For the first time since 2002, the Internal Revenue Service has updated its Uniform Lifetime Table and lowered the size of RMDs. The new tables, which now project longer lifespans, are used to calculate RMDs from individual retirement accounts, 401(k)s and other retirement savings vehicles each year. This means that starting in 2022, retirees can keep more money in a tax-deferred retirement account.
What Are RMDs and How Are They Calculated?
Traditional IRAs and 401(k)s allow retirement savers to defer taxes until they withdraw money from their accounts. This allows the money to continue to grow at a faster rate over time. The IRS does, however, require you to withdraw a specific amount each year once you reach a certain age. This limits you from keeping the funds in a retirement account forever.
The following accounts are subject to RMDs: Traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, 457(b) plans, profit sharing plans, other defined contribution plans. Roth IRAs are not subject to RMDs.
To calculate your RMD, first, look up the market value of your retirement account as of Dec. 31 from the previous year. Then, divide that value by the distribution period figure that corresponds with your age on the IRS Uniform Lifetime Table. For example, a 72-year-old retiree with $500,000 in her IRA would divide $500,000 by her distribution period figure, which is 27.4. As a result, she would be required to withdraw at least $18,248 from her IRA in 2022.
Why The New RMD Formula Is Good For Retirees
The IRS has raised the average life expectancy from 82.4 to 84.6. With a higher life expectancy, retirees will likely need to spread their assets over more years. Due to the need to cover additional years, RMDs that begin in 2022 will be less than they were under the previous formula.
Since smaller withdrawals will be required each year, more of your retirement assets can remain in an IRA, 401(k) or tax-deferred account. Smaller RMDs will lessen your tax liability and could potentially drop you into a lower tax bracket – good news for retirees or those subject to RMDs.
Under the previous Uniform Lifetime Table, a 72-year-old with $500,000 in her 401(k) would have been required to withdraw $19,531 ($500,000/25.6) during her first year of taking RMDs. That’s $1,283 more that would have been subject to income taxes compared to the smaller minimum withdrawal required under the revised table.
Meanwhile, a 72-year-old with $2 million in his retirement account would have been required to withdraw $78,125 under the older formula ($2 million/25.6). However, the updated formula results in an initial RMD of just $72,992 ($2 million/27.4), meaning this retiree would keep an extra $5,133 growing tax-deferred in his retirement account.
In summary, for the first time since 2002, the IRS updated the actuarial tables that determine the amount of money a person must withdraw from their IRA or 401(k) at a certain age. The SECURE Act changed the RMD age from 70.5 to 72 and the updated Uniform Lifetime Table has lowered the size of RMDs. This allows you to keep more of your assets in a tax-deferred account. Remember, RMDs are only the minimum amount that must be withdrawn each year. You can always withdraw more from an IRA or 401(k), but keep in mind: the larger the distribution, the larger your tax bill.
If you or someone you know plans to attend college this year after graduating from high school, you’ll be happy to know that AllCom Credit Union is offering eligible members a chance to win a $1,500 scholarship to help cover the expanding costs associated with your college education.
The Credit Union College Scholarship Program, supported by Massachusetts Credit Unions and our statewide campaign, Better Values – Better Banking, is funding six (6) $1,500 scholarships that will be awarded to six (6) high school graduates chosen as winners from across the state.
Scholarship Eligibility 1. Eligibility is limited to high school seniors who will be enrolled in an undergraduate college degree program during the 2022-2023 academic year.
2. Applicant or parent/guardian must be a member of the sponsoring credit union.
3. The credit union must be a member in good standing with the Cooperative Credit Union Association.
4. Each applicant must complete a current scholarship application form and submit it with the other required material to the sponsoring credit union.
5. Each credit union will select its top 3 applications and forward them to their chapter president. They must be accompanied by a cover letter from the sponsoring credit union CEO verifying that each applicant and/or parent/guardian is a credit union member.
Each chapter will select its scholarship winner evaluating each applicant on the same criteria the credit unions will be using grades, essay and extracurricular/community activities.
Students must submit the following items with their completed applications. All items requested must be received in order for the application to qualify for consideration.
