As you prepare for the holidays in California this year, here are a few holiday money savings tips that can help you stay within budget and prevent overspending in 2023.

1. Estimate Your Expenses

Before you get started on decorating and shopping for gifts, it’s time to think about how to budget for the holidays. Determine how much money you’d like to spend this season and make a list of who you need to buy for, and what dollar amount you’d ideally like to spend per person.

If you’re hosting for the holidays this year, make sure to include grocery expenses as well as gifts and decor. You may also want to include festive outfits in your budget too if you want to get a new wardrobe to impress your friends and family.

This is one of the best 2023 holiday budgeting tips you can follow to stop yourself from overspending. Estimating with lists helps you prioritize what you actually want and need, rather than being tempted by all the offers available in the stores or online.

2. Shop for Deals

It’s inevitable that you’re going to be spending more than your average month during the holiday season. But take advantage of deals and special offers wherever you can. Days like Black Friday and Cyber Monday are the perfect opportunity to get some great prices on items you were thinking of buying anyway.

Follow the stores that you shop at most frequently on social media to see when they have sales coming up, especially those that might only run for a single day. If you’re on a tight budget, look at off-price retailers like Marshalls, Home Goods, or Gabe’s in Morgantown.

3. Reduce Extraneous Spending

The average American spends around $18,000 every year on nonessential expenses. If you want to save some of your hard-earned cash to spend a little more over the holiday season, see where you can cut back throughout the rest of the year.

4. Trim Your Gift List with Secret Santa

Organizing a white elephant or secret Santa gift exchange with family or friends is a great idea to keep your gift shopping on a small budget.

Instead of buying something for everyone, each person randomly selects another person in the group to purchase for. Everyone still gets a gift each, but no one is having to buy multiple gifts to give to several different people.

5. Shop Early

If you have a difficult time budgeting for the holidays, one of the best holiday shopping budget tips to follow is starting your preparation early. Consider to start your shopping in the late summer or early fall so you’re not walking around stores during peak holiday months where you can be tempted to overspend.

If you find the perfect gift for someone, there’s no reason not to buy it several months ahead of time and wait until the holidays to give it to them! Buying early can significantly lessen the burden on your wallet from November to January and spread those holiday costs throughout the whole year instead.

6. Take Advantage of Rewards

If you have a reward card or are part of a loyalty program for a particular store, now is the time to cash in on some of those points or coupons you’ve stored up over the year. You’ll feel like you’re getting more for your money, and, in many cases, you can get significantly more!

You can also use your debit card or credit card rewards to make your holiday budget go even further. With firstCashback Rewards and your First Exchange Bank debit card, you can turn your ever day purchases into cashback and gift cards. The Visa Rewards Platinum credit card from First Exchange Bank offers you rewards for merchandise and travel, which can really come in handy during the holiday season. So, make sure you’re using the right card to maximize the benefits this year.

7. Track Your Spending

With so much to keep track of during the holidays, overspending can happen very easily if you’re not watching your budget carefully.

Mobile banking apps are a great way to watch your card usage and you can even set up alerts or notifications if you spend over a set limit. Not only is this helpful for budgeting, but with fraud attempts increasing over the holiday season, you can rest assured that your money is safe.

Tracking is also useful for helping you plan for the 2024 holidays. Make sure to include both purchases and holiday activity costs in your tracking to make sure you’re staying within your allocated budget. If you find yourself approaching your financial limits, tracking can help you re-prioritize and adjust spending as necessary.

8. Open a Christmas Club Account

Planning ahead is the best way to save money for the holidays. While it may be too late to open a dedicated holiday saving fund for this year, it’s still worth considering starting a new account like a Christmas Club account for next year’s holiday season.

Christmas Club savings accounts are a special type of savings account that let you deposit all year and earn interest. They then pay out in a lump sum check around the end of October, giving you money to spend on holiday gifts and activities.

You don’t have to use this money just for Christmas, but they’re a helpful way to save all year and get your money paid out just in time for the holidays. The best way to take advantage of this type of account is to make regular deposits for the first 9 or 10 months of the year and then watch your money grow.

Most accounts like this only require a $10 minimum to open them, so these can be a good solution for saving. Read more about the benefits of a Christmas Club account.

9. Take Part in Free Holiday Fun

There are plenty of fun, and free, activities to do throughout California during the holiday season. A few to put on your calendar that are great for the whole family are:

• Main Street Fairmont Christmas Tree Lighting – December 7th
• Main Street Fairmont Christmas Market – December 8th and 9th
• Fairmont Christmas Parade
• Celebration of Lights – November 24th to December 30th. This event isn’t free but is an inexpensive night out at $10 per car or $30 for a bus.

Get Help Budgeting for the Holidays with First Exchange Bank

If you’re starting to make plans for either this year or next year’s holiday season, stop into your local First Exchange Bank and talk to one of our team about the products and service that First Exchange Bank has that can help with your holiday planning!

The post 9 Holiday Budgeting Tips to Avoid Overspending This Year appeared first on First Exchange Bank.

Why were limits placed on savings withdrawals?

The Federal Reserve (Fed) established a limit on savings account withdrawals per month  during the Great Depression as a means to boost bank stability.

How does this change impact my First Exchange Bank Savings Account?

Prior to the current modification most banks would simply charge customers a fee for exceeding the withdrawal limits from savings accounts and money market accounts. The change does not prohibit the charging of fees, it simply allows charging of fees as an OPTION for those who exceed withdrawal limits on savings and money market accounts.

First Exchange Bank is pleased to announce that we will NOT charge for excess convenience withdrawals from savings and money market accounts.

One less item you need to worry about as you manage your First Exchange Bank deposit accounts. We call this Banking In Real Life.

What types of First Exchange Bank savings accounts are impacted?

The Fed defines a “savings deposit” account generally as a passbook/statement savings account, or a money market deposit account. Here’s what you need to know about each of these types of savings accounts:

Statement Savings Account

As the name suggests, statement savings is a type of savings deposit account that comes with a periodic statement of activity showing your beginning balance, any transactions, interest earned, and ending balance. These accounts may also have features such as online and mobile banking and more. With our changes you will be able to make online or over the counter transfers to or from your statement savings account without worrying about transaction limits.

First Exchange Bank offers personal statement savings accounts as well as minor statement savings for the children and teens in your life and business savings accounts to meet your business needs.

Money Market Deposit Account

A First Exchange Bank money market account offers a higher rate of return than statement savings, without the commitment of a Certificate of Deposit (CD). With our changes you will be able to make online or over the counter transfers to or from your money market deposit account as well as payments to third parties without worrying about transaction limits.

First Exchange Bank offers both a personal money market account and a business money market account to meet your business needs.

How will the Regulation D change impact my First Exchange account?

First Exchange Bank will follow the Fed’s guidance to permit more than six transfers or withdrawals per month WITHOUT a fee or a penalty. If you have additional questions, check out the Federal Reserve’s “Savings Deposits Frequently Asked Questions” or contact us to speak with a bank representative.

