Financial Literacy

Creating a Household Budget

• Gather every financial statement you can. This includes bank statements, investment accounts, recent utility bills and any information regarding a source of income or expense.
• Record all of your sources of income. If you are self-employed, or have any outside sources of income be sure to record these as well. If your income is in the form of a regular paycheck where taxes are automatically deducted then using the net income, or take home pay, amount is fine.
• Create a list of monthly expenses. Write down a list of all the expected expenses you plan on incurring over the course of a month. This includes a mortgage payment, car payments, auto insurance, groceries, utilities, entertainment, dry cleaning, auto insurance, retirement or college savings and essentially everything you spend money on.
• Break expenses into two categories: fixed and variable. Fixed expenses are those that stay relatively the same each month and are required parts of your way of living. Variable expenses are the type that will change from month to month and include items such as groceries, gasoline, entertainment, eating out and gifts to name a few.
• Total your monthly income and monthly expenses. If your end result shows more income than expenses you are off to a good start. This means you can prioritize this excess to areas of your budget such as retirement savings or paying more on credit cards to eliminate that debt faster. If you are showing a higher expense column than income it means some changes will have to be made.
• Make adjustments to expenses. If you have accurately identified and listed all of your expenses the ultimate goal would be to have your income and expense columns to be equal. This means all of your income is accounted for and budgeted for a specific expense.
• Review your budget monthly. It is important to review your budget on a regular basis to make sure you are staying on track.

Sample Budget Worksheet - Click here to download a sample worksheet

Budgeting Resources

CNN Money 101
Smart About Money

Budgeting for Education

• The sooner you start saving, the better. The costs of a college education are steadily increasing and kids grow up fast. Four years of tuition at a public university currently averages $31,000. But, in 18 years, that amount will nearly triple.
• Stocks are best for your college savings portfolio. With tuition costs rising faster than inflation, a portfolio tilted toward stocks is the best way to build enough savings in the long term. As your child approaches college age, you can shelter your returns by switching more money into bonds and cash.
• You don't have to save the entire cost of four years of college. Federal, state, and private grants and loans can bridge the gap between your savings and tuition bills, even if you think you make too much to qualify. 
• With mutual funds, investing for college is simple. Investing in mutual funds puts a professional in charge of your savings so that you don't have to watch the markets daily.
• 529 savings plans are a good way to save for college and they offer great tax breaks. Qualified withdrawals are now free of federal tax and most plans let you save between $100,000 and $270,000 per beneficiary. Plus, there are no income limitations or age restrictions, which means you can start a 529 no matter how much you make or how old your child is.
• The approval process for college loans is more lenient than for other loans. Late payments on your credit record aren't automatic grounds for refusal of a college loan.
• Lenders can be flexible when it's time to repay. There are still ways to cut costs after you graduate and begin repaying your student loans. 
• Taxpayers with student loans get a tax break. You may deduct the interest you pay up to $2,500 a year if your modified adjusted gross income is less than $65,000 if you're single or less than $130,000 if you're married filing jointly.

Education Financing Resources

NC State Education Assistance Authority
College Foundation of North Carolina
Savingforcollege.com
College Savings Plan Network 

Budgeting for Retirement

• Decide when you wish to retire to determine how long you have to save and roughly how much you will need to put aside each month.
• Think about both positive and negative changes to your budget. For example, you may lose your health insurance once you retire or you may want to sell your home and move to a smaller place, thus saving in taxes and utilities. Many retirees experience an increase in "entertainment expenses". Since they have an increased amount of free time, they spend more money on hobbies, travel, eating out and other expenses.
• Calculate estimated retirement expenses. Decide how much money you need to live comfortably. Don't use your present salary as a guideline.
• Plan for a long retirement. Most people live in retirement at least 20 years. If you retire at 55, expect that number to be even larger. You need enough savings to last you for that period even before tapping into your retirement fund and your IRAs.
• It is important to realize that 10, 20 or 30 years from now costs will be higher in accordance with inflation. Failing to adjust for this factor could lead to a severe shortage of funds. If you are using financial planning software, you may be able to create an estimate of how much your money will depreciate over the next few decades.
• Once you know how much you need and when you need it, you can calculate how much you need to save between now and then.
• Start planning as early as possible, but step up your plan at least five years before your actual retirement. At this point, you will need to set up a date for the actual retirement and start working on making sure all your bases are covered. Also, catch up on late payments, increase your investments and pay old debts.
• Ask for help. There are many good (and free) internet based retirement calculators, counseling services and assistance programs that help you determine how much money needs to be saved each month in order to meet your goals.

Retirement Resources

Decumulation - National Endowment for Financial Education
AARP
Social Security Administration - Retirement
New Retirement 
CNN Money
North Carolina State Retirement Systems