Spring into Financial Literacy

April is financial literacy month, but what exactly is financial literacy, and what does it mean for us?  Everyone has different levels of experience with financial products, terms, and organizations. We also have different levels of confidence with using them. University of Maryland Extension has a team of personal finance educators offering educational workshops and trainings across the state. Learn more about our programs on our website. 

Let’s discuss some different financial health measures and how we can use them to evaluate our own personal finance situation. 

Financial literacy is personal finance knowledge. It is what we know about topics including saving, investing and debt, and insurance, along with related concepts such as interest rates and creating budgets. Financial literacy also measures our ability to make informed decisions about financial products like investment accounts, loans, health and life insurance, and more.

The idea of financial literacy education assumes that if individuals have more financial knowledge, they will manage their financial resources better and have a stronger sense of financial well-being. How is your financial literacy? You can take some self-tests and find out.

Photo by Miquel Parera on Unsplash.

Financial confidence. Financial confidence is a different measure than financial literacy. The problem with financial literacy measures is that we can have knowledge about something, but still feel uncomfortable using that knowledge to grow or protect our money. As the term implies, financial confidence describes how comfortable an individual feels about managing their finances. For example, we can know how about savings accounts and the importance of emergency savings. We could know how to compare interest rate yields. However, if someone fears going into a bank or is not comfortable talking with a bank representative about opening an account, the knowledge, or financial literacy, is not helping them achieve their goals.   

Financial empowerment is a frequently used term. Financial empowerment combines the concepts of financial literacy and financial confidence. According to the Consumer Financial Protection Bureau, financial empowerment means you’re both informed and skilled. The sense of empowerment builds confidence, helping you effectively use your financial knowledge, skills, and resources to reach your goals. Try this financial empowerment assessment tool.   

Financial wellbeing is another important personal finance measure. Financial well-being determines how much your financial situation and money choices provide you with security and freedom of choice. It is a measure of how you feel about your money situation and your sense of control over your finances, regardless of how much money you have. There is a widely used financial wellbeing self-test which you can take at https://www.consumerfinance.gov/consumer-tools/financial-well-being/. You can read more about financial wellbeing and the self-assessment here.

How do you feel about the results of these assessments? Do you want to know more about financial products, or are you with an organization that helps people manage their resources? University of Maryland Extension has educators, programs, and resources to help.  Connect with us to partner together on our journey.

Budgeting Your Holiday Spending

The days are getting shorter and I am starting to get more and more creative with my Thanksgiving leftovers. For me, those are clear signs that we are getting into the height of the holiday season. Looking at my calendar for the next few weeks, there are gatherings with friends and family, gifts to buy, and special meals to plan. Unfortunately, all of these things can add up and stretch an already tight budget even tighter. So, I thought I would share some tips for staying on track with your budget this holiday season. 

Tip #1: Make sure you have an accurate budget

This may seem obvious to some, but I want to explain what I mean here. Many of us are feeling the pressures of inflation as prices rise for all kinds of things. What you may not realize is that many people also engage in “mental accounting.” This means that they try to keep track of their money in their mind. But when prices are rising and changing, your estimate of how much things cost might be off. Additionally, the busy holiday season can mean it is difficult to remember everything we will need to do and buy. This is a recipe for a budget shock. Essentially, it puts us in a position where things are likely to cost more than we expect and we are likely to forget about some things we need. Doing our best to get an accurate idea of what we will need and how much it will cost will give us a better idea of what we need to do to stay on budget. 

Tip #2: Consider modifying traditions, especially expensive ones

Tradition is a powerful force in many of our lives. It can feel comforting to know that some things will stay the same, even as time passes. Additionally, we may feel that others are relying on us to keep certain traditions alive. But if maintaining a holiday tradition means that you are going to have trouble affording things you need, then it makes sense to reconsider. Communication is key here. It can be difficult to talk about money, but it could help explain to family and friends why a particular tradition might need to change. For example, you might host a gathering with friends where you typically provide all the food. But you might be able to talk with friends and let them know that, especially with inflated food prices, that won’t be an option this year. Your friends might be willing to switch the tradition to a pot luck meal. That way, you can still spend time together without breaking the bank. I know thins year I will be thinking about why certain traditions are important to me and trying to get creative with finding ways to achieve the same goal, but at a lower cost. 

