Category Archives: Financial Advice

How to Break the Emotional Spending Cycle

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If you’ve ever opened a shopping app after a stressful day at work, had a conversation that didn’t go as planned, or you received bad news – you’re not alone. Shopping after experiencing difficult emotions is more common than you might think. But if clicking check out on your online shopping cart temporarily gives you a rush of excitement and is then quickly replaced with financial consequences and feelings of regret – you’re most likely engaging in emotional spending. Let’s learn what emotional spending is, why we do it, and how to overcome it.

What is Emotional Spending?

Emotional spending (sometimes nicknamed “retail therapy”) refers to purchases that are driven by emotions rather than your need for the product or service. It’s different from typical discretionary spending, like when you buy the new golf clubs you’ve been planning to buy and that you’ve budgeted for. In this state, shopping is a way to relieve feelings like stress or loneliness.

Emotional spending isn’t always a large purchase. It can be frequent, small purchases in grocery checkout lines or even late at night. It can look like ordering takeout after a long day, even when you already have groceries at home. It can be impulsively purchasing everything in your Amazon cart because it will make you feel better, even if you know you can’t afford it. Emotional spending does not always begin as a problematic habit – it’s a common behavior that can have serious financial and emotional consequences if it becomes one.

Signs of Emotional Spending

  • The impulse to go shopping comes after experiencing an emotion like stress or boredom.
  • You feel a short-lived sense of relief after making the purchase, which is later replaced by guilt or regret.
  • Your spending has caused you to accrue debt, deplete your savings, negatively impact your credit score, or worse.
  • Spending causes conflict with family, friends, or significant others.
  • You continue to repeat the pattern, even though you are aware it has had a negative impact on your financial health.

What Causes Emotional Spending?

Research has shown that shopping makes people feel good – every aspect of the transaction from browsing, to imagining, to finally owning the product. According to the Cleveland Clinic, this is because shopping releases “happy hormones” that encourage us to keep engaging in the same behavior. We feel temporary relief after shopping, so we keep doing it.

How to Overcome Emotional Spending

1. Track Your Patterns and Address Them

Do you know what gives you the urge to buy things? Maybe you notice a pattern of shopping after a difficult day at work or you reward yourself after reaching a goal.

Consider using a journal or app to track when the urge to spend arises and what caused it. By addressing the root cause of the spending, you are more equipped to recognize  a pattern and redirect your focus.

2. Implement a Spending Rule

Consider hitting pause before buying the item. Give yourself a set time to wait before making an unplanned purchase, or longer for bigger purchases.

During this waiting period, ask yourself a few questions:

  • Do I really need to make this purchase or am I shopping to relieve the emotion I’m feeling right now?
  • Does this purchase fit into my budget?

When the time is up, you may discover that you don’t need the purchase. Your desire to  buy the item might even disappear completely.

3. Set a Discretionary Spending Limit

If your budget allows for it, set aside some “fun money” you can use for wants. By deciding how much you can comfortably afford to spend, you can shop without feeling guilt or regret.

Need to create a budget? Check out our fillable budget worksheet to calculate what you might have left to spend after your total monthly expenses.

4. Set Financial Goals

Having clear, meaningful financial goals can make you think twice about buying something you don’t need. When your money has a purpose, you might be more likely to reconsider non-essential purchases – because that money can get you closer to reaching one of your goals.

5. Find Alternative Activities to Handle Emotions

Both negative and positive emotions can lead to overspending. When those emotions arise, try replacing shopping with another more productive activity.

Breaking the habit of emotional spending can feel overwhelming, even if you recognize the negative consequences it has on your daily life. However, breaking the cycle can help you experience improved financial well-being.

For more financial advice and money management tips, subscribe to our First Scoop Blog.

When Does a Personal Loan Make Sense?

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A personal loan can be a valuable tool for meeting your financial needs when used wisely. Keep reading to learn what a personal loan is, the advantages of using one, and when it could make sense to use as a financing option.

