Even as one of the wealthiest nations in the world, many Americans struggle to make ends meet. A shocking 61% live paycheck to paycheck, according to a 2023 LendingClub report. It’s easy to speculate why, from increased costs of living to skyrocketing national student loan debt. At Credit Union of Denver, we seek to find solutions. Almost half of U.S. adults rate their personal financial knowledge a grade “C” or worse, per the National Foundation of Credit Counseling. We believe more financial knowledge to help eliminate debt and accelerate saving might be the key to financial stability.
Pay Down Debt
According to Opportunity Financial, 90% of millennials are in debt, with 25% having over $55,000 in student loan debt. Debt weighs on borrower’s decisions and is difficult to get rid of because of its dirty little secret—compounding interest. Compounding interest makes small balances on credit cards or loans grow rapidly into much larger amounts. There are various methods of paying down debt, such as tackling smaller balances first or higher interest rates first. Consolidating high interest loans like credit cards to lower interest debt like a HELOC is a good place to start, as it will lower your monthly payment and reduce debt faster. Regardless of the method, finding a plan that works for you and sticking to it is key.
Build an Emergency Fund
Nearly half of Americans don’t have enough in their emergency fund to cover three months of living expenses. An emergency fund is essential, especially when you’re the sole provider for a household. Without a safety net, you risk falling into debt if something affects your monthly income or you have unexpected expenses, like from auto repairs or job loss. We recommend that you pay yourself first when you get your paycheck, and start building your emergency fund now, even if you’re not debt free yet.
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Budgeting for the Long-term
Around 75% of Americans follow a monthly budget and still 16% of them overspend, per a Nerd Wallet survey. Monthly budgeting is great, especially to curb spending. Our website offers tools, to help you stay on track and get ahead with your budget. If you find yourself consistently overspending, it may be time to reevaluate your essential and non-essential spending. It is important to include non-essential spending in your budget, so you’re not overspending or feel restricted when it comes to spending on things that bring you joy.
More forward-looking planning like yearly budgeting allows you to plan for life events. If you have plans to eliminate debt or save for a house, build it into the budget—weekly, monthly, and beyond. Planning further ahead allows you to achieve bigger goals. Credit union of Denver offers free financial coaching to help you plan and track finance goals. If you’re not sure how to start budgeting or simply want someone to help keep you on track, don’t hesitate to contact us. You can sit down with a certified financial coach for free today.