Tag Archives: Personal Finance

4 Ways You Can Trick Yourself Into Becoming a Better Saver

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bigstock-Closeup-of-hundred-dollar-bill-26175143For many people, the biggest hurdle to saving is creating the habit. While many financial advisers often recommend that clients take the work out of the process by having savings automatically deducted from each paycheck, plenty of people still struggle to get started. “We’re not seeing progress on the savings front,” said Greg McBride, chief financial analyst for Bankrate.com, which found in a survey that 22 percent of consumers have more debt than emergency savings. “And it’s desperately needed.” Without savings, he adds, some consumers may pile on more debt when emergencies happen.

Some people need a bigger incentive, say the pressure of knowing someone else is counting on you or the chance to win money, to finally kick-start the habit. During America Saves Week, a campaign organized by nonprofit, government and private groups to encourage financial literacy, rounded up some creative ways to boost your savings. Here’s what they came up with…

1. Get your friends involved. If you struggle to have the self-discipline to save on your own, it might help to have some friends hold you accountable. Through so-called lending clubs, a group of people get together to pool their savings, giving the cash post to a different person each week. For example, say 10 people contribute $100 each for a total of $1,000. Over the course of 10 weeks, the cash pot goes to a different person each week until everyone has had a turn. For those early in the cycle, it can be like receiving a short-term loan, said Jonathan Morduch, economics professor at New York University’s Wagner school. For those who receive the cash toward the end of the cycle, it can feel like a forced savings program, he added.

In some cases, the pressure of knowing that other people are counting on you can be more effective than setting aside $100 a week into a savings account, said Morduch, who studied the approach as lead researcher for the U.S. Financial Diaries, a project that followed the weekly cash flow of 235 families for a year. “It’s different from the way we usually think about savings, as slow and steady,” he said. “This is something that works for a lot of folks.”

2. Make it a competition. Savings contests, such as the 52-week savings challenge, can make saving seem more approachable by breaking a larger goal down into small weekly sums. While it’s usually a system that’s talked about at the start of the year, the approach can work for any year-long period. Basically, consumers start small, saving $1 the first week, $2 the second week, and so on all the way to $52 for the last week. At the end of the challenge, the account should have $1,378. Starting the challenge with friends who remind one another to make contributions each week can help some people find the motivation to keep saving, even as the amounts grow.

3. Save your change. You can do this the old-fashioned way, where you throw the singles and coins left in your bag at the end of the day into a jar, McBride said. At the end of the week or month, you can take the cash and deposit it in a savings account, he said. But if you’re like the many people more prone to using plastic than cash these days, you might want to check whether your bank offers a way for you to do this digitally.

4. Have an app do it for you. New smartphone apps are making it easier for people to save by automating the process. One app, Acorns, makes it possible for people to set aside their spare change from everyday purchases. But instead of going into a low-interest savings account, the money is stored in a portfolio that invests in exchange-traded funds. Savers need to pay $1 a month in management fees for accounts smaller than $5,000 and a fee that adds up to 0.25 percent of assets for accounts $5,000 or larger. Another app, Digit, studies users’ cash flow and makes automatic transfers to a savings account two or three times a week. The program, which doesn’t charge fees, analyzes when a person is paid, what bills he has to pay and how he generally spends. Then it moves cash that could be extra, typically ranging from $5 to $50, into a separate account. “You don’t actually feel the money missing,” said Ethan Bloch, chief executive of Digit.

*Original article source courtesy of Jonnelle Marte of The Chicago Tribune.

10 Money Questions to Ask Yourself

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The first quarter of the year is a great time for reflection. And your money is no exception: Think about where it’s been, where it’s going, and, most important, where you want it to go. Whether your finances had a stellar year or took a hit, take a minute to check in and see where you want to go next. Here are 10 questions to get you started for a better financial year.

1. How much debt am I taking into the new year?
Tally up what you have left to pay on your student loans, any outstanding credit card balances, and your mortgage (if applicable). Take a long, hard look at this number. It’s better to know it than not know it. Make this number a key part of your action plan for next year.

