NWColumbus Blog

Creating a budget for crisis

We talk a lot around here about budgets. But what about unexpected financial hits? How do you plan for those?

While you can’t account for every potential scenario, there are ways to prepare for the unknown without knowing exactly what that is. This is what experts call a crisis budget.

Before we dive in, this advice really is for the person who has already gotten the hang of budgeting under normal circumstances. If you need help with those skills, you may find our Third Thursday financial courses a great start!

Think of a crisis budget like a fire drill–you want to know your escape route before the fire strikes. It’s not meant to be a doom-and-gloom outlook but rather just a way to be as prepared as you can be for something that hopefully won’t happen.

The first step of being prepared for disaster is to have an emergency fund. Experts recommend a savings for this of $1,000 to $3,000, but obviously, the higher this fund is the longer you could last on limited or no income. Here are some tips for building your savings if you don’t have this yet.

As part of basic budgeting, you have a list of your income and your expenses each month. As part of crisis budgeting, you really zero in on your priorities. If your income was drastically cut for whatever reason, what is essential to your budget?

Under normal circumstances, maybe you can afford streaming services and unlimited data on your phone plan. But in a crisis, perhaps those are things you can do without.

Perhaps your monthly budget allows for so much in groceries each month, but in a crisis, how could you simplify your meal planning to something more basic?

These are the things that are helpful to consider before you really need to. If you are really clear on your priorities, and have done the math to see that you will be able to financially float for a bit, that is one less thing to worry about if you do take a financial hit for some reason.

Managing Credit Cards

Credit cards can get a person into a lot of trouble and for good reason. When misused, credit cards can lead to unnecessary debt that can become a financial burden.

But in the right circumstances, credit cards can be a powerful tool to help establish credit.

In the NeighborWorks Columbus homeownership program, we walk with people through the processes of building a strong financial foundation. This includes creating and maintaining a budget, helping people manage their debts and rebuild their credit scores, and for some it includes establishing credit in the first place.

This is where credit cards come into play, but many people wonder where to start. Which credit card should you get? How should you use it? These are the questions we will walk through now.

Who should get a credit card?

If you are struggling to manage your budget, it is not the time to get a credit card. But, if you have successfully built a money management plan and stuck to it, a credit card could be beneficial for you to boost your credit score.

Which credit card should you get?

There are several credit cards that are known as starter cards. You will want to ensure you don’t get a credit card that comes with a fee. You also want to ensure your card has a relatively low spending limit to start out with so you don’t get into trouble. To get the most benefit from your cards, you also want to get one that reports to all three major credit bureaus.

How do you use your credit card for the most benefit?

Spending isn’t usually an issue for people, right? If anything we need to be careful to not overspend, whether you’re using a credit card or any form of money.

But, what we’re talking about here is how to use your credit card in a way that actually provides a benefit to your credit and doesn’t hinder it.

There are a few key things to make a credit card work for you and not against you. The first is to set a monthly spending limit that is well within your budget. Some people choose to use it to only pay for gas, for example.

You also want to make sure the spending cap you choose is not the one the credit card company gives you. The best way to use this card is to spend no more than 30% of what your limit is at any given time. So, if your credit card gives you a $1,000 limit, you will want to make sure you never have more than a $300 balance.

Finally, and most importantly, make sure you pay your entire balance on time, every time. Setting up automatic payments is the best way to ensure you don’t forget.

Keeping your goals alive during the holidays

Imagine this: You’re getting the hang of budgeting. You’re maybe even beginning to save a little money. You’re financially on track–and then, the holiday season hits and you lose focus.

In a season that is full of distraction, festive events, and shopping deals, even the most well-intentioned financial planner can drift from their goals. So as we head toward the holidays, let’s equip ourselves with some tools to help avoid some of these pitfalls.

Make a plan before you get busy.

Most of us have a calendar that gets quite full between October and December. Gatherings with family and friends; performances to attend; traveling for some of us; and holidays themselves. Everyone’s schedule won’t look the same, but most of us will have some level of busyness creep in. So now, before you are swimming in festivities, is the perfect time to make a spending plan.

