Understanding your spending habits and developing a budget inclusive of a spending plan are critical to the success of your future financial goals as these will allow you to manage your money more effectively. With these tools, you will be able to take advantage of opportunities you might otherwise have missed and you may have extra money in hand by identifying areas where you can save for future financial goals. Can you spend less on your day-to-day expenses? How much impulse buying do you do?
Why Create a Budget?
Setting a budget and sticking to it
Whatever your monthly income, creating a budget is the first step in making your money work for you. Knowing how much you have to spend is a key factor when it comes to knowing how you can spend it. Creating a budget also helps you achieve your savings goals. The only way to estimate how much you can save for the future is to determine exactly how much you currently spend on a monthly basis, and how much is left over to save.
Budgeting to pay yourself first
When building your budget, you should establish the goal of saving 10% of your monthly income. If you cannot meet this goal immediately, consider reducing your monthly spending on certain items, or consider consolidating your debts with a low-rate loan.
Budgeting for long-term financial goals
Whether you are saving for college, buying a new car, paying off credit cards, or saving for that trip to Egypt, managing your monthly expenses is the first step to financial stability. It will also let you know how much you can set aside per month and will enable you to calculate how long it will take for you to reach your financial goals.
The Basics of Budgeting
- Keep track of your daily expenses for a month by writing them down.
- Organize your monthly spending into a budget with three categories:
- Essentials (rent, food, utilities, commuting costs, etc.),
- Discretionary (gifts, electronics, etc.), and
- Luxuries (jewelry, travel, etc.)
- Minimize your monthly expenses by limiting your discretionary and especially your luxury spending
- Check your monthly statements on a regular basis
- Automatically include 10% of your paycheck in your budget
Reduce your Debt
Personal debt is an ongoing and growing concern. If you find yourself overwhelmed, there are ways to reduce your debt and get back on track.
Consider the following ways to trim spending and pay down debt:
- Reduce your monthly spending
Try to reduce your monthly spending by establishing a budget - and stick to it. Before buying something ask yourself the following questions:
- Do I really need it?
- Do I have to have it today?
- Use your savings to pay down debt.
If you have money in a savings account earning 3% and you are paying 10%-18% on debts, you are losing money. Use your savings to pay down your debt, or consider applying for a Signature loan to consolidate your debt.
- Use only one credit card-preferably the card with the lowest APR.
Combining balances from several high APR credit cards to one card with the lowest APR, reduces the amount of interest you pay, and simplifies your debt management. Consider transferring your balances to a competitively low rate UNFCU VISA® Credit Card.
- Increase your monthly payment.
Any extra money you can contribute on a monthly basis will eliminate your debt significantly faster. For example, suppose you have a credit card with a balance of $1,000 at 18.46% interest. If you stop using the card and make minimum monthly payments of 2% it would take you 8 years (or 96 months) to pay down that debt. If you add $45 to that minimum monthly payment, the debt would be paid in full in approximately 18 months.
- If you have multiple debts, pay more to the smallest debt first
This strategy eliminates one debt more quickly, which allows you to increase your payment to the next largest debt.
Remember, UNFCU may be the best resource to assist you in managing your debt, and put you on the road to financial stability.
Why you Need an Emergency Fund
Build a financial safety net
It is essential for everyone to have an emergency savings account to cover the cost of unexpected urgent situations, such as:
- Loss of income from the loss of employment or unexpected life event;
- A medical emergency or long term healthcare issue;
- Emergency repairs, such as a leaky roof.
Your emergency fund should be able to cover these costs without having to take a loan or using your credit card. It is always better to "borrow" from your own funds, than have to pay money back with interest.
How much should you have in your emergency fund?
The minimum amount should be five (5) to ten (10) months worth of basic living expenses. For single people with no dependents, five (5) months' worth is usually sufficient. But couples or anyone with dependents should put aside ten (10) months worth of expenses. The more people you support, the more likely you are to have unexpected or unplanned costs.
How to begin and maintain an emergency fund
The easiest way to build your emergency fund is to regularly set aside money in your emergency fund, and use the fund only for emergencies. A good place to save these funds is in an account that you can easily access in case of emergency. For instance, a UNFCU Savings Account, a Money Market Account, or a Club Account may work for you.
Paying for College
With tuition costs on the rise, saving for college has never been more important. However, there are several financial solutions available to you:
Many students need to borrow money to pay for college expenses. The US Government offers Federal Student Loans to students and parents who meet eligibility and US citizenship requirements.
Alternative loan solutions
- You may not be eligible for Federal Loans if you are not a US citizen. Therefore, we also offer a low-rate UNFCU Education Loan This loan can be used in conjunction with or in lieu of Federal Loans.
- If you are a homeowner, you also have the option of using the equity in your home as a student loan resource. A UNFCU EquityLoan or EquityLine can often offer a lower rate than other student loan options.
Start saving now for your children's education
- Financing a college/university education is becoming more and more challenging. Each year tuition costs increase and the trend is expected to continue.
- As a parent/guardian, it is essential to start saving for your children's education as soon as possible. The sooner you start saving for college, the more time your money will have to grow. Even modest contributions to your educational fund can add up to substantial savings. For example If you start putting aside $200 a month as soon as your child is born, you can save approximately $70,000, by the time your child is 18 (assuming a 5 percent rate of return).
Finding an affordable home loan
Buying a home is one of life's milestones and is not a task to be taken lightly. When purchasing a home, be sure to do your homework. It is important to note that what you will spend on a new home depends on many variables, such as negotiating the final price and choosing the right home loan.
The right financing for you
As a member of UNFCU, you have a valuable resource at your fingertips: the UNFCU Mortgage Centre. Our Mortgage Representatives will take the time to help you compare your loan options and explain how you can get the best loan to suit your needs.
Home equity loans
- Contact a Mortgage Representative.
- Visit our Mortgage Centre
(Only available for properties located in the US)
If you already own a home and would like to use it as equity to borrow, contact
a Mortgage Representative. Learn more
about home equity loans.
Down payment for your home
Your lump-sum distribution can help you purchase a new home. If you would like to use these funds for a down payment, speak with a Mortgage Representative or, visit here for general home loan information.
Buying a home in your homeland
As a member of the United Nations community, you may live in more than one country over the span of your career. And currently you may be stationed away from your country of origin. You travel to your homeland as regularly as you can, and you may even dream of retiring there one day.
It is never too early to start making that dream a reality. Thanks to a variety of loan options, buying a home in your homeland-whether you currently reside there or not-could be easier than you think. Learn more about an International Home Loan.