4 Signs You Have a Spending Problem and How to Fix It

Cracking piggybank

One in five Americans spent more than what they earned in the last 12 months, according to a Federal Reserve Board survey. Some might be relying on credit or dipping into savings to cover their spending because they are having trouble making ends meet. And, some might be simply living beyond their means.

Regardless of the reason your spending exceeds your income – your overspending might be making it hard to pay bills, have money for emergencies, and save for the future. It could also lead to serious consequences, such as bankruptcy.

Here are five warning signs that indicate you are spending too much, how your overspending can hurt you, and how to get your spending under control:

1. You max out your credit cards and pay only the minimum.

If you’re maxing out your credit cards and can’t pay off your balances every month, it’s a sign that you’re relying on credit to supplement your income. Not only can this hurt your credit score, but it can also leave you in debt longer than necessary.

If a high percentage of your available credit is used — in other words, most of your cards are maxed out — the credit scoring agencies consider this to be a sign that you are overextended and will likely lower your credit score. A lower score will make it harder for you to get additional credit and might force you to pay higher rates on that credit.

Paying the minimum on your credit card won’t necessarily hurt your score, but it could take you a long time to pay off your debt and cost you extra money in interest. For example, if you had a $1,000 balance on a card with a 16% APR and made a minimum monthly payment of $25 on your balance, it would take nearly five years to pay off your debt. And, you’d pay about $440 in interest too.

2. You pay bills late.

About one out of 20 people with a credit file are at least 30 days late on a credit card or a non-mortgage account payment, according to an Urban Institute report.

Paying bills late because you don’t have the cash to cover them is a sign that you’re overspending. And it sends a red flag to your credit issuers, which could hike your interest rates or lower your credit limit, according to the National Foundation for Credit Counseling. You’ll also be hit with fees — which can add up quickly — and several late payments will hurt your credit score.

If you’re more than 180 days late on a payment, your debt typically is assigned to a collection agency or debt collector. Having debt in collections can lower your credit score and will remain on your credit report for seven years, according to myFICO.com. What’s worse is that your creditors or debt collectors could potentially sue you and be allowed to garnish you wages to pay the debt you owe.

3. You raid your retirement account.

You might think there’s no harm in borrowing from your retirement account because it’s your money. About 20% of 401(k) plan participants have taken a loan from their account, according to the Pencil Research Council Working Paper. You can borrow up to half of your 401(k) balance, up to a maximum of $50,000, but rarely is this a good idea.

If you borrow from your retirement account, you will have to pay yourself back with interest — which can be lower than the rate of return you would’ve gotten if you had left the money in the account. So really, you’re just shortchanging your retirement savings.

4. You borrow from friends and family.

If you have to turn to friends and family for money, it’s a sign that your overspending has left you financially strapped. You might think it’s a good way to get an interest-free loan, but being unable to pay back the loan can lead to tension and can affect your relationship.

How to Stop the Overspending Habit

If you’ve realized that you have an overspending problem, rest assured — there are different ways you can get your spending under control and create healthy spending habits.

1. Create a budget.

The first step to getting your spending under control is to create a budget. Take a close look at what you’re spending money on and ways to cut back.

2. Rely on cash.

By living on a cash or debit-only budget, you can curb the impulse to overspend. Set a budget for each shopping trip and only bring that much cash with you to avoid making impulse purchases.

3. Get help.

If you’re buried in debt and can’t curb your spending, your best option might be to get professional help. The National Foundation for Credit Counseling provides free and affordable debt counseling and other money management services. You can find an agency in your area through NFCC.org.

Don’t forget about First Financial’s free, online debt management tool, Debt in Focus. In just minutes, you will receive a thorough analysis of your financial situation, including powerful tips by leading financial experts to help you control your debt, build a budget, and start living the life you want to live.

Article Source: Cameron Huddleston, http://www.gobankingrates.com/personal-finance/5-signs-spending-problem/

3 Tips for Getting Control Over Your Spending

Glamour purse fill with money isolated on white background

Two days after you receive your paycheck, do you wonder where all the money went? Is your closet full of clothing and other items that still have the tags on them? Then your spending habits may need some adjusting.

