Make SMART New Year’s Resolutions

Everyone–regardless of age–can take steps to shape up their finances.

As you decide on your New Year’s resolutions, think SMART–financial goals that are specific, measurable, adjustable, realistic, and time-oriented.
Here are some examples of financial goals for different generations:

Youth
* Collect your change. Each time you buy something, save the change you get back. Deposit the change in a container at the end of every day. Over time it could add up to a significant amount of money.

* Save your allowance. Whether you want to buy something you’ve been eyeing for months or you want to start saving for college, the only way you are going to do it is by putting your allowance away. Deposit at least part of your allowance in a share savings account at the credit union.

Gen Y
* Open a Roth IRA (individual retirement account) and start saving. Make savings a habit and invest at least 10% of every paycheck for retirement. The longer you have to save with a Roth IRA, the more you save on taxes. Although contributions aren’t tax-deductible, your money grows tax-free and comes out tax-free as long as you meet certain requirements.

* Put your credit card away. Use credit cards only when you know you have the funds set aside to pay the bill in full when the bill comes. Don’t leave a balance on your credit card or you’ll be charged interest.

Baby boomers
* Put your debts in priority order. Make a list of all your liabilities and organize them by the annual interest rate. Pay off those with the highest rates first, while still making at least minimum payments on all the others. Set a specific, realistic date for when you plan to achieve your goal of paying off all debts.

* Determine your net worth. Calculate your assets minus liabilities each year–preferably on Dec. 31–so you quickly can see whether you’re gaining ground or falling behind. Your net worth should be increasing each year. If it’s not, make a plan to improve it, such as pay down a specific debt or put more money into a retirement account.

Seniors
* Evaluate your estate plan. Establish or review your will, advance directives, and powers of attorney, and make sure they reflect your preferences and current situation. Make sure all of your intended beneficiaries are on file for all your financial accounts.

* Check all insurance policies. For example, know what is covered in your homeowners policy and verify your liability coverage. Call your insurance agent if you have any questions.

Three-Digit Code Makes Shopping More Secure

Q: Recently, when I’ve made purchases over the phone, merchants have asked for the three-digit security code on the back of my credit card. Why is this?

A: This is to verify that the card definitely is in your possession. It generally follows the 16-digit card number on the back of the card. It’s information that wouldn’t be available to someone who has intercepted your card number and expiration date.

That said, make sure you know to whom you’re giving this information over the phone or on Web sites.

Con artists often are able to obtain partial information about a potential victim’s account, and then contact the person masquerading as a company representative to “verify” the account by requesting additional details such as the three-digit security code. But they might just as well ask for other pertinent details–for example, they may provide the last four digits of your account number (which typically show up on sales receipts) and request the other 12 digits to “confirm” it. Or they already may be in possession of your full account number and request the expiration date of the card, or your billing address. Any of these individual bits of information may be just what the scammer needs to “fill in the blanks” and gain full access to your account, so beware.

Keep in mind, though, that legitimate businesses or financial institutions may request your three-digit security number (known as “CVC2” by MasterCard and “CVV2” by Visa) to authenticate a transaction. Just be sure you know whom you’re talking to before giving it out.

Debt Consolidation Loans: Pros and Cons

If you’re mired in debt, you may perk up when you hear about a loan that promises to:
* Save you money by lumping your debts into one loan with a lower interest rate.
* Spare you payment hassles by providing the convenience of making one loan payment each month, instead of multiple monthly payments to numerous creditors.

Maybe you’d be eager to jump at such an offer. But first, ask yourself crucial questions.

What will really change?
You might consolidate your debts into one loan in various ways, if you qualify. You could take out a home equity loan for the total amount you owe in credit cards and other consumer debt. You could put several credit card balances onto only one lower-rate card. Or you could obtain a signature loan, unsecured by collateral, to cover the total debt amount.

But a debt consolidation loan often becomes a Band-Aid, experts say, because people don’t change the behavior that caused their debt problems. Studies show that 80% of borrowers who consolidate their debts end up repeating their mistakes and end up in deeper debt.

