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The concept of "YOLO," or "you only live once," has become a popular theme among millennials. While the message of not allowing fear to dominate your life or letting opportunities pass you by is admirable, too often it can be used as an excuse to justify poor financial decision-making. After all, if you live only in the now, you do not have to worry about the tough tasks of saving money, investing, or making critical financial decisions for your future.
Yet the problem with YOLO-style spending is that while it may be easier to ignore financial concerns in the moment rather than face them, it can cause significant stress and even financial instability in the long-term.
Fortunately, living a more financially-balanced lifestyle does not mean living a boring life, just a more thoughtful one. The new year is a great time to re-think your finances and prioritize your spending based on what you truly value, though of course, you can improve your financial life at any time of the year.
Why YOLO Is Risky in the Long Term
A major danger of the YOLO lifestyle comes from people using it to justify purchases they cannot afford, which means they must incur debt to pay for whatever they want in the moment. The YOLO way of thinking overlooks the importance of responsibilities such as budgeting and saving, which require serious thought and effort. Because Americans pay for purchases with money they have not yet earned, the average household in the US had over $8,000 in credit card debt as of the third quarter of 2017 (wallethub.com).
Fortunately, there are many ways to improve your financial situation. As an alternative to YOLO living, check out these suggestions on how to be financially responsible while still enjoying life in the present.
Financial Strategies for Saving and Spending
These strategies focus on how to organize your finances in a way that will help you feel in control of your money, rather than feeling controlled by it. Following these tips and tricks could make a dramatic change to your lifestyle right away!
Track your expenses
Many people do not know exactly what they spend their money on, a problem that is amplified by the wide-spread use of debit and credit cards. Tracking your expenses is not designed to be a punishment but an exercise in self-awareness. You can track your expenses in a spreadsheet in detailed categories, but at the very least you should read your bank and credit card account statements every month. Reviewing your expenses will also give you an opportunity to catch double charges and fraudulent transactions.
Pay off your debts
If you are conflicted about where to allocate your money after your essential living costs are accounted for, you should prioritize paying off your highest debt accounts first. If you are carrying a balance on your credit cards as of December 2017, you are paying on average 16.2% annually (creditcards.com) on the balance for the privilege of paying for items you cannot truly afford. You will almost certainly earn less than this annual rate in an investment account, so you should prioritize paying down debt accounts with the highest interest rates. A great way to get your credit card debt under control and to save money is by doing a balance transfer from your high interest rate card to a lower interest rate card. Our Visa Platinum Credit Card features 0.00% for the first six billing cycles and rates as low as 7.99%. Click here to learn more!
Pay yourself first with automatic savings account transfers
It can be difficult to have the willpower and time to set aside funds for savings every month. Instead, it is much more effective to automatically have a certain amount deposited directly into a savings account as soon as you receive your paycheck. Visit your local Collins Community Credit Union branch for personalized guidance on what your savings goals should be, but saving 10% to 20% of your monthly income is a good general target savings rate.
Plan your budget around your own priorities
Following a budget should not feel restrictive; it is ultimately designed to help you responsibly spend money on what you value the most. Understanding how much money you have available after taxes and savings will help you prioritize your spending decisions. A person who enjoys buying a new video game every week might design a budget that allocates more money to an entertainment category and less to another expense category, such as dining out. An effective budget is one that aligns with what you most want to spend money on and ensures that you will not feel deprived.
Set up multiple savings accounts for future expenses
When you manage your money responsibly, you should still be able to enjoy your favorite items and activities. The only difference is that you will save for major expenses ahead of time instead of using credit cards to cover the costs and trying to pay for your purchases later. At Collins Community Credit Union, we allow members to set up multiple savings accounts. Contributing to a dedicated account for your next vacation, for instance, will allow you to enjoy guilt-free spending when the day comes and truly enjoy yourself in the present moment.
Next Steps for Your Financial Life
By planning your expenses and following a budget, you will feel more in control of your financial life, and will have no guilt when you make major purchases. Ultimately, this is a much more enjoyable and healthier way to live your life. We are happy to talk to members or prospective members at any of our branches about financial options at any time. Stop in today!