BCR_Finance Matters_October 2020

The time to start saving for next Christmas is now!

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| FINANCE MATTERS

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MONEY WATCH

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How to monitor your money when relying on cashless spending

Cashless spending has long been a The following are some tips to make convenient way to make purchases, it easier for consumers to monitor and that convenience became even their spending when they’re not using more evident in 2020. The outbreak cash. of the novel coronavirus COVID-19 n Use an app to track spending. If in the winter of 2019-20 forced people you’re using an app like Venmo to across the globe to change how they make purchases, you can just as easlive, and those changes even affected ily use an app to track that spending. how items are Mint is a free app paid for. that automatically According to and cateAccording to the Centers updates the Centers of gorizes how your Disease Control money is spent. of Disease Control and and Prevention, Users can see how touching or hanthey’re spending Prevention, touching or dling certain their money in items, including real time, making handling certain items, cash, could exit easy to know pose people to including cash, could expose where they stand the COVID-19 with their fivirus. That led people to the COVID-19 virus. nances. many people to n Recognize the rely more heavily temptation assoon cashless payciated with cashless spending. Studies ments, including traditional options have shown that cashless spending like credit or debit cards, but also rela- tempts people to spend more than tively new cashless options, including buying with cash. A recent study from apps such as Venmo. While these op- the Massachusetts Institute of Techtions can be very convenient, cashless nology asked business students to bid payments can make it more difficult on basketball tickets. Some particifor people unaccustomed to making pants were told they would eventually purchases without cash to monitor have to pay with cash, while others their spending.

were told they would need to use a card. Those who paid by card spent more than twice as much as those who were told they had to pay with cash, which illustrates just how easy it is to spend more on transactions that do not involve cash. By recognizing that temptation in advance, consumers can better prepare themselves to remain disciplined when using cashless payments like credit cards or mobile apps like Venmo. n Pay off your balance each month.

If your preferred mode of cashless

spending is credit cards, then make sure you pay off your balances each month. This not only saves you from potentially hefty interest charges, but the knowledge that you will need to pay off your purchases at the end of each month can help you stay more disciplined with your spending.

Cashless payments have made it easier to purchase goods during the COVID-19 outbreak. But it’s imperative that consumers take steps to control their spending when going cashless. TF209319

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HOLIDAY FINANCES

Tips to stick to a holiday budget

The holidays are an exciting, fun and joyful time of year. And for many people, the holidays also are expensive.

According to the Motley Fool Company, a financial wellness resource, the average American spent $882.45 on Christmas gifts, food, decorations, travel, and other holiday-related expenses in 2019. Around 56 percent of gift shoppers set a budget for holiday spending, but only 64 percent stuck to it. In addition, 21.5 percent of respondents went into debt due to holiday shopping.

Who doesn’t want to have a super holiday with delicious foods on the table and lots of presents to share with family and friends? While that’s tempting, such a bounty should never result in financial peril. These six strategies can make it easy to establish and stick to a budget this holiday season. e 1. Budget for everything. When workhing out holiday spending plans, factor min all of the expenses associated with tthe holidays – not just the most obvi-

ous, like gifts. Costs for gas, parking lot fees, greeting cards, postage, travel expenses, and much more should be included in your final number.

2. Determine how much you can spend.

Money for gifts and other holiday expenses should ideally come from your disposable income. Look at your finances in advance of the holiday season and figure out how much extra cash you have for the holidays, and use that figure to determine how much you should spend. Find ways to make up any deficit by curtailing expenses like dining out or entertainment extras. Many people plan to use credit cards to pay now and worry about the aftermath later. Only use credit cards if you have the money in the bank and can pay off the entire bill when the balance due is in January.

3. Set a spending limit for individuals. Based on your numbers and how much you plan to spend overall, start allocating money to categories, including gift recipients. Come up with a spending range for each person and

stick to it.

