Simply being aware and understanding some key terms around your finances will help you make positive and informed choices. Here’s a shortlist of terms to educate yourself with:
Debit Card: an electronic card issued by a bank connected to a personal banking account. The card allows access to money in an account by electronically making purchases of goods and services or removing cash at an Automated Teller Machine (ATM)
Credit Card: a card issued by a financial company, that lets cardholders borrow funds with which to pay for goods and services. Credit cards impose the condition that cardholders pay back the borrowed money, plus interest, as well as any additional agreed-upon charges.
Debt: an amount of money owed to another.
Loan (auto, home, school): money, property or other material goods given to another party in exchange for future repayment of the loan value amount, along with interest or other finance charges.
Credit History: your ability to pay bills on time and repay money that is owed; detailed as a credit rating and credit score.
Service Charges: fees for use of services. For example, a service charge may occur each time you use a bank machine.
Budget: a financial plan adjusting expenses to income.
Credit: refers to borrowing; your ability to borrow and the amount you borrow. When it comes to loans (like credit cards, auto loans, and home loans), your credit is your reputation as a borrower. It tells lenders how likely you are to repay your loans, which helps them decide whether or not to approve your loan request and how much to charge.
Creating 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 are most important.
Follow the steps below as you set up your own, personalized budget:
- Set your goals.
- Write down your goals.
- Think about what you want to accomplish financially in the next three months, the next year, and the next three years.
- Determine your income.
- Figure out your available income (the amount of your take-home, or net, pay).
- Determine your expenses.
- “Fixed expenses,” such as a 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 could be billed quarterly, semi-annually, or yearly.
- 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.
- TRY THIS BUDGET TEMPLATE!
- 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.
If you’d like to explore a couple really awesome websites/apps for budgeting, personal financing, and credit tracking check out the following: