Consumer Blog

Happy International Credit Union Day!

Credit unions are valuable resources in improving your financial position and reaching your money goals. Because credit unions are not-for-profit financial cooperatives, we value people over profit. Montana’s credit unions have always focused on helping to strengthen the financial lives of individuals, families, and businesses across our state.

Identifying where your finances currently stand is the first step to improving your financial well-being. Take a look at our list of questions below to learn how you can assess your financial health.

How prepared are you for unexpected events? Do you have an emergency fund?

Due to unforeseen circumstances, you sometimes may find yourself in a financial pickle. Perhaps you lost your job, got into a car accident, or had a family emergency. Having an emergency fund to fall back on is a lifesaver in situations like these. Most financial experts recommend that you have somewhere between three months and six months of basic living expenses in your emergency fund. This backup fund makes a stressful time more manageable.

What is your net worth? Is it positive or negative?

Your net worth is what you own, minus what you owe. It’s an overall measure of wealth. Knowing your net worth can help identify where you spend too much money. Consider this knowledge like a personal compass, it will help you be wise in your spending. Being able to afford something doesn’t always mean it’s a good investment.

When calculating your net worth, remember to include assets like land, vehicles, and other valuables you own. Need some help with that math? Try using Dave Ramsey’s net worth calculator.

Do you have the things you need in life? How about the things you want?

Prioritizing your needs over your wants takes some discipline. When you’re setting goals, don’t overwhelm yourself with all you need and want on one big list. Break it up into smaller goals and timeframes.

What are the smaller steps to get to your bigger goals? Put the smaller steps in a short-term goal list and the bigger goals you’re working toward in a long-term goal list.

What percent of your debt would you consider high-interest, such as credit cards? Is it more than 50%?

None of us like being in debt, great or small. Once you’ve calculated your situation, take a look at any money you owe and make a plan to diminish your debt. There are many strategies for getting out of debt. Two of the more well-known tactics are the Snowball and Avalanche methods.

• The Snowball Method focuses on paying the smallest debts first and building up to larger debts. The first step is to list all your debts from smallest to largest, then after making minimum payments on all accounts owed, put any extra money towards paying off the smallest debts on the list. As you pay off your smaller debts, you’ll have fewer minimum payments and, thus, more money to apply to your larger debts.
• The Avalanche Method focuses not on the size of your debts, but the interest you are paying on them.  You start by paying the minimum payment on each source of debt and then put any extra funds toward repaying your debt with the highest interest rate.

Are you actively saving for retirement? Do you feel you’re on track to meet your long-term goal?

Although retirement may seem far in the future (or not), planning and saving can and should start now! Whether you are thinking ahead or playing catch up, solidify your retirement goals today. When do you want to retire? How much annual income will you need to live on once you do? These questions will help you figure out how much you need to save for your big quitting day. Check out these resources to evaluate the best retirement plan for you:

• The Millennial’s Guide to Retirement Planning
• Retirement Planning in Your 40s & 50s
• Retirement Savings in Your 60s

Do you have enough insurance coverage — whether it be health or life?

If you have health insurance that exceeds your needs, you could save some cash by shopping around the market for new insurance. If you need additional insurance, planning those expenses in advance will make budgeting for them smoother.

So, the next time you sit down for your monthly budget planning (because we know that you do that) add these six questions into the mix to continually check in on your financial health. Plus, for additional ideas to improve your financial health check out our 6 tips to achieve financial wellness!

If you have financial questions or needs, we encourage you to visit a credit union near you today to schedule a consultation with a financial expert. Our credit unions put members first. We hope these tips help you prepare for your bright tomorrow!