Financial wellness covers so much throughout a person’s lifestyle and is a common source of stress, anxiety, and fear for so many people.
Here are five questions that have been received, which have been answered with as much detail as possible and yet in a succinct manner. The first three questions are concerning saving money, the fourth question is about going back to school, and the last question is about home equity.
Q & A
- I know that saving is important, but after taking care of daily expenses and doing my best to save for emergencies, thinking about stashing money for my child’s college education and my retirement is overwhelming. I’m not sure I can cover it all… which savings goal takes priority? Answer: This is a question many families are asking. Ideally, we should save for both, but in reality, families juggle multiple priorities. Paychecks can be stretched thin. Here are some things to remember when you’re mapping out your saving strategy.
- Saving, even small amounts, really adds up. It’s a common misconception that you must save large chunks of money for your efforts to be worthwhile. If you consistently put a little money toward each savings goal, over time your dedication will pay off. Starting early and saving often – even if each deposit is small – can have more of an impact on your long-term bottom line than starting later and saving more! Sometimes, slow and steady really does win the race.
- Windfall money can make a big difference. Decide to stash unexpected funds, like rebates, monetary gifts, or tax refunds, into your savings account. Since you’re used to living without that money on a day-to-day basis, save it to help you reach your goals.
- Children can save, too. It’s never too soon to teach children the value of goal-setting and saving. Encourage your child to put a portion of any allowance or gift money they receive into a savings account. Creating a healthy savings habit is a money lesson that will set him up for a lifetime of financial success.
If you must choose between saving for retirement and saving for a child’s college education, focus on your retirement. As a parent, it’s natural to want to focus your efforts on your child(ren), but it’s important to remember that while there are many financial aid opportunities to help fund higher education, the same can’t be said for funding your retirement. When a difficult choice has to be made, take care of your retirement needs first.
- I want to save money, but how do I do that when I’m living paycheck to paycheck? Answer: When you’re living paycheck to paycheck, saving money may seem impossible. However, when you take a close look at your income and where it’s going, you may be surprised to find that saving money isn’t such a farfetched goal, after all. Below are some tips for building savings while living on a limited income.
- Track your spending. You think you know where your money goes and it seems you should have enough left at the end of the month, but you don’t. Most people are astonished when they begin tracking their spending habits at how quickly small, routine expenses add up. Snacks and drinks at the convenience store, unplanned shopping trips or groceries that weren’t on the list are all money leaks. Make note of every dollar you spend for a month and categorize the expenses (household, eating out, entertainment, gifts, etc.). What needs to change?
- Substitute instead of sacrifice. When tracking your expenses, you may find a spending habit that’s a financial hang up. For instance, if you love Starbucks coffee so much that you have it every day that habit may cost you approximately $1,800 over the course of one year! Instead of making a daily purchase, consider buying a nice travel mug and brewing your own coffee at home. Then, cut back to one Starbucks visit each week. Limiting your trips through the drive-thru might even help you enjoy the experience more while saving around $1,500 per year. Do you spend each month on books and magazines? Check out free resources at your local library. If you enjoy going to movies and concerts, research free screenings and special events in your community. Allocate the differences in every category to savings.
- Prepare a budget. Creating a realistic spending plan is vital. If your budget doesn’t work or it’s too restrictive, you won’t stick to it. To make a livable budget, account for all your expenses – including savings, bills and fun. When trying to save or pay off debt, many people immediately cut out the fun, which is a mistake. In doing so, they’ve immediately sabotaged their spending plan. Having fun is important; if you know that you like going out to dinner or buying new music, simply allocate some funds for it. Deciding how you’ll spend your dollars and following that track allows you to truly enjoy yourself without the guilt or stress of trying to rearrange funds to cover a splurge. If you need help developing a workable spending plan, check out the interactive budgeting tool at OklahomaMoneyMatters.org.
- Start an emergency fund. An emergency fund is essential, especially when you’re barely making ends meet. It’s okay to start small; even if you have to begin by saving only five dollars per week, eventually you’ll build a substantial safety net. To keep the process manageable, try setting a small emergency saving goal first. For instance, plan for a routine yet often unexpected expense, such as your medical copay. Once you meet that goal, move on to saving for a larger potential emergency expense, like replacement tires or a new hot water heater. Keep going until you’ve built enough savings to live comfortably for 3-6 months if you were to lose your income. Consistency is the key, so even if you’re also focusing on debt reduction, keep plugging money into your emergency fund until you reach that goal.
