"Don't Buy Stuff" Saving Strategies How is the economy today? Signs of Recovery DOW If you look at the 90-day rate it has been heading straight up — it has not receded. Local Economy High Electric Bills Decrease in Unemployment Rates December 2009 – 12.1% March 2010 – 11.5% Reasons for decrease could be hiring of seasonal workers or unemployment benefits ending Beaufort County Medical Cuts 16 Positions, Explores Future This decision comes after a difficult year for the medical center which even after drastic cuts lost 1 million dollars this year. Topics Of Discussion Financial/Spending Plan Budgeting Money Management Financial/Spending Plan Establishing Your Financial Plan 1. Assess your current financial picture! 2. Define your financial goals! 3. Create and put your plan into action! 4. Evaluate your plan regularly! Assess your current financial picture! Determine your net worth. What is your cash flow? Do you have an emergency fund and is it enough? What is saved for retirement? Define Your Goals Specific Define your goal in detail. Measurable Assign a specific amount to your goal. Attainable Evaluate your goal to ensure that you can reach it. Realistic Review your goal to ensure it is achievable. Time Bound Allocate a time frame in which to achieve your goal. Define Your Time Frame Goals Length of Time Example Short-Term Less than 3 months Concert tickets. Intermediate 3 months – 1 year A down payment on a new car. Long-Term Over 1 year Save for early retirement. Create A Plan Make yourself a priority list. Make a plan that works for you. Plan for your Future. Pay Yourself First! Establish an Emergency Fund Each time you are paid, set aside a portion of your check to deposit into a high interest savings account. Evaluate Your Goals Continuously monitor each goal to insure they reflect your current lifestyle. Over time your goals can change. Budgeting What Is A Budget? A plan to manage your money for a specified period of time. How a budget can change on you! Benefits Of Budgeting Provides an organized way for you to save money for your goals. Helps you determine where you may be spending too much money for things you may not need. Helps you determine where you are spending your money. Allows you to save for expensive items without the use of credit cards or loans. Puts YOU in control of your financial future. Provides financial “FREEDOM” Cash Flow Income Any money you receive. Examples: Paycheck, Child Support Expenses Any money you pay out. Examples: Rent/Mortgage, Loan Payments, Gas Types Of Expenses Types Characteristics Examples Fixed Amounts do not Car Payment change Variable Amounts change Grocery Bill frequently Periodic Amounts vary can be Phone Charges fixed or variable Creating Your Budget 1. Determine your Income 2. Calculate your Expenses 3. Analyze your Budget Step 1: Determine Your Income What is your salary? Do you currently have a 2nd job? Do you receive any other forms of income? Alimony, Child support, Interest, Dividends… Step 2: Determine Your Expenses Make a list of everything you pay for monthly. This includes rent/mortgage, utilities, loan payments, credit card payments, savings account, gas, groceries, etc. Categorize each expense as fixed, variable or periodic. Step 3: Analyze Your Budget Compare your Income and Expenses to determine if they are equal. “Cash Flow” If your Income and Expenses are not equal, ask yourself a series of questions: Are there expenses that I can decrease? Is another source of income necessary to sustain my lifestyle? Budget Guidelines 25% 15% Debt Housing Savings 15% 35% Transportation 10% Other Budgeting Resources It is always a good practice to have your budget written down or on the computer to ensure you are following it. There are a variety of resources available to assist you in creating your budget. Here are a few examples. Money Management Planner Microsoft Money Quicken An Excel Spreadsheet A Budget Template (Using Microsoft Excel) Budget Templates Personal budget worksheet Family monthly budget planner Personal Budget Planner for Bills Bi-weekly Budget Household monthly budget Simple Personal Monthly Budget Personal expense budget Money Management Example of a recent Financial Assessment Family size of 4 Net household income of $4,542. Fluctuating paychecks 90 days delinquent on their mortgage (Monthly Mortgage Payment of $1,350). Several charge-offs & collections on their credit report. Monthly Expenses: Dry Cleaning $240 Car Payments $952 Direct TV $115 Phone & Internet $350 Car Insurance $100 Vehicle Gas $260 Groceries $850 Progress Energy $215 Bricks Alarm $35 Misc. Expenses + $450 $3,317 Mortgage $1,350 + Monthly Exp. $3,567 = $4,917 Negative Monthly Cash Flow= -$375 3 ways to fix a negative cash flow 1. Earn more money 2. Eliminate and/or cut back on expenses 3. Debt consolidation 1. Earn More Money Get a 2nd job. Get family members to contribute by working. Invest in the stock/bond market. Obtain higher education to qualify for pay increases. 2. Cut back on expenses Allow yourself to let go of your “wants”! Take advantage of coupons and discounts. Take advantage of employer benefits. -Medical Reimbursement Plan (Health Care FSA) -Dependent Care Reimbursement Plan 3. Debt Consolidation 1st thing…You need to qualify! Find a lower rate and/or longer term. Refinance your house HOEQ loan Use a car loan to payoff unsecured debt Use pay down debt methods that work for you. Attack the highest interest rate Snowball Effect “Don’t buy stuff you cannot afford.” Money Management Tips Always PAY YOURSELF FIRST! Put at least 10% away for retirement. Build an emergency fund equal to at least 3 months salary. If you do not currently have a savings account, visit your local financial institution to open one today! Sometimes it’s helpful to set up a draft so money is automatically transferred into your emergency fund. Money Management Tips Make sure your financial goals are outlined and manageable. Pay more than the minimum on your credit card. Each time you receive a pay increase, put that extra money in your retirement account, savings account or apply it to a debt. Money Management Tips Take advantage of banks/credit unions’ programs. -Online Banking -Online Calculators -Financial Counseling Speak with a financial counselor if you need help. Money Management Tips Before you go to the grocery store make a list. Remember if it is not on the list, don’t buy it! Use coupons when shopping and discount cards if available. If you prefer a soft drink or snacks bring your own from home rather than purchasing it from a vending machine. Money Management Tips Wash your clothes in cool water. About 80% of energy used in your washer is from heating the water! Set your temperature in your home during the spring/summer to 76-78 degrees and in the fall/winter to 68-70 degrees. You can save 7-10% of your cooling/heating costs on your energy bill! (Tips provided by NC GreenPower) What If… You saved 15% of your paycheck each month for 1 year? You purchased a soda every day for 1 year? You went out to eat 3 times a week for 1 year? Results Assume you get paid $2,000 per month, you would save $3,600 (more than 1 month’s paycheck). ($2,000 x .15 = $300 a month) (12 months x $300 = $3,600!) If a soda costs $.65, you would spend $237.25. (365 days per year x .65 = $237.25) If it costs $8 each time you eat out, you would spend $1,248. (3 days x $8 = $24/week) (52 weeks x $24 = $1,248) Questions?