1. Completed printed application.
2. An academic transcript of grades.
3. A typewritten essay of at least 250 words describing what you career you wish to pursue when you complete your education and why.
4. A detailed list of extracurricular/community activities and/or volunteer activities.
If you have any questions, please call Erin Harvey, Branch Manager at 508.754.9980.
If you’re someone who likes to make resolutions on New Year’s Day, you know how hard it is to stick to them. Here are a few resolutions that can help increase your financial fitness and hopefully inspire you to stay committed to them in the new year.
Resolution 1: Create a budget Saving and investing during your working years, if you are consistent, should lead to a rising net worth over time, enabling you to achieve many of life’s most important goals. Creating your own budget can help you build your road map and stay on track. At a minimum, be sure to have a high-level budget with three things: how much you’re taking in after taxes, how much you’re spending and how much you’re saving.
Resolution 2: Manage your debt Debt, depending on how you use it, isn’t always good or bad—it’s simply a tool. For most people, some level of debt is a practical necessity, especially to purchase an expensive long-term asset to pay back over time, such as a home or car. Problems may arise when debt becomes more of a burden than a tool.
Resolution 3: Prepare for the unexpected Risk is a part of life, particularly in finances. Your financial life can be affected by all sorts of surprises: an illness, job loss, disability, death, natural disasters or lawsuits. If you don’t have enough assets to protect against major risks, make a resolution to get your insurance needs covered. Insurance helps protect against unforeseen events that don’t happen often, but are expensive to manage yourself when they do.
Resolution 4: Protect your estate An estate plan may seem like something only for the wealthy. But there are simple steps everyone should take. Without proper beneficiary designations, a will and other basic steps, the fate of your assets or minor children may be decided by attorneys and tax agencies. Taxes and attorneys’ fees can quickly diminish these assets and delay their distribution when those who are entitled to them need them most.
I started working at Central Massachusetts Telephone Workers’ Credit Union on June 7, 1977, which was located within the New England Telephone Building at 15 Chestnut Street in Worcester. Our members then were all employees of New England Telephone. I was one of three part time employees and the Credit Union only offered savings accounts, small personal loans and auto loans.
We posted everything by hand and didn’t own a computer. It’s hard for me to believe that more than 44 years have passed and it’s amazing to see what AllCom Credit Union has become.
One thing remains the same and that is my commitment to you, our members and our owners. Every day my one driving thought was “the member comes first”.
Over the years we have been supported by a wonderful volunteer Board of Directors who have given their time freely and generously to set the policy direction of the Credit Union, always keeping our members and staff at the forefront of their decisions.
We have had wonderful staff that have worked incredibly hard and along with our Board of Directors and our committed members we have built an extremely strong and viable financial institution. We are just as relevant today as we were 100 years ago, as we continue to serve a purpose in our members’ lives and in our community.
Laura Ybarra, our Executive Vice President will take my place on January 1, 2022. Her intelligence, dedication, work ethic and commitment will continue to contribute to the overall success of AllCom. She embodies the true spirit of what a Credit Union is and I know she will successfully lead AllCom into the future.
We are approaching our 100th anniversary in 2022 and although these economic times are uncertain, AllCom is positioned to weather the storm and continue to thrive. I will miss helping generations of families meet their financial goals and making friendships that have lasted decades.
My last day in the office will be December 10th but I will be continuing to work remotely through the end of the year.
Thank you for turning what I thought would be just a part time job into a rewarding and fulfilling, 44 year career.
AllCom Credit Union is pleased to announce the 2022 Student Essay Contest for seventh and eighth grade students which is organized by the Cooperative Credit Union Association.
Students in seventh and eighth grade are asked to write an essay in 250 words or less on the following topic:
“Your community, your country and the entire world continues to battle the effects of the Covid-19 virus pandemic. Everyone has experienced changes in how we work, how we learn, how we socialize and credit unions have worked hard to continue to serve their members’ varied financial needs under very challenging circumstances – remote workers, sick or caregiving staff, covid restrictions such as masks, social distancing, and protective barriers, etc. Please share the three biggest covid impacts in your own life and how you have challenged yourself to overcome them”
Eight winning essays from across the state will be chosen. The first prize winner will receive $500. The seven finalists will each receive $250. In addition to the eight winning essays, there will be several honorable mention winners who will each receive $50. There will be an awards ceremony to honor the contest winners scheduled for May 20, 2022.
