Don’t Trust The Card or Yourself Without a Plan

Don’t Trust the Card or Yourself Without a Plan

In the world of purchasing with plastic (credit or debit card) we sometimes lose sight ever so quickly of exactly how much we are spending! In fact, I find that by the time I am in the parking lot after making a purchase my mind has already moved onto the next thing. By the end of the week when I am about to make another purchase I have already forgotten that I even made the first purchase which causes me to have a false idea of how much money I actually have left to spend. Before I know it if the plastic I am making a purchase with happens to be a credit card then I could so easily fall into the trap of purchasing an item with future income (money from my next paycheck that hasn’t even hit the bank yet). This can happen to even the best of us.

Let me be clear I am not suggesting we should all revert back to the archaic envelope budgeting system and cash. However, I am suggesting there a few things we can recognize when purchasing everything with a card to ensure financial success.

Here are a few tips that can help lead to financial success if you pay your bills and make all of your purchases with a card, especially if its a credit card.

1) Keep Track of What You Spend.

Don’t fall into the trap of only reviewing the balance on your credit card every couple of weeks or once a month when your bill comes due. If you are using a debit card be careful to avoid only reviewing the available balance in your checking account when in the checkout line at a store or on pay day.

I am not a psychologist by any means, but I know myself well. I do not think I am alone when I say that it is easy to underestimate how much I’ve spent since I last looked at the balance on my card and overestimate how much I can afford to spend when I have not sufficiently tracked my previous purchases. The Consumer Financial Bureau suggests that there is some research to back the assessment that I have made.

It may not be fun at first, but putting a spending plan in place and rigorously keeping up with it will be one of the greatest stress relievers you can experience regarding money. If money is a source of stress or anxiety it can be tempting to ignore the way you spend, your bank account or credit card balance, however, this will create more stress in the long run and financial disaster I might add. I personally prefer to track my expenses through the use of budgeting software called youneedabudget.com. I know others that prefer good ole excel spreadsheets, pen and paper, or mint.com.

2) Don’t Trust Monthly Minimum Payment Offers.

When things are tight and there are extra items needed or wanted, it can be extremely tempting to take advantage of the credit card offer to carry the balance on your card over to the next month and only make the minimum payment. This can be especially tempting during times where there is stress pouring in from other areas of life.

It is important to recognize that when you only make a monthly payment, it means you are committing your future income to interest payments on items that are not worth paying interest on. Also keep in mind credit cards offer some of the worst, if not the worst, interest rates. They can get up to almost 30%! Nerd Wallet, a reputable personal finance website, goes as far as to say they are designed to keep you in debt. Click here if you want read more on minimum payments.

It can be tempting and you might say to yourself that you will be able to pay it all off the next month before the interest takes off and gets out of control. That can be a dangerous place to be especially considering personal finance tends to be one of the most unpredictable areas of life, because it involves almost every aspect of life. You cannot predict when your car is going to breakdown, you are going to have an emergency room visit, animal needs to go to the vet, or some other unexpected expense shows up.

3)Preemptive Planning vs. Reactionary Spending

If you want to beat living paycheck to paycheck, pay down debt, and avoid having to pay only the minimum payment on a card it happens through planning. The words “budget or spending plan” are not everyone’s favorite words. However, they can be such a lifesaver! For some they do not like the idea of a budget because they feel that it will constrict their financial freedom to do as they please. For others it is just an overwhelming, daunting task and an area that causes anxiousness so they just avoid it.

I would like to suggest that choosing to be preemptive in planning, how to spend and save your money, will actually create a sense of financial freedom not experienced beforehand and will help reduce anxiety surrounding money. Planning our spending will prevent those moments when we react to a need or want, have not planned our spending for the pay period/month and then swipe our card, and we can’t help but experience the anxiety surrounding the purchase. The all too familiar questions surface in our mind such as “can I really afford this and will I have enough left for my bills due soon?” I would like to suggest these questions almost steal the joy that could have come from the purchase.