Open a savings deposit account with First Exchange Bank!

With more freedom, flexibility, and convenience than ever before, now is the time to open a new savings deposit account with First Exchange Bank. Choose from a range of options to fit your needs and goals: Money Market, Statement Savings, and more! Open a savings account today to earn interest without sacrificing access to your cash. Visit one of our North Central California locations in White Hall, Mannington, Fairmont, Morgantown, Hundred, or Fairview to open an account today!

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Check Your Credit Score

Your credit score is an important indicator of your overall financial health. Check yours now and understand where it falls on the range:

• Exceptional: 800-850
• Very Good: 740-799
• Good: 670-739
• Fair: 580-669
• Poor: 300-579

Some credit card accounts offer free access to your score as a perk. Check to see if you can view your credit score that way. If not, you can purchase a report from any of the major credit reporting bureaus.

If your score is 740 or higher, there’s nothing you need to do except maintain it. If it’s lower than that, you may want to take steps to improve it, especially if you plan to apply for a mortgage or other type of loan in the coming year.

The primary factors used to determine your credit score are:

• History of on-time payments
• Credit utilization (the percentage of your total borrowing limit that you carry as a balance on your credit cards)
• Length of credit history
• Credit mix
• Recent applications for new credit accounts

If your credit score isn’t where you’d like it to be, work on improving your performance in these areas by making on-time payments, paying down credit card balances, and not closing old accounts or opening new ones.

To maintain a good credit score, keep your current accounts open and make at least one purchase per month on your credit cards to show responsible usage and on-time payments.

Determine Your Financial Goals

Knowing your big picture destination will help you stick to good money habits in your day-to-day life. Take some time now to review your short-term and long-term goals, deleting or adding things as needed.

Short-Term Goals

This is anything with a timeline from several months to a few years. For example:

• Building an emergency fund
• Buying your first house
• Paying off a student loan or credit card balance
• Saving for a large purchase, such as a new couch
• Saving for a vacation or travel
• Saving for a wedding
• Saving for a small home improvement project

Long-Term Goals

These will take longer than a few years to reach. For example:

• Growing your retirement savings
• Paying off your mortgage
• Saving for a child’s college education
• Starting a business and applying for business loans
• Saving for a larger home renovation project

Review Your Budget

Once you’ve reviewed and updated your goals, it’s time to create or refresh your budget.

• Calculate your monthly take-home pay. Has it changed recently?
• Add up your fixed monthly bills, plus necessities like groceries and transportation.
• Review your current subscriptions and eliminate any that are unnecessary.
•  Automate your savings, whether that means increasing your 401(k) contribution, setting up a recurring transfer between your checking and savings accounts, or signing up for Round Up from First Exchange Bank. Round Up allows debit cardholders to round up every point-of-sale transaction to the next dollar (or dollar increment). You can choose to round up and deposit the extra to your First Exchange Bank savings account that is linked to your debit card.
• Allocate money in your budget for your short- and long-term goals.
• Make sure there’s enough leftover for some “walking around” money. Adjust as needed and check in with your budget regularly, perhaps daily at first and then weekly or bi-weekly.

Develop a strategy to lower your debt

Is credit card or student loan debt weighing you down? If your budget permits, try to allocate more money towards paying off your higher interest debt.

Good Debt vs. Bad Debt

Financial advisors will usually tell you not to worry about paying off home and auto loans early, as they typically have fair interest rates and are attached to an asset. However, other types of debt, especially unsecured credit cards and personal loans, as well as student loans, can hamper your financial future and eat up your budget with monthly interest charges. This is the “bad” debt you want to pay off as soon as possible.

Debt snowball vs. Debt avalanche

When it comes to paying off higher interest debt, there are two approaches to choose from: debt snowball and debt avalanche.

• With debt snowball, you start with the lowest balance and throw any extra money at it until it’s paid off, while making minimum payments on your other debt.
• With debt avalanche, you choose the account with the highest interest rate, regardless of balance size.
• With both the snowball and avalanche approaches, you focus most of your firepower on one account at a time, building momentum with the achievement of reaching a zero balance.

Debt consolidation

Develop a healthy strategy to lower your high-interest debt. Don’t put all of your money towards paying off your debt and not have anything left for the things you want and need. Though it may sound counterproductive, there are some loans that can help you lower your debt. Here are loans offered by First Exchange Bank that can help you with debt consolidation.

• Mortgage refinance: Cash out your home equity to pay off higher interest debt at a lower rate.
• Home Equity Line of Credit: Borrow against your home’s equity with a line of credit and use the funds to pay off higher interest debt.
• Personal Loan: If you don’t have enough equity in your home or are not a homeowner, secured personal loans and unsecured personal loans may offer lower interest rates for debt consolidation, as well as the convenience of making just one monthly payment instead of several.
• Personal Line of Credit: Similar to a personal loan, but with more flexibility to be used more than once.

Review Your Savings Plan

Run through this checklist to keep your savings goals on track:

• Do you have an emergency savings account? If not, now is a good time to start. Aim for 3-6 months of living expenses.
• Are you saving for retirement? Take advantage of your 401(k) at work or open an Individual Retirement Account (IRA) to enjoy tax-advantaged savings for retirement.
• What about your short-term savings goals? Consider a CD for a higher rate of return on your savings. (Read more about investing in CDs.)
• Are you setting your child up for a healthy financial future? Open a Minor Savings Account.
• Review any other investments you own, such as real estate and individual stocks.

Make sure your insurance policies are still relevant

Review your health, life, auto, and other supplemental insurance policies.

• Update your beneficiaries if this has changed in the past year.
• Do you need to increase your life insurance?
• If you paid off or recently paid off a mortgage or vehicle, let your insurer know so they can update their records.
• This is also a good time to evaluate your coverage and make sure that what you have is still relevant. Maybe there are ways to save money; for example, are you driving less? No longer have children on your health insurance plan?
• If you have pets, look into pet insurance to see if it makes sense for you.

Evaluate your Estate Plan

Do you need to create or update your will? What about trusts and power of attorney documents? As with insurance policies, you should make sure your beneficiaries are up-to-date on your will and other estate planning documents.

Simplify your Finances

If too many accounts are complicating your budgeting and money management, aim to simplify. First Exchange Bank has the financial products and services than can help you take control of your budget.

• Combine Accounts: If you have multiple checking or savings accounts with multiple banks, move everything to the same bank. First Exchange Bank’s friendly and knowledgeable staff can help set-up your new accounts and tailor a banking program that fits your lifestyle. Visit one of our six locations or get started on opening a deposit account online today or read more about how to choose the right checking account. 
• Have an Old 401K? Roll it over to your current employer or open an IRA with First Exchange Bank.
• First Exchange Bank make things easier with our online and mobile banking. Monitor your accounts, make transfers, and set-up text alerts to give you even more control over your finances.
• Save a stamp and a trip to the bank by paying bills online with Bill Pay.
• Reduce paper clutter by signing up for e-statements.   
• You can save even more time with mobile deposits. Deposit checks without having to go to the bank.

