Take Control of Your Financial Future

When you understand how to manage your money, you’ve taken an important first step to reaching your financial goals. And developing full financial literacy means you have a handle on how to create a budget, track your spending, manage debt, and plan for retirement. The sooner you learn these basics, the more confident and successful you will be on your lifelong financial journey. Here are a few tips to get you started.

Opening a Bank Account

Having a bank account makes it easier to track your spending and save money. Plus, you can also bank online or through a mobile app which allows you to conveniently bank on-the-go! Online banking typically includes features that help you pay bills, transfer money, deposit checks, and access payment apps like Zelle®, Venmo or PayPal. Additionally, when you keep your money in a bank account it’s insured by the FDIC (up to certain limits), which provides peace of mind. And money held in a bank is protected from theft, fire, and flood. When you need quick access to your cash, you can use ATMs or debit cards, which further enhance your ability to monitor and control your spending habits.

Creating a Budget

Any good budget plan starts with knowing how much money you receive and spend each month. You can create a budget in different ways, using a spreadsheet, app, or old-fashioned pen and paper. Whichever way you decide to go, just be sure to clearly lay out the following:

  • Income: List all sources of money that you receive in a month. This includes income from your primary job, any side jobs you may have, alimony, or child support.
  • Expenses: List every purchase you make in a month, splitting them into two categories: fixed expenses and discretionary spending. Fixed expenses are ones that occur each month such as your house payment or rent, car payment, gas, utilities, student loan payments, and credit card payments. Discretionary spending would include entertainment, eating out, vacations, or new clothes. And be sure to think about if these items are needs or wants.
  • Savings: You will also want to record any money that you are already saving each month, whether it’s cash for emergencies, a future vacation, or investments like a 401(k).

You will subtract your total expenses from your total income to know the amount of money that you have left at the end of each month. This will help you have a clear picture of what money is coming in and how you are spending it. With this information, you can identify any areas that you might need to cut back or you may see new opportunities to save.

Sample Monthly Budget

The following monthly budget was created using a spreadsheet. The first column lists all the fixed payments and discretionary payments. This budget takes things a step further and includes due dates for monthly expenses. Taking this approach helps identify if you have adequate cash flow on hand during the month or if you might need to change when some of your expenses are paid. The bottom half of the spreadsheet includes monthly income, how it is received, and what time of the month the income is generated, with the surplus/deficit noted at the bottom.

This is just one example of a budget plan. The important thing is to build a budget that works for you, and to put it to use.


Savings and Retirement

Now that you’ve created a budget, you can make more informed decisions about how much money you’re able to set aside for emergencies, put into a savings account, or invest in a retirement account. While cash on hand or a savings account provides a cushion for unexpected emergencies, investing can help your money grow. This is where having a relationship with a bank is beneficial, as community banks like American Bank are equipped to assist with your retirement planning, investing, and explaining financial products.

No matter where you are on your financial journey, it’s never too early or too late to create or review your budget and retirement plan. Take some time to review yours and reach out to us if you have questions about resources that can help you reach your financial goals.

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