Tidying Up Your Finances

You’ve probably seen or at least heard about the show “Tidying Up with Marie Kondo” which aims to help people clear the clutter from their homes.

Marie asks participants to assess each item and determine whether it “sparks joy” for them anymore. If it doesn’t, it goes to a charity shop or to the trash. By clearing the clutter in one’s life, Marie says it not only creates a better home environment, but it has beneficial effects on one’s mood, thought processes, and abilities.

The same exercise can be applied to your finances. Is your spending out of control? Do you have little to no idea how much you spend on food, clothes, or entertainment per year? Do you hate looking at your account balance because you’re afraid of what you’ll see? Then you may want to tidy up your finances. Here are a few ways to help you get started:

• Create a budget. Start by adding up all the monthly expenses you MUST pay for – rent/mortgage, utilities, gas/transportation, groceries, credit card bills, out-of-pocket health expenses, insurance. Deduct that from your monthly take-home pay. What’s left is what you can either save or spend on non-essentials. Nerdwallet has an online budget sheet https://www.nerdwallet.com/blog/finance/budget-worksheet/  you can use to make these calculations. There are also many free apps, like Everydollar.com and Mint.com, to help you stay on budget.

• Get rid of credit cards with high interest rates. Their huge interest charges make them harder to pay off. For instance, say you bought a coat for $400 (on sale!) on a credit card with 16.99% interest. If you only pay $25 each month, that coat will end up costing you $456 because of the interest. The more expenses you put on that card, the higher your interest charges will go. Apply for credit cards with low interest and transfer the balances on these high-interest cards to the low-interest cards. Pay more than the minimum or the entire amount whenever possible.

• Control impulsive shopping. Yes, that new [fill in your latest obsession] may “spark joy” at this moment, but is it really worth the financial stress it may create? Postpone the purchase for 24 hours and see if you still must have it.

• Save for big-ticket items. Instead of using credit cards for expensive items, plan ahead and save for them. Getting into a savings habit will help you live within your means and avoid the stress of deepening debt.

Copyright 2019 Credit Union National Association Inc. Information subject to change without notice. For use with members of a single credit union. All other rights reserved.

Tips for Parents of College-Bound Students

High-school students bound for college will embark on many new experiences–including financial independence. Here are some tips for parents to help kids prepare for what’s in store.

* Explain how credit works. A credit card is not free money; it’s instead a means of putting off paying for purchases until a later date. Accompany your child to the credit union for the best rates on credit cards and consider urging him or her to use a debit card instead.

* Create a spending plan. Write down all college expenses such as tuition, books, room and board, toiletries, entertainment, and so forth. Determine which expenses you’ll be paying and those for which your child will be paying.

* Come to a no-bail-out agreement. If your child ends up charging more than he or she can afford, or runs out of money before the end of the month, your first reaction may be to send money and bail him or her out. Don’t do it. If your child needs to figure out a way to get out of debt, such as working or staying home on weekends, chances are good he or she won’t make the same mistake twice.

Want a few more ideas?

Streamline Your Finances—Automatically

Putting your money on auto-pilot saves time, money, and the environment. Step one is to find out if your employer offers direct deposit; most do. Signing up is usually as simple as taking a voided check to your human resources department. You’ll see your first paycheck appear automatically in your Hopewell Federal Credit Union account within a few weeks.

Step two is to set up electronic payments. There are a few ways to do this, and you can use them all:

* Authorize a biller to take money directly from your checking account. These ACH payments can take a bit of effort to stop, so use them for regular, uniform payments that will continue for a long time—mortgage payments are a no-brainer.

* Pay bills online using a credit card. Paying with your credit card is ideal for bills that only pop up twice a year—like car insurance. It’s also a good option for bills that change in amount, such as your cellphone bill. Be sure to pay off the card balance each month to minimize interest charges.

* Use Hopewell Federal’s online bill pay service to pay bills by electronic transfer to a vendor or service provider. Or, if the merchant isn’t set up to accept these, the credit union will issue a paper check debiting your account. You can set up payments 24/7, adjust payment dates to jibe with your paydays, and make optional extra payments when you can—say to your credit card.

With these three automated options, you can pay every bill you have.

Don’t overlook automating routine savings, too. Set up automated transfers from checking to your credit union savings account(s), and you’ll always be financially ready for an unexpected car repair and for infrequent but larger bills like insurance premiums.

Streamlining your finances with online tools is about more than just saving time. By helping you to avoid late fees and overdraft fees, automatic services save you money. To make sure you’re never penalized for overdrawing your checking account, for example, set up an overdraft protection savings account or line of credit at Hopewell Federal Credit Union.

Once you’ve automated your finances, use our website to track your accounts and transfer money between them. Check accounts frequently to make sure your automated system is working smoothly, and to monitor for attempted fraud or ID theft.

Put Cash Flow on a Calendar

Money management, as with so many things in life, often comes down to timing. If you find yourself short of cash when bills are due, take some steps to match your cash flow with the calendar. Mileah tells about her system:

“I have an annual schedule of bills broken down into 12 months; each month is broken down by pay periods. We have one person paid every two weeks and the other paid twice a month, and this method helped me keep better track of what was due or coming due each pay period. I pay bills more often, but I use my credit union’s online bill pay and schedule automatic reminders with auto pays. I perform ‘maintenance’ on it once a month to make sure all expenses are covered and then review on paydays.”

Mileah created her system using Excel. She says, “We work on a very tight budget with less than $100 wiggle room each pay period. This helped tremendously. We found ourselves better able to live on our weekly allotted living expense.”

You don’t have to use a spread sheet—you can use any online or paper calendar large enough to note the bills and paycheck amounts, or even a legal pad.

Bill Hampel, senior vice president and research chief economist for the Credit Union National Association, Washington, D.C., says as many as two-thirds of consumers live paycheck to paycheck. You might benefit from being able to visualize your cash flow using some kind of calendar system. Your cash-flow calendar picks up where your check register and monthly statement leave off—they all work together.

More ways to match bills and paydays:
* Use online bill pay to pay large bills in chunks, say thirds or halves.
* If you have trouble coming up with full payments, set up a savings account just for bill payments; make consistent, automated deposits into that account and then transfer what you need to checking when the bills are due.
* Pay some bills early, from a paycheck when you’re a little flush. You might lose a tiny amount in dividends but the upside is better—no late fees, bumped-up interest rates, or damage to your credit score.
* Keep in mind that mortgage payments typically have a grace period—you might be able to pay 12 days after the due date and still be within a 15-day grace period, for example.

Think of the many benefits to Mileah’s careful planning: reduced or no overdraft or courtesy pay charges, no late fees for tardy bills, better savings growth because of consistency, reduced anxiety about having enough money to pay bills, and no unpleasant financial surprises. And keeping your obligations visible this way also can help you stick to your spending plan—you pretty much know your priorities at all times.