Anytime you move or get a new phone number, it comes with a seemingly endless list of organizations that you need to inform. Whenever you change addresses, phone numbers, name, etc., it is essential to make sure you also update your information with your financial institution in particular. You may think as long as your debit card and Online Banking works, having an updated phone number or street address isn’t important, but that couldn’t be further from the truth!
Fraud Protection: Visiting websites and making online purchases with your debit and/or credit card open an opportunity for fraudsters to exploit on. Give us the tools to protect you!
Current Address for Confidential Information: A change of address with USPS does not mean Bank Statements and other confidential information will be forwarded. USPS does not forward bank mail. AllCom needs to be notified. Keeping your contact information and your online banking profile updated are the best ways to do this.
Important Reminders and Updates: Not updating your contact info means missing out on important reminders, and other time-sensitive prompts. Updated contact info is vital for those who don’t receive a paper statement of account.
Please contact us here or call 888-754-9980 to update your contact information.
Cybersecurity has never been more important than it is now. As we spend more time online, we’re often creating and sharing more of our personal data. And if this data falls into the wrong hands, private and financial information could be at risk. So, for businesses and individuals alike, protecting sensitive data is critical.
Be Cautious of Links Links in emails are a common tool used by hackers to trick individuals into giving up their secure information. Typically, hackers will use emails with banking statements, flight reservations, password recovery emails and more.
If a user clicks on one of these links, they are taken to a fake site that looks eerily similar to its real counterpart. The site will ask them to login or input private information. Once a hacker has their hands on this information they have access to the user’s account.
Vary Your Passwords Although it’s easier to remember a single password for all your different accounts, it’s not the most secure. The best practice is to vary your password for every different site and account you use. This way, if a company you use gets breached, those stolen credentials won’t work on other sites.
Use a Password Manager A password manager is a software or program that keeps all your passwords in one place. You have one “master key” password to unlock access to these passwords. With a password manager, you won’t have to worry about remembering each of your passwords. It will also keep you from having to write passwords down (which you should never do!)
Set Up Multi-Factor Authentication Without multi-factor authentication (MFA) set up, a user can access their account with only a username and password. But, MFA adds another layer of protection. It requires more than one method of authentication to verify a user’s identity for login.
Don’t Save Payment Information A lot of websites allow you to save your credit card information to make future buying faster and easier. Don’t do it. Breaches happen all the time. There’s nothing to steal if your credit card isn’t saved on the site.
Keep Your Systems Up to Date Your software, operating system, and browser should always be up to date. If your business uses a firewall, your firewall software and firmware should also be up to date. The older a system is, the more time hackers have had to try and find vulnerabilities. By updating your systems, you will prevent malware or hackers from exploiting those security weaknesses.
Avoid Unknown Sites In this age of social media, it’s easy to share a link online. But, exercise caution when visiting new sites. With an attack like this, a user doesn’t even have to click on anything for their computer to get infected. Just visiting a site is enough to pass on malicious code.
Be Careful on Social Media Social media is a great way to keep in touch with friends and family. But, be aware of what you are sharing online. Criminals and hackers can learn a lot of information about you by observing your public profile. And just like you wouldn’t share all your personal information with a stranger, you shouldn’t share it all online either.
Install Anti-Virus Software Viruses, spyware, malware, phishing attacks, and more. There are so many ways in which your data can be compromised. Installing anti-virus software on your device will help combat these attacks. Make sure the software is active and up to date, and it should prevent digital security threats before they even happen.
Avoid Unnecessary Downloads Downloads are a prime tactic hackers use to gain access to your network. To protect your computer and your data, limit your downloads. Any unnecessary software or browser extensions should be avoided. And in an organization, employees should need authorization before downloading anything from the internet.
