Message from Service Representative

Keep Debit in Check

70-20-10 RULE

In today’s times there are many more demands on the family budget than ever before. Unanticipated medical expenses, an unexpected car repair / towing, or the current rising of home heating fuel cost can quickly create financial pressure. While it is very tempting to utilized your credit cards to address these types of expenses, if you begin to financially plan now you can reduce your reliance on credit to handle these emergencies.

There is a good rule of thumb to follow and it is called the 70-20-10 Rule. While budgeting your monthly expenses, allot 70% percent for living expenses, such as rent, mortgage, food, utilities, clothing and gasoline. Then save or invest 20% percent of your earned income for financial goals and emergency expenses. This can also be called the “Rain Day fund”, which you set aside now for sometime in the future. The 20% percent can be divided into retirement savings “IRA” and or saving for a specific goal, such as a vacation or to purchase a large-ticket item. You could also set up an emergency saving fund. A good long term goal for this would be to save three to six months of living expenses in that account. Hey don't be disappointed if an actual emergency arises that causes you to withdraw some funds, because that is what it’s there for. However, don't withdraw your cash funds for impulse buying. By getting into a saving mode you will find that you rely less on credit and loans to make your purchases. This will allow you to stay within your means. The remaining 10% percent should be dedicated to debit payments. This includes debt such as your credit card payments, and auto / student loans. Yes, following the 70-20-10 rule requires you to work hard to live within your means. If you must devote more funds to living expenses, then you will have to reduce some of the funds dedicated to savings or debt payment. However, by applying good financial leverage you can work to avoid spending more than your monthly income.
The NAPUSFCU is always available to help you with your financial needs. Visit them at NAPUSFCU.ORG.

Deborah Boulware

.