What is a Personal Loan?

A personal loan is a fixed-rate installment loan, which provides quick access to funds for various purposes. You’re often approved based on your creditworthiness, income, and overall debt levels. Since borrowers often apply for personal loans because of urgent needs, many lenders offer quick access to the funds once approved. The funds are usually disbursed in one lump sum.

Advantages of Personal Loans

  • Fixed Interest Rates: Fixed interest rates give you a fixed monthly payment and offer protection against variable interest rates (rates that are subject to change based on market conditions).
  • Fixed Monthly Payments: Personal loans usually come with fixed monthly payments, which makes them predictable and easy to budget for.
  • Flexible Terms: Depending on the lender, loan terms can be as short as 1 year or as long as 5 years or more. This gives borrowers the flexibility to choose a term that won’t strain their budget and fits their priorities.
  • No Collateral Required: Personal loans usually have no collateral requirement, meaning you aren’t risking your home or car if you are unable to repay the loan. However, be aware that without collateral – you typically face higher interest than a loan type with collateral backing it.
  • Flexibility for Using Funds: Personal loans don’t have as many restrictions as some other loan types. They’re versatile and can be used for many purposes, such as consolidating multiple types of debt or funding a home renovation project.

When to Use a Personal Loan

  • Debt Consolidation and Streamlining Payments: A personal loan makes it easy to take multiple payments and turn them into a single streamlined payment. This ultimately reduces the number of monthly payments you must make each month on other loans, making it less likely that you’ll miss payments. Additionally, consolidating multiple debt sources can lower the overall interest you’re paying – especially if your credit score has improved.
  • Credit Card Payoff: The interest rate on a personal loan is usually lower than that of a credit card. Although the interest rate you secure on a personal loan will depend on your creditworthiness, the average national personal loan rate currently stands at 12.44% while credit cards stand around 19.61%. Additionally, interest rates on credit cards are usually variable. A personal loan with a fixed interest rate that’s lower than that of a credit card can help you pay down your credit card balances faster and save money on interest over time. If you’re consolidating credit card debt, commit to also changing your spending habits so you don’t go deeper into debt.
  • Emergency Expenses: Sometimes the money just isn’t there when an emergency arises – such as an unexpected hospital stay, medical bill, or car repair. Personal loans tend to have quick approval and funding decisions, which makes them a helpful choice in an urgent situation. A personal loan can be a useful option in these situations, especially if the alternative is financing the expense with a credit card.
  • Relocation Expenses: There are times when you can’t plan for a move, such as in the case of a job loss, family emergency, or a major life change. Moving can also come with unexpected costs. You may decide to use a personal loan to finance moving-related expenses such as hiring movers, renting a moving truck, or paying a security deposit or first month’s rent. A personal loan can help you cover these upfront expenses and pay them back with a predictable monthly payment.

A personal loan can offer predictability, structure, and flexibility when used appropriately. It can give you the confidence to meet your financial needs with a fixed interest rate and a predictable monthly payment.

If you’re in Monmouth or Ocean Counties in New Jersey and believe that a personal loan may be the right option for your financing needs, First Financial is here to help. With fixed rates, flexible terms up to 60 months, and no pre-payment penalties – our Personal Loans may be able to help you affordably cover the cost of life’s necessary expenses.* You can apply online 24/7 or call our Loan Department at 732.312.1500, Option 4 if you have any questions before applying.

*APR = Annual Percentage Rate. Actual rate will vary based on creditworthiness and loan term. Subject to credit approval. Personal Loan repayment terms range from 12 to 60 months, and APRs range from 10.24% APR to 18% APR. Loan payment example: A $2,000 Personal Loan financed at 10.24% APR for 24 months, would have a monthly payment amount of $92.51. A First Financial Federal Credit Union membership is required to obtain a Personal Loan or Line of Credit, and is open to anyone who lives, works, worships, volunteers or attends school in Monmouth or Ocean Counties. A $5 deposit in a base savings account is required for credit union membership prior to opening any other account/loan.

