We’re Lakeside Bank. We know retail and business banking. We know it well. And we know all the basic banking things folks should do. And that many of us don’t! (Including Lakesiders. Mentioning no names.) And we know the mistakes so many of us make, too. (Again, mentioning no Lakesiders.) So, if you’ll forgive us, here are our very basic banking recommendations for the new year. Put them to work and we promise you’ll be more relaxed by year’s end. And probably happier financially, too!
OK … there had to be a list, right? And it starts with the most basic banking recommendation of all: BUDGET! It’s simple. And it’s hard. And once you create a budget, you’ll be amazed at where the money goes. Your money. Sit down at your computer. Or pull up a legal pad. Put down your monthly expenses. Rent or mortgage. Utilities. Phone. Other communication stuff. (Yes, Comcast, HBO and the NFL Red Zone count!) Car. Other transportation. Like to work. Starbucks. (Yes, Starbucks.) Meals out. Snacks out. Other entertainment expenses. And yes, you can put in a monthly average. But be painfully honest! It’s just you reading it!
NOW … once you’re somewhat over the shock of what you spend with your favorite barista, make three columns. The first column should be titled, “MUSTS”. Under this, put your mortgage or rent and basic utilities. That would be water, electricity and gas. HBO is N.O.T. a “Must”. And you know that.
Then make a second column: “NEEDS”. Transportation goes here. You’ve probably got to get to work. There will be a few other things, too. The dry cleaner. Occasional new clothes.
And now … the really tough column: “WANTS”. If you’re honest (please try; remember, it’s just you reading), a lot of monthly costs will fall under this all-too-easily justifiable banner.
With these three columns done, Step Back. Take a good hard look at where your hard earned money goes. And make some hard choices. If you’re chatting with the barista multiple times a day … you could probably cut that down. And do you really need HBO, Starz, Netflix and 12 other networks?? It all adds up! As you now see.
Hard choices done, reward yourself with a trip to Starbucks! WAIT … that’s definitely not in the spirit of what we’re trying to do here. Which is: SET A REASONABLE MONTHLY BUDGET. SOMETHING YOU CAN LIVE WITH. But it should have a little bit of pain attached to it. THEN, put it into practice. Live it. And it leads to our next recommendation!
SAVE MONEY! And here’s STEP ONE … Set up a plain vanilla money market or savings account at your local bank. (Did we mention Lakeside Bank??) Even if you can only contribute a few bucks a week or month, do it! Your goal should be to get to at least three months of salary. Ideally, six months. Consider this account Untouchable. It’s your emergency fund. It’s not your vacation fund. And it’s certainly not your Starbucks fund. Howard Schultz is rich enough. Keep feeding this baby. With your BUDGET working, set up an automatic transfer from your FREE CHECKING ACCOUNT (which we offer at Lakeside … and it pays 2.50% interest, too!) so that money automatically finds it’s way over to your Untouchable Savings Account. Or Money Market.
Retirement Savings! We can hear what you’re thinking: “What, more money I don’t get to spend? But I’m young!” Yeah, well, everyone gets old(er). And someday you’re going to need retirement money. Especially the way our politicians are behaving. But here’s the beauty of this area. Chances are, your company offers a “matching” contribution. They’ll literally give you free money! And is there a nicer word than “Free”? We think not! (Unless it’s, “Hi, Lakeside Bank. I’d like to open an account. And can you help me with a mortgage? How about a credit card? A loan? CD’s?” OOPS … that’s more than one word.)
Anyway, most companies will match a percentage of your first 2%, 3% or even more of your contributions to a retirement account. And did we mention that their contribution is FREE? That’s right. FREE MONEY. Two simple words of encouragement: TAKE ADVANTAGE!! Seems obvious, right? You’d be amazed how many folks don’t take the FREE MONEY. We hope we’ve been clear. The FREE MONEY adds up. And this is the good adding. Not like the “Wants” column you’re probably still shedding a tear over.
Debt is Dumb! Well, there is some good debt. A mortgage. A college loan. Other loans you needed and pay on time. (And can afford. See “Budget, The”.) And there are others. But most debt is bad debt. Let’s take the worst offender: Credit Card debt. Have you SEEN the interest rates they charge?? Mob guys charge less! Simple rule for 2019: If you can’t afford to pay the credit card bill at the end of the month, DON’T BUY IT! And review “Wants vs. Needs” for a refresher course. Believe it; you’ll sleep a lot better avoiding unnecessary debt! Debit cards are wise as they’re like a check. The money comes out of your account right away. If you haven’t got the cash in your account, you can’t spend it. Credit cards can be overly tempting. They’re great for cash back or airline miles, but use them with a wise degree of caution.
Mortgage Management. There’s an easy way to shave years off your mortgage. Over the course of the year, make additional “Principal” payments on your monthly payment. The goal should be an extra month’s payment total per year. On average, you’ll cut four to five years off your mortgage … and save a lot in interest!
Credit Care. Check your credit rating once a year. There are three sources: Equifax, Experian and Transunion. And, by law, they have to provide a free credit score once a year. How about that? A law worth liking. Keep an eye on your credit score. If something isn’t right, look into it. A good credit score is important for mortgages and all kinds of things. To help keep your score high, pay bills on time. And don’t open or close too many credit card accounts.
Invest. The first step is always the hardest. Here’s a simple way to start running. Pick a major mutual fund company like Vanguard or Fidelity. There are many others. Open an account. Pick a basket of basic index funds. They’ll help you do it. Be sure to select funds with low costs. Steer what you can afford (back to the Monthly Budget) to these funds. Make it automatic so you don’t miss payments and continue to make payments no matter what the market is doing. The market goes up & down. All the time. This should be “fire & forget”. Keep plugging away.
So … you have a rainy day fund in a savings account or money market, you’re steering money into retirement AND now you’re investing, too. How much of your income should you be saving overall? On average, Americans save 5%. Or less. You should shoot for 10%. 15% if you really want to be a hero.
LIVE A LITTLE. Most budgeting recommendations are serious. And painful. We believe money is a tool. It’s to be saved, sure. That’s responsible and essential. But money is also for living. Really living, not just paying the rent. Be sure to earmark monies for what makes you & yours happy, too. Life’s short. Spend a little. (Within the budget!)
Thanks for reading the Lakeside Bank to an Every Person’s Guide to Better Living Through Better Budgeting / Banking / Financing! Have a great 2019.