Budgeting 101
If you’re like most people, you work hard for your money. While much of that income goes toward meeting your obligations—housing, food, cars, insurance—it’s nice to have a little extra for the finer things in life.
The key to having enough for both your wants and needs is to spend your money wisely, which means developing a budget. A household budget is like a written blueprint for spending that helps document how much you take in, how much you pay out, and how you might stretch your dollars a little further.
Our calculators at Berkshire Bank can help you run the numbers. Budget tracking software and apps like Mint, Quicken, and You Need a Budget are also excellent tools for money management and planning. Before you dive in, here’s an overview of what you’ll be doing and why it should pay off:
- Add up your income. You likely know your annual salary, but to compute your household budget, you’ll need to know how much you earn monthly. Reference paystubs for all the wage-earners in your family to get a sense of your total monthly household income. Be sure to also account for regular income from other sources, such as interest or dividends. Subtract the amount deducted for taxes, Social Security, Medicare, and your retirement plan. Your take-home pay after all expenses have been deducted is known as your net income.
- Compute your expenses. How much do you spend each month? Expenses can be divided into two categories: fixed and variable. You pay the same amount every month for fixed expenses, like housing, car loan payments, and cable. Variable expenses change month to month, and can include grocery purchases, electric bills, clothing, and entertainment costs. You can find expense information by logging into your Berkshire Bank online banking account to review your checking account payment history and eStatements. Individual expenditures are also listed on credit card statements, which you can view on paper or online.
- Calculate the difference. The next step is to use basic math or a simple budget calculator like this one to determine the difference between your income and your expenses. If your net income exceeds your expenses, you’re in a great position and can work to make that gap even larger. If your expenses exceed your income, you know you need to look for ways to save.
- Set financial goals. You’re most likely to follow a budget if you have specific financial goals in mind. These can be short-term goals, such as paying down debt or buying new appliances, or long-term goals, like saving to buy a house, fund a child’s college education, or build a retirement nest egg. Stay motivated to save by writing your financial goals in a place where you’ll see them each time you work on your budget.
- Crunch the numbers. Now it’s time to really get organized. Divide your expenses into categories. These might include housing, transportation, loan payments, utilities, food, health care, and entertainment. Within those categories, identify each month’s fixed costs and variable expenses. You probably won’t be able to alter your fixed costs very much—after all, you have to pay the mortgage. But taking a hard look at your variable costs can pay big dividends. Find creative ways to save money, like dining out less often, reducing your electric use, and carpooling or taking public transportation. Determine what you need and what you want, then cut back where possible. Can you live without some of what you want to free up cash to pursue those short- and long-term financial goals?
- Break down your budget. A good rule of thumb is to put 50% of your budget toward fixed expenses, 30% toward variable or flexible spending items, and 20% toward your goals. Whatever formula you use, make sure to build in a smart savings plan, especially if you’re setting money aside for long-term goals. Berkshire Bank offers interest-bearing savings accounts, money market accounts, and certificates of deposit to help you make the most of your money.
- Be diligent. Once you identify ways to save, set monthly goals for each category. You’ll need to keep an eye on your spending over time for your efforts to pay off. Whether you choose to save a receipt, send yourself a text, or make a note in your budgeting app, get in the habit of documenting every expenditure. The very act of monitoring your spending may make you think twice about buying things you don’t really need. Check in with your budgeting software to track your progress at regular intervals. Over time, you’ll sharpen your skills and come up with new and better ways to make the most of your money.
If you’d like help setting up a budget just for you, contact a Reevx Labs MyBanker.
Mortgages 101
When you're looking for a new home, we're looking after you.
Need some help choosing a loan? Our expertise is on the house.
When you go house-hunting, you'll surely see many different floor plans and architectural styles. When it comes time to finance your new place, you'll encounter a wide array of fixed-rate and adjustable rate mortgage options. But don't worry, you won't have to sort through them on your own. At Berkshire Bank, we take pride in helping our neighbors find a loan that's as sweet as their home.
Adjustable-Rate Mortgage
- Lower initial interest rates reduce monthly payments
- Loan terms limit future interest rate increases
- Low closing costs
- Choose from a variety of ARMs
Fixed-Rate Mortgage
- Competitive interest rates
- Low closing costs
- Repayment terms that fit your needs
- Monthly payments will remain stable over course of loan
- Priority Borrower Approvals are available
Avoiding Online Scams
We seem to hear about a new online scam nearly every week. While the internet has changed the world for the better in many ways, there is a downside. Online scams are widely prevalent, and despite the misconception that they are primarily a concern for senior citizens, a recent study by the
FTC found that more millennials than retirees are now getting scammed out of money online.
