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Good Savings Habits

Do you feel like you can’t get ahead when it comes to your finances? You never seem to have quite enough money to meet all of your monthly obligations and can’t even think about saving for a rainy day. You’re not alone. Many of us feel the same way and have the same issues with our finances. The bad news is there is no magic to make it better immediately. The good news is you can take immediate steps to make it better in the future. Here are three steps to help improve your savings habits and put you on the path to better financial management.

Start Early

Don’t put off saving money until things are better, or until you are making more money. It won’t happen on its own. Start right now by setting up a savings account and putting a portion of your paycheck away every payday. Start small, $5.00 or $10.00 each paycheck and gradually increase the amount. Or better yet, start with a certain percentage of your paycheck, say 5%. This way the amount you are saving will increase as your income increases.

If you have children, teach them from a young age proper money management. Pay them a regular allowance for chores they complete around the house. Sit down with them each time they receive their allowance and decide how much they will save, 5%,10% or more, and then divide the rest into how much they can spend, how much they will donate to charity, etc. Do the same with money they receive for birthdays and Christmas. Teaching them good savings habits now will insure that they will be able to handle their finances properly when they grow up.

Make It Automatic

Many employers now require that your payroll be directly deposited to your bank account and most of them will deposit it to more than one account, if requested. Set up a separate savings account and have a portion of your payroll deposited to that account. This makes saving automatic. You will soon learn to live on less income and not miss the amount being saved. If you don’t have direct deposit of payroll, ask your bank to set up automatic transfer from your checking account to your savings account and treat that transfer like a bill that must be paid on a regular basis.

Even better, set up two savings accounts, one for specific savings goals (trade autos, house downpayment, etc.) and one for emergencies. Use the second savings account only for true emergencies like unplanned auto repairs or medical bills. After you have a balance in this account equal to a least 3 months payroll, start transferring the excess funds to a more permanent savings vehicle (CDs, mutual funds, etc.) that pay better returns.

 Credit Cards

Credit cards have become almost a necessity in our lives whether for making a reservation at a motel or renting a car, many businesses require that you have a credit card to do so. We are often tempted to use our credit card when we don’t have the immediate cash to pay for something. Avoid that trap at all costs. If you don’t have the excess cash to pay for something, ask yourself if you really need it and resist the urge to “buy it now”. Make a plan to save the money needed to make the purchase.  If you do have to use your credit card, try to pay the entire balance off each month. This will keep you from going deeper into debt and help avoid paying finance charges which can double or triple the cost of your purchase. If the balance is too large to payoff all at once, pay as much as possible and always pay more than the minimum amount due. If you manage your credit card balances wisely, you will be amazed at how much more you have available to save.

These three steps will help you improve your savings habits and “have more money left at the end of the month”. Your finances will be less stressful and you will enjoy watching your rainy day funds grow. 

By: Robert Wise, Vice President

An Economic Downturn Can Be a Great Time to Start a Business

Really?  It sounds strange, but think about it.

  • Costs are lower.
  • More workers are available and looking for work.
  • Potential customers are looking to cut costs and are more likely to give a new supplier a try.
  • The competition is likely focused internally on cutting costs themselves, and perhaps not giving much effort to marketing.

The one difficulty left to face is . . . . capital.

Lenders and investors are very careful about who and what they invest in during a downturn.  You may have a savings account, a home equity line of credit, credit cards, or other sources of cash to start up a business.  This is well and good.  But if capital is short, your plan of attack to attract that capital needs to be a very well prepared business plan.

Four Ideas For a Better Business Plan 

  1. Be Thorough.  Cover all of the details of your start-up business.  Go to http://www.citizensmn.com/business/getting-started/how-to-prepare-a-business-plan.html  for additional information on this topic.
  2. Use Candor.  No one wants to hear that “we are the best” and “everything is wonderful”.  Identify your critical factors for success, and tell why you are uniquely qualified to succeed, even if your future success is based upon past failures.  Don’t be afraid to identify your weaknesses, and how you plan to address those.
  3. Be Conservative and Identify Contingencies.  Everyone knows that initial sales projections are difficult to meet.  Thus, give a solid basis for your underlying assumptions, and show a “worst case”, “best case”, and “most likely” case scenario.
  4.  Make a Case for Why You’ve Built the Better Mousetrap.  In other words, there has to be a reason that the public will change their behavior and buy your product or service over what they are currently doing.  What is that reason?  What will incent customers to use your mousetrap?  Does it solve a problem? What is that problem? 