How to Avoid Lifestyle Creep After Your Income Increases

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Congratulations – maybe you got a raise at work or started a new job where you’re making more money. You’re not alone if you already feel more breathing room in your finances, or if you’re thinking of finally treating yourself to a luxury item you’ve always wanted. An increase in your salary can mean you’ll have more money in your checking account, but it can also mean that you’re spending more to keep up with it. Let’s talk about what lifestyle creep means, the signs that you might be experiencing it, and how to avoid it.

What’s Lifestyle Creep?

Lifestyle creep occurs when you spend more as your income rises, often on non-essential items. This can make it feel like the increase to your income never happened – even though your paycheck went up, your wiggle room didn’t.  It can also occur after paying off a loan or credit card – which frees up money that would usually go toward a monthly payment. Rather than redirecting that money to savings, you spend it.

It usually happens little by little, and creeps up on you. At first, it might look like ordering takeout more often or buying pricier gifts because you can afford it. You might start upgrading existing subscription services or adding new ones to your recurring monthly expenses. Eventually, it might be that your spending has increased so much that your savings either looks the same or has dwindled, while your credit card balance grew.

Signs of Lifestyle Creep

Here are some signs that you might be experiencing lifestyle creep:

  • Living paycheck to paycheck.
  • Not knowing where your money goes every month.
  • Little luxuries like going out to eat or going shopping don’t feel special anymore.
  • The balance of your savings is stagnant or dwindling.
  • Relying on credit cards to make ends meet between paychecks.
  • Extra items that are wants, are now seen as
  • Consistently justifying expensive purchases as “deserved.”
  • Prioritizing luxury over practicality.
  • Unable to cover an emergency expense.

How to Avoid Lifestyle Creep

1. Decide on a Purpose for the Increase

As soon as your income increases, decide on a purpose for the extra money before you get used to seeing it in your account. Let’s say each paycheck goes up by $100.

  • 75% or $75 of the increase would go to your emergency savings, to pay down debt, or save for a financial goal.
  • 25% or $25 of the increase would go toward a valuable upgrade you want to make to your lifestyle.

You don’t have to follow these percentages exactly – the point is deciding before your spending habits decide for you. It is perfectly normal and expected to spend money on things that make you happy, but make sure you’re making future you a priority, too!

2. Automate Savings

When you receive a raise, consider increasing your automated savings at the same time (or begin automating your savings if you haven’t already). That extra income hasn’t been in your budget before, which makes it a good time to redirect some of it to savings before you adjust your spending habits around it.

First Financial members can setup automatic transfers to any of their First Financial Savings Accounts. It’s easy to set up automatic transfers between a First Financial Checking Account or an external account, as well as increase those transfers when you get a pay raise.*

3. Set Clear Financial Goals

Having clear, meaningful financial goals can make it easier to direct extra income. Whether you’re building an emergency fund, saving for your child’s college education, or for a family vacation – giving your extra income a purpose makes you less likely to spend it. Additionally, it can remind you to reconsider impulse purchases because that money can help get you closer to achieving a goal.

4. Sleep on New Monthly Payments

Before taking out an installment plan on a new furniture set or applying for a new car loan, sleep on it to decide if you really need it. Lifestyle creep isn’t only caused by single, large payments – it can be caused by taking on new monthly payments because they become permanent in your budget for 1 year, 5 years, or more.  If after sleeping on it, you decide that you still want the item in question – consider pairing it with a downgrade that either saves you money, or increase the amount you put into your savings account.

Increasing your income can be a great feeling – don’t let lifestyle creep change that. By making a plan for extra funds and being aware of your spending, you can ensure that you’re enjoying your pay bump today, tomorrow, and in the future.

For more financial advice and money management tips, subscribe to our First Scoop Blog.

*A First Financial membership is available to anyone who lives, works, worships, volunteers or attends school in Monmouth or Ocean Counties.  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 program. View full Rewards First program details at firstffcu.com. Some restrictions apply, contact the Credit Union for more information.