On the other hand, when you take time to plan your spending upon receiving a paycheck and then follow point #1 of tracking your expenses, you can feel comfortable spending money because you have planned the spending and do not have to deal with questions like “Can I afford this and will I have enough for my bills?” It creates a since of freedom and peace of mind. Finally, it is important to be aware that everything might not always go according to plan, however if there is a plan in place you will know how to adjust to ensure that you are staying within your means.

Financial Wellness Checklist for Graduating Seniors

It is almost graduation! While graduation is an exciting time, it can also be overwhelming to be thrown out into the “real world”. Getting your financial life in order can help you to feel more prepared for the next chapter in your life. Although this post is geared toward graduating seniors, it is helpful for anyone.

I also want to add that our counselors are here for you. Visit us before graduation and let us help you start post-grad life off on the right foot!

I have compiled a neat checklist for you to follow along with. This list is not exhaustive, but is a great start!

Graduating Senior Financial Checklist:

  • Create an online log-in with your student loan servicer
  • Set-up an appropriate repayment plan for your student loans
  • Open a checking account with no minimum balance and no monthly fees
  • Open a high-yield savings account to store emergency fund and other intermediate-term savings
  • Perform a credit well check- consider opening a credit card if you do not already have one
  • Read your employee benefits- if you are starting your career, spend some time studying your new benefits
  • Create a written budget
  • Start saving for retirement- utilize your employer match if you are starting your career, or consider opening a Roth IRA
  • Write out your short-term, intermediate-term, and long-term financial goals

The WKU Center for Financial Success has resources explaining how to accomplish these items here:

https://www.wku.edu/cfs/resourceshome.php

Our counselors can also walk you through this checklist and have you leaving WKU empowered and excited for the road ahead!

Visit our website to set up an appointment:

https://www.wku.edu/cfs/become-a-client.php

How to Live Well All Year Long (as a college student)

When I first started budgeting, I realized I was spending an absurd amount of money at Starbucks and eating out.

Like many others, I work as much as possible during the summer and winter to stockpile money for the semester when I cannot work as much. My financial goals at the start of each academic year are always to:

  1. Make my money last until May.
  2. Experience that year with my friends and family.
  3. Save money going into the next academic year

In August, I would look at my bank account balance and be afraid to spend because although my bank account balance was high, I was unsure how long my money would last. I would say no to weekend trips or events with my friends, and I stressed about unexpected expenses.

It wasn’t about having money, I had some, but I constantly worried, Do I have enough?

Enter budgeting. With my budget, I decide how much I want to spend each month to live comfortably. I decide how much I need for gas, for eating out, for gifts, for trips, and all of the other things that might happen in my life that academic year. I also consider things that might happen, such as having to get new tires or replacing my phone. After deciding how much I need, I spread my pile of money out from August to May.

I don’t have enough money for everything that I list out that I want. Because of this, I must prioritize what is important to me and eliminate those things that are less important. For example, I do not buy coffee from Starbucks anymore, unless I am having coffee with a friend. I also follow the same rule for eating out. For me, I was spending too much of my money on grabbing coffee and food alone, that I had to say no when friends were going out. I also do not buy new clothes and limit myself when buying new possessions. I don’t have enough for possessions and experiences. If I buy a new shirt, I must say no to fun with my friends later that week. I try to choose people over things.

Depending on your goals, your budget may lead you to work less or work more. For me, my budget enables me to stress less about work because I know how much time I need to spend at work to fund my priorities.

For help getting started with your own budget, we have a Quick Start Guide to Your Financial Success on Budgeting available for you here:

https://www.wku.edu/cfs/quickstartbudgeting.pdf

As always, we also encourage you to take advantage of our free peer-to-peer financial counseling by setting up an appointment with one of our counselors. You can do that here:

https://www.wku.edu/cfs/become-a-client.php

Saving in a World of Targeted Ads

I originally wanted to write a blog post about subscription services, and how they eat up your income. On my laptop I started researching the most popular subscription services.

A few hours later I opened Instagram on my phone and it was filled with ads for various subscription boxes. The two I get most frequently is for Fab Fit Fun and for Hello Fresh.

