MONEY MANAGEMENT

 

> Planning a budget.

The single most important aspect of your financial planning is the construction and maintenance of a monthly budget plan. A working budget is very difficult to make and hard to apply and maintain. Below you will find some simple steps to follow in creating a budget for you and your family to follow.

 

1. Figure out how much money you earn on a monthly basis; this amount will determine the basis of your spending allowance.

 

2. For one month, keep track of all your expenses, the variable expenditures as well as any monthly re-occurring payments you have to make. A variable expense is one that does not show up every month.  For example clothing, gifts, restaurants, taxes, house or car repairs, and medical/dental costs. A monthly re-occurring expense is one that needs handling each month.  It includes such things as rent/mortgage, vehicle expenses, utilities, groceries, cell phone, and internet.  Any outstanding amount on credit cards must be paid off on a monthly basis also.

 

3. Make a list of your “unnecessary” expenses. For example, one of the most common items in this category is the morning coffee on the way to work or eating out a lot instead of cooking at home.  These types of expenses usually add up to a substantial amount of money in the end.

 

Use the calculator below to aid in adding and subtracting the figures you have gathered from the above three steps in figuring out your monthly budget allowances.

 

INCOME	EXPENDITURE
Salary after tax: $	Mortgages: $
Government Benefits: $	Rent: $
Super./Pension: $	Utilities: $
Interest/Dividends: $	Credit Cards: $
Annuities: $	Loans: $
Other Income: $	Insurance Policies: $
	Car Expenses: $
	Living Expenses: $
	Entertainment: $
	Education Expenses: $
	Other Expenses: $
RESULTS
Total Income: $	Total Expenditure: $
YOUR SURPLUS IS: $

 

Once you have determined your monthly surplus you can begin to construct a monthly savings plan. Saugeen Community Credit Union can work closely with you to help you determine what the best long and short term strategies are when it comes to investing your savings towards a bright financial future. Make sure and keep track of your progress and adjust your budget accordingly each month when incomes or expenses fluctuate and change.

 

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> Understanding your debt.

Being in a lot of debt can be a stressful situation and one that seems hopeless at times. It's important to not lose hope and to know that with a few management strategies, you can pay down your debt and live a more financially balanced lifestyle.

 

There are 2 main types of debt that you need to be able to identify. One is called structured debt and the other is called revolving debt.

 

Structured Debt

Structured debt is easily compared to the type of debt such as a loan or mortgage where the amount of borrowed money is paid off in specific installments until the loan balance is zero. With structured debt you generally pay off the interest and principal at the same time until the term of the debt is over. With structured debt, the amount of credit doesn't increase as the balance is decreased.

 

Revolving Debt

Revolving debt usually refers to credit card  or lines of credit debt. This is debt that changes from month to month depending on if you make purchases or make payments. It is different from structured debt that you have when you borrow a defined amount of money like a personal loan or mortgage.  When revolving debt remains from month to month, the debt amount carries over or revolves to the next month, and interest is charged on any debt that remains unpaid. In addition, amount of available credit goes up or down depending on the debt, so the term revolving credit is often intricately connected to revolving debt. As debt gets paid down, more credit is available, but as debt increases, less total amount can be borrowed. With revolving debt, you are paying high amounts of interest if the debt is carried from one month to the next.

 

Choose low cost borrowing options.

If you are carrying a balance on a credit card from month to month, you are paying most of your money to interest payments while your balance stays relatively the same. This can be a never ending cycle where you end up paying more than your principal debt in interest payments. An alternative to this would be to turn the revolving debt into a structured debt such as a lower interest personal loan. Saugeen Community Credit Union can help you look at your options in helping you managing your revolving debt.

 

> Making your savings grow.

There are many ways in which you can begin to save your income for anything such as a vacation, new vehicle, home renovations or retirement. Saugeen Community Credit Union is there to help you finsd which options suit you the best. Some of the ways in which you can invest and save your money include

 

• Savings Account.

A savings account is a great way to save for short term goals and have full access to your money when you need it. A savings account pays less interest than a GIC or mutual fund, but you aren't locked into a specific term with penalties for early withdrawls.

 

• Mutual Funds.

A mutual fund brings combines money from many people and invests it in stocks, bonds or other assets. The combined holdings of stocks, bonds or other assets the fund owns are known as its portfolio. Each investor in the fund owns shares, which represent a part of these holdings. It is important to note that there is market risk involved when investing in mutual funds, including possible loss of principal. A mutual fund can earn a higher rate of return for the higher risk.

 

• Term Deposits, GIC's and Tax Free Savings Account.

These types of savings options take a deposit and lock it in for a specified term anywhere from 30 days to 5 years. Each investment option provides different benefits depending on your specific needs and provides a higher rate of return than a traditional savings account. These types of deposits are guaranteed and a minimum deposit is required in most circumstances.

 

• RRSPs.

A Registered Retirement Savings Plan (RRSP) is an investment account designed primarily for saving toward your retirement years. As a retirement savings vehicle, regulated by the Canadian government, RRSPs have special tax benefits. Your annual RRSP contribution can greatly reduce the amount of income tax you pay in that year, and the money you put away can have years of tax-deferred growth potential. You only pay tax on the amounts you withdraw. RRSPs are available through chartered banks, trust companies and other financial institutions.

 

You may consider investing in RRSPs if:

• You have little to zero debt.
• You will have a small pension or none at all.
• You’re many years away from your retirement.
• You don’t want to work during retirement.

Saugeen Community Credit Union can help you decide which savings option is best for you.