The Risk of Putting Your Finances on Autopilot

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Automation makes it easy to manage your finances. Direct deposit, autopay and automatic transfers into your savings takes tasks off your plate, and for many – that hands-off approach is exactly what keeps their money on track.

However, when everything runs completely on its own – it’s easy to stop paying attention altogether. Keep reading to find out what to watch for, and how to stay in the loop with your finances without giving up the convenience.

You Can Lose Touch with Your Spending

When your bills pay themselves and your paycheck splits itself into savings, it’s easy to stop looking at where your money actually goes. You can miss patterns you would otherwise catch, like a forgotten subscription or a spending category creeping up month over month.

Automated savings can fall behind too. If you set a transfer amount once and never revisit it, it won’t grow when your income does. Say you set up a $50 automatic transfer into savings two years ago. After a raise, that same $50 is a smaller share of your paycheck than it used to be, even though the transfer still shows up every payday.

Set a recurring reminder monthly or quarterly, to review your accounts and see where your money is really going. Our Home Budget Calculator is a good place to start.

Overdrafts and Fees Can Sneak Up on You

Automation removes some of the manual work, but not the responsibility of knowing your account balances. If a payment goes out before your paycheck lands, or if you have more automatic payments scheduled than your account can cover that week – you could end up with an overdraft plus a late fee or returned payment fee from the biller.

This often happens right after a change in pay schedule or a new autopay you set up for a service. Checking your account balance, upcoming transactions, and payment timing regularly helps you catch these mismatches before they turn into fees.

Errors and Fraud are Easier to Miss

A missed decimal point, a duplicate charge or an extra zero can happen, and automated systems do not always catch these mistakes on their own. Fraud can be even harder to spot, since scammers often start with small charges that don’t raise a red flag – hoping you won’t notice before they move on to bigger ones. When your bills still get paid, and your balance still looks roughly right at a glance, nothing prompts you to look closer unless you already are.

A quick weekly glance at your transaction history is one of the simplest ways to catch something before it grows. Visit our blog’s Important Alerts & Scams page to stay up to date on the tactics scammers are using right now.

Your Plan Can Get Outdated Without You Noticing

Automation is built to run the same way every time, but your finances are not static. A new job, a move, a new family member or a paid-off loan can all change what your money should be doing, and none of those changes will update your automatic transfers on their own.

When you pay off a loan, automation will not redirect that freed-up money into savings, another debt or another goal for you. Treat every major life change as a cue to revisit your automatic settings, not just your budget.

Automation and Oversight Work Better Together

Automating your finances is still one of the best tools available for building good money habits, especially when you pair it with a regular check-in.

If you have been hands-off for awhile, start small. Review your accounts at least once a week for the first month, then shift to once a month. A short check-in does not need to take long. Each time, look for:

  • Charges you don’t recognize or can’t place.
  • Subscriptions or automatic payments you no longer use or need.
  • Savings transfers that have not kept pace with your income.
  • Life changes that may update your automatic settings.

Automation and oversight are not opposites. Together, they give you the convenience without losing sight of your money.

For more financial tips like these, subscribe to our First Scoop Blog.

It’s National Preparedness Month: Build a Financial Emergency Kit

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September is National Preparedness Month, an annual observance across the U.S. that encourages individuals, families, and communities to be proactive in preparing for emergencies. Disasters take many forms, but all have the same impact – unexpected and sometimes costly disruptions in your day-to-day life. Emergencies are typically unpredictable, but you can help your family be more resilient by being prepared. Check out these tips for being financially prepared, should a disaster strike.

Protect Important Documents and Valuables

Once the immediate danger passes, important documents and records will be essential for kickstarting your recovery. Every household should take inventory of these items in advance and evaluate how they can protect them.

The Federal Emergency Management Agency (FEMA) breaks these documents and records into 5 main categories. Review their checklist for a full list of documents that might apply to your household and how to safeguard them.