If you deem a download safe, always choose a custom install and watch carefully. If any add-ons or extensions pop up during automatic installations, decline them.
Although many things online are secure, it’s better to be safe than sorry. Be aware of any links you are clicking, software you are downloading, and sites you are visiting. Keeping a little healthy paranoia towards email, social media, and the internet can help you catch things that would otherwise slip by.
Learning about your credit score and what you can do to improve it will help you unlock your full credit potential and achieve your financial goals.
How your Credit Score is Calculated Lenders and creditors with whom you have a loan, credit card or other credit account, report information about your credit activity to the credit bureaus. This includes details like the balance of your account, amount paid, amount due and the payment status.
Scoring agencies incorporate five factors into the scoring model including payment history, credit utilization, average age of accounts, types of credit in use and new credit.
The Top Factors that Impact Your Credit Score
Payment History
Your payment history is typically the most important factor in calculating your credit score because it shows lenders whether you’ve been reliable in making on-time payments. This is an indicator that you’re likely to pay back your debts in the future. Just one or two late payments could significantly hurt your credit score.
Credit Card Utilization
Credit utilization ratio, or debt-to-limit ratio, measures the amount of your overall credit card limit that you are using. You should aim to keep your credit utilization ratio below 30%, but the lower the better. A high credit utilization ratio can lower your credit score and can make potential lenders worry that you may not be able to handle more debt. Your credit card utilization ratio is calculated by dividing your total outstanding balances on all of your cards by your total credit limit.
Age of Credit & Established Credit History
Establishing a long credit history usually improves your credit score if you have a history of on-time payments on your open accounts. Factors also include how long all of your credit accounts have been open (the age of your oldest account, the age of your newest account and an average age of all your accounts), how long specific credit accounts have been open and how long it has been since you used each account.
Credit Mix and Number of Accounts in Use
The number and type of credit accounts that you have in use (credit cards, auto and student loans, mortgages and other lines of credit) all factor into your credit score. Having more open credit accounts can lead to a better credit score. In addition to the number of open accounts, having a diverse mix of credit across two main categories, revolving credit and installment loans, could also improve your credit score.
Hard Credit Inquiries and New Credit
Each time someone pulls your credit report, a lender, landlord or insurer, an inquiry is noted on your credit report. There are two types of credit inquiry, hard and soft inquiries and only hard inquiries are visible to others on your credit report and impact your credit score.
Hard inquiries, typically only made with your permission, occur when a financial institution accesses your credit report when you apply for credit.
Soft inquiries, sometime made without your permission, occur when someone accesses your credit report—but not because you are applying for new credit.
Lenders who see that you have many recent inquiries may worry that you are applying at several places because you’re unable to qualify for credit or may be desperate for money.
The Bottom Line From getting a low-interest personal loan to consolidating your credit card debt to buying your first home, strong credit health can be empowering and help you achieve the financial goals you’ve set. Achieving good credit health begins with knowing your credit score and where you land on the credit score spectrum, understanding what’s in your credit report and learning what actions you can take to maintain or strengthen your credit health. Check your credit score regularly and review your credit report annually to take better control of your finances and reach your full credit potential. Visit www.allcomcu.org to apply for a loan or credit card today.
Due to the unprecedented increase in Covid-19 cases impacting our local community, AllCom Credit Union has made the decision to close our main office branch lobby at 36 Park Avenue temporarily. Although this was a difficult decision, we know it is in the best interest of the health and safety of our employees, our members, and our community.
Effective January 10, 2022 our lobby will be closed to the public. Both lanes of the drive-up teller will still be open during normal hours.
Our staff will still be available to assist you via the telephone. In-branch visits will only be allowed by appointment and for loan and mortgage closings when necessary. Please call 888.754.9980 to schedule any in-branch assistance you may need.
AllCom is here to help you during these difficult times. If you have questions, please do not hesitate to contact us at 888.754.9980.
Please take a minute to become familiar with our remote services and contact us if you need any assistance:
Please continue to visit our website for the most up-to-date information regarding how the Coronavirus may affect AllCom’s functions and services.
We want you to know that the health and safety of our members, employees and their families is always our top priority. We will continue to take the proper precautions to ensure our member’s needs are continually met.
