MONEY MANAGEMENT

It takes time to save the money needed to start living independently – first and last month’s rent, deposits for utilities and books for school all cost money. It is important to be able to cover these costs to meet goals and avoid undesirable outcomes such as homelessness. In other words, we need to start building their own safety net, sooner rather than later.

Budgeting

What do I need a budget for?

Money can buy things now or it can be saved for bigger things. We think of money in terms of their immediate, short-term and long-term goals. Think about what you can buy for $100 and what you could buy if you saved that $100 until you had $200. You need to determine if immediate gratification is worth the loss of the future benefit.

Determine your most important goals: college, an apartment of their own, a car? Saving small amounts can eventually add up to a new cell phone, a great pair of shoes or the security deposit on that apartment.

Income is the amount of money you can expect from a job, benefits, student aid if you go to school and/or continued support from your family. Make sure you understand your paycheck and know how much money you will actually receive each pay period. The goal is to come up with a realistic amount of income that will cover your expenses and enable you to save money. Sometimes you may need to increase your income which may be done by increasing hours worked, if possible, or by working to get a promotion to a higher pay level or job.

Your budget should list the real costs of your needs: How much will food cost each week? How much will rent be? Do you need medication? What is the co-pay for the medication and how often do you need to refill it? Figure out how much to allow for these basic needs either by researching the cost of these things yourself, such as by walking through the supermarket or looking at rental listings, or by working with a worker or school counselor. It is important to make sure your expenses do not exceed your income. If it does you may need to review your priorities and consider spending less on some things you want in order to pay for things you need.

Once you’ve figured out the cost of your needs, you can start listing your wants. Saving is closely related to goal setting and the ability to prioritize one goal over another. You may have to put money aside each week to save for your wants/goals. The secret to budgeting is setting priorities. What’s your most important goal? School, an apartment of your own, a car? Saving small amounts can eventually add up to a new cell phone, a great pair of shoes or the down payment on a car.

Don’t forget – it’s also important to include having money for emergencies in your saving plan.

Do you know someone who handles money well? Ask them how to budget and save. By making a budget for yourself and sticking to it, you’ll learn what you spend your money on and can decide how changing your spending habits can help you reach your goals. Ask your worker or someone you know who has good sense about money to help you with your budget.

Knowing you have enough money to take care of yourself is probably going to be one of the most satisfying feelings you’ll ever have and it is key to reaching your life goals, whatever they are. No one can have everything they want exactly when they want it. When you use your money carefully, you have a better chance of living the kind of life you want to live.

Budget Tool

Investing vs. Saving

Once you have a plan of saving for long-term goals, you many may be interested in making your savings grow faster. If you learn to wisely invest the money you are saving, you may be able to reach your goals sooner such as putting money into a Certificate of Deposit rather than a non-interest savings account.

As you save larger sums, you may consider investing money. Make sure you understand that financial advisors often base their recommendations on the advisor’s commission rather than your best interest and be wary of investing in get-rich-quick schemes. If the opportunity seems too good to be true, it probably is.

Investing Tool

Credit Cards

Credit cards can save you the headache of carrying around cash, but they are not income. At the end of the month, you must pay for everything you bought with your credit card. If you spend more than you have in the bank or more than you earn, you’ll be paying the credit card company both the money you spent and interest.

How much interest will you pay? It can range from 9.9% to 29.99%, depending upon the credit card and whether you are considered a good risk. When you use a credit card, you are borrowing money from the credit card company. The interest rate is the price you pay for buying something you didn’t have the money to pay for.

Banks, employers, insurance companies, and landlords may look at your credit report when you ask for a loan, apply for a job, buy a car or rent an apartment. A bad credit report can cost you that job or keep you from getting the car or apartment.

When you start to pay for things yourself — a cell phone, an apartment, a credit card — you sign a contract saying you are going to pay the money you owe, on time. Your credit report reflects how well you live up to your promise to pay.

A credit report includes information on where you live, how you pay your bills, and whether you’ve been sued or have filed for bankruptcy. Credit reporting companies sell the information to businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.

Credit bureaus keep track of all your payment history, from utility bills to phone bills to credit cards, and just about everything you buy, unless you pay cash. These credit bureaus then assign you a credit score, known as a FICO2. That score is what employers, landlords and banks look at when deciding if they want to do business with you.

The Fair Credit Reporting Act (FCRA) requires that the three credit-reporting agencies — Equifax, Experian, and TransUnion — provide you with a free copy of your credit report, if you ask for it, once every 12 months. To get your free report, visit annualcreditreport.com or call 1-877-322-8228.

Annualcreditreport.com is the ONLY website authorized to provide free credit reports. Some “imposter” sites use terms like “free report” in their names; others have web addresses that purposely misspell annualcreditreport.com in the hope that you will mistype the name of the official site. Some of these “imposter” sites direct you to other sites that try to sell you something or collect your personal information. Be very careful when giving financial information to any website.

You can also get a free report if your credit report was used to deny you a job, insurance or loan. If your credit report is used against you, get a copy to make sure that the report is accurate.  Federal law requires both the credit report­ing company and the information provider (that is, the person, company, or organization that provides information about you to a credit reporting company) to correct mistakes. For details about how to correct errors, visit the Federal Trade Commission website.