Near Year’s resolution: Reach financial goals by learning to manage money
Common Cents classes
The financial literacy classes are held at the Vail Public Library over five weeks. Each class goes from 5:30 to 6:30 p.m. and is free and open to the public. Attendees are not required to attend the entire series. For more information and to RSVP, contact Mary McDougall at 970-479-2186 or email@example.com.
Jan. 11: Goal setting and financial planning
Jan. 19: Key investment concepts
Jan. 26: Retirement savings vehicles
Feb. 2: Common investment types
Feb. 8: Managing money during retirement
Editor’s note: This is the second article in a five-part series about New Year’s resolutions, running daily through Tuesday. Search “New Year’s resolutions” at http://www.vaildaily.com to read additional articles in the series.
VAIL — With the New Year, there’s no better time to tone your financial muscles or set some monetary goals. That could be getting out of debt or saving up for a big purchase, but to reach most of these goals, you’ll have to know a thing or two about basic finance management.
That’s where a basic financial literacy education can come in handy, and it turns out that many Americans could use a refresher course.
“Many Americans don’t practice consistent budgeting and saving methods. It’s not a habit,” said Mary McDougall, circulation manager at the Vail Public Library and retired bank president. “It’s never too late and never a bad time to start these habits, especially to make financial fitness a New Year goal.”
That’s why the Vail library is hosting Common Cents Colorado, a free financial literacy program that begins Jan. 11. Vail is among the first handful of Colorado libraries to offer the program, which is made possible by a grant through the American Library Association. Common Cents will start off with five one-hour seminars, held weekly, that cover financial skills such as budgeting, basic investing, saving for retirement and more. Additional topics and classes are planned through 2017, depending on what attendees and community members want. The library is also interested in holding seminars at workplaces and organizations around the Vail Valley, McDougall said.
“These will be held in a free, stress-free environment. No one will be selling anything, and no one speaking will be representing a certain financial institution or business,” she said. “The goal is to identify needs and what people need and want in the community and help them achieve those goals through the seminars and programs we provide.”
Are you ready to control your money instead of letting your money control you? Here are several ways to start.
Make a budget
It’s difficult to get ahead financially if you don’t know what you’re spending.
“(At Common Cents,) we’ll talk about how to make a balance sheet, how to create a budget, how to track your income and expenses and how to use those tools and measure those goals,” McDougall said. “Those are basic things that anyone can do to get started. That makes it easier for them to make decisions about saving, investing and planning for the future. I believe that those core tools are things that people need help with, regardless of who you are.”
Many people view making a budget with trepidation or worry that the exercise will force them to cut their spending. However, a budget can actually help you “find” money, said financial advisor Tina DeWitt, of Edward Jones Investments.
“Most people do not know how much money they spend month to month,” she said. “By going through a budget and analyzing their credit card statement, cellphone bill and utilities, you get a good idea of how you’re spending. What I find is that people often haven’t looked at their bills for a long time, so that cable bill that used to be $50 has now crept up to $80, and they didn’t even realize it. They can look at their spending habits and find excess cash.”
Savings and retirement
So if you find that excess cash in your budget, then you should blow it immediately on the latest outdoor gear you’ve been eyeing, right? Not so fast, financial advisors say.
Everyone should be saving in some way or another, whether it’s for an emergency stash fund, for a new home in the future or for retirement. There’s no doubt it can be very difficult to save. The key, said DeWitt, is to “pay yourself first.”
“What you do is you put your savings in as soon as you receive your paycheck, or make it automatic. People hope to do something at the end of the month, but then spending takes over,” she said. “If you put away 5 (percent) or 10 percent or whatever you’re able to put away first, you’ll find you make it work with whatever is left in your check.”
Advisors say that everyone should try to have at least six months of living expenses saved up. After that, make sure you’re putting away for retirement and saving to reach your financial goals.
“One of the biggest financial mistakes I see in the valley is people wait too long to start saving for a house or retirement,” DeWitt said. “Many people are not taking advantage of the retirement plan through their employer or opening an IRA on their own.”
Getting out of debt
According to the Federal Reserve, Americans were carrying about $3.34 trillion in outstanding consumer debt last year. A big part of that comes from student loans and credit card debt. That’s where making a budget, finding extra money to help pay your debt, categorizing your types of debt and making a plan for payment are invaluable. Pete Thompson, who teaches a financial literacy class at Colorado Mountain College in Edwards, said many people fall into the debt trap because they don’t have a good understanding of the financial system.
“In my classes, we talk about the financial system of the U.S., and how you fit into it. If you don’t understand it, it is going to take advantage of you,” he said. “A big mistake is not understanding the concept of compounding — that you’re paying interest on the interest. The system is really rigged against you unless you understand it.”
The other aspect of debt, or staying out of bad debt altogether, is living within your means. Thompson said that’s one concept he hasn’t figured out how to teach people to do.
“I swear it’s the most important thing,” he said. “That’s the No. 1 rule of my own financial commandments.”