financial basics made easyresource.sacfcu.com/hs-fs/hub/238780/file-250712834-pdf/financial... ·...
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Financial BasicsMade easyTake control of your finances with simple, powerful steps that help you stress less, save wisely, and reach your goals.
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savings, credit, retirement, budgeting – financial basics can feel overwhelming sometimes, and it’s tough to know where to start. Fortunately, you don’t need accounting classes to learn simple strategies that can help you take control.
in this financial literacy e-book, we’ll guide you through easy steps that will help you master topics like budgeting, credit, and more.
leT’s geT sTarTed!
TaBle oF conTenTs – click To juMp To a speciFic Topic
Financial goal seTTing
BudgeTing how-To
Building a savings Fund
crediT Basics
insurance needs
reTireMenT savings
With a stronger financial foundation, you can manage debt, save for that big
purchase, or just put yourself in a more comfortable position for spending
more wisely.
“Financial goal setting is a great way to establish responsible money management. It’s never too late to start.”
karen guy Business & Marketing Analyst at SAC Federal Credit Union
every adventure begins with a plan. a financial journey is no exception – goal setting is a crucial first step that can help you set your course in the right direction.
Financial goal
seTTing
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Determine what you want to work toward, then
break down your goals into short-term and
long-term categories.
step
step
step
talk to an associate at sAC Federal Credit
Union to learn more about available resources.
Review your plan every month or so to check
your progress toward your goal.
Getting Started 1-2-3Goals can include paying off a car loan, creating an
emergency fund, eliminating credit card debt, or saving for a
down payment on a house. Setting a goal creates motivation
and momentum, and gets you in the habit of creating
financial milestones that can be easily reached with time
and persistence.
SAC Federal Credit Union’s Karen Guy suggests breaking
down your goals into short-term and long-term categories:
shorT-TerM goals
• Can usually be achieved in three years or less
• Include goals that can fit in that time frame, such as paying off a high-interest credit card or creating a vacation fund
• Provide a sense of accomplishment
• Can be blended with long-term goals
long-TerM goals
• Follow a three- to five-year time frame or longer
• Include larger, more complex goals like establishing a retirement plan, creating a college fund, or saving for a new home
Once goals are set, review the plan periodically to get a
picture of your progress. If you’ve gotten off track, recalculate
what you need to save going forward. If you’re close to
achieving your goal, start planning for your next one.
Financial goal
seTTing
wiTh FirMly seT goals, iT’s Much easier To Take on The nexT sTep: BudgeTing.
after setting goals, it’s time to tackle budgeting. here’s the good news: it’s easier than you think.
“You’ll want to make sure that each dollar spent will fit into one of the categories you’ve created. You can also look to future expenses (like holiday gift purchases) that may only occur once during the year and create categories for those items.”
BudgeTing how-To
karen guy Business & Marketing Analyst at SAC Federal Credit Union
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Creating a budget is all about ensuring you’re living comfortably and well within your means. It all
starts with taking a careful look at your current monthly spending – on day-to-day essentials as well
as miscellaneous costs – and determining what you’d like to spend, given your income. In creating a
budget, the majority of categories will be spending or expenses. These might include:
Food
cloThing
vacaTion expenses
Medical expenses
MorTgage payMenT or renT
chariTaBle donaTions
enTerTainMenT
sTudenT loans
uTiliTies
BudgeTing how-To
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step
step
step
Getting Started 1-2-3
take a close look at areas in the budget
where extra spending seems unnecessary; for
example, a pricey daily takeout lunch versus a
brown bag lunch from home.
Go through receipts and bank statements to
put each expense into one of those categories.
Create spending categories for daily, weekly,
monthly, and yearly expenses.
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Karen Guy from SAC Federal Credit Union offers some top
tips for creating a budget that works:
• Figure out how many total dollars you spend every month. Take some time to really understand where your money is going. Many people know generally how much they spend on bills, but expenses like dining and entertainment can be more than they think.
