Stressed Over Expenses? We Can Help Meet Your Needs

Your Income and Expenses

Thinking about expenses can be stressful, especially if someone is worried about making ends meet. For our November seminar with the SHA, Mike Crews, Financial Literacy Educator at Town and Country Bank, helped participants understand that developing a plan for their income can empower them to make choices and changes, ultimately assisting them with achieving their financial goals.

"There’s no reason to be ashamed of it. Most folks don't track expenses.  There's no wrong way to develop a budget as long as you're monitoring spending versus income. Much like a diet, make a budget that you can stick with," says Crews. 

Understanding The Basics

To start building a plan for your income and expenses, it’s important to understand the factors involved. There are many forms of income, including earned income, income from assets or investments, and public benefits or entitlements that pay money. There are also several forms of payment, including cash, paper checks, direct deposits, payroll cards, and electronic transfers. There are two ways your income will be reflected: gross income and net income. Your gross income is your total income without deductions, and your net income is what you make after any deductions.

There are two types of deductions: required deductions and elective deductions. Required deductions include Social Security and Medicare as well as income taxes, while elective deductions include insurance premiums, union dues, retirement account contributions, charitable contributions, and direct deposits. Depending on how you’re paid, you should be able to identify your gross and net income on your pay statement, as well as other important information like the hours you worked, the deductions from your gross pay, and employer contributions.

Knowing how much income you receive and how regular it is, is key to developing a solid financial plan. If you have more than one job, you may be receiving income from multiple sources. One job may have a regular income, meaning you can expect a consistent paycheck at regular intervals, and another may be a one-time or seasonal deal. Making a list of your income and expenses is a great way to begin managing your spending and may reveal excess spending in certain areas.

Tracking Your Income and Expenses

Now that you have a better understanding of income and expenses, let’s talk about the best ways to track your money. You should consider three areas when reflecting on how you spend your money: how you save it, share it, and spend it.

Save: Putting some of your income aside for an emergency fund is a smart idea in case something unexpected happens, like losing a job or receiving an injury. You can also save money for short and long-term goals, like going back to school or saving for retirement.

Share: Gifting money to friends and family or donating it to charity are examples of sharing money.

Spend: Much of what you spend will probably go towards your necessary living expenses, like groceries, rent, debts, and other bills, as well as other personal items you need or want.

While building a financial plan, it’s necessary to have an honest conversation with yourself about the difference between what you need and what you want. To avoid falling into debt, your bills and obligations should be your priority. Before spending, ask yourself the following questions:

1. Are there less expensive ways to meet my needs?
2. Am I prioritizing my needs over my wants?
3. Is there a way to consolidate or lower necessary payments?

By considering these questions, you may be able to save money or redistribute your funds in a more beneficial way.

The benefits of tracking your income include understanding if your spending habits support your financial goals and discovering areas to make positive improvements. A great way to track your spending is by keeping a saving, sharing, and spending diary. To begin, start by tracking how you save, share, and spend money for one month. Be specific. Identify all the significant areas you’re saving, sharing, and spending, and why. At the end of the month, review your habits and compare them to your financial values and goals. You may find that you spend way more on fast food or give more money to your friends than you realized. If keeping a physical diary isn’t for you, it may help to research budgeting and income tracking apps on your phone.

"There are many reasons to track expenses, chiefly, to become aware of spending habits...the good, the bad, and the ugly. The bottom line is, if you don't know where your money is going, it becomes difficult to recognize negative spending behaviors that could be adjusted to transform money into a source of strength," says Crews.

Managing Your Income and Expenses

Managing your expenses so that you can make payments in advance of their due dates can help you avoid late fees, interest on unpaid balances, negative credit reports, loss of services, and other fees. Creating a monthly payment calendar can help keep you on track. List the expenses you pay regularly, the due date, the amount owed, and the payment method.  If you are concerned about debt, check out the blog from our October seminar on understanding and reducing debt.

Keep Up With Our Financial Literacy Seminars

To keep up with topics covered in our financial literacy seminars with the SHA, check out our blog! Not sure where to start building your financial future? Visit us at one of our 12 conveniently located branches to speak with a banker about building a financial plan that’s right for you.