Credit & Borrower Education
For educational purposes only, reviewing this information is not a requirement of obtaining a loan.
Budgeting and Saving
Building a budget and implementing a savings plan are two foundational pieces of financial health. While it may seem a little overwhelming at first, there are simple steps that can be taken to make it a little easier. Like any new habit, getting started can be hard. Making budgeting and saving consistent habits will pay off, though, both by providing peace of mind and a sense of control over your finances.
How to Establish a Household Budget
Before creating a budget, it helps to understand your current financial situation. A few simple steps can help you create a plan that works for your household. It’s important to have a budget that you can easily reference when debating taking on new expenses. If an expense doesn’t fit into your budget, you may want to consider cutting items that are non-essential or finding ways to supplement your income if possible to make room.
Pick Your Budgeting Method
While there are various ways you can choose to budget, keeping it simple is sometimes best. You can use a spreadsheet or even a good old-fashioned notepad and pencil to create your plan. Budgeting apps can be a great way to budget on the go, and some apps will even electronically connect to your bank account for simplified tracking.
Review Your Income
You can’t create a budget without knowing how much money you are working with each month. If you’re a salary employee or receive income that is consistent each month, it makes it a little easier to set a solid base for your budget. If you earn income through an hourly wage or gig work, look at the average of your recent months’ income and use this as your starting point. For people with less consistent incomes, you can create a budget based on the lowest month in recent history and make that amount work to cover your basic needs like housing, food, medication, transportation, and education.
Review Your Spending Habits
Begin the process by creating a snapshot of your current financial situation. A great place to start is by looking back at the previous 1-3 months to gain a better understanding of your spending habits. Take note of any areas where you find yourself spending more than you would like to spend. For example, if you eat out frequently and know that you want to save more, make note that your restaurant spending may need extra attention and monitoring.
Create Categories
As you build your budget, you’ll become familiar with categorizing expenses. Making spending categories and setting a budget for them is the key to a great, sustainable budget. Everyone has a unique budget and unique spending habits, so your budget will be fully customized to fit your lifestyle. However, there are common categories that you can use for inspiration. Some categories will be flexible which means they might change month over month, and others are fixed which means they’re typically the same or within a somewhat predictable range.
Basic Budget Categories
Housing Costs—rent, mortgage, utilities, and any housing related costs
Medical—insurance, medications, doctor co-pays
Food—don’t forget to account for both home-cooked meals and eating out
Transportation—vehicle payments, public transportation, insurance, and fuel costs
Necessities—toiletries, household items, needed clothing, etc.
Miscellaneous or Extra Spending
Debt Payments
Fixed Expense Examples
Mortgage or rental payments
Utilities
Insurance—homeowner's or renter's
Health insurance premiums
Life insurance premiums
Prescriptions and some over the counter medications taken regularly
Cell phone
Internet and cable
Vehicle payment
Vehicle insurance
Childcare
Child support
Tuition and fees
Subscriptions—these could be flexible
Flexible Expense Examples
Groceries
Take out
Bank fees
Credit card fees
Savings
Health and personal care products
Entertainment
Clothing
Laundry
Gas or EV charging for vehicle
Public transportation—include taxis and rideshare costs
School supplies and extracurricular costs
Set the Budget
Each category gets a budget number—the maximum amount you can spend on that category per month. Start with your fixed costs and then divide the remaining income between your flexible and non-essential costs. You’ll keep an eye on these numbers consistently to avoid overages in each category.
Budget Tracking is a Habit
Every time you swipe your card or pull bills from your wallet, make a note or record the transaction. You can keep a notebook in your bag, track using your phone, or keep your receipts and then track your spending when you’re home. Consistent tracking will help you realize your goals more quickly.
Enjoy Peace of Mind
Budgeting, while a little daunting when getting started, pays off the longer you stick with it. The more you understand about your finances, your spending habits, and the areas you can improve to meet your financial goals the quicker you’ll succeed. Sometimes, you may fall out of the habit, but stick to your plan. Pick right back up and keep going. Budgeting is a marathon endeavor vs. a sprint to the finish line. The reward is much sweeter than a gold medal—it's the peace of mind that comes with having a sense of control over your finances.
