Follow the tips from the American Bankers Association below to get started.
Set up an organized system for filing your receipts and financial information. Consider buying a shredder to eliminate receipts when no longer needed and to avoid identity theft.
Create a Budget
Track your income and expenses to determine how you spend. Establishing a budget will help you pay down debt and save at the same time. Use a computer software program or basic budgeting worksheets to create your budget and review it regularly.
Lower your Debt. Establish a budget to pay down debts while you save.
Points to consider when cutting debt:
Save for the “Unexpected and Beyond”
What Is Elder Financial Abuse?
It’s a crime that deprives older adults of their resources and ultimately their independence. Anyone who sees signs of theft, fraud, misuse of a person’s assets or credit, or use of undue influence to gain control of an older person’s money or property should be on the alert. Those are signs of possible exploitation. Older Americans that may have disabilities or rely on others for help can be susceptible to scams and other fraud. Advances in technology can also make it difficult for seniors to know who to trust and what’s safe.
Despite these threats, taking simple steps to safeguard personal information and being aware of warning signs can protect aging men and women from financial abuse.
Tips for Seniors: What should you do to protect yourself?
What should you do if you are a victim of financial abuse?
Never give your Social Security number, account number, or other personal financial information over the phone unless you initiated the call.
Questions? Please contact Consumers@aba.com for more information
The following steps outline your process. It’s important to keep accurate records of your spending so you’ll spot places where you can save money and know how much you can reasonably spend.
Where Do You Stand?
Did you have money left over at the end of the month – or too much month left at the end of the money?
If your income and expenses are EQUAL…
You might be living paycheck to paycheck. Cut expenses and develop a savings plan in case of emergencies or unexpected expenses.
If your income and expenses equal each other, but only because you’re using credit to survive and paying only minimums each month, you may need to talk to a debt counseling service to help you get back on the track to live within your means.
If you have MONEY LEFTOVER at the end of the month…
You’re doing a good job of managing your expenses. Here are some suggestions for the leftover money:
If you DON’T HAVE MONEY LEFTOVER at the end of the month…
Questions? Please contact Consumers@aba.com for more information.
Note that you may have to pay for the numerical credit score itself.
For more information on debt management, contact the National Foundation for Consumer Credit www.nfcc.org.
The American Bankers Association suggests the following tips to help save for it:
Start by determining how much you’ll need for a down payment. Create a budget and calculate how much you can realistically save each month – that will help you gauge when you’ll be ready to transition from renter to homeowner.
Set up a separate savings account exclusively for your down payment and make your monthly contributions automatic. By keeping this money separate, you’ll be less likely to tap into it when you’re tight on cash.
It’s a good idea to check rates for your car insurance, renter’s insurance, health insurance, cable, Internet or cell phone plan. There may be deals or promotions available that allow you to save hundreds of dollars by adjusting your contracts.
With online banking, keeping an eye on your spending is easier than ever. Track where most of your discretionary income is going. Identify areas where you could cut back (e.g. nice meals out, vacations, etc.) and instead put that money into savings.
Many states, counties and local governments operate programs for first-time homebuyers. Some programs offer housing discounts, while others provide down payment loans or grants.
Saving enough for a down payment can be daunting. To avoid getting discouraged, break it up into smaller goals and reward yourself when you reach each one. If you need to save $30,000 total, consider treating yourself to a nice meal every $5,000 saved. This will help you stay motivated throughout the process.
Start with an evaluation of your financial health. Figure out how much money you have for a down payment or deposit on a rental. Down payments are typically 5 to 20 percent of the price of the home. Security deposits on rentals are usually about one month of rent and more if you have a pet. But be sure to keep enough in savings for an emergency fund. It’s a good idea to have three to six months of living expenses to cover unexpected costs.
Consider all of your current and expected financial obligations like your car payment and insurance, credit card debt and student loans. Make sure you will be able to make all the payments in addition to the cost of your new home. Aim to keep total rent or mortgage payments plus utilities to less than 25 to 30 percent of your gross monthly income. Recent regulatory changes limit debt to income (DTI) ratio on most loans to 43 percent.
A high credit score indicates strong creditworthiness. Both renters and homebuyers can expect to have their credit history examined. A low credit score can keep you from qualifying for the rental you want or a low interest rate on your mortgage loan. If your credit score is low, you may want to delay moving into a new home and take steps to raise your score. For tips on improving your credit score, visit aba.com/consumers.
Create a hypothetical budget for your new home. Find the average cost of utilities in your area, factor in gas, electricity, water and cable. Find out if you will have to pay for parking or trash pickup. Consider the cost of yard maintenance and other basic maintenance costs like replacing the air filter every three months. If you are planning to buy a home, factor in real estate taxes, mortgage insurance and possibly a home owner association fee. Renters should consider the cost of rental insurance.
Generally, the longer you plan to live someplace, the more it makes sense to buy. Over time, you can build equity in your home. On the other hand, renters have greater flexibility to move and fewer maintenance costs. Carefully consider your current life and work situation and think about how long you want to stay in your new home.
Questions? Please contact Consumers@aba.com for more information.
Coping with Debt
If you are a homeowner experiencing difficulty keeping up with your mortgage payments, it can leave you feeling vulnerable. Being proactive and educating yourself on the different options to prevent foreclosure will make the process less stressful, help you make educated decisions, and get access to the resources you need to keep your home.
Here are a few basic tips that can help you prevent foreclosure:
COMMUNICATE: If you are starting to have financial difficulties and having a hard time paying your mortgage, make sure you contact your lender and respond to any correspondence you may receive from them.
READ: Look for your loan documents and understand what your mortgage rights are if you can’t make payments to your lender.
SPEND LESS: If you want to keep your home you will have to review your finances and figure out what areas of spending need to be cut or reduced and applied to your mortgage. Example of areas you might be able to trim include cable and eating out frequently until you are back on track with your mortgage.
AVOID FOR-PROFIT FORECLOSURE PREVENTION COMPANIES: These for-profit organizations claim to help you keep your home but will charge you huge fees that can be used towards a mortgage payment instead. Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Their counselors are certified and trained in consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.
Most reputable credit counselors are non-profits and offer services through local offices, online, or on the phone. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate non-profit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be good sources of information and referrals.
But be aware that “non-profit” status doesn’t guarantee that services are free, affordable, or even legitimate. In fact, some credit counseling organizations charge high fees, which they may hide, or urge their clients to make “voluntary” contributions that can cause more debt.