4. Pay in cash as much as possible.

It’s easy to know what you’re spending when using cash as opposed to credit. There is some risk with carrying around cash, but that risk may be offset by the benefit of spending only what you can afford to spend.

5. Track all purchases. Save the receipts and keep a running total of expenditures so you can see how your spending is measuring up to your budget. If necessary, scale back on one category if you’ve tipped the scales in spending on another.

6. Shop sales and deals. High-end stores may have the impressive tag, but their prices can set you back. Instead, look for comparable gifts at discount stores and other retailers. Also, if you must use a credit card, use one that earns you a cash-back bonus for added savings.

A holiday budget is a must to avoid overspending and finding yourself in debt early next year. GG209246

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Ho. . . Ho. . . Hold on to that budget!

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SAVINGS

Saving for next Christmas funds, start now

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By Kevin Hieronymus khieronymus@bcrnews.com

Have you checked your savings account and worried that you may not have enough money to buy gifts for every one on your Christmas list this year? Don’t think there’s enough time to put some extra cash aside to get those gifts?

Sara Hudson, retail manager of Heartland Bank and Trust in Princeton, has good news.

“There is still time to save for the holidays. It’s never too late,” she said.

Heartland Bank and Trust offers a “Funds Tracker,” which enables customers to have a convenient and comprehensive view of their online accounts at Heartland Bank and other financial institutions in one place.

Customers can manage cash flow, set a budget and monitor spending and savings goals all in one convenient location.

This is a free tool that is part of Heartland’s online banking product.

Hudson said Heartland also has customers that open a dedicated account for “holiday savings,” and transfer SHAW MEDIA PHOTO/KEVIN HIERONYMUS money into it throughout the year.

Cathie Etheridge (from left), Tim Kunkel and Sara Torri can help you save money for a Christmas fund at First State Bank in Princeton.

See FUNDS, Page 5

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FUNDS

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First State Bank offers a Christmas Club. Funds are automatically transferred monthly out of your checking or savings account and put into your Christmas Club account. Members then receive a check in mid-October each year. “It’s more of an old-fashioned savings that more and more people are looking to start over again, start small and build their savings,� said Cathie Etheridge, customer service representative.

Now would be a good time to start planning for next year, Etheridge added. “We can still open one and then you’ll have a whole year,� she said. “I would recommend coming up before the holidays while you’re thinking of it, ‘Oh, I wished I would have some Christmas money,’ and then you’ll have it for next year.�

If you have procrastinated this late for Christmas savings this year, you will need to pay out a lot more, Kunkel said. “Any time is a good time to set that up. If you started it now for next year, it would be pretty cool if you decided how much you wanted to set aside for next year,� he said. “For this year, it would obviously take a higher percentage of your pay to do what you wanted to do.�

Sara Hudson, retail manager of Heartland Bank and Trust in Princeton.

FINANCE MATTERS | Shaw Media/ October 2020

FROM PAGE 4 “A great idea is to set up an automatic funds transfer,� she said. “This can be set up to automatically transfer funds from a checking or savings account, into a dedicated account for savings. The customer can set this up to transfer any amount of money and at any frequency. “Set your goal, set transfers up automatically and just watch what you can accomplish.�

Hudson said people could set aside money each day they many spend on some splurges for their holidays needs down the road. “Think about how much you spend daily on lunch out, or that iced coffee.

Instead of indulging in these treats, put that amount of money into a savings account and watch it grow. It adds up quickly,� Hudson said.

Tim Kunkel, community president of First State Bank in Princeton, said the best way to save money for Christmas shopping is through a separate savings account. “Setting up your own savings account is probably the best way to do it,� he said. “I would say it’s best for people to try put away what they think is best toward it whatever they think is a good amount to have. Kind of funny, because years ago, $15 a month was a pretty good number, but that doesn’t get you very far any more. Now it’s more like a $100 a paycheck, I would

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CREDIT

How to begin building a credit history

Credit scores play a significant role in the lives of millions of adults across the globe. A strong credit history can help people secure more borrower-friendly terms on home and auto loans, potentially saving them thousands of dollars.