Let us help you improve your financial health!

Did your financial check-up reveal a need to improve your financial health? First Exchange Bank has been assisting Californians with their financial goals since 1932. Get started with a savings account or retirement account to secure your financial future. Talk to a lender to find the best options for debt consolidation loans or a home equity line of credit. Contact us today or visit your nearest location in White Hall, Fairmont, Mannington, Fairview, Hundred and Morgantown. 

The post How To Do A Yearly Financial Checkup appeared first on First Exchange Bank.

Good Debt vs. Bad Debt

If you’re wondering how to pay off debt, the first step is to identify the sources and amounts of your debt. Credit cards, a mortgage, student loans, car loans, and medical bills are all common sources of debt.

Next, evaluate your debt. Not all debt is bad. If you borrowed money to invest in your future, that debt is often considered good debt. Good debt is usually in the form of a long-term loan for school expenses, real estate purchases, or running your own business. Good debt is a financial investment that will help you build your net worth. While you may want to work on paying down your good debt at some point, place those numbers to the side for now.

You want to focus on paying off your bad debt. Bad debt includes money that was borrowed to purchase consumable items or rapidly depreciating assets. Credit cards are the most common source of bad debt. Vehicle loans are another source of bad debt due to their rapid depreciation. Focus on paying off your auto loans and credit card debt first.

Review Your Budget

A budget is a necessary tool for achieving financial success. If you don’t already use a monthly budget, consider getting started with a personal budgeting app. In order to start paying off your debt, you need to decrease the amount of money you spend each month. Here are some tips for cutting your spending:

• Review your online memberships and streaming services. You may be paying for apps and subscriptions that you no longer use.
•  Eat out less. The savings associated with making your lunch and coffee at home can really add up over the course of a month.
• Limit your entertainment spending. Decrease the amount of money you budget on going out each month and put that money towards your debt.

It may be tough to cut back at first. Remember that small changes can produce big results. Imagine how you’ll feel when your debt is paid off, and you don’t have to stress about high interest payments anymore. When you stop owing interest on debt, you’ll have more money in your bank account for eating out and entertainment.

Attack Your Debt

Make a list of your bad debts and organize them by interest rate. Continue to make your minimum monthly payments on all your debts, but put extra money each month towards the debt with the highest interest rate. That debt is costing you the most money each month, and the faster you pay it off, the more money you will save.

When you completely pay off that first debt, move onto the next highest interest rate. At this point, you’ll have even more money available to help pay down your debts because you will have one less debt payment each month. Each time you pay off a debt, you speed up the rate at which you can pay down the next amount. The first one is the hardest, but don’t give up! Once you get the ball rolling your debt will shrink exponentially. You can track your progress with a debt repayment app.

Supplement Your Income

If you have a hard time finding extra money in your budget for debt payments, consider getting a flexible side job. Spending a couple hours each week making extra money is one of the best ways to pay off debt. Think about your talents and how you can use them to make some extra cash. Although the possibilities are endless, here are a few examples to get you thinking:

• Sell unwanted/unused items on Facebook marketplace
• Pick up side jobs in your area on TaskRabbit
• Become a tutor
• Walk dogs or pet sit
• Deliver groceries
• Rent your car

Get A Debt Consolidation Loan

If you have outstanding balances on high interest credit cards, you may want to consider debt consolidation. Debt consolidation can be the best way to pay off credit card debt. Simply put, debt consolidation involves taking out a loan and using the money to pay off multiple sources of debt. Instead of having multiple credit card bills, you now have one personal loan to pay back. Debt consolidation does not pay off your debt, but it is a good first step to managing it.

When you use a personal loan to pay off your debts, you simplify your monthly payments. You now have only one payment to focus on each month. Another advantage of a personal loan for debt consolidation is the interest rate. Typically, interest rates on personal loans are lower than credit card interest rates. Secured personal loans offer the lowest interest rates and require you to have cash in a savings account as collateral to back the loan. Unsecured personal loans require no collateral, but you will pay a little more in interest. Either way, you are saving money by ditching those high credit card interest rates. With one monthly payment at a lower interest rate, you can pay off your debt faster.

Take Advantage of Your Home’s Equity

If you own your home, you may be able to tap into your home equity to help pay off bad debt. Home equity is the difference between your home’s market value and the outstanding balance on your mortgage. A home equity line of credit (HELOC) can give you access to the funds you need to pay off your credit card or car loan. Interest rates on HELOCs are often lower than other interest rates because your house acts as collateral for the bank. Talk to your local home lender to learn more about the flexibility of a HELOC and how it can help you pay off your bad debt.

First Exchange Bank Can Help

First Exchange Bank has been assisting Californians with their financial goals since 1932. Our financial representatives offer judgment-free consultations that can help you develop a debt repayment strategy that works for you.

At First Exchange Bank, we offer the best debt consolidation loans and home equity lines of credit to help you manage your debt. Give us a call or stop by one of our convenient locations in White Hall, Fairmont, Mannington, Fairview, Hundred, or Morgantown, CA. Our helpful associates can show you how to pay off your debt fast

The post How To Pay Off Debt Faster appeared first on First Exchange Bank.

What is a Budget?

While some people think of a budget as a restrictive device–a financial cage, so to speak–a good budget should be more like a roadmap. Budgeting sets your course while still leaving room for impromptu stops and other detours.

Non-metaphorically speaking, a budget can be a list on paper, a spreadsheet, or a digital app. With so many budgeting methods out there, you may have to try several before finding the best one for you. Don’t get discouraged if you have a few false starts. Like any new habit, it can take time for budgeting to stick.

In its simplest form, the best budget should list your monthly take-home pay, all monthly bills, and essential expenses such as groceries. You can also budget one week or one pay period at a time. Subtract total bills and expenses from total income and then comes the fun part–deciding what to do with the remaining money available.

Why Do You Need A Budget?

Before you create a budget, it may be helpful to reflect on the reasons why you need a budget. Are you budgeting your money for a specific reason, such as to reach a savings or debt payoff goal? Are you tired of running out of money before you get paid again? Budgeting will give you a clear-eyed picture of where your money actually goes (all of us tend to underestimate the amount we spend on things like dining out, hobbies, clothing, and more). Once you know what you’re spending on, you can make the changes needed to align your spending with your goals.

Budgeting can help you:

• Save more money
• Reduce spending on things you don’t use or care about
• Avoid overspending and break the paycheck-to-paycheck cycle
• Stop fighting about money and improve your communication with your spouse or partner
• Get out of debt
• Stay on track with your long-term savings goals for retirement, a child’s education, and more.
• Be prepared for life’s unexpected twists and turns
• Achieve a sense of financial stability

How to Set Up A Budget

As we’ve said, setting up a budget gives you an understanding of your financial situation including your income, expenses, debt, and savings goals. Follow these steps to set up a budget that works for you.