Tip #3: Manage impulse extras

This may not be true for everyone, but for me the holiday season encourages impulse spending. Since I am spending more time in stores where I am browsing for gifts, rather than shopping with a list, it makes it more likely that I will throw some extra things in my cart. But these small purchases can quickly throw my holiday budget out of whack. I have a few ideas for how I can limit this extra spending:

  • Know when I’m done shopping for each person. If I see something I think my dad would love, but I already have a gift for him, I need to encourage myself to leave it on the shelf. I could always take a picture and save it for his birthday or Father’s Day. 
  • Whenever possible, have a list. Instead of wandering from store to store and increasing the chances of buying random things, I am planning to go out when I have a list and an idea of what I really need. 
  • Avoid the “Buy Now” button. If I can give myself a day or two to consider purchases, it might help me avoid buying things I don’t really need. When I’m online shopping, adding something to my cart rather than buying it immediately will give me time to truly consider my purchases. 

Especially during the holiday season, there is pressure to spend money. We tend to feel like there are so many things we have to have so that we can make memories with family and friends. But I think there are ways to create memories and enjoy the holiday season without overspending and making life more difficult for ourselves in the New Year. So, this year I am going to give it my best shot and I hope you will too. 

Happy Holidays! 

When Your Income Is Not Enough: Learn to track and prioritize

Unfortunately, many of us have been in a position of not having enough money to pay all of our bills in full and on time each month. Even if we have planned carefully, there may be situations where there is not enough money to pay bills. When your income is less than usual or you have had an unexpected expense, your regular bills and living expenses do not stop.

When you can see that you are coming up short to pay your bills and living expenses, there are a few things you can do. For some, balancing personal priorities and family expectations can sometimes be a challenge. If your work is seasonal or irregular, you may be able to cover everything when you are working, but struggle to cover expenses in the months or weeks when you are not working. 

The more you can prepare for your bills you know are coming, the better you can save for them. Having a plan in place for paying bills can make them easier to pay and help reduce stress. To help you gain a better understanding use the spending tracker, bill calendar, cutting expenses, and prioritizing bills strategies. 

Spending Tracker

  • Get a small container or envelope.  Every time you spend money, get a receipt and put it into the case or envelope.  If the receipt does not list what you purchased, take a second to write it on the receipt.  If you do not get a receipt, write down the amount of the purchase, what you purchased on a piece of paper, and add it to the stack. 
  • Analyze your spending. Go through your receipts and enter the total you spent in each category for each week. Add the weekly amounts per category. Once you get have totals, add them together to get your total spending for the month. 
  • Notice trends.  Circle items that are the same every month (rent, car, or cell phone payments). This will help you create your budget easier. Identify any areas you can eliminate or cut back on.

Bill Calendar

  • Gather all the bills you pay in one month or use the information from your spending tracker. 
  • Write down the date when you must send the payment or when the money must be taken out of your account, in advance of the due date. 
  • Write down the name of the company or person you owe the money to and the amount that’s due on the date the bill must be sent to arrive on time.

Cutting Expenses

These are a few suggestions to decrease spending. You can use coupons, switch to lower-fee or no-fee accounts at financial institutions, and bring lunch to work instead of buying it.

Prioritizing Bills

Identify what you need to pay to protect your housing and income, keep your insurance, and meet any court-ordered obligations.

For more about personal finance programs at UME, go to https://extension.umd.edu/programs/family-consumer-sciences/financial-wellness/personal-finance.

Time to Take a New Look at Your Money Habits

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Pay down that old debt in the coming New Year!

The New Year holiday creates a feeling of starting fresh and encourages us to set new goals.  While diets come to mind, setting new financial goals should be on the top of our lists. As you reflect on the past year, focus on your experiences – build on what worked and what didn’t to shape the new year’s money habits.  Here are some ideas to consider as you set your financial goals for the New Year. 