At Reevx Labs,
protecting your money and personal information is a top priority. That’s why we’ve outlined how to spot the latest online scams and how you can protect yourself with these internet safety tips.
Facebook scams
The
Better Business Bureau warns about online fraud happening within Facebook. It starts with a “friend or relative” who contacts you through Facebook saying you are entitled to free money. These can come from fake profiles or hacked accounts. The catch? You need to pay up front for shipping or processing or provide other sensitive information that can be used for identity theft.
Follow these tips to avoid a Facebook hack or scam:
- Don’t give out your password (and don’t use the same password for multiple accounts)
- Avoid accepting unknown friend requests
- Use a secured network, not public Wi-Fi, when signing into any accounts (especially your bank account)
- Keep apps, browsers and antivirus software updated
Scam websites
The old phrase “If it seems too good to be true, it probably is” certainly applies to shopping online. Fake shopping websites have been popping up lately, aiming to scam you out of your hard-earned money. Pay attention to these red flags, which will help tip you off to a fake website or online store:
- Bad grammar, incorrect spelling and/or poor website design
- Super-low prices that seem too good to be true
- Bootleg logo, store name and/or URL (e.g. “you-pay-less-4-mac-stuff.com” or a site with a URL that’s one or two letters off from a legitimate domain)
- Inability to accept credit or debit card payments
- Reviews that sound suspicious or inauthentic
How can you protect yourself from fake shopping websites?
- If you are wary of a fake site, run it through Google’s Transparency tool or the BBB’s Scam Tracker
- Only purchase items online using a secured network
- Check to be sure the web address begins with “https,” indicating your personal and payment information is encrypted
- Use two-factor authentication for paying online
Texting scams, or “smishing”
You’re likely familiar with phishing scams—fake emails that look to be sent from legitimate companies—but have you heard of a similar tactic called smishing?
Smishing scams involve fraudulent text messages that seem urgent and indicate something is wrong. These messages prompt you to click a link, send sensitive personal information or reply to the text to resolve a serious situation. They may also promise free gifts or offers in exchange for personal information. So how should you handle to a text message you think may be spam?
- Don’t reply or click any links
- Call the company directly if you suspect the text may not be real (use the phone number on its real site)
- Delete the text
Make money online scams
Some of the biggest categories of online scams are ones that promise you can make easy money online or from home by doing little work. Here are a few to watch out for:
- Work-from-home scams: There are number of ways to make money online, but also a lot of traps, as listed by The Penny Hoarder. Watch out for jobs that require you to pay in order to start work and those that sound too good to be true.
- Cryptocurrency accounts: These scams offer you bank accounts to deposit your bitcoin or other cryptocurrency, with promises of doubling or tripling your money.
- Generate passive income with our system: This scam sells you a “proven system” to help you become an overnight financial success. Typically, these are loaded with fake testimonials and bogus information.
Online dating or romance scams
If you’ve heard of “catfishing,” you can imagine what this breed of scamming is all about. In this increasingly popular online scam, a fraudster preys on vulnerable people seeking a romantic connection to lure them into draining their bank accounts.
Online dating scammers often fool their victims into falling in love with them by using information posted in the victims’ dating or social media profiles. Romance scammers try to quickly woo their targets and move the conversation to a private channel, like over the phone. Then, suddenly, something horrible happens. This could involve a lost job, a family member ending up in the hospital or someone dying—which is when the fraudster will ask for money or gifts.
Consider these tips and others
from the FTC to avoid falling for a romance scam:
- Don’t give money or gifts to someone you haven’t met in real life
- Be careful what you post online and avoid sending photos of yourself, which can be used for blackmail
- Do a reverse image search of the person’s profile to see if he/she may be using a stolen photo
- Talk to someone you trust and pay attention if friends and family are concerned
How to report a scammer
Do you think you or someone you know is getting scammed? Here’s how to report a scammer and form a paper trail of evidence against fraudsters:
If you suspect you’ve become a victim of fraud or identity theft, contact Berkshire Bank right away by calling 800-773-5601. Report suspicious activity, lost or stolen cards and all other fraud immediately.
