ST JOSEPH, MI (November 20, 2014) -- If you are in debt, you are not alone. But the good news is the New Year gives you another chance to change your spending habits. There are encouraging signs that many Americans are starting to realize the urgent need to start saving for tomorrow and stop spending more than they earn. Here are some tips on how to save money and manage debt in 2015.
Understand that credit is not more money. If your credit card or loan has a $5,000 limit, you don’t have $5,000. You only have the right to rent $5,000 and you may pay a very high price for that right. If you are going to use a credit card, make sure it does not have a high interest rate.
Sit down and make a list of your debts. Include how much you owe and the interest rate you are being charged on each debt. Consider paying off the one with the most expensive interest rate first, not necessarily the largest amount owed. It might also be a good idea to consolidate your debt by transferring multiple, high-interest rate balances to a single, low-interest account. Update the list each month and total the amount owed to make sure that it is getting smaller each month.
Establish a savings plan. You should have both short- and long-term savings goals. The short-term goals are for insurance, home and auto repairs, new appliances, holiday gifts and other predictable costs. The long-term goals are for house down payments, kids’ college expenses and retirement. Keep the two funds separate and set a specific amount to go into each fund out of every paycheck.
Save first. Do not try to save from money left over after other bills have been paid. Often, there will not be any. Like many people, if you have been living beyond your means, it may be because credit has disguised the reality of your situation. Making savings payments to yourself first forces you to see what you really have to live on.
Carry a little notebook around with you for one month and write down everything you spend. Everything—from the home mortgage payment to a pack of gum—must be written down. Small things can add up. Even a low-cost $5 lunch each working day will cost $1,250 over a year. You cannot start trimming costs until you actually know what you are spending.
Establish a spending plan based on your savings goals and spending patterns. Then follow it. The plan does not have to be brilliant; it just has to be followed. You do not have to be a rocket scientist to design a budget; you just need the will to follow it.
Involve your family in your budget planning. A successful budget is not imposed on family members; it emerges from consensus. If everyone in the family does not feel their interests have been considered, they will not be motivated to make the spending plan a success.
Did You Know?
United Federal Credit Union Financial Counselors provide Members with free advice and guidance on how to budget monthly spending. To find out more about this service, visit our website at https://www.unitedfcu.com/ or call (888) 200-7834, ext. 5115.
About UFCU
United Federal Credit Union has served its Members since 1949 by helping them to build a sound financial future. UFCU consists of more than 130,000 Member/owners worldwide, and manages assets in excess of $1.8 billion. Its corporate offices and main branch are located in St. Joseph, Mich., with additional branches in Arkansas, Indiana, Michigan, North Carolina, Nevada, and Ohio.