Beware of Debt Relief Scams

High debt can be a beast, taking huge bites out of a household or personal budget and destroying any chance of financial wellness. To make matters worse, being in high debt can mean being stuck in a desperate cycle that never ends, as payback is often accompanied by high interest rates that make it nearly impossible to get ahead. Unfortunately, scammers know this well, so they target victims with debt relief scams to get at their money.

Here’s what you need to know about debt relief scams and how to avoid them. 

How the scams play out

Debt relief scams target consumers who may have significant levels of credit card debt using any, or a combination, of the following false premises: 

  • Debt repair service that greatly increases their credit score in a short time 
  • Service to remove negative credit report information
  • Student loan debt reduction
  • Promise to reduce credit card interest rates 

The target, who is desperate to get rid of their debt, will pay any price for these services. The scammer demands a non-refundable upfront fee before getting started and happily pockets this money. The scammer then fails to come through as promised, leaving the consumer even deeper in debt. 

In a variation of this scam, the bogus debt relief company will collect payments in small increments, promising to bring the target’s credit score up and their debt balance down over a short period of time. The target will continue making payments to the fictitious service until they finally smell a scam, which might ultimately cost them thousands of dollars in losses. 

Red flags

Debt relief scams can be difficult to spot because there are legitimate debt relief services available for debt-straddled consumers. However, there are several signs you can watch for to let you know when you’re being targeted by a scammer. Most importantly, it’s crucial to remember that overcoming a significant amount of debt takes lots of time. 

Look out for these red flags to help you identify a debt relief scam: 

  • The service guarantees to bring your credit score up by a specific amount of points in a short amount of time.
  • The service promises to get rid of factual credit report information that’s on your credit file.
  • The service demands an upfront payment.
  • The service claims to be affiliated with a credit card company, but the card company does not recognize the service. 
  • The service advises you to cut off all communication with creditors. 

The do’s and don’ts of credit repair

If you’re looking for a legitimate credit repair service, these tips can help. 

Do: 

  • Research the debt relief service you consider using very thoroughly. Look for a secure site, a phone number and street address on their website, as well as positive reviews from past clients. You can also do a quick Google search of the company’s name and the word “scam” (such as, “ABC Debt Saviors Scam”) to see what the internet has to say about them. 
  • If the service claims to be affiliated with a credit card company, give the card company a call to see if this claim checks out. 
  • Ask for a clear explanation of all fees and conditions of the service before signing up. This includes the timeframe for the service, the total you can expect to pay and any risks you should know about before using the service. 
  • Consider other options for paying down debt, such as credit counseling, negotiating for a lower interest rate from your creditors or taking out a [debt consolidation loan] [or personal loan] from Advantage One Credit Union.

Don’t:

  • Never pay an upfront for a debt relief service.
  • Don’t believe a service that guarantees to bring up your score by a certain amount in a specified timeframe. There are no guarantees when it comes to debt relief. 
  • Don’t agree to let a company enroll you in a debt relief program without fully knowing any details. 
  • Don’t believe a service can get rid of negative information on your credit file. There are laws dictating how long specific information must stay on your credit report, and a debt relief service can’t change that. 

  • Your Turn: Have you been targeted by a debt relief scam? Share your experience in the comments. 

Your Complete Year-End Financial Checklist

As 2021 draws to a close and we prepare to usher in 2022, take a moment to go through this year-end financial checklist for ensuring your finances are in order before the start of the New Year.

  1. Review your budget

Is your monthly budget still working well for you? Are you stretching some spending categories or finishing each month in the red? Take some time to review your budget and make any necessary changes.

  1. Top off your retirement plan

If you have a 401(k), check to see that you are taking full advantage of your employer’s matching contributions. If you haven’t contributed as much as you can, you have until the end of the year (Dec. 31, 2021) to catch up; to a limit of $19,500. If you turned 50 this year, you are eligible for an additional catch-up contribution of $6,500. If you anticipate getting a holiday bonus, consider putting this money toward your debt. 

