Tag Archives: budget

Save Smarter: Spring Clean Your Finances

Put the shivering cold behind you and look ahead to warmer temperatures. Spring is coming! But this time of year isn’t just about rain showers and blooming flowers—it’s time for some spring cleaning, which includes tidying up your finances. Follow these tips to de-clutter your financial life and give you a fresh start for spring.

Close dormant accounts. A financial institution will typically send you a notification if you have an open account that hasn’t been accessed for a set amount of time. If you don’t plan on using the account, close it as soon as possible. This ensures that you’ll avoid any dormant account fees and recoup any remaining funds. It also helps simplify your finances by reducing the number of accounts you have to monitor, which makes maintaining your household budget easier.

Check your credit report and fix any discrepancies. By law, you’re entitled to one free credit report each year, which can be accessed by visiting annualcreditreport.com. You’ll receive a report from each of the three major credit bureaus. Review them to make sure the information looks familiar. If you see something you don’t recognize, like an account you didn’t open, contact the bureau directly to address the discrepancy.

Go paperless and set up automatic bill pay. If you find yourself tossing aside paper account statements, opt to receive electronic statements instead. Not only is it better for the environment, you’ll reduce clutter and receive your account information faster. Another way to reduce clutter and increase efficiency is to set up automatic bill pay, which can typically be done through your financial institution’s online banking system. This will help eliminate your chances of missing a payment and being charged a late fee.

Organize and shred financial documents. Save it or shred it? Experts recommend keeping tax-related documents for seven years, which should cover you in case of an audit. If you’re a homeowner, keep documents related to the purchase of your home, records from any major improvements, and mortgage paperwork. Things like receipts and bills can be safely shred once they clear your account. Rather than piling financial paperwork in one place to deal with later, set up a filing system so you can quickly store what you need to keep and shred what you don’t.

Presented by Member One Federal Credit Union

 

Home Equity Basics from Member One

Your home improvement to-do list is a mile long, but you’re lacking the funds to get anything done. Sound familiar? Since the likelihood of stumbling upon a pot of gold is none, consider tapping into your home equity—the difference between what your property is worth and what you still owe on your mortgage. Read on to learn more about how to leverage your home’s hidden value.

Do the math. Home equity is calculated by looking at the value of your home and subtracting the amount you owe on any mortgages. Let’s say your home is valued at $200,000, and you owe $150,000 on your mortgage. That means you have $50,000 in equity you could potentially use to fund a renovation.

Know the difference. With a home equity loan, you receive the money you’re borrowing in a lump sum payment. It usually has a fixed rate and is often best for large, one-time expenses like a new roof. A home equity line of credit (HELOC) operates more like a credit card in that you can draw money as needed from an available maximum amount. This is best for ongoing expenses that require spending flexibility.

Shop around. You have to apply for a home equity loan or line of credit through a financial institution that offers it. As with any loan, shop around for the rate and features that fit your financial situation. It’s important to understand that committing to a home equity loan or line of credit means you’re using your home as collateral—if you don’t repay the loan, it could go into default, and you could risk losing your home. Make sure you understand the terms and only borrow the amount you can afford.

Budget accordingly. One of the most common ways to use a loan or line of credit is for renovations because they add even more value to your home. You can also use it for things you might not expect like college tuition, debt consolidation, or unexpected medical costs. Whatever you decide to fund, make sure it fits your budget. If your income is unstable and you can’t keep up with the payments, it’s probably not a good idea to incur more debt. If you don’t need to borrow much money or you’re just going to use this for basic day-to-day expenses, it might be wise to consider different options—such as a credit card—or reevaluate your spending habits.

Warm Up to Responsible Spending

With warm, sunny days upon us, it’s time to plan for more than just your tan: summer spending. Vacations, airline tickets, dining out, and entertainment—it adds up. If you haven’t budgeted for these expenses in advance, a quick swipe of your credit card takes care of it. But if responsible credit card use isn’t your strength (or you just need a refresher), these tips could help curb the temptation to overspend this summer.

Be selective. There are several factors to look at when picking a credit card. First, you’ll want to see what your limit is. If you don’t think you can handle the freedom of a credit card, start with one that has a lower limit, like $1,000. Additionally, look at the credit card’s annual percentage rate or APR. That interest will add up if you’re not planning on paying off the total each month, so shop around for a low APR. Finally, look out for cards that charge annual fees just for keeping them open.

Monitor your balance. You should keep credit card payments to 10 percent of your monthly take-home income. For example, if your monthly income is $2,000, your monthly credit card payment should not be more than $200. This doesn’t mean your balance should not exceed $200, but make sure your minimum payment is no more than that. Keep in mind, however, that paying off the entire balance each month is in your best interest financially.

Know the benefits. By making purchases with your credit card and paying the balance off each month, you’re proving to lenders that you’re a responsible, creditworthy consumer. It boosts your credit score and will help you in the future if you ever want to get a loan—or another credit card.

Stick to a budget. It’s important to set parameters for yourself when using a credit card. One simple way to do this is to use the credit card for one specific purpose, like gas or groceries, so it’s easier to keep your spending in check. Another way is to get a card with a low limit. This forces you to keep your spending under a certain amount.

Smart credit card use doesn’t have to be a mystery or limit your fun this summer. Follow these simple tips and your poolside lounge session (while possibly chasing the kids) will be that much more relaxing.

Presented by Member One Federal Credit Union