Many consumers aren’t saving enough for a rainy day. The U.S. personal savings rate has increased within the last 12 months (5.3% compared with 4.8% the year before), but there is still room for improvement. Approximately 44% of households across the nation have less than three months of savings, according to the Corporation for Enterprise Development’s 2015 Assets & Opportunity Scorecard. Furthermore, a recent Bankrate Money Pulse survey revealed that less than 4 in 10 people are capable of covering an emergency expense, and about 18% don’t have a budget.

If you’re struggling to control your spending, there are a few things you can do to break bad habits. Here are three tips for regaining your footing and getting back on the path toward financial health.

1. Carry Cash
One of the best ways to keep spending in check is to pay for most of your purchases with cash. When you rely on a credit or debit card, it’s easy to lose track of how much money you’re shelling out. Swiping your card is simple and can make you feel like you have more money than you really do. Cash, on the other hand, will allow you to see exactly what you’re spending. And when the cash runs out, you know it’s time to put your wallet down and stop making purchases for that day. Try your best to get out of the “buy now, pay later” mentality.

2. Use a Spending Tracker
There are plenty of mobile phone apps and online web tools that can assist you with keeping tabs on your spending. If you’ve been slow to devise a budget, these technologies are a great way to get started. Some useful apps available are Goodbudget, Mvelopes, and Pocket Expense.

3. Go on a Financial Fast
Resolve to cut out all of your spending for a certain period of time; it could be two weeks or one month, the timing is up to you. When you refrain from spending any money (except on necessities such as mortgage payments and groceries) you’ll quickly see what you can truly live without.

Article Source: Sheiresa Ngo for http://www.cheatsheet.com/personal-finance/3-tips-for-getting-control-over-your-spending.html/?a=viewall

13 Commandments For Smart Personal Finance

commandments1. Know your goals. This means trying to step back and say, “Where are we going? How are we going to get there?”  While it doesn’t necessarily mean having all the pieces in place, you should be able to identify the goals and a few actions that will bring you closer to achieving them.  Don’t be be afraid of dreaming a little, but also make sure the goals are specific, measurable, and realistic.

2. Don’t be paralyzed by past mistakes. Most people, even those who are highly successful, have made bad investments at some point in their lives.  The important thing is to learn from your mistakes and move forward. Stressing about the past is not a productive activity.

3. Develop a plan. A goal without a plan is nothing but a wish.  You also need to be flexible enough to re-calculate as goals and situations change. This is where a trained and certified financial planner can be an asset, monitoring your performance, how it measures up to the market, and whether or not you are on track to meet your stated goals.

4. Know your cash flow. This is the financial equivalent of taking your blood pressure. It’s not about putting you on a budget, it’s about knowing how much money is coming in and where it’s going. You might be surprised at how much you are spending on certain items. Having a handle on your cash flow combined with knowing your goals, will help identify possible changes that can be made to help you achieve your objectives.

5. Plan your major celebrations without stress. Planning for a child’s wedding?  Rather than incurring excessive debt, consider scaling down the event to reduce stress. In addition, if there is enough time and with proper planning, there may be ways to save well in advance.

6. Understand your liquidity. Liquidity is the ability to convert your investments into cash quickly.  Liquidity is valued because life is dynamic and your need to move quickly may be necessary – whether it’s due to an opportunity like a good investment, or an unforeseen expense, like a flood in your basement.

7. Know and manage your risk. Things go wrong and accidents happen. Whether it relates to a downturn in your health or your finances, you want to protect your family. Understanding your insurance options is an important part of every financial plan.

8. Plan for financial independence. Knowing when you can retire and having some confidence that you will have enough money, is what financial independence is all about. The financial planning process can help you project your retirement at a given age based on such things as assumed income, expenses, inflation, social security, and savings.

9. Establish an estate plan. This gives you control over your money and your children’s future when you’re gone.  Unfortunately, too many people relegate this to the bottom of their list.

