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January e-News


Spending Plan Beats Budgeting for 2012

Was your New Year’s resolution to save more and spend less in 2012? Consider thinking about creating a "spending plan" this year rather than a traditional budget. A budget is simply the framework for planning how to spend and save your money. Follow these simple steps to create your own spending plan.

Step 1: Track Expenses

For two months, keep track of every dollar you spend. Yes, every dollar. You’d be surprised at how quickly that daily cup of coffee or late afternoon vending machine snack adds up. Although it may sound like a daunting task, this exercise will be the key to managing your money.

You’ll probably find you have two kinds of expenses: fixed and variable. Fixed expenses are those that are predictable and are paid at a regular interval—rent or mortgage, utilities, loan payments, insurance, childcare, etc. Variable expenses are a bit more difficult to capture since the amount and frequency changes. These expenses might include groceries, clothing, doctor visits, entertainment, charitable giving, etc.

To identify these expenses, use your bank statement, credit card statements, check register and ATM receipts to remind you where and when you spent your money. Assign each transaction to a category.

Step 2: Analyze Spending

Using money management software, a spreadsheet program, or even a notebook with a pencil and calculator, create categories for all your spending. Categories can be broad to begin with—housing, utilities, insurance, food, entertainment, etc. As you analyze how your money is spent, you may want to create more detailed categories or subcategories. For example, under utilities you may break down expenses by electric, gas/oil, water, etc. Record the date of each transaction, the category under which it falls, a description of where/how the money was spent, and the amount. Then add up the amount spent in each month for each category.

Washington Trust’s Online Banking offers the financial tool FinanceWorks that helps you track and manage your monthly spending.

Step 3: Create your Spending Plan (a.k.a. budget)

Now that you see where your money goes every month, create a plan for spending it. If working on paper, create a grid with your categories listed down the side and the months of the year across the top. Using your analysis from step 2, forecast your spending for each category by month, taking into consideration any circumstances that will affect it by month. For example, your electric bill may be higher in the summer to accommodate air conditioning. Your holiday spending may only take place for three months of the year. Don’t worry if your amounts aren’t 100% accurate—you’ll be able to make adjustments later.

Step 4: Review and Adjust

Your spending plan is a live tool. It will take on a life of its own if you don’t manage it. Review your spending every month and make adjustments in your plan where appropriate. The more time you invest in managing your budget, the more it will work for you.

Washington Trust’s Online Banking offers money management tools to help you stay on track in 2012. Managing your money has never been so easy. Check account balances, transfer money between accounts, pay and receive your bills electronically, and more. Online banking is FREE with any Washington Trust checking account. Click here for more information or contact a Washington Trust representative today at 800-475-2265.

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Economic Outlook 2012
By: Mary McGoldrick, Senior Vice President & Director of Investments

We anticipate continued moderate expansion during the New Year, with GDP growth registering around the 2% mark. Looking back at 2011, the pace of U.S. economic growth slowly and steadily accelerated despite a series of unforeseen events, including higher commodity prices, natural disasters, supply chain disruptions, debt limit gridlock and the Euro sovereign debt crisis.

Consumer spending will continue to drive the economy in 2012. Retail sales were solid in the latter part of 2011, however they were accompanied by a decline in the savings rate. Clearly this is not a sustainable trend. Going forward, we are looking for more robust employment growth to boost household income and buying power. The unemployment rate is still high at 8.5%, but initial claims for unemployment insurance are at the lowest level since June 2008, suggesting that the jobless rate will trend lower in 2012.

High unemployment and a supply "hangover" have taken their toll on the housing market. It appears that we are at or near the trough of the residential housing cycle. Affordability is at an historic high due to the combination of falling home prices and record low interest rates. Continuing improvement in consumer debt-to-income ratios and a better employment situation will allow more buyers to meet stricter mortgage underwriting guidelines.

Against this backdrop, interest rates are likely to remain at or near current low levels. The Federal Reserve has clearly stated its intent to maintain the current low target for the Federal Funds rate into 2013. In fact, the Fed could buy additional bonds for its own portfolio thereby providing additional support to the housing market.

The low rate interest rate environment has also benefited corporate America. Many firms have taken advantage of current borrowing levels to repay and/or refinance existing debt and improve profitability. This balance sheet improvement has allowed companies to undertake new capital spending projects, and spending on equipment and software has been growing at a double digit rate.

