Build Your Budget
Making a budget — and sticking to it — is the first step to being a smart money manager. But only 1 in 3 Americans has a dedicated monthly budget for spending.
Gather up your credit card and bank statements (at least several months’ worth so you can get an accurate picture). Then divide your expenses into two categories: Needs and Wants. Finally, subtract your expenses from your total take-home pay.
You’ve run the numbers. Now you know where you stand. Do your expenses exceed your income, forcing you to rely on credit cards? Are you barely breaking even with no money left over for savings? If so, it’s time to readjust.
Many financial advisers suggest applying the 50/20/30 rule to your budget.
- 50% goes to essentials like housing, food, utilities and transportation.
- 20% is for savings, debt payment and long-term financial goals.
- 30% is for personal wants like dining out, travel and entertainment.
Revisit your budget every few months. Consider online budgeting tools that will automatically pull in your expenses.
Create the Future You Want: A Happier, Healthier Retirement
No matter what your age, now’s the time to start gearing up for retirement.
Deal With Debt
Saving is hard when you’re drowning in debt. In 2017, the average U.S. household owed $15,654 in credit card debt (Source: Nerdwallet).
Here are two ways to approach credit card debt.
- Debt avalanche: Pay off the card with the highest interest rate first. Make that debt your priority and pay more than the minimum each month until that card is paid off. Then move on to the card with the next highest interest rate. (Remember, you’ll need to keep making the minimum payment on all credit cards during this time.)
- Debt snowball: With this approach, don’t focus on the interest rate. Start with the smallest debt and pay that off, then work your way up to the larger balances. Financial advisers like this approach because it creates momentum and helps you stay motivated as you see progress.
If you’re having trouble paying off your debt, get help from a credit counselor. These experts can advise you on managing money and debts, help you develop a budget and offer free educational materials and workshops. Many nonprofits offer these services, but that doesn’t mean they are free. Look at universities, military bases and credit unions to see what services are offered.
But be wary. Steer clear of anyone who says they can fix your debt or mend your credit in a few short weeks. Do your homework and search the Better Business Bureau for any complaints about the company.
Plan for Just in Case
About 60% of American have less than $500 in their savings to cover an emergency. Here’s how you can be prepared for whatever comes your way.
- Decide where to save. Set up a separate account — don’t stash the money in your checking account. You need to be able to access your emergency fund, so look into opening a savings account or a money market account that comes with a debit card or check-writing privileges.
- Start small. Aim to save $500 to $1,000. Then, if the unexpected happens, you won’t be as tempted to borrow or withdraw from your 401(k) plan account or run up credit card debt. Try setting up an automatic savings deposit of $20 each paycheck.
- Look for other ways to save. Hold a garage sale or sell items on social media. Trim your dining out budget and eat at home more often. If you get a tax refund, deposit it directly into your emergency fund.
- Round up. Use an app that does the saving for you. For example, if you spend $4.50, the app will automatically deposit $.50 into your savings account. Some apps are free, while others may charge a fee.
- Grow your savings. Keep on saving until this fund can cover 3 to 6 months of living expenses. If you’re a one-income family or if someone in your family has a chronic medical condition, you’ll want to save at least six months’ worth of expenses.
- Reserve your savings for true emergencies. “Emergency” does not mean that new phone you have to have or once-a-year expenses that you can see coming, such as auto insurance or homeowner’s association dues. Ask these questions to determine if you have an emergency expense:
- Is it unexpected?
- Is it necessary?
- Is it urgent?
Save in Your TEAM 401(k)
The TEAM, Inc. Salary Deferral Plan and Trust is a great way to save for the future. You get tax-advantaged savings, convenient payroll deductions and a variety of investment options. Plus, TEAM pays you to save — the Company will make a matching contribution to your account of $.50 for every dollar you save, up to 6% of your pay. Learn more here.