Likewise, if you have an IRA, you have until April 15 to scrape together the maximum contribution of  $6,000, with an additional $1,000 if you are age 50 years or older. 

  1. Check your progress on paying down debt

 Give your debt an annual checkup by reviewing your outstanding debts from one year ago and holding up the amounts against what you now owe. Have you shed debt from one year ago, or is your debt growing? If you’ve made no progress, or your debt has grown, consider taking bigger steps toward paying it down in 2022, such as consolidating your debt with a [personal/unsecured] loan from Advantage One Credit Union.  

  1. Get a free copy of your annual credit report

The end of the year is a great time for an annual credit checkup. It’s a good idea to review your statements each month to check for fraudulent charges, but you can also request a free copy of your credit report from all three credit agencies once a year. Get your free annual credit reports here, and take a close look at each report. Look for accurate, updated information and any errors, like charges you don’t remember making, or other signs of possible identity theft. If you find any wrongful charges, be sure to dispute them immediately.  

  1. Review your investments and asset allocation

Take some time at year’s end to rebalance your portfolio and to see if your asset allocation is still serving you well. You may need to make some changes to your mix of stocks, bonds, cash and other investments to better reflect the current state of the market.  

  1. Review your beneficiaries

Has your family situation changed in the past year? If it has, be sure to switch the beneficiaries on your accounts and life insurance policies to accommodate these changes. 

  1. Complete open enrollment and select your employer benefits

The end of the year coincides with open enrollment for health insurance policies. This is your chance to select the employer benefits you want for the coming year. If you miss this window, you will be stuck with the benefits you chose last year or with no benefits at all. 

  1. Review your tax withholdings

It’s a good idea to review your W-4 annually and see if the amount of tax being withheld from each paycheck needs to be adjusted. If you’re not a numbers person, ask your accountant for help. Changing up the numbers just a bit can make a significant difference in your tax bill at the end of the year. Or, if you usually get a large refund, adjusting the amount withheld can mean enjoying a larger paycheck throughout the year instead of giving the government an interest-free loan to be paid back in one lump sum at year’s end.  

The doors are closing on 2021 and it’s time to give your finances a full checkup. Use this checklist to make sure your money matters are in order before the start of 2022.

Your Turn: What’s on your financial checklist for the end of the year? Tell us about it in the comments.

6 Ways to Boost Your Credit Score

An excellent credit score is the ultimate goal of the financially responsible consumer. Those three magic digits tell a story of accountability, good financial sense, and the ability to spend mindfully. A great credit score also unlocks doors for large, affordable loans; employment opportunities, and more.

Its significance notwithstanding, achieving and maintaining an excellent credit score is easier said than done. There is no quick and easy way to dramatically boost your score over a short amount of time, but you can take steps to increase your credit score gradually. Below, we’ve listed six ways you can start amping up your credit score today.

1. Pay your bills on time

Your payment history is the single most important factor in determining your score. A missed credit card payment can significantly impact your score and it can take months to recover the loss. Set a reminder a few days before your bill is due to ensure you never miss a payment.

2. Reduce your credit utilization ratio

Another crucial factor in your score, your credit utilization ratio refers to the amount of available credit you use. It’s best to keep your utilization under 30%, or even 10% if you can swing it. This means, if you have $50,000 of available credit, try to keep your usage below $15,000 at most and, ideally, below $5,000.

It can also be a good idea to accept offers of increased credit or to request an increase on your own, which can instantly bring down your credit utilization ratio. However, only go this route if you know you are not at risk of overspending as soon as you have more credit at your disposal.

3. Use your cards

Taking a pair of scissors to credit cards can seem like the perfect way to increase your credit score, but you need to use your cards to keep your score high. A great way to make sure you use your cards on occasion but don’t overspend is to charge fixed expenses, like monthly subscriptions, to your card. Just be sure to pay the balance in full before the credit card bill is due.

