You’ve heard the saying, “A penny saved is a penny earned,” but why, how, and where should you be saving?
Let’s begin with why you should be saving. While we hope that life goes smoothly and there are no unexpected emergencies, that’s just not realistic. It is important to begin saving so you will be prepared for emergencies that arise, things like when the dryer stops working or your car needs repairs or new tires. This can also be an account to help prepare for a planned vacation or a large, expected expense. Preparation is key!
Save regularly toward your goals – it will add up quickly! Photo source: UF/IFAS Extension
That leads us to the next pieces – how and where do you save? This all begins with taking the steps to open a savings account. These days, opening an account can be done from nearly anywhere. You might visit a financial institution’s local branch, make a phone call, or even go online. You will need to provide a few pieces of personal information for verification and often you are required to deposit a sum of money to activate the account. Once your account is open, you can decide how to add money into it. Perhaps you deposit a certain amount from a regular paycheck or funding source, maybe you would prefer to transfer funds from other accounts, or you can deposit cash or checks periodically.
One thing about a savings account is the money is typically not as accessible as money in a checking account. This is all by design – the funds you allot to your savings account should be left alone and not used frivolously. An advantage to a savings account is the interest earned on your money while you aren’t doing anything with it. It won’t be much in the beginning, but, over time, interest earned could be a bit of a boost to your savings, helping you reach your goals more quickly.
To reach goals, you need to plan them out – be SMART. SMART goals are Specific, Measurable, Attainable, Relevant, and Timed. Decide what you will be saving for and be specific. Will this account be for emergencies, vacation, or a vehicle? Your savings goal should also be measured in some way so you can track your progress. Ensure your savings goal will be attainable, set yourself up for success, and be realistic with the amount of money you are setting aside. Your savings goal also should be something you are excited to work towards to make it relevant to you. Lastly, give yourself a time frame for reaching your savings goal. Will this take a month, one year, five years? Whatever you decide, stick to your time frame. Being able to identify your goals will aid in your savings success.
Tired of renting and thinking about buying a house? Not sure where to start? Let’s talk about some of the first steps in the path to homeownership.
Many people don’t realize that making the decision to buy a home and the process to buy one isn’t a one-size-fits-all step. There are many emotions and considerations that go into it. Here are some of the first questions to consider.
Do you have a budget or spending plan that you can live on?
Photo Credit: UF/IFAS Photo by Tyler Jones
Having a spending plan or budget that you can live on means that you’ve reviewed your income and expenses and either have a balanced budget or one with money left over. You may adjust that budget each month as expenses and/or income change but you don’t end the month in the negative. If you’re just getting started, try checking out our Money Management Calendar. It will take you through the six steps of building a spending plan and serve as a tool to help track your money each month. Knowing your financial situation before you begin the process to buy a home is important, as there are out-of-pocket costs that you’ll encounter when buying a home such as appraisal fees and closing costs, in addition to costs associated with homeownership, like maintenance, repairs, and insurance.
How does your credit report and credit score look?
Lenders use your credit score to help determine whether or not to approve you for a mortgage loan and, if approved, at what interest rate. The higher your credit score, typically, the lower your interest rate and the less you’ll pay for your home. Different loan programs may also have a minimum credit score requirement you’ll have to meet. Start by checking your credit report at the three different credit reporting agencies: Experian, Equifax, and TransUnion. Look for any errors or mistakes that could negatively impact your score. The three national credit reporting agencies permanently extended a program allowing individuals to check their credit report for FREE once a week at each agency. Visit AnnualCreditReport.com access the free copies of your credit reports. Improving your credit score can take time so starting early is helpful.
How much debt do you have?
Photo Credit: UF/IFAS Photo by Thomas Wright
Debt is another factor that lenders consider when you apply for a mortgage loan. Having too much debt can cause you to be turned down for a mortgage loan. The amount of debt you have can also significantly impact how much a lender is willing to lend you toward a home purchase. You can calculate your debt-to-income (DTI) ratio by dividing your total monthly debt payments by your total gross monthly income and multiplying it by 100 to convert it to a percentage. For total monthly debt payments, you should include any loans, credit card payments, child support, alimony, medical payments, and similar items. Do not include things like groceries, utilities, etc.
Each lender and loan program will have a different maximum limit, but many are in the range of 35-41% of your income going for debt repayment.
These are just a few of the initial questions to consider if you’re thinking about buying a home (and can be ones to think about even if you’re not!). Saving money, paying down debt, and repairing or raising your credit score all take time. Starting today can help you to be in a better position when you are ready to take the next step. If you want to learn more, UF/IFAS Extension offers classes for first-time homebuyers (returning buyers are welcome, too!) that go more in-depth for each of these questions and much more. Contact your local Extension office to find out about class schedules.
Resources:
My Florida Home Book: A Guide for First-Time Homebuyers in Florida, University of Florida/IFAS Extension
It has often felt like time has dragged on in 2020, but despite all the challenges, time has continued to march on, and that means the holiday season is right around the corner. Thanksgiving is fast approaching; November 26th will be here before we know it. And while this year has been tough in many ways, we also have a lot for which to be thankful.
One of the ways we celebrate that gratitude is through a nice meal with friends and family. However, many of us have experienced financial difficulties over the last several months, which may put a damper on our traditional celebrations.