For Further Reading 

These related books will inspire you to find your niche and transform your business into something unique and lasting:

  • Purple Cow, by Seth Godin.  Transform your business by being remarkable.
  • Good to Great, by Jim Collins.  Why some companies make the leap… and others don’t.
  • Thank God It’s Monday, by Roxanne Emmerich.  How to create a workplace you and your customers love.

By: Julie Baumgartner, Vice President

Equal Housing Lender - larger

Banking Acronyms 101

Ever received a text you didn’t understand? For example; Ur my BFF! LOL! IDK, where r u? They assume you understand all the little acronyms in the message. Well, don’t assume anything. The same goes with banking. Because I have been in banking for several years I assume everyone knows the banking acronyms as well as I do. I see them everyday, you don’t. So, here’s a small lesson in banking acronyms: 

ACH – Automated Clearing House
A computer-based clearing and settlement facility for interchange of electronic debits and credits among financial institutions.

APR – Annual Percentage Rate
The amount of interest the borrower actually pays, including loan interest points, and origination fees.

APY – Annual Percentage Yield
The amount of interest expressed as a percentage rate, a deposit account (or a share draft account) would earn in a year at a stated interest rate. The APY disclosure, showing the effect of interest compounding, assumes that funds remain on deposit for a full 365-day year at the advertised rate, and no additional deposits or withdrawals are made.

ATM – Automated Teller Machine
A computer terminal activated by a magnetically encoded bank card, allowing consumers to make deposits, obtain cash from checking or savings accounts, pay bills, transfer money between accounts, and does other routine transactions as they would at a bank teller window.

CD – Certificate of Deposit
A receipt for a time deposit  issued for a stated time period and normally paying a fixed rate of interest.

DBA – Doing Business As
A name used for business purposes that is not the legal name of the individual or organization actually conducting the business. A proprietorship commonly operates under a DBA, as in John Smith DBA John’s Auto Body.

DDL – Daily Dollar Limit
Refers to the maximum dollar amount you can withdrawal from your ATM card at an ATM within a 24-hour period.

EFT – Electronic Funds Transfer
A transfer of funds between accounts by electronic means rather than conventional paper-based payment methods, such as check writing.

EIN – Employer Identification Number
A Taxpayer Identification Number  for entities other than individuals, such as partnerships, corporations, estates and trusts.

FRB – Federal Reserve Bank
One of the 12 banks that, with their branches, make up the Federal Reserve System.

FHA – Fair Housing Act
A law enacted as part of civil rights legislation that prohibits discrimination of home sales, rentals and financing based on race, color, national origin, religion, sex, familial status or those with disabilities.

IRA – Individual Retirement Account
A tax-deferred retirement account allowing an individual to contribute a pre-set amount annually from personal income.

IRS – Internal Revenue Service
An agency of the federal government that is responsible for the administration and collection of federal income taxes.

PIN – Personal Identification Number
A numeric identification code used by bank customers when making transactions at a self-service electronic banking terminal, such as an automated teller machine.

POA – Power of Attorney
An instrument by which one person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of the principal.

POD – Payable on Death
A regular bank account that names a specific person as the beneficiary of all funds once the bank account holder dies.

POS – Point of Sale
A system that uses a computer terminal located at the point of sales transaction so that the data can be captured immediately by the computer system.

PR – Personal Representative
The generic term for an executor for the estate of a deceased person who left a will or the administrator of an intestate estate.

RTN – Routing Number
A numeric coding facilitating check clearing among banks. The ABA numbering system, managed by the American Bankers Association, assigns a unique identifier to each U.S. financial institution.

SBA – Small Business Administration
A United States government agency that provides support to small businesses.

TIN – Tax Identification Number
An identifying number used for tax purposes in the United States. It is also known as a Tax Identification Number or Federal Taxpayer Identification Number. It may be assigned by the Social Security Administration or by the IRS (Internal Revenue Service.)

UGMA – Uniform Gift to Minors Act
A UGMA provides a child under the age of 18 (a minor) with a way to own investments. The money is in the minor’s name, but the custodian (usually the parent) has the responsibility to handle the money in a prudent manner for the minor’s benefit. The parent cannot withdraw the money to use for his or her own needs.

UTMA – Uniform Transfers to Minors Act
The Act allows the donor of the gift to transfer title to a custodian who will manage and invest the property until the minor reaches a certain age. The age is generally 21, but is different in some states (usually 18 in those cases). In the interim, the custodian can also make payments for the benefit of the minor out of the corpus of the gift.

By Cindy Lewis, Customer Service Director

Equal Housing Lender - larger

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