• Compare costs when planning your everyday spending. For example, it’s cheaper to bring a bag lunch from home versus getting takeout from a restaurant near the office, so take that into consideration when budgeting for meals.
• Factor saving into your budget. Guy notes that even putting $5 or $10 aside every day can add up quickly and help you meet your financial goals.
• Save receipts and enter those amounts into the budget. Nonessential items are often bought with cash, so they tend to be overlooked when using bank statements to create a budget.
• Get the whole family involved in the budgeting process. Set aside 15 minutes every week for a family meeting to discuss the budget. This also helps children to establish good money habits from an early age.
BudgeTing how-To
on The nexT page, we provide a saMple worksheeT To kick-sTarT your new BudgeT.
Monthly budget breakdownincoMe
Take-home pay
Other income sources
Fixed expenses BudgeT acTual spenT
Mortgage or rent
Loans: home equity, student loans, other
Car payment
Insurance premiums: life, health, auto, home
Other
savings
Emergency fund
College fund
Additional retirement savings (SEP, IRA, etc.)
Other investments
variaBle expenses
Utilities (electricity, gas, water, etc.)
Phone/cell phone
Transportation (gasoline, bus fare, etc.)
Credit card payments
Car repairs
Clothing
Dining/takeout
Entertainment and recreation (movies, live entertainment, etc.)
Groceries
Noninsured medical or dental
Charity
Miscellaneous
Total budgeted: $ Total spent: $
now that you’ve determined your budget, you’ll be able to launch a strong savings plan that helps you reach your goals.
“It’s difficult to get started with savings if you don’t have something in mind that you’re saving for. It helps to have that goal in order to be motivated.”
keli wragge Vice President of Consumer Lending at SAC Federal Credit Union
Building a savings Fund
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step
step
step
Getting Started 1-2-3
Revisit your goals and savings amounts
periodically. this will give you a sense of
forward momentum and can recharge
your enthusiasm.
Determine how much you can save without
sacrificing too much. Make sure that you’re not
putting so much aside that you’ll have to draw
from it for monthly expenses.
save according to a goal, like a major
purchase, a vacation, a college fund, or other
targets. that will give you more motivation,
instead of saving just for the sake of it.
Keli Wragge from SAC Federal Credit Union suggests some
tactics for putting more oomph into your saving efforts:
• Don’t be afraid to start small. Ease yourself into the habit of saving – even putting aside just a few dollars per day or even per week can help kick-start a savings fund.
• Consider certificates. In addition to paying interest on the money you save, another benefit of a certificate is that it “locks in” your money for a certain time frame so you’re not tempted to withdraw those funds.
• Choose a savings account that fits your goals. For example, a vacation fund or holiday savings account from SAC Federal Credit Union offers a higher interest rate and, like a certificate, you can’t withdraw the money early without penalty.
• Create an emergency savings fund. Ideally you should shoot for an amount that is equal to three to four months of expenses. You can determine this by looking at your budget to understand what you typically need on a monthly basis.
wiTh goals seT, a BudgeT deTerMined, and sTeady savings deposiTs arranged, iT’s TiMe To Take a look aT
your crediT score To Make sure you’re sTaying on Track.
Building a savings Fund
part of any robust financial management plan is making sure that credit and debt are being handled wisely.
“You need good credit so that when you want to make a purchase like a home or a car, you can get a low interest rate. At SAC, your score won’t necessarily determine approval or denial, since we take many factors into consideration, but it will factor in to the interest rate.”
julie Bruning Vice President of Consumer Lending at SAC Federal Credit Union
crediT Basics
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step
step
step
Getting Started 1-2-3
establish a strong credit score by getting a
share secured loan or a share certificate loan
with your credit union, or even just a single
credit card – it only takes one line of credit to
build your score, whereas opening multiple
lines may actually be detrimental if you’re just
getting started on building your credit.
thoroughly double-check your credit report to
make sure there are no errors that could be
affecting your score.
