Creating a Savings Plan: Pay Yourself First

Creating a Savings Plan: Pay Yourself First

You’ve probably heard the phrase “pay yourself first.” But what does it really mean? It means you should consider your savings account in the same manner you consider your monthly bills—as a necessary expense. In fact, you should pay yourself before you pay your monthly bills. Professional blogger J.D. Roth lists these three reasons why:

·         When you pay yourself first, you’re mentally establishing saving as a priority. You’re telling yourself that you are more important than the electric company or the landlord. Building savings is a powerful motivator—it’s empowering.

·         Paying yourself first encourages sound financial habits. Most people spend their money in the following order: bills, fun, saving. Unsurprisingly, there’s usually little left over to put in the bank. But if you bump saving to the front—saving, bills, fun—you’re able to set the money aside before you rationalize reasons to spend it.

·         By paying yourself first, you’re building a cash buffer with real-world applications. Regular steady contributions are an excellent way to build a nest egg. You can use the money to deal with emergencies. You can use it to purchase a house. You can use it to save for retirement. Paying yourself first gives you freedom—it opens a world of opportunity.

Virginia Saves offers a variety of resources to help you get started—join today!

Paying Off High Interest Debt


Paying Off High-Interest Debt

Borrowing more money than you can afford is costly in many ways. Americans spend well over $75 billion a year just on credit card interest and fees. That means that families who revolve credit card balances pay an average of $1,500 a year in interest and fees. If they saved that $1,500 in an account with a five percent yield, in 40 years they would have nearly $200,000! Taking on too much debt also lowers your credit score. That means you will end up paying higher interest rates on all your consumer and mortgage loans. A low credit score can also make it harder to rent an apartment, get utility services, and even get a job.

Too much debt isn't just expensive. People with lots of debt often say they lack peace of mind. They worry constantly about paying off debts and making ends meet. The stress of these worries affects their family life, work performance, and other areas of their lives.

Are you in Trouble?

If you answer "yes" to any of the following questions, then you probably need to get your debts under better control:

  1. Can you only afford to make minimum payments on your credit cards?
  2. Do you worry about finding the money to make monthly car payments?
  3. Do you borrow money to pay off old debts?
  4. Have you used a home equity loan to refinance credit card debts, and then run up new revolving balances on your cards?
The good news is that there is hope. With planning, discipline, patience, and maybe some outside help, almost anyone can reduce their debts and start to accumulate wealth.

How to reduce your Debts

The first step in getting out of debt is to stop borrowing. To do that, you have to stop spending more than you earn. So, make a budget and cut out any expenses you can. It may help to cut up your credit cards or lock them away in a safe place.

      Set a Goal.

  •  Example: I want to pay down $5,000 in debt in one year.

      Make a Plan.

  •  Figure out the most you can afford to pay each month to reduce your debts, then make those payments without fail. See if you can automatically pay your bills each month to ensure you make your payments on time.
TIP: If you have debts on more than one credit card, either pay off the card with the highest interest rate first and work your way down to the card with the lowest rate, or pay off the smallest loan first and work your way up to the largest. Once you've paid off your debts, don't give in to the temptation to start over spending again. Instead, take the money you were paying each month on  your debts and begin to save it. That will give you a financial cushion the next time an emergency strikes.

Where to get help

In communities, there are agencies that can help you manage your debts.

           Consumer Credit Counseling Services 

            The most helpful and most widely available are non-profit Consumer Credit Counseling
            Services (CCCS). CCCS counselors can work with you privately to help you develop a   
            budget, figure out your options, and negotiate with creditors to repay your debts.
            Call 1-800-388-2227 to locate the office nearest you.

            Cooperative Extension Offices

            Some national credit counseling non-profits, who provide advice online or over the phone,
            can also be helpful. However, others charge high fees for little service, so be sure to shop
            carefully. In many communities, Cooperative Extension offices offer workshops, home-study
            courses, and other services to help people manage their money, including their debts.
            Cooperative Extension offices are listed in the blue pages of the phone book under county

Are you ready to set your goal?

Virginia Saves is a non-profit that encourages individuals and families to save money and build personal wealth, can help you develop your goals and take action. When you join as a saver you'll receive the following benefits:
  • Free subscription to the quarterly American Saver newsletter
  • Free monthly e-mail newsletters with savings advice from national experts.
  • Free access to the members-only Savers Tracking Tool to help you reach your goals
  • Access to online financial prizes and games. Get 100 bonus credits with SaveUp at
  • Like us on Facebook at: Virginia Saves
  • Join today at


Saving for a Large Purchase

Saving for a Large Purchase

Traditionally when we think about saving for a large purchase we think about saving for a car or a home. But there are other short-term and life event purchases that could also fall into this category. For example, saving for a new computer, a vacation, or a wedding could all fall nto the large purchase category.

No matter what you are saving for, the way to achieve your goal is the same:

          Set a Goal.

    • Decide what you want to save for.

          Make a Plan.

    • Determine how much you want to save a month and for how long.

           Save Automatically.

    • Set up direct deposit or put part of your pay into a savings account automatically each month.

