4/9/2024 7:00:00 AM | Money Matters

How to get your finances under control in 6 easy steps

April is Financial Literacy Month, making it a great time to take control of your financial future. The knowledge of how to manage money and the ability to do so effectively is critical to achieving long-term security.

Here are 6 steps you can take today: 

1. Create a budget  

Budgeting doesn’t have to be hard. There are a plethora of free apps and your bank may even offer budgeting tools to help track your spending. Umpqua Bank’s Financial Tools is a free budgeting resource that customers can access right from their digital checking account.  

Start with the must-haves like food, shelter, utilities and transportation. After that, add in debt payments and put negotiable items last.   

A budget only works if you use it. Take a close look and see if there are areas where you could cut costs, looking closely at the negotiables. Track your spending to make sure you are sticking to your goals.  

2. Use a debt-payoff calculator 

If you have debt, make a plan to pay it off. An online search will turn up calculators you can fill out today to see how quickly you can be at zero debt. Two popular methods are avalanche and snowball payments. The avalanche method pays off the debts with the highest interest rates first. The snowball method pays off debts in order from smallest to largest — ideal if achieving quick wins helps keep you motivated.  

3. Get your free credit report 

You’re entitled to a free copy of your credit report annually. The three nationwide credit bureaus – Equifax, Experian and TransUnion – have a centralized website to get all the reports in one place. Visit annualcreditreport.com to review the reports from each bureau for any errors or suspicious activity.  

Consider freezing your credit too. This helps prevent identity thieves from opening credit in your name. It’s free and you can “thaw” it when you want to apply for credit.  

4. Start an emergency fund 

In addition to a checking account, make sure you have a savings account that’s just for emergencies. Even a small balance can help you cover unexpected expenses and will keep you from going into debt when the oven goes out or your car needs repair.  

Umpqua Bank has accounts for every life stage and can link your savings to your checking and even set up automatic savings transfers. Experts suggest at least $1,000 to start. You don’t have to have it all right away, but can start smaller and put that as a line item in your budget to add to it every month.  

5. Take advantage of compound interest  

Now we’re getting to the good stuff. Simply put, compound interest is when you earn interest on the money you've saved and on the interest you earn along the way.  

Let’s say you put $1,000 into a money market account (think “special savings account”) earning 5% interest and never touch it. If the interest is calculated once a year, after one year, you’ll have your $1,000 plus the additional $50 you earned in interest. The second year, you’ll earn interest on the $1,050 for a total of $1,102.50. After 15 years, it will have more than doubled, at $2,078.93. The longer the better, and even more so if you add a little to it every month! Have fun with this calculator and see the impact compound interest can have. 

Umpqua’s Thrive Money Market is a good place to start, with just a $100 required minimum starting balance.  

6. Get term life insurance 

If someone else relies on your income, make sure you protect them with a term life policy. This could help them make ends meet or cover any final expenses. And because term life doesn’t have a cash value, you can get more coverage for a much lower price.  

Want to learn more about how to get your finances under control?   

Ask your banker for information or advice on any of these smart steps. And if you want to dig deeper, Umpqua Bank offers Financial Health Resources with budgeting help, tools for parents and even a financial literacy curriculum to help teach basic money management.