10. Manage your taxes. Your accountant and financial advisor should be talking when it comes to your tax planning. You should have a strategy in place that will minimize your taxes, while helping you achieve long term value.

11. Manage your debt. Carrying debt creates anxiety and stress. Credit card debt in particular often results in interest rates exceeding 20%! It’s important to pay down debt as quickly as you can. This ultimately frees up funds that can be relegated elsewhere.

12. Understand your investment strategy. Your investment strategy should be tied to your goals, time horizon, and risk tolerance. Having a plan guides you so that you avoid the type of panic that can lead to making bad decisions.

13. Putting it all together. Simply stated, this means looking at the big picture and feeling confident you have crossed your T’s and dotted your I’s. Be sure to prioritize your needs and talk with a professional who can offer independent advice.

Questions about retirement savings, estate planning, or investments?  If you would like to set up a no-cost consultation with the Investment & Retirement Center located at First Financial Federal Credit Union to discuss your savings goals, contact us at 866.750.0100 or stop in to see us!*

*Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. Non-deposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.

Article Source: http://www.valuewalk.com/2015/06/personal-finance-commandments/

What To Do With Extra Cash

Excited-Woman-Holding-CashFor the first time in a long time – thanks to a rebounding economy and an increased minimum wage in 23 states – salaries are on the rise. Great news, right? If you’re one of the fortunate recipients, what are you going to do with the extra cash? Step one is to make an actual plan to put it to use. Here are a few suggestions to get you started.

Flesh out your emergency fund.
A fully-funded emergency cushion should include enough cash to support 3-6 months of mandatory spending, but this doesn’t mean you have to cover all of your costs. Your emergency fund doesn’t need to include what you usually would spend in 3-6 months, but what you have to spend. This includes rent, bills, food, gas, and other necessities. This should also be enough to bail you out of a jam if your car breaks down or your plumbing gets backed up. If you dip into your emergency fund, you’ll want to spend the next few months replenishing it.

Pay down debt.
Here’s the deal on debt: The return on your money is equal to the interest rate you’re paying. So prepaying your mortgage – at 3% or 4% before the tax deduction – is less valuable to your bottom line than paying off a credit card at 15% or 19%.

Don’t forget about First Financial’s free, online debt management tool, Debt in Focus. In just minutes, you will receive a thorough analysis of your financial situation, including powerful tips by leading financial experts to help you control your debt, build a budget, and start living the life you want to live.

Treat yourself.
This goes back to having a plan. When you get a raise, you have to avoid making impulsive decisions. The last thing you want is to look back years later and regret how you spent your extra cash. But the feeling that you deserve to celebrate is certainly common – and warranted. There is no one way to do this, but think about it long enough to try to spend money on something that makes you happy and that will last. The lasting impact doesn’t have to be material, either – a vacation can create memories that you’ll never forget!

*Article courtesy of Jean Chatzky of SavvyMoney.com.

Thinning Out the Document Mess

files_pileWhen’s the last time you took a peek at the filing cabinets in your home office?  A lifetime of financial matters means accumulating a lifetime of documents. Let’s get a grip on things and whittle down the mess. Below is a list of the financial documents you should keep and for how long.

  • Tax returns. The IRS recommends keeping these for at least three years.
  • Investments. Just like the tax returns, keep capital gains tax reports and 1099 forms for at least three years.
  • 401(k) statements. Save the end of year and quarterly statements for the current year. After that, shred them.
  • Pay stubs, credit card, and bank statements. If all is well with your accounts (they are balanced and there is no fraud) go ahead and get rid of these items.
  • Loans. Keep one statement with your current balance. If you have paid the loan off, keep the final statement for at least seven years.
  • Insurance policies. Keep them until the policy is no longer in use.
  • Medical records. Medical bills from your insurance, hospital bills and other medical-related statements should be kept for five years.
  • Real estate records. Keep any purchase, sale or home improvement receipts for as long as you own the underlying asset.

Getting organized is an important step in getting on top of your finances – happy organizing!

*Article courtesy of Chris O’Shea of SavvyMoney.com.