Can you afford the loan?
Let’s say you’re determined to mend your ways, and a debt consolidation loan is one option. You’ll replace lots of payments with one bigger payment. But be sure it fits into your budget.

Consider, too, the total you’ll pay over the life of the loan. If you consolidate credit card debts into a 15-year home equity loan or unsecured loan, you’ll be stretching a five-year debt to 15 years. You could end up paying as much or more in total interest and principal. The total payment is key, not just the monthly payment.

Can you trust the lender?
A reputable lender will determine if you can afford to pay it back before giving you a loan. But some lenders give loans to anybody just to make a buck. Work with the professionals at Hopewell Federal Credit Union—a lender you know has your best interests at heart.

How to Recover From Holiday Spending

While many people consider the holidays the best time of the year, they’re undeniably also the most expensive. Between the costs associated with hosting and attending holiday parties, buying gifts, purchasing items to decorate your home, and all the other expenses, many people start the New Year in a not-so-stellar financial state.

If this sounds familiar, don’t stress. There are many quick and easy ways to pay off your holiday credit card debt and replenish your savings account in no time at all. Follow these 7 tips to pay off holiday debt and regain control of your finances.

Return Unused and Unwanted Gifts

Let’s face it everyone gets holiday gifts they don’t actually want. Instead of letting these items collect dust in your home, return them to the store to get a little extra money. Even if you don’t have the receipt, most stores will give you merchandise credit, which you can certainly put to good use. The same rule applies to unused gifts. If you bought gifts for people and never actually gave them out, return the items to the store, get a refund and put the extra money towards paying off your credit card debt.

Create a Budget

You have to be in control of your finances to create a strategy to pay debt off. Write down and calculate all your necessary monthly expenditures, such as rent or mortgage payments, transportation costs, and utility expenses. Then add up your total amount of debt. Use this total to make a budget that’ll help you pay off debt and avoid accruing even more.

Transfer Balances to One Credit Card

While not always the best move, consolidating your credit card balances onto one card can save you a great deal of money. Before making the move, compare interest rates, see if there’s a fee to complete the transfers, check the terms of each card and consider your credit limits on each card. If you’re able to find a credit card with a lower interest rate and attractive terms and conditions, not only can this save you money, it can also help to raise your credit score.

Use Your Tax Refund to Pay Off Debt

Everyone loves getting the extra springtime “tax bonus” each year. Instead of spending yours freely, dedicate the full refund to paying off your holiday debt. While it might be tempting to spend the funds on a new bag or a vacation, think of how good you’ll feel by getting closer to being debt-free.

Cut Back on Expenses

Save extra money by cutting back on non-essential spending. For example, if you typically eat out most days of the week, start bringing your lunch to work and stay in for dinner all but a couple nights per week. Or if you’re a bit of a shopaholic, vow to stop buying new clothes until you’ve paid your holiday debt off.

Save Cash Gifts  

If you received monetary gifts this holiday season, you’re probably filled with ideas of how you’d like to spend the funds. While you’re probably not going to want to hear this, saving that money and putting it toward the debt you incurred during the holiday season is the most financially savvy thing to do. The longer you let balances sit on your credit cards, the more interest you’ll incur, making your debt even greater. So use the money to bring your debt levels down and then save up to reward yourself for your sacrifices in a few months.

Earn Extra Income

If your job offers overtime pay for working extra hours, put in a little more time at the office to earn additional income. Getting a temporary part-time job is another great way to supplement your regular income and get those debts paid off fast.

See a Financial Counselor

It’s never easy to ask for help, especially when it comes to your money. But seeing a financial counselor, who can help teach you how to budget and get yourself out of debt, can make a world of difference.

Final Word

The holidays are a pricey time of year. We are all susceptible to getting carried away with expenses, as we want to give our loved ones the world. If you’re feeling overwhelmed with debt, don’t worry! With a little savvy planning and a bit of financial sacrifice, you’ll be back on your feet in no time at all.

Damaris Olaechea, NerdWallet