Find out your credit score by visiting the
website of one of the credit reporting agencies,
or talk to a sAC Federal Credit Union advisor
about obtaining a credit report.
A credit score is determined by the three major credit
reporting agencies: Equifax, TransUnion, and Experian.
Often, lenders will take these agency scores and combine
them to get an idea of creditworthiness. The scores are
calculated based on:
• Payment history. Do you pay bills on time? Do you pay in full or only the minimum amount due?
• Amount owed. Do you have a large amount of outstanding debt?
• Length of credit history. Have you shown financial responsibility over a number of years, or only just recently?
• New credit. Have you applied for more credit cards or loans lately?
• Types of credit used: Do you carry multiple credit cards and loans in addition to a mortgage and auto loan?
When a credit score drops due to factors like bankruptcy,
debt collection, late payments, too many credit accounts,
and other challenges, it can take years to repair the damage.
A major credit hit like bankruptcy can take seven to 10 years
to be cleared from your credit score.
“It’s critical to have healthy credit habits from the start,
because it takes so long to recover from any damage to your
credit score,” SAC Federal Credit Union’s Julie Bruning says.
crediT Basics
“It’s critical to have healthy credit habits from the start because it takes so long to recover from any damage to your credit score.”
julie Bruning Vice President of Consumer Lending at SAC Federal Credit Union
The best scenario with insurance is to pay for coverage and never need to use it. no one enjoys thinking about situations like house fires, long-term disability, and fender benders.
“Insurance is a smart and necessary expense because it acts as a safety net: Ideally, you won’t need to use it, but if something unexpected happens, you’ll be glad it’s there.”
karen guy Business & Marketing Analyst at SAC Federal Credit Union
insurance needs
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Proper insurance coverage can save you from financial
disaster – rather than emptying out an emergency savings
fund or going into debt in the wake of a natural disaster,
accident, or theft, insurance provides assurance that you’ll
be protected throughout a challenging situation.
But it only works if the coverage is appropriate for your
needs. Determine what type of coverage is most appropriate
for you, such as health insurance, renter or homeowner
insurance, and auto insurance, and then begin to look at
more options like long-term disability or life insurance.
Here are some tips for major types of insurance that often
get overlooked.
hoMeowner or renTer insurance
• Consider coverage that includes Guaranteed Replacement Cost coverage for the structure of your home, which ensures that if your house is destroyed in a tornado, for example, you’ll be paid for the reconstruction cost of your home, regardless of the limit on your insurance policy.
• If you have an older home, ask your insurance agent about Building Code Upgrade coverage, which protects you in case you need to repair your home to meet new standards.
• Make sure your policy comes with Replacement Cost coverage for your possessions, so you can recoup losses from damage or theft. Some policies only cover “actual value” of items, which might not be enough to replace your possessions.
liFe
• If you have children, a spouse, a parent, or a sibling who depends on you financially, life insurance is advisable to make sure they’re covered if anything should happen to you.
• Many employers offer life insurance, so be sure to ask about basic policies and whether you can purchase more to include in your benefits package.
insurance needs
See more insurance options
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step
step
step
Getting Started 1-2-3
Contact sAC FCU Wealth Management to set
up an appointment to talk about your options
and find an insurance solution that fits within
your budget.
Determine what makes sense for you at this
point in your life and set some time aside to
compare policies.
Make a list of insurance types like health, long-
term disability, homeowner coverage, assisted
living, and car insurance.
insurance needs
long-TerM disaBiliTy
• About one in four of today’s 20-year-olds risk becoming disabled before retirement, according to the Council for Disability Awareness. Those odds alone should make you consider this type of insurance.
• Short-term disability coverage, which is also a good option to consider in your insurance mix, generally expires after three to six months.
