Money. We often want more of it. We spend all day making it or thinking about ways to earn more. But when it comes down to it, many people feel they lack the knowledge or confidence to reach their financial goals. Whether you tend to overspend or are clipping coupons, 2020 could be the year you feel more empowered to create a better relationship with your finances.
It used to be considered taboo to talk about money, but today there is more transparency around finances. According to a BECU survey of 1,000 Americans, 77% feel comfortable talking about their financial situation with friends and family, but only 46% are actually satisfied with their finances.
Those who are satisfied with their finances also feel the most prepared if the country went into a recession: 63% said they’d be able to weather a financial storm, compared to just 16% of those who do not feel satisfied with their finances.
Whether you spend impulsively or are focused on saving, Stacey Black, a financial educator at BECU, says the way to stay on track with your personal finances is to familiarize yourself with your money habits and focus on your priorities.
Curb your overspending habits
The BECU survey reveals that buying nonessential items is a hard habit to break. Even though 80% of Americans have some level of debt, they can’t seem to break up with their streaming services, eating out and going to the movies. They are also more likely to spend money on themselves. “Self-reward is the number one reason that Americans overspend, with 40% engaging in a ‘treat yourself’ mentality,” says Black.
Black recommends keeping tabs on your financial situation and tracking spending with tools like low-cost budgeting apps or free resources from your financial institution. For example, BECU members can take advantage of BECU’s Money Manager or free consultations with trained specialists through its Financial Health Check program, which focus on taking immediate action on goals like budgeting or paying off debt.
Tip: Create alerts to send a message by text or email to notify you when your account balance is lower than a designated amount.
Those who are more confident in their finances tend to be focused on long-term savings goals, like emergency savings, retirement and financial freedom, rather than short-term rewards, like vacations.
“It’s important to pay yourself first by building a savings cushion for emergencies,” Black says. “Get into the habit of saving every month for a ‘rainy day’ fund. You’ll be so glad you did the next time your car breaks down or a surprise medical bill comes in and you won’t have to depend on credit to pay it off.”
Tip: Set automatic transfers to a savings account that you only touch in the event of an emergency to ensure you’re regularly saving.
When creating short- and long-term savings goals, Black recommends saving for at least three months of expenses. “However, for many people this can be overwhelming. Don’t get discouraged. What’s most important is to get into the habit of saving. Set goals that you can actually achieve within a shorter amount of time,” says Black.
Expand your savings strategy
Once you have a good grasp on your spending habits and have built up your “rainy day” fund, it’s time to refocus on longer-term goals. Black recommends looking into more advanced savings accounts that often have higher interest rates. Account options include a money market account, which has no monthly maintenance fees or minimum balance requirements, or a CD (certificate of deposit), which has specific fixed terms and interest rates.
Tip: Most financial institutions allow you to have more than one savings account and assign names, like “vacation” or “home down payment.” This can help you visualize the specific goals you are working toward.
Add money talk to date night
Understanding your money habits is the first step. Ensuring you and your partner are on the same page financially is next. The BECU survey reveals that one in three Americans don’t feel comfortable talking with their significant other about finances.
Black suggests not only talking about money with your partner, but making financial check-ins part of your date night. “Pour yourselves a nice (moderately priced) glass of wine or drink of choice, make a later dinner reservation or queue up your favorite movie.” Black continues, “Having your financial check-ins bookended by a fun date night activity makes them feel less tedious and more enjoyable.”
With or without the wine, Black recommends scheduling a financial review once or twice a month, and first touching on lighter topics like financial goals before diving into the nitty-gritty of things like debt.
As a member-owned credit union, BECU is focused on helping increase the financial well-being of its members and communities by returning profits in the form of better rates, fewer fees, community partnerships and financial education. BECU is federally insured by NCUA.