Credit scores are not typically on the minds of young adults who are years away from purchasing their first homes. However, young adulthood is a great time to begin building a strong credit history. By laying a strong foundation now, young adults can reap significant rewards when they try to finance major purchases, such as cars and homes, down the road. n Open a credit account. It’s important to begin building credit histories once you’re eligible, as young people with no credit histories may find it hard to get loans or even apartments of their own. Cosigners can help, but loans secured with cosigners won’t do much to improve young people’s credit scores. Borrowers want loan applicants who have shown they can pay their own bills, and length of credit history is one of many variables that are used to determine borrowers’ credit scores. A long history that documents a young person’s track record of paying bills on time is to his or her advantage. Many credit card companies issue credit to applicants as young as 18, so young people should not hesitate to begin exploring their options. The online financial resource NerdWallet notes that young people with no credit history may need to apply for secured credit cards. Unlike more traditional cards, secured cards are backed by upfront cash deposits.

However, secured cardholders must still make payments on time and will still incur interest charges if they don’t.

These cards can be a great way for young people to begin showing lenders their creditworthiness. n Apply for an installment loan. Installment loans are another great way for young people to build their credit histories. According to the credit reporting agency Experian, auto loans are among the easiest types of loans to obtain. Young borrowers may need cosigners, though some lenders may not require that. Young people who want

to buy new vehicles can avoid leaning on their parents to facilitate their purchases and instead take out an auto loan that requires monthly payments.

A track record of making installment loan payments on time and in full is a great way for young people to prove their creditworthiness and improve their credit scores. n Ask your landlord to help. Young people who rent and pay their rent on time might finally be able to benefit from that. In the past, the only way rent payments were included on credit reports was if tenants were delinquent

with their rent payments and subject to lawsuits or were reported to collection agencies. However, Experian recently started to include positive rental payment information in their credit reports. Young people with histories of making rent payments on time can ask their landlords to report their positive payment histories to the credit bureaus.

Strong credit histories can benefit adults from all walks of life. It’s never too early for young adults to begin building their financial reputations. TF203762

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VEHICLE FINANCING

Consumers in the market for new vehicles must make a number of decisions before getting behind the wheel of a new car. Some may debate whether or not to buy a new or preowned vehicle, while others may wonder if buying or leasing is best for them. People who decide to lease will likely have another decision to make when their leases reach maturity: should I return my car or buy it?

Drivers who have never leased a vehicle may not even know that lessees have the option to buy their cars at the end of their lease agreements. The idea of leasing suggests drivers would always be better off turning their vehicles in, but there are situations in which keeping the car can benefit buyers. n The buyout figure is less than the market value of the vehicle: Lessees who don’t drive much might find that their vehicles are worth more at the end of the lease than the buyout figure indicated on the agreement. That means lessees can buy the vehicle for less than its market value. They can then flip the vehicle and reap a profit or simply keep driving the vehicle. n The excess mileage penalties are

steep: Drivers also may be better off buying if they significantly exceeded their mileage restrictions. Lease agreements typically include per-mile penalty fees for every mile drivers go past the mileage limits indicated in their agreements. These fees can quickly add up, but drivers won’t have to pay them if they choose to buy their vehicles at the end of their leases rather than returning them. n The condition of the vehicle: Drivers who took care of their leased vehicles and even those who did not may benefit from keeping their cars when their leases reach maturity. Keeping a leased vehicle that’s been well-maintained can save drivers money over the cost of buying new vehicles, as the buyout value on their lease is likely a lot less expensive than the cost of a new car or truck. But keeping vehicles that have enduring considerable wear and tear also may be wise, as leasing companies may charge hefty wearand-tear penalties.

Buying a vehicle at the end of a lease may seem unusual. But there are various instances when buying makes more sense than turning the vehicle in.

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When buying a leased vehicle makes sense

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