I really love the song “85” by Andy Grammer. The lyrics are:

“There is a lie that I believed
The more that I got, the more I’d be free, free, free, free
So I’ve been away, making the green
See, the more that I get, the more that I need, need, need, need

I like to think that I am highly resistant to targeted ads, but it is a constant struggle to remind myself that I don’t need these products.

A few weeks ago, I kept getting, and still do get, ads for different tooth powders. I had never heard of tooth powder, yet the ad was so enticing that I almost paid $30 for a TINY container of tooth powder.

Subscription boxes and other products that these ads are often for have a way of eating up our money.

Here are strategies I use to resist targeted ads:

  1. Avoiding them. As I am scrolling through social media, I often will click hide on ads without really reading them.
  2. Wait 24 hours to purchase. Often the ads are trying to rush you to buy NOW. Just wait. Often after 24 hours you realize naturally that you really don’t need it.
  3. Comparison shop. I sometimes find myself convinced by the ads that this product is the best on the market. But if I take a moment to comparison shop, I typically find that the product is overpriced compared to other products.

Finally, having a written spending plan can help you navigate the appropriate time to make purchases on items that you may want, but do not need. If you would like help building a spending plan personalized to your needs, schedule an appointment with a Peer Financial Counselor at the Center for Financial Success. Visit our website to schedule an appointment!

Goal-Setting is like the One-Two Punch

The “One-two punch” is one of the first moves taught to a boxer in training because it tends to be easy and effective. It consists of quick jab with one hand followed by a cross punch (a much more potent punch than a jab) from the other hand. Secondly, this is a fundamental technique to build upon more complex techniques in the boxing world. As a former athlete this analogy resonates with me, because I have understood from experience the importance of the developing the fundamentals first.

Goal-setting in financial success is just that – the fundamental piece that sets you up to take on every financial situation. Successful goal setting is a multi-step process. People often say their goals are tasks like retiring with $1 million, visiting Paris, swimming with dolphins, saving for a new car, or starting an emergency fund. I would like to suggest that these are dreams not goals, and with a little bit of work they can become realizable goals. Just like the one-two punch doesn’t end with the first jab because the first jab doesn’t accomplish the job but rather sets up you for the second blow in the same way dreaming of what you want sets you up for the opportunity to create incredible goals. At the Center for Financial success we strongly encourage forming specific, measurable, attainable, realistic, and timely goals. Specific goals have a much better chance at being achieved then a vague goal. For example, if you want to go on a spring break trip and leave your goal at saying, “I want to go somewhere for spring break” you will be much less likely to actually achieve that goal then if you state, “For spring break 2019, I would like to go to Destin, Florida for 5 days and stay at a beach-side condo that costs $100 a night.”

Measuring a goal is the point where you set forth concrete criteria to see if you are staying on track to attain your goal. When you have established such criteria and then you use the measure to evaluate if you are on pace to achieve a goal it can create a sense of accomplishment that encourages you to keep pressing on towards your goal. Let’s assume you have ten months to save $1,000 for the trip to Destin. This would mean you need to save $100 a month therefore you can measure the goal by looking at your savings at the end of each month and see if you have save another $100 dollars.

The final three steps are attainable, realistic, and timely. This part involves examining your time frame for achieving your goal and determining if the time frame is realistic and attainable. For example, if spring break is 10 months away and costs $1,000, but you are in a position where you are only able to put $50 a month towards this goal then it is not attainable. At this point you should not ditch the goal, but rather determine how to proceed. Should you adjust your time frame? Maybe waiting until the fall would make more sense or you might determine that you have enough time to pick up an extra side job to stay on the same time frame.

When making realistic goals, your goals need to be personal to you. It is easy to build goals based off what everyone else is doing, but those same goals may not truly align with what you define as success and a full life. Do not be tempted to live someone else’s dream. Figure out your dreams, make them goals and write down a plan to accomplish them.