2. How much did I save last year?
If you automate deposits into your savings account, this should be easy to calculate. (If not, here’s your incentive to do it.) Take a look at your savings account and consider what’s there: Could you have saved more? Did you plan to have more? What stopped you from meeting your goal? And if you don’t have a savings account — or a savings plan — make one.

3. What’s my credit score?
First of all, know what goes into your credit score — and then check your number free online. Check your credit report, too, and make sure any debts you’ve accrued this year are accounted for and that no one has taken out lines of credit in your name. Remember: You get one free credit report from each of the three credit bureaus a year: Equifax, Experian and TransUnion.

4. Am I getting the most out of my credit cards?
Take stock of what your credit cards have given you this year, like great rewards, lower interest rates, or cash back. If your cards haven’t provided you with any of those perks, consider upgrading to a different card. If you have a card that’s dragging you down with high annual fees, think about closing it — provided you know the consequences of doing so. Make sure you know the best way to use your cards and that you aren’t inadvertently hurting your credit.

Transfer your high balance to First Financial’s Visa Platinum Cash Plus Credit Card today!* Enjoy great low rates, no annual fees, and 10 day grace period.** Getting started is easy – apply online, 24/7. 

5. How much money will I make this year? Can I make more?
Whether you’re a full-time employee or a one-lady business, consider whether there are ways you can grow your income. Is there some sort of side gig you can take on? Could you be a consultant? If you work a 9 to 5, would a switch to freelance be more lucrative? On the other hand, is it finally time to shut down professional projects that are draining your resources?

6. What do I want to save for in the next year? How will I accomplish that?
Set financial goals, like saving for a down payment on a home, paying off a certain amount of debt, or putting a specific amount in savings. Figure out what strategies you will put in place to save, such as making lifestyle changes or automating with apps.

7. Did I stick to my budget? If not, why not?
If you blew off your budget this year, take time to troubleshoot. Maybe your goals were unrealistic or you didn’t have a budget at all. Now’s the ideal time to make one, or get started with an app or two.

8. How will I budget this year?
Once you know what has (or hasn’t) been working for you, look ahead toward optimizing. Maybe you’re ready to switch from a simple pen and notebook to an app, or vice versa. Maybe you’ve learned that you perform better on a less stringent budget and or that you actually need more structure. If you’re newly partnered (or married), this may involve merging finances — or simply merging financial goals.

9. How much money is in my emergency fund?
You have no idea what the new year could bring: sudden health crises, unexpected layoffs, or a downturn in business. Make sure your emergency fund (about three to six months of living expenses) is robust enough to take care of you if need be. And if not, make it a priority to establish a healthy fund. If you need some incentive to save, make it fun with these hacks.

10. What are some poor money habits I can squash?
Think about some areas in your daily (or monthly) life where you can save — or stretch your dollar. If you’re living beyond your means, know where to rein it in. Eating out at work? Make lunch. Tempted to go buy new clothes? How about revamping your old ones instead? Know the red flags if you think you’re in financial trouble and decide to make a change.

*APR varies up to 18% for purchases, when you open your account based on your credit worthiness. The APR is 18% APR for balance transfers and cash advances. APRs will vary with the market based on the Prime Rate. Subject to credit approval. Rates quoted assume excellent borrower credit history. Your actual APR may vary based on your state of residence, approved loan amount, applicable discounts and your credit history. No Annual Fee. Other fees that apply: Cash advance fee of $10 or 3% of the total cash advance amount—whichever is greater (no maximum), Balance transfer fee of $10 or 3% of the balance—whichever is greater (no maximum), Late Payment Fee of $29, $10 Card Replacement Fee, and Returned Payment Fee of $29. A First Financial membership is required to obtain a Visa® Credit Card and is available to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties.

**No late fee will be charged if payment is received within 10 days from the payment due date.

Original article source courtesy of Koa Beck of Market Watch.

