With the Holidays passed and the beginning of 2024, now is the time for people to reflect on their financial well-being. Having a plan for the beginning of the year is crucial to help prevent overspending and can lead you toward personal financial goals. In this blog, we will look at different ways to budget your money and the best ways to store it to fit your own needs.
How To Budget
Budgeting is a simple science on paper but can get very difficult when life throws obstacles at you. Budgeting can be divided into 4 main phases: tracking expenses, allocating income, limiting unnecessary spending, and reflection. Learning how to budget effectively is crucial to taking hold of your finances and learning how your spending impacts your life. The first phase, tracking your expenses, is the easiest of the four. By writing down and categorizing your expenses, you can see patterns of behavior that may be unfavorable or opposite to your future goals.
Expenses can shift from month to month which is an important note to keep in mind when you begin to allocate your income. By looking at your expenses, you can make a guide to divide your income each month to match what your needs are. This process can be eye-opening to some people as they can recognize spending habits that they either cannot afford or would like to limit.
Take a good look at what recurring purchases you make each month and think about how those could be controlled. After you recognize those habits and assign a budget for each category, review and be realistic with yourself. Note that a good budget has flexibility so when sudden transactions arise you are prepared to tackle the issue.
What To Do With Your Savings.
Now that we have a baseline of how to build a budget, we have to determine what we will do with any excess money that can be put into a savings account. There is a whole range of savings accounts that can apply to just about any situation you are in your life. Determine the fluidity and return you would like to do by choosing which savings account is for you!
A traditional savings account typically has a low minimum deposit to open, has tiered interest, and could come with monthly fees or deposit requirements. These accounts are typically good as they provide a low-entry point to be able to earn interest on your money while still maintaining the liquid flexibility for your monthly necessities. At Auburn Savings, our Statement Savings provides customers with a low minimum deposit to open, tiered interest, waivable monthly service charges, and no minimum number of deposits required. Learn more here!
A money market account has all the benefits of a traditional savings account except they usually come with higher returns/yield but generally have a higher minimum deposit rate. Money market accounts are generally useful if you need to start building a security fund for yourself, in case of injury or job loss you can have a stockpile of a fund to hold you over until the next source of revenue comes in.
IRAs or Individual Retirement Accounts are tax-time related and advantaged accounts that provide steady growth and returns on the downside of being locked until a term is finished. Terms can range from 6 months to 5 years. Another good feature of IRAs is that you can transfer your funds from one financial institution to another at maturity without taking a hit from taxes. Here at Auburn Savings, check out our great Traditional and Roth IRA accounts with a $500 minimum deposit to open and earn the Annual Percentage Yield. Switch over your IRA account from your old financial institution to us and see the benefits of our great products! Discover more here.
There are also certain types of saving accounts that can help teach kids about good money habits such as our KidsPlus account. This account, and similar ones, are opened with an approved co-signer and can help teach kids 12 and under many useful tips and tricks for the future. Starting your kids off learning the importance of saving money from a young age can have a profound impact on their future growth.
Health Savings Accounts or HSAs are usually partnered with a health insurance plan and can be used to pay for current or future medical expenses. This is another type of account that is tax-advantaged and can contribute to your tax-deductible, as well as having tax-free withdrawals on qualified medical expenses. These accounts also give you yield rates with funds that carry forward from year to year. A HSA is very useful if you have a lot of medical visits to maintain your health or use it for kids and partners with family plans.
Personal CDs (Certificates of Deposit) are similar to IRAs in the sense that the funds are secured for a specific time range and can’t be withdrawn. The upside to these accounts is that they generally give a greater return on your investment. Personal CDs are a good tool to utilize if you are looking to have money grow that you do not need access to for long periods of time.
No matter which path you choose for a savings account, starting the journey to financial independence and security is a fulfilling and necessary learning experience. Utilize these tips learned today to maintain your monthly budget and start building your savings for the future. Check out what Auburn Savings has to offer with our current rates on all savings accounts.
This blog is for educational purposes only and should not be used as financial advice. Feel free to check out any of our resources from Auburn Savings, come inside and visit a branch and one of our Customer Representatives can assist you. At Auburn Savings, we nurture relationships, foster ambition, and are driven by purpose—you come first. Bank On Us.