7 Bad Financial Habits You Need to Break Right Now
Human beings are habit-creating machines, craving any mental or physical shortcut that lets us focus on higher-level thoughts, such as what's for lunch or developing theories about Netflix dramas.
Bad money habits are more difficult to steer out of than other automated behaviors like driving a car. Why? Financial peace of mind is a much more subtle reward than the satisfaction of navigating a half-ton piece of metal through city streets without death or injury.
Still, every person who is good at money learned good habits, which means you can, too. "What we know from lab studies is that it's never too late to break a habit. Habits are malleable throughout your entire life," Charles Duhigg, author of "The Power of Habit," told NPR.
Here are seven financial habits you should break before you go broke.
1. Stop spending more than you earn
Who do you think you are, the U.S. government? America's fiscal deficit is projected to be $559 billion in fiscal year 2017, according to the Congressional Budget Office.
How is your own personal deficit? About one in five Americans spend more than they earn and 38% break even, research from the National Financial Capability Study shows. Your goal must be to join the 40% of Americans who spend less than they earn.
2. Stop ignoring your bills
Here's how not to handle your obligations: When a collection agency calls, you pay the bill. This kind of financial firefighting only guarantees you'll veer from crisis to crisis as your credit score burns.
Payment history carries huge weight on your financial future; more than one-third of your credit score is judged by your ability to pay your power bill, car insurance and credit cards on time. If you can't, work out a payment plan with your creditor before it goes to collections.
3. Stop using your credit cards like free money
Credit cards are a weapon in your financial arsenal. Like all armaments, they can be used in strategic defense or to shoot yourself in the foot. Too often, it's the latter -- the average U.S. household with credit card debt has $16,748 of it.
That plastic in your pocketbook is the greatest enabler of bad money habits, allowing you to spend on a whim and forsake all budget plans. Sticking to a budget should be your most faithful money habit.
4. Stop thinking you're not smart enough
Today, consumers must take control of their own financial lives, whether it's understanding health insurance or guiding their own 401(k) plans to invest for retirement. Even so, during the rollout of the Affordable Care Act, many consumers struggled to understand basic health insurance terms such as "deductible," a survey by the Kaiser Foundation found.
Learn the lexicon of finance to manage your money better.
"I used to catch myself saying, 'Investing is hard. I just don't understand it.' This gave me permission to avoid learning how to invest," wrote Ann Marie Houghtailing, author of "How I Created a Dollar Out of Thin Air." "Now I say, 'Investing is a skill. You just have to start small.'"
5. Stop making it hard to save
Old habits die hard, and one of the oldest habits is using checks to pay bills or make savings deposits. "Personal finance habits take longer to change than the way you might switch from one smartphone to another. That's because money is so important to us," Fred Davis, a professor of Information Systems at the University of Arkansas, told Marketplace.
Set up automatic transfers for bill payments. Also automatically have 10% or more of your paycheck sent directly to your savings account. These two steps will go a long way toward building good money habits and credit scores with little effort.
6. Stop complaining about your paycheck
Whatever energy you're spending complaining about the size of your paycheck takes energy away from finding ways to improve your bottom line. Think you're being underpaid? Negotiate a raise or at least talk with your boss to understand what's needed to see a bump in pay. If you're valued, your supervisor will see the implicit threat that you may leave for a higher-paying job. Start looking for that more lucrative gig while you're at it.
In the meantime, investigate ways to build other streams of income and seek ways to improve your skills.
7. Stop thinking more cash brings happiness
OK, money does bring happiness, but only to a point. Purchasing experiences and giving to charity have a much longer shelf life for our well-being, research suggests.
Replace bad habits with good ones
Breaking your go-to financial routines will take time and effort. Subbing in habits that improve your bottom line -- paying bills on time, using technology and increasing your income and savings -- will be worth the work in the long run.
Kevin Voigt is a staff writer at NerdWallet, a personal finance website.
Your Credit Score Decoded!
What makes up your credit score? Why is it so important? Sue DeStephano, President/CEO breaks down that score and tells you what it really means! Just click on the image below.
First Capital Federal Credit Union breaks down the budgeting process for you! Just click on the image below to find out how you can get started!