4. Work to pay down outstanding debt

If any of your cards are carrying a balance from month to month, showing that you are working to get rid of this debt can do wonders for your credit score. Maximize your monthly payment by trimming an expense category in your budget and channeling that extra money toward your credit card bill. Don’t be afraid to reach out to your credit card company to ask for a lower interest rate as you work to pay off debt. Finally, consider consolidating credit card debt with a personal loan from Advantage One Credit Union, which will help you get rid of your credit card debts and leave you with one low-interest payment to make each month.

5. Look for errors on your bill and credit history

A fraudulent charge on your credit card can bring down your score without your knowledge. That’s why it’s important to check your statements each month and to look for charges you don’t remember making. If you see anything suspicious, contact the credit card issuer immediately to dispute the charge. It’s also a good idea to get your free credit report once a year from annualcreditreport.com for a more comprehensive look at your credit usage and signs of possible fraud. 

6. Become an authorized user on another cardholder’s account

If you’re new to the world of credit, and you’re looking to thicken your credit file to build your score, becoming an authorized user on another cardholder’s account can be a great way to get results quickly. Team up with someone who has excellent credit and never misses a payment. Your partner’s responsibility will reflect well on you and help build your credit history and boost your score. 

Credit scores are a crucial component of financial wellness, but achieving and maintaining a high score can be challenging. Use the tips outlined above to start boosting your score today. 

Your Turn: Have you taken steps to boost your credit score? Tell us about it in the comments. 

Real Life Money: An Honest Guide to Taking Control of Your Finances

Title: Real Life Money: An Honest Guide to Taking Control of Your Finances 

Author: Clare Seal

Paperback: 288 pages

Publisher: Headline

Publishing date: August 24, 2021

Who is this book for? 

  • Readers trying to get rid of debt 
  • Anyone interested in an honest, insightful memoir of a young woman’s journey to financial wellness 
  • Late teenagers looking for advice on avoiding the debt trap as they transition into adulthood

What’s inside this book?

  • Seal’s personal journey from the queen of debt to money master 
  • A straightforward introduction to budgeting, debt repayment, and the psychology of finance 
  • Tips and strategies for managing money while under challenging circumstances

4 lessons you’ll learn from this book: 

  1. How to negotiate repayment terms. 
  2. How to set realistic budgets. 
  3. How to create an actionable plan for paying down debt. 
  4. How to stop defining yourself by your financial situation.

4 questions this book will answer for you: 

  1. Is money anxiety an inevitable part of life?
  2. How do I have the “money talk” with my partner without jeopardizing our relationship?
  3. How does a person’s mental health affect their finances and how do I overcome the guilt/shame I feel about my debt?
  4. How do social media and influencer culture impact our spending choices?

What people are saying about this book: 

  • “Her voice [is] refreshing in a world where finance and investment still feels so male-dominated.” ―Grazia
  • “This book is going to be a gift to the lives of many. It’s packed with encouragement, support and wisdom that will dismantle shame, and equip people in finding balance both financially and in the way they emotionally approach money.” ―Anna Mathur
  • “Want to finally get a grip on your cash? This is the book for you.” ―Cosmopolitan
  • “Whether you have debt, are a bit too trigger happy with contactless payments, or just can’t bear checking your bank account in the middle of the month, Seal’s non-judgmental book is unmissable… this is an essential and kind book that everyone could benefit from reading.” ―Stylist

Your Turn: What did you think of Real Life Money? Share your opinion in the comments. 

6 Steps to Crushing Debt

You and debt are so over. You’ve just about had it with those endless piles of credit card bills and those hideous numbers that never seem to get any lower. It’s time to kiss that debt goodbye!

Getting rid of high debt will take hard work, willpower and the determination to see it through until the end, but it is doable. Here, we’ve outlined six steps to help you start crushing debt today. 

