Financial Literacy

Step 1: Track your spending

Are you being responsible in tracking your spending? You can do this with a budgeting app, by keeping a running estimate of how much you’re spending in each category in your head, or by reviewing your receipts and checking account statements at the end of each month. Knowing where your money is going will help you make more responsible spending decisions in the future.

Step 2: Create and stick to a budget

Budgets need to be reviewed and tweaked every few months or so to ensure they still work for your present life circumstances. Fluctuations in consumer prices, your income and various life expenses need to be accounted for in your budget. If your budget no longer works for you, make some changes until it does again.

Step 3: Pay down debt

Take a minute to review where you are in your debt-paying journey. Have you made as much progress as you’d hoped to at this point in time? Can you beef up any payments and make that debt disappear sooner?

Step 4: Talk money with your partner         

Have you had the big money talk with your partner? Are you remembering to touch base on money matters on a regular basis? Do you need to revisit any of the topics you’ve discussed, such as sharing accounts, dividing expenses and saving up for a shared dream?

Step 5: Spend mindfully

Review some of your recent purchases. Are you blowing money on stuff you don’t need instead of relieving stress and emotional overload in a healthy manner? If so, look for better ways to de-stress and remember to avoid temptation by disabling one-click purchases and staying away from stores that trigger your overspending impulse.

Step 6: Pay it forward

The money, time and smiles we share are the only moments that are truly ours. Are you remembering to pay it forward? You can volunteer at a soup kitchen or homeless shelter, donate clothing to the less fortunate and help your favorite charity.

Step 7: Pay yourself first

Are you remembering to feed your savings? Remember to prioritize having an emergency fund with three to six months’ worth of living expenses. Once you have that funded, you can work on saving toward long- and other short-term saving goals by automating a monthly transfer from your checking account to your savings account. At this time, you may want to consider increasing the amount you are putting into savings each month by trimming some discretionary expenses.

Step 8: Know when and how to indulge

Living a spartan lifestyle without any indulgences can make you lose your budget–and fast! Instead, make sure you know when and how to indulge. Are you remembering to work your selected just-for-fun expenses into your budget so you can indulge without the guilt? Now is a good time to look back at your indulgences to figure out if they were good uses for your money.

Step 9: Check your credit score

How are those three magic numbers doing? If you’ve been following the rules for boosting and maintaining a high credit score, like paying your bills on time, having several active cards and keeping your credit utilization low, your score should have improved during these last few months, opening the door to low-interest loans and more.

Step 10: Think about retirement

Have you opened and furnished retirement accounts at work and beyond? Take the time now to review these accounts and to assess whether your funds have reached the place you’d hoped they would by now.

Step 11: Start investing

Have you taken the beginner steps toward investing? A crucial part of successful investing is reviewing your portfolio on a regular basis and adjusting as necessary. Make sure your investments are performing well and that your assets are diversified in the most optimal way.

Step 12: Review your overall financial health

In this final step, you’ll review your financial health on a regular basis, just as you’ve done here. Don’t forget to maintain each component of your financial wellness to keep it in top shape.

Reviewing your financial health on a regular basis is an important part of staying financially fit.

The world of investing can be vast and confusing, especially to a first-timer. There are so many decisions to make, and each one carries with it the risk of loss, or the promise of growth for your money. No worries, though; SRI Federal Credit Union can help! Here’s how to start investing in five easy steps.

Step 1: Define your tolerance for risk 

If you’re investing, you’ll need to be prepared for the reality of potential losses. There is no such thing as a “sure thing.” But how much losing can you take?

Determining your risk tolerance is an important way to ensure you’re completely comfortable with your investment path. Your risk tolerance will likely vary according to your age and the time horizon you’re working toward; your risk capital, or the amount of money you can afford to lose; and your investment objectives, or what you hope to gain through your investments.

2. Define your investment goals

Why are you investing this money? Do you hope to save enough money for a down payment? Are you trying to fund your retirement? Do you plan to use this money to pay for your child’s college education? Or, are you looking for a way to grow your money without any real plans for its ultimate use?

Identifying your investment goals will help you choose your investment vehicles and the amount of money you’re comfortable investing.