There is little you won’t be able to accomplish when you have written goals that you actively work towards and track your progress. Finally, it is tempting in the goal-setting process to make goals that are easily achieved and that never challenge you to reach them. I caution this because I am not convinced that you will be able to achieve the dreams that you will really want achieve. Do not let the fear of failure keep you from achieving tough goals!

At the WKU Center for Financial Success we are in the business of helping you make your goals a reality. Consider scheduling a free appointment with one of our Peer Financial Counselors. It is easy, just visit our website and fill out a form that takes 30 seconds and you could be on your journey to achieving your dreams!

If you found this article helpful please take a moment to comment, like and share on your social media!

How {not} to spend your tax return

It’s tax season and for many of us that means a hefty tax return. What is the healthiest and most effective way to view your tax return?

Many people view a tax refund as free money and spend it almost as fast as it hits their bank account. But this attitude is dangerous. You work hard for your money all year, you have taxes withheld during that time, and now the government is giving you back some or all taxes withheld because you had more withheld than your tax liability.

Your tax return is an opportunity for you to create leverage in your financial life.

Here are 5 ways you can use your 2017 tax return:

  1. Open a high-yield savings account. You can use bankrate.com to research savings accounts and deposit the tax return money for safe-keeping. This can act as an emergency fund.
  2. Pay for school expenses. Your tax return could be used to pay off all or some of your WKU shortfall, allowing you to minimize the student loans you take out this fall.
  3. Pay off your credit card debt. It is not abnormal for college students to find themselves in credit card debt. Credit card interest rates are high and not paying hurts your credit score- use this as an opportunity to wipe the slate clean.
  4. Use it for an experience. Managing money is about using your money effectively to meet your short, intermediate, and long-term goals. It is okay to use part or all your return for a bucket-list item, if these other opportunities do not apply to you.
  5. Start a Roth IRA. A Roth Ira is a retirement savings account. Starting to save while you are young allows you to benefit from compound interest-and with a Roth IRA your money grows tax-free!

As always, for more information or to meet with a Financial Counselor, contact us at the WKU Center for Financial Success! We would love to sit down with you, go over your specific situation, and help you use your tax refund effectively!

How to Quit Stressing About Student Loans

If you’re reading this, you probably have student loan debt. It’s just a fact of life. The average student loan debt at graduation for WKU students is $28,000.

While the debt is a fact, the stress that ensues from it can be overwhelming and debilitating.

And everybody knows, the best thing to do when something is overwhelming is to suppress, suppress, suppress. When someone mentions student loans you just make like Andy Grammer and say, “Nah, nah, honey I’m good” and go about your day.

The great Michael Scott, long-time Regional Manager of Dunder Mifflin Scranton once said, “And I knew exactly what to do. But in a much more real sense, I had no idea what to do.”

You probably know exactly what you must do: pay back student loans after graduation. But how can you do that when you aren’t sure of your balance, the types of loans you have, who your loan servicer is, and repayment strategies? Answer: you can’t.

These amounts aren’t arbitrary. They are important and relevant to your life at this very moment. There are things you can and should be doing this month and this semester and this year to poise yourself for financial success now and into the future!

You have a couple things you can do. One is to whine! This is terrible, they don’t teach you this in school, school should be free, etc., etc., blah, blah, blah. Okay, now that were done whining, we will move on.

Next is to accept the reality. You are making an investment in yourself by attending WKU. You clearly value knowledge and are poising yourself for a successful career in an area you care about. And there are costs. Let’s not ignore these costs, but instead weigh them with the benefits!

We as humans tend to ignore what overwhelms us, especially finances because we lack the prowess to effectively manage them.

You, however, made a very intelligent decision to attend WKU. As a student you have full access to the counselors at the WKU Center for Financial Success, who will sit down with you one-on-one and go over each student loan, your WKU costs, as well as the other aspects of your financial life and create a financial strategy with you.

The problem with student loans is the uncertainty of it all. You’ll come into a one-on-one meeting feeling nervous and stressed, but you’ll leave with an attack strategy. We cannot erase your student debt, but we can help you handle it.