Most people are familiar with the term “debt consolidation,” but they might not understand exactly what it means. Yes, it’s a way to reduce debt and pay less interest; however, the term itself can be intimidating. Often, members feel the process is too involved, or they’re confused about the benefits.

Not to worry. We’re here to unpack everything you need to know about debt consolidation – including how to use this process to eliminate debt quicker and pay substantially less interest along the way.

What is Debt Consolidation?

Debt consolidation is the process of combining multiple credit cards or personal loans into a single loan. The goal is to obtain more favorable terms, such as a lower interest rate. And with only one payment to manage monthly, it’s much easier to get control over your finances.

Example:

Imagine you have three credit cards with different balances and interest rates:

Your total outstanding balance is $4,250. Through debt consolidation, you can combine all these credit card balances into a new loan or credit card. Ideally, you’ll secure a lower interest rate, resulting in instant and significant savings.

Types of Debt Consolidation

Two of the most popular means to consolidate debt are through a credit card or personal loan. Each offers unique benefits.

• Credit Card Balance Transfer

Using the example above, you could transfer all those outstanding balances to a new, lower-rate credit card. Now, you’ll have one credit card with a balance of $4,250. With a lower interest rate, you’ll instantly reduce how much you were paying monthly. And with less going toward interest, you can chip away at the debt quicker.

• BENEFIT: A major benefit of a credit card balance transfer is that you choose how much to pay monthly (making at least your minimum payment). This feature gives you added flexibility – allowing you to pay more for some months than others.
• DRAWBACK: One downside is that if you only pay the minimum payment (or close to it) monthly, your outstanding debt could become a long-term hurdle. So, you want to ensure you have a repayment plan in place so that you’re reducing the balance consistently.

• Debt Consolidation Loan

A debt consolidation loan acts the same as a personal loan. Your outstanding credit card balances will be transferred to a new, unsecured loan (ideally, with a lower interest rate). Much like a car loan, you’ll have a predetermined monthly payment. Your loan will also have a set term – letting you know exactly when you’ll be debt-free.

• BENEFIT: With fixed monthly payments, you’ll typically pay off the debt much faster than if you were making payments on a credit card (where you choose the payment amount). And by eliminating the debt quicker, you’ll save substantially more interest.

• DRAWBACK: Unlike the credit card option, you won’t have as much flexibility. Your payment is fixed, and the full amount due is required monthly.

Don’t Be Intimidated About Debt Consolidation

Yes, financial jargon can often be confusing – leading to stress and anxiety. However, debt consolidation is a quick and easy process that instantly saves you money. Here’s a step-by-step guide on how to consolidate debts.

1. Identify Debts to Consolidate.

First, you’ll want to make a list of all the credit cards, personal loans, or payday loans you might have open. If you’re unsure, you can access a free copy of your complete credit report at www.AnnualCreditReport.com. Your credit report will list all credit and loan accounts open in your name.

2. Gather Records for Each Debt.

Next, you’ll want to gather your loan paperwork or most recent credit card account statement. Put all these documents into a folder.

3. Stop By the Credit Union.

One of our team members will review your current loans with you. Then, you’ll receive options, such as a credit card balance transfer or debt consolidation loan. You’ll have the opportunity to ask questions and review different scenarios for each option – including payoff dates and potential interest savings.

4. Finalize Your Debt Consolidation Loan.

Once you decide on the type of debt consolidation loan (credit card or personal loan), the credit union will pay off your existing debts. Then, they will transfer those amounts to a new, single loan with the credit union.

It’s that simple! Our team will do all the heavy lifting – identifying which loans you can consolidate and providing options with the greatest savings potential. All you need to do is gather paperwork and initiate the process. Again, your goal is to secure a lower interest rate so you can save on interest immediately.

We’re Here to Help!

Once you understand how debt consolidation works and the immediate savings it provides, you’ll wonder why you didn’t jump on board sooner. It’s a simple process that often sounds intimidating. However, it’s one of the easiest ways to put more of your hard-earned money back in your pocket – and reduce debt quickly.

Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.

As a parent, you are the most significant influence on your children’s financial habits, now and later in life. Providing a good example and helping them set healthy money habits now will set them up for success in the future.

Teaching your children about finances is not as complicated as it may initially seem – in fact, it’s something you can do every day. You can turn your day-to-day activities into teachable moments for your family. Use trips to the grocery store or ATM as opportunities to help them learn valuable money lessons. Being open about topics like spending money, the importance of saving, and needs vs. wants will help cultivate savvy financial habits.

