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Ease cash crunch in new year

Most people have times in their life when it seems as if their money has wings. For many, the holiday season, with extra as well as end-of-the-year expenses, is an example, said Carol Young, K-State Research and Extension financial management specialist.

The cash crunch can be a challenge, yet also can make the end of the year a good time to review personal financial goals and consider saving and spending priorities for the new year, said Young, who recommends tracking expenses for a week or two to get a handle on your finances.

Doing so need not be difficult, said Young, who advises saving receipts and reviewing them, noting expenses in a check register or pocket notebook, or using a computer financial management program to identify unnecessary spending.

"We have to know where our money is going before we can make changes to improve our financial situation," Young said. "If, for example, you are choosing a beverage from the vending machine at work each day, ask yourself: 'Do you really want to spend $250--or more--a year on beverages?'"

Consider carrying your own water or other beverages and save what you would have spent toward an emergency fund or a personal 'would-like-to-have', she said.

"The choice is up to you," said Young, who noted that successful money management--and financial security--requires a self-assessment and personal choices when it comes to saving and spending.

After tracking expenses, she encourages looking for ways to reduce expenses.

Credit card debt will be an issue for many people, and, if so, Young advises putting away the plastic: "Carrying high-interest loans--credit card debt is an example--commits future earnings that might be better spent or saved for other financial goals."

"Make paying down credit card and other high-interest loans as quickly as reasonably possible (while still meeting other necessary expenses) a priority," said Young, who advised not charging more than can be paid in full during a billing cycle.

The financial management specialist also recommends building a cash reserve for an emergency fund and saving for short- and long-term goals.

"Pay yourself first," said Young, who is an advocate for payroll savings, which are automatically deducted from a paycheck, or regular automated transfers from a checking to savings account.

Automatic savings can help to make saving a habit, she said, noting that the Consumer Federation of America currently recommends $1,500 as a minimal basis for an emergency fund. As little as $10 a week will yield savings of $520 a year.

While such an amount may seem insurmountable to individuals and families who are struggling, she urged beginning by saving something. As little as a dollar a day can be a beginning toward building an emergency fund or cash reserve.

If entitled to an income tax refund, she also suggested using it to pay down bills and establish an emergency fund.

Building an emergency fund that is equivalent to 10 percent of your income or six months of earnings is a good goal, she said.

"Look to the new year as a time to move toward financial stability and security," said Young, who recommended resources on saving and spending at K-State Research and Extension offices in each of Kansas' 105 counties and online: www.ksre.ksu.edu/financialmanagement and www.KansasSaves.org.



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