• Long-term disability insurance pays a percentage of your salary, usually about 50 to 60 percent, for as long as you’re disabled, up until age 65.
• SAC FCU partners with a third-party vendor to offer Accidental Death & Dismemberment insurance to its members. Talk to a SAC representative to learn more and to activate your coverage.
long-TerM care
• These policies help those in assisted living facilities or receiving at-home care to cover costs that aren’t covered by Medicare or other health insurance plans.
• When evaluating policies, make sure to find out whether pre-existing conditions are covered. This can significantly impact coverage.
now ThaT you have a handle on Basics like goal seTTing, BudgeTing, crediT, savings, and insurance,
you’re in a greaT posiTion To Take a look aT reTireMenT.
creating a nest egg for retirement is a key part of everyone’s financial future, and it’s never too late – or too early – to start planning and saving.
“How much to save for retirement is a personal choice based on what you want to do when you retire. You should put some thought into options that you want available to you when you choose to retire.”
Margie johnson Vice President of Quality Assurance & Compliance at SAC Federal Credit Union
reTireMenT savings
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As you start mapping out your retirement plan, ask yourself
what you want your retirement to look like. For example, do
you want to travel? Do you want to own your home or will you
be renting? At what age do you expect to retire? Even if you’re
just starting out in your professional life, taking time to consider
questions like these will help set a robust retirement plan.
SAC Federal Credit Union’s Margie Johnson offers these tips
for developing a plan that’s flexible and able to accommodate
changes that occur throughout your life:
• Start early. In today’s economic environment, it’s critical to think about retirement even in your 20s. It’s smart to invest a little when you’re first starting your career so it becomes a habit.
• Take your planned retirement age into consideration. Keep in mind that if you retire early, your money will have to last longer.
reTireMenT savings
• Take advantage of employer retirement accounts. These benefits usually include matched funds or contributions from employers.
• Be responsible with extra income. When you get a pay increase or bonus, deposit some of that financial boost into your retirement account. And after a pay raise, adjust your retirement contributions to reflect the percentage increase.
• Establish an additional savings account. Retirement funds often have early-withdrawal penalties if you draw from them before retirement, so having an additional account will allow you to have access to funds if you need them before you hit retirement age.
• Explore your options. Talk with a SAC FCU Wealth Management advisor about investment choices, and get detailed information about their recommendations for pursuing your financial goals for the future.
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step
step
step
Getting Started 1-2-3
set up a direct deposit from your paycheck to
your employer retirement account or Individual
Retirement Account (IRA). When you get a pay
increase, adjust your contributions accordingly.
Look at the length of time until you retire to
determine how aggressive you should be in
your savings plan.
Consider your standard of living for today and
what you want to maintain when you actually
retire. this will help you set an initial goal.
reTireMenT savings
iT’s never Too laTe To sTarT.
When it comes to saving for retirement, the earlier you
get started, the better off you’ll be. But that doesn’t mean
you can’t start saving at 50! The table below shows a
breakdown of what your savings would look like if you set
aside $200 a month at different interest rates.
age 20 age 30 age 40 age 50
2% $174,931 $121,510 $77,764 $41,943
4% $301,894 $182,746 $102,826 $49,218
6% $551,199 $284,942 $138,599 $58,164
8% $1,054,908 $458,776 $190,205 $69,208
Source: 360financialliteracy.org
Yes, you’ll have more money in the long run if you start
saving in your 20s, but there can be time to build up a
sizable chunk of money to supplement your other income.
at this point, you’ve set goals, determined your budget, evaluated insurance and retirement, and mastered credit basics. you’re well on your way to taking control of your financial future.
as you continue to organize your finances, sac Federal credit union is always here to help, with experts who can offer insight and tailored solutions that support you, no matter where you are in your financial journey.
conTacT us:
saving: crissy [email protected]
crediT: julie [email protected]
leT’s Be Friends:
reTireMenT: Beverly [email protected]