3. Determine your investing style

Next, you’ll need to find an investing style that suits your personality and investing goals. Here are your basic choices:

• Active management–personally managing your investments. This can be a great choice for an investor who is confident in their knowledge of the market and can make decisions they won’t regret. It’s generally not a choice that’s recommended to new investors.
• Broker/financial advisor–allowing an outsider to manage your investments. There are several kinds of brokers you can choose: Full-service brokers will charge a higher fee, but they will also manage every aspect of your investments, including estate planning, retirement planning, financial advice and more. Discount brokers will have lower fees, but offer fewer services. A financial advisor will make investment decisions, monitor your portfolio and make changes as deemed necessary according to your indicated risk tolerance.
• Robo-advisor–an automated option that typically costs less than a traditional broker and works with your goals, risk tolerance level and other personal details.

4. Choose your investment account

You’re ready to choose your investments! Here are some options to choose from:

• Bonds–a loan to a company or government entity that agrees to pay you back in a specified amount of years. You’ll receive modest dividends until the bond matures. Bonds are low-risk, but tend to offer lower long-term returns.
• Exchange-traded funds (ETFs)–individual investments that are bundled together and traded throughout the day, like a stock. Share prices are relatively low, making ETFs a great choice for small budgets.
• Mutual funds–professionally managed pools of investor funds that focus their investments in different markets. Mutual funds are inherently diversified and can be a good choice for beginner investors.
• Stocks–a single share or a few shares in a specific company. If you’ll be putting all your eggs in one basket, be sure to research your chosen company carefully.

5. Learn to diversify and reduce risk

Once you’ve started investing, you’ll need to monitor and adjust your portfolio on a regular basis for optimal performance. Most importantly, you’ll want to make sure your portfolio is diversified, or that your funds are divided across different investments and classes. Diversifying helps reduce your risk of loss by ensuring that one poorly performing investment won’t bring down your entire portfolio.

Getting your feet wet in the world of investing can be super-exciting, but daunting. Follow the steps outlined here to get started.

Let’s explore the best ways to build and maintain an excellent credit score.

Have several active credit cards

Many consumers mistakenly believe the path toward great credit is through swearing off all credit cards. However, building and preserving a healthy credit score requires owning a card or two and keeping them active. If you’re just starting out, consider signing up for a beginner’s card, which generally features easy eligibility requirements and very little available credit. Otherwise, be sure you have a minimum of three open cards and that you use them on a regular basis.

To keep your cards active without having an open balance, you can pay one fixed monthly bill, such as a subscription or monthly membership fee, with each of your credit cards. Set up an automatic monthly payment for the bill by linking your credit card, and then set up an automatic monthly payment for the credit card, too, by linking your checking account to the card. Choose to have the money transferred before the bill is actually due. This way, your cards will be open and active and you’ll never have a late payment, which would negatively impact your credit score. Several months of using your cards responsibly will generally help move your credit score upward.

Work on paying down debt

If you’ve landed deep in debt and can’t find a way out, now’s the time to work on kicking that debt for good.

First, choose your debt-crushing method: The snowball method works by putting all available funds toward paying off the smallest amount of debt first, and then the next smallest, until all debts are paid off. The avalanche method works the same way, but pays off the debt with the highest interest rate first, and then the next highest until all debts are paid off. With the snowball method, you’ll see results quicker but may ultimately pay more in overall interest. Choose the method that works best with your personality, goals, and lifestyle.

Next, list your debts. If you’re going with the snowball method, list in order from lowest amount to largest. If you’ve chosen to use the avalanche method, list your debts in descending order of interest rate.

You’re now ready to pay down those debts! Review your monthly budget to find a way you can trim your expenses, or look for a side hustle, and use the extra cash to maximize your payments toward the debt you’re working on first. Keep at it until you’re debt-free.

It may take a while to crush a mountain of debt, but showing the credit bureaus that you’re on track to pay off that debt can do wonders for your score.

Pay your bills on time

Paying credit card bills when, or before, they’re due is a major factor in determining your score. Carrying an outstanding balance, and/or owing lots of interest, shows that you are not timely with your bills and can’t be counted on to repay loans responsibly. As mentioned, you can set up automatic monthly payments for your bills so you’re never late. Just make sure you keep the account you are paying from well-funded to cover your payments as they come out.

Bring down your credit utilization ratio

Another crucial factor contributing to your score is your credit utilization ratio. This refers to the amount of available credit you have and use. It’s best to keep your utilization under 30%, or even 10% if you can. To that end, make sure you’re using just a bit of your available credit each month. In addition, consider accepting offers for increased credit – as long as you know you won’t rack up huge bills by having all that additional credit.

Keeping an excellent credit score is a key factor in financial wellness. Use the tips outlined here to build and maintain a great score.