  1. Household Identification: These are documents you would need to identify yourself and members of your household.

– Vital records pertaining to births, marriage, divorce, and adoption papers.

– Personal identification, such as a passport, driver’s license, green card, and Social Security card.

– Military service records.

– Pet ownership papers and/or identification tags.

  1. Financial and Legal Identification: These documents would help if your home, vehicle, or income was impacted by the disaster.

– Housing documents, such as lease/rental agreement, mortgage information, and deed.

– Insurance policies, such as homeowner’s or renter’s, life, and auto.

– Vehicle documents, such as loan information, VIN, and registration.

– Financial accounts.

– Tax statements.

  1. Medical Information:

– Health/dental insurance.

– Physician information, in case medical care is needed.

– List of medications, immunizations, allergies, prescriptions, medical equipment/devices.

  1. Emergency or Hotline Contact Information: Employers/supervisors, schools, houses of worship, social service providers, Homeowner’s Associations, and home repair services.
  2. Valuables and Important Personal Items: Priceless personal mementos like family photos and keepsakes, and possessions with monetary value (jewelry and art).

Once you’ve gathered your important documents and records, it’s important to store them in safe locations. Consider storing paper copies in a fireproof/waterproof box or safe, and electronic documents in a password-protected format or on a removable flash or hard drive (stored safely so it’s protected from water or fire damage).

Check out FEMA’s Emergency Financial First Aid Kit for more detailed checklists and guidance on collecting and safeguarding your household’s important information.

Review Insurance Policies and Financial Paperwork

It’s important to periodically review insurance policies and other financial paperwork to ensure it is current and accurate. For insurance policies, this can help you understand what may be covered under your policy, identify any gaps in coverage, and simply confirm you have the necessary information needed to quickly process any claims in the event of an emergency.

Equally as important – reviewing these documents can help you identify any outdated information, which can affect your protection during an emergency.

Consider an Emergency Fund to Use in a Crisis

An emergency fund is a dedicated savings account to cover urgent expenses that arise from unexpected situations – anything from job loss to a natural disaster. A natural disaster like a hurricane, flood, or earthquake, can cause unforeseen expenses such as short-term lodging, home repairs, and even daily essentials. An emergency fund can help you maintain stability and avoid turning to high-interest debt. It can also give you peace of mind – reducing stress and uncertainty during a time where the focus is on recovery.

Additionally, it’s important to keep a small amount of cash at home in case of a disaster, as ATMs and credit cards may not work in the event of extended power outages – should you need to purchase supplies, fuel, or food.

Consider Electronic Options

Certain disasters can cause disruptions to mail service that may last days or weeks. If you rely on income or federal benefits – consider switching to electronic payments to continue receiving your income as expected. This can also help you meet your financial obligations, if you normally make any utility or loan payments through regular mail.

Ensure that your online and mobile banking services are set up – provided you have power or WiFi and still have access to those services. This can help you maintain financial access when traditional banking services may be inaccessible or unavailable.

While emergencies and disasters are unpredictable, it’s important to expect the unexpected. Financial preparedness doesn’t have to be costly – but being unprepared for a disaster can be.

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How to Budget for Your Baby’s First Year

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If you’re preparing to welcome a new baby, you’re probably already expecting sleepless nights and plenty of new expenses – as well as unforgettable milestones along the way. While you likely know your expenses are about to change, it can be difficult to pin down exactly how much these changes may cost. Which baby items are must-haves, and which can you afford to skip?  Which items are one-time purchases, and which will become ongoing costs? Calculating what you’ll spend in the first year isn’t an exact science, but having a plan can reduce financial stress so you can focus on what matters most. Here are the first-year expenses you can expect and how to plan for them.