- Find free money. Don’t leave money on the table! If your or your spouse’s employer offers a matched saving program, take advantage of it. Also, make sure you have appropriate retirement and banking options in place. If you’re paying a fee for financial services you don’t use, cancel the service or switch to a financial institution with fewer fees. While you’re at it, take a look at your insurance rates. Make sure you’re getting the best deal on your car and home or rental plans. During your health insurance enrollment period, re-evaluate your needs and choose the best option for you. Review your mortgage rates or bundled utilities and negotiate or shop for better deals. You can also declutter while making some cash. Sell unwanted items at consignment shops, have a garage sale or post your items on “buy, sell or trade” sites. Commit any money earned through these efforts to meeting your saving goals.
Once you’ve identified some ways to save, make savings automatic. Each time you get paid, have money auto-debited from your paycheck and deposited into a savings account. You won’t miss what you don’t see, and before you know it, you’ll have a healthy savings cushion that will give you the financial security required for more peace of mind and less stress.
- I know it’s important to save money; in fact, I’m great at stashing money in my emergency fund. I’d like to take it to the next level by cutting back on day-to-day expenses, but everything I’ve tried is too complicated or time-consuming. I need a system that’s easy to stick to. Can you help? Answer: Many people find that money-saving options for routine, every day expenses are easier said than done, especially if they require too many “extra” steps, like organized couponing or driving to a variety of stores to catch the best deals. If a complicated system isn’t for you, consider the following smartphone apps and cash-back programs that reward you for spending behaviors you’re already doing.
- Receipt Hog pairs market research with a fun rewards program. Earn virtual coins by shopping the way you always do, then scan receipts to rack up coins that can be redeemed for cash or Amazon.com gift cards. This app boosts the fun by letting you spin the “hog slots” and enter monthly prize drawings for a chance to win cash or extra coins.
- Checkout 51 offers rebates on specific food and personal care products. New rebates are available every week and can range from a few cents off for fresh produce or several dollars off for a specific name brand item. Shop at any store and simply scan your receipt to confirm your qualifying purchase. Once you’ve accrued at last $20 in rebates, you can request a check.
- Walmart Savings Catcher takes the hassle out of price matching. Instead of keeping track of competitors’ sale prices, simply shop and then scan the bar code on your Walmart receipt within seven days of purchase to automatically compare Walmart’s prices to local competitors’ advertised prices. If a lower price is found, you’ll receive an eGift Card for the difference.
- Target’s REDcard works in one of two ways. You can opt for a debit card that’s attached to your existing bank account, or select a Target credit card. Either way, you’ll enjoy 5 percent off every purchase made at Target, receive free shipping on purchases made at Target.com and get an extra 30 days to return items. To get more for your savings buck, pair REDcard savings with coupons, the Cartwheel app and Target subscriptions. If you opt for the credit card, remember to spend only what you can afford to repay immediately, or any savings will be lost to interest fees.
The key to making each of these options work to your best advantage is to avoid spending money just to earn rewards and always put the money you save into an interest-earning savings account or apply it to other necessities, which frees up more money for your overall savings plan.
“The habit of saving is itself an education; it fosters every virtue, teaches self-denial, cultivates the sense of order, trains to forethought, and so broadens the mind.” ~ T.T. Munger
- I want to go back to school to finish my degree, but I’ve been putting it off because I’m not sure that I can afford it. Aside from scholarships and student loans, what are some ways that I can pay for college or reduce the cost of attendance? Answer: Many students begin school with the best of intentions, but then life happens. Unfortunately, between events like getting married, having kids or focusing on a career, time has passed and earning your college degree gets lost in the shuffle. By the time you decide to go back to school, you may feel you’ve lost too much time or any advantage you might have had when you were younger. Luckily, it’s not too late; earning your degree is an achievable goal. Below are some college financing options you may want to look into.
- File your FAFSA. Regardless of your financial circumstances, visit the Free Application for Federal Student Aid (FAFSA) for a brief program description, general program requirements, and next steps. For a free form with instructions, use FAFSA. This form helps determine your eligibility for federal grants, student loans and work-study programs. Completing the FAFSA is the first step in the financial aid process for every family, because many state scholarships require a completed FAFSA and colleges and universities use it to determine institutional financial aid, too. Visit FAFSA.gov to begin.
