About half of Americans believe they are unprepared for a sudden financial need such as the purchase of a new car, appliance or furniture or a significant home repair. Whether it’s saving, budgeting or planning, addressing our financial goals is beneficial for our overall health and wellbeing.

The MyMoney Five

Making the most of your money starts with five building blocks for managing and growing your money – The MyMoney Five. Keep these five principles in mind as you make day-to-day decisions and plan your financial goals.¹

1. Earn

• Your employer has to subtract certain taxes and other items from your wages every pay period. Your take-home pay (net income) is what you receive after any taxes and deductions are subtracted.
• Usually, your deductions and withholdings include federal, state and city income taxes, Social Security and Medicare taxes, your contributions for retirement savings, and payments for health insurance provided as part of your job.
• Be sure you take advantage of all the credits and deductions that help lower your taxes.
• It’s a good idea to sign up if your employer offers a retirement savings program. Many employers will match part of every dollar you save this way, and you will benefit from it when you retire.

2. Borrow 

• Borrowing money is a way to purchase something now and pay for it over time. But, you usually pay “interest” when you borrow money. The longer you take to pay back the money you borrowed, the more you will pay in interest.
• It pays to shop around to get the best deal on a loan. Compare loan terms from several lenders, and it’s okay to negotiate the terms.
• When repaying a loan, it may be better to pay more than the minimum amount due each month, so you will have to pay less in interest over the life of the loan.
• One of your most important aids when shopping for a loan is the APR – the Annual Percentage Rate. This is the total cost, including interest charges and fees, described as a yearly rate.
• Paying your bills on time will help increase your credit score. Even if you fell into trouble with borrowing in the past, you can get on solid footing and rebuild your credit history by making regular payments as agreed.

3. Save & Invest

• An easy way to save is to pay yourself first. That means each pay period, before you are tempted to spend money, commit to putting some in a savings account. See if you can arrange with your bank to automatically transfer a certain amount from your paycheck or your checking account to savings every month.
• People who keep track of their savings often end up saving more, because they have it on their minds.
• If you are making investments, it’s good to consult with a qualified professional about your plans. Before you purchase investments, be sure to build an emergency savings fund to cover your needs for at least three months. Keep the savings in an insured bank or credit union account that you can access if you need it.
• Many professionals call themselves “financial planners.” Before you hire one, ask for a description of the services offered. A good place to check the credentials of an investment advisor is your State’s consumer protection office, the State’s Attorney General’s office, or the issuing agency for any professional licenses or certifications.

4. Budget & Spend

• Make a budget or a plan for using your money wisely. Set short and long-term financial goals and manage your money to meet them.
• A good way to take control of your spending is to set the maximum amounts you plan to spend each week or each month. Once you’ve set the maximum, stick with your plan.
• It’s helpful to track your spending over a few weeks or months to get a handle on how you are using your dollars and cents. Look into using online systems or phone apps for keeping track of your spending – you will be amazed at what you’ll learn about your habits!
• Be careful not to let a sale or discount coupon persuade you to purchase something you don’t really need and that isn’t in your spending plan.
• When planning a big purchase, take time to comparison shop and check prices at a few different stores, by phone or online.

5. Protect

• A good system for keeping personal money records will include copies of important documents like your will, property ownership documents, and information about savings and insurance. It should include overview of what happens to property after a major life event occurs.
• Assume that any offer that “sounds too good to be true” – especially one from a stranger or an unfamiliar company – is probably a fraud.
• Look at your bank statements and bills as soon as they arrive and report any discrepancy or anything suspicious, such as an unauthorized withdrawal or charge.
• Be wary of request to “update” or “confirm” personal information, especially your Social Security number, bank account numbers, credit card numbers, personal identification numbers, your date of birth or your mother’s maiden name in response to an unsolicited call, letter or e-mail.

Budgeting Basics

Make a budget worksheet to evaluate which expenses are flexible and which are fixed for at least two or three consecutive months. This will give you an idea of how you are spending your money and changes you can make to improve your situation.

Fixed Expenses

Fixed expenses are items you have little or no control over. You will pay a fixed amount for these expenses each month. Remember, you have some control over certain expenses before you sign a contract, for example, a short-term or payday loan, car loan, or home mortgage. You should shop for the best value before committing to the payments.

Examples include: health insurance, car insurance, life insurance, homeowners or renters insurance, rent or mortgage, auto loan or lease payment.

Flexible Expenses

Flexible expenses are expenses that you can control – think about what you need and what you want. This will help you control your spending in this category. What are some ways that you could control the costs of these expenses?

Examples include: groceries, coffee, restaurants, utilities, gasoline, internet, cable, phone or cell phone, car or home repair, activities or hobbies, savings, and emergency savings.² 

References:

1. https://www.mymoney.gov
2. https://www.mycreditunion.gov/tools-resources/Pages/Personal-Budgeting-Worksheet.aspx