Author: Libby Morsheimer

Budget, Credit, Debt, Parachute Services

10 Money Moves for a Brighter Financial Future

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  1. Track Your Spending

We underestimate what we spend and we often have multiple (mostly small) budget leaks that can add up to BIG losses. Benjamin Franklin said, “Beware of small expenses. A small leak can sink a great ship”.  Think of a small leak in a pipe under a sink. While it is a small, maybe even an infrequent leak or drip, over time, the bucket below the sink can be full of water just a few days later! The same loss can happen to our hard-earned money if we are not mindful of how we are spending it. 

  • Review your spending plan (i.e., budget) regularly

Your budget or spending plan is simply a plan of what money is coming in every month and what money is going out. You want to pre-plan so you know if all your expenses are covered or if you need to concerned about a deficit. Your spending plan or monthly budget can actually be perceived as a wealth building plan if you prioritize regular savings, even small amounts that can help you avoid credit card debt and high interest charges. Your life changes over time and your budget needs to reflect these changes such as a job or income change, a new baby, a mortgage or planning for a vacation, etc. By regularly paying attention to your budget, you can gain greater control over your money and direct the funds where you want them to go – including your financial goals such as a new car, a new place to live, etc.  

  • Live Below Your Means

If you spend less than you make, you will always have some money! Of course, there are times you may need to borrow money and incur debt, but most debt should be based off of our needs and not wants and you don’t want to confuse the two. High interest credit card debt can quickly ramp up leaving you on a debt treadmill where you may be struggling just to make minimum payments. In the meantime, savings and financial goals suffer like buying a home or saving for an earlier retirement.

  • Automate your savings/investments

If you “set it and forget it” savings and investing becomes a very easy process and funds will grow over time with interest earnings. Don’t withdraw your funds unless there is a true emergency. Shop FDIC insured banks or NCUA credit unions and compare interest rates for the best returns on your money. Educate yourself on investing and understand the risk that can be involved or consult a financial expert who can help you make decisions for your level of risk tolerance. Investing can be both a very safe and also a very risky proposition depends on the decisions you make.

  • Have more than one income stream

By having more than one income stream, you help protect yourself against any future income losses. If you would ever lose a job, there would still be some funds coming in. Extra funds can always be used to pay down debt, build savings and provide a financial cushion for unexpected events (e.g., major car repair, home repair, illness) as life happens to everyone!  Having a cushion of savings and some financial breathing room helps emergencies becoming inconveniences and not the other way around! 

  • Hold a long-term view/save or invest for the long term

Saving and investing for the future is just that and money takes time to grow through compounding interest (interest earned that earns more money on itself). Warren Buffet describes compounding interest as “a snowball rolling down a hill” and Einstein described it as “The 8th wonder of the world.” Small amounts of regularly saved or invested money can grow to BIG savings and investment over time.  It requires regular contributions, time, attention and patience.  A perfect example of this is how many people save for retirement so they can enjoy many decades without working. 

  • Avoid excessive and bad debt

Bad debt is debt that has high interest attached sometimes making it impossible to pay it down, especially if it is credit card debt and you keep using the cards. Using credit cards to supplement your income or lifestyle can be a dangerous practice resulting in numerous decades of debt repayment – a debt treadmill where thousands of dollars are being paid out in interest. Bad debt is often unsecured, meaning it does not have any collateral behind it like a house, which can appreciate in value over time.      

  • Learn about money

Financial experts believe that success with money is 80% determined by our decisions and behaviors around our money. The more we learn about how money works and investigate why we make the decisions we make, the more successful we can be! There are lots of easy ways to learn about money! There are articles on online, websites, books, podcasts, documentaries on Netflix and more. There are also many people who work in the financial services industry like the financial counselors at Parachute who can provide trusted advice or point you in the right direction!      

  • Prioritize saving over spending

The key is to try to make regular savings a priority over spending, especially for those wants or luxury items as opposed our basic needs such as food, clothing, shelter, medical and transportation. Approaching your financial health from a savings mindset can help assure there are funds available for you for emergencies (thereby avoiding debt or as much debt) but also for future choices, opportunities and goals.  Having savings helps provide financial stability over time.  Make saving a habit early on for big long term pay offs! 

  1. Ask for Assistance

As said earlier, there are lots of ways to learn about money and get advice from others who work professionally in related fields. There are many books, podcasts, online resources and guides to help! You don’t need to go it alone as mistakes can be costly.  

