Set Yourself Up for Financial Success in 2019
With the New Year underway, I’ve started to reflect and plan for the 2019 year that includes personal goals, financial goals, and health goals. I’ve teamed up with BECU, a member-owned credit union focused on helping increase the financial health of its members, on a multi-part content series that will span over the next several months exploring these areas to help you get ahead this year.
During this process, I went through a budgeting class at BECU HQ located in Tukwila, Washington with financial educator, Stacey Black and other experts who were extremely knowledgeable about budgeting, goal setting, debt management and the pitfalls of credit scores. It was an eye-opening experience where I learned quite a bit in a short amount of time. I’ll walk you through some of the things I learned during this session.
Let’s start with budgeting. When it comes to budgeting, there are a number of ways to cut back, and when I say “cut back” I’m referring to every charge you make whether it is via cash or credit card. This includes buying clothes, coffee purchases, going to concerts, going out to restaurants, golfing, etc. The goal here is to decrease or eliminate the charge as best as possible. This could be putting a limit on how much you can spend on clothes per month, making coffee from home or buying 1 coffee a week vs. daily coffee purchases, going to 2 concerts a year vs. 1 a month. It’s the little improvements you do that will help you start saving for something you really want.
A great debt reduction strategy is something called the debt snowball. How the debt snowball works is you pay the smallest balance due first, then move along to the next smallest amount. By doing this, this helps put some satisfaction and accomplishment to your life. I love this tactic because there is a great sense of joy when you eliminate debt completely. Whether you use this technique, or use another method for reducing debt, the important point is that you’re making progress.
That brings me to the next point, which is goal setting. One of the ways to do this is by focusing on goals and breaking them down into three categories: Short Term (Up to 3 years), Medium Term (3 to 5 years), and Long Term Goals (5 or more years). This helps shape your spending plan based on what you want and when you want it. You want to make sure your goals are realistic and attainable, that means you need to be specific, have a deadline, and follow up on the goal. You can also use BECU’s interactive budget planner to help visualize your expenses and how you can start working towards your goals.
Here are my Short, Medium, and Long-Term Goals:
Short: Save for medical bills and diapers for another baby.
Medium: Pay off my car.
Long: Pay off the house.
One of the most popular goals people have on their list is buying their first house. Many of you asked about my experience buying my first house years back, so I’ll share with you what I went through and provide some recommendations, resources and tips to accomplish this.
Wind the clock back to 2013, I was engaged, living in an apartment in downtown Bellevue, and had a full-time job; does that sound like you? It was always a dream to have my own place and raise a family of my own. Being a first-time home buyer can be exciting and scary at the same time, as it’s often the biggest purchase you’ll make. As a first-time home buyer, I didn’t know much about buying real estate. So what do you do? You trust your real estate agent. Unfortunately, he wasn’t aware nor did he tell us about all the great financial opportunities and incentives you could take. This would’ve allowed us to buy our dream home at the time, but we ended up moving a bit further out of the city. So, to maximize your financial opportunity and give you more options in 2019, I’m going to share some of my tips and recommendations to reference when purchasing your first home.
One of the first questions you may have is, am I even able to afford a house? A great resource provided for free at BECU is a Financial Health Check. The Financial Health Check is a program designed to help you make decisions and take actions on savings, budgeting and debt management in real-time during a confidential one-on-one session. This is an incredible benefit to take advantage of. If you had to choose between saving money for an emergency fund, a home down payment, retirement, college for your kids, vacation, or paying down your debt, would you know what to do?
An incredible program offered at BECU is the First-Time Home Buyer Grant. BECU's first-time homebuyer grant awards eligible members with up to 2% (maximum of $6,500) toward the down-payment or closing costs on their first home. Here are some of the qualifications that grant program recipients must meet. You may be eligible for grant funds if you can answer “yes” to the below questions:
Are you a BECU member (or eligible to become one)?
Are you a first-time homebuyer?
Do you have a good payment history and qualify for a BECU home loan?
Can you pay your portion of the down payment? (Additional closing costs are required.)
Is your income (and the total income of all borrowers on the loan) less or equal to 100% of the Area Median Income (AMI)?
Are you willing to attend a homeownership course?
As a first-time home buyer, you may withdraw up to $10,000 in earnings from your ROTH IRA without penalty or tax for the purchase, repair, or remodel of a first home. This is a great way to invest in yourself without paying penalty. Traditional IRA’s are similar but you’ll have to pay regular income tax on the entire amount. SIMPLE and SEP IRAs follow the same rules. If you are married, your significant other may also withdraw $10,000 from his or her traditional IRA, so you can collectively obtain $20,000 penalty-free for a down payment.
Members who purchase their home using a credit union certified real estate agent may receive $300 to $6,000 cash back at closing, just for using BECU Home Rewards. All this extra cash will give you more options when looking for a home and help you get an edge when putting in an offer.
Whether you’re buying a house or working towards your goal, it’s important to save. Did you know 47% of Americans are not able to come up with $400 to cover an emergency without borrowing or selling something? And, 43% people polled would be unable to make ends meet for three month or less in event of sudden drop of income. A typical rule of thumb is to save 20% of your income. A financial best practice you can take is by paying yourself first, which means put whatever you made into savings, then spend the remaining towards necessities and discretionary items.
As a parent of a young daughter, I’ve started to save $150 a month into a 529 Savings Plan which can be used tax-free for any school matter in the future. There are other great programs to encourage youth banking. A BECU Early Saver account makes it super easy and rewarding for young people to save. It’s designed for kids under age 18 and offers your child a premium interest rate of 6.17% APY on the first $500 in deposits. This might be the highest interest rate I’ve seen from any financial institute.
It’s no surprise BECU is the largest community credit union in the US with 1.1MM members across 50 states and more than 50 branches in Washington state. I’m such a huge fan of BECU putting its members first and giving back. Here’s an easy way to Switch to BECU and start taking advantage of its benefits, roughly 15-20 minutes online.
This post is sponsored by BECU. All opinions are my own