Calculating Your Credit Score
When it comes to protecting yourself online, knowledge is power. We’re here to help keep you safe from online criminals and keep your information secure online.
If you’ve applied for a car loan or a mortgage lately, you’ve probably heard someone mention your credit score. It’s also likely you’ve read articles or blog posts about how to improve your score.
By now, you might know that paying bills on time and keeping credit card balances and other debt under control can move the needle in the right direction. But that’s only skimming the surface. To figure out the best way to improve your credit score, it’s a good idea to learn how it’s calculated.
What Is A Credit Score?
A credit score is a number assigned to all adult consumers. It’s compiled from several financial factors and attempts to measure how responsible you are financially and how likely you are to repay a loan.
The most widely used score is from a company called FICO, which rates consumers on a 300 to 850 scale. If your score is much below 650, you’ll pay high rates on loans and credit cards, if you qualify at all. Once you reach 700 or so, you’ll get the best interest rates. FICO scores aren’t just used by banks and other lenders. Insurance firms, landlords and even employers also use them to help determine how responsible you are.
Three agencies provide scores to the public – Experian, Equifax and Transunion. When you have accounts at Berkshire Bank, you can get a free credit report on a regular basis. You can also get scores from many websites, including
AnnualCreditReport.com.
Credit Score Criteria
Figuring out your credit score is a lot harder than, say, computing a student’s grade point average or a car’s fuel mileage. By one estimate, about 36 billion pieces of data are used to create scores for 220 million American consumers. Here are the main factors:
►Payment History
Weight: 35% of score
Explanation: It’s no secret that overdue bill, loan and credit card payments are score killers. But ratings firms dig even deeper and factor in how late your payments were, how much was owed, and how recently you missed a payment. Bankruptcies and foreclosures are also considered.
Tip: We all lead buy lives and it’s easy to forget payment due dates
. At Berkshire Bank, you can use online automatic bill pay and mobile banking tools to eliminate that worry by scheduling bill payments ahead of time.
► Amount Owed
Weight: 30% of score
Explanation: It’s not quite as simple as keeping your debt in check. Credit agencies compare your total debt to the amount of borrowing power available to you. They examine how close you are to limits on credit card limits and instruments like home equity lines of credit. If you have a cushion that allows you to quickly access money, you’re considered to be a better credit risk.
Tip: Don’t max out your credit cards. Aggressively pay down your balances. And consider applying for a card from Berkshire Bank with a lower interest rate
. Also, think twice before cancelling a credit card. While that might reduce your temptation to spend, you’re also eliminating some of the credit cushion that the rating agencies value.
► Length of Credit History
Weight: 15% of score
Explanation: Rating firms look at how long your oldest accounts have been open. They want evidence you’ve reliably made on-time payments over a lengthy period. Young people – especially those with student loans -- are often wary about adding debt. But avoiding it completely also isn’t the best idea.
Tip: You can certainly start to build your credit rating by paying bills on time. But you should also look to take on manageable debt, perhaps with a credit card geared toward people building a credit history or a modest auto loan.
► Current Credit Mix
Weight: 10% of score
Explanation: Not all debt is the same. Credit cards are known as revolving debt, since you draw on money as you need it, pay it back, and then use it again. Auto loans and mortgages are examples of installment loans, where you borrow once and then make monthly payments. Creditors like to see that you’re able to manage multiple types of loans.
Tip: If you want to improve your credit mix, a home equity line of credit is another revolving loan option. Similarly, a regular home equity loan is a solid installment loan choice. Either one can give you resources to renovate your house, buy new furniture, or take a special trip.
►New Credit
Weight: 10% of score
Explanation: Rating agencies look only at how many credit cards and outstanding loans you have. They also look at how many you’ve applied for recently. A flurry of new activity can be a sign of personal financial trouble.
Tip: At Berkshire Bank, we certainly want to be your go-to destination for loans and credit cards. But we also care about your overall financial health. If you want to talk about your credit score or get financial counseling, just contact one of our
MyBankers.
How to Get Out of Debt
It’s no secret—Americans really know how to get into debt
. U.S. household debt climbed to
$13.95 trillion in the third quarter of 2019, up from $13.54 trillion the prior year. The numbers are even more staggering on a personal level. The average family with credit card debt owes
$8,500, whereas an average household with auto loans owes about
$27,800, student loans average
$46,800, and average mortgage debt is around
$189,600.
