Story last updated at 12/31/2008 - 11:45 am
Alaska might not be feeling the full effects of the global financial crisis but that doesn't mean everyone is confident about their financial future.
For those who are worried, most financial experts would agree that there's no better time to start saving money than right away.
Jeremy Kerr, a branch manager with Alaska USA Federal Credit Union in Juneau, teaches financial education classes to high school students. The lessons apply to people of all ages, though the younger people are when they learn financial literacy, the better off they are, Kerr said.
"The sooner you start saving, the more you're going to have," he said. "The later you wait, the harder it's going to be to catch up."
He cites the example of a young man who started putting aside all of his part-time job paychecks while he was in high school. Now this teenager has $20,000 in the bank - more, Kerr said, than many of the adult accounts he sees.
But adults should start saving now, especially if they're worried about their job security or their financial situation in general.
"I think right now is a good time for people to start (saving)," Kerr said. "In order to have that financial cushion when you need it, you have to start saving now."
Many financial experts recommend having three to six months worth of living expenses in savings in the event of an emergency. But how do you find the money to save?
A plan for your money
The first step is creating a budget. Amanda Coate, a business associate with Wells Fargo in Juneau, prefers a less intimidating term. She talks about "making a plan for your money."
"Don't spend more than you have coming in, but that's easier said than done," she said. "There are a lot of people who come to my desk and say, 'Why am I overdrawn?'"
Coate recommends breaking down expenses into three categories: fixed, flexible and discretionary. Fixed expenses are those that occur regularly and don't vary from month to month, such as insurance payments or rent. Flexible expenses occur regularly but vary in amount, such as food and gas purchases. And discretionary expenses are those you chose to spend, such as money for entertainment and gifts.
One simple way to start saving more money is to look for discretionary expenses that can be cut out or replaced with a more inexpensive option. Do you need to see every movie in the theatre, or can you wait for video? Do you need a grande mocha every morning or could you make coffee at home?
People who want to save money should also look at way to cut down on flexible expenses, such as groceries and gas.
Many people don't look at the coupon flyers for grocery stores, Coate said, but they should. Looking for the sale stickers in stores and switching to store brands are other simple ways to get essentially the same product for less.
Of course, shopping is about value as well as price. For many people, buying from locally owned businesses is important enough at times to justify higher. For others, buying organic foods is important.
"It comes down to value," Coate said. "Is your value that you want to support local businesses or that you want to save money?"
The same could be said for some discretionary expenses. Some movies are so much better on the big screen it's worth paying extra. The key is to recognize when something is worth an extra expense.
Both Kerr and Coate recommended carpooling and using public transportation when possible to save money on gas.
"I tell the kids (that) it's not necessary to drive downtown, to drive around town all the time," Kerr said.
If you have a family, discuss all of these changes with your spouse and children old enough to understand. For any financial changes that will affect others, it's important to let them be a part of making decisions, Coate said.
Once you have a good idea of what you should be spending on your flexible and discretionary expenses, Coate recommends the "envelope system" to hold yourself to only spending as much as you've budgeted. Each week, or month, put aside a certain amount of money in envelopes designated for groceries, gas, entertainment, etc.
Money in the bank
Once there is money left over, don't just keep it in an envelope. If you already have a bank account, talk to your banker about whether you are getting the most bang for your saved buck. The more money you have saved, the higher interest rate you may be able to get on your savings.
"Look at your financial institution to see what they've got," Kerr said. "And shop around. See who has the best rates."
Coate said that a lot of people are scared of banks but a regular visit with bankers is an important part of a good savings plan.
"As your financial situation changes, your need for information changes," she said. "Go talk with your banker on an annual basis. Maybe you can earn more."
Continue to keep good records of spending and savings. Coate recommends noting all transactions by hand in your check register, even if you do a lot of your banking online.
Credit cards can be a blessing or a curse.
Kerr noted that having multiple credit cards can give you a better credit rating, as long as you are keeping most of the credit lines open.
But, he warned, "If you cannot handle your credit card, cut it up."
If your workplace has a 401K retirement plan, sign up as soon as you can, he added.
"You can't beat it," he said. "It's not taxed."
Finally, Kerr recommends remaining confident in your ability to improve your own financial situation. Don't let the financial crisis get you down.
"Don't get discouraged," he said. "This too shall pass. We've been through recessions before. We'll get out of it. There's a lot of doom and gloom out there, but be optimistic. Use your entrepreneurial talents."