Step 1: Choose your debt-crushing method

There are two approaches toward getting rid of debt: 

  • The snowball method, popularized by financial guru Dave Ramsey, involves paying off your debt with the smallest balance first and then moving to the next-smallest, until all debts have been paid off. 
  • The avalanche method involves getting rid of the debt that has the highest interest rate first and then moving on to the debt with the second-highest rate until all debts have been paid off. 

Each method has its advantages, with the snowball method placing a heavier emphasis on achieving results at a faster pace, which then motivates the debt-crusher to keep going, and the avalanche method, focusing more on actual numbers and generally saving the borrower money in overall interest paid on their debts. There’s no right approach, and you can choose whichever method appeals to you more.

Step 2: Maximize your payments

Credit card companies are out to make money, and they do this by making it easy to pay just the minimum payment each month, thus really paying only the interest without making progress on the actual principal, thereby trapping millions of consumers in a cycle of endless debt. Beat them at their game by maximizing your monthly payments. Free up some cash each month by trimming your spending in one budget category or consider freelancing for hire and channel those freed-up or newly earned funds toward the first debt on the list you created in Step 1. Don’t forget to continue making minimum payments toward your other debts each month!

Step 3: Consider a debt consolidation loan

If you’re bogged down by several high-interest debts and you find it difficult to manage them all, you may want to consider consolidating your debts into one low-interest loan. A personal loan from Advantage One Credit Union can provide you with the funds you need to pay off your credit card bills and leave you with a single, low-interest payment to make each month. Or, you can transfer your credit card balances to a single card with a low-interest or no-interest introductory period. Be aware, though, that you will likely get hit with high interest rates when the introductory period ends. 

Step 4: Build an emergency fund

As you work toward pulling yourself out of debt, it’s important to take preventative measures to ensure it won’t happen again. One of the best ways you can do this is by building an emergency fund. Ideally, this should hold enough funds to cover your living expenses for three to six months. Start small, squirrelling away whatever you can in a special savings account each month, and adding the occasional windfall, like a work bonus or tax return, to beef up your fund. 

Step 5: Reframe your money mindset

Sometimes, like when there’s a medical emergency or another unexpected and expensive life event, a consumer can get caught under a mountain of debt through no fault of their own. More often, though, there is a wrongful money mindset at play  leading the consumer directly into the debt trap. 

As you work on paying off your debts, take some time to determine what got you into this mess in the first place. Are you consistently spending above your means? Is there a way you can boost your salary or significantly cut down on expenses? Lifestyle changes won’t be easy, but living debt-free makes it all worthwhile. 

Step 6: Put away the plastic

Credit cards are an important component of financial health and the gateway to large, low-interest loans. However, when you’re working to free yourself from debt, it’s best to keep your cards out of sight and out of mind. You can set up a fixed monthly bill to charge one or more of your cards to keep them active, but only do this if you know you will pay off the charge in full before it’s due. Learning to pay your way using only cash and debit cards will also force you to be a more mindful spender. 

Kicking a pile of debt can take months, or even years, but there’s no life like a debt-free life. Best of luck on your journey toward financial freedom!

Your Turn: Have you kicked a significant amount of debt? Tell us how you did it in the comments. 

Get the Hell Out of Debt

Title: Get the Hell Out of Debt: The Proven 3-Phase Method That Will Radically Shift Your Relationship to Money

Author: Erin Skye Kelly

Paperback: 320 pages

Publisher: Post Hill Press

Publishing date: July 20, 2021

Who is this book for? 

  • Anyone who is fed up with living in debt. 
  • People seeking to get rid of credit card debt without paying a fortune in interest.
  • Readers who want to improve their money management and find most personal finance books boring.

What’s inside this book?

  • An honest, incisive and often humorous guide for paying off debt.
  • An outline for the three phases of getting rid of debt.
  • The two most important tools of money management.
  • Kelly’s own journey toward a debt-free life.

