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SALT LAKE CITY — Becoming a responsible money manager is something many Utahns and others around the country struggle with, from learning how to save, how to use credit or managing debt. This week is Utah Saves Week — part of a nationwide effort to help individuals eliminate debt, use credit efficiently and build a strong financial foundation.
Saving money and lowering debt requires discipline, said Zions Bank financial literacy manager Don Milne. But those willing to put forth the effort are rewarded with the "peace of mind" that comes with knowing your financial house is in order.
Among the most important items on any financial management agenda is to establish an emergency fund, he said.
If something comes up such as a problem with a car or the water heater goes out, many people often resort to using a credit card or in a worst-case scenario take out a payday loan, he said. Having some funds on-hand just in case of such an occurrence can help avoid rising debt.
"The great thing about a savings account is when these emergencies happen, you have a way to pay for them," Milne said. "Unfortunately, many people have never learned that lesson, so they treat their credit card as an emergency fund."
He said such credit usage can be quite costly depending upon the rate of interest charge on the credit account, and payday loans are typically very expensive as well.
An emergency fund of just $1,000 can make a huge difference between those who manage to stay afloat and those who sink financially, according to Milne. An emergency savings fund, he added, can help avoid the use of high-cost credit cards or payday loans and help maintain financial stability.
Another suggestion is to take a budgeting class.
Various nonprofit organizations frequently offer educational seminars on budget and money management that are often at no cost or low cost, he noted.
For example, this week as part of renowned financial guru Dave Ramsey's Financial Peace University, free budgeting classes are being held in locations statewide.
"People who do a budget are more likely to keep their expenses in line", Milne said. When people live within their means and properly manage their finances, they feel empowered and are more inclined to maintain smart budgeting habits, he said.
Milne also noted that taking a directed approach to reducing debt is among the key components to smart money management.
Pay off smallest debt first to create momentum, he advised.
Personal finance is 20 percent knowledge and 80 percent behavior, he said. Paying off lower debt amounts first will help build a habit of good behavior of financial responsibility and build confidence.
"Right now the average household has about $15,000 in credit card debt," Milne said. "If you're paying 20 percent, then that is about $3,000 a year that you're spending in interest. That is enough to pay for an emergency fund three times over."
He noted that some quick "wins" in paying off debt quickly can boost an individual's motivation to get out of debt completely.
"Human nature being what it is, if it's easier, you'll do it," Milne said. "If it's harder, you'll give up."