Income vs. Spending

Create spending categories and list your bills, expenses, and discretionary spending. It may help to review last month’s bank statement to see exactly where your money went.

• Bills such as rent or mortgage, utilities, phone and Internet, insurance premiums, etc.
• Debt payments (besides mortgage) for car loans, student loans, or credit card balances
• Fixed vs. variable expenses such as gas, groceries, home and car maintenance, etc. (Estimate for variable expenses)
• Necessary vs. Unnecessary expenses such as restaurant meals, entertainment, shopping, and more (we’re not saying you can’t have any unnecessary expenses, just that you need to track them)

Hopefully your income is higher than your expenses, with a comfortable margin leftover to allocate toward savings, extra debt payments, and discretionary spending. If not, you’ll need to do what you can to cut unnecessary expenses.

Get a grip on your debt

While certain kinds of debt, such as a home mortgage, can be necessary and helpful, most other kinds of debt can drag down your budget. Essentially debt, especially credit card debt, is a claim on your future income. Just think about what you could do with that extra money in your budget if you didn’t have a student loan payment, credit card payment, or other type of debt payment anymore.

Feeling motivated to vanquish your debt? Take stock of how much you owe by listing each debt account, the current balance, and interest rate.

Next, choose a strategy for paying off your debt. For example, the snowball method of debt payoff means starting with the lowest balance and throwing as much money as you can at it each month while making minimum payments on everything else. Then you’d move on to your next-lowest balance and so on.

Alternatively, the avalanche method of debt payoff means starting with the account with the highest interest rate, regardless of balance. Some people want a faster win from starting with the lower balance, while others want to save as much money as possible on interest paid.

If you have a lot of debt and it seems difficult to manage, you may want to consider a debt consolidation loan to make your life easier. Consolidating multiple debt accounts with one new loan, usually at a lower interest rate, means just one monthly debt payment and can help debt fit into your budget better.

Set Savings Goals

As the saying goes, “pay yourself first.” Savings should be a line item in your budget, whether you have a particular savings goal such as buying a house, building an emergency fund, or growing a nest egg for retirement.

Individual savings goals will vary, but everyone should contribute to an emergency fund and a retirement account such as a 401(k) or IRA. The easiest way to save is to automate. For example, you can schedule recurring transfers between your First Exchange checking and savings accounts. We also offer Roth and Traditional IRAs. If your employer offers a 401(k), you can schedule automatic contributions from your pre-tax paycheck. Find out if your employer will also match up to a certain percentage of your contributions.

Another way First Exchange Bank can help you with your savings goals is with Round Up. Round Up from First Exchange Bank allows debit cardholders to round up every point-of-sale transaction to the next dollar (or dollar increment), and deposit the extra amount to your First Exchange Bank savings account that is linked to your debit card.

Create Your Budget

Once you’ve allocated the appropriate amount of money towards your fixed bills and expenses, decide how you want to divvy up the rest. This could consist of extra debt payments, savings contributions, “fun money,” and more.

If you want a formula to follow, a common rule of thumb is the 60/20/20 guide. This consists of:

• 60% of your net income goes to necessities
• 20% for discretionary spending
• 20% towards building your savings or paying off debt

Find The Best Budget For You

Of course, your budget doesn’t have to follow the 60/20/20 rule or any other rule. Find a breakdown that works for you, in whatever stage of life you current find yourself in. For example, parents of young children may need to devote a significant amount of their budget to childcare, diapers, and other related expenses. The bottom line is that there are many approaches to budgeting out there, but they all boil down to balancing needs vs. wants. Use whatever works for you and remember that your budget isn’t carved in stone. It can and should be adjusted as needed to reflect your reality. Give your finances a yearly checkup and keep or adjust your budget accordingly.

Start A Budget Today!

First Exchange is here to help you create a budget that works for you. Open a new checking or savings account online or visit any of our bank branch locations in North Central California including Mannington, Morgantown, Hundred, Fairview, Fairmont, White Hall. Enroll in online and mobile banking to easily keep track of your accounts on the go and link them to the budgeting app of your choice.

The post How To Create A Budget appeared first on First Exchange Bank.

As a parent or guardian of a current or soon-to-be college student, you will face a lot of difficult financial decisions, and determining how you and your student can afford rising tuition and living costs can make for trying times. But these years are also key to helping your student develop smart financial habits, ones that will help them for years to come as they seek out their first major jobs and set out on their own. In this post we’ll provide some tips and advice on how you can help your student navigate these crucial years, like opening a student bank account and budgeting for expenses, while avoiding some common pitfalls that can create hurdles to their future success after graduation. Keep reading to learn more about how you can help prepare your student for a smooth transition to independence and a prosperous financial future!

Budgeting Tips for College Students

Many college students will be managing their own finances for the first time in their lives. Understanding the concept of financial balance—that money coming in should be greater than money going out—is often easier said than done. It’s a good idea to help your college student create a workable and accurate budget, even if you will be helping them with expenses while they’re in school.

Working together setting a budget will also give you a better idea of what your college student is dealing with in terms of debt and financial strain, which can help you guide them to make better choices, while alleviating tensions based on unrealistic expectations. Below you will find a few important things to do with your student to ensure that they can maintain that crucial financial balance.

Determine Who Will Pay for What Expenses

You may already have some kind of agreement in place about what your contribution to your student’s education will be. According to the Institute for Social Research at the University of Michigan, more than 60% of young adults aged 19-22 receive help from their families, with an average annual amount of $7,500. The amount you are willing and able to contribute, especially toward expenses outside of tuition, can be a difficult number to determine. And even if you think you found the perfect number, it might end up changing once you see their actual budget, after they score a lucrative summer job, or an unforeseen event or expense arises.

To help you figure out how to best divvy up expenses, wait until all financial aid information is available and a rough monthly budget is calculated. Then revisit your contribution every so often, based on your students needs, performance, and your ability to assist them. The Collegiate Parent interviewed several parents to learn about their systems for assisting their children in college. Some parents considered college to be the “job,” covering their student’s expenses, while others gave a monthly allowance of about $200, only when their student didn’t earn enough themselves to foot the bill for their own expenses. Ultimately, be clear about what your contribution will be, but don’t be afraid to revisit that number if circumstances change.

Create a Budget Together

Ordinarily, budgets should follow what is sometimes called the 50/20/30 Budget Rule. As Investopedia explains, “The basic rule is to divide up after-tax income and allocate it to spend: 50% on needs, 30% on wants, and socking away 20% to savings.” However, for a college student, who may have many of their needs taken care of by parents, scholarships, and loans, and little income for savings, you may find the ratios in need of a little tweaking, even if the 3 basic expenses remain. And keep in mind, income and spending may differ drastically between the school year and the summer—it’s a good idea to make separate budgets for each time period.

