Managing Your Finances

Proper planning lays the framework for building up to your goals.

Financial planning 101

Having a solid financial plan isn't as hard as you might think. From every day planning to reaching a particular goal, adopting positive behaviors with your money can help guide you toward a sound financial future.

Find your starting point

Knowing your current financial situation helps you determine what goals are realistic and in what timeframe. Create a list of all your assets (checking or savings accounts and investments) and liabilities (current bills and outstanding debt). Checking this from time to time will help you make sure you're staying on track.

Know your goal

Before you can have a plan, you need to know what you're hoping to achieve. Maybe you have an upcoming large purchase, need to save for retirement, want to fund your children's education or save for a house. Once you know where you're going, you can create a plan to head in the right direction. To help hold yourself accountable, set specific dates you want to achieve each one.

If large goals seem overwhelming to you, consider setting smaller, short-term goals to get your feet wet and gain confidence.

Create a household budget

Preparing—and sticking to—a budget is essential for responsible money management. Think of it as creating awareness of where your money is spent—not as a punishment. Understanding this can help you see how to save it.

Where should your money be spent? A good rule of thumb is the 50/20/30 rule. Your essential expenses (groceries, utilities) should account for 50% of your budget. Financial priorities, such as savings and debt, is 20% and the final 30% goes to personal choices (internet, entertainment, gym, pets, restaurants).

Your budget is the foundation for good financial habits that'll help you avoid the problems and pitfalls that could arise without a structured plan.

Develop a financial reserve

Being prepared for unexpected expenses can help relieve financial anxiety. Ideally, you should aim to set aside 4 to 6 months of living expenses. Make it easy by setting up an automatic, recurring transfer to your savings account. The fund will grow, and you may not even miss what you save each month.

Reduce high-interest-rate debt

If you're carrying balances and paying interest on your credit card each month, try to cut down on your card use and pay more than the monthly minimum. Finding a different credit card with a lower interest rate can also greatly help the time it takes to pay off your balance.

Think of paying down debt as an investment. Making only the minimum payment due will cost you more in interest, and it will take much longer to pay off the balance. For example, paying just $25 a month on a credit card with a balance of $3,000 and an annual percentage rate of 17% will cost you $2,241 in interest and will take you 10.5 years to pay off your balance in full!

To avoid unruly balances, use a debit card instead to pay for everyday expenses, and buy only what you can truly afford.

Pay your bills online

It's easy, and you won't have to worry about stamps or driving to the post office to send those last-minute checks. If you have regular monthly payments, like an auto or student loan, you can set up recurring payments and they'll be paid automatically on the day of the month you choose. It's free and takes just minutes. Plus, it's safer and more convenient than sending paper checks.

Organize your records

Having a system for handling expenses and keeping organized records saves time and reduces stress.

Start a file for bank statements, bills, receipts, loans and tax records. Or go paperless with online banking to access all your account history. Knowing where important financial information is located will save you time and aggravation.

The bottom line

If you stray or things don't go as planned, have patience and stick as close as you can to your budget and plan. It becomes easier as you form beneficial habits—a positive attitude goes a long way!

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