If you’re dealing with high interest debt payments as well, see what you can save with Parachute’s Debt Management Plan https://parachutecreditcounseling.org/dmp-calculator/

Would you like to meet one-on-one with one of our Financial Counselors to talk specifically about your budget? Check out our Financial Coaching Session https://parachutecreditcounseling.org/services/credit-budget-counseling/#financial-coaching  or call 716-712-2060.

Uncategorized

Financial Fumbles: 10 Mistakes Sabotaging Your Savings

Here are 10 financial fumbles that could be sabotaging your savings making it harder for you to reach financial stability and achieve long term financial wellness.

  • Fumble # 1 – Your Mindset!

Thinking you have absolutely NO money to save is a fumble!  Be sure you are thinking about your financial needs versus wants and that you are *not* elevating wants to needs. Most financial experts agree that you can be saving some money, even if a few dollars. Start small by saving change and considering fun action steps like the Penny Challenge.  With the Penny Challenge, you save a penny on Day 1, 2 pennies on Day 2, 3 pennies on Day 3 and so on.  By 365 days, you will have nearly $670!

  • Fumble #2 – Paying Everyone Else FIRST

When you get paid, don’t wait until the end of the month or the end of your paycheck to see how much you have left to save. Instead, pay yourself *first* by automatically transferring a set amount of money to your savings account each payday. This action prioritizes savings and helps assure that you stay on track with your savings for emergencies, both short and long term goals, retirement and more.

  • Fumble #3 – Unintentional Spending/Not Tracking Spending

If you are not managing your money, who is? Perhaps, no one. This is a risky situation to be in as we depend on money and income for our very survival. You need a spending plan (i.e., budget) to be sure you have a good plan for financing your life now and in the future.  If you are not directing your money intentionally as to where it should go, you are also not honoring the time and effort it takes you to earn it.   

  • Fumble #4 – Competing with Others

Competition with others is not always a bad thing when we have the goal of improving ourselves (e.g., in sports, school) but competing with others in terms of material possessions can be very damaging to our financial wellbeing. Outward appearances can be extremely deceiving and people can get into a great deal of debt trying to impress others – everything from the shoes they wear to the car they drive. We don’t really ever know someone else’s full financial situation, so living within YOUR means and prioritizing and honoring your own financial goals is key. 

  • Fumble #5 – Not having savings goals

Research shows that people who have savings goals written down (or otherwise recorded) where they are very specific, are most likely to achieve them. Without goals, our income tends to evaporate into meeting needs and random purchases based on what we want in the here and now.  

  • Fumble #6 – Not automating your savings

Saving regularly can be a “set it and forget it” action. The easier you make the process, the more likely you are to continue it as a habit and this can have a big payoff over time! Also, you can make it intentionally difficult to withdraw your savings making it less tempting to do so. This really helps your money grow over time with compounding interest – where you earn interest on interest you have already earned!  More to come on that!

  • Fumble #7 – Saving money in the wrong accounts

To get the most out of your savings efforts, you will want to research the current interest rates offered at both banks and credit unions (go to bankrate.com), any fees, and special features that may be useful to you like overdraft protection or special savings accounts for children or college students. 

  • Fumble #8 – Pulling from savings for wants (not needs)

Many people don’t avoid the temptation of withdrawing from their savings account for unnecessary expenses. Because of this, their savings do not have the chance to really grow and gain the advantage of compounding interest. They also confuse what is truly a need in their life versus a want and they often elevate wants to needs. By waiting at least 48 hours before withdrawing from savings and reflecting on the withdrawal first, we can give our money a chance to really grow.  Finally, waiting another month or for our next paycheck for a desired purchase can help, so think about delaying that gratification a bit to help meet future goals. 

  • Fumble #9 – Giving Up Too Easily/Not Understanding Compounding Interest

As mentioned above, building strong savings and financial stability takes time, effort and consistency. It also includes the magic of compounding interest! This is where depositors are rewarded with some percentage of interest (extra, free money) by placing their money in certain accounts for specified periods of time. Typically, the longer you keep your money in the bank and the more money added to the account, the more interest you earn.  Also, because interest is then compounded (interest you’ve already earned earns interest too), it’s like magic in the way it can grow!

