The road to financial success isn’t always a straight shot. There can be unexpected twists and turns on your path toward achieving your financial goals. Navigating them successfully is the key to reaching your destination, even if you take a detour along the way. Stay in the driver’s seat of your finances with expert advice from Stacey Black, BECU's lead financial educator, on four key financial themes: saving, budgeting, paying down debt and boosting your credit score.
New York Life Insurance Company (source)
First step: "Simply get into the habit of saving,” Black says. Open a savings account that you only access in an emergency and set up automatic transfers—even $5/month—to build your savings muscles. With interest rates on the rise, your money will earn a little more, and you won't have to lift a finger.
Bonus tip: Cancel one monthly subscription — maybe that streaming service or music app you'd forgotten about — and add that amount to your savings account. The goal here isn’t to stop having fun but to stop spending as much to have fun.
Think of it as budgeting for fun!
Ultimate goal: Set more money aside each month into a savings account to help save for important financial milestones and unplanned expenses. Save enough to cover 6-9 months’ worth of living expenses in case you are without income for an extended period. “It’s important to set monetary goals that you can actually achieve within a shorter amount of time, understanding that it’s okay to start small and build from there,” Black says.
putting off going on vacation
delaying paying off credit card debt
waiting to buy a car
holding off buying a home
First step: Start by learning about the 50-20-30 rule and track your spending this month. Here's how the 50-20-30 rule works:
Ultimate goal: Budget every month according to the 50-20-30 rule, with more intentional spending and noting where inflation might be impacting you most. Remember, some things you want — such as travel expenses or dining out with friends — can be a great use of hard-earned money, as long as it doesn't eat into your rent or credit card payment. In fact, 62% of consumers have a greater interest in self-care now than before COVID-19, according to Jungle Scout’s Q1 2022 Consumer Trends Report (source).
First step: Continue to pay at least the minimum payment due and consider signing up for automatic payments. You won't forget to pay the bill, can always increase amounts in the future, and can avoid late-payment fees and even credit score hits.
Ultimate goal: When you have more disposable income, consider other long-term debt pay-off strategies, such as increasing the amounts you're paying. Or talk to your financial institution. “If your income was interrupted since the onset of the pandemic, consider reaching out to your financial institution to see if they are willing to work with you on changing due dates or delaying payments for now,” says Black.
According to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit, consumer debt and credit rose 1.7% in the first quarter of 2022 to $15.84 trillion, due in part to a $250 billion increase in home loan balances. As interest rates rise, you may also see higher credit card bills if you aren't paying in full each month.
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Having poor credit can deprive you of the best rates on a home or car loan and can even cost you a job
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Up to 30% of employers conduct credit checks on some employees
Ultimate goal: For credit success, consider leaving your credit card at home and don't turn to new cards to pay for necessities. Credit cards may seem like an easy solution during money-tight times, but you could wind up paying thousands of dollars in interest – and your credit score will also take a hit as your credit utilization goes up. You won't be alone, other inflation-weary consumers are reducing their spending, too. In fact, 72% are spending less and cutting out “fun” or “impulse buys,” while 38% are spending less overall, according to Jungle Scout’s Q1 2022 Consumer Trends Report (source).
First step: For those without credit, a secured credit card provides the opportunity to start building credit responsibly. A secured card requires you to make a security deposit, which is used as collateral in case of default on the loan, and can help people feel more invested to make payments.
Bonus tip: Review your budget for a few months to spot where inflation is impacting you the most. Where are costs going up by a little, or a lot? Is it due to increased spending or prices? "The bottom line is that you either need to make more or spend less. Most people have more control over how they spend than over their income, so focus on your expenses and look at every single item,” says Black.
Then, strategize.
Read up on a few tips to offset inflation in your problem areas, whether expensive gas, frightening grocery and online shopping receipts, or high electric bills. Shop around for insurance and phone service providers.
As a member-owned credit union, BECU is focused on helping increase the financial well-being of its over 1.3 million members and their communities. BECU is federally insured by NCUA and is an Equal Housing Opportunity Lender.
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33%
22%
22%
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But before you can put more toward savings, remember to pay down debt...
”Inflation is eating into our financial goals nationwide.”
Stacey Black, lead financial educator, BECU
Save Strategically
Build a solid budget
decimate debt
Build or boost your credit score
Try creating a spending journal to help you look at how and where you’re spending your money, and divide each spend into one of these three categories. Keep in mind that the 50-20-30 rule is one general rule of thumb – you can always adjust to meet your individual budgeting goals.
• 50% of your income should go toward your everyday needs, including rent, utilities and other items like groceries and transportation.
• 20% of your income goes towards your financial goals, such as saving and reducing debt.
• 30% of your income is typically used for items you want versus need, such as outings with friends or travel expenses.
Federal Reserve Bank of New York (source)
Bankrate (source)
New York Life Insurance Company (source)
4 ways to reach your financial goals
By BECU