How to Be Frugal Without Wasting Your Time

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bigstock-Portrait-Of-Happy-Business-Wom-64512829-e1455714572209A lot of people think frugality is about saving money at the cost of your time: you spend all day clipping coupons just to save a couple bucks on your groceries…that’s not what being frugal is. Your time is precious—more precious than money—and being frugal is about using both your time and money wisely. Here’s how.

Pick the methods with the biggest payoff.

You’ve probably heard the saying, “penny wise, pound foolish.” This means going out of your way to save $5 on gas when you have a $500 car payment or buying nothing but Ramen for the week when you mindlessly spend $300 on drinks while you’re out every month. It’s a waste of time to scrimp and save on the pennies when you’re blowing big money like it’s nothing.

When you’re trying to shrink your budget, you want to focus on the big stuff – meaning the categories with the largest payoff. These are typically the three most expensive categories in your budget:

  1. Housing: According to the Bureau of Labor Statistics, housing makes up about 30 percent of the average American’s annual expenses.
  2. Food: Makes up 12 percent.
  3. Transportation: Makes up 17 percent.

Some frugal solutions are easier than others, but to toss some general ideas out there, you might:

  • Move to a cheaper area.
  • Negotiate your rent.
  • Cut back on your restaurant spending.
  • Find a better way to meal plan.
  • Carpool on your way to work.

Making a single frugal decision in these expensive categories will give you the quickest, biggest bang for your buck. Similarly, when you’re trying to save money on anything else, keep your eye on the big picture—what money saving tactic will net you the largest overall savings?

For example, let’s say you’re planning a nice, relaxing two-week vacation. There are a lot of ways you could cut costs: stay in a hostel, cook instead of going out, house sit for someone in exchange for lodging. Those are all valid ways to save, but you’ll save more if you focus on the biggest expenses, like your flight and lodging. You can save a ton by simply flying at the right time, when travel is cheap. By choosing to travel six to eight weeks before or after high season (called the shoulder season), you could easily save you hundreds if not more.

Use technology to find deals and coupons automatically.

Focus your energy on larger items, then automate your savings everywhere else by downloading a few browser extensions to find deals for you.

We all love a good deal, but if it takes you two hours of research to find a new laptop that’s only $25 cheaper, that might not be the best use of your time. Thankfully, there are so many tools out there that find the best price for you.

You could also use a browser extension like Honey or Coupons at Checkout to automatically find coupon codes when you shop online at thousands of popular, participating retailers like Amazon, Target, Gap, and Best Buy to name a few. When you go through the checkout process online, the extension will automatically populate and enter in coupon codes so you don’t have to search for them yourself.

Beyond couponing, you can automate your frugality in other areas too. Save money on your monthly electric bill by installing a smart power strip that knows when to turn off all of your electronics, or tweak the energy settings on your TV, computer, and other gadgets. Call your utility providers and negotiate or find better rates for Internet, cable, cell phone service, gym membership, and car insurance. Even though this might require a little effort, you’ll save money every month without having to do any additional work.

Come up with rules for making smarter spending decisions.

Unless you’re Warren Buffett, you’re probably not in a position to drop $700 on a phone. So while it’s important to think about your spending, wavering over some purchases can also be a huge waste of time. To combat this, establish some rules for your spending decisions.

If you’re incredibly indecisive about even the most frivolous spending, try the “10/10 rule” for small purchases. If you’re thinking about buying something that’s ten dollars or less, try not to spend more than ten minutes thinking about it. This comes in handy when you’re in a store and you pick up something you like and throw it in the cart (especially at Target). Give it some thought first, but if you haven’t put it back and it’s less than ten dollars, then you could buy it – but if it’s more than ten dollars and you’ve spent ten minutes thinking about it, put it back on the shelf. It’s a really simple rule and helps for those one-off, impulsive items.

Another rule for larger purchases is setting a dollar amount at which you give yourself at least a week to think about the purchase – like a $100 pair of Nike sneakers. If you’re thinking about buying anything that costs $100 or more, give yourself a week to think it over. It’s not to say you won’t automatically buy anything you see that’s $99—this tactic just gives you ample time for larger decisions.