Financial Tips for Recent Grads Entering the Workforce
College is in your rearview mirror, and you're about to enter the working world. Although snagging a job certainly calls for a celebration or two, it is also time to start tackling the various financial responsibilities that await you, like saving for retirement and improving your credit score.
Here's an overview of where to get started, including several best practices to help you along the way.
Keep credit card debt to a minimum
In 2014, households with unpaid credit card balances owed an average of about $15,000 on those cards, which can damage credit scores and make it difficult to qualify for low interest rates on auto loans and mortgages.
Once those first paychecks arrive, it may be tempting to max out your plastic for some new shoes or that must-have gaming console. Do everything in your power to resist that initial urge. While it's OK to splurge from time to time, it's important to keep debt as low as possible, especially if your plastic carries a high interest rate.
Contribute to a retirement account
Stashing away cash for retirement starting at an early age is one of the best money moves you can make. Your savings will have decades to multiply thanks to the wonders of compound returns, which lets you earn money on what your money earns.
If your employer offers a 401(k) retirement plan, be sure to take advantage of it. Start by contributing at least 10% of your monthly income and try to gradually work your way up to 20%. Individual retirement accounts, or IRAs, can also provide investment vehicles in which most people can put up to $5,500 each year. Both 401(k) and IRA contributions may reduce your taxes, too.
Build an emergency fund
Gone are the days in which you could call up your parents for a quick injection of cash. Once you begin earning a steady salary, set some money aside for unexpected expenses. An emergency fund should consist of three to six months' worth of living expenses. Because you'll never know when you might need that money, keep it somewhere safe but within easy reach, like your savings account.
Keep an eye on your credit score
Although it might be hard to believe, it's likely that eventually you'll want to settle down and buy a house. To do that, you're probably going to need to apply for a mortgage. The better your credit score, the lower your interest rates will be, which could save you tens of thousands of dollars over the course of a 30-year mortgage.
To improve your credit score, pay your bills on time and restrain your card use to 30% of your credit limit. Regularly practicing this kind of responsible behavior should give your score a substantial boost over the years.
The bottom line
Although it'll take some effort, making smart money moves at a young age doesn't have to be a huge hassle. Just remember to pay attention to your retirement savings and make sure that your spending habits don't result in massive amounts of debt. Before you know it, you'll be able to toast to a secure financial future.
© Copyright 2016 NerdWallet, Inc. All Rights Reserved
A Message from First Capital's New President/CEO!
Budgeting Tips for Winter Gift Purchases
It's a feeling that will sound familiar to many: The holidays are approaching and you don't yet have a plan for what you need to buy -- or worse, you don't have the money. If this sounds like you, don't panic. The season is still salvageable. Here are some planning tips.
Find the money
The average American will spend $805.65 this year on gifts, food, decorations and other holiday items, according to a National Retail Federation survey. But that doesn't mean you need to be the "average" American.
Figure out what you absolutely must spend. That's subjective, of course. Your 2-year-old grandchild might not need a gift, but he or she is going to get one from you.
Now that you have the number, do you have the money on hand? If not, your best options likely involve a personal loan or credit card. Interest rates are often lower at credit unions than at banks, whether for loans or credit cards. First Capital Federal Credit Union, for instance, offers a six-month introductory credit card interest rate of 2.99% and holiday personal loans at 8.99%. Your interest rate will depend a great deal on your credit score.
Keep age and relationship in mind
Now the hard part: taking names and making a list. Write down each person you want to give a gift to, then estimate how much you want to spend on that gift. Add up the numbers, and then, if you need to, start chopping.
Grandchildren and non-adult children are a must, but remember to be age-appropriate. Infants don't understand gifts; give diapers or baby clothes to the parents. Toddlers really only relish ripping open the packages, so it's perhaps a bit easier to scrimp on the contents. Then comes the toy era, the gadgets era and the gift card era.
Adult children can be harder on your pocketbook. They might love a new tablet or smartphone, but what they really might need is new tableware. They're making their own budgets, so they understand practicality.
Parents and grandparents probably don't want you spending your money on them. In many cases, they already have everything they want, or at least need. But they still deeply appreciate a gift. Keep this under $50 or go in together with your siblings on a bigger gift.