New Savings Account for the New Year

Think about what you want to save for the coming year and commit to opening a savings account to reach that goal. Examples can be creating an emergency fund or setting money aside for your children’s future college tuition. Decide on the type of savings account that will meet your goal and commit to depositing a set amount on a regularly to get into the habit of saving.  For example, if you open a basic savings account, deposit $25 every month and sign up for direct deposit or automatic withdrawals from your checking account. Increase the amount once you are comfortable with saving.

  Visit https://www.fdic.gov/consumers/consumer/news/september2018.pdf and https://www.investor.gov/introduction-investing/basics/save-invest for information about  various savings accounts.  

Pay Down Old Debt in the New Year

Confronting your debt and thinking about how to pay it off can be scary and overwhelming, but you should use the New Year to face your fears. First make a list of your debts, noting the monthly payment, current balance, and interest rate, and make a plan to start paying them down. Experts recommend focusing on either debt with the highest interest rates or debts with the lowest balances to pay off.  You will likely save more money paying off debts with the highest interest rates but it may be faster to pay off the smallest balances first. Whichever method you choose, start by adding a small amount to one of your current payments.  

Visit https://www.fdic.gov/consumers/consumer/news/cnfall17/debt.html and https://www.consumer.gov/debt#!what-to-know for additional information.  

Get Organized

Keeping your finances organized will help you control your money and achieve your financial goals. Some basic tasks to help you start organizing include making a budget, tracking your spending, and putting a system in place to ensure you pay your bills on time every month.  Monitor your credit card and bank statements for any unexpected fees or unusual activity. The easier you find mistakes or unauthorized transactions, the easier it is to correct them. As you organize your finances, start small by picking one organizational task and focus on that task for one month before adding another. For example, start by making sure your bills are paid on time by setting up automatic bill pay from your bank account. 

For more information on managing your finances, explore our Financial Checkup at https://extension.umd.edu/finance.

Create a Holiday Spending Plan

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The holiday shopping season is quickly arriving. It is a time where many spend hundreds of dollars buying gifts for their loved ones.  It is projected that in 2019, holiday spending will exceed 1 trillion dollars. For the average adult, that will be about $920 per person. As we enter the holiday season, I would like to offer a few financial tips to help you along the way.  

  1. Establish a spending plan.  You may or may not be living on a monthly spending plan or budget.  Regardless, you need a spending plan for the holidays. The starting point is prioritizing and finding out how much disposable income you have available. Once that is determined, know your limit and stick to it. 
  2. Make a list of who will receive a gift. Family, friends, co-workers — you can think of many people in your life that you would like to give gifts. Remember your spending limit and then make a list on how much money you plan to spend on each person. Keep in mind, you can always recognize someone without buying a gift. Some of the best gifts don’t cost anything at all.
  3. image-from-rawpixel-id-1231781-jpegSet limits on how much you will spend on gifts. It is the thought that counts. Some of my most precious gifts didn’t have a high dollar value. It was the thought and meaning behind the gift. When it comes to social gatherings and gift exchanges, set limits up front and stick to them.
  4. Talk about gift expectations/limitations. When I first graduated from college, I had a limited amount of money. Although I would have liked to buy more expensive gifts, it just wasn’t possible at the time.  Also, as the immediate family continued to grow with nieces and nephews the number of gifts also increased. Talking about gift expectations up front can help you and your friends and family.
  5. Consider home-cooked meals over eating out.  It is cheaper to eat at home.  Adding holiday shopping to your already busy schedule often means eating out, but it also costs more money.  A family of four can easily spend $60-$80 eating out at one meal. This adds up quickly. Make cooking at home a family bonding time by cooking everyone’s favorite meals together to save. 
  6. Don’t be fooled by the sale.  We are already seeing the special holiday sales. It is tempting to buy things you don’t need, just because you can get a good price. Remember to stick to your spending plan and set your limits. The specials can add up quickly.
  7. Compare prices. It is almost ironic to bring this up after being warned about sales. Keep in mind that stores try to lure you in with special savings. Take advantage of the discount offer, but also compare prices. Getting the best price is like putting money back into your pocket.

Hopefully, these strategies will take some of the stress out of the holiday season and keep money in your pocket at the same time. Enjoy time with your family, friends, and co-workers and stay financially fit in the process. If you are looking for more information, visit the CFPB website.