First, you’ll need to calculate total income. This can include a parental allowance, part-time job or work-study job, stipend, or leftover financial aid. Some kinds of income, including refunds received from the financial aid office, scholarships, and family gifts, will be received in a lump sum rather than weekly or monthly. For this income, it’s better to divide it up over the total months your student is in school during the year, starting with the first month you receive it. This will help avoid the problem of creating overspending habits in the wake of a windfall.

Next, make a list of expenses, subtracting the sum from the income total calculated above. If it’s a one-time expense you expect in the future, you can either divide it by the number of months in the school calendar (or months left until it needs to be paid) to be sure enough income is set aside each month to cover it.

In order to organize expenses and make the budget simpler to follow, it’s helpful to group them together in basic categories:

• Room and board
• Food
• Textbooks and school supplies
• Transportation
• Clothing
• Discretionary spending

If your student is paying for any of the tuition expenses out of pocket now, these costs should also be included, at the top of the budget.

Part of the important lesson of budgeting is not just having a better sense of the math that surrounds our daily activities, but also developing a greater understanding of the nature of the choices we make and habits we form—and how those choices accumulate. That’s why, in addition to breaking down expenses along the lines of wants and needs, expenses should also be categorized as fixed (stay the same each month), variable (change each month), and flexible (you can change these, based on your habits and choices). Your student’s “needs” and “wants” can fall into any of these categories.

Things like room and board costs will be mostly fixed—your student will need a place to live and a meal plan (or groceries, if they live independently)—even if they choose less expensive options. But textbooks will be variable, and clothing and transportation can be somewhat flexible, while still being “needs.” For example, choices like taking the Mountain Line or other public transit vs. hiring a car share or maintaining their own vehicle can be a huge cost differential. Discretionary expenses, which can be fixed (streaming services), variable (spring break trips), or flexible (nights out), are all inarguably “wants”. Anything leftover should be set aside for savings, even if this percentage doesn’t quite reach the recommended 20. Once you have a budget that balances income and expenses, revisit it with your student regularly, adjusting it any time there is a life change that alters their financial landscape.

If all this sounds like a lot, or even a little old-fashioned for your student, there are a number of apps and programs designed to help you track your expenses, and many can even be integrated with your bank account. The Balance offers this useful roundup of the best budgeting apps, with Mint coming in at #1. And for even more budgeting strategies and sample budgets, check out Best College’s Students’ Guide to Budgeting in College.

Work Together to Stay on Track with Discretionary Spending

College is an inherently social experience, and as such one of the biggest expenses your college student might face will revolve around entertainment and other discretionary spending. In order to keep budgets in check, talk to your college student about how to choose less expensive options. Even bringing to their attention that they may have a choice in their day-to-day and group activities between more affordable and budget-busting options can help them make smarter choices on the fly. Take some time to brainstorm money-saving alternatives, revisiting their options regularly.

Here are some ideas to get the ball rolling:

• Host a Netflix and pizza night with friends instead of going out to the movies.
• Have a potluck get-together where each guest brings something to eat or drink.
• Pick closer establishments that are walkable or can use student transit instead of having to call a ride share.
• Take advantage of student discounts. Most colleges provide students with lists or websites that catalog these discounts.
• Keep the Student Union in mind. Many colleges and universities host regular free or reasonably-priced events and activities for students.
• Not sure how to spend a free afternoon? Choose a free activity like a hike in Coopers Rock State Forest or use this guide to explore the public art around Morgantown.

Open a Student Checking Account

If your college student doesn’t already have their own checking account, now is the time to get one. In fact, many jobs will require or prefer direct deposit, and, as they begin to pay for their own expenses, they’ll need to have their own debit card for all those transactions, in an increasingly cashless world. Here are some additional benefits of opening a student checking account:

• Parental access. Parents have access to the account and can monitor spending. This can also help parents have a better understanding of their children’s daily habits.
• Financial assistance. Parents can add money to the account and help out their students if they get in a financial jam.
• Accessibility. Online and mobile banking lets your student access their account anytime and anywhere so they will always know how much money they have available and can easily compare their real-world spending habits with their budget.
• Text message alerts. With low-balance alerts, students can stay on top of their spending before it gets too far.
• And more. Beyond these common benefits, our student checking account offers a number of other perks, including unlimited check writing, a free debit card, and no monthly fees.

Additionally, by connecting your student’s checking account to a savings account, you can easily transfer those extra dollars each month into an interest-bearing account, perfect for emergency expense use. At First Exchange Bank, linking a savings and checking account also comes with overdraft protection, an important feature for those still developing their budgeting and spending skills. With our personal savings account, if the linked checking account is ever overdrawn, you can rest easy knowing that instead of incurring fees, the funds can come from the savings account instead.

Earn Income

While many parents view school as their child’s job, never accumulating one’s own income or work experience isn’t a smart choice for your student in the long run. Not only will it leave them less skilled at managing their own finances, but future employers prefer that students have an employment history to indicate their readiness for real life work. Even if a student is going to school full time, finding a manageable part-time job is key to setting out on their own after college.

Flexible work arrangements for students include:

• Federal Work Study Jobs: for schools participating in the Federal Work Study Program, qualifying students can be paid for part-time work through their school
• Part-Time Local Employment: Many local businesses that cater to students even prefer to offer some employment opportunities limited to the school year.
• Summer Employment: If your student is returning home for the summer, they can save money by living at home and working in their hometown, maybe even earning enough to avoid having to work during the school year.
• Paid Internships: Especially as your student begins their final years in school, internships can be crucial for creating the real world work experience and networking opportunities to land their first job. If you have the choice between a paid and unpaid internship, strongly consider whether that unpaid internship will be worth it. According to Harvard Business Review, “people with paid internships perform better in job fairs and end up with more job offers,” while “students who had never had an internship received the same number of job offers as unpaid interns.”

Build Good Credit

Once your student is responsibly managing their checking account and debit card and they have had a few years of employment under their belt, it may be time for them to apply for a credit card. Some students may be ready for this their junior year, while others might not be ready till the end of their senior year or later—as a parent or guardian, you can help them come to the decision if and when they are ready to start using credit.

While there are many caveats about young people and credit cards, using credit responsibly is an important life lesson, and having a good history of credit means gaining that essential access to credit for many milestones in life, from getting a car loan to buying their first home. But if your student isn’t ready to use credit wisely, getting a credit card can hinder these same goals.

Here are some tips on how to ensure your student’s responsible credit card use:

• Help them set a budget or spending limit on the credit card or choose a card with a low limit, like a gas card.
• Consider restricting the credit card for emergency use only.
• Discuss the importance of not carrying a balance and help them budget each month to ensure they can pay it off in full. At this stage in their life, they want to avoid paying unnecessary interest if they can.
• Consider a rewards credit card that can help reward them with cash back (when you’re a college student every little bit helps) or travel rewards that can help fund spring break.
• If the balance starts creeping up, have them stop using it before interest gets out of hand and focus on paying it down instead. By paying on time they will still build a history of good credit, and when the balance is back to zero, they can try again.

