SPECIAL SECTION:
PERSONAL FINANCE
TAKE CONTROL
OF YOUR
W
FINANCES
orking toward financial goals is high on many of our
priority lists, but it’s often thought that achieving
financial success is out of reach. According to
Bankrate.com, 1 in 4 Americans have more credit card debt than
savings, down 6% from 2015. Saving doesn’t always come easy,
but with a little planning, determination, and self-control, you
can get out of the red.
Creating a budget is the first step in building up your savings
and paying down your debts. Whether you are saving for the
short term (a new pair of shoes), the long term (college tuition)
or for a larger purchase (a house), seeing where your money goes
will help put saving into perspective.
A simple guideline for budgeting is the 50/20/30 Rule.
A tried-and-true breakdown of monthly
expenses, the 50/20/30 rule helps to
benchmark spending across three main
categories: fixed costs, financial goals, and
flexible spending. The rule works by allotting
50 percent of take-home pay to be spent on fixed costs, 20
percent to be put toward financial goals, and the remaining 30
percent to be used as flexible spending.
Fixed costs include monthly spending required to live.
Think of the essentials: food, shelter, transportation. Your
mortgage, utility bills, and transportation costs are often
similar month-to-month and easy to predict, making this
category the easiest to budget.
Financial goals will help you get to where you need to be
for your future. This includes saving for retirement, paying
down debts, and building your emergency fund.
Flexible spending varies from month to month, but can be
somewhat predictable. Groceries, gas, and entertainment all
find their way into this category. While some of these costs
can be impulsive (going to the grocery store on an empty
stomach and buying everything in sight), you can look at
monthly spending to gauge what you typically spend on
these types of purchases.
Once you determine where your money is going, and what
you have left over, start by paying off your most expensive debt
first. Look for the credit card with the highest interest rate and
start paying off the balance by making more than the minimum
payment, while continuing to make the minimum payments on
all other cards. Taking these steps to start eliminating debt will
enable you to start investing your money to allow it to grow for
the future.
INVESTING ESSENTIALS
We all work hard for our money, but it is
important for your money to work just as hard
for you. Now that you’ve determined that 20%
of your money should be budgeted to financial
goals, you just need to figure out how to invest.
No matter what you are saving for, you should
start by setting realistic, manageable goals for your money, and
then find the discipline to reach them.
Investopedia breaks investments into three groups: ownership,
lending, and cash equivalents.
Ownership Investments: Typically the most volatile and
profitable. These types of investments span from stocks, to
owning or running a business, to buying investment real
estate, to purchasing precious objects such as jewelry or
art with the purpose of reselling to make a profit. While
you can make the most money out of these investments,
there is often greater risk. If you have a “risk is worth the
reward” mentality, then ownership investments may be a
good option for your money.
Continued on page 83 ➢
A simple guideline for budgeting
is the 50/20/30 Rule.
Peters Township | June/July 2016 | icmags.com 79