If improving your family’s financial awareness is one of your goals this year, we’ve got you covered! Use the following tips to help teach your children valuable money management lessons.

Kids Ages 2 – 5

Although children at this age won’t fully understand the concept of money, it’s never too early to begin teaching basic lessons. Here are some easy ways to get started:

• Incorporate opportunities like pretending to play grocery store or restaurant to introduce the basic concept of exchanging goods for money.
• Teach them the names of different coins and bills and let them handle money.
• Discuss the differences between wants vs. needs. For example, needing groceries to make dinner vs. wanting candy at the checkout line.
• Introduce the concept of saving money by providing them with a piggy bank or savings jar. Young children are visual learners, and this is an excellent way for them to see how saving works.

Kids Ages 6 – 9

As your children progress through early school and learn basic arithmetic, use these skills to enhance their knowledge of money.

• Introduce the concept of comparing prices when at the grocery store or looking at a restaurant menu.
• Create a budget for a trip to the grocery store and let them help you decide what to get to stay within budget. Incorporate coupons to show ways to save money and have your child look for those products in the store.
• If your child earns an allowance, begin teaching them to save a portion of their money toward future goals.
• If there is a toy that they have their eyes on, create a savings chart to help them visualize how saving money will help them achieve their goal.

Kids Ages 10 – 12

This age is the perfect time to begin introducing your child to banking and letting them make some of their own financial choices.

• Bring your child to the credit union to open their first savings account. Explain how banking works and begin making regular deposits with them into their account – both at the branch and digitally.
• Include your children in conversations about lunch money and shopping for school supplies. Test their skills by giving them a budget and list. Then, let them shop for specific items within the store.
• Your kids might start earning money for performing chores around the house or for helping neighbors. Encourage them to deposit some of their earnings into their savings account.

Kids Ages 13 – 15

As your child progresses through middle and early high school, they’ll be introduced to more advanced money concepts. Use these opportunities to enhance your kid’s money management skills.

• Begin discussing stocks and other advanced investment opportunities. You can make it a family activity and let everyone choose a stock as “theirs.” Then, monitor the stocks and discuss how everyone’s choices fluctuate and perform overall.
• Introduce the concept of an emergency fund and how having money set aside for unexpected expenses (or impromptu activities with friends) is important.
• Since they will start learning to drive soon, talk to your kids about cars. Look at vehicle prices, compare new vs. used, discuss maintenance costs, etc.

Kids Ages 16 – 17

Your child is now at the age where money is likely part of their everyday life. They are driving, possibly beginning their first jobs, and spending more time being independent. All these events provide opportunities to teach valuable money management skills.

• If your child works a part-time job, review their paystub with them. Discuss earnings, taxes being taken out, and the importance of saving. You can also enroll them in direct deposit to have their checks automatically deposited into their credit union account each payday.
• Now that your child is driving regularly, they may inquire about getting their first car soon. Take them with you to look at vehicles and compare prices for different features. This is an excellent opportunity to review needs vs. wants!
• As your kid becomes more independent, open a checking account at the credit union and include a debit card. Teach them how to review their balance and transactions through digital banking. Work with your child to create a basic budget or way to track their expenses.

Kids Ages 18 & Up

Although your child is now legally an adult, there is still much financial wisdom for you to bestow upon them. There are many milestones they will achieve soon, and you want to ensure they are ready.

• Once they turn 18, your young adult can open their first credit card. While many parents are worried about this step, it’s an excellent opportunity to teach them real-life money management skills. And it allows you to introduce the concept of credit reports and scores.
• If your young adult is heading to college soon, involve them in discussions about tuition, financial aid, meal plans, books and supplies, and other costs. Work on creating a budget for their college life and test drive it in the months before they head to school.
• If your young adult is starting a full-time job, encourage them to contribute around 15% of their income to savings and suggest setting up automatic transfers. Discuss the differences between gross and take-home pay and how to factor that into their budget. Encourage them to start saving for retirement through their employer-provided 401(k) or set up an Individual Retirement Account (IRA).
• As they start saving for their first apartment or home, look at prices with them and help them be realistic about housing costs. Be transparent with your young adult about your mortgage or rent costs, utilities, and other things they need to consider. Remind them that their total housing costs should only be around 30% of their income.

Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.

Crafting Financial Goals for the New Year & Beyond

New Year’s Day marks one of the most popular moments when it comes to setting goals. Resolutions allow you to start the year off with personal improvement on your mind, giving you something to strive for in the months ahead.

One of the most popular goals people set is improving their financial situation. The challenge with financial goals is that they are usually longer term, meaning it’s often difficult to stay motivated when the prize is so far away.

