Financial Tips for 2020

Best Ways to Save: Top 5 Tips

As part of our 20 Financial Tips for 2020 series, we are here to share some of our advice on saving.

1. Do Not be Afraid to Return

Look, we get it, sometimes you just can’t resist making an impulse purchase. We do it too! What’s important is that you remember you CAN return items. Most retailers have a return policy that aims to make the customer happy; if you get home and decide your purchase was a mistake, don’t be afraid to return it. If you’re unsure of your favorite stores’ return policies, you may want to look them up. If their policies tend to be unforgiving, consider shopping at other retailers.

2. Get. Those. Points.

Yeah, you guessed it, we are talking Rewards Credit Cards. Rewards Credit Cards are an awesome way to get a return on your expenses. The return comes in the form of points that can be redeemed for a wide array of items, sometimes even cash back. You’ll want to do some research to see what card works best for you. Love to travel? Look into a Travel Rewards Card that makes your points worth more when used on travel purchases. You’ll also want to consider any bonus point opportunities to determine which Rewards Card is right for you. A word of caution though: only spend money you have. Just because your Credit Card has a limit of $25,000, does NOT mean you should be spending $25,000. Work within your budget, make purchases on your Rewards Credit Card, and pay that bad boy off at the end of each week.

A fun side–note: Here at Wheelhouse Credit Union, we offer both a Rewards Credit Card and a Rewards Debit Card, so you can get the most out of all of your purchases. And, you can COMBINE your Credit Card and Debit Card reward points to earn more rewards and/or cash back. Plus, if you would like to start instilling good money habits in your children, consider opening them an Access Checking Account (for ages 16 to 25). Access Checking comes with a Debit Rewards Card so your kiddos can earn points too! Isn’t that awesome?! We think so.

3. Forget the Traditional Checking and Savings Accounts

So you still have that traditional savings account that was required when you opened a traditional checking account 50 billion years ago? Yeah, it is time to upgrade both of those my friend. Let’s break it down. Think about that checking account that is earning zero, zip, nada, nothing, on your money. Think about that savings account that is earning you around 0.10% APY*.

Now let’s take a look at this scenario: Traditional checking accounts do not pay interest, so in this case you are earning zero on the money in your checking. Additionally, if you have a traditional savings account earning you 0.10% APY*, and you have say, $10,000 in this account, you would be earning $10 in a year. Sounds lame.

So how about this? Put your money in an account like our Inspired Checking1 and Inspired Savings, which will earn you up to 1.00% APY* and up to 0.50% APY* respectively. So now you are earning 1.00% APY* on the money that you were earning nothing on, and you are earning 0.50% APY* on your savings. If you had $10,000 in your checking account, you just made you $100 in a year. Can I get a “so much better than $10?”

4. Pay off Higher APR** First

You may be wondering why this is under “Savings” and not “Money Management.” Well, honestly, most of these tips could go under either category. The reason we put it here is because it is saving you money in the long run.

Let’s look at an example: If you have a credit card at 16.00% APR* and an auto loan at 3.00% APR*, you will want to pay these in order of interest, high to low. Ideally, you pay the minimum amount on each loan and use whatever extra money you have to pay down the higher interest (APR) debt. By paying the minimum, you avoid extra fees and charges. Then, by paying more on the high interest debt, you spend less on interest in the long run, ultimately saving you money.

Here are some fictional numbers for a nice visual.

$20,000 on the credit card (x 16.00%) = $3,200 in interest per year
$10,000 on the auto loan (x 3.00%) = $300 in interest per year

In this scenario, if you focus on paying down the smallest balance first, you will actually be paying more money in the long run. Why? Because your $20,000 credit card debt is racking up more than 4x the interest than your auto loan is, every year. So if you paid the $10,000 auto loan off in a year, you also gained approximately $3,200 of debt from the credit card. On the flip side, if you paid the $20,000 credit card balance off in two years, you will have gained approximately $600 of debt from the auto loan. That is approximately $2,600 that you saved yourself from spending on interest in just two years.

Not accounting for the minimum payment made which decreases the overall, interest-accruing, balance.

5. Think About Purchases in Terms of Hours Worked

A simple and effective tactic to saving instead of spending is to think about the cost of a purchase in terms of how many hours of work it takes you to make that amount of money. This is a great way to understand the cost of an item and the value you perceive it to have. So if you make $15 an hour, you should divide the cost of the item, say $100, by your hourly wage. Is that item worth around 6 to 7 hours of work? It may be, it may not be.

Coming up in our next blog, tips on security and keeping your finances safe.

*APY = Annual Percentage Yield.
**APR = Annual Percentage Rate.
1Inspired Checking is a variable rate account and rate and yield are subject to change without notice. Inspired Checking requires monthly direct deposit of $450 or more, an active online banking registration and eStatements within 90 days of account opening. Electronic deposits are defined as ACH or Automatic Clearing House deposits. If requirements are not met and maintained, account will be converted to a Basic Checking Account. Membership is required.

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