6 Sneaky Summer Expenses to Avoid

iStock_000016935539XSmallSummer is the time kick back, relax and just take things easy for a few months. While this means you may be feeling a little lax with your budget, you don’t have to waste those hard-earned dollars on frivolous purchases and expenses that can easily be avoided. Even if you aren’t tracking your spending on a daily basis, there are some things you can do to be more mindful about your spending habits and make better money decisions all season long.

Whether you’re enjoying some vacation time this summer or just working your way through those hot summer days, here are six sneaky summer expenses you can avoid.

  1. Excessive toll charges. You may be relying on your GPS to provide you with the shortest route and turn-by-turn directions to your final destination, but make sure you aren’t required to pay a lot of toll fees along the way. Consider taking an alternative route – even if the trip takes slightly longer – so you don’t end up paying extra money in toll charges on a single trip. Factor in the extra cost of gas on the alternate route if needed so you really are saving money on the total cost of that drive.
  2. Car rental insurance. If you’re planning a road trip but don’t want to put miles on your own car or you end up needing a rental car when you’re on vacation, don’t add more to the cost of your trip by purchasing rental car insurance. Almost all major credit card companies offer car rental insurance coverage as a benefit to cardholders – regardless of their balance. Check with your credit card provider to find out if it offers car rental insurance and also check with your insurance company to see if car rentals are included in your coverage. In many cases, your car insurance will provide primary coverage and the credit card will take care of secondary coverage, such as towing charges and other fees.
  3. Cost of personal items on vacation. Don’t let running out of sunscreen, bottled water or other everyday essentials put a dent in your vacation budget this season. Buying these items at a hotel, resort or retail store at a vacation hotspot can leave you paying a premium, so make sure to stock up on the essentials before you head out. Make a checklist of must-haves for the beach and beyond so you don’t spend extra money on the basics.
  4. Beach umbrella and chair rentals. Many resorts and hotels by the ocean offer beach umbrella and chair rentals for an additional fee. If you can bring your own, you could end up saving upward of $15 per day on these amenities. Call ahead to confirm that you are permitted to bring your own beach items – some larger resorts may not allow you to use anything but their own, so you can save some extra money on that overnight stay.
  5. Premium gas prices in tourist towns. If you’re heading to a major tourist city, make sure to fill up in the suburbs or anywhere outside of the main tourist zones to avoid the high price of gas. Many gas stations around tourist hubs charge a premium because they know visitors have limited options in the area. Be smart about where you fill up so you aren’t paying several cents more per gallon every time you need gas.
  6. Movie rental late fees. If you’re planning a movie marathon for a group or just binge-watching a few days during that summer vacation away, make sure you don’t get stuck with late charges and extra fees on those rentals. Only rent what you can watch that same night so you don’t fall into the trap of holding on to the movie for a few extra nights – and paying late fees. Redbox, for example, only charges $1.50 plus tax a night for most DVD rentals but will charge you the same price for every night you hold onto it. If you’re bad about returning movies on time, consider low-cost and free alternatives, such as rentals from the library or borrowing a DVD from a friend to offset some of the costs of movie night.

First Financial’s Summer Savings Account is ideal for those who are looking to save up for summer expenses or a vacation as well as employees who get paid 10 months out of the year. This account allows you to have money available for summer expenses during July and August and you have the ability to choose the amount of money you’d would like to have deposited each pay period through direct deposit or payroll deduction.*

You can elect to have your money transferred into a First Financial Checking Account in two different ways: Either 100% of funds can be transferred on July 1st, or 50% will be transferred July 1st, and the other 50% August 1st. This account can be opened at anytime – stop into any branch, or call us at 866.750.0100.

*A $5 deposit in a base savings account is required for credit union membership prior to opening any other account. All personal memberships are part of the Rewards First program and a $5 per month non-participation fee is charged to the base savings account for memberships not meeting the minimum requirements of the Bronze Tier. Click here to view full Rewards First program details. Accounts for children age 13 and under are excluded from this program. 

Article courtesy of US News – Money by Sabah Karimi.