- Employer reimbursement. Many employers offer tuition reimbursement programs as an employee benefit. Often these programs have eligibility requirements, like selecting a degree field that relates to your job, maintaining a certain GPA or working for the company for a particular amount of time. Within DHS, Child Welfare offers tuition reimbursement but it’s possible that other divisions no longer offer this. However, it’s worth checking with Human Resources Management to see if it’s an option.
- Tribal membership benefits. Most Native American tribes offer some sort of educational or college assistance program. Many, but not all, of these programs may require you to agree to work for the tribe for a specific time period upon completion of your degree. If you’re Native American, search your tribe’s website or contact the Bureau of Indian Education for specific details.
- Military benefits. Most military branches provide college tuition assistance through several programs, such as Reserve Officer Training Corps (ROTC), grants, scholarships and loan forgiveness programs. Some of these benefits can even be extended to the spouse or children of military service members.
- Apprenticeships. Apprenticeships allow a company to pay college or trade school tuition and offer the student a salary. The student must complete a number of field work hours determined by the Department of Labor. To learn more about apprenticeships, visit the US Dept. of Labor website.
- In-demand jobs. Some schools and companies offer aid to individuals who pursue fields that are considered “in demand.” Examples include nursing, teaching, STEM (science, technology, engineering, and math) related programs and social work. Explore opportunities for tuition coverage through national programs like Teach for America and the National Institutes of Health. Many hospitals will also cover college and training expenses if the student will contract to work for them for a specific amount of time.
- Tuition waivers. Many colleges offer tuition waivers for students who fall within certain income limits or meet other qualifications. Don’t limit your search to certain types of institutions. Some Ivy League schools offer free tuition to students who qualify.
It’s also a good idea to check out Reach Higher, the state system adult degree completion program. Reach Higher offers flexible class options and enrollment periods at eight of Oklahoma’s public regional universities and 14 public community colleges and technical branches. Depending on your career goal and the number of college credit hours you’ve already earned, you can choose an associate degree in enterprise development or a bachelor’s degree in organizational leadership, and many campuses are in the process of adding other degree options.
“You are never too old to set another goal or to dream a new dream.” ~ C.S. Lewis
- I’ve been seeing advertisements for HELOCs at my bank. What is a HELOC and how can it be used?Answer: A HELOC stands for home equity line of credit. Most banks, credit unions or mortgage lenders offer this product to allow customers to borrow up to 85 percent of their home’s assessed value, minus what is owed on the mortgage(s). Compared to a home equity loan, through which you borrow a lump sum representing a portion of the home’s value, a HELOC allows you to make smaller withdrawals against the balance over a set period of time. Below are some things to consider before opting for a HELOC.
- A HELOC is a revolving loan. Similar to a credit card, a HELOC can be repaid and then borrowed again. It’s important to research options to find the product that will best meet your needs and craft a budget and repayment plan to avoid getting into a cycle of debt.
- A HELOC is a secured loan. Taking out a secured loan means that you’re pledging collateral that can be repossessed by the lending institution if you default on the loan. Since a HELOC is based on the equity in your home, you risk losing your house if you don’t uphold your end of the loan agreement.
- A HELOC’s interest rates vary. While interest rates on a home equity loan are fixed, HELOC rates are adjustable, rising and falling with the economy. This means your payments may begin low, but can vary from month to month and may result in a balloon payment at the end of the loan.
Only you can determine if a HELOC is a wise financial option for your situation. Some people use a HELOC to consolidate debt or remodel their home. Others use a HELOC to pay for their child’s college tuition, cover emergency expenses or fund retirement. Using your home as collateral to fund these types of costs can be risky, so evaluate all your options and visit with a certified financial adviser to ensure you’re using the best financial tools available to you.
“Money is multiplied in practical value depending on the number of W’s you control in your life: what you do, when you do it, where you do it, and with whom you do it.” ~Timothy Ferriss
You may also want to review the CSQuest article Help for Your Financial Wellness for how to manage and budget your money, and to take your own Financial Wellness Assessment to see how you compare with other Americans.
Aristotle stated that “Money is a guarantee that we may have what we want in the future. Though we need nothing at the moment it insures the possibility of satisfying a new desire when it arises.”
But as Roy T. Bennett, author of The Light in the Heart, articulated there are at least 15 Top Things Money Can’t Buy:
- Inner Peace
- Common Sense
Remember to make time for all these things that money can’t buy.