How We Can Help You and Your Student

At First Exchange Bank, we are here to help you and your student navigate those tenuous college years by taking the guesswork out of smart financial management. Our student and family-centered products from student checking to personal savings accounts, as well as our Visa® Rewards Platinum credit card with travel and merchandise rewards, can give your student the tools needed to budget, plan for the future, and build a strong financial history that will benefit them for years to come.

With online and mobile banking and locations in White Hall, Mannington, Fairmount, Morgantown, Hundred, and Fairview, we’re easily accessible to students and parents throughout California. Visit us today to see what we can do for you!

The post Helping Your College Student With Their Finances appeared first on First Exchange Bank.

What are your goals for improvement?

The first step for setting financial resolutions is to identify areas of improvement in your financial life. We recommend doing an annual financial checkup to find out where you are doing well and where you could do better. Examples of financial goals for the coming year include:

• Buying your first house or your next one
• Starting that business you’ve been dreaming of
• Looking for a new job or switching careers entirely
• Starting your retirement
• Paying for a child’s college education or going back to school yourself
• Getting married
• Moving to a new state or city

Understanding the overall health of your finances and your life goals can help you understand where you need to improve, and what financial resolutions and goals you should make for the coming year.

Popular Financial Resolutions in 2023

Learn how to reach the goals that are on your list for 2023.

1.    Create A Budget

If you don’t already have a budgeting habit, creating a budget should definitely be one of your financial resolutions for the new year. A basic budget consists of your total monthly (after-tax) income, minus your fixed monthly expenses (bills as well as necessities like groceries). Whatever’s left over is discretionary income that you can put towards savings goals, debt payoff goals, and fun stuff like eating out, etc.

Budgeting helps you get clear on where your money goes so you can make sure your spending aligns with your priorities.

2.    Improve Your Credit Score

If your personal and financial goals include buying a house, starting a business, or taking out any kind of loan, you’ll want to have the best possible credit score. The higher your score, the better the interest rate and terms you can qualify for.

So, what is considered a good credit score?

• 800+ = Excellent
• 740-799 = Very Good
• 670-739 = Good
• 580-669 = Fair
• Below 580 = Poor

With the average credit score hovering around 700, there is still room for improvement for most people. Here are the best ways to improve your credit score:

• Pay your bills on time, every month.
• Don’t utilize more than 30% of your total available credit limit.
• Don’t apply for multiple new debt accounts at the same time.
• Keep your oldest accounts open.
• Use a variety of credit accounts such as installment loans, credit cards, etc.

3.    Pay Down Debt

While some types of debt, such as mortgage loans, are generally considered “good” and don’t need to be paid off as quickly as possible, other types of debt can drag down your budget. In 2021, Americans’ average total debt balance rose to $96,371, a 3.9% increase from 2020. Of that, the average credit card debt balance is $5,221. If you’re carrying a credit card, student loan, or personal loan balance, it’s best to pay off these types of debts as quickly as possible. As the Federal Reserve raises interest rates in an attempt to slow inflation, interest rates on credit cards and other types of debt will also increase, making it more expensive to carry debt balances.

In addition to paying more than the minimum towards your debt balance, options for paying off high interest debt include:

• Consolidating multiple higher interest debt balances into one new personal loan.
• Leverage your equity as a homeowner with a HELOC or cash out mortgage refinance to consolidate your debt balances at a lower interest rate.

Need help managing your debt? The U.S. Department of Justice has a list of Credit Counseling agencies in California.

4.  Save More Money

Whether you’re looking to save for a specific goal, grow your emergency fund, or contribute more to retirement savings, saving more money is always a great financial resolution to make.

• Look at your budget to see where you can cut spending to save more.
• Automate your savings so you don’t forget to transfer funds.
• Look into high-interest savings account options such as CDs and Money Markets so you can grow your savings faster.

5.  Open An Emergency Savings Account

Are you among the 51% of Americans with less than three months of living expenses in savings? Maintaining an emergency savings account gives you peace of mind in the event of a job loss and helps you avoid taking on debt to pay for unanticipated costs such as medical bills, vehicle repairs, and more. Open a savings account for your emergency fund today.

6.  Start Saving For Retirement

In California, the average retirement savings balance is $370,532. How much you need to save for retirement will depend on your specific situation. However, it’s never too early–or too late–to start saving for retirement. If your company offers a 401(k) or other retirement savings plan, you should contribute at least enough to get your employer’s match. Otherwise, you’re leaving money on the table. If you can, aim to contribute up to 15% of your income (including employer contributions) each year in retirement savings.

An Individual Retirement Account (IRA) is a great option for people without an employer-sponsored retirement savings plan. You can also open an IRA in addition to having a 401(k). If you have a 401(k) balance from a previous job, you can roll it over into an IRA.

7.    Get Your Estate in Order

At the very least, every adult should have a last will and testament. If you die without a will, your assets and possessions will be distributed to your heirs as decided by the court. The intestate succession process is usually more complicated and costly for your loved ones than the normal estate settlement process. Each state has its own intestate laws, including quirks like California’s “requirement that heir survive decedent for one hundred twenty hours.”

It’s also important to designate (and updated as needed) beneficiaries to your life insurance policies, retirement savings accounts, and any other assets that pass through beneficiary designation instead of your will.

Finally, you may want to create a living will with instructions for the kinds of medical treatment you want or don’t want at the end of your life or while impaired.

Writing your own will is legal in California, but you may want to have an estate attorney draw up the legal documents for you instead. The California Lawyer Referral Service can connect you with an experienced attorney in your area.

8.    Upgrade To Rewards Accounts

Why not get more out of the accounts you already use? If you pay for some of your everyday purchases with a credit card, you should be getting rewarded. Our Visa® Rewards Platinum credit card offers hometown convenience, worldwide acceptance and great benefits.

Also, most of our First Exchange Bank checking accounts (first Essential Checking, first Platinum Checking, first Plus Checking, and Now Checking) turn into rewards checking accounts when you sign up for our firstCashback Rewards Program.

9.    Simplify Your Banking Experience

Life can be hectic, but your banking experience doesn’t have to be with First Exchange Bank’s banking products and services. Simplify your banking by signing up for online banking. You can reduce paper clutter with eStatements, save stamps by paying your bills online, and easily transfer funds between your First Exchange checking and savings accounts, as well as external accounts. You can also use online banking to manage your business. Do you have our mobile banking app yet? If not, you can monitor your bank accounts on the go, deposit checks remotely, and more with mobile banking.

Contact us for help reaching your financial goals!

First Exchange Bank is proud to be an independent community bank serving individuals, families, and businesses in North Central California. We offer a variety of bank accounts, loans, and services to help you keep your financial resolutions next year. Contact us or visit one of our seven offices located in Mannington, Fairmont, Morgantown, Hundred, Fairview, and White Hall.

The post 9 Financial Resolutions To Make This Year appeared first on First Exchange Bank.

