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Good Debt vs Bad Debt

Good money habits to start off the New Year right

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The New Year symbolizes hope —a chance for a fresh start. Many of us set goals to do better: exercising more, eating healthier and spending more time with loved ones. It’s also the perfect time to look at your finances and improve your financial health. Here’s 3 steps to help you get started:

  • Take a good look at what’s coming in and going out

    Good money management starts with basic knowledge about your income and your key expenses. So, begin by recording your monthly income and expenses. You can use Quicken software, a simple spreadsheet or even a pen and paper.

    For your income, put down your take-home pay after taxes, insurance, and other deductions. Don’t forget to list investment income and things like alimony. For your expenses, start with the essentials, such as housing, utilities, and groceries. Then note money spent on dining out, entertainment and shopping. After a couple months, look back to see your spending patterns.

  • Cut your spending

    Once you have your financial information laid out, you’ll be able to see where your money goes each month – and look for ways to cut your spending. You’ll probably be surprised about how much money gets spent on certain categories, especially discretionary ones like eating out. Eating out accounts for 43% of a household’s average food spending according to Bureau of Labor Statistics — U.S. households spent $3,008, or about $8.35 a day, eating out in 2015.

    Many of us also pay subscription fees for things we don’t use or could do without. Can you give up a sports channel and reduce your cable bill? If you have a gym membership that you haven’t been using, consider taking up hiking and enjoying the outdoors instead. These small changes will add up over time.

  • Make savings automatic

    Ideally, you want to have money left over at the end of each month so you can build up savings of 3 to 6 months of living expenses. This amount is generally considered what’s needed as an emergency fund. Additionally, you may have other financial goals, such as saving for a vacation, a car, a down payment on a home, college or retirement. Look for a high yield savings account to maximize your return.

    If you have a 401k program at work, consider contributing the maximum. It’s automatic savings and tax-deferred growth — and if your employer matches contributions, it’s also free money.

    Set a savings goal. When you become a member, we automatically open a savings account for you with a $1 deposit. You can start with a small, automatic monthly transfer to your savings account, such as $25 a month, and it will add up over time.

    Having an emergency fund is especially important. Check out our emergency fund video, and learn how to create a savings goal to track your progress in Patelco Online™.

    Start with these 3 simple steps, and you will soon be on your way to better financial health in 2018.