3 lessons you’ll learn from this book: 

  1. How to pay off a large amount of consumer debt.
  2. How to create and maintain wealth. 
  3. How to change your money mindset so you’ll stay debt-free.

5 questions this book will answer for you: 

  1. Why do people tell me to consolidate and refinance my way out of debt when this advice only takes me deeper into debt?
  2. Is it possible to kick my debt for good?
  3. What practical steps do I need to take to get rid of my debt?
  4. Is financial stress an inevitable part of life?
  5. How can I find true financial freedom?

What people are saying about this book: 

  • “Erin has a brilliant way of explaining, step-by-step, how to radically shift your finances for the better.”  — Peter Mallouk
  • “Erin understands that wealth is about so much more than money. It is about creating, living, and leaving a legacy of love and happiness.”  — W. Brett Wilson
  • “With a welcomed irreverence and absolutely no judgment, Erin shows us all of the nuanced, messy, and dysfunctional ways we stumble and fall into debt. But then! Then she shows us how to get up and stand tall before we kick, claw, and fight our way out of it. It’s you against your debt. Read this book if you’re ready for your gloves to come off.”  — Jesse Mecham

Your Turn: What did you think of Get the Hell Out of Debt? Share your opinion in the comments. 

Preparing Financially for a New Baby

Congratulations! You’ve just gotten the positive pregnancy test results and you’re breathless with excitement — and nerves. Or maybe you’re a few months along, and the mild panic is growing right along with the baby bump. Regardless, a baby means big changes, and some of those changes bring many new expenses. How will you pay for it all?

Whether you’re only thinking about having a baby, or your due date is fast approaching, there’s no need to stress about finances. By taking the necessary measures today, you can learn to cover these new expenses without falling into debt.

Here are some steps you can take to prepare financially for a new baby:

Pay down debt

There’s more than just a nursery to set up before your baby’s arrival. It’s best to get your finances in order to make it easier to manage all new expenses and prepare for your child’s future. If this involves getting rid of a mountain of debt, you can choose between these two debt-kicking plans:

The snowball method involves maximizing your payments toward your smallest debt balance first. Once it’s paid off, move on to the next-smallest debt, “snowballing” the payment from your previous debt into this one until it’s paid off, and repeating until you’re completely debt-free.
The avalanche method involves maximizing payments toward the debt with the highest interest rate and then moving on to the one with the second-highest interest rate until all debts are paid off.

Adjust your monthly budget

Babies don’t come cheap. When your little one arrives, you’ll need to spring for baby gear and furniture, a new wardrobe, diapers and possibly child care as well. According to the USDA’s most recent report on the cost of raising a child, the average middle-income family will spend approximately $12,350-$13,900 on child-related expenses before their baby’s first birthday.

Most of these expenses will be ongoing, and it’s best to make room in your budget for these new items before the baby is born. Spend some time reviewing your monthly budget to look for ways to cut back on spending and give you that wiggle room to cover baby-related expenses.

Set up a baby account

All those baby expenses can be overwhelming, but if you break them down into bite-sized pieces, they’ll be easier to manage. You can do this by putting away some money for baby costs as soon as you plan on having a baby or find out you’re expecting. Consider setting up a new savings account at Advantage One Credit Union for all baby expenses to keep this money separate from other savings. You may also want to automate these savings by setting up a monthly transfer from your payroll or checking account to your “baby account.”

Estimate prenatal care and delivery costs

While exact amounts vary by state and by insurance provider, prenatal care and delivery can cost thousands of dollars. This includes out-of-pocket expenses, co-pays and insurance deductibles. Be sure to prepare for these expenses by saving up for them or by allocating a large windfall, such as a tax refund or generous work bonus, to be used for paying for prenatal care and delivery.

