from staff
Family Foundations, the consumer credit counseling organization, released a 12-step formula for financial stability. Family Foundations is a nonprofit, community-based organization and a member of the National Foundation for Credit Counseling.
“A new year can mean a new you, at least a new financial you,” said Dawn Lockhart, president of Family Foundations.
“Put one of the steps in place each month, and at this time next year you’ll see that new financial you. Even better, put one tip in place each week, and you’ll be on your way to financial stability at the end of the first quarter of 2011,” said Lockhart.
The steps are:
• Consumers should review their credit reports. The contents of a credit report may have errors that can affect financial lives, so it’s important to review reports regularly. Consumers are allowed one free report from each of the three major bureaus once every
12 months. Reports can be accessed from www.annualcreditreport.com.
• Reduce debt. Piling new debt on top of old is a red flag, a sign of living beyond one’s means. Family Foundations provides financial coaches and consumers might qualify for its “Debt Management Program,” a systematic way to pay off unsecured debt with a monthly payment. Family Foundations said that it credits 100 percent of the debt payment to the client’s creditors, unlike debt settlement companies that can charge thousands of dollars.
• Commit to save. Ideally, a consumer should deposit 10 percent of each take-home check into a savings account. If that’s too big a leap, start with 1 or 2 percent and increase it over time. Find extra money to dedicate to saving by putting raises, bonuses, birthday checks and any other windfall money into savings.
• Become financially organized. Consumers should create a personal financial center for easy access to the family’s financial records. It can be as simple as an accordion folder. The point is to know where everything is. Place original documents, such as a will or a mortgage, in a safe-deposit box, and keep a copy at home.
• Avoid late or overdraft fees. Pay bills the day they arrive. Don’t forget to note an ATM withdrawal or debit purchase. Late fees can show up on a consumer’s credit report and lower his or her credit score. Use online banking to review transactions regularly. Also, consider paying bills online.
• Track spending for 30 days. Write down every cent that is spent because it’s often the small, miscellaneous expenses that wreak havoc with budget plans. At the end of the month, review the spending to figure out where that hard-earned money is going.
• Create a spending plan that is workable. Make sure the plan is one that will work for the family. If the plan is too strict, no one will stay on board, but if it’s too lenient, goals won’t be reached.
• Take advantage of free money. Employees should contribute the maximum amount to the retirement plan at work, or at the very least, meet the matched amount, or else free money is being thrown away. Options such as Flexible Spending Accounts or Health Savings Accounts can lower taxable income.
• Have an annual insurance checkup. Make an appointment with the insurance provider and confirm that the coverage is what is needed. Ask how to lower premiums and whether there are discounts available for loyalty, good driving or bundling multiple policies.
• Plan to purchase a home. A home can stabilize monthly payments and build equity, but it’s important to be prepared. Family Foundations offers “Homeownership Preparation Education.”
• Save for college. Too many students graduate from college with student loans that can take decades to repay. Investigate the numerous options available for college savings, such as 529 plans or prepaid tuition plans.
• Remember to budget for “fun” times. Budgeting is often considered a burden rather than a tool to meet goals. Don’t forget to put a line item for fun into the budget. Specials and coupons can stretch entertainment dollars.
Family Foundations has trained and certified credit counselors who offer financial management and debt reduction services that are low-cost. For information, call 396-4846 or visit www.familyfoundations.org.