The start of a new year is a time to make resolutions, correct bad habits and consider ways to improve your financial health. Even if you already are a successful saver and investor, there is always room for improvement. Here are 10 tips from The Massachusetts Bankers Association that can make a difference in your financial situation:

Review Your Current Finances 

The first step toward improving your finances is to know where you stand. Take the time to look at all your assets (e.g., checking, savings, savings bonds, 401(k), etc.), as well as your liabilities, such as car and house payments and credit cards and their outstanding balances. Once you have a good picture of your current finances, you can move on to the next step.

Make a Budget

Most consumers don’t have a budget. According to a survey by the National Foundation for Credit Counseling (NFCC), just 41 percent of adults use a budget to manage their finances. Remember that a budget does not have to be complex. Essentially, a budget should have income vs. spending, with spending itemized. The goal is to have money left over at the end of a month, or at least to break even.

Stress Test Your Finances

As part of the budget process, conduct your own stress test for your finances. For example, are you prepared for a medical emergency or job loss? Now is the time to think about what you would do in this kind of scenario. The worst thing is not to have planned for the unexpected.

Implement the Island Approach

The island approach is an innovative way to manage your finances. This simply means to isolate different financial needs on different financial products. For example, have one credit card for everyday purchases such as gas and food that you pay off each month; and another credit card for emergency expenditures.

Reduce Your Debt

You’ve reviewed your current financial condition and created a budget. Now you want to add a line item for debt reduction. Credit card debt should be at the top of the list, followed by car payment, home mortgage, etc. Your goal should be to reduce your debt each month.

Protect Yourself from Scams

Everyone needs to be reminded about the dangers of fraud, identify theft and just plain scams. If you get an offer that sounds too good to be true, it is. Protect yourself and your money at all times.

Start an Emergency Fund

Ideally, you have money left over at the end of the month. The best thing you can do is to put this into an emergency fund for those unexpected expenses that always seem to happen. A three to six month expense cushion is recommended.

Increase Your Savings Percentage

In addition to accumulating an emergency fund, try to increase your savings, such as an IRA, passbook account or 401(k). If you now save only 3 percent, for example, try increasing it one percent a year over the next five years. According to the same NCCP survey, fewer than 19% of U.S. adults feel “very confident,” while 29% indicate “not at all confident” that they have saved enough for retirement. Most financial planners recommend saving 15-20% of income for retirement.

Improve Your Credit Score

As part of your financial review, you need to check your credit score. Remember: The higher the score, the lower your interest on loans. Good credit pays. And good credit scores are based on your ability to pay down your debt.

Talk to Your Banker

You have made your financial plan and set your goals. The final step is to renew your relationship with your bank and ask your local banker to go over plans with you. Call your banker. They can help solidify your plans as well as help achieve your financial goals. In addition, they can help you plan for those life-changing situations or unexpected expenses.

Contact Our Investment Executives

The Massachusetts Bankers Association represents approximately 145 commercial, savings, and co-operative banks and savings and loan associations with 69,000 employees located in Massachusetts and elsewhere in New England.

 

 

Sheryl Walsh is the Senior Vice President and Chief Consumer and Small Business Banking Officer
with The Cooperative Bank of Cape Cod. She lives in Centerville and is looking forward to
sending her final tuition payment this fall.

 

 

 

 

So, you’re sending your high school graduate off to his or her first year of college. It’s exciting and fraught with emotion. I know because I’ve sent two daughters off – one to UMass Amherst and one to the University of New Hampshire. As our children enter their first phase of real independence, and possibly their first time handling finances on their own, it’s important to send them off with some financial parameters. Here are 4 tips I recommend instilling in your undergrad:

1. Be smart about credit.

   There will be numerous temptations and offers for new credit cards, many coming with tempting perks geared for the collegiate set. Keep to one emergency credit card with a low credit limit. Have a plan for when it should be used and a plan for making regular payments. Getting into credit trouble now can haunt them years later and cripple important milestones, like buying a first home.

2. Make a budget and stick to it. 

   Having a monthly plan of what you have and your anticipated expenses will keep you on track. Plug in the categories you spend money on most, including going out to dinner with friends, concert tickets, Uber fares, and even your morning coffees from Starbucks (those add up!). Consider using a budgeting app like Mint or NerdWallet to easily keep track of your spending on your phone. For parents, if you’re supporting your child with spending money, work with him or her on the budget and set a monthly limit for what you’ll provide.

3. Use your meal plan.

   It’s already paid for, so opt for pizza in the dining hall rather than calling out for delivery. And make sure you know all of the little extras your meal plan may include, like purchases at satellite restaurants or in the bookstore. For the parents, I strongly recommend doing your due diligence when selecting a plan. The options can be dizzying, so read up on them and take advantage of any information sessions offered. It can be tempting to purchase the most lavish, expensive plan, for fear your undergrad will starve, but bigger isn’t always the smart option. You may end up throwing money down the meal-plan-drain.

4. Protect your valuables.

   College living is a fun, communal, social atmosphere, which is great and should be enjoyed! The downside is that it’s also an environment where valuables can easily be stolen. Be smart about laptops, phones, jewelry and other prized possessions. Lock your dorm room door when you’re going down the hall to visit friends or keep your valuables on you. A stolen laptop is a financial hit for sure, but it will also result in lost productivity, lost homework, potential theft of personal information stored on the hard drive, and the inconvenience of replacing it.

This is an exciting time for the student and parent. With the right plan, you’re guaranteed to find success!