  • Final Fumble # 10 – Not Having a Bank Account

If you don’t have a bank accounts/a savings account, you are missing out on compound interest (see above), the establishment of banking relationship for your future wants and needs (e.g., a mortgage loan), opportunities to learn about various ways to grow/invest your money as well as building credit.  Doing your research into local and online banks is a good way to start to see all the benefits offered by banks and is safer option to store extra funds and a way to encourage you to save!

If you’re dealing with high interest debt payments as well, see what you can save with Parachute’s Debt Management Plan https://parachutecreditcounseling.org/dmp-calculator/

Would you like to meet one-on-one with one of our Financial Counselors to talk specifically about your budget? Check out our Financial Coaching Session https://parachutecreditcounseling.org/services/credit-budget-counseling/#financial-coaching  or call 716-712-2060.

Credit, Debt, Parachute Services

Credit and Your Financial Goals: A Powerful Partnership

Credit can be a double-edged sword. While credit offers the flexibility to make purchases and investments, it can also lead to long term debt and financial hardship if not managed responsibly. Understanding how credit can impact your financial goals is crucial for making informed decisions and achieving long-term financial success.

How Credit Can Help Achieve Your Financial Goals

  • Homeownership: A good credit score is often a prerequisite for obtaining a mortgage with favorable terms. Favorable terms make it more likely to be able to repay the mortgage loan and build equity in a home. 
  • Vehicle Purchase: A strong credit history can qualify you for lower interest rates on car loans.
  • Education: Credit cards can be used to help cover educational expenses, but it’s essential to manage them wisely to avoid accumulating debt. You first want to research and take advantage of low interest loans (e.g., federal educational loans) before considering using credit.  Credit may be an option for supplemental educational expenses like books or supplies.
  • Business Ventures: A good credit score can improve your chances of securing loans or lines of credit for business ventures.
  • Emergency Funds: Credit cards can serve as a safety net during unexpected financial emergencies, but it’s important to pay off the balance promptly to avoid interest charges. Interest charges are now averaging about 27%, so the balance owed can accumulate very quickly if you do not or cannot pay off the balance monthly.

The Risks of Mismanaging Credit

  • Debt Accumulation: Overspending on credit cards can lead to significant debt, which can be difficult to manage and can negatively impact your financial well-being.
  • High-Interest Rates: Credit cards often have high-interest rates, which can make it challenging to pay off balances and can increase the overall cost of purchases.
  • Damaged Credit Score: Late payments, missed payments, or exceeding credit limits can damage your credit score, making it more difficult to obtain loans or credit in the future.

Tips for Using Credit Wisely

  • Create a Budget: Develop a budget to track your income and expenses and avoid overspending. Think of it as exercising power over your money and as a spending plan instead of something restrictive. 
  • Pay Bills on Time: Make sure to pay your bills on time to avoid late fees and negative impacts on your credit score.
  • Limit Debt: Try to keep your credit card balances low and avoid using credit cards for unnecessary purchases. Be honest about your wants versus needs.
  • Monitor Your Credit: Regularly check your credit report for errors and take steps to correct any inaccuracies.  Go to annualcreditreport.com as often as weekly to look for errors or discrepancies.  
  • Consider Debt Consolidation: If you’re struggling with high-interest debt, explore options like debt consolidation to potentially lower your interest rates and make payments more manageable. Talk to non-profit agencies like Parachute for other debt management solutions. 

By understanding the potential benefits and risks of credit, and by taking steps to use it responsibly, you can leverage it as a powerful tool to achieve your financial goals!

If you’re dealing with high interest debt payments as well, see what you can save with Parachute’s Debt Management Plan https://parachutecreditcounseling.org/dmp-calculator/

Would you like to meet one-on-one with one of our Financial Counselors to talk specifically about your debt? Call us at 716-712-2060!

Budget, Parachute Services

Breaking the paycheck-to-paycheck cycle

Living paycheck to paycheck can result in the inability to cover necessary and unexpected expenses and be mentally and physically stressful. It can result in the accumulation of debt and the inability to gain financial security over time.

Here are some ways to break the paycheck to paycheck cycle and work towards long term financial stability. Being patient and consistent with the process is important. 

