Budgeting is pretty simple when you think about it — at least in theory. Spend less than you bring in each month so you can save toward long-term goals and weather unexpected financial storms. Make a plan and track your progress to keep yourself honest and organized. These fundamental principles apply to everyone — no matter how much money you make or where you happen to live.
But, as we all know far too well, the bustle of everyday life seems to create a big disconnect between theory and reality. Things get in the way, stealing our time and demanding more of our money. In this respect, budget burdens do differ based on geography given the socioeconomic differences that exist between states, cities and even zip codes. And, with that in mind, it’s fair to wonder what unique circumstances may be in play for residents of northern states like Maine as the seasons change and the temperatures drop.
The good news is that Maine is already home to some of the country’s best budgeters, with Portland and Bangor ranking 25th and 62nd, respectively, among the 150 largest metro areas in the U.S., according to a recent WalletHub study. But there’s always room for improvement (and the possibility of regression), so here are some things to keep in mind in the weeks to come.
1. Watch out for winter binge shopping
Consumers nationwide seem to be falling back into pre-recession bad habits, with credit card debt climbing rapidly in recent quarters. As of 2015’s midpoint, the most recent data that’s available, the average balance for a household with credit card debt was more than $7,800 – the highest level since the Great Recession. And the busiest shopping period of the year, when we historically see the biggest build-up in credit card debt, still looms large on the horizon.
Colder weather also creates more time and temptation to shop online, especially when snow enters into the equation. The El Nino effect, expected to cause a warmer-than-average fall and winter for Maine, may help save you from unnecessary boredom-based buying to a certain extent, but it’s not like The Pine Tree State is going to be mistaken for The Sunshine State anytime soon.
So, with our financial discipline receding and interest rates expected to rise sometime soon, we need to keep our spending in check over the next few months in order to make sure our wallets don’t have too bad of a New Year’s hangover. The best ways to do so, other than simply being cognizant of our tendency to overspend during the winter months, are to make a long-term budget, shop for winter essentials in advance and invest in some inexpensive forms of entertainment like books or a Netflix subscription to reduce the likelihood that you’ll feel inclined to shop for sport. If you have excellent credit, opening a new credit card could also help you save more than $600 on winter travel or $400 on holiday presents, thanks to historically lucrative sign-up bonuses. Just keep in mind that this strategy will only work if you pay your bill in full each month and would not have to spend more than you would ordinarily to qualify for the initial rewards bonus on your card of choice.
2. Save recent energy savings for when prices rebound
Oil and gas have been extremely cheap for months now – a fact which has clearly influenced consumer habits, with insurance companies reporting that their own costs have increased as a result of people driving more miles and getting into more accidents. It’s also padding our bottom line, with the White House estimating that the average household will save $750 just on gas for their cars during 2015.
Residents of Maine, the state most reliant on home heating oil, have also benefitted from a windfall of utility savings. Last winter, with the price of heating oil down $1 per gallon year over year, Mainers were estimated to save roughly $3 billion. And the price is down about another $1 per gallon since then.
The key is to use reduced energy costs not as an excuse for a shopping spree, but rather to prepare your finances for when costs inevitably rebound. After all, even considering the recently depressed oil prices, Maine is still one of the most energy-expensive states in the country due to relatively high consumption. So, take the excess amount you would’ve ordinarily spent on gas for your car and heat for your home and divert it to your emergency fund and, in turn debt payments. It’s important to make sure you have a few months’ pay stashed away before concentrating funds on getting out of debt because you’d be walking a tightrope with no safety net otherwise. One slip-up or unexpected financial headwind could send you plummeting back into debt.
The easiest way to sock a little bit more away each month is to setup an automatic monthly transfer from your checking to your savings account. You may also want to revisit your budget to verify that no luxuries have transformed into necessities during this period of consistently low energy costs.
3. Make a financially-informed college decision
Fall means a lot more than football to high school seniors, as it’s when serious educational decisions start to be made. We all know how debilitating the cost of higher education can be for students and families, so it’s important to approach this decision and the financial demands that accompany it as strategically as possible.
Having some of the best K-12 public schools in the country is one unique advantage for Maine residents, as not having to pay for private school leaves more money for college and high-performing students have greater access to merit scholarships. But the University of Maine is tied for 91st among public colleges, according to US News, which could serve to create something of a conundrum for college-shopping families considering that out-of-state tuition at public colleges and universities costs about twice as much on average as in-state public tuition, while private institutions are roughly three-times as expensive.
With all of this in mind, it’s important for applicants to seek out scholarships, grants and every other form of financial assistance they can plausibly qualify for. They should also approach both their school and major of choice in terms of the return they will get on their monetary investment. In other words, what kind of job are you likely to be able to get after graduating, roughly how much will it pay and, thus, how quickly will you be able to recoup the amount spent on tuition? Depending on one’s career of choice and current financial status, a four-year college may not even be the best option – at least not to start. For instance, WalletHub ranked Maine’s community college system as being the 26th best nationally (third among New England states), with three individual schools in the top 150: Northern Maine Community College (113), Washington County Community College (130) and Kennebec Valley Community College (149). Community colleges often have programs whereby graduates are granted automatic admission into state universities and professional programs.
4. Improve your credit score, save on car insurance
A lot of people don’t realize this, but your credit score impacts how much you pay in monthly insurance premiums. This is especially true in Maine, as there is a 70% fluctuation between the average amount paid by drivers with no credit and good credit, respectively.
This is, of course, only one small slice of the savings you can derive from a solid credit score, but it should underscore the importance of concentrating on your credit profile even if weren’t planning to apply for a loan or credit card in the near future. The first step in your credit maintenance plan should be to make sure you have an open credit card account that is in good standing. Credit cards are the most efficient credit building tools available to consumers because they can be free to use and, unlike a loan, they don’t necessitate actually incurring any debt. As long as you pay your bill on time each month and avoid spending up to your credit limit, if you even decide to use the card in the first place, positive information will be relayed to your major credit reports each month – thereby either expanding a thin file or devaluing past mistakes.
The next step is to assess the current state of your credit standing. You can do so by ordering your credit score from one of the numerous free credit score providers currently on the market as well as by taking advantage of the government’s free annual credit report program. This will enable you to spot inaccuracies or signs of fraud that might be holding back your score, in addition to providing a baseline against which you can gauge improvement over time.
5. Make sure you’re covered if you live on the coast
Rising sea levels and intensifying storm systems are increasingly putting coastline properties at risk, necessitating that landowners take new precautions when it comes to insurance. This is an especially poignant issue for Maine, considering that its 3,478 miles of coastline are more than California has and trail only Alaska, Florida and Louisiana.
While opening a supplemental policy may prove to be a long-term prerogative, the best thing you can do at this juncture is carefully review your existing coverage to refresh your memory about what exactly it does and does not guard against. This will give you foresight into potential loopholes that could put your home and finances in jeopardy as a result of things like tidal flooding, storm surge and structural damage due to high winds.
At the end of the day, saving money is equal parts art and science. It’s a bit different for everyone and there is no exact formula you can follow to success. But it does require strategic planning, discipline and self-honesty. So, consider the cold weather to be an opportunity to re-think your personal financial strategy and hopefully your money can begin to bloom come springtime.