Dealing With Inflation!

How do we deal with inflation? The cost of goods has increased around 8% over the past year. The income for most has remained constant or only slightly higher during that time. If you are not careful, you will find yourself spending more than your income. Unfortunately, many people don’t notice as they use their credit card to make up the difference or don’t notice until they receive their credit card statement. I want to share a few simple strategies to offset some of the increase.

The price of gas is one of those areas with the largest increase and therefore the first tip is to drive less. This is accomplished by planning your trips. We like the convenience of getting items when we want them. Consolidating trips can reduce the amount of gas used as well as the wear and tear on your car.

Have you ever used coupons? Maybe now is the time to start. Using coupons can reduce cost and in some cases provide you with free items. Look around coupons are out there. A simple search on the internet can provide you with a list of sources. You also get them in the mail or newspaper.

Use your merchandise cards. The gas station I use has a merchandise card. I scan the card and instantly get 3 cents off my gasoline. It also provides me with a free doughnut and coffee on occasion. Many grocery stores offer them as well.

If you are purchasing large items like a refrigerator or even a car, think about delaying those items for a few months. When it is time to purchase, compare prices. The recommendation is to compare prices at three different locations. You would be surprised how stores mark up prices on certain items to reduce prices on others. Their goal is to get you in the store. Your goal is to save money!

Think about a household audit. You don’t realize how many items you have drawing power that you are not using. Unplug it! What about those lights? Turn them off when you leave the room. Now your thermostat, adjust it a little higher in the summer and a little lower in the winter. Remember, little things add up.

I also need to emphasize the importance of a spending plan. You need to know where your money is going. Analyzing your spending plan will inform you of the habits you developed like buying coffee every morning. It may not seem like much, but every trip costs you $2-$10. 

These strategies may seem simple, but little things add up. Be savvy and save!

Small Savings Go a Long Way – Fighting Against Inflation

When I first thought about this blog, I was thinking about strategies to save. When I started typing, my mind went from strategies to save, to strategies to adjust for inflation.

Inflation is the price change of goods over a period of time. In other words, when you bought a gallon of milk a year ago, does it cost the same today? Compared to last year, the price of goods has increased 4.4%, a 30 year high. The typical inflation rate runs about 2%. This means that your salary needs to increase at the same rate to keep a balanced budget. Unfortunately, that usually does not happen which means we need to cut expenses or seek additional income.

Since my title is Small Savings, let’s focus on sharing some small ideas to cut expenses. Reflecting on your habits is a good place to start. Many of us buy coffee, so let’s start there. If your coffee cost between $2-$5 and you buy one every day, that will cost you between $730-$1,825 a year. How about eating out? If we spend $42 eating out every week, that totals $2,190. As you can see, small changes can save a lot of money over the course of a year. Reflect on your habits and make changes that lead to small savings.

High inflation is likely to continue for the coming months. This means we need to adjust our financial behaviors to insure the money we make (income) remains in line with the money that goes out (expenses). If you have a budget, great, but be sure to monitor it for changes. If you don’t have a budget, the Consumer Financial Projection Bureau has some great resources.

For additional ideas to save money visit Nerdwallet, The Semple Dollar or Ramsey Solutions for ideas.

4 Strategies To Reach Savings Goals 

Saving money, improving your financial life, and building wealth all start when you set a goal and implement a plan to reach that goal. 

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Make a Plan

Those with a savings plan are twice as likely to save successfully.  That is where America Saves can help. Savers are guided on how to reach savings and debt reduction goals when making a commitment to yourself to save with the America Saves Pledge. To learn more about how you can save and sign-up to take the pledge visit the America Saves website www.americasaves.org. Complete the Pledge and America Saves will send you short emails and text reminders, resources, and tips to keep you on track toward your savings goal.  

Save Automatically

Automatic savings means you have a process in place to save at regular intervals, whether that is monthly, weekly, or daily. You can instruct your employer to withdraw a certain amount from your paycheck each pay period and transfer it to a retirement or savings account (or both). You can also contact your bank or credit union to set up an automatic savings by transferring a fixed amount from your checking account into your savings account each month. Saving automatically becomes a part of your budget and acts as a safety net for unexpected situations and emergencies. 

Retirement Insurance Pension Saving Plan Benefits Travel ConceptPay Off High-Interest Debt

Paying down debt, especially loans or credit cards with high interest rates, can lead to extra money every month for saving. Prioritize paying debt with double-digit interest rates and increase your payments over the minimum due. For example, if you have a $3000 credit card balance at 19.8%, and you pay a minimum balance of 2%, it will take 39 years to pay off the loan and cost more than $10,000 in interest charges. 

Save for Retirement

Retirement savings is a top priority for many savers.  Saving now for retirement will ensure that you have enough money to enjoy a comfortable standard of living when you stop or reduce the number of hours you work. You may be able to save for retirement at your workplace through a 401(k) plan, which has many benefits including direct deposit from your paycheck. If your employer doesn’t offer a retirement plan, you can still save for retirement, by putting money in an Individual Retirement Account (IRA). 

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.

Where to Put Your Money for Savings

Have you ever thought, “Is my money in the right place?”p177274_331839045_4

Don’t worry, you are not alone.  Many people are not sure where to put their money.

Some items to consider include:

  1. What the money is for?
  2. How soon will you need it?
  3. How comfortable are you with fluctuations in the value?

To begin, you need to think about number 1 – your purpose or goals.  What is this money for? Retirement? A large purchase such as a car or a house? Or is it a fund for unexpected emergencies?

Answering number 1 helps you determine the answer to number 2 – how soon will you need the money? When you will need to use the money will inform your decision on where to put it for saving – ask yourself whether you will need it in the short term (up to a year), medium term (1 to 10 years), or long term (10 or more).

Short Term

Short term items include money to pay for immediate needs such as bills or money you need easy access to in case of an unexpected emergency, like a major car repair.  When you need easy or immediate access to money, you would keep it in a checking account, savings account, or money market account.  These accounts offer easy access but very low interest rates.  If you frame it in terms of risks vs reward, these accounts are low risk, low reward.

p177274_219724264_5Medium Term

Saving money for large purchases, such as preparing to buy a car or house, will fall in the medium savings ranges.  At this point, you are trying to maximize the amount of interest you can earn without fluctuations in the value of the money. You can still consider a money market account, but you will also want to consider certificate of deposits (CDs) or savings bonds, which offer higher interest rates but less access to your money.

Long Term

When you think long term, you are talking about investments.  This would include stocks, bonds, and mutual funds.  Now we need to go back to the concept of risk vs reward.  Risk means that you also have the potential for losing money.  In return for the risk, you have the potential for a greater reward.  Stocks and mutual funds are tied to stock market. Bonds are tied to the risk associated with the investment. Because of the risk associated with investments, it is beneficial to consult with a financial adviser.

For more information, check out the University of Maryland Extension’s Financial Education Programs, available throughout the state.