  • Track your spending. This will help you understand where your money is really going and identify areas where you can cut back, at least temporarily. There are many different ways to track your spending such as using a writing it down in a notebook, using your bank’s online spending tracker or using a budgeting app. Do you research as to the best app for you. Check out The Best Budget Apps for 2024 – NerdWallet. If you are serious about breaking the cycle, make the commitment to really see where your money is going as this is way to gain control over it.
  • Create a budget. Once you know where your money is going, you can create a budget to help you to live within your means. A budget is a plan for how you will spend your money each month. Think of it as a foundation to help you build long-term financial stability. It should include all of your income and expenses, and it should help you save money each month.
  • Cut back on unnecessary expenses. Be honest with yourself about what is a “want” and what is a “need”. Take a close look at your budget and see where you can cut back on unnecessary expenses. This may mean eating out less, canceling unused subscriptions, shopping around for better insurance rates, and reviewing and organizing your clothing before buying something new.
  • Pay off debt. Debt can make it difficult to break the paycheck-to-paycheck cycle. Make a plan to pay off your debt as quickly as possible by making more than the minimum payments each month. Paying anything over the minimum required can help! At least double your minimum payments, if possible, whenever possible.
  • Increase your income. Try to increase your income by getting a raise at your current job, working extra hours, or getting a second job. Consider selling items you no longer need or want. 7 Ways to Increase Your Income – Experian
  • Involve your family.  Schedule some family creative savings meetings.

Here are some additional tips:

  • Set financial goals. What do you want to achieve with your money? Do you want to buy a house, a car, save for retirement, or pay off debt? Having financial goals will help you to stay motivated and on track. Be sure your goals are specific and detailed as research shows you are more likely to achieve them.
  • Automate your finances. Set up automatic transfers from your checking account to your savings account each month. This way, you will be saving money without even having to think about it. You can also redirect some money from your paycheck directly into a savings account. Make it hard to withdraw from that account by not using a bank card.
  • Make sacrifices. Breaking the paycheck-to-paycheck cycle may require you to make some sacrifices. Before you buy something, ask yourself out loud, “Is this a want or need?” “Can it wait until my next paycheck?” It will be worth the sacrifices in the long run especially as you begin to see the accumulation of those savings! This will empower you and motivate you to keep going.

Breaking the paycheck-to-paycheck cycle definitely takes time, effort and commitment, but it is possible!  By following the tips above, you can start to build a more secure financial future for yourself and your family.

If you’re dealing with high interest debt payments as well, see what you can save with Parachute’s Debt Management Plan https://parachutecreditcounseling.org/dmp-calculator/

Would you like to meet one-on-one with one of our Financial Counselors to talk specifically about your budget? Check out our Financial Coaching Session https://parachutecreditcounseling.org/services/credit-budget-counseling/#financial-coaching  or call 716-712-2060.

Credit, Debt

How Credit Card Interest Works: The Cost of Convenience

Understanding the Basics

Credit refers to the ability to access and/or purchase goods or services with the understanding that payment will be made later. Creditors grant credit based on their confidence that we can be trusted to pay back what we borrowed, along with any finance charges (i.e., interest charges) that may apply. While credit can come in many forms, the most common are credit cards (e.g., major cards and department store cards) and home, car and student loans.

Credit card interest, known as the Annual Percentage Rate (APR), is the cost of borrowing money using your credit card.

Here’s a simple summary of key interest charges:  

  • No Interest if Paid in Full: If you pay your entire credit card balance by the due date each month, you won’t be charged any interest.  
  • Interest Accrues on Unpaid Balance: If you carry a balance from one month to the next, interest starts accruing on the unpaid amount.  
  • Daily Interest Calculation: Interest is typically calculated on a daily basis. Your APR is divided by 365 to determine the daily interest rate. This daily interest is added to your balance each day.  
  • Compounding Interest: The interest charged each day becomes part of your new balance, and interest is then calculated on the increased balance the next day.                   This is how credit card debt can grow rapidly!
  • Minimum Payment: Paying only the minimum payment each month means you’ll carry a balance, and interest will continue to accumulate.  

How to Minimize Interest Charges:

  • Pay Your Balance in Full: This is the most effective way to avoid interest altogether.  
  • Avoid Cash Advances: These often come with high fees and interest rates.  
  • Transfer Balances Wisely: Consider balance transfers only if you can pay off the balance before the promotional rate expires. (See below).

Remember: Credit card interest can very quickly add up!  It’s essential to use credit responsibly and make timely payments to avoid excessive debt.  