1. Start with Common One-Time Expenses

Below are some items that expectant parents typically purchase before or just after birth to prepare for bringing their little one home:

  • Nursery furniture – such as a crib, mattress, changing table, and dresser.
  • Baby gear – such as a stroller, infant car seat, high chair, baby monitor, and a starter supply of diapers and wipes (don’t buy too many newborn diapers – your baby will likely quickly outgrow these).
  • Toiletries and medication – such as an infant thermometer, baby bath, and washcloths.
  • Newborn clothing.

2. Understand Ongoing Expenses

These are items that typically become a non-negotiables within your budget once you bring your child home:

  • Diapers and wipes.
  • Feeding – such as formula if you plan to use it, and baby food as your child grows.
  • Medical expenses – such as co-pays for doctor visits.
  • Toiletries and medication – such as baby wash, shampoo, and over-the-counter infant pain relievers and fever reducers.
  • Clothing, since your baby’s wardrobe will need to be replaced as they outgrow their newborn clothes.
  • Childcare – which tends to be the biggest potential variable expense and will differ based on each individual family’s situation.

3. Learn Where You Can Save

While there are certainly items that might be worth spending a little more on, there other areas in which you can save:

Clothing. Babies typically outgrow their clothing every 2-3 months and because of this – used clothing can also be like-new. If you prefer to buy new clothing, it might be worth skipping the full wardrobe and sticking to a handful of onesies and sleepers per size category.

Baby gear (such as strollers and highchairs). You can usually purchase these items second-hand at local thrift stores, garage sales, or online marketplaces for a fraction of the cost. An exception to the second-hand rule are car seats. It is recommended to always purchase new car seats, as they do expire and prior crash history may not be available.

Diapers. There are subscribe-and-save services to save on the price and shipping cost of diapers. You may also consider using cloth diapers. The upfront cost of cloth diapers is more, but this can cut the total spend since they are reusable. Lastly, consider going with store brand diapers – they will typically work just as well. The same may go for store brand formula, provided it meets the same FDA standards as name-brand formula. Research as much as you can in advance.

Toys and books. While not a necessity, you may also be able to find great deals on toys and books at your local thrift shop, a garage sale, or via online marketplace. If you have friends or family members who have slightly older children, you may even be able to take advantage of hand-me-downs.

4. Prepare Financially Before Baby Arrives

There are a few ways to baby-proof your finances before your little one arrives:

  • Save 3-6 Months of Expenses in an Emergency Fund. Personal finance experts always recommend having 3-6 months of expenses stored away for a rainy day, but this becomes even more important with a new addition to your family. A new baby paired with a sudden emergency (job loss, medical emergency, or major car repair) can lead you into relying on high interest debt to stay afloat. This can be avoided by having an emergency fund.
  • Consider a Baby Sinking Fund. Babies often come with unexpected expenses. It may be useful to have a baby sinking fund, or a separate savings account specifically for unforeseen baby-related expenses. This can help you avoid dipping into your general savings or emergency funds.
  • Work on Finalizing Childcare Plans. Depending on the parental leave policies available to you and/or your spouse, assistance from family, and your personal preferences – you may need to budget for extra childcare costs. While there are many childcare options out there, daycare centers may have waitlists and should be researched and toured early. Consider whether you prefer a daycare center or an at-home nanny. Many families even opt to have a back-up care plan in place after they finalize their primary childcare option.

It is common to see estimates for the cost of your baby’s first year in the ballpark of $15,000 to $20,000, which is an eye-opening figure for most. Keep in mind that this amount varies significantly between families based on multiple factors such as geographic location and childcare needs. Although financially preparing for your baby’s first year might be daunting, a little thoughtful planning can go a long way into being more prepared to welcome your newest addition.

If you have questions about expanding your budget for a new baby, managing your savings, or creating a financial plan for your expanding household – First Financial is here to help you every step of the way. Contact us today or make an appointment at your local branch to further discuss the options that may be available to you.

A First Financial membership is available to anyone who lives, works, worships, volunteers or attends school in Monmouth or Ocean Counties.  A $5 deposit in a base savings account is required for credit union membership prior to opening any other account. Contact the Credit Union for more information.