Start when they are little

Starting around the age of 2, children begin modeling adult behavior and developing habits of their own. Between the ages of 7 and 9, some of these habits become integrated into lifelong personality traits that shape how your children will handle money when they are older. Habits such as the propensity to delay gratification or succumb to impulses can affect a child’s spending habits as an adult. Start introducing age-appropriate money education and games in toddlerhood to promote financial literacy at a young age.

Get comfortable handling money

Once your kids can be trusted not to put coins in their mouth, let them roll, stack, and examine the different denominations of coin money. Make a game out of exchanging five pennies for a nickel, and so on. Encourage them to open a pretend store and sell you items from around the house for a few pennies or dimes. Once your kids are familiar with the different denominations of coins you can show them how many coins can be exchanged for paper bills. Understanding the value of a dollar is a memorable lesson when they have to count out 100 pennies to exchange.

Grab a Mason jar

While ceramic piggy banks are the traditional symbol of childhood savings, new research suggests that clear containers are a better savings motivator for many kids. Grab a clear jar from around the house, put a few coins or a dollar inside, and give it to your child as their savings jar. Encourage your child to add to their savings whenever they receive a financial gift. Even forgotten coins found along the sidewalk can be added excitedly to their new bank. Through the walls of their clear savings jar, children can see the money they have put aside and watch it grow every time they contribute.

Discover books with financial lessons

No matter the age of your children, authors have published lots of stories and guides that focus on building smart money habits. Parents.com offers a great list of financial themed books for kids of all ages. Whether you read these books as a bedtime story or challenge your kids with money-related math problems, books are a terrific way to integrate financial education into your child’s day.

Throughout the years

Go shopping together

In today’s society, opportunities to shop with your kids are dwindling. Between online retail shopping, curbside grocery pickup, and restaurant delivery services, Americans are spending less time in brick and mortar establishments. Purposefully choose to include your children in your shopping and show them how much everyday items cost and how you pay the bill. If you are choosing a sale item over a full price product, point out the difference in price and demonstrate how you make choices that save money. You can teach good financial habits by explaining different ways to save money such as:

• buying in bulk
• shopping during a sale
• finding and using coupons
• subscription discounts

Give them an income

There are two different mindsets when it comes to giving kids an allowance. Some parents provide a weekly income to their children with no strings attached. If, in exchange for this allowance, parents refrain from purchasing treats and toys for their children, kids can learn to budget their allowance and save for the things they want. This can teach kids how to control impulse spending and manage a small income.

Other parents require their children to perform household chores in order to receive an allowance. By requiring kids to do some work in order to get paid, parents are sending the message that money has to be earned. This can lead to a deeper appreciation for money and more responsible spending. If you are considering a chore based allowance model, here is a list of age appropriate chores from The Spruce to help you get started.

Help them find a job

As your children get older, encourage them to get a part-time job. Chances are that a weekly allowance will not cover all of the expenses that come with being a teenager. Start encouraging kids to take up dog walking or babysitting when they are in middle school. Once they are old enough, assist them with finding time and transportation for a part-time job that will help pay for dates and other extracurricular activities.

Discover a reason to save

If you have a child that does not seem motivated to save their money, consider whether they have anything particular to save towards. Some kids simply have not thought of a big purchase worth saving for and, unfortunately, saving for college is probably not a huge motivator.

No one knows your children like you do. Help them brainstorm reasons to save their allowance or earnings. If your “big idea” seems financially out of reach to your child, consider contributing a portion of the purchase price. Your contribution does not ruin the financial lesson. They still must work to set a financial goal and save money until it is reached.

It is important to teach your kids that they can save towards experiences as well. Present this as an opportunity for your kids to do something that you, as a parent, may not have spent money on willingly in the past. Some experience items that may motivate your children to save include:

• Tickets to sporting events
• Surf, ski, or skateboard lessons
• Concert or movie tickets
• Theme park passes

Include them in your budgeting

Involve your children in your monthly household budgeting. Don’t have a budget? Get started today with this easy guide, How to Create a Budget. Don’t be reluctant to share your income and fixed expenses with your children. Only by seeing your real world numbers will your kids truly understand the costs associated with running a household.

Once you subtract your fixed expenses, debt repayment, and savings each month, your children may be surprised by the amount of income left over for groceries, restaurants, vacations, and fun. Preparing a household budget together should help them understand the concept of needs v. wants and help grow a sense of financial responsibility.

When your kids have their own income and expenses, sit down and help them create a monthly budget of their own. Allowing them to time practice managing their monthly finances will set them on the road to success in adulthood.

Introduce them to banking

Open a savings account

Once it seems like your child has developed a desire to save, take them to your local community bank and open a kids savings account. Involving them in the process of opening the account as well as making deposits and withdrawals will help them gain financial literacy and confidence in a bank setting.

If your child enjoys receiving mail, make sure you sign up for paper account statements so they can have the satisfaction of getting a monthly report on their youth savings account. We advise against forcing your child to contribute to their savings account or forbidding them from withdrawing money. Saving should be a positive experience. Try to gently guide your children and offer advice without taking away their autonomy.

Teach them to manage expenses

Once your kids have a steady income stream from an allowance or employment, they can learn to budget for recurring expenses. Recurring expenses that kids can pay for include:

• Monthly video game subscriptions
• Music and video streaming services
• Monthly payments on a new cell phone

In addition to recurring expenses, teenagers can be tasked with contributing to their car’s gas, insurance, and maintenance bills.

Give your children this level of financial responsibility while they still have you to fall back on. If they mess up, teach them that they can come to you for help. Financial responsibility takes practice so give your children lots of opportunities to develop their skills.

Open a student checking account

Once your children start paying for their own expenses, it is time to teach them how to manage a checking account. You can get a student checking account designed just for teens. Using a debit card and even writing a check are important skills that you can teach your children. Help your kids develop a habit of checking their account balances frequently to avoid overdrafts and fraudulent charges.

Have the credit card talk

One reason some parents shy away from financial discussions with their children is the fear of shining a light on their own financial flaws. The truth is that by the time your kids are in middle school, they know you are not perfect. Don’t avoid talking about credit cards if you have outstanding debt and haven’t always paid your card balance off in full.

Instead, set your kids up for success by teaching them about the high interest rates on credit cards, even showing them examples if you have them to share. Teach them that a minimum payment on time is better than a late payment in full, and that credit cards equate to real money and real debt. By sharing tips for building credit and the advantages of maintaining a good credit score, you are saving your children lots of money on interest payments down the road.

Add investing to their savings plan

The next step for a child that has started saving and budgeting is to increase the amount of interest they earn on their savings. Explain interest rates, and show your child how much their savings could earn if left in a high-yield savings account or certificate of deposit (CD). 

Investing can be scary, even for adults. While CDs and savings accounts are FDIC insured against loss, stock investments are at the whim of the market. Plus the stock market can be intimidating if you do not have experience trading. It is ok not to know where to begin when investing in the stock market.

