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How We See It

Aaron May, Advertising Coordinator

Aaron May, Advertising Coordinator

September 28, 2016

Thinking Forward: A New Way to Look at Personal Finance

Do you ever feel like you’re stuck living in the past? The calendar has today’s date, but the bills in the mailbox are a constant reminder of yesterday’s adventures – or misadventures. Financial stress often hits people like a bolt of lightning when they see the credit card bill after a summer vacation, holiday shopping, or some other unplanned expense. For those who live paycheck to paycheck, it can feel like the next several months of work are dedicated to paying off the bills that have accrued. Then, like hamsters on a wheel, we repeat the process year after year.

A recent study indicates only 37% of respondents have money in savings to cover a financial emergency, such as a $500 car repair or $1,000 medical bill. The rest of us plan to pay for unexpected expenses by reducing our lifestyles (23%), turning to credit cards (15%), or asking friends and family for loans (15%). Therefore, there is a major breakdown occurring between defining what needs to be paid and planning how to pay for it.

I’m not trying to sound like a TV pitchman, but what if there was a better way? What if I told you that you can pay for vacations, Christmas gifts, and other expenses without the fear of opening your mailbox to see a “past due” statement? Well, there is a way, and it may be easier than you think. It involves shifting the way we plan our spending by incorporating designated savings accounts into our monthly budget.

Basically, establishing designated savings accounts allow you to pay for major expenses in advance by saving a small portion of the total price each month until you reach your goal. For example, if you are planning to spend $400 on Christmas gifts, you can save $40 each month from January through October and be able to pay cash for your presents. The same concept also works for vacation planning and home repairs, or even school supply shopping and pet vaccinations. The added benefit of using designated funds is it reduces financial stress. Just imagine how relieved you would feel when you can come home from a vacation and not have to pay off the credit card bill. 

Designated savings accounts are part of a strong financial foundation, which also includes establishing a pre-planned, written budget and an emergency fund for truly unplanned expenses, such as a car accident, injury, or job loss. While these accounts function similar to an emergency fund, they essentially add another layer of financial security by specifically identifying common expenses.

The true key to success in personal finance is recognizing that lasting change comes over time. Learning to write a budget takes discipline, and it may take a while for emergency and other savings funds to grow. But the results of a well-planned budget will last for years to come. 

Take time to invest in your future instead of paying for the past. 


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