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12 Steps to Financial Wellness-Step 2: Creating a Budget

12 Steps to Financial Wellness

12 steps to financial freedom.- Step 2 Creating a Budget

Step 2: Creating A Budget

Budgets play a crucial role in promoting financial awareness, which leads to more responsible money choices.

Let’s take a look at how to create a budget and review some popular budgeting systems, as well as how they work.

Create a budget in 5 easy steps

  • Track your spending and income. This includes all your financial documents, like your account statements, bills and pay stubs. [If you’ve followed Step 1, you’ve already completed this step–nice work!]
  • Tally up your totals. Calculate the totals of your monthly expenses and all streams of income.
  • List your needs. Your needs include anything that is essential for living and basic functions, such as mortgage payments. As you list each need, write down its corresponding cost. Sum the total of all your needs when you’ve finished.
  • List your wants. This includes anything that is not essential for living, like entertainment costs. Here, too, note the monthly cost of each item on your list and add up the total when you’re done.
  • Assign dollar amounts to your expenses. Open a new spreadsheet and copy your list of expenses. Assign an appropriate dollar amount for each of these costs.
  • Review and tweak as necessary. You will likely need to adjust the amounts in each expense category at least once a year to keep your budget relevant.

Budgeting systems

While every kind of budget involves tracking expenses and committing to a maximum spending amount each month, there is a wide range of budgeting systems to fit every kind of personality and money management style.

  • The traditional budget.  doesn’t involve much more work than the steps described above. After working out a number for every expense category, you’ll simply need to track your spending throughout the month to ensure you’re sticking to the plan. You can use a spreadsheet for this purpose, or utilize one of the budgeting features in our Online Banking. AGCU has helpful budgeting tools with online banking. just log on to your account through our web portal and click on the “My Finance” tab. If your life happens on your phone, you use budgeting apps like YNAB or Mint to help you track your spending. Both apps allow you to allocate a specific amount of money for each spending category for each month and will enable you to track your spending with just a few clicks. It’s important to note that YNAB is not a free app, but that it may be worth the price for users who want to take on a more active role in their money management.
  • The money-envelope system. works similarly. However, instead of simply committing to sticking to your spending amounts for each expense category, you’ll withdraw the amount you plan to spend on all non-fixed expenses in cash at the start of the month. Divide the cash into separate envelopes, using one for each of these expenses. Then, withdraw cash from the appropriate envelope when making a purchase in that category. There’s no way to blow your budget with this system; when the money in the “Dining out” envelope runs dry, that’s all for this month!
  • The 50/30/20 budget. is simpler, but requires more discipline. Set aside 50 percent of your budget for your needs, 30 percent for wants and the remaining 20 percent for savings. Of course, you’ll need to make sure your income and expenses will work with this kind of budget. Does 50 percent of your income cover your needs? If yes, this budget allows for more individual choices each month and less accounting and tracking of expenses.
  • A well-designed budget can provide its creator with a sense of financial security and freedom. When you stick to a budget, you’ll always know you have enough to get through the month and save for the future. Start budgeting today!

Read Step 1: How to Track Your Spending

Read Step 2: Creating a Budget

Read Step 3: Pay Down Debt

Read Step 4: Have the Money Talk With Your Partner

Read Step 5: Practice Mindful Spending

Read Step 6: Pay It Forward

Read Step 7: How to Pay Yourself First

Read Step 8: Know When and How to Indulge

Read Step 9: Build and Maintain an Excellent Credit Score

Read Step 10: Plan for Retirement

Read Step 11: Start Investing

Read Step 12: Review and Tweak

Banking With A Purpose

Much more than a catchphrase, our tagline is our passion, our reason why we do what we do. This is the impact of your membership with AGCU.
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12 Steps to Financial Wellness-Step 1: How to Track Your Spending

12 Steps to Financial Wellness

12 Steps to Financial Wellness-Step 1: How to Track Your Spending

Step 1: How to Track Your Spending

Are you ready to join us on a journey toward financial wellness?