Friends understand; a card or phone call can generally suffice. For work colleagues, bring in some sweet treats.
Shop -- and make next year easier
You have the money and you've allotted it. Now the buying. If you've procrastinated, consider NerdWallet's four tips for limited time shopping: organize your plan, including dates and times for shopping, use apps to help you out, shop online as early as possible to avoid delivery snafus, and look for deals even when you're in a hurry.
With more time to plan, your options improve. Many credit unions, including First Capital, and banks have Christmas club-type accounts that allow you to set aside a little each month with no service fees, and actually pay you a bit of interest. Doing this through direct deposit eases the pain. In addition, several major retailers have layaway programs, where you pick the gift, pay a little each month toward the cost and pick up just before the holidays.
Lynn Mucken, NerdWallet
© Copyright 2015 NerdWallet, Inc. All Rights Reserved
7 #CreditUnioning Tips for Young Millennials
Once you start receiving your first paychecks after graduation, knowing how to spend or save your money wisely can be tough. While you may be able to do your #creditunioning with just a few taps on your phone, managing money well is much more complicated.
Here are a few tips to help you get started.
1. Budget using apps
Tracking how much you spend weekly and monthly shows you where your money goes and how you can save more. You can use a budgeting app that tracks your cash automatically or one where you enter information manually. Choose an app that lets you spend as little or as much time on budgeting as you want. From there, you can identify your total fixed expenses, such as rent and car payments, and more flexible costs such as shopping and dining out.
2. Set up automatic transfers to savings
When you have a rough idea of how much you can save regularly, create a recurring transfer from your checking account to a savings account. By making savings automatic, you can get used to spending "below your means" and never have to worry about remembering to transfer.
3. Avoid overdrawing your checking account
Before you pay rent or spend any other big chunk of money, take a look at your checking account's available balance. This can prevent you from spending more than you have in your account. If you overdraw, you may be charged a fee.
4. Establish credit
Student loans and credit cards can help you build good credit -- as long as you stay current on monthly payments and don't overuse your cards. Your credit score, which shows how responsible you are with credit, is an important factor that lenders check before approving car loans and mortgages. The better your score, the lower the interest rate you which you may be eligible.
5. Repay debts strategically
If you have debts from multiple credit cards and student loans, pay the minimum on each and then contribute more to your higher-interest debts. By making those a priority, you can reduce how much interest you're paying faster than by treating all debts the same.
6. Start an emergency fund
Being financially prepared in case of health emergencies or unexpected unemployment can save you from going into debt. Have a separate savings account just for this purpose -- don't mix it up with your regular savings. A good rule of thumb is to save enough to pay three to six months' worth of living expenses.
7. Set long-term savings goals
Consider saving for retirement in an employer-sponsored 401(k) plan or individual retirement account. When you start saving early, you take advantage of compounded returns to make more money off your contributions overall.
From smart budgeting to setting goals, make good money choices now. Since time is on your side, you can benefit from building credit and saving early to be ready for big financial decisions in the future.
Spencer Tierney, NerdWallet
© Copyright 2015 NerdWallet, Inc. All Rights Reserved
Spruce Up Your Finances With a Spring Cleaning
As piles of snow fade to distant memory, it's time again for an annual spring cleanup. While you get your house in order, don't forget your finances. They'd probably benefit from some tidying up as well.
Clear the clutter
Not being able to find important documents is a guaranteed source of heartburn, and part of the problem is that most of us hang on to much more than is necessary. Aim to go paperless wherever possible, and in the meantime, shred and trash these documents today:
- Tax records over 7 years old
- Pay stubs reconciled with W-2s
- Expired service contracts and warranties
- Insurance policies no longer in effect
Your most important documents -- birth certificates and marriage licenses, Social Security cards, car titles and mortgages -- should be stored in a safe deposit box or fireproof container. Separate the remaining paperwork into active and inactive files. The active file will contain things you refer to regularly, such as income-tax-related papers, account statements from financial institutions, loan documentation and active insurance policies. Keep these in an easily accessible place. Move outdated documents to the inactive file for the recommended time period, and then shred them.