With that in mind, here are a few tips for saving money this Thanksgiving:
Keeping the sides simple and having guests contribute items to the meal are two ways to reduce the overall cost of a Thanksgiving meal. (Photo source: Tyler Jones, UF/IFAS)
Shop with a list. This is good advice for everyday shopping, too, but especially at the holidays, when there are just so many delicious seasonal goodies available and we might feel like splurging. Don’t get carried away, though! Stick to traditional favorites everyone enjoys and only get enough to feed the number of guests, not an army. And remember, if it’s not on the list, don’t buy it.
Shop early. Supermarkets often begin putting holiday food items on sale weeks before the main event. Planning ahead and purchasing ingredients early can save money in the long run. Also, think about purchasing canned and dry goods for next year’s festivities right after this Thanksgiving, as ingredient prices are reduced in order to sell them more quickly and make room for other items. Just remember to check the expiration/sell-by dates to make sure they do not expire before next year.
Choose one type of meat. Turkey is the traditional centerpiece to most American Thanksgiving meals, but it doesn’t have to be. Other popular meats include ham, lamb, roast, and prime rib. The key to saving money on the meat, however, is to choose just one. Meat is one of the most expensive items on a Thanksgiving menu, and, odds are, if there is an abundance of side dishes, there won’t be a need for as much meat.
Frozen over fresh. As for the turkey, go with a frozen store brand turkey. The savings could be significant over a name brand or fresh turkey. Just remember, frozen turkeys take time to thaw safely in the refrigerator. Plan for 24 hours of thawing time per five pounds of turkey. For example, a 15-pound turkey will take at least three days to thaw in the refrigerator. Remember to place the turkey in a pan to prevent juices from dripping onto other food in the refrigerator.
Make it a potluck. Ask guests to bring a dish to share with everyone else. This way, the expense is spread out over several people and everyone saves money. There are some really great free websites that allow people to sign up to bring certain items. Customizing the sign-up helps ensure that everything is accounted for and that there isn’t a pile of pumpkin pies but no side dishes.
For more information about holiday savings tips, contact Samantha Kennedy, Family and Consumer Sciences agent, at (850) 926-3931, or reach out to your local Extension office.
Unexpected expenses? Be prepared with a “rainy day” fund. Photo credit: UF/IFAS Northwest District
It began as a normal six-month dental check-up – no pain, no problems. After the X-rays, cleaning, and exam, my dentist informed me the X-ray showed an abscess above a back molar. The next thing I knew, I was headed to the endodontist for a root canal then back to my dentist for a permanent filling – wow! Who saw that coming? That was a classic “Life happens” moment!
We all face those unexpected events – a flat tire, a faulty alternator, an appliance on the fritz, a medical emergency. The question is, do we have the funds available to cover it? An emergency, or “rainy day,” fund helps us to handle those surprise expenses more easily, reducing our need to borrow to pay for them.
How much should we have in our emergency fund? A minimum of $1000 is a good starting point – that typically will cover most emergencies. A fully funded emergency reserve is three to six months of expenses; some financial advisors recommend eight to 12 months of expenses. If you are the sole breadwinner in your household, funding it to six months or beyond gives you a greater cushion. What is significant about these numbers? If you were unable to work due to a job loss, layoff/furlough, illness, or a family emergency, you would have funds available to tide you over until you could get back on your feet. Having funds to keep you afloat for a few months removes a lot of pressure and may allow you to explore your options without feeling like you need to take the first job offer that comes along because you “need the money.”
How do you fund your emergency fund? Look at your finances and, if you aren’t already in the habit of doing so, set aside a portion of your paycheck for savings right off the top – pay yourself first! Even if it’s just a few dollars per paycheck, those dollars will add up. If you receive a pay raise, save the difference between the new amount and your pre-raise salary. Your income tax refund is another great way to jump start your emergency fund – use Form 8888 Allocation of Refund to direct deposit your refund into one or more accounts.
It is a fact of life that life happens – be prepared with an emergency fund!
It’s tax time, and many of us will be seeing refund checks soon—time to celebrate!
Now, what are you going to do with all that extra cash?
Maybe you have some bills to take care of, and it’s certainly a good idea to get those off your plate. But after that, let’s say you have some money left over. What then?
Think about putting those extra dollars in a savings account. Or, if you don’t have a savings account, open one. Even if it’s just $100, that first deposit could be the start of a lifelong savings habit.
Which brings us to another question: Why is it important to save?
Let me answer that question with another question: If you had to cover a $1,000 unexpected expense today, could you do it?
These little emergencies come up all the time. Your car needs repairs. You get sick and miss work. You have to travel out of state unexpectedly. These challenges are just part of life, but you can be prepared to meet them.
That $100 you tuck away is not much now, but consider this: If you saved $100 each month for a year, you’d have $1,200 in your bank account. That’s a good financial cushion that can keep you afloat when the unexpected happens.
Need a little encouragement to stick to the savings habit? The Florida Saves Pledge (floridasaves.org) is a great tool for setting financial goals. With this pledge, you’re making a commitment to work toward some type of savings objective, such as an emergency fund, a down payment on a house, or even retirement.
As a Family and Consumer Sciences Agent in Washington and Holmes Counties, part of my job is to help our community members learn to take charge of their money. In fact, there are people like me all over the state helping their neighbors with everything from horticulture to nutrition and youth development. We’re a network of experts who make up the University of Florida’s Institute of Food and Agricultural Sciences Extension. And we’re here to help, today.
