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Getting an Early Jump on Taxes? Here is How to Manage that Money and Grow Your Savings!

Getting an Early Jump on Taxes? Here is How to Manage that Money and Grow Your Savings! Blog image
Free Tools For Understanding Finances Affinity FCU Blog
By: Oscar Cordoba
Manager External Affairs & Financial Education

January 18, 2024

Learning how to manage your money effectively is an essential life skill. Especially during this time of the year when you are looking to get a jump start on filing your taxes and getting back money. With the money you get back from taxes you may want to plan for a big purchase, preparing for unforeseen expenses, or simply aiming to grow your nest egg, striking a balance between managing everyday expenses and boosting savings is key to short- and long-term success. Here are some actionable tips to help you navigate your financial journey.

Establish SMART Goals

Setting SMART (specific, measurable, achievable, relevant, and time-bound) goals is especially relevant when it comes to managing your finances. The practice is simple, first determining what those specific goals are - for example, saving for a down payment on a house, building an emergency fund, or planning for retirement - and then assigning a deadline to meet the goal. The timeline needs to be realistic as it relates to the goal. For example, saving for a down payment on a home will take longer than saving for a new sofa for your living room. These clear goals can help you stay focused and support your financial decision-making process.

Create a Budget and Track Your Spending

One of the most effective ways to manage your money is by creating a budget. Budgeting can feel intimidating but new tools and resources - like our Enrich program - are available that make this process easier than ever. Categorize your expenses into necessities (rent, utilities, groceries), discretionary spending (entertainment, dining out) and debt repayment. Once you have a clear view of where your money is going, you can design your budget tracking in a way that makes sense for you. Budgeting apps, spreadsheets or handwritten logs all work to maintain visibility into how you spend your money, as well as identifying areas where you can cut back or redirect funds into savings.

Automate Your Savings and Fortify Your Emergency Fund

Automatic savings transfers can help streamline your overall savings efforts. Whether it's a small percentage of your paycheck or a fixed amount every month, automating ensures you consistently contribute to your savings without having to think about it. It also allows you to work toward your established SMART goals in an efficient manner.

If you are just starting out on a savings plan, build an emergency fund that includes 3-6 months of expenses. This fund serves as a safety net for unforeseen expenses and ensures you don’t need to dip into your savings or take on additional debt to cover expenses.

Make a Concerted Effort to Pay Down Debt

High-interest debt, like credit card balances, can hinder your ability to save. Focus on paying down these debts by allocating more than the minimum payment each month which reduces interest charges. We offer free credit counseling services that help our members tackle debt challenges while working toward other financial goals.

Uncover Money in Your Budget

More likely than not, there is money hidden in your budget. Start by identifying and removing unnecessary expenses. For example, ongoing subscription services or gym memberships that are no longer in use can be redirected to other areas of your budget or your savings goals.

You can also seek opportunities to become a savvy shopper by seeking discounts, cutting coupons, or comparing prices before making larger purchases. These relatively small changes can make a big impact on your overall budget.

Balancing everyday expenses with growing your savings doesn’t have to be daunting. By setting goals, creating a budget, and making informed choices, you can navigate your financial path confidently.

This information is for informational purposes only, is intended to provide general guidance, and does not constitute legal, tax, or financial advice. Each person's circumstances are different and may not apply to the specific information provided. You should seek the advice of a financial professional, tax consultant, and/or legal counsel to discuss your specific needs before making any financial or other commitments regarding the matters related to your condition.

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