Each month, AGCU will focus on one step of a journey of financial wellness. We’ll tackle the topic in detail and help you learn all you need to know about this step. Follow along, and at the end of the year, you’ll have mastered the tools for a life of financial wellness.

Tracking your spending is the first step toward greater financial awareness and, ultimately, toward financial health. However, mastering this skill is easier said than done. How can you track every dollar you spend when you make multiple purchases each day?

We’ve outlined how to track your spending in 3 easy steps.

1. Choose your tools

Tracing every dollar’s journey isn’t easy, but with the right tools, you can make it quick and simple. Choose from one of the following money-tracking techniques:

  • Budgeting apps. AGCU has helpful budgeting tools with online banking. just log on to your account through our web portal and click on the “My Finance” tab. If your life happens on your phone, you use budgeting apps like YNAB or Mint to help you track your spending. Both apps allow you to allocate a specific amount of money for each spending category for each month and will enable you to track your spending with just a few clicks. It’s important to note that YNAB is not a free app, but that it may be worth the price for users who want to take on a more active role in their money management.
  • Spreadsheet. If you like to see everything spelled out clearly, a spreadsheet might be a better choice for you. You’ll need to record every transaction, but if you prepare the sheet with all the spending categories you think you’ll need, this step shouldn’t take long at all.
  • The envelope system. If you’re a big cash spender, consider withdrawing the cash you think you’ll spend in a month (or in a week) and keeping it in an envelope designated for each category. When you need to make a purchase, just use money from the envelope.
  • Receipts. Hold onto every receipt from the purchases you make this month to help you track your spending.
  • Pencil and paper. Recording each purchase the old-fashioned way can help you make more mindful money choices throughout the day. Be sure to keep a steady supply of both writing instruments handy at all times so you never miss a purchase.

2. Review your checking account and credit card statements carefully

Along with one of the tools listed above, you can track the purchases you make using plastic by reviewing your monthly checking account and credit card statements at the end of the month. You may receive these in the mail, or you can access them online by logging into your account and downloading.

3. Review and categorize your purchases

At the end of the month, use your chosen tool to review all the purchases you’ve made throughout the month. If you’ve used an app or a spreadsheet, adding your purchases to find the total amount of money spent will be simple. The app or spreadsheet may have already helped you divide the money spent into separate categories as well. Similarly, if you’ve used the envelope system, you should know how much you spent on each kind of purchase this month. However, if you’ve chosen another method to track your spending, you’ll need to crunch some numbers to get an accurate picture of your spending habits.

When completing this step, don’t forget to include any automated payments you may rarely think about, such as subscription fees and insurance premiums.

Tracking your spending and identifying your money drains is the first step toward greater financial awareness and responsibility. Use the tips outlined here to successfully master the skill of tracking your spending.

 

Read Step 1: How to Track Your Spending

Read Step 2: Creating a Budget

Read Step 3: Pay Down Debt

Read Step 4: Have the Money Talk With Your Partner

Read Step 5: Practice Mindful Spending

Read Step 6: Pay It Forward

Read Step 7: How to Pay Yourself First

Read Step 8: Know When and How to Indulge

Read Step 9: Build and Maintain an Excellent Credit Score

Read Step 10: Plan for Retirement

Read Step 11: Start Investing

Read Step 12: Review and Tweak

 

 

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Much more than a catchphrase, our tagline is our passion, our reason why we do what we do. This is the impact of your membership with AGCU.
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12 Steps to Financial wellness: Review and TweakReview and Tweak12 Steps to Financial wellness: Review and Tweak

12 Steps to Financial Freedom - Review and Tweak

12 Steps to Financial Wellness:

Step 12- Review and Tweak

Congratulations! You’ve reached the 12th and final step of the 12 steps to financial wellness. Here, we’ll review the previous steps and adjust this part of your financial health plan as necessary.