Please stay safe and healthy. AllCom Credit Union Staff
Branch Access Update
September 20, 2021
Effective September 20, 2021, the City of Worcester has issued an emergency order requiring masks when indoors.
AllCom Credit Union will have extra masks available in the branch if needed.
Branch Access Update
June 1, 2021
AllCom Credit Union’s lobby continues to be open.
We are committed to providing a safe environment for everyone and continue to follow CDC and state guidelines at all times.
Starting June 1st, those who are fully vaccinated are no longer required to wear masks in our lobby. We welcome you to still wear your mask if you choose. If you are not fully vaccinated, we ask that you wear a mask.
If you have any symptoms of illness, we ask that you use our digital options until you are feeling better.
Thank you for your continued cooperation.
Branch Access Update
April 19, 2021
AllCom Credit Union’s lobby is now open.
We will allow lobby access to a limited number of members to ensure compliance with governmental guidance on occupancy limits and social distancing.
IMPORTANT NOTICE Prior to entering the building, please call our main number at 508.754.9980 when you arrive. We will let you know if you are able to enter right away or if you should wait in your car until we call you back.
We are strongly encouraging members to continue to use our drive-up windows along with our electronic services to perform standard transactions. While not required, appointments are also strongly encouraged to minimize wait times for new accounts, member services or loan applications and closings.
AllCom continues to follow the appropriate health guidelines of social distancing, requiring masks be worn when entering our lobby.
If you have questions, please do not hesitate to contact us at 888.754.9980.
Branch Access Update
February 8, 2021
While the branch lobby renovations have been completed, the AllCom team will continue to prioritize the safety of our members. The branch lobby is currently open by appointment only. To make an appointment, please call 508.754.9980.
When appropriate, please use the drive thru or our electronic services for teller transactions.
Lobby access will remain limited to a small number of members to ensure compliance with governmental guidance on occupancy limits and social distancing.
Important Update on our Branch
July 8, 2020
AllCom Credit Union will reopen our branch lobby effective Monday, July 13, 2020.
We will allow lobby access to a limited number of members to ensure compliance with governmental guidance on occupancy limits and social distancing.
IMPORTANT NOTICE Prior to entering the building, please call our main number at 508.754.9980 when you arrive. We will let you know if you are able to enter right away or if you should wait in your car until we call you back.
We are strongly encouraging members to continue to use our drive-up windows along with our electronic services to perform standard transactions. While not required, appointments are also strongly encouraged to minimize wait times for new accounts, member services or loan applications and closings.
AllCom continues to follow the appropriate health guidelines of social distancing, requiring masks be worn when entering our lobby.
How we are prioritizing your safety:
The following safety precautions have been implemented:
Face masks must be worn when visiting our office in accordance with Governor Baker’s order.
Social distance floor markers and one-way enter/exit arrows have been placed in our lobbies.
Seating in lobby areas has either been removed or will have at least six feet of separation.
Hand sanitizer is available.
Plexi-glass barriers have been installed throughout our office.
Our restrooms are closed to the public until further notice.
We request that trips be limited to one person per household whenever possible.
If you have questions, please do not hesitate to contact us at 888.754.9980.
AllCom will continue to monitor the COVID-19 situation and will follow guidance from public health officials and government agencies, so we can continue to support our members and communities as safely as possible.
We are here for you.
May 12, 2020
AllCom is here to help you during these difficult times. Our team is ready to assist and help find the right solution for you.
We understand the uncertainty you may feel during this time and we are here to help. If your finances have been affected by COVID-19 and you are experiencing a financial hardship, are concerned about your financial well-being or are looking to better understand your financial options, please contact us.
Governor Baker issued an order, effective Wednesday, May 6, requiring face masks or cloth face coverings in public places. To ensure your safety, as well as the safety of others, AllCom is strictly enforcing these guidelines for any person entering the branch. Click here to learn more.
As a reminder, AllCom Credit Union will send you debit card fraud alerts via text message, telephone and Email. We will NEVER ask you to click on a link or enter your card information.