Of course, we always recommend starting with your budget. If you don’t know how much you have available to spend on various things, you won’t be able to make a very good plan. If your money is tight, you could consider a way to make a little extra money, if spending is something you’d like to do this season. Possibly, there’s something you could sell on Marketplace or you could take on a small side job for the holidays, like house cleaning, yard work or one of these other ideas.

Once you know how much you have to work with, you can prioritize the most important things to spend your money on. We even recommend planning what you want to buy, for whom, and where you may get it from. Any pre-planned detail will help you avoid impulsive spending when you get those ads in your inbox!

2. Prioritize yourself.

The holidays are often considered a “season of giving,” but we’re here to tell you that prioritizing your own goals and needs is important. If you are saving for a big goal, like homeownership, or working toward paying off your debts, do not let those goals go. Do not let outside pressures to spend derail your progress. Remember, this goal won’t last forever, and it will make future celebrations all that much more exciting!

3. Get creative.

Even while staying laser-focused on your goals, you can still find many ways to get in the spirit of the holidays! Have a fancy party or church event to attend and need a new outfit? Maybe you can start shopping second-hand or hold out for a big sale and find the perfect attire. Want to give some great gifts? Watch those sale ads and wait for the best deal. Perhaps you prioritize the children in your spending and send cards to adults? Maybe you can use your talents to offer a nice gift or service.

We fully believe you can have a meaningful holiday season, no matter your income or financial goals. We hope some of these tips can help you be festive without breaking the bank or your progress.

But to end, if you overspend–like Forbes says 7 of 10 Americans do, you are not alone.Give yourself grace and continue working toward the finish line. Whatever holidays look like for you and yours, may your season be full of warmth, love, and light!

Surprising benefits of homeownership

If you’ve come across this article, chances are you are thinking about becoming a homeowner one day. And, we bet you have really good reasons for that goal.

Perhaps you are looking to build equity; maybe you are excited about the freedom to make your own home choices, like renovations and paint colors; perhaps you are looking for the stability of mortgage payments remaining consistent and no longer having to move. And, tax breaks never hurt, right?

These are all really common reasons people seek out homeownership, and they are all great ones. But, we thought we’d let you in on a few other benefits that maybe you haven’t considered. Homeownership has some surprising ripple effects on not just a homeowners’ lives but the entire community. Let’s dive in:

1. Homeownership is good for your health.

Homeownership is about so much more than just having a house. It creates stability, community ties, and financial security, and with these, studies show that homeownership has a positive impact on physical and mental health. A recent study from the Centers for Disease Control (CDC) looked at chronic health conditions and homeownership and found that as a group, homeowners have better health outcomes.

We (and the CDC) are not saying that if you buy a house, you will not experience any health problems. But studies continue to show it plays a role. It’s not simply about the structure of a house, but rather the other benefits that come with homeownership. Though, the structure of a quality home can lead to better health, as well.

There are also mental health benefits. Adults have plenty to worry about, and when you have a safe, decent, affordable home, that is a big load off. You don’t have to worry about moving, so you are free to focus on other important things in life.

2. Homeownership helps children thrive.

Studies also show that children of homeowners perform better in school. They are more likely to score higher in math and reading scores improve the longer they are in a home. Further, kids from low-income families who are homeowners are 11% more likely to graduate high school and 4.5% more likely to attend a post-secondary school than those who do not own their homes.

Again, we are not saying purchasing a home is a magic fix for your children’s school performance. But something is to be said for the data that shows stable housing is a strong contributing factor to education.

3. Homeownership helps families build wealth.

According to a study by Habitat for Humanity, U.S. homeowners have a net wealth that is 400% higher than renters with similar demographics and income. Having equity in your home makes you a wealthier person, even if the wealth doesn’t equal immediate cash in hand. You are laying down roots for your family and your future when you purchase a home.

4. Homeownership helps make safer communities.

Like health, there are several factors that contribute to public safety, but housing is definitely one of them. The quality of housing and involvement of a neighborhood’s residents are key to creating safe communities. And when people are in their homes to stay, they are more likely to take better care of them and become more involved in their communities.

Overall, we don’t think there are many bad reasons to buy a home, there are many benefits to doing so. We hope these give you a little insight into some that may not be talked about as much as others, and if you decide homeownership is the path for you, NeighborWorks Columbus is here for you every step of the way!