Step 1: Track your spending

Are you regularly tracking your spending? Knowing where your money is going will help you make more responsible spending decisions in the future.

Step 2: Create and stick to a budget

Budgets need to be reviewed and tweaked every few months or so to ensure they still work for present life circumstances. If your budget no longer works for you, tweak until it does.

Step 3: Pay down debt

Have you made as much progress in your debt-paying journey as you’d hoped to by this point? Can you beef up any payments to make debt disappear sooner?

Step 4: Talk money with your partner

Have you had the big money talk with your partner? Need to revisit any of the topics you’ve discussed, such as sharing accounts, dividing expenses and saving up for a shared dream?

Step 5: Spend mindfully

Review some of your recent purchases. Are you blowing money on stuff you don’t need instead of relieving stress in a healthier manner? If so, look for better ways to de-stress.

Step 6: Pay it forward

Are you remembering to pay it forward? The money, time and smiles we share are the only moments that are truly ours.

Step 7: Pay yourself first

Are you remembering to feed your savings? At this time, you may want to consider increasing the amount you’re regularly putting into savings by trimming some discretionary expenses.

Step 8: Know when and how to indulge

Are you remembering to work your just-for-fun expenses into your budget so you can indulge without guilt? Now is a good time to look back at your indulgences to figure out if they were really good uses for your money.

Step 9: Check your credit score

If you’ve been following the rules for boosting and maintaining a high credit score, like paying your bills on time, having several active cards, and keeping your credit utilization low, your score should have improved during these last few months.

Step 10: Think about retirement

Review your retirement accounts and assess whether your funds have reached the place you’d hoped they would by now.

Step 11: Start investing

Make sure your investments are performing well and that your assets are optimally diversified.

Step 12: Review your overall financial health

In this final step, you’ll review your financial health on a regular basis, just as you’ve done here.

Reviewing your financial health on a regular basis is an important part of staying financially fit.

Banking With A Purpose

Much more than a catchphrase, our tagline is our passion, our reason why we do what we do. This is the impact of your membership with AGCU.
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12 Steps to Financial Freedom: STEP 9 Build and Maintain an Excellent Credit score

12 Steps to Financial wellness STEP 9 Build and Maintain an Excellent Credit score

Your credit score is vital to your financial health. This number measures your money management skills, credit capacity, and fiscal responsibility. An excellent credit score can open the door to large loans with better interest rates, as well as employment opportunities and more.

Let’s explore the best ways to build and maintain an excellent credit score.

Have several active credit cards

Building and preserving a healthy credit score requires owning a few cards and keeping them active. If you’re just starting out, consider signing up for a beginner’s card, which generally features easy eligibility requirements and very little available credit. Otherwise, have a minimum of three open cards that you use wisely on a regular basis. AGCU offers a variety of personal credit cards, including Max Cash Preferred, Real Rewards, Platinum, and Secured Card. Pick the card best suited for your needs!

Work on paying down debt

Crushing Debt: Snowball vs. Avalanche Method

First, choose your debt-crushing method: The snowball method works by putting all available funds toward paying off the lowest debt first and then the next smallest, until all debts are paid off. The avalanche method works the same way but focuses on paying off the highest interest rate debts in descending order until all are paid off. With the snowball method, you’ll get faster results but may end up paying more in overall interest payments on all debts. Showing the credit bureaus that you’re on track to pay off your debt can do wonders for your score.

Pay your bills on time

Paying credit card bills when, or before, they’re due is a major factor in your score. Continually carrying an outstanding balance and/or owing lots of interest shows that you can’t be counted on to repay loans responsibly. Remember, you can set up automatic monthly payments with AGCU Bill Pay, so you’re always on time.

Bring down your credit utilization ratio

Another crucial factor in your score is your credit utilization ratio. This refers to the amount of available credit you use. Keep your utilization under 30% or even 10% if you can. To that end, make sure you’re using just a bit of your available credit each month. In addition, consider accepting offers for increased credit – as long as you know you won’t rack up huge bills simply because of having all that credit.

