Financial stability brings hope for secure future|
Posted 1/12/2011 Updated 1/12/2011
by Airman 1st Class Heather Holcomb
81st Training Wing Public Affairs
1/12/2011 - KEESLER AIR FORCE BASE, Miss. -- Everyone dreams of having a disposable income dripping from the tips of their fingers, and for many people, the reality is debt, budgets and sacrifices.
However, with patience, determination and a little help from the airman and family readiness center, there's hope for a financially secure future.
Rose Janosik, community resource specialist, said that financial wellness is being able to pay bills on time, having a high credit score and not having unmanageable debt.
"Financial wellness is having a goal and sticking to it for your own betterment," Ms. Janosik said.
An easy way to break down financial wellness into manageable steps is by evaluating the financial situation, paying off debt and then saving money.
Evaluate the situation
The first step toward financial wellness is sitting down and determining where you stand.
As James Baldwin said, "Nothing can be changed until it is faced."
First and foremost, check your credit report. You can do this by going to www.annualcreditreport.com three times per year to check your credit report with one of the three major credit bureaus.
Ms. Janosik said that checking credit scores is so important because it determines not only if you can qualify for a loan, but how much you will pay in the long run.
The next step is to determine your debt to income and debt to credit ratios. To determine your debt to income ratio, add up everything you bring home each month and from that, subtract everything you pay out.
If the number is negative, determine if there are any areas where cuts can be made or payments can be consolidated into one lower payment.
"Your debt to income ratio is important because it is an indicator of how much of your income is spoken for each month," Ms. Janosik said, "In general, the lower your debt to income ratio, the better your cash flow."
Having a low debt to credit ratio can improve your credit score because it shows creditors that you are responsible. To determine your debt to credit ratio, add up the available credit on all credit cards and then subtract from that the total amount you owe on all the cards. The lower the number, the better the ratio.
Pay off debt
After you've determined where you stand financially, the next step is to pay off debt. This can seem like a daunting and unmanageable task, but it's not impossible. The key is to focus on one thing at a time.
Choose the card or loan with the highest interest rate and put as much extra money on it as you can afford each month and only pay the minimum payments on everything else. Then, when that is paid off, take all the money that was going toward the first debt and add it to the minimum payment of the debt with the next highest interest. That way, your monthly payments never increase, but you're saving money on interest in the long run.
"If you're in the market for a big ticket item someday, focus now on reducing your recurring debts," Ms. Janosik said, "Focus on paying off those debts and avoid taking on additional debt."
Most people want to skip straight to this step, but without completing the first two steps, a lot of money can be wasted. For example, if you're bringing in 5 percent interest from a savings account, but you're paying out 15 percent interest on a credit card that's a 10 percent loss.
Once debt is paid off, the next step is to save money in an emergency fund. It's recommended to have one month's pay put away for those inevitable circumstances in life such as car
repairs or unemployment.
After that's completed, begin to save for larger items such as the down payment on a house and retirement.
"If we have financial stability in our lives, we'll have a clearer picture of what we want and we'll always be moving forward," said Ms. Janosik.
For more information or to schedule an appointment for financial consultation, call the airman and family readiness center, 376-8728.