How to Establish a Household Savings Plan
Saving for a rainy day is extremely important. We may not know when or what will happen that will require extra funds, but we all know that something will happen. Starting small is a great way to create the habit of saving. A number that a lot of finance experts throw out is $1,000, so that could be your first big goal. Ultimately, choosing your savings goal will be a personal decision. You may have specific milestones coming up or purchases you know are important to save for, but a rainy-day fund is an important goal to keep as a priority. Opening a separate account for your savings is a great way to keep the funds separate and protects you from spending your savings on everyday expenses.
How do you create room for savings day-to-day? Finding ways to trim the fat in key areas of your budget is the fastest way to success. For example, foregoing eating out once a month can kickstart your savings plan. Sometimes, budgets are so tight it may feel completely impossible to save a dime. If that’s the case, skipping a meal out may not be enough—perhaps you don’t eat out at all. In that case, you’ll want to focus on every cent that is coming in and going out. Look for ways to save on your fixed expenses, try finding cheaper ways to meet basic needs. Can you switch internet or phone providers to lower those expenses? Can you opt for public transportation a few times a month to lower your fuel bill? Take this one step at a time and try to keep in mind that cutting spending to create savings is helping shape your future financial peace of mind, even if it feels hard in the moment.
Credit Score and Credit Reports
Keeping an eye on your credit score and working to improve your score if needed is an important part of total financial health. Your credit score can determine access to lending opportunities and even housing options.
How to Get Your FREE Credit Report
If you have a credit card, they may provide free access to credit monitoring. Otherwise, you can often sign up for a free trial of credit monitoring to pull your report. Checking your credit at least once per year is a great idea to not only see where you’re at but to catch any discrepancies or errors in your report. You can request your report from Equifax, Experian, and TransUnion directly if you’d like, which are the three main credit bureaus. As suggested by the Federal Trade Commission, you can also get your report once a year for free from AnnualCreditReport.com.
How to Dispute Credit Report Errors
Finding an error on your credit report can be jarring, but don’t stress. If the information truly is an error, the reporting agency can help you correct the report. Contact the reporting agency to gain more clarity about the error. You may need to contact the creditor to resolve the issue. All of this may take time, but it is worth it. An accurate credit report, and a healthy credit score, are an important step in your journey to full financial health.
Can You Improve Your Credit Score?
With dedication and focus, you can improve your credit score. Repairing a credit score can be done, but it takes time. There are various ways you can work towards repairing your credit.
Pay bills on time—on time payments can positively affect your score.
Pay down debt—large amounts of debt can affect your credit score.
Utilize a secured credit card—this is a lower risk card that can be used to build positive credit history.
Protecting Your Information Online
It’s important to protect your personal, identifying information. Unfortunately, there are bad actors who will try to take advantage of you by stealing your information and even your money. By following basic online safety rules and taking steps to prevent identity theft, you’ll hopefully stay a few steps ahead of would-be criminals. Now this is only an introduction, so if you are concerned that your personal information has been compromised, there are additional resources available at consumer.gov/content/resourcesscams-identity-theft.
Preventing Identity Theft
Monitoring and identity theft protection are recommended by many security experts as a healthy part of a personal identity protection plan. Regularly implement security measures such as multi-factor authentication where available. If you suspect your password has been compromised, change it immediately. When you are creating a new password, often there are guidelines that will help you make it as secure as possible. If not, try to mix upper and lowercase letters, symbols, and use hard-to-guess phrases or words. Never use your name, birthdate, or any information that could easily be guessed when creating a password. Remember, it’s important that you do not share your passwords with anyone.
There are various ways that would-be criminals extract information that is used to steal a victim’s identity, but a very common method is through phishing. Like the kind of fishing that takes place in the great outdoors, a bit of bait is used to lure in the victim before they are caught. A red flag should go up if you receive an email, a call, or an SMS text message from someone claiming to be a service provider asking for your personal information. Because identity theft is unfortunately such a common occurrence, companies know that consumers are and should be on guard. Legitimate companies will not reach out asking for your personal, identifying information or password. If you receive a communication asking for information and you know that there may be a legitimate issue with your account, you can always reach out to the company using the method you are comfortable with. If you typically call, for example, use the number you know is correct to confirm that the company did ask for the requested information.
Recovering from Identity Theft
You can sign up for identity protection which will help you recover if your identity is stolen. It’s important to follow official guidelines for reporting and handling a stolen identity. Visit IdentityTheft.gov for more information.