Use the tips outlined here to build and maintain a great score.

Read Step 1: How to Track Your Spending

Read Step 2: Creating a Budget

Read Step 3: Pay Down Debt

Read Step 4: Have the Money Talk With Your Partner

Read Step 5: Practice Mindful Spending

Read Step 6: Pay It Forward

Read Step 7: How to Pay Yourself First

Read Step 8: Know When and How to Indulge

Read Step 9: Build and Maintain an Excellent Credit Score

Read Step 10: Plan for Retirement

Read Step 11: Start Investing

Read Step 12: Review and Tweak

Banking With A Purpose

Much more than a catchphrase, our tagline is our passion, our reason why we do what we do. This is the impact of your membership with AGCU.
Learn More About Banking with a Purpose

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12 Steps to Financial Freedom: Step 11- Start Investing

12 Steps to Financial Wellness: Step 11 Start investing

12 Steps to Financial Wellness:

Step 11- Start Investing

The world of investing can be confusing, especially for a first-timer. No worries, though; AGCU can help! Here’s how to start investing in five easy steps.

1.  Define your tolerance for risk

If you’re investing, be prepared for potential losses, because there are no sure things. But how much loss can you take? Your risk tolerance will vary according to the time horizon you’re working with, the amount of money you can afford to lose and your objectives.

2.  Define your investment goals

Why are you investing this money? Do you hope to save enough money for a down payment, or to fund your retirement? Or, are you simply looking for a way to grow your money? Identifying your investment goals will help you choose your investment vehicles and the amount of money you’re comfortable investing.

3.  Determine your investing style

Next, you’ll need to find an investing style that suits your personality and investing goals. Here are your basic choices:

  • Active management–personally managing your investments. This can be a great choice for an investor who is confident in their knowledge of the market.
  • Broker/financial advisor–allowing an outsider to manage your investments and make decisions regarding your portfolio.
  • Robo-advisor–an automated option that typically costs less than a traditional broker and works with your goals, risk tolerance level and other personal details.

4. Choose your investment account

You’re ready to choose your investments! Here are some popular first-time investments:

  • Bonds–a loan to a company or government entity which agrees to pay you back in a specified amount of years. You’ll get modest dividends until the bond matures. Bonds are low-risk, but offer lower long-term returns.
  • Exchange traded funds (ETFs)–individual investments bundled together and traded throughout the day, like a stock. Share prices are relatively low.
  • Mutual funds–professionally managed pools of investor funds that focus their investments in different markets. Mutual funds are inherently diversified, making them a good choice for beginner investors.
  • Stocks–a single share or a few shares in a specific company. Be sure to research your chosen company/ies carefully.

5. Learn to diversify and reduce risk

Monitor and adjust your portfolio on a regular basis to keep it diversified and help minimize the risk of loss. Follow these steps to help you get started investing with more confidence.

If you’re ready to start investing or would like some more advice, Reach out to our good friends at AGFinancial

Read Step 1: How to Track Your Spending

Read Step 2: Creating a Budget

Read Step 3: Pay Down Debt

Read Step 4: Have the Money Talk With Your Partner

Read Step 5: Practice Mindful Spending

Read Step 6: Pay It Forward

Read Step 7: How to Pay Yourself First

Read Step 8: Know When and How to Indulge

Read Step 9: Build and Maintain an Excellent Credit Score

Read Step 10: Plan for Retirement

Read Step 11: Start Investing

Read Step 12: Review and Tweak

Banking With A Purpose

Much more than a catchphrase, our tagline is our passion, our reason why we do what we do. This is the impact of your membership with AGCU.
Learn More About Banking with a Purpose

More articles

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12 Steps to Financial Freedom: Step 6: Pay It Forward

Step 6 of 12 to Financial Wellness: Pay it Forward

Step 6 : Pay it Forward

There’s so much good you can do with the money you’ve been blessed to have. There’s also a lot of good you can do with your time, talents, and possessions. Let’s explore some ways you can make the world better by paying it forward.

