MANAGING YOUR MONEY
- Establishing yourself financially
- Balancing your checkbook
- Starting and keeping a budget
- Using credit cards wisely
- Reviewing and understanding your credit report
- Preventing and detecting Identity Theft
Your money is a huge part of your life. It can determine what you can do and where you can go. Learning how to manage your money the right way is an important step toward taking control of your life.
Understand where your money is coming from, where it is going to, and how to make sure that the way you manage your money falls in line with the values that matter most to you.
ESTABLISH YOURSELF FINANCIALLY
Take these basic steps to get established financially:
- Set up a realistic budget and stick to it.
- Open up checking and savings accounts. Don't spend more than what is in the accounts.
- Learn how to use credit cards wisely.
- Pay all your bills on time each month.
- Review your credit reports.
Learning how to balance, or reconcile, your checkbook - and balancing it every month when your bank statement arrives - is among the best money management habits you can keep.
BALANCE YOUR CHECKBOOK
Below are some of the benefits of keeping your checkbook balanced:
- Helps you keep track of your money.
- Verifies the information you have tracked is accurate.
- Catches any mistakes your bank might make.
To balance your checkbook, follow the simple steps listed below:
- Ensure you've entered all automatic transactions (e.g., ATM withdrawals, electronic transfer of funds, online bill payments, debit card transactions) into your check register.
- Review your statement.
- Compare your statement with your check register and mark off all items that match.
- Add to your register any deposits or additions from your statements, including interest payments and ATM or electronic deposits.
- Subtract from your register any account deductions, including fees and ATM or electronic deductions, that are not already entered.
- Update your statement information.
- Enter the ending balance recorded on your statement.
- Add deposits and other additions not recorded.
- Subtract checks and other deductions not recorded.
- The result should equal your register balance.
Balances don't match? Try these tricks:
- Check to ensure you didn't transpose any numbers.
- Make sure you didn't enter an amount more than once.
- Take a break. When you come back, you'll be refreshed and might see your error more quickly.
Remember, you must reconcile your account each month (at a minimum).
Establishing a budget and sticking to it isn't easy, but it's the best way to be in control of your finances and make sure your money is going toward the expenses that matter most to you.
Follow the steps below as you set up your own, personalized budget:
- Make a list of your values - Write down what matters to you and then put your values in order.
- Set your goals - Write down your goals. Think about what you want to accomplish financially in the next three months, the next year, the next three years
- Determine your income - Figure your available income (the amount of your take-home, or net, pay). Do not include overtime pay, because you shouldn't rely on that as regular income.
- Determine your expenses - Review your checkbook register, credit card statements, store receipts and more. Where is your money really going? Fixed expenses such as rent, auto, or student loan payments, are easy to determine. Flexible expenses such as food, clothing, and entertainment, vary from month to month. Don't forget about expenses, such as taxes or insurance, that are billed quarterly, semi-annually, or yearly. Look into personal finance software programs that offer a budgeting feature to help you track your expenses.
- Create your budget - Think of your budget as a "spending plan", a way to be aware of how much money you have, where it needs to go, and how much, if any, is left over. Your budget should meet your "needs" first, then the "wants" that you can afford. Your expenses should be less than or equal to your total income. If your income is not enough to cover your expenses, adjust your budget (and your spending!) by deciding which expenses can be reduced.
- Pay yourself first! - Saving is a very important part of protect yourself financially. Save as much as you can every month. Even a small amount can make a big difference if you keep it up. A great goal is to establish an emergency savings fund large enough to cover three to six months of your living expenses. After you have an emergency fund, your savings can go toward meeting your goals.
- Be careful with credit cards.
- Check back periodically - Be sure to review your budget regularly. Does the plan still meet your needs and help you achieve your goals? If not, make some adjustments or create a new budget that better meets your needs.
USE YOUR CREDIT CARDS WISELY
It's easy to get a credit card. Managing a credit card well is not as easy.
- Understand that any time you use a credit card, you are borrowing money. If you don't pay off your balance each month, interest will be added to the total amount you owe.
- Think before getting your first credit card. Think very carefully before you decide to get your first credit card. Do you really need a credit card or would another option work just as well? Some other options to think about:
- Getting a debit card which is connected to your checking or savings account rather than borrowing money for each transaction.
- Consider sharing a card with your parents and asking them to help you stay on track.
- Waiting. Just put off the decision for six months or a year and see how well you might do without a credit card.
- Choose wisely. When selecting a credit card, you should shop around for the best deal. Compare different cards based on your own situation. Look for the following:
- A low annual percentage rate (APR). The lower the rate, the less interest you have to pay. Watch for low introductory rates that are raised after a year or less.