Strategies for Saving for a Large Purchase

  • Build adequate emergency savings -  Before you begin to save for any large purchase, make sure you have adequate emergency savings. You wouldn't want to save for months or years only to have to dip into your large purchase savings in order to pay for an emergency.
  • Pay Yourself First - Once you have set your goal and made a plan on how long it will take to reach your goal, having money automatically put into an account through direct deposit or an automatic transfer from your checking account.
  • Keep your savings safe and protected
    • If you are looking to save for a few years, consider putting your savings in a Certificate of Deposit (CD), a U.S. Savings bond, or a 529 account (for college savings). These types of accounts generally yield more than a typical savings account but also have limitations to when you can access your funds. Learn more about financial products to help you save.
    • Some large purchases, like saving for an appliance, a computer, or a vacation take less time to save for. For these types of purchases consider putting your savings into a savings account or share account. This will keep your money safe and secure and you can usually access your savings at any time.

Are you ready to set your Goal?

Virginia Saves are here to help. Virginia Saves can help you develop your goals and take action. When you join as a saver, you'll receive the following benefits:
  • Free subscription to the quarterly American Saver newsletter.
  • Free monthly e-mail newsletters with savings advice from national experts.
  • Free access to the members-only Savers Tracking Tool to help you reach your goals.
  • 100 bonus credits with SaveUp

Courtesy of Katie Bryan, America Saves communications manager

A Lesson from the IRS for Students Starting a Summer Job

School’s out, but the IRS has another lesson for students who will be starting summer jobs. Summer jobs represent an opportunity for students to learn about the tax system.

Not all of the money they earn will be included in their paychecks because their employer must withhold taxes.

Here are six things the IRS wants students to be aware of when they start a summer job.
1. When you first start a new job you must fill out a Form W-4, Employee’s Withholding Allowance Certificate. This form is used by employers to determine the amount of tax that will be withheld from your paycheck. If you have multiple summer jobs, make sure all your employers are withholding an adequate amount of taxes to cover your total income tax liability.

2. Whether you are working as a waiter or a camp counselor, you may receive tips as part of your summer income. All tips you receive are taxable income and are therefore subject to federal income tax.

3. Many students do odd jobs over the summer to make extra cash. Earnings you receive from self-employment – including jobs like baby-sitting and lawn mowing – are subject to income tax.
4. Even if you do not earn enough money to owe income tax, you will probably have to pay employment taxes. Your employer will withhold these taxes from your paycheck. If you earn $400 or more from self-employment, you will have to pay self-employment tax. This pays for benefits under the Social Security system that are available for self-employed individuals the same as they are for employees that have taxes withheld from their wages. The self-employment tax is figured on Form 1040, Schedule SE, and Self-Employment Tax.

5. Food and lodging allowances paid to ROTC students in advanced training are not taxable. However, active duty pay – such as pay received during summer camp – is taxable.
6. Special rules apply to services you perform as a newspaper carrier or distributor. You are treated as self-employed for federal tax purposes regardless of your age if you meet the following conditions:
  • You are in the business of delivering newspapers.
  • All your pay for these services directly relates to sales rather than to the number of hours worked.
  • You perform the delivery services under a written contract which states that you will not be treated as an employee for federal tax purposes.
    If you do not meet these conditions and you are under age 18, then you are generally exempt from Social Security and Medicare tax.
More information about income tax withholding and employment taxes can be found at, the official IRS website.

Big Purchases, Big Decisions

FDIC Consumer Newsletter Offers Tips on Buying a Bank CD, Paying for Education, Financing a Car

Big purchases - and the financial decisions that come with them -- can have major implications for consumers. The Spring 2012 issue of FDIC Consumer News features practical tips for buying a certificate of deposit (CD), paying for higher education, and financing the purchase of a car.

Spring 2012 FDIC Consumer News

Retirement Shortfall Risk Making College Saving Tougher, Even for Affluent


Financial planners are helping affluent families confront a financial quandary that most families didn't face 30 or 40 years ago: How to plan for both their retiremnt and their children's college tuition. 
National studies show that most Americans run the risk of running out of money in retirement thanks to the combination of factors, which include record unemployment, declining wealth, low savings rates, investment losses and falling home values. For more click here.

Courtesy of Financial Advisor and Virginia 529

Student loans: 5 steps to pay down your debt

Student loans: 5 steps to pay down your debt

Student loans should be paramount in your mind if you've recently graduated college. The school halls are empty, the weekly speeches for your English class are complete, and you’re cleaning up after your graduation party. Now comes the hard part: paying for the education that you’ve just completed. Where to begin? Collect all your loan paperwork and then follow these five smart steps to paying off your student loans.
– Maura Kastberg is a financial-aid expert and director of student enrollment at RSC, Your College Prep Expert, a college- and career-prep service based in Schenectady, N.Y.

For the 5 steps to pay down your debt.

Courtesy of The Christian Science Monitor

Financial Planning for College

If you have children in high school, now is the time to begin planning for college.  Take a look at this article to help you start the process. click here for more information from the Washington Post.

Help Your Graduate to Manage Money

Help Your Graduate to Manage Money

Parents provide the most influence on their child's financial knowledge, attitudes, and behaviors. So, whether your child just graduated from high school or will be home soon from college for summer break, now is the perfect time to help him or her learn to manage money and exercise wise financial decision making. For more click here.

Courtesy of