  1. Donate funds to your favorite cause

The classic and simplest way to pay it forward is by supporting a charity or two that speaks to your heart. Make a donation that fits your budget to help make a difference. Be sure to verify the authenticity of the organization on a charity-vetting site, like Charity Navigator or CharityWatch. Don’t forget to save your receipt so you can claim a tax deduction.

  1. Commit to do one random act of kindness each day

Kindness doesn’t have to be big, loud, or costly to make a difference. Small things can have a big impact on someone’s day. You can offer to make a coffee for your coworker, feed a parking meter that’s about to run out, remove a branch or rock from a busy thoroughfare or let someone go ahead of you at a checkout counter.

  1. Write thank you letters

When was the last time you thanked your child’s teacher, your parents or your postal carrier? Pick up a set of thank you cards, and spend 20 minutes writing thank you letters. Your letters may be cherished by the recipients for many months or years to come.

  1. Donate your time

Unfortunately, there are many people suffering from various hardships. With just a small donation of your time, you can help alleviate some of their suffering. Volunteer at a soup kitchen, help bring cheer to hospitals, offer to babysit for a couple who is going through hard times so they can have a night out or visit a lonely person. You can brighten someone’s day simply with your presence!

There are so many ways to pay it forward and make the world a better place. And when you give to others, you’re really giving to yourself by learning to be a better, kinder person.
The more you use AGCU for your day-to-day banking needs, the more you help support worthy causes – both locally and worldwide. We donate 10% of our annual earnings to support churches and ministries, educational scholarships and programs, and humanitarian efforts. Every day, we provide financial services to people across the United States and missionaries in 190 countries around the world.

Read Step 1: How to Track Your Spending

Read Step 2: Creating a Budget

Read Step 3: Pay Down Debt

Read Step 4: Have the Money Talk With Your Partner

Read Step 5: Practice Mindful Spending

Read Step 6: Pay It Forward

Read Step 7: How to Pay Yourself First

Read Step 8: Know When and How to Indulge

Read Step 9: Build and Maintain an Excellent Credit Score

Read Step 10: Plan for Retirement

Read Step 11: Start Investing

Read Step 12: Review and Tweak

Banking With A Purpose

Much more than a catchphrase, our tagline is our passion, our reason why we do what we do. This is the impact of your membership with AGCU.
Learn More About Banking with a Purpose

More articles

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12 Steps to Financial Freedom: Step 8: Know When and How to Indulge

12 Steps to Financial Freedom. -8 Know When and How to Indulge

Living a life of financial wellness means being happy with a lifestyle that’s within your means, but doesn’t leave you feeling like you’re lacking. At the same time, financial wellness means money choices are governed by discipline and not by emotion. So how do you strike a balance between the two?

Here’s how to indulge responsibly.

Live with a budget

To do this, track your spending for three months. Next, make a list of all your expenses and list your income in a parallel column. Tally up your totals and assign a realistic dollar amount to each expense. Going forward, be sure to only spend within the allocated amount for each expense category.

Leave room in your budget for “just for fun” purchases

As you work on building a budget, leave room for the occasional treat. The exact amount will vary by income level, lifestyle and personal choice. However, wisely choose an amount you can easily afford without feeling deprived.

Review your savings

Before giving yourself permission to indulge, make sure you’re setting aside some of your monthly income to savings. Ideally, short-term savings should be enough to keep you afloat for 3-6 months if you have no source of income. Long-term savings should be sufficient to support your retirement and any long-term savings goal you may have.

Choose your “treats”

Everyone’s got a personal vice or three. Take a look at where your non-discretionary money went over the last month and highlight the more expensive impulse buys. Hold these purchases up to these questions:

  • Did this purchase bring me happiness or positive energy the day I bought it? How long did that feeling last?
  • Did this impulse buy blow my budget?
  • Does thinking about this purchase now fill me with joy, guilt, or something else?