A few simple rules can help find a balance between being mindful about your spending and overthinking it to the point of wasting your time.

Make sure every purchase is worthwhile in the long-term.

When you’re trying to be frugal with both your time and money, it helps to consider the long-term impact of your spending too. This is why it usually makes sense to buy a quality item even if it costs a little more because the cheaper item will eventually cost you more in the long run. Let’s say you buy a pair of cheap boots that you have to replace every winter. You’ll actually spend more over time than if you were to just buy quality boots in the first place. Not only that, but also think about the time you spend shopping for new boots every year. Buying quality means you buy once, and you won’t have to waste time doing it again for several years – of course, expensive doesn’t equal quality, but your time is still valuable.

*Original article courtesy of Kristin Wong of TwoCents.com.

Financial Choices You’ll Regret in 10 Years

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According to self-made millionaire David Bach, you don’t have to earn a lot of money to get rich. You don’t even need remarkable willpower to build a fortune.

Bach exposes these misconceptions, and more, in his book “The Automatic Millionaire.”

Before you write yourself off as an “average earner,” consider these common misconceptions Bach outlines about money:

1. You don’t have to make a lot of money to be rich.

“How much you earn has almost no bearing on whether or not you can and will build wealth,” Bach writes. “Regardless of the size of your paycheck, you probably already make enough money to become rich.”

On the flip side, a salary with a bunch of zeros tacked on the end doesn’t necessarily equate to wealth. At the end of the day, it’s just a number — and if the cash behind that number is not managed properly, it can disappear in the blink of an eye.

As Robert Kiyosaki, author of the personal finance classic, “Rich Dad Poor Dad,” emphasizes in his book, “Most people fail to realize that in life, it’s not how much money you make. It’s how much money you keep.”

The good news is that anyone can start saving — you don’t need to be rich to invest and take advantage of the power of compound interest. You just have to be smart about it and start as early as possible. When you start to save outweighs how much you save.

2. You don’t need discipline to get rich.

The ultimate money managers don’t necessarily work harder — they don’t have extraordinary willpower or discipline, Bach emphasizes. They simply automate their finances, meaning their money is automatically sent to their investment accounts, savings accounts, and creditors before they even have the chance to spend it. This allows even the laziest of people to grow their wealth.

“Making your financial plan automatic is the one step that virtually guarantees that you won’t fail financially,” Bach writes. You’ll never forget a payment again — and you’ll never be tempted to skimp on savings because you won’t even see the money going directly from your paycheck to your savings accounts. It also frees up valuable time and allows you to focus on the fun parts of life, rather than spend time worrying about whether you paid that bill or if you’re going to overdraft again.

3. You don’t need to be your own boss to get rich.

There’s a lot to be said about self-employment — many self-made millionaires determine the size of their own paycheck by building their own businesses, while average people tend to settle for steady paychecks.

Rest assured, if the entrepreneurial path isn’t for you, “you can still get rich being an employee,” Bach writes.

It all starts with investing in your employer’s 401(k) plan, if one is available. You’ll get large tax advantages, the money is automatically taken from your paychecks before you have the chance to spend it, and sometimes your employer contributes money to your account in what’s known as an employer match.

Perhaps most importantly, it allows you to compound money over time — and compound interest, if taken advantage of from a young age, can make you a millionaire.

As Bach writes:

The single biggest reason why paying yourself first into a retirement account at work is such an effective way to build wealth is that you make it automatic … Because this process is automatic, the chances are pretty good that you will continue doing it for a long time.

And by doing that, you will get to enjoy the benefits of a mathematical phenomenon most people don’t really understand but everyone can use to become rich — the miracle of compound interest. It comes to this: Over time, money compounds. Over a lot of time, money compounds dramatically!

To see just how much your money can compound, check out these charts. Or read about how one man is on track to accumulate just under $2 million by age 60 by maxing out his 401(k) plan.

