Tips from the Better Business Bureau to enrich your financial skills
Money is one of the top stressors for most Americans in almost every survey; often ranking No. 1. Even before the pandemic, 30% of Americans said they were within three paychecks of needing to borrow money or defaulting on one or more bills.
Our BBB believes that helping consumers and businesses with all skills to improve their understanding and knowledge of money management is essential to strengthening our market.
As members of the community, we’ve been an active partner of Chicago Money Smart Week, promoting and providing tools to help people with their money affairs because, as they say, “Money Doesn’t Come with instructions”.
This year, Chicago Money Smart Week will be held from April 9-16. It’s a timely reminder to review your finances and engage in some “spring cleaning” of your financial house.
Two of the pillars to taking control of your finances are setting up a monthly budget spending plan and learning the power of compound interest.
A few items are needed to establish your spending plan: a sheet of paper, a pencil and a calculator. Write down your sources and amounts of income for the month and your expenses. Be sure to include income and expenses that may fall outside of a given month. (taxes, insurance premiums, etc.)
Many people who start a spending plan are shocked by various monthly services and bills which in many cases can be reduced or eliminated.
It’s hard to argue that saving more is detrimental to your financial health. A spending plan can give you ideas for cutting costs to increase your savings.
Various accounts attribute the following phrase to Albert Einstein: “The most powerful powerful force in the universe is compound interest.” Time and a disciplined savings plan could allow you to take advantage of this powerful financial strength.
The power of years of compound interest can be dramatic, especially for those who start saving earlier in life. There is an oft-told golf story about composition. If you bet a penny per hole to a friend and agree to double the bet on each hole, on the fifth hole you will bet $1.60 per hole. By the time you started on the 18th, you would be playing for $13,107.20.
Seemingly small, initial savings amounts can add up to dramatic long-term balances over time through the power of compounding.
Compound interest can work for you or against you. The average credit card debt of American families is $6,270, according to the most recent data from the Federal Reserve. Paying off high-interest debt is key advice for financial health.
Another way to increase your savings is to participate in a deferred savings plan. If your employer offers a sponsored retirement plan with matching contributions, set a goal of “maximizing the match.” The target contribution percentage would initially be based on maximizing your employer’s contribution.
Money is complex, and one of the other frustrating issues people report is finding the right finance professional to get help and help you get peace of mind.
We’ve partnered with the Financial Planning Association of Illinois to provide consumers with a powerful, free e-book filled with easy-to-understand information to help them build a well-coordinated financial plan.
The free eBook is intended to help consumers navigate and understand the often complicated and confusing world of financial services.
The guide is designed to help you:
• Determine your financial planning needs;
• Identify strategies to engage better quality professionals;
• Learn to avoid high pressure sales tactics; and
• Identify resources and links to help you in your search for a finance professional.
The core of BBB’s mission is to educate and protect consumers and promote better businesses. We are honored to partner with the Financial Planning Association of Illinois, another organization with standards of excellence, to bring this valuable information to help people in a time when finances have never been more important.
• Steve J. Bernas is President and CEO of BBB Chicago and Northern Illinois and can be reached at [email protected]