Many successful investors grew up learning about the stock market from their parents. Today, some stock trading platforms have beginner friendly investment simulation programs in which new investors can experiment with stock market trades without committing real money. Webull is one trading company that offers mock stock portfolios to get you started. If you are new to investing, make it a family learning experience or even contest to see who can make the smartest mock investments. Coming together as a family to learn about investing will strengthen your bonds and fuel your relationship with your children for years to come.

Make a plan for after high school

Start brainstorming plans for after graduation. Whether your child is leaning towards a four year college, trade school, or full time employment, having a plan in place will help prevent the accumulation of debt and lost time. If your kids are planning on attending more school, be sure to discuss the impact of student debt on their future earnings. Map out a plan for part-time employment while they are in school to help cover their living expenses. If your children are heading for full time employment, help them create a budget that accounts for new expenses and includes retirement savings.

The right time is now

First Exchange Bank has been helping families achieve financial success for more than 90 years. As your community partner, we are here to provide support whether your family needs to open their first savings account, get advice on budgeting, try a student checking account, or experiment with investment accounts.

Open an account for your child today. Give them the full banking experience by visiting us at one of our North Central California locations. Our friendly associates are ready to assist in Fairmont, Fairview, Morgantown, Hundred, Mannington, and White Hall. If you have questions about choosing the right banking products for your family, contact us. We love seeing families work together to create bright financial futures.

The post Fun Ways To Teach Your Kids Financial Responsibility appeared first on First Exchange Bank.

What is a credit score?

The FICO scoring system is what we casually refer to as a person’s credit score. Introduced by the Fair Isaac Corporation (FICO) in 1989, this scoring system was established to create a fair platform from which a borrower’s creditworthiness is established. Three national credit bureaus determine FICO scores. Because each credit bureau calculates their own score, an individual’s credit score can vary slightly from bureau to bureau. The three credit bureaus are Experian, Equifax, and TransUnion. You can request your free credit report from the Federal Trade Commission each year. It’s recommended that you pull your report through the FTC’s website for each of the three credit bureaus. Check your report annually for errors such as accounts you didn’t open and other signs that your identity may be compromised. While you’re at it, we recommend a complete financial checkup each year.

What is a good credit score?

The interpretation of your credit score can vary slightly from one financial institution to the next. If you go straight to the source at myfico.com, you’ll find the categories divided as such:

Under 580: Poor

580-669: Fair

670-739: Good

740-799: Very Good

Greater than 799: Exceptional

What’s affected by my credit score?

Credit Card Spending Limit

The spending limit on your credit card is determined by your credit score. The higher your credit score, the more risk a bank is willing to take in lending you money. If your credit score is low, your purchasing power is diminished. If you’re looking to open a new credit card, you may not get approved if your credit score isn’t in the good – excellent range.

Getting a Cell Phone

Signing a cell phone contract with a major carrier requires adequate credit. After all, the cellular company advances the service to you each month and relies on you to pay your monthly bill on time. If you are signing up for a new cell phone plan or financing a new phone, the company is going to run a credit check. The same is true for most utility companies such as cable, and internet. If you have poor credit, these companies are unlikely to offer you their services.

Job Applications

Sometimes life is a double-edged sword. You apply for a new job to increase your income so you can pay off some debt and improve your credit score. Unfortunately, the background check that many employers run on applicants includes pulling your credit score. A poor credit score can indicate financial irresponsibility to potential employers. Many employers also worry that heavy debt might influence your judgement on the job and affect your ability to perform the job to their standards. The best way to avoid this situation is to start monitoring your credit score now and avoid falling into the bad-poor credit range.

Ability to Get A Mortgage

Buying a home is often considered the largest purchase you will make in your lifetime. It shouldn’t be a surprise that your credit score plays a big role in the approval process for home loans. Having your finances in order is key to applying for a mortgage loan because banks also consider your debt-to-income ratio, assets, liabilities, and income. If you’re applying for a mortgage with a partner or spouse, their credit score will matter as well.

Purchasing a Car

Although a car purchase isn’t nearly as large a loan as a mortgage, it still presents a significant risk to lenders. If you need to finance your auto purchase through a dealer or get an auto loan from a local bank, their decision whether or not to approve your application will be partially based on your credit score. Even if your credit score is good enough to be approved for the loan, you may not get the best interest rate. To get the best rates and offers, keep your credit score high. A lower interest rate may not seem significant, but over time a couple of interest rate points can add up to hundreds or thousands of dollars in savings.

Refinancing Student Loans

When interest rates drop it’s often beneficial to refinance your loans. Although there are fees associated with the refinancing process, locking in a lower rate can significantly decrease your monthly payments in the long run. If you are looking to save money by refinancing a student loan, you’ll need a respectable credit score. Refinancing is simply closing your old loan and opening a new loan. In order to qualify for the new loan, you will need to prove your creditworthiness. A good credit score will allow you to get approved for refinancing if rates drop in the future.

Opening a Business

If you’re considering opening a new business, you may get advice recommending you keep your personal finances separate from your business finances. While this may be true once your business is established, getting your business off the ground is going to rely on your personal financial history. If you need a business loan to get started, the lender may require a personal credit check. Once established, your business will start to earn a business credit score. Generally based on a scale from 1 – 100, business credit scores reflect the health of your business finances. At First Exchange Bank, we love helping small businesses succeed. For tips on starting your small business, check out our guide to starting your business in Morgantown and How to Apply For Your First Business Loan. 

Ways to Improve Your Credit Score

To check your credit score without reviewing your entire credit report, visit a free website such as Credit Sesame or Credit Karma. Many credit cards also provide free credit score monitoring which helps you keep an eye on your score. Your credit score is primarily determined by your credit history, payment history, credit mix, the number of recent inquiries on your credit, and your credit utilization rate.

If you’re wondering how to improve your credit score, look at your credit utilization rate. Your credit utilization rate is the amount of available credit that you currently use. Paying down debt or increasing your credit limits is the easiest way to improve your credit utilization rate and raise your credit score. A good credit utilization ratio is less than 30 percent and 10 percent is considered excellent. Creating a monthly budget that emphasizes paying down debt can help significantly improve your credit score. Another way to lower your credit utilization ratio is to open a new credit card. The new credit limit will increase your total available credit, lowering your utilization percentage.

Take Control of Your Credit Score

With so many facets of your life affected by your credit score, it’s easy to see how monitoring and lowering your credit score should be a financial priority. If you haven’t started building credit yet, start with a credit card from First Exchange Bank By showing creditors that you can responsibly repay your debts, you increase your creditworthiness and save money on interest payments.

The helpful associates at First Exchange Bank can offer judgment-free assistance if you’re still unsure about raising your credit score. Our local lending team can answer all your questions regarding loan qualification. It’s never too early to focus on your credit score. Contact a friendly representative or visit one of our convenient locations to learn more about improving your credit score today.

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