In this article, we’ll provide tips on how to break longer-term goals into bite-size pieces to significantly improve your odds of success. Keep reading to learn how to achieve your financial goals in the new year and beyond.

Step #1: Identify Your Goals

What financial objectives are you hoping to achieve in the months ahead? Start by listing out areas of your finances that you believe will relieve stress or strengthen your financial position. Use this step as a brainstorming session to gather ideas. With financial goals, you’ll often find many sections overlap – revealing a single tactic that can help improve multiple areas.

For example, common financial resolutions include:

• Reducing or paying off debt.
• Improving your credit score.
• Establishing or growing your emergency fund.
• Saving for retirement.

Trying to achieve all these goals at once can be challenging, leading to a higher chance of not fulfilling any. Instead, look for overlapping features or tools that can address the bigger picture.

A common underlying theme for these goals is the need for a realistic and active budget. Following a budget can free up funds to reduce debt and ensure other monies are set aside for savings. Reducing outstanding debt will instantly help you start to improve your credit score.

Look for ways that your financial goals are linked. Then, identify the steps to help you work smarter, not harder.

Step #2: Get Specific

Once you identify your financial goals, it’s time to get as specific as possible. You want to avoid overly broad objectives. For example, stay away from goals like “Grow my emergency fund.” Instead, identify a particular amount you want to reach, establish a deadline, and list the purpose:

I will increase my emergency fund to $3,000 by December 31^st.  

It’s much easier to stay motivated and monitor your progress with precise and attainable objectives.

Step #3: Break Up Your Goal

Many financial goals are longer-term, making it harder to stay motivated. Imagine you’re saving for a down payment on a new house you plan to purchase in three years. Your financial goal might look like this:

I will save an additional $15,000 over the next three years as a down payment on my new house.

The thought of saving $15,000 can be daunting. Instead, break that goal down until it’s more manageable for you. Start with annual goals, then keep going until you’re comfortable:

• I will save $5,000 per year for the next three years.
• I will save $1,250 per quarter for the next three years.
• I will save $416.67 per month for the next three years.
• I will save $192.31 per paycheck for the next three years. (assuming you’re paid biweekly)

Putting aside $192.31 per paycheck is much easier on the eyes than the $15,000 lump sum. While this goal was lofty, smaller financial goals could appear minuscule and easily attainable once you break them down.

Step #4: Schedule Your Actions

This next step is crucial in helping you stay motivated and achieve your goals. You need to identify the actions you must regularly take to ensure you’re on track. For example, if you want to improve your credit score, your schedule might look like the following:

• Review current credit score monthly.
• Schedule all loan payments and monthly bills on my calendar.
• Make payments at least 7 days before the due date.
• Review my budget at the beginning of the month.
• Balance my budget at month-end.
• Monitor credit card transactions and balances weekly.

While these might seem like a lot of steps, most can be accomplished in a few quick minutes. The best way to ensure you stay on track is to set reminders on your phone or schedule appointments with yourself on your calendar. By blocking off a set time for yourself monthly and treating it as an appointment, you’ll be more likely to stick with it.

Step #5: Hold Yourself Accountable

A final and crucial component of setting personal or financial goals is holding yourself accountable. Keep track of your progress and regularly check in to ensure you meet your deadlines. Consider sharing your goals with a trusted friend or family member who can act as an accountability partner.

Setting rewards for completing your goals by the deadline is another way to stay motivated. Or, if you respond better to negative reinforcement than positive reinforcement, you can consider imposing a “penalty” if you get off track. Determine the most effective accountability method for you and incorporate it into your plan.

Bonus: Use Additional Tools

There are numerous tools and resources available to help you achieve your goals. For example, payroll deduction allows you to set up specific amounts to automatically be withdrawn from each paycheck and deposited into the account of your choice. This service is ideal if you are working on saving goals or want to ensure you never miss a loan payment.

Additionally, there are many apps and websites that will help you create and manage budgets, check your credit score, and set reminders on your devices. Explore which tools best complement your financial goals and commit to using them regularly.

We’re Here to Help!

Setting financial goals helps you stay focused on your priorities and empowers you to take the necessary steps to achieve the life you envision. Regardless of your financial goals this year, the most important thing is to start taking steps toward attaining them. By regularly checking in to evaluate your progress, holding yourself accountable, and taking advantage of the useful tools available, you will be on your way to achieving your goals before you know it!

If you want to open a savings account or have questions about the tools available to help you achieve your financial goals, we’re ready to help. Please stop by  or call 732-634-0600 to speak with a team member today.

Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.