If debit card fraud is suspected, you will receive a text message and Email. You can communicate with our fraud department in real time and will be asked to respond Yes or No to confirm the legitimacy of a transaction.
Text messages will be sent between 8am and 9pm. If a transaction is declined outside of these hours, please check your email for more information.
To ensure you receive these messages, please contact us to update your information with your cell phone number.
Free Weekly Credit Reports
During these times, accessing your credit is especially important. Equifax, Experian, and TransUnion are now offering free weekly online reports through April 2021. These reports do not contain your credit score. Click here for more information.
If you have questions, please do not hesitate to contact us at 888.754.9980. If you are ever unable to reach us via the main number, please use an alternate telephone line of 508.754.5489 or email us at memberservices@allcomcu.org.
AllCom will continue to monitor the COVID-19 situation and will follow guidance from public health officials and government agencies, so we can continue to support our members and communities as safely as possible.
We are all in this together.
April 6, 2020
We understand the uncertainty you may feel during this time and we are here to help. If your finances have been affected by COVID-19 and you are experiencing a financial hardship, are concerned about your financial well-being or are looking to better understand your financial options, please contact us.
AllCom is here to help you during these difficult times. Our team is ready to assist and help find the right solution for you.
AllCom cares about your financial health and wants to ensure you don’t fall victim to a scam. Scammers are taking advantage of fears surrounding the Coronavirus. Though the reason behind their fraud is new, their tactics are familiar. Learn more about how to protect yourself.
If you have questions, please do not hesitate to contact us at 888.754.9980. If you are ever unable to reach us via the main number, please use an alternate telephone line of 508.754.5489 or email us at memberservices@allcomcu.org.
We are all in this together. We will continue to monitor the COVID-19 situation and will follow guidance from public health officials and government agencies, so we can continue to support our members and communities as safely as possible.
Coronavirus Update – Information about the branch
March 17, 2020
AllCom Credit Union has been consistently monitoring the recommendations of the CDC and local authorities. As a result, we have decided to close our main office branch lobby at 36 Park Avenue. Although this was a difficult decision, we know it is in the best interest of the health and safety of our employees, our members, and our community.
Effective March 18, 2020 our lobby will be closed to the public. The drive-up teller will still be open during normal hours.
Our staff will still be available to assist you via the telephone. In-branch visits will only be allowed by appointment and for loan and mortgage closings when necessary. Please call 888.754.9980 to schedule any in-branch assistance you may need.
AllCom is here to help you during these difficult times. If you have questions, please do not hesitate to contact us at 888.754.9980. If you are ever unable to reach us via the main number, please use an alternate telephone line of 508.754.5489 or email us at memberservices@allcomcu.org.
Please take a minute to become familiar with our remote services and contact us if you need any assistance:
Please continue to visit our website for the most up-to-date information regarding how the Coronavirus may affect AllCom’s functions and services.
We want to reassure you that all deposits are insured in full. The National Credit Union Administration (NCUA) insures up to $250,000 and the Massachusetts Credit Union Share Insurance Corporation (MSIC) fully insures the deposits in excess of the federal limit of $250,000. Click here for more information.
We want you to know that the health and safety of our members, employees and their families is always our top priority. We will continue to take the proper precautions to ensure our member’s needs are continually met.
Please stay safe and healthy. AllCom Credit Union Staff
Coronavirus Update – A Message to Our Members
March 16, 2020
At AllCom Credit Union, we care about more than your financial health. We care about your total well-being. We would like to reassure you that we are continuing to closely monitor the situation and the health, safety and service of our members and employees is always our top priority.
At this time, our operating hours have not been affected. However, we understand you might be taking more precautions and limiting your face-to-face activities outside the home. With this in mind, we wanted to remind you of functions and services available online and by phone.
Banking Remotely with AllCom Credit Union:
AllCom has all the tools you need to manage your accounts without needing to visit one of our physical branch locations.
We are available by phone (888-754-9980): Mon – Fri: 8:30 a.m. – 4:30 p.m. and Sat: 9:00 a.m. – 12:00 p.m. to answer questions, assist in basic transactions, loan applications and more.