Fewer Americans understand how to get out of debt. While it starts with willpower, there are proven financial strategies to consider. Berkshire Bank offers a variety of tools and resources to help you improve your financial wellness, including
MyBankers, interactive
calculators, and educational
resources.
Make the Commitment
If you’re carrying a lot of debt, be prepared to put about 15% of your income toward reducing it. Making only minimum payments on your credit cards and other loans will cause interest charges to pile up, meaning it will be difficult to break the cycle and get out of debt.
- Find online assistance. Consider investing in debt-elimination software to help you run the numbers and set priorities. Popular choices include Quicken, Zilch Works, and Undebt.it. Smartphone apps, such as Debt Payoff Planner and Debt Free, are also available. AARP’s free Debt Consolidation Calculator will help you understand how rolling your debt into a single loan can save you money in the long run. Also, Berkshire Bank’s Credit Card Payoff Calculator can help you create a plan and understand how long it will take to eliminate your balance.
- Tighten the belt. To free up money for debt payments, you’ll need to reduce spending. Come up with a monthly budget, put it in writing, and stick to it. Use this budget calculator to keep tabs on your income, expenses, and opportunities to save. Cut back where you can by cooking rather than dining out. Cancel cable and opt for a more cost-effective streaming service. Bargain hunt for great deals on discount sites like Groupon and Slickdeals. Small adjustments to your spending habits can add up over time.
- Seek bigger savings. Evaluate your insurance policies to see if you can find less-expensive coverage that still meets your needs. Berkshire Bank can help you find affordable alternatives to your home, auto, life and personal insurance policies.
Use Credit Cards Wisely
Credit cards offer convenient buying power and can earn you valuable rewards. Problems arise, however, if you charge too much and carry a balance, causing interest to accumulate.
- Set priorities. If you have multiple credit cards, identify the one with the highest interest rate. Pay that card down as aggressively as possible while making minimum payments on the others. After the first card is paid off, allocate your largest payment to the card with the second-highest interest rate, and so on, until you eliminate your debt.
- Look for 0% interest rates. Another technique is to apply for a new credit card that offers a promotional 0% interest rate, usually for a period of 12 to 24 months, then transfer all outstanding balances to the new card. This will buy you time to pay down the balance without accruing additional interest charges. Berkshire Bank offers a number of credit cards to help our customers keep their debt under control.
Be Strategic About Your Loans
Buying a home, getting a new car, sending your children to college—these can all be worthwhile investments, and borrowing money is a great way to make them happen. While loans can afford you the opportunity to make major expenditures, keeping up with the payments can be a challenge.
- Make mortgages manageable. Most homes are financed with 15- or 30-year mortgages, but you’re not obligated to keep the original loan that long. If interest rates drop, consider refinancing. Even a 1% rate reduction can trim payments on a $200,000 mortgage by well over $100 per month. If rates haven’t dipped, switching to a loan with a longer payoff period will reduce monthly payments and free up cash to pay off shorter-term debt. Berkshire Bank can help you navigate our many mortgage refinancing options.
- Shift gears. Consumers often drive away from an auto dealer with a vehicle they love and a loan they don’t. The solution is to trade in that unsatisfactory loan on your new car, motorcycle, or RV. Refinancing to a lower interest rate or longer repayment period will reduce monthly payments and minimize stress on your household budget. Berkshire Bank provides a range of auto refinancing options to help you get back on track.
- Simplify student loans. Student debt can be crippling. One solution is to consolidate all those years of school loans into a single new loan to reduce overall monthly payments and simplify your finances. College grads with federal loans can apply for a Direct Consolidation Loan.
- Get it together. Debt consolidation is an effective tactic. Berkshire Bank offers great rates on personal loans, home equity loans, and lines of credit. You can use money from those sources to pay off credit card balances, medical bills, and even school loans, bringing your debt under control.
- Beware of debt-relief companies. Many debt-relief companies can be scams. In November, a student loan debt-relief scheme siphoned millions out of former students’ pockets, according to the Federal Trade Commission. Contact your state Attorney General’s Office or consumer protection department to vet out debt-relief companies before giving them your business. You can also reach out to your partners at Berkshire Bank for help consolidating loans and paying off debt.
Developing a smart strategy to pay down your debt and consolidate loans will help you get a handle on your finances. Berkshire Bank provides a variety of resources to help our customers understand their options and improve their overall financial health.
Contact us today to learn more about how we can help you manage your debt.