8/19/2024

Creative Ways to Save

It is hard to save money. And that’s especially true if you are living paycheck to paycheck in a time where the prices of many things have increased.
While saving may seem out of reach, don’t despair–you can still reach your goals, but you may be forced to get a little creative. We have some ideas that just may help, but before we share those, let’s just remind you that none of this is really possible without some budgeting and basic money management. If this is where you are, check out one of our past resources here.

Now, let’s get creative:

Saving on food
Meal plan–making a meal plan is the first step to saving on groceries you don’t need each month. There are several methods of meal planning, including listing each and every meal, coming up with a rotating list, or even following a basic idea such as “taco Tuesday” or “meatless Monday.” The method we recommend? Whatever works for you!
Shop with a list–one of the biggest ways to rack up an unusually high grocery bill is impulse buying. Making a list (that matches your meal plan) and avoiding those eye-catching items, will help you save money at the checkout.
Shop generic–we all have brands we love, but one of the best ways to save is to embrace the generic brands that every grocery store has. Sure, there may be some items you just have to have a certain brand of, but maybe be choosy about what those are for you.
Buy in bulk–there are certain things most households use a lot of. These we recommend buying in bulk either at a warehouse store or even just when they happen to go on sale at the grocery store of your choice.
Eat (and drink) at home–Skipping on eating out is key to saving. Pack your lunch, skip the fancy coffee, and stay in for dinner. Remember you don’t have to do these things forever, but when you have a goal in mind this will help you reach it.

Saving on transportation
Carpool–One simple way to save money is to drive less. And one simple way to do this is to carpool to common places. Maybe you take turns driving with your favorite co-worker? (Plus, you’re packing a lunch anyway, so that will help you avoid the temptation to hit the drive thru). Win-win!
Walk/Bike–it’s not always possible to ditch your car completely, but there might be some situations where you could walk or bike. Columbus has many new trails. Maybe you could occasionally replace an errand you would normally drive to with an alternate mode of getting around.

Saving on electricity
Use LED lights–LED lightbulbs are more energy efficient and therefore, will help you save on your power bills.
Unplug–You can save about 5% on power by unplugging certain items when you are not using them. This includes things like electronics, computers, cable boxes, chargers, printers, and smart home appliances.
Time your chores–Georgia Power lists its peak hours as 2 to 7 p.m. It’s recommended you attempt to time the use of your major appliances before or after those times for greater efficiency.
Adjust thermostat–According to the Department of Energy, you can save up to 10% on your electric bill each year by turning your thermostat up by 7-10 degrees for 8 hours during the day. If you work outside of the home, this is a perfect time to do that.
Make use of ceiling fans–In warmer months, ceiling fans can keep you cooler, reducing the need for you to run your AC as much. Likewise, in cooler months, ceiling fans can circulate warm air, taking a load off your heating system.

Other ways to save
Ditch disposables–while convenient, the fees of paper plates, utensils, and napkins can add up.
Check on subscriptions–sometimes we sign up for things and forget about them. Other times, we just sign up for too many things. Either way, are there any monthly subscription services that are no longer serving you or you could do away with in the name of reaching a goal?
Review bills–every once in a while, it’s a good idea to review some of your common bills. These include things like your insurance or phone plans. Make sure you review these every couple of years as the competition just might offer a better rate for you.

Make extra money
Side hustle–sometimes, the best way to save is to just find new ways to add to your income. Side hustles are a great way. There are literally hundreds of ways to create a side hustle, and that all depends on what your individual talents are: tutoring, freelance services, handyman jobs, lawn care, house sitting, pet sitting. These possibilities are endless.
Sell items–Do you have any items in storage or that you just aren’t using anymore? Hosting a yard sale if you have enough of them or selling them on places like Facebook Marketplace are great ways to add extra income. Extra clothes that are still in good shape could be sold in consignment stores or even online consignment like Poshmark.

While we’ve compiled a lot of ideas here, this is by no means exhaustive. We hope this gives you at least one idea to implement as you work to reach your goals. You’ve got this!

Creating a budget for crisis

Managing Credit Cards

Keeping your goals alive during the holidays

Surprising benefits of homeownership

Creative Ways to Save

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