We continue to implement the following practices and policies in our branches to prevent the spread of illness and keep our members and our employees healthy:
Hand washing – Regular and thorough hand washing is one of the best ways to prevent the spread of viruses and bacteria.
Hand sanitizers – Our locations are equipped with hand sanitizers and wipes for members to use. Be sure to wash hands or use sanitizer before and after any transactions, including physical currency exchange or payments, card usage, and ATM transactions.
Disinfect – We are thoroughly wiping down countertops, surfaces and door handles throughout the day.
Employees – Our employees may use sanitary gloves when handling transactions as a precaution.
Keep Your Distance – We ask employees and members to limit physical contact with others to prevent the spread of illness.
Stay Home – Employees who do not feel well and exhibit signs of illness are asked to stay home and recover. If you’re not feeling well, you should stay home too!
AllCom Credit Union will keep you informed as updates become available. We send our hope that you and your loved ones remain healthy and we are here to assist in any way we can.
Visit the Centers for Disease Control and Prevention – www.cdc.gov for more information and updates regarding the Coronavirus.
If you’re not good at maintaining a household budget, you’re not alone. Many families operate without a spending plan, and even those who think they are budgeting may not actually be doing so. The budgeting process involves more than simply recording receipts and taking stock of spending habits. The following are some crucial steps for making a family budget:
Bring Both Partners Together Have a discussion with all decision-makers in the house to hash out shared and individual financial goals. Both partners need to understand and accept that compromise may be necessary to create a budget that works for the entire household.
Create Goals Whether your budget succeeds or fails could depend largely on whether it aligns with your personal and family priorities. Decide together what is important to your household. That could be one parent staying home to raise children, an early retirement or extensive travel. If it’s realistic, create your budget so it will funnel money toward that goal.
Track Income and Expenses Before you can write a budget, you need to understand your current financial situation. Begin by tracking or reviewing 60 days’ worth of transactions through your bank and credit card accounts. This will be crucial to identifying what money gets lost in your household’s “black hole”.
Evaluate Your Current Situation As you track expenses, place them into categories that make sense, such as housing, entertainment, dining out and debt payments. Once you know how much you spend in each category, determine which expenses are fixed and which change throughout the year. It’s also helpful to identify which categories are discretionary, meaning they cover expenses that are nice but nonessential for your family.
Trim Costs If spending in one category is too high or if there is no money left over for savings or debt repayment, it’s time to trim expenses. Dining out tends to be a drain on many budgets. Menu planning, shopping sales at the supermarket and buying items in bulk can all reduce the cost of groceries and make it more economical to eat at home. Cable, subscription services and impulse purchases made online are also low-hanging fruit when it comes to reducing household spending.
Build Savings Savings should be a top priority for any money left over after monthly expenses are paid. While it may be tempting to focus on paying down debt first, an emergency fund is equally important. Keeping enough money in savings to cover three to six months of expenses is a common rule of thumb.
After an emergency fund, retirement is the next savings priority. Workplace 401(k) accounts and IRAs offer tax incentives, making them a good spot to deposit money for retirement. Many employers will match employee 401(k) contributions up to a certain percentage, and workers should contribute at least enough to their retirement plan to receive the entire match. AllCom offers its members retirement options as well. Click here to learn more about Traditional and Roth IRAs.
Get Out of Debt Part of the budgeting process is balancing the need to pay off debt with the need to save for the future. While having an emergency fund is important, it may be best to shift your focus to debt repayment after that. If a debt charges higher interest than savings would yield, it may be better to pay down debt than boost savings beyond what is necessary.
Some debt, however, comes with tax advantages – Up to $2,500 worth of student loan interest can be deducted from federal income taxes, and mortgage interest can be included on itemized deductions.
Check in Frequently Once completed, a budget should serve as a road map for how a family plans to spend its money going forward. To be effective, it should be consulted frequently to ensure actual household spending is in line with what is written. As family circumstances or priorities change, the budget can be adjusted.
Effective January 10, 2022 our lobby will be closed to the public. Both lanes of the drive-up teller will still be open during normal hours. Click here for more information.
