Financial freedom for consumers in 2009 and beyond

By Elna Seabrooks
Staff Writer
    HOULTON — In a tumultuous economy, the importance of shoring up financial resources and bracing for the possibility of an extended recession are paramount. But, Katahdin Trust Company VP Annette J. Beaton, in an interview with the Pioneer Times, offered advice that serves consumers in any economic environment.
Make a budget – job 1
Houlton Pioneer Times photo/Elna Seabroooks
CUSTOMER SERVICE WITH A SMILE — Katahdin Trust Company VP Annette J. Beaton says budgeting is critical in financial planning. “You have to know where you are spending your money in order to live within your means.” As a branch manager and retail services officer, she assists customers with assessing strategies to meet their financial goals.
    “I think the most important things for customers is to have a budget and stick to it. They really need to sit down and analyze what they can afford in order to live within their means,” says Beaton of the one thing the average person may not have put on their list of New Year’s resolutions.
    She says you should “make a list of everything that you have to pay and analyze where you spend your money.”
    “You want to look at ‘what do I have for bills and what do I spend my money on?’ You really have to have that information to prepare your budget. Sometimes people can do without certain things even if they’ve been spending money on them. You can really take a look at what you’ve done and what history has shown you with your own circumstances in order to determine what you can cut out and what has to be paid,” says Beaton.
Credit card debt
– not free money
    Adding that “credit cards are good for those people that use the money and pay it back quickly,” she  also says “to use money and have no plan of paying it back and just make your minimum payment, is tough for the consumer because it adds up and adds up. And, some customers have a lot of credit card debt.”
    And, even bigger problems ensue when payments are late. “There could be late fees, over-the-limit fees, so they get nowhere with their balances unless they have a plan to pay them back. If they have a high interest rate, plus late fees and over-the-limit fees, it could be many, many years [to pay off those loans.]”
    Beaton says “the average person can afford no more than 40 percent of their gross monthly income going out in monthly payments, not including insurance and food and that type of thing. Some banks say 36 percent. In today’s economy to have 40 percent of your gross monthly income going out in monthly payments is high because of the price of everything, even though the cost of fuel is coming down, today.”      Beaton says people need to look at what it costs to live because they have not only their payments, but they also have their lights, their fuel, their car insurance, medical bills, food, etc. That may not sound as important as it is. But, according to 2007 Census figures, 7.5 million Americans spend at least half their income on their housing expenses. For most family budgets, housing expenses combined with rising food and fuel prices are enough to break the bank.
Where to go from here
    Beaton says it never hurts for customers to talk with their banker about financial matters from budgeting and financial planning to credit cards, mortgages and refinancing. One of the newer options available to homeowners is a mortgage acceleration program, whereby the homeowner pays off the loan faster.
     “You can cut many years off a 30-year-fixed mortgage just by paying it weekly or bi-weekly. If you’re consistent about the way in which you pay, especially if it’s automatic, then there’s a huge benefit if your bank allows it. We can do an amortization schedule and show them on paper what paying it weekly will do for them and show them the benefit of how much interest they’ll save and how much time they’ll save.”
    If saving is your goal, Congress has temporarily increased FDIC deposit insurance from $100,000 to $250,000 per depositor through Dec. 31, 2009.
    Putting your finances on a new regime for the new year may have good unintended consequences. You may be able, over time to improve your credit score. Beaton says a good credit score is 700 or above. Besides, some employers, depending on the profession and the position, do credit checks. Some landlords are doing background credit checks, as well. And, you would not want to lose out on a great opportunity because a credit inquiry shows you’re a deadbeat.