Setting financial goals not only helps you feel good about yourself, but it also increases your probability for financial success in the future. Learn more about three popular ones and how to achieve them here.
January is a great time to set new financial goals for yourself. Besides being the first month of a new tax year, it’s typically when many of us tidy up our recordkeeping, clear out files, and adjust our budgets or create new ones.
What’s interesting to note is that money and financial goals are usually top contenders for resolutions each year. In fact, a recent Forbes Health/One survey found that improving finances was second on their participants’ list, just behind improving fitness.
With all of this in mind, Chambers Bank would like to share with you some insights on the goals we hear our members talk about most often as well as ways you can achieve them if they happen to be on your resolutions list.
Save For a Home Down Payment
So, you want to buy a home in the future? That’s great! Not only is becoming a homeowner an opportunity to put down roots in a neighborhood, but it’s also a way to invest for the long term and gain valuable federal and state tax benefits each year.
Achieving this goal involves gathering enough down payment money on the purchase price of a home in order qualify for a mortgage. Conventional loans usually require 20% cash down, but there are other options that require less. Keep in mind, however, that if you put under 20% down, you will have to pay Private Mortgage Insurance (PMI) until your home equity is above 20%. This insurance can cost from 0.2%-2.0% of the total loan amount.
To get a down payment amount, first determine how much “house” you can afford to buy; a mortgage affordability calculator will help you find a home price in a realistic range. With most calculators, you’ll need to at least provide your total annual income, total monthly debts, and estimated down payment amount.
Once you have a home price determined, use your target down payment amount and create a savings plan. Then, open a dedicated Chambers Savings Account and automate a monthly deposit to help you stay on track with your goal. Here’s an example: You want to save $20,000 for a down payment, and you earn $100,000 a year. By saving 10% of your income—about $835 a month—you’ll reach your goal in 24 months.
Did You Know? The Chambers Personal Finance tool is made to help you track progress on your down payment savings and reach all of your financial goals. Sign up for this free service today!
Put Money Away for Retirement
Many experts say you should put away at least 10-15% of your gross income for retirement, so if you aren’t saving already or you aren’t saving enough, review your budget to see how much you can afford. You can get a refresher on building a budget in our Chambers blog here.
If you’re an employee, you can take advantage of a workplace retirement plan such as a 401(k), 403(b), or 457, and most employers will match your contributions based on a percentage of your salary or certain annual dollar amount. You make contributions with pre-tax dollars and your employer will deduct the money automatically from your paycheck.
If you’re a self-employed business owner, consider contributing to a SEP-IRA, SIMPLE IRA, or solo 401(k) plan. The plan you choose will often depend on your total annual income, corporate structure, and whether or not you have employees. Your contributions are tax-deductible and can be beneficial in helping you reduce self-employment tax when you file your annual income tax returns.
Besides the options above, a traditional IRA or Roth IRA is a good addition to your retirement portfolio. The traditional IRA allows you to make tax-deductible contributions and defer taxes on earnings until you’re required to start taking minimum distributions at age 73—although you can begin making withdrawals by 59½. Roth IRA contributions are nondeductible, but you can make tax-free withdrawals after age 59½ as long as the IRA’s five-year waiting period has been satisfied.
Did You Know? You can open a Chambers traditional IRA or a Chambers Roth IRA by contacting any branch location and applying. Both require $1,000 minimum to open an account and have terms ranging from 12 to 36 months.
Get Cash to Start a Business
Personal money is one of the main ways individuals fund their new businesses. If you have enough available, you can use yours to open a Business Checking Account, make a first deposit, and officially start your business. On your records, you can call this personal cash either equity or a loan, but equity becomes a no-obligation contribution while a loan becomes a debt you will need to pay back to your personal account.
If you don’t have personal funds available and need cash for your business, you can try qualifying for a personal loan or business loan to get started. Utilizing a business credit card is also a possibility, but unless you have a card with a zero-interest or low-interest introductory offer, the interest charges will get expensive if you don’t pay the card off each month.
Some business founders have alternatively been able to locate sources such as crowdfunding, crowdlending, grants, and corporate lending programs to get their start-up capital. For some additional ideas on this topic, take a look at the U.S. Small Business Association’s list of funding programs and this guide from the U.S. Chamber of Commerce.
Did You Know? At Chambers, we offer a variety of commercial and agricultural loans for equipment, capital, facilities, and expansion projects. Please contact one of our branch locations if you’re interested in applying for a Chambers Commercial or Agricultural Loan.
Ready to Work On Your Financial Resolutions?
Now that you know how to get started on financial resolutions, it’s time to put your plans into action. As always, if you have any financial questions and you’d like to consult with a banking representative, please reach out to your local branch office for more information.
