MANHATTAN, Kan. -- New Year's resolutions can bring change, but one -- a personal financial review -- also may help to build savings and increase personal financial security.
With tax preparation a given this time of year, Carol Young, a Kansas State University Research and Extension financial management specialist, encourages taking extra time to review the 2010 money that came in -- and money that went out.
The beginning of a new year also is a great time to review short- and long-term financial goals, said Young, who explained: "Goals are important road maps. If you don’t know where you’d like to go, you probably won’t get there."
Saving for a specific purpose, a newer, more dependable vehicle, update in the family room, exercise equipment or vacation, for example, can spur savings and a lifelong savings habit.
"Doing the extra paperwork can pay off," said Young, who offered basic money management tips to know where your money has gone and see if you want to make any changes for the future:
* Make a list of your financial goals for at least the next year, and, ideally, the next five, 10 and 20 years. Post these goals in a prominent place in your home as a daily reminder to help avoid impulse buying and build resolve for saving.
* Be clear about income available to spend, save or pay off debt.
* Identify and plan to pay fixed expenses and payments first, such as mortgage, rent, insurance, car or truck payment, school loan, etc.
* Does money seem to disappear? Track miscellaneous cash, debit and credit card expenses for seven to 30 days. Many people who do this simple exercise are amazed at the results and begin to make different decisions about what is necessary or unnecessary spending.
* Sign up for direct deposits for paycheck and other income to reduce the temptation to spend.
* Pay yourself first, by investing some dollars in yourself regularly via automatic deposits to an emergency fund, personal savings and retirement accounts at work or set up separately.
* Pay all bills promptly to avoid costly late fees, more interest or a higher interest rate. If paying down credit card debt, make sure to pay at least the minimum payment required (on all cards) and pay as much extra over the minimum as possible to pay off the debt as quickly as possible.
* Consider paying for routine or small purchases with cash or a debit card, rather than using a credit card, which, with a credit limit and a ‘pay later’ mentality, gives a false sense of available income and buying power.
* If using a credit card, try not to charge more than can reasonably be paid off in one credit card billing cycle, usually one month.
* When making a major purchase (a new appliance or car repairs are examples), paying with a credit card can offer a consumer some leverage to dispute payment to the vendor if the purchase is faulty or fails to live up to advertised claims.
* Weigh carefully the benefits for cash back or rewards credit cards. Charging more than you can reasonably pay each month builds a balance plus interest that is likely to be greater than any reward.
* Stop asking for cash back from check or debit card purchases. Such money can easily ‘disappear’ over a year's time -- $20 a week = $1,040.
* Build an allowance for each member of the household into a money management plan; having planned discretionary money available to everyone can help to lower credit card or other unnecessary spending.
* Paid off car or truck loan? Continue making car payments (to yourself) and deposit them in an interest-bearing account to ease the sting when it's time to replace a vehicle.
* Make a spending and saving plan to prioritize long-term needs (replacing a refrigerator or buying tires are examples) or wants, such as a weekend get-away.
* Count change in various containers around the house periodically and deposit the money in an interest-bearing account.
* Invite the family to brainstorm about ways to help save -- turn off lights; group errands; refill water bottles to carry instead of buying drinks; check a video out of the library, rather than going to a movie; or make a pizza at home, rather than eating out.
More money management and savings tips are available at Kansas State University Research and Extension offices throughout the state and online: www.ksre.ksu.edu/financialmanagement/ and at www.kansassaves.org.
Sidebar: Why an Emergency Fund, Plus Tips to Build One
MANHATTAN, Kan. -- Car repairs, broken glasses or an illness may all come at inopportune times.
Life can be unpredictable and costly, said Carol Young, Kansas State University Research and Extension financial management specialist, who advises building an emergency fund to help cover unexpected expenses that often occur when least expected.
While saving the equivalent of several weeks or months wages is the ideal goal to create some financial security, having as little as a few hundred dollars available may be all that it takes to relieve immediate financial pressures without having to borrow and pay added interest at the bank or run up a balance on a credit card with a high interest rate, Young said.
To get started, Young recommends using gift money, overtime wages or an income tax refund to jumpstart new emergency savings, or increase an existing fund.
Setting aside a dollar a day will increase savings by $365 annually, and saving $10 a week will generate $520 for an emergency fund in a year, said Young, who offered key points in building an emergency fund:
1) Start today;
2) Make the contribution automatic from checking to a savings account each payday, and
3) Keep up the contributions to your most important investment --YOU.
Knowing that some emergency funds are available can help to relieve the stress generated by emergencies, and, also help create a healthy money-saving habit for life, Young said.
More information about managing money successfully is available at K-State Research and Extension offices throughout the state and online: www.ksre.ksu.edu/financialmanagement/ and at www.Kansassaves.org.