What are sub-saving accounts?

These are accounts within your bank account.  If your bank has the feature to have multiple saving account, you can open saving accounts online to save for whatever you want.  Let say you want to buy a new car in two years, you can open an account and call it “New car fund” and have a percentage of your savings automatically sent to that account every month.  This will help you from spending your new car money and give you a little back up if your old car need fixing.

Sub-saving can be use to save for anything and is a great way to help you get in the habit of planning ahead.  This can also help you complete your goals on time, you eliminate one of the main two reasons our goals get side tracked… lack of funds.

There are a couple things to watch out for when setting up these sub-accounts.  I have found it is best to have money routed from you main saving account. Having it taken from your checking account can lead to the risk of being overdrawn.  If you need to, you can increase the amount being sent to your main saving account to accommodate and since more money is being taken out of your accounts be sure to keep a close eye on your checking at first.  Be careful if your bank has fees related to their saving accounts,  some banks still offer free checking and saving accounts.  If you have no idea how to setup these accounts, go talk to you account manager at your branch or call your bank.  You account manager is there to help and most people never utilize there service.  A good account manager should have the answer to all your questions and be able to help you with all your banking needs.

Having these sub-accounts will help reduce over spending and is simply just another great way to help you manage your money.

Most of us have more than one credit card in our wallets and use them on a daily basis, but have no idea how they work. We just swipe the card, sign the receipt and grab our bags and go. Credit cards do make out lives a bit easier and when used responsibly are the best source to build up credit scores. There is a lot that goes on behind the scenes after you swipe and I will try to explain. Hopefully you will have an understanding of how your money is distributed.

Merchant:

First you have the store, gas station, website, or anywhere you swipe or input your card number. We all know these places too well, so I won’t go into more details about them.

Acquirer:

Next you have what is called the acquirer or merchant credit card processing services, such as paypal.

Issuer:

The acquirer then send your information to the the issuing bank. This is the bank that you see printed on your card or the bank that you applied to for the card. The bank is the one lending you the money to buy your item.

The bank checks your account and make sure you have enough to cover your purchase. This information is the sent back to the credit card processing service and before they send it back to the merchant they take a small cut, which is split between them and Visa, Master card, Discover etc. The merchant get the green light and hands you a receipt and your item. The merchant takes there cut and use the rest to replace the item for the next customer.

All this takes place in a matter of seconds and is way more complicated then I make it sound, but these companies do there best to keep it as simple as possible for the cardholders. So, that is it, what happens after you swipe your credit card.

I know one of the hardest part of starting anything is knowing where to start. I’ve laid out some steps to show you what your financial plans should look like and where is the best place to start. I am making the assumption that you already know how much debt you have, your current credit score and all your other information. If you do not then you should read how to set-up a budget.

OK! here we go:
1)If you have credit card debt, do not charge anything else on your cards and continue making the minimum monthly payments. Your credit score is very important and should be maintained as best you can. Without a good score you will not be able to acquire loans for a car, home or other big ticket items. Paying all your bills on time will ensure your score does not take unnecessary hits.
2)Start writing down everything you spend money on. This will make it easy to track your spending and make cut backs where needed. Remember not to cut out entertainment completely, we are human and we need to have fun.
3)If you have not started an emergency fund as of yet, call your bank and set that up now. Before you pay off any outstanding debts, save at least 3 months worth of living expenses. Before anyone else get there money make sure you have yours. If you start paying off your debts and lose your job, your debts will start increasing again and you will be left without anything type of protection.
4)Once you have 3 months of emergency fund saved, you can start paying off your debts. Take ¾ of the money you were putting into your emergency fund and put towards your lowest debt first and keep putting the other ¼ in your emergency fund. Once that is paid in full go to the net one up and so on…
5)After your debts are paid, start on your retirement fund. Your emergency fund should be close to 6 months or already at 6 months. Put as much as you can in long term savings account such as Roth I.R.A, CD’s or your companies 401K. If you have a company match 401K max that out before you start on the others.
6)By now you should have 6 months of emergency funds saved, your debts paid, and started saving for your retirement. Now you can start saving for big ticket items such as a better car or a home.

As I said before, this is to give you an idea of what your personal finance plan should look like. This is not set in stone and you should use your common sense to make adjustments where you feel they are needed. Take this as a simple guide to get you started. Good luck!

We are all in the same boat when it comes to our finances as of late. Even large companies like Wal-mart are strapped for cash and some others are going under.  This recession is proof that we never know what will happen tomorrow.  Being ready for the future is a major part of life, but most forget the number one way to prepare.  Saving a little of our monthly income is the best way to cushion ourselves for financial setbacks.

For many of us, saving is not simply depositing the money and forgetting about it.  We will dip into our accounts, skip on making deposits, and stray away from our budgets (If we have one to begin with).  This always hurt us financially in the future, but there is good news.  There are simple solution for these problems that you can implement with a few phone calls and a little paper work.

Direct deposit is a great way to help prevent unwarranted spending. Study shows that people are less likely to spend money if they have cash VS credit cards or debit cards. As the saying goes “Out of site out of mind”.  Another great resource we have at our disposal is automatic bill pay, which we can set up to pay recurring bills every month.  This is a valuable tool that most do not utilize or simply just don’t know about, ask your bank account manager to help you with the details.  Most bank offer this service free of charge.

Time Deposit Accounts (CD’s) are one of the best type of saving accounts for people that have problems saving.  The minimum amount for these accounts are higher than regular saving accounts, usually $1,000 , but if you look around you can find some that require a smaller deposit.  IRA CD’s are great for those looking to starting a retirement fund.  Make sure you do some research and find the best IRA CD rates available to you.

There are two great features that make CD’s a must for everyone…
1) You will have to leave your money in the account for a set period of time before you can make withdrawals without incurring a fee.
2) The interest rate on CD’s are usually much higher than normal savings accounts, this is a great way to make your money work for you. You will earn money just because you have money, if this is not motivation then I don’t know what is.

Now, if you Have direct deposit and automatic bill pay setup to put a small amount into your CD’s every month, you will not have to deal with it manually and are more likely to forget that you’r saving. This is a very powerful way to prepare financially for an uncertain future.  Money management is an important part of life and should be taken seriously, so take the steps and get started on the right track.