Start saving for college

Hard as it may be to believe, your little one will one day be all grown up and ready to go to college. With college tuition now averaging $41,411 at private colleges, $11,171 for state residents at public colleges and $26,809 for out-of-state students at state schools, according to data reported by U.S. News and World Report, this can mean paying a small fortune to give your child an education. In addition to spreading the costs over nearly two decades, starting to save for your child’s college education now will give those savings the best chance at growth.

Consider opening a 529 plan before your child is born where your college savings can grow tax-free.

Write a will

No one wants to think about their own death when preparing for a birth, but writing a will — and purchasing life insurance if you haven’t already done so — can be the best gift for your child in case the unthinkable happens.

Welcoming a new baby is a life-altering experience, and can mean big changes for your finances. Follow our tips to ensure you’re financially prepared for your new baby’s arrival.

Your Turn: What steps are you taking to prepare financially for a new baby? Tell us about it in the comments.

Learn More:
nerdwallet.com
mint.intuit.com
thepennyhoarder.com

Spring Clean Your Finances

Spring is a great time of year to clear your house of accumulated junk and make it sparkle. Why not do the same for your finances? Junk can accumulate there, too. In fact, some of your money matters may need a good wipe down this season. It is especially true this year, when many Americans are still recovering from the financial fallout of COVID-19, or maybe wondering how to use the latest round of stimulus checks. Whatever your current situation, a thorough spring-cleaning for your finances is a responsible move this time of year.

Here are some ways to spring clean your finances:

Sweep out your budget

It’s time to shake out the dust in your budget! Review your monthly spending and find ways to cut back. Have you been overdoing the takeout food this year? Buying up more shoes than you can possibly wear? Pare down your budget until it’s looking neat and trim.

Freshen up your W-4

Tax season is prime time for revisiting the withholdings on your W-4. If you received an especially large refund this year, you may want to adjust the amount you withhold. The IRS’s tax withholding estimator  can be a useful tool to help you determine the perfect number.

Deep clean your accounts 

If you’ve switched from one bank or credit union to another, you may have dormant accounts that are still open and may be charging you fees. Or, perhaps they’re holding onto money you’ve forgotten you have! And don’t forget about the 401(k) you may have from an old job. Now may be the time to transfer those funds to your current 401(k).

This spring, do a Marie Kondo on your finances and get rid of any accounts you don’t need any longer. A minimalist approach to your finances will make it easier to manage your accounts. It will also give your savings a greater chance at growth, and help you avoid fees for unused accounts.

Toss out your debt

Get ready to kick that debt for good!

If you’ve been stuck on the debt cycle for too long, make this spring the season you create a plan to break free.

First, trim your budget or consider a side hustle for earning some pocket money, designating these extra funds for your debts. Next, choose a popular debt-busting approach, such as the avalanche method, in which you pay off debts in order from highest interest rate to lowest, or the snowball method, where you start with the smallest debt and then move up your list as each is paid off. Once you’ve chosen your approach, maximize payments to the first debt on your list, making sure not to neglect the minimum monthly payments on your other debts. Before you know it, that debt will be gone!

Dust off your saving habits

Have you been remembering to pay yourself first? Get into the habit of maximizing your savings this spring with a tangible financial goal. You can also make savings an itemized line in your budget. This way, you’ll have funds set aside for this purpose, instead of savings only happening if there’s money left over at the end of the month. Finally, automate your savings by setting up a monthly transfer from your checking account to your savings account. Never forget to pay yourself first again!

Make your investments sparkle

Whether you’re an experienced investor or you’re just getting your feet wet, it’s time for a spring cleaning of your investments! Check if your allocation strategy is still serving you well, whether you need to adjust your diversification and if your retirement accounts are on track for your estimated retirement timeline.

Make your stimulus count

Don’t let your stimulus payment and tax refund blow through your checking account. Instead create a spending plan for the funds that includes paying down debt, allocating some of the money for long-term and short-term savings and possibly investing another portion of the payment. Don’t feel guilty about using the rest of your stimulus check to splurge on a purchase or experience you’ve been wanting for a while now. The money is being distributed with the hopes that it will help stimulate the economy, and the best way to do that is to spend — just don’t go overboard.