Take control of debt
Get a fresh start this spring by cleaning up debt. When bills from multiple sources become unmanageable, consolidation can reduce your total monthly expense and pave the way to pay off debt faster. Financial institutions such as First Capital Federal Credit Union offer a number of debt consolidation solutions, including home equity financing that combines low interest rates with the possibility of deducting the interest from your taxes. If you're carrying a high-interest mortgage, it may make sense to refinance and take advantage of today's interest rates, which remain near historic lows.
This would also be a great time to tailor savings accounts for life's milestones and surprises. Savings accounts work well for emergency funds, and a club account can help make a special vacation become reality. Share certificates and Coverdell IRAs provide a way to handle education costs, while traditional and Roth IRAs can help ensure a comfortable retirement. If saving consistently is a challenge, an automatic savings plan that puts a portion of your paycheck into savings makes the process easier.
Finally, check your credit, review beneficiaries, evaluate your insurance coverage, and update your budget.
A thorough spring cleaning of your financial house may seem like a lot to do. But the effort will prove its worth with improved financial health and peace of mind for many seasons to come.
By Roberta Pescow, NerdWallet
5 Tips to Help You Fight Identity Theft
Your identity is at risk of being stolen every day, from potential data breaches at retailers and health-care centers to online hacking, ATM skimming schemes and good old-fashioned thievery.
Here are some tips on protecting yourself and keeping your personal information secure, as well as what to do if you fall victim.
Safeguard your information
You need to memorize and keep all of your personal information private, even from family and friends. This includes your personal identification, account and Social Security numbers, credit card data and logon information, and passwords. Never let a website store your information or card numbers.
Create strong passwords for your accounts; your passwords should combine a mix of letters, numbers and special characters. It's also a good idea to change passwords periodically, and don't use the same passwords for all your accounts.
Monitor your accounts
Check your credit and bank account statements frequently to spot any unfamiliar transactions. You should also take advantage of the free credit history checks you can make each year at each of the three major credit-reporting bureaus.
If you find any suspicious activity or errors on your report, notify the corresponding bureau immediately. Some lenders, like First Capital Federal Credit Union, help customers keep up with fraud schemes and hacker threats.
Cautious card use
Only use your debit or credit card at places you know you can trust. Standalone ATMs can be hot spots for skimming scams, so be wary. Hackers sometimes attach electronic card readers to these machines that record your account information to steal it.
At restaurants and other places where your card goes out of sight, it's best to use cash whenever possible and keep track of receipts.
Pay online safely
When making online payments, look for a website security seal that says "TRUSTe." This indicates that the site is in good standing with the Federal Trade Commission's regulations regarding privacy and security. Secure sites also include "https" in the web address.
Report identity theft
If identity theft happens to you, contact the financial services provider associated with the account. You can opt to have your credit report frozen as well.
Then, call the FTC at 877-438-4338 or file a report online. Fill out a police report as well, to ensure the crime has been documented.
Identity theft can happen to anyone, but you can make yourself less vulnerable by taking this proactive approach to protecting your personal information.
By Anna Helhoski, NerdWallet
410 Days at FCFCU!
So there I was, December 16, 2013, fifty-nine years old and it was my first day of work at First Capital Federal Credit Union. After thirty-one years of successful employment at a previous employer, I was struggling through the simplest of things, like just finding my office. We have all been there.
Before long with the help of Andrew, Devan and others, I could find my office on a fairly consistent basis. But I also found something else, something I didn't expect. I found a management team that cared more about their staff and members than their own personal goals.
"How could this be?" I thought. How could any business succeed in a very competitive industry when they don't always put dollars and cents first? Yet there it was every month, always positive budget numbers, always near the top compared to our peers. Then it struck me, it was all of us working together for the members that makes us great! I am truly thankful to be part of this team! I guess they are wrong, you can teach an old dog new tricks.
By Chuck Burkhardt, VP of Information Technology
Welcome to our New Blog!
Welcome to First Capital's new blog! We are excited to offer you this opportunity to communicate with us on any topic of your choice. Our first question to you is "DO YOU KASASA?" If you don't, you're missing a great opportunity not offered by other banks and credit unions in Central PA. Check it out! Great rates and deals...Kasasa®
By Dennis Flickinger, President/CEO