Positive developments in the U.S. have been overshadowed by deteriorating fundamentals in Europe. The risk of default by several members of the European Union has caused market disruption and volatility. To date, the policy response in Europe has been piecemeal and reactive. Investors lack confidence that European leaders will be able to garner support for the fiscal and monetary support needed to keep European debt markets liquid.

We are hopeful that European leaders will recognize the seriousness of the situation and support a comprehensive monetary solution that will offset the austerity programs being implemented in many nations. Meanwhile, weakness in Europe will be offset by faster economic growth in the emerging economies. China and India are forecasted to grow at an 8% clip. These faster growing developing economies will provide a market for U.S. exports in 2012.

Fiscal policy remains a question mark in the U.S. The payroll tax cut has been temporarily extended through February, 2012, but Congress may be reluctant to extend these cuts without commensurate spending reductions. In addition, the tax cuts enacted during the Bush administration will expire at the end of 2012. Without congressional action, marginal tax rates for high income taxpayers will increase and the tax rate on dividend income and capital gains will also rise. Thus, it is possible that greater fiscal austerity could restrain economic growth.

Against this backdrop, 2012 is likely to witness continued uncertainty in the financial markets. Investors will be focused on the latest headlines, with the upcoming Presidential election, debt ceiling debates, European debt negotiations and the latest economic data points all contributing to ongoing market volatility. During these volatile times, we believe that investors should focus on their long term objectives while maintaining a strategy of portfolio diversification across asset classes and market sectors.

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Keeping New Year's Resolutions

The New Year is an ideal time to make positive changes in your life. From saving money to losing weight, set yourself up for success by following these proven tips for keeping your resolutions.

Set realistic goals
Rather than resolving to lose 20 pounds, set a goal to lose two pounds a month. Achieving success in small steps is the motivation that will keep you going. Make your goals measurable so you know when you've reached a milestone.

Make a plan
If you want to volunteer or help others this year, look at your time, skills, finances and motivation to see where the fit might be, then decide how to carry out your plan. Will you "adopt" a child from a foreign country by sending money, or connect with a child from a local children's organization and spend time with him/her? Walk dogs at a pet shelter or stock shelves at the food pantry? Raise money for medical research or advise a non-profit on strategic issues? Determine your interest and ability, then put it in motion.

Write it down
You've made your plan (see previous step), now put it on paper and keep it where you will see it often. This could be your budget if you're trying to save money, a picture of a cigarette with a red line through it if you want to quit smoking, or a picture of a quiet place if you're intent on reducing stress. The important thing is to have a visual reminder that you see on a regular basis.

Enlist support
Give your plan to a friend and ask for their help in keeping you on track. Join a support group comprised of members trying to do the same thing you are. Work out at a gym where others are of the same mindset. Find a job counselor who can help you assess your skills and strengths to enable you to launch a successful job hunting campaign. Everyone needs support of some kind.

Avoid temptation
A resolution is essentially a change in your lifestyle. Since you are moving away from an existing habit, make a conscious effort to avoid what you're trying to change. Don't buy junk food if you're trying to lose weight. Turn off the TV if you want to learn something new. Avoid shopping as retail therapy if you want to save money. Find new friends who don't smoke or drink if that's what you're trying to change. Steer clear of that which tempts you to set yourself up for success.

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January is National Get Organized Month!

If one of your New Year’s resolutions was to get organized, this is the month to take action! Here are some ways Washington Trust can help you get organized:

  • Online Statements - Access your accounts and account statements through Personal Online Banking. To sign up for Online Banking, click here. View your checking and or savings account statements online by selecting the Online Statements tab. If you no longer wish to receive paper statements, click on the "User Options" tab, select "Online Statement Options" and choose "Waive the mailing of your monthly paper statement."
  • Bill Pay & E-Billing - You can pay and receive your bills electronically, all with the click of a mouse. Bill Pay and E-Billing is FREE with any Washington Trust checking account.
  • FinanceWorks – A money management tool available for Washington Trust customers. It's a free online service that helps you see where you are spending your money, and how you can save.

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I Luv RI Photo Contest

Enter Your Photos for a Chance to Win Big in 2012!
Click here to enter your photos!

 

 

 

 

 

 

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Business Spotlight

 

 

 

 

 

Be a part of the action!
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Track your spending in 2012

FinanceWorks is available in Online Banking

 

 

 

 

 

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