Happy Valentine’s day from Neighbors! As you prepare to treat that special someone to a dozen roses, we’re going to take a moment to fall in love with the savings! The key to saving money always start with evaluating your financial situation to find areas where you can save! Here are a few questions you should ask yourself to get started.
How much money do I have?
Create a balance sheet showing assets and liabilities. You may be pleasantly surprised or you may discover that you need to manage your money more effectively. You typically should have three to six months of bills saved up. If you don’t have at least three months of bills saved you may need to find ways to cut your monthly expenses.
How much debt do I have?
If you want to get the most out of your finances, it is virtually a requirement that you get out of debt- or at least make your debt more manageable.
Getting out of debt means that you have full control over your income – and that is an incredible feeling. It will leave you with more money for savings, investing and even more for spending. It will make it easier to quit a job you do not like. It will free your mind of the worry and stress that come with debt.
Sometimes it is impossible to get rid of all of your debt. Most people usually have at least a car note or a mortgage loan. The key here is to make sure you have good debt and not high interest. Many times secured loans can have lower interest rates than unsecured loans such as credit card debt.
Sometimes consolidating your debt into one low-interest loan can save you thousands of dollars or reduce your monthly burden. You can see Neighbors’ debt consolidation options here.
Is my Emergency Fund well stocked?
We normally think of having an emergency fund as being a short-term financial goal. However, experts say your emergency fund should be stocked with three to six living expenses. With an increase in the number of people impacted by natural disasters, job loss and major illness, having money tucked away is a necessity rather than a feel-good emotion. Having this emergency fund available allows you to invest your money more freely into a variety of investments.
How much do I have in long-term savings?
Have you calculated how much you need to save annually in order to retire comfortably? Saving for your retirement should be a priority. The earlier you start, the better off you are.
If your employer offers a 401k or other savings plan, take advantage of it. And, talk with your banker about other ways to save for your retirement. If your employer does not offer a retirement program you can look into Neighbors’ options here.
What is my mortgage rate?
Should you consider refinancing? Mortgage rates are pretty low right now, and it may be time to take advantage of them. Even though there are costs associated with refinancing, it may be to your advantage, as it is likely you will be able to reduce your monthly payments and save on interest. If you do not want to refinance, consider making additional payments on your mortgage to draw down the lifetime cost of the loan. The rule of thumb is if you can reduce your interest rate by 1% or more you should go ahead and refinance. Neighbors has a variety of mortgage options available to you at our Mortgage Center.
Setting a financial goal is the first step toward achieving financial success. However, reaching your goals must include progress checks along the way. Success is achieved and maintained by those who try and keep trying!