That’s not enough of a reason though, be sure that you plan to stay in the home long enough for the savings to outweigh the closing costs.

If you’re looking to purchase or refinance a home, First Financial has a variety of options available to you, including 10, 15, 20, and 30 year mortgages. We offer great low rates, no pre-payment penalties, easy application process, financing on your primary residence, vacation home or investment property, plus so much more! For rates and more information, call us at 732.312.1500, Option 4 for the Lending Department.*

4. Taxes

Smart taxpayers make smart tax decisions all year long. Here’s a tip that not enough people take advantage of: Set up and use a flexible spending account throughout the year. It lets you put aside pre-tax dollars to pay for qualified health care expenses.

5. Estate Planning

This is another critical area of personal finance. Your estate plan might include a will, a durable power of attorney, a living will, advance medical directives, beneficiary designations on financial accounts, and possibly a trust. Don’t assume you have everything covered with just a will, as you might be able to save your loved ones a lot of headaches, heartache, and money with some more planning and preparation. A living, or revocable trust, for example, can let you avoid the sometimes long and costly (and public) process by directing how your property is to be handled before and after your death.

There’s a lot more to learn about each of these personal finance topics. Spend a little time on them, and you may find that they’re not so boring, and the prospect of saving a lot of money (and being able to spend it now or in retirement) is exciting. And if you need help, don’t be afraid to consult a financial professional.

Questions about retirement savings, estate planning, or investments?  If you would like to set up a no-cost consultation with the Investment & Retirement Center located at First Financial Federal Credit Union to discuss your savings goals, contact us at 732.312.1500 or stop in to see us!**

*APR = Annual Percentage Rate. Subject to credit approval. Credit worthiness determines your APR. Rates quoted assume excellent borrower credit history and are for qualified borrowers. Your actual APR may vary based on your state of residence, approved loan amount, applicable discounts and your credit history. Higher rates may apply depending on terms of loan and credit worthiness. Minimum mortgage loan amount is $100,000. Available on primary residence only. The Interest Rates, Annual Percentage Rate (APR), and fees are based on current market rates, are for informational purposes only. Rates and APRs listed are based on a mortgage loan amount of $250,000. Mortgage insurance may be required depending on loan guidelines. This is not a credit decision or a commitment to lend. If mortgage insurance is required, the mortgage insurance premium could increase the APR and the monthly mortgage payment. See Credit Union for details. A First Financial membership is required to obtain a Mortgage and is open to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties.

**Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker/dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. First Financial Federal Credit Union (FFFCU) and First Financial Investment & Retirement Center are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using First Financial Investment & Retirement Center, and may also be employees of FFFCU. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of FFFCU or First Financial Investment & Retirement Center.

Securities and insurance offered through LPL or its affiliates are:

Article Source:  http://www.fool.com/how-to-invest/personal-finance/2014/08/10/personal-finance-5-areas-you-cant-ignore.aspx by Selena Maranjian.

3 Totally Common Financial Tips You Should Probably Ignore

Posted on by
Reply

Mature man taking data off the computer for doing income taxesWhether you get your financial tips by asking friends and family, checking out library books, attending seminars or searching online, impractical pieces of advice sometimes abound.

Too many personal finance experts tend to populate their cable appearances, books, columns and blogs with the same simple tidbits. But some of that common advice is also not applicable to everyone. For each of these three clichéd tips, let’s look at some other alternatives:

1. In Debt? Cut Up Your Credit Cards

Certain financial gurus advise people in debt to cut up all their plastic and consider using credit cards as the eighth deadly sin.  Here’s some advice: don’t cut up your cards.

People land in debt for various reasons, and some – like student loans, don’t have anything to do with credit cards.

If being unable to pass up a sale or discount clothing bin is your trigger for getting into massive amounts of debt, then put your cards in a lock box and back away. If you fell into some bad luck and used your credit card for an emergency, consider a balance transfer.

But just because someone is in debt and wants to get out of it doesn’t mean they’re going to stop spending money entirely. People still need to eat, fill the car with gas, and deal with the occasional unexpected expense.

Some may counter that it’s best to use a debit card, but consider the ramifications of debit card fraud.  A compromised debit card gives thieves direct access to your checking account. While most financial institutions will cover the majority of money taken from your account, it can be an extreme hassle to deal with. When a credit card is compromised, the issuer typically reacts quickly – possibly even before the customer notices, and usually offers fraud protection.

It also helps to have a low-interest rate credit card for emergencies. Think of it as a fire extinguisher housed in a glass case. You don’t want to break that glass unless you really, really need it. But you do want the fire extinguisher to be there.

2. Have a 20% Buffer in Checking

Undoubtedly, it’s preferable to have a buffer in your checking account to avoid overdraft fees, but two types of situations typically cause overdraft fees.

  • Person A is forgetful, forgets a recurring charge or neglects to check his or her balance before making a purchase.
  • Person B uses overdrafts as a form of short-term borrowing because he or she does not have enough money to get by without going into overdraft.

About 38 million American households spend all of their paycheck, with more than 2/3 being part of the middle class, according to a study by Brookings Institution.

It’s simple for personal finance experts to recommend tightening up the purse strings, doubling down on paying off debt, and moving out of the paycheck-to-paycheck lifestyle – but those who don’t have assets and who struggle each month to make ends meet don’t need to hear people harping about avoiding overdraft fees by “just saving a little bit.” Every little bit counts for them.

Instead, let’s offer some practical advice: Those looking to avoid overdraft fees should evaluate their banking products.

Americans who use overdraft fees as a form of short-term lending may want to set up a line of credit with a credit union or have a low-interest credit card for emergencies.

3. Skip That Latte!

Many years ago, David Bach created a unifying mantra for personal finance enthusiasts. The “latte factor” was that you could save big by cutting back on small things.

Bach’s deeper concept – that each individual needs to identify his or her latte factor – got lost in the battle cries, with many people crusading specifically against your daily cup of coffee.

Yes, people should be aware of leaks in their budget. But everyone’s budget looks different. If “Person A” buys a coffee each day, but rarely buys new clothing, and trims the budget by cutting cable and brown-bagging it to work, then leave them alone about their caffeine habit.

People are allowed to live a little when it comes to their personal finances. It’s important to save for the future, but it’s also important to enjoy life in the present. Personal finance shouldn’t be a culture of constant denial either. Create a budget, figure out if you can work in an indulgence or two, and don’t live in complete deprivation. For those working to dig out of seemingly insurmountable debt, then yes, it may be time to identify and limit your latte factor or make an appointment with a financial counselor.

Decide What’s Right for You

Keep in mind, personal finance is indeed personal.  A generic piece of advice, like keep a 20% buffer in your checking account to avoid overdrafts, may not be helpful in your personal situation.  You need to figure out what works for you, and ask for help along the way if you need it.