4. You can build a fortune on a few dollars a day.

“The trick to getting ahead financially is watching the small stuff — little spending habits you have that you’d probably be better off without,” Bach writes. “Most of us don’t really think about how we spend our money — and if we do, we often focus solely on the big-ticket items while ignoring the small daily expenses that drain away our cash … We don’t realize how much wealth we might have if, instead of wasting our income, we invested just a little of it.”

He illustrates this idea with what he calls “The Latte Factor,” which basically says that if you ditch your $4 latte every morning, you’d have quite a bit of money to contribute towards savings — about $30 a week, or $120 a month. Over the course of a few decades, that money could grow substantially.

“Whether you waste money on fancy coffee, bottled water, cigarettes, soft drinks, candy bars, fast food, or whatever it happens to be — we all have a Latte Factor,” Bach writes. “We all throw away too much of our hard-earned money on unnecessary ‘little’ expenditures without realizing how much they can add up.”

To give you an idea of how much money you could have if you identified and eliminated your Latte Factor, he gives the example of making a $5 purchase (the average cost of a latte and a muffin) each day, which would cost you $35 a week and about $150 a month. If you invested that $150 instead, assuming a (very generous, admittedly) 10% annual return, you’d wind up with $30,727 after 10 years, $339,073 after 30 years, and $948,611 after 40 years, he explains.

Original article source courtesy of Kathleen Elkins of Business Insider.

A Simple Financial Checklist You Really Need

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bigstock-Young-Businessman-Checking-Mar-72052462When it comes to your fiscal health, things may seem overwhelming. There are so many different responsibilities and goals you have to keep straight to be truly on the right track. If you are struggling with this, just like with other overwhelming aspects and times in life, it is sometimes best to pause and make a list. You can often check in on your progress more effectively when you have everything in a visual format. Check out some items that should be on your list.

1. Evaluate your budget.

Almost as important as creating a budget, evaluating your budget can help you assess whether your money is still going where you want and in the amounts you intended. It also gives you the chance to make any changes based on your dynamic needs and goals. It’s a good idea to continue tracking your spending and adjusting any categories on your budget that are consistently lower or higher than you had estimated. This can help make sure you are on track for monthly and annual goals.

2. Contribute to retirement funds.

One of the ways to make sure you are preparing for your long-term future is calculating how much money you will need in retirement. Then you can focus on a collaboration of employer-sponsored and individual retirement accounts to save toward that goal while still meeting other goals. If possible, it can be a good idea to talk with your company’s human resources department and adjust your retirement account contributions so you can qualify for the maximum match available.

Set up a no-cost consultation with the Investment & Retirement Center located at First Financial Federal Credit Union to discuss your savings and retirement goals – contact us at 732.312.1500 or stop in to see us!*

3. Double down on debt.

Everything from your credit card debt to student loan payments can hang over your head and cause stress. It’s a good idea to create a plan to automate your debt repayments so you avoid late payments and don’t have the choice of paying them or not. It may be stressful, but it’s important to come to peace with your debt and feel comfortable with your debt-repayment plan. This can even include taking on freelance, part-time or odd jobs to make additional payments if necessary.

4. Work on your credit score.

Your credit score affects many financial decisions in your life from what interest rate you pay on a mortgage to whether you can rent an apartment. It’s important to regularly check your credit report, look for any mistakes, and work on some ways to improve your score. These include paying your bills on time, opening credit card accounts only as needed, paying off debts and keeping revolving credit low. You can check your credit scores every month on Credit.com to track your progress.

5. Update your insurance details.

From home, auto, and health all the way to life insurance, it’s a good idea to make sure your personal information is up to date and that you are getting the best deals possible. Some strategies you can employ include simply paying your premiums as due, asking your provider about reducing your rates, and making sure you have the coverage you need even as your life circumstances change.

6. Boost your emergency fund.

You may have heard this one before but it is a good idea to stash of three to nine months’ worth of expenses in an easily accessible place in case of a sudden rough patch. The exact amount you decide to tuck away to cover the emergencies will vary depending on things like job security, living expenses and streams of income.