- The interest calculation method. This affects how much interest you pay, even when the APR on two different cards is identical.
- Low or no annual fees. If the issuer charges an annual fee, ask them to waive it.
- All other charges (i.e., late payment fees, transaction fees, over the limit fees, etc.) These can really add to the total cost of your charges.
- A grace period. Some credit cards charge interest from the day that the charges appear on your account. Other cards offer a grace period for you to pay off your balance before interest charges begin to accrue.
- The credit limit. Keep your credit limit low (think about $500 or less), to make sure you don't get in over your head.
- Wide acceptance. A major credit card is convenient, and easier to manage.
- Services and features, such as cash rebates, frequent flyer miles, extended warranties, etc. Think carefully about the true cost of these programs when you consider interest and other charges.
- Limit the number of cards you get. It will be easier to keep track of your spending.
- Think about ways to track your spending. Waiting until your statement arrives once a month to think about your balance can get you into trouble quickly. Check your account online frequently. Save receipts. Maintain a ledger.
- For each of your cards, keep a record of the following in case your card is lost or stolen. Account number, issuer's name, and phone number. Even better, keep a photo copy of the front and back of your card in a safe place at home.
The bottom line: Don't spend more than you can afford to pay on a monthly basis. Wise use of your credit cards will help you establish a solid credit rating and avoid financial problems.
REVIEW AND UNDERSTAND YOUR CREDIT REPORT
Your credit report is a collection of information about you and your credit history, and can have a major impact on your life. The three credit reporting agencies are Equifax, Trans Union, and Experian.
- Know whether you have a credit report. If you have ever applied for any of the following, you have a credit report: Credit Card, Student Loan, Auto Loan, or Mortgage.
- Understand who looks at your credit report. Your credit report may be looked at by all of the following: Potential creditors, landlords, potential and current employers, government licensing agencies, and insurance underwriters.
- Know what these entities are asking. How promptly do you pay your bills? How many credit cards do you hold? What is the total amount of credit extended to you? How much do you owe on all of your accounts?
- Be aware of the consequences of credit mistakes. Any negative information found on your credit report (late payments, bankruptcies, too much debt) can have a serious impact on your ability to do the following: Get credit, get a new job, advance in your current job, rent or buy a home.
- Know what is on your credit report.
- Personal identifying information - Name, social security number, date of birth, current and previous addresses, and employers.
- Credit account information - date opened, credit limit, balance, monthly payment, and payment history.
- Public record information - bankruptcy, tax and other liens, judgments, and in some states, overdue child support.
- Inquiries - names of companies that requested your credit report.
- Your credit score - depending on the type of report.
- Know what is not on your credit report: Checking or savings account information, medical history, race, gender, religion, national origin, political preference, or criminal record.
- Be aware of how long information stays on your credit report.
- Positive Information - indefinitely
- Inquiries - 6 months to 2 years
- Most negative information - 7 years
- Some bankruptcies - 10 years
- Request your free credit report.
- Check your credit report. Review your credit report at least once a year, making sure the information is accurate. This can help you prevent and detect inaccuracies.
- Report inaccurate information. Find out how by reviewing the Fair Credit Reporting Act.
PREVENT AND DETECT IDENTITY THEFT
Identity theft, the fastest growing crime in America, is when someone uses another person's identity information to commit fraud. This can include someone borrowing money in someone else's name, leaving victims of identity theft with debt and credit problems.
In 2003, 10 million Americans were victims of identity theft. Avoid becoming a statistic.
- Keep your information safe.
- Shred financial documents and paperwork with personal information before you discard them.
- Protect your social security number. Don't carry your social security card in your wallet or write your social security number on a check. Give it out only if absolutely necessary (you can always ask to use another identifier)
- Don't give out personal information on the phone, through the mail, or over the internet, unless you know who you are dealing with.
- Never click on links sent in unsolicited e-mail messages. Instead, type in a web address that you know.
- Use firewalls, anti-spyware, and anti-virus software to protect your home computer - and keep them up to date.
- Don't use an obvious password like your birth date, your mother's maiden name, or the last four digits of your social security number.
- Keep your personal information in a secure place at home, especially if you have roommates, employ outside help, or are having work done in your house
Regularly monitor your financial information. Review your various financial accounts and statements. Also, request a copy of your credit report every year and review it. Be alert to things that require immediate attention.
- Purchases you did not make
- Bills that did not arrive as expected
- Unexpected credit cards or account statements
- Denials of credit for no apparent reason
- Calls or letters about purchases you did not make
Act quickly when you suspect identity theft. review the Federal Trade Commission's (FTC) victim recovery guide. Understand identity theft in relation to student loans. A federal student loan may be cancelled if it was falsely certified as a result of identity theft.