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Have you ever felt “out of the loop” on something? It’s not a great feeling.
Don’t let that happen with your money.
There are plenty of smart, well-known steps you can take to properly manage your finances, such as keeping a budget and fully paying off your credit card bill each month. But there are other tips you may have missed along the way that are more outside the mainstream.
Here are some simple, often-overlooked tactics that can have a positive impact on your money management strategy.
For most people, their paycheck lands in their checking account before being divvied out to savings and elsewhere.
What if you flipped the script?
Try having your paycheck direct deposited into your savings account instead! Then, as needed, you can transfer the appropriate funds to your checking to cover your normal expenses and bills.
What difference does this make? It literally prioritizes savings over spending since the money starts off in your savings account. Then it’s up to you to move the money out. Little things like this can help you save more and stick to a budget.
Keep the number of transfers to and from your savings within the legal limit of six per month. Note: Transfers made at your bank or at your bank's ATM do not count toward the six-per-month limit.
Looking to pay off your loans faster? A simple change to your repayment strategy could do the trick, and it might be easier to incorporate into your budget than you’d think.
Traditionally, loan payments — whether student debt, a mortgage, or another debt — tend to be repaid on a monthly basis. Here’s an idea — try splitting your monthly payment in half and pay it every two weeks. Most months there will be no difference, but keeping to this schedule will result in two months per year when you’d make three payments instead of two. Those additional payments add up to an extra month’s worth of payments over the course of a year.
Consider this example: Your monthly student loan payment is $200. If you made this payment once a month, you'd pay $2,400 over the course of a year. However, let's say you split that $200 monthly payment into a $100 payment every other week. Then you'd end up paying $2,600 ($100 x 26 two-week periods) over the course of a year — a $200 difference. That extra $200 every year over the course of, say, a 10-year loan would add up to $2,000 in extra payments.
To maximize this tip, you’ll want to confirm with the lender that the extra funds (in the example, the extra $200 per year) are being applied to the loan’s principal instead of simply being counted as an early payment for the next month. Also, some loans have penalties for paying off ahead of schedule, so check your loan agreement first before implementing this plan.
Your home is a lot of things — a place to rest your head, a sense of security, and a place to build the rest of your life. Did you also know it’s a good way to lock in a lower interest rate loan?
A home equity loan uses the equity in your home as collateral in exchange for a lower interest loan or line of credit with rates that tend to be lower than other borrowing options, such as personal loans. Make sure you are comfortable with the payments because a home equity loan puts a lien on your home, so you should use it for important, large expenses.
Here’s how you calculate your home’s equity:
This lending option could help you consolidate high-interest credit card debt into one payment, fund a wedding, pay for the adoption of a child, or finance any other big expense. It’s important to know that you can only borrow up to the amount of equity you currently have in your home, so if you just bought a house and haven’t made your first mortgage payment yet, you might want to hold off until you’ve built up more equity.
Others might prefer to open a home equity line of credit (HELOC). This option acts similar to a credit card; you have access to a revolving line of credit based on the equity in your home. And, like a credit card, there are no borrowing requirements, so you can set it up and borrow as needed.
Once you pay down your balance, you regain access to those funds to use over the course of a draw period, which is typically 10 years. Once the draw period ends, you stop drawing from the line of credit and enter the repayment period, where you make payments on the principal and interest on the outstanding balance.
A big difference between a home equity loan and HELOC is the loan has a fixed interest rate, while a HELOC has a variable rate.
These financial tips aren’t top secret, but for a lot of people, they aren’t top of mind either. These tips could help you reach your financial goals, whether they’re in the near future or years down the road.
Looking to better manage your money? Our dedicated colleagues can address your financial concerns and help you reach your potential. To learn more, please call 1-877-360-2472, visit us online, or schedule a Citizens Checkup at your nearest Citizens Bank branch.
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