Ensuring Financial Stability

(This article appeared in the January/February 2008 issue of The American Postal Worker magazine.)

Joyce B. Robinson, Research & Education Department Director

A sufficient amount of money in savings accounts can protect you from unexpected financial hardships, such as those associated with illness or divorce. Financial advisors recommend that everyone have at least three months’ salary in the bank for emergencies. If you don’t have at least that amount, you should make this your first priority when setting your financial goals. You can start by saving just a little money out of each paycheck.

Better Budgeting

To create and maintain an individualized budget, experts at Consumer Credit Counseling Services, (CCCS), recommend these six simple steps:

Record income: Document what you expect to earn this year and factor in raises and other income such as tax refunds;

Identify expenses: Don’t minimize or exaggerate what it costs to run your household; include average monthly spending on hobbies, dining out, and salon services;

Pay yourself first: Include monthly savings, no matter how small. Small savings grow quickly;

Adjust as you go: Squaring expenses with income often will require some tweaking. If you need help with the fine-tuning, consider seeking help from a nonprofit organization such as CCCS;

Banish debt: If the bulk of your monthly income currently goes toward indebtedness, consult with an agency such as CCCS about consolidating your debt, and structuring reasonable monthly payments; and

Track results: Check your budget monthly. When you see how quickly you are moving toward your long-term goals, you will realize how helpful a budget can be.

Eliminating Credit Card Debt

In today’s society, credit is such a way of life that you may think it’s impossible to eliminate credit-card debt. But here are some tips on how to do just that:

Select a credit card as a “keeper:” Choose one credit card to be used only for emergencies, such as major car repairs;

Shred all other credit cards: Just cut them up;

On your budget, list credit cards by amount owed: The card with the lowest balance should be listed first and the highest listed last. Record the balances owed, along with the minimum payment due each month;

Pay smaller balances first: Start with the credit card with the smallest balance and pay it off first, even if it means paying more than the minimum payment;

Apply those payments to another card: Each time you pay off a card, apply those payments toward the next lowest balance and add them to the “payment due.” In this way, you can measure the progress you are making as the balances disappear; and

Avoid the “consolidation” trap: Many people consolidate credit-card debt, work it down or pay it off, and start all over again: They get new credit cards and quickly find themselves back in the same dire straits. Unless advised to do so by a nonprofit consumer credit agency, avoid this practice.

Start Saving Today

When you get a tax return or a raise, put part of the money in savings. One way is to save with the Thrift Savings Plan. This plan offers an employer match of funds deposited by FERS employees. Try to save the maximum amount allowed. When you pay your monthly bills, set aside money for holiday spending, a vacation, college tuition, home ownership, retirement, or for emergencies (a medical crisis, a surprise household expense such as a heating/cooling breakdown, a car breakdown, etc.).

If your current debts and budgetary practices are keeping you from saving money, be sure to get help — nonprofit consultations are available nationwide. During a private credit-counseling session, an advisor typically will outline an individualized budget and debt-management plan designed to lift you out of your fiscal woes and help you build a strong financial future.

For more information visit the CCCS Web site, at www.cccsatl.org.