It is important not only to be financially responsible, but also to make financial goals and work toward reaching them. Writing your goals and responsibilities down can help you be more accountable and make things easier to grasp.

*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:

Original article source courtesy of AJ Smith of USA Today.

Big Financial Mistakes You Don’t Want To Make

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Reality check: there is no such thing as a perfect financial plan. While it may be difficult to achieve perfection in our planning, there are things we can do to avoid making the big mistakes. Here are three examples of financial mistakes that people often spend decades trying to recover from:

Thinking that you don’t need a budget (or it’s impossible to follow one for your situation).

  • “I know that budgeting is important, it just hasn’t worked for me.”
  • “It’s too hard to follow a budget.”
  • “I have a general idea of where my money is going but not a written plan.”

Similar statements are shared in financial planning meetings and during meaningful discussions between friends and family on a regular basis. We all have life goals and a vision for how we think our money should be aligned with those things that matter the most to us. The problem is that the lack of a budget is a major obstacle standing right there in the middle of our path.

Let’s call a budget by its proper name and purpose – it’s really a “personal spending plan.” These spending plans give us awareness of where our money is going and help us prioritize financial decisions. Too many people think budgets are just for those who are struggling to make ends meet. In reality, we all need a personal spending plan and it needs to be more than just a brain cloud of good intentions. It needs to be in writing.

The good news is that it doesn’t have to be perfect. Your budget can be as simple or complicated as you want it to be. Try to make saving, paying the bills, and paying off debt automatic. Then check out automatic budget tracking tools like Mint or GoodBudget to see if one might be worth adding to your budgeting tool chest.

Relying on credit card debt to pay for lifestyle choices.

If lack of a personal spending plan is a problem that can delays financial life goals, then debt issues may prove to be even bigger obstacles on the path to important goals like retirement. For example, Alicia and Tony, a couple in their 30’s, are trying to balance the competing goals of paying everyday living expenses, digging out of credit card and student loan debt, and raising 3 kids. They saw firsthand how seemingly small credit card balances can pile up in a hurry. If not addressed early enough, the financial stress will continue to increase along with that debt.

Initially, they said the combined balances owed on these cards usually never exceeded $2-3k. However, shortly after the birth of their twin daughters, Tony’s job was eliminated. Unfortunately, this major life event did not result in major changes to their lifestyle. Tony eventually decided to start his own home-based business funded in part with personal credit cards and their total balances ballooned to over $35,000. While some of these credit card expenses were for necessary items, most were for lifestyle choices, or “wants” and not “needs,” that could have been avoided.

If you have revolving credit card balances, an innocent night of fun and revelry could end up costing hundreds if not thousands of dollars over time if it’s funded by plastic. We also tend to spend more when we swipe a card compared to simply paying with cash. Credit cards are not necessarily a bad thing, especially if you have the discipline to pay them off in full each month. In fact, you can rack up some nice rewards and let the 34% percent of Americans that have revolving credit card debt help pay for your perks. After all, the average consumer spends $2,630 per year on credit card interest.

The best way to make sure that you’re not using credit cards the wrong way is to create a “24-hour rule” for all purchases with credit. If you can’t pay off your balance in full within 24 hours, then you shouldn’t buy that item. If you can’t manage that plan, it may be time to cut up those cards.

How we choose to manage our personal finances says so much about our life goals, values, and priorities. These financial decisions also demonstrate how we balance living in the moment with the need to plan for future goals. This balancing act can be a struggle and that is exactly why the simple act of creating a basic financial plan can help you stay focused on what matters the most to you. Just remember to avoid making the big mistakes when creating and following your financial plan.

Be sure to utilize First Financial’s free, online debt management tool, Debt in Focus. In just minutes, you will receive a thorough analysis of your financial situation, including powerful tips by leading financial experts to help you control your debt, build a budget, and start living the life you want to live.

*Original article source courtesy of Scott Spann of Forbes.com.