We’re talking, here, about income (paycheck, allowance, Social Security, pensions, investment returns, etc.) and expenses (bills!). Hopefully, the first always exceeds the second.
Think of your main checking account as your financial hub. Money comes in, goes out. Your monthly e-statement is a tight, accurate record of all of it. We have two different accounts for you— our “DA” package (this should be your main one)— and our freedom checking, if/when you need an additional account(s) for managing things in your own certain way. Both are free!
The trend, these days, is hard in the direction of debit cards, in which funds come directly out of your account to cover your card-based expenses. Either way, you get a monthly record of your expenses, and you’re more able to solve any problems that arise.
Two rules here— don’t spend more than you have coming in. And pay yourself first (see below)! Save as much as you can as early as you can…and let the huge advantage of compounding work for you.
We strongly recommend— do a budget! Who does this? Not everyone, for sure. But smart people do…even if it is just a simple summary of monthly expenses. The beauty of it is— once you have a comfortable plan worked out, it tells you how far you can go in each spending category. It’s flexible, of course, but it provides a strong sense of financial control.
It’s not the money in your wallet...it’s your earning potential, plus your credit-worthyness, that are the true measures of your overall financial worth. Borrowing money is good when you do so wisely…to improve your personal/family situation (a house, a car, appliances, furniture, tools, education, travel, etc.). Borrowing allows you to have what you need when you need it, and pay for it over time.
This is important! Whether you know it or not, you have a credit “score”. It’s part of determining your “creditworthiness” and factors into any borrowing you ever do, particularly for big-ticket items (auto, mortgage, etc.). You should make it a point to check your personal credit score once a year. Let us show you how.
Borrowing— is financial leverage. Borrowing wisely can pay off for you in both the short, and long run. KPCU is here to make loans and we’ll always work hard with you to do so for you.
This is “money-at-the-ready”. Open a one-time line of credit and draw upon it when you need extra cash. No loan payback or interest is due until you take money out. An Equity LOC is backed by the value you own in your home (like a mini-second mortgage), the rates are usually very good, and the added advantage is that you can deduct the interest from your annual federal income tax.
For most of us, obtaining a mortgage will be the most significant financial move we’ll make. It’s more than just a bit involved, and it’s something you’ll live with, financially, for years. There are a number of options, a number of arrangements…which one is right for you? We can help you work that out. And— we’ll push the paperwork through in record time.
No matter what your income, a key objective should be to increase your financial holdings over time, by keeping some portion of what you earn…for the future. Everybody can do this, no matter what your financial circumstance. The accumulating factor of savings, earned dividends, and then compounding dividends…really works!
First…save some money! No matter how much you earn (or don’t earn), make a promise to yourself to put some money away somewhere that is yours! As a KPCU member, you have a savings account (it’s required…just to be a member). Think of this as a “ready cash” stash for when you need money in a hurry or in an emergency. The experts say to build this up to equal two-to-three times your monthly income. We say that’s as good a goal as any. Your best move— let us transfer a set amount from your checking account into your savings account every month. Just do it, forget about it, let it build. You won’t be sorry!
Once your savings account begins to build, add any (or all) of these additional savings programs to your personal financial portfolio. Each of these offers slightly different advantages. All of them pay higher dividends than you can get on regular passbook savings.
We can’t say a lot about this because we’re not exactly in the investment services business. But the fact of the matter is— you will want, as some point, to do some investing. If you own your home, that’s a sort of investment— generally speaking the value of real estate appreciates over time. But stocks and bonds are the more common way into this part of the world. “Playing” the investment market yourself is (we’ll say) not the best way to go about things (although some who do, and who know what they are doing, can make out big…sometimes!). A relatively safe “rule of thumb” is to play the long game. Put money in no matter whether the market is going up or down at any particular time, and rely on the fact that, over time, the market generally goes up. Think conservatively…think in terms of a 6% growth each year.
For so many years, people were urged to buy and own their own homes. Generally it was good financial advice. It still is. The advantage, besides the pleasure and pride of having and “doing” your home, is the “forced savings” benefit of increasing your personal net worth as you pay down your mortgage. Sure, this happens over years…but it is amazing how quickly these years go by. Many families find that their home becomes the major element of their personal net worth. Owning is not for everybody, of course. Your situation may dictate a different plan. But there are ways to measure the advantage of owning over renting (or vice-versa). Let us help you figure your best option.
Managing cash effectively, borrowing wisely, and building one’s personal wealth…are the everyday aspects of personal finance. Formulating the “Big Picture” is what brings it all into perspective and puts you solidly in control of your financial future. The more of these (below) you do— and the sooner you do them— the further ahead you will be financially!
Life should be lived! Think about that, then start writing down the things you want to do— yourself, with your family, with friends. Career, travel, hobbies and fun, anything/everything that is meaningful to you. Maybe they are “bucket list” items, or maybe an entirely new chapter for you. Begin to figure out what you would have to do to make any of these things happen. The more specific and detailed you are about this, the more they might happen. Or, maybe something else, and better, will. There will be costs involved. Go back and look at your budget/spending plan…and make sure you are committing some of your income in some of these directions. As they say “living well is the best reward”. What that means for you…only you can decide.
If you, or someone in your family has been employed, Social Security is something you probably can anticipate (at least for now). But it probably won’t be enough to provide what you need through your retirement years. You have two main objectives when it comes to saving: You want a ready-cash account for right-now, out-of-the-ordinary expenses…and you want something in the way of retirement savings for down-the-road expenses. The best advice is— get started with both of these plans as early as possible…and don’t touch the funds you have in the retirement pot if you can possibly help it, until it is “time”.
Everybody should do this! Start by writing a letter to someone, saying what you want to have happen with all the things you own. And say too, what you want to have happen to you (during your final months, years…and after you die). There are useful guidelines for all of this. Let us help you.
This particular “drill” will put your financial picture into full perspective. Make two lists— what you own, and what you owe. Add the dollars in each list and subtract the second list from the first. That’s your “net worth”. Do this every couple of years and watch the bottom line slowly grow.