Spring is the perfect time to give your finances a thorough cleaning. Follow our tips to make your money matters shine!

Your Turn: How are you spring cleaning your finances this season? Share your tips with us in the comments.

Learn More:
nerdwallet.com
thebalance.com
doughroller.net

Spring Clean Your Finances

Spring is a great time of year to clear your house of accumulated junk and make it sparkle. Why not do the same for your finances? Junk can accumulate there, too. In fact, some of your money matters may need a good wipe down this season. It is especially true this year, when many Americans are still recovering from the financial fallout of COVID-19, or maybe wondering how to use the latest round of stimulus checks. Whatever your current situation, a thorough spring-cleaning for your finances is a responsible move this time of year.

Here are some ways to spring clean your finances:

Sweep out your budget

It’s time to shake out the dust in your budget! Review your monthly spending and find ways to cut back. Have you been overdoing the takeout food this year? Buying up more shoes than you can possibly wear? Pare down your budget until it’s looking neat and trim.

Freshen up your W-4

Tax season is prime time for revisiting the withholdings on your W-4. If you received an especially large refund this year, you may want to adjust the amount you withhold. The IRS’s tax withholding estimator  can be a useful tool to help you determine the perfect number.

Deep clean your accounts 

If you’ve switched from one bank or credit union to another, you may have dormant accounts that are still open and may be charging you fees. Or, perhaps they’re holding onto money you’ve forgotten you have! And don’t forget about the 401(k) you may have from an old job. Now may be the time to transfer those funds to your current 401(k).

This spring, do a Marie Kondo on your finances and get rid of any accounts you don’t need any longer. A minimalist approach to your finances will make it easier to manage your accounts. It will also give your savings a greater chance at growth, and help you avoid fees for unused accounts.

Toss out your debt

Get ready to kick that debt for good!

If you’ve been stuck on the debt cycle for too long, make this spring the season you create a plan to break free.

First, trim your budget or consider a side hustle for earning some pocket money, designating these extra funds for your debts. Next, choose a popular debt-busting approach, such as the avalanche method, in which you pay off debts in order from highest interest rate to lowest, or the snowball method, where you start with the smallest debt and then move up your list as each is paid off. Once you’ve chosen your approach, maximize payments to the first debt on your list, making sure not to neglect the minimum monthly payments on your other debts. Before you know it, that debt will be gone!

Dust off your saving habits

Have you been remembering to pay yourself first? Get into the habit of maximizing your savings this spring with a tangible financial goal. You can also make savings an itemized line in your budget. This way, you’ll have funds set aside for this purpose, instead of savings only happening if there’s money left over at the end of the month. Finally, automate your savings by setting up a monthly transfer from your checking account to your savings account. Never forget to pay yourself first again!

Make your investments sparkle

Whether you’re an experienced investor or you’re just getting your feet wet, it’s time for a spring cleaning of your investments! Check if your allocation strategy is still serving you well, whether you need to adjust your diversification and if your retirement accounts are on track for your estimated retirement timeline.

Make your stimulus count

Don’t let your stimulus payment and tax refund blow through your checking account. Instead create a spending plan for the funds that includes paying down debt, allocating some of the money for long-term and short-term savings and possibly investing another portion of the payment. Don’t feel guilty about using the rest of your stimulus check to splurge on a purchase or experience you’ve been wanting for a while now. The money is being distributed with the hopes that it will help stimulate the economy, and the best way to do that is to spend — just don’t go overboard.

Spring is the perfect time to give your finances a thorough cleaning. Follow our tips to make your money matters shine!

Your Turn: How are you spring cleaning your finances this season? Share your tips with us in the comments.

