Why Financial Capability Matters in 2014

Last year, the White House declared April Financial Capability Month, proclaiming that “all Americans deserve the chance to turn their hard work into a decent living for their families and a bright future for their children. Seizing that opportunity takes more than drive and initiative -- it also requires smart financial planning. During National Financial Capability Month, we recommit to empowering individuals and families with the knowledge and tools they need to get ahead in today's economy.”

With the unemployment rate in South Carolina steadily decreasing from 8.1 percent in February 2013 to 6.4 percent as of February 2014, it’s crucial that those gaining employment use practical money management skills. That’s where financial education comes in. Financial education is a means to help alleviate and prevent poverty. Although the unemployment rate is down in South Carolina, the number of those in poverty is up. Currently 1 in 5 South Carolinians live in poverty compared to 1 in 6 in 2000. That’s nearly 300,000 more residents.

Image via Pearson Foundation

Regardless of your economy or your household income, it’s important to realize that financial education matters. Those individuals who receive it are more likely to make the right financial decisions for themselves and their families that will help them build and maintain assets. When people are buying houses, maintaining a home or steady residence, and are paying on their debts, it positively affects the local economy.

Financial education is more than just gaining a budgeting tip here and a saving strategy there. This knowledge converts into skills, which convert attitudes, and those attitudes affect behavior. What you’re left with is healthy financial habits. Those that take charge of their personal finance and choose to become informed consumers avoid scams, predatory lending and other deceptive practices, and can effectively address their needs versus wants.

Family Services, Inc. (FSI), as a charter member of NeighborWorks America, aligns itself with the initiative to help end poverty and raise better awareness for financial education. Their staff of licensed professionals is dedicated to highlighting the importance of financial capability and helping those in the community establish and maintain healthy financial habits. Through its programs and services, FSI advocates, counsels, and educates for clients so they can make the most of what they have.

Written by: Sarah Cornwall, Marketing Resources, at Family Services, Inc.

4 ways to use your tax refund to strengthen your overall financial situation

If you are anything like me, you’ll be more than tempted to use your tax refund for that flat screen you’ve wanted, or maybe that weekend vacation you keep putting off. It feels good to finally get those material things you’ve “needed”. However, like most material indulgences, the charm wears thin and quick…especially when an emergency comes up, or reality hits that you should invest more in your future.

I asked our experts here at Family Services, Inc. for different ways to use a refund that will leave you feeling secure, and confident about your financial situation.

 1.       Pay off/down debt: This encompasses a lot. Who doesn’t have debt these days? Pay off a credit card balance. Double up on a mortgage payment. Doing this once a year can shorten your overall payment period (provided it's allowed under the terms of your loan). If you’re not a homeowner, apply this trick used for mortgages to your student loan debt. Paying down debt, whether it’s a credit card, car loan, mortgage, student loan, or any other kind, is usually a guaranteed return equal to the interest you would have otherwise paid.

2.       Make an emergency fund: If you have your debts under control, and don’t feel it’s necessary to make an extra payment, then your tax refund might be an excellent starting point for building an emergency fund. Personally, my refund will be put away as “emergency funds”. The other day I left work to find that I had a flat tire. Needless to say, I had NO money to pay for this unexpected expense and was forced to charge it, maxing out my credit card!

3.       Invest: If you have no debt and a healthy emergency fund (kudos to you), then you can always look to the future. A tax refund can be used to put a down payment on a house, buy a car, or help pay for an education for you, or the little ones (look to ESA plans and 529 plans). Try one of these: 401(k), 403(b), Roth IRA, Traditional IRA, SEPs. Have questions? One of our licensed financial coaches can help! The purpose and the time frame will help you decide the kind of investment you should be looking at.

              

4.       A savings account: Instead of a regular savings that would perhaps hold your emergency fund, try a Christmas club account. Christmas is the same time every year, but it still catches the majority of people off guard. Even better, invest in a Certificate of Deposit account, similar to a savings account but with higher interest for your benefit.

Go to www.fsisc.org or call 843-735-5522 for information or assistance.

Written by: Sarah Cornwall, Marketing Resources Assistant at Family Services, Inc.

Spending money on what you value brings real happiness

By Carey Denman

My husband and I have a good life. We have flexible work schedules and a home in the country where we grow a large garden and keep a few chickens. We’ve been known to float homemade rafts and dangle our toes in the nearby creek with our four children, and to eat s’mores made in our fire pit for dinner.

In general, I’d say we live a slow, deliberate life. We don’t have television reception where we live, and we have no cable. And we have pay-as-we-go cell phone plans because we don’t get service in our area. Our two cars have a combined total of over 330,000 miles on them, and we do almost all of our shopping for clothes and other household needs at thrift stores.

Now, it’s quite possible that the idea of going without cable, weeding a garden and paying 10 cents a minute for cell phone calls might literally sound like torture to you. And that’s OK—because my definition of a good life cannot (and should not) be the same as yours.

Too often, people look around at what others are doing and buying, and decide that those things are necessary for a good life. And so begins a vicious (and often debt-ridden) cycle, where other people’s lives and possessions become the measure of our happiness. The result is that happiness becomes elusive, always just one purchase or activity out of reach.

This isn’t to say that material possessions don’t have the potential to improve your happiness quotient. In fact, I unequivocally believe they do—as long as the things you buy reflect what you sincerely value. My husband and I, for example, value nature and look for ways to spend more time outdoors.

Accordingly, we invested in a 1978 pop-up camper last summer. It’s got brown plaid seat covers, gold linoleum and a few dents here and there, but it suits our family well right now. We also saved for and built a screened porch last winter. We knew we wanted a room that, for three seasons of the year, would shelter us from the weather and keep us sequestered from mosquitos. Both the camper and the porch have improved the quality of our lives by giving us more ways to enjoy the outdoors.

Figuring out what you value isn’t always easy, but it’s worth the effort to do it. Begin by asking yourself a simple question: What is important to me? If you can, list at least five things. The things you list will be your unique values. When you identify them, and start making decisions based on them, you will be happier and more satisfied with your life.

My own list includes beauty, creativity, family, flexibility and, as I already mentioned, nature. With this list at the top of my mind, I am better equipped to make decisions about how I do and do not wish to spend my time and money. Sure, I may still admire a friend’s new car or the fashionable way she dresses, but I don’t value driving a new vehicle or wearing trendy clothing. I have learned that I get genuine satisfaction from spending my money to outfit our camper with the supplies we need for a weekend getaway, or to create a playhouse for our children.

When you understand what you value, you’re more prepared to create a budget that actually works. Your budget will help you focus on spending your money in ways that will help you achieve the good life that you – not your friends or neighbors – really desire.