As 2020 draws to a close, do you know where you stand financially? Taking the time to create or review a financial plan can help you prepare for a better new year.
Here are some simple tips to help you get there.
What’s in a Plan?
Simply put, a financial plan is a complete snapshot of your finances, including your financial goals, and the strategies to use to accomplish them. For instance, you may be saving regularly for retirement, are building an emergency fund, but want to pay off some lingering credit card debt, or establish an estate plan. Whether you’ve developed a plan on your own, or worked with a financial advisor, it’s good to review it at least annually to address any questions you have.
For instance, do you pay off all your credit card debt before saving or investing? Or should you funnel more dollars into your retirement fund? And what about purchasing big-ticket items like a house or car? The truth is — the answers to these questions depend on your individual circumstances, but a financial advisor can help you map out a strategy.
Establish a Spending Plan
If you haven’t looked at your budget in a while, it may be time to review and adjust. Whether you prefer a pencil and paper, or an online budgeting tool, your goal is to figure out where your money goes, and how to manage it better.
This spending plan pie chart is a great way to help you get started when figuring out your own.
Debt? Create a Payoff Strategy
Credit card debt can be a real budget buster, especially when you’re only making minimum payments. First, determine how much extra money you can put toward attacking debt. Then make a list of what you owe, and how much interest you’re paying for each card. Stack your debt and concentrate on the one with the highest interest rate first, adding the extra funds to your minimum payment. Once you’ve paid off that card, take on the next one. And if you can, look for opportunities to transfer your debt to a credit card that offers a lower interest rate without charging unnecessary fees. If you need assistance with budgeting and debt management, visit GreenPath Financial Wellness1 for more tips and one-on-one counseling.
Save More … Automatically
Socking away just 10% of your income is not only a great discipline, but it leads to long-lasting security. The trouble is there’s a lot of competing priorities for your hard-earned dollars. That’s why it’s a smart strategy to set up automatic transfers to a savings account, so you don’t have to think about whether or not you can afford to do it this week, this month, or this year. AmericaSaves.org provides a Savings Assessment Tool1 which helps you determine if you’re saving enough and offers some tips to keep you going strong.
Retirement Savings: Take the Match
The best way to save for retirement is by using tax-advantaged accounts such as company sponsored 401(k)s, 403(b)s and 457(b)s or Individual Retirement Accounts (IRAs). You can get an extra boost from a 401(k) plan because your employer will usually match what you invest—typically from 2% to 8% of your salary—a great way to feather your nest egg. If you are a school employee, you can schedule a complementary appointment with one of our Retirement Plan Advisors2 who can assist you with your 403(b) and 457(b) plans.
Big Dreams Can Come True
You may have goals that you are working toward, such as buying a new home. Again, this is where your spending and budgeting smarts come into play. You should spend no more than 35% of your monthly gross income on housing costs, which include mortgage payments, homeowners insurance, property taxes and condo or homeowner association fees, home repairs, and utilities.
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Extra Credit provides general information to help improve our Member’s financial lives. Every situation is different, so please contact us for guidance on your specific needs. The advice provided in Extra Credit is not intended to serve as a substitute for speaking to a loan representative, financial advisor, or GreenPath Financial Wellness counselor who can help tailor a solution for you.
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