Learn More:
nerdwallet.com
thebalance.com
doughroller.net

How Do I Give Myself an End-of-Year Financial Review?

Q: With 2020 drawing to a close, I’d love to give myself an end-of-year financial review before it goes.  Where do I begin?

A: Giving yourself an end-of-year financial review is a wonderful way to check on the progress you’ve made toward your goals, highlight areas needing improvement and update your accounts, funds and investments. Here’s all you need to know about this important end-of-year ritual.

Step 1: Review all your debts and create a payoff plan

Take a few minutes to list all your debts and their interest rates. Have you made any real progress toward paying them off this year? Or have you stuck with minimal payments each month, leaving the actual balance to pile up since you’re mostly just paying for interest?

If your debt needs some help, you have two primary options for how to proceed:

  • The avalanche method. Focus on paying off the debt with the highest interest rate first, and then continue to the debt with the second-highest interest rate. Move through the list until you’ve paid off all debts.
  • The snowball method. Work your way through your debts, starting with the lowest-balance debt. Then, once it’s paid off, apply the payment that was previously committed to that debt to your new lowest debt. Repeat through the rest until all debts are paid off.

For both methods, be sure to pay the minimum balance on all your other debts each month. Try to boost your income and/or trim your monthly spending for extra cash and use it toward the first debt you are paying off completely.

Step 2: Automate your savings

Review your savings from 2020. Have you reached your goals? Have you forgotten to put money into savings each month?

Going forward, make it easy by automating your savings. Give us a call at 734-676-7000 to set up an automatic monthly transfer from your checking account to your savings account. [You can also set this up through your online and/or mobile banking with us.] This way, you’ll never forget to put money into savings again.

Step 3: Review the progress you have (or haven’t) made on financial goals

Have you made measurable progress toward your financial goals in 2020?

Take a few minutes to review your past goals, taking note of your progress and determining how you can move toward achieving them.

Step 4: Review your retirement account(s) and investments

As you work through this crucial step, be sure to review the following variables:

  • Your employer’s matching contributions. Are you taking advantage of this free money, or leaving some of it on the table?
  • The maximum IRA contribution limits for 2021. You will likely need to make adjustments for the coming year.
  • Management fees and expense ratios for your investments. Fees should ideally be less than 0.1%.
  • Your stock/bond ratio and investing style. You may want to take more risks in 2021 or decide to play it safer this year.
  • Your portfolio’s balance. Does it need adjusting?

Step 5: Create an ICE Binder

The events of 2020 underscored the importance of making plans in case one becomes incapacitated for any reason. Create an In-Case-of-Emergency (ICE) Binder to hold all your important documents in one place in case the unthinkable happens. Because of the sensitive nature of the information it holds, be sure to keep this in a safe place where it will not fall into the hands of identity thieves.

Include the following in your binder:

  • Medical information
  • Account information
  • Child care and pet care details
  • Online accounts and passwords
  • Insurance policy documentation and details
  • Investment accounts and details
  • A copy of your life insurance policy
  • A copy of your living will
  • A copy of your last will and testament

Step 6: Set new financial goals for 2021
As you finish reviewing your financial progress of the past year, look forward to accomplishing greater financial goals in the coming year.

A great way to turn dreams into reality is to set goals that are SMART:

Specific

Measurable

Attainable

Realistic

Timely

Here are some goals you may want to set for the coming year:

  • Create a monthly budget before January. Be sure to include all expense categories. Review on the first of each month and tweak as necessary.
  • Review the week’s spending with your partner each Friday night.
  • Pay off your largest credit card bill by 2022.
  • Start a vacation fund in February.
  • Cut out two subscriptions you don’t really use by mid-year.
  • Slash your weekly grocery bill by 10% before May.

Wishing you a financially healthy New Year!

Your Turn: Do you have any additional steps for your own end-of-year financial review? Share them with us in the comments.

Learn More:
moneyning.com
14news.com
steppingstonestofi.com