Use the insight about your indulgences to help you make better money choices in the future.

Lose the guilt

Once you’ve decided how much you want to spend each month on indulgences, it’s time to let go of guilt. If you’re spending responsibly, there’s no need to beat yourself up over an impulse buy you could have done without. As long as you’re keeping these just-for-fun purchases within your budget, you can maintain your financial wellness.

Read Step 1: How to Track Your Spending

Read Step 2: Creating a Budget

Read Step 3: Pay Down Debt

Read Step 4: Have the Money Talk With Your Partner

Read Step 5: Practice Mindful Spending

Read Step 6: Pay It Forward

Read Step 7: How to Pay Yourself First

Read Step 8: Know When and How to Indulge

Read Step 9: Build and Maintain an Excellent Credit Score

Read Step 10: Plan for Retirement

Read Step 11: Start Investing

Read Step 12: Review and Tweak

Banking With A Purpose

Much more than a catchphrase, our tagline is our passion, our reason why we do what we do. This is the impact of your membership with AGCU.
Learn More About Banking with a Purpose

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12 Steps to Financial Freedom: Step 7: How to Pay Yourself First

“Pay yourself first” is a catchphrase that refers to prioritizing your personal savings above other expenses. To achieve it, savings should be a fixed line on your budget that happens every month without fail.

Here’s how to pay yourself first.

Review your spending

Take a clear look at your spending. If you already have a budget, this will be as simple as reviewing the column which lists all of your expenses, including your discretionary spending. If you don’t have a budget, track your spending over several months to identify your primary expenses and to find the average amount of money you spend each month.

Set short- and long-term saving goals

Short-term savings, or funds you want to be able to access in the near future if necessary, can be allocated to an emergency fund. Experts advise having three- to six-months’ worth of living expenses set aside in an emergency fund in case of a sudden, large expense and/or loss of employment.

Long-term savings should include funds you can afford not to touch for several years or more. Your long-term saving goals can include your retirement, as well as a downpayment on a home, a new car, a sabbatical from work or any other super-big expense.

Narrow down your short- and long-term goals, then attach a number to each savings category.

Set a timeline for each savings goal

Now that you have a number for the amount you want to save, you’ll need to work out a realistic timeline for meeting those goals. It’s best to give first priority to your emergency fund, but at the same time, it’s a good idea to start saving for retirement today so compound interest has an opportunity to work its magic. To that end, you may want to allocate the bulk of your monthly savings to your emergency fund until you meet your goal. Once your emergency fund is full, you can divide your savings more evenly between your short-term savings and long-term savings.

Calculate how much you’ll need to save each month

Take your total for each goal, and divide it by the number of months in your timeline. For example, if you’ve decided you want to have an emergency fund of $24,000 established in four years’ time, you’ll divide $24,000 by 48 months to get $500 a month. This is the amount you’ll need to set aside each month to reach your goal in time. Do this for each of your goals.

Automate your savings

Once you’ve got your savings plan ready to go, it’s best to make it automatic. You can set up a monthly transfer from your credit union checking account to your credit union savings account. This way, your savings will grow even when you forget to feed them.

Congrats–you’ve mastered the art of paying yourself first!

Read Step 1: How to Track Your Spending

Read Step 2: Creating a Budget

Read Step 3: Pay Down Debt

Read Step 4: Have the Money Talk With Your Partner

Read Step 5: Practice Mindful Spending

Read Step 6: Pay It Forward

Read Step 7: How to Pay Yourself First

Read Step 8: Know When and How to Indulge

Read Step 9: Build and Maintain an Excellent Credit Score

Read Step 10: Plan for Retirement

Read Step 11: Start Investing

Read Step 12: Review and Tweak

Banking With A Purpose

Much more than a catchphrase, our tagline is our passion, our reason why we do what we do. This is the impact of your membership with AGCU.
Learn More About Banking with a Purpose

More articles

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