Key Terms to Know:

  • APR (Annual Percentage Rate): The yearly interest rate charged on your credit card balance.  
  • Grace Period: The time between purchase and the billing cycle when you can avoid interest by paying off the full balance on your card(s).  
  • Balance Transfer: Moving debt from one credit card to another, often with a promotional interest rate.  
  • Cash Advance: Borrowing cash against your credit limit, usually with higher fees and interest rates.  

You can learn more information at Credit cards key terms | Consumer Financial Protection Bureau (consumerfinance.gov).

If you’re dealing with high interest debt payments as well, see what you can save with Parachute’s Debt Management Plan https://parachutecreditcounseling.org/dmp-calculator/

Would you like to meet one-on-one with one of our Financial Counselors to talk specifically about your debt? Check out our Financial Counseling Session https://parachutecreditcounseling.org/services/debt-management/ or call 716-712-2060.

Budget, Parachute Services

Our Relationship with Money

Our relationship with money is complex and often shaped by our upbringing, societal norms, religious and cultural background, and personal experiences. It can be a source of great joy and security, but also stress, shame, anxiety, and conflict. Understanding our relationship with money is crucial for achieving financial well-being and building healthy relationships.

Positive Aspects of Our Relationship with Money include:

  • Security and Stability: Money provides a sense of stability and security, allowing us to meet our basic needs, pursue our goals, and plan for the future when we are no longer working or able to work for our income. Retirement could involve 30+ years!
  • Freedom and Choice: Money empowers us to make a number of choices, from what we eat to where we live and what we do for a living. It enhances our freedom and autonomy.
  • Opportunity and Growth: Money can open doors to opportunities for further education, travel, and experiences that we pursue to enrich our lives and broaden our perspective on the world and others.
  • Contribution and Impact: Money can be used to make a positive difference in the world, supporting causes we care about and contributing to the well-being of others. It allows us to help others who may be struggling and help ease the suffering of people around the world.

Negative Aspects of Our Relationship with Money:

  • Stress and Anxiety: Financial instability, debt, and the pressure to achieve financial goals can lead to stress, anxiety, and fear. This can lead to poor mental and physical health outcomes for us.
  • Materialism and Consumerism: Excessive focus on material possessions and external validation through wealth can lead to dissatisfaction with ourselves and others and a sense of emptiness and lack of fulfillment.
  • Comparison and Frustration: Comparing our financial situation to others can fuel feelings of envy, inadequacy, and frustration, hindering our progress overall and toward our financial goals.
  • Relationship Strains: Financial disagreements, misunderstandings, and unequal financial contributions can strain relationships, affecting trust, communication, and intimacy. Money issues remain a top contributor to broken relationships and divorce.

Building a Healthy Relationship with Money:

We can work every day toward having a healthy relationship with money as every day gives us a chance to make different decisions. We can research the topic to better understanding our unique relationship with money and choose options that support our overall financial well-being. In doing so, we may help our own physical and mental health as well as improve our relationships with others.   

  • Financial Awareness: Develop a clear understanding of your income, expenses, and financial goals. Utilize budgeting tools and track your spending habits. You owe it to yourself to know where your money goes. You’ve worked hard to earn it!
  • Responsible Spending: Make informed decisions about purchases, prioritizing essential needs over impulsive wants. Avoid impulse buying and unnecessary spending to be sure you have what you need.
  • Saving and Investing: Set aside a portion of your income for savings and investments. Long-term financial planning ensures security and stability for the future. The importance of planning for the future cannot be underestimated.
  • Delayed Gratification: Prioritize long-term financial goals over immediate gratification. Delaying immediate pleasures can lead to greater long-term happiness and peace of mind.
  • Seeking Support: If you struggle with money management or have accumulated debt, seek professional guidance from a credit counseling agency like Parachute.  

Remember, our relationship with money is fluid and it can evolve and change over time. By understanding our own financial habits, recognizing our emotional triggers, and making conscious choices, we can develop a healthier and more balanced relationship with money, enhancing our well-being and enriching our lives.

If you’re dealing with high interest debt payments as well, see what you can save with Parachute’s Debt Management Plan https://parachutecreditcounseling.org/dmp-calculator/

Would you like to meet one-on-one with one of our Financial Counselors to talk specifically about your budget? Check out our Financial Coaching Session https://parachutecreditcounseling.org/services/credit-budget-counseling/#financial-coaching  or call 716-712-2060.