Budgets, Accounts and Retirement: Back to Financial Basics

financial basics

No time to waste – let’s get back to basics. Below, a refresher on the fast facts of three financial topics you should know before heading into the new year, courtesy of Titonka Savings Bank:

Creating a Monthly Budget: How-To

  1. Categorize your expenses: Break up what you spend into obvious categories, like housing, food, auto, and personal. Then identify essentials from extras, starring the things you can’t live without and the one or two “extras” that add much-needed meaning to your life.
  2. Identify what’s earned, estimate what’s spent: You can’t budget if you don’t know what you’re working with. Nail down exactly what you bring in each month with income after taxes and other side sources of cash flow, and subtract from it an estimate of what you typically spend in 30-days. This allows you to see if you’re saving, breaking even, or coming up negative.
  3. Know where you’re going: If you have nothing you’re working towards, what’s the point of a budget? Pick a goal – paying off debt, buying a car – and rework your numbers from steps 1 & 2 to create a way to get there.

Understanding the Top 3 Bank Account Options

  1. Savings: Use this one to save money first and foremost. Make deposits and withdrawals, but writing checks may be off the plate. Check up on your monthly or quarterly statements of these transactions to stay in line.
  2. Basic Checking: Draw money for checks from this account. Typically, they don’t pay interest, and you may face an added fee for writing more than a certain number of checks each month.
  3. Certificates of Deposit (CDs): Also called “time deposits” because of the holder’s agreement to keep money in the account for a specified time (three months, six years, etc.). Money here can’t be touched during that time, but it’s rewarded with a higher interest rate. Drawback: big penalties for withdrawals before the maturity date.

Launching a Retirement Plan

  1. Know Your Needs: Your current age, expected age of retirement, amount currently in savings, and other factors are needed to determine how much you need to set aside. Check out a nifty retirement calculator for a rough estimate.
  2. Check Your Employer’s Plan: If your employer offers a 401(k) or similar plan, hop on it. Lowered taxes, matched contributions from your business, and automatic monthly deductions make savings a breeze.
  3. Start saving ASAP: Compound interest is a beautiful thing. Saving smaller for a longer length of time often yields more benefits than if you start saving big late in the game.

We barely skimmed the surface. Get in touch with one of our financial advisors to dig deep into any of these categories in the upcoming year!