It doesn’t matter if you are just starting to get your finances in order or are trying to squeeze the last drop of return from your money. In this article, we will provide you with the information you need to quickly get on top of your finances.
Money 101 Introduction
Basic money skills (Money 101) are important for a variety of reasons. It will help you create more independence, help you set and reach your saving goals, help you live comfortably within your means and help you prepare for your future.
Setting Your Money Goals
When starting out getting your finances in order you need to know what you are trying to accomplish. Do you want to save for retirement? Do you want to take several vacations per year? Send your children to college? Your financial goals are yours and yours alone. You need to set clear goals for saving money to get the maximum benefit from your efforts.
Making a Budget
Many people hate budgets and find them hard to follow and maintain. But money 101 is here to help. The more detailed your budget is the less likely you are to follow it. Keep it simple. You will find segmenting your budget into bills, savings, living expenses and fun is all that is necessary. All you have to do is add up all your monthly bills (rent/mortgage, utilities, credit and loan payments, etc.) then add up your basic living expenses (food, clothing, gasoline, etc.) and subtract both from your monthly income. With whatever is left over save a percentage you are comfortable with and designate the rest for fun activities for the month. Setting up a budget this way is a lot easier than what most financial advisor suggest, helps in controlling debt, is more natural and it works.
Basics of Banking and Saving
How should you set up your banking and savings is simple. Keep a no-fee checking account from a national bank or credit union and transfer all savings to a high yield savings account or your investment accounts.
Using a large bank to handle your day-to-day transactions (i.e. bills and living expenses) is the most convenient way to go. You have access to local branches to handle any face-to-face business you need to perform and access to no-fee ATM’s throughout the country or even the world. Which will help you save on bank fees and such. However, don’t expect to find one that offers good interest rates on their checking and savings accounts. Use a bank only for your regular transactions and send your money elsewhere.
Another option is going with a national credit union if you are eligible for membership. Large credit unions can provide you with some of the best credit card rates, some of the best personal loans, home loans and better investment options than national banks. Many also offer free checks, ATM fee reimbursement and other services that will save you money! Credit unions usually offer better interest rates on checking and savings accounts but you can find better rates elsewhere. I suggest you only keep money in a savings account at a credit union for really short (3-6 months) savings goals. Use a high-yield savings account for longer savings goals up to 1 year or as a way to park cash until you can invest it.