New to managing your money? Make these must-have financial moves

There’s no such thing as starting too early when it comes to creating a solid financial foundation. No matter what your income, there are a few, must-have steps and habits that will help you gain the skills for whatever comes next.

Checking and Saving: Essentials for a Solid Financial Foundation.

Big dreams start with the basics. And two fundamental items needed for any financial endeavor are a checking and savings account.

Your checking account may be the most important financial tool you use. It’s a hub for your everyday transactions—a place to deposit paychecks, pay bills, budget and take a closer look at your spending habits. And in an increasingly cashless society, it’s nearly impossible to function financially without one. Yes, there are apps that function like checking accounts, but only a checking account at a reputable bank is insured for up to $250,000 by the FDIC (Federal Deposit Insurance Corporation). That additional security is important considering how hard you worked to earn every dollar.

Next up, a savings account. Your savings account will help you establish a financial safety net for emergencies. By setting aside dollars every month, you can create a cushion to weather a financial setback, pay for an emergency expense or handle a temporary loss of income. A separate account just for savings also creates a “temptation barrier” between long-term funds and what’s been set aside for daily expenses.

If you want to go further and accelerate your savings, interest-earning deposit accounts like CDs  (certificate of deposit) and money markets can help your existing dollars earn more. Both are FDIC insured and have guaranteed returns. CDs require a smaller deposit, and we recommend learning more about the differences between each.

Budget Like You Mean It

Budgets are as important as eating healthy or brushing your teeth. You can even think of them as financial hygiene. Not having a budget is like not having gravity where everything floats without an anchor (it’s safe to say we really believe in budgeting). When you know where every dollar goes, you’ll prioritize your spending, adjust purchasing, and will eventually save thousands—money that can be placed toward investing, saving or experiences you’ve dreamed of.

As you know, there are a lot of budgeting apps to choose from. You’ll want to find one where you can set spending categories, see your cash flow, connect to existing accounts and create a debt repayment plan. We’re partial to Money Monitor within the ANB Go app (an app attached to a bank—just in case you want to talk to someone directly).

How should you prioritize your spending? The 50/30/20 rule is a general method of breaking down your monthly expenditures. Aim to allot 50% of your income for necessities (food, shelter, utilities and transportation), 30% for wants (entertainment, dining out and other discretionary expenses) and 20% for savings. This helps create a sense of balance and ensures you always have money left over for emergencies and goals.

Maybe you’d prefer 40/20/40. Maybe you want to budget like no one is looking and save with gusto. We’re all for it, but the most important part is to stay committed and learn to love your budget.

Finally, be sure to look at monthly AND yearly costs in each expense category. The results can be eye-opening as those tiny, weekly purchases add up.

Building and Managing Credit

Once you have the foundation of good money management in place, it’s time to advance to the next level—building credit.  

So, what is a credit history and how do you get yours? Your credit is a history of how well you pay your bills, loans and account balances. Credit reports, put out by the three major reporting agencies (Experian, Equifax and TransUnion), and can be accessed for free on time a year at www.AnnualCreditReport.com.

Having good credit is necessary for attaining important financial milestones. Credit scores are used by lenders to determine loan approvals and interest rates, insurance and utility companies to assign fees and set premiums, and potential landlords when choosing tenants. Sometimes even employers will request your credit score during the hiring process. 

Credit scores are a numerical representation of the information on your credit report. Better scores are more likely to lead to loan and credit card approvals and can also get you better interest rates. For instance, for many home loans you will need a score of at least 620, with scores over 760 getting the best available rates. Scores are designated as “poor” to “excellent”: 

• Poor Credit: 300 – 579   
• Fair Credit: 580 – 669   
• Good Credit: 670 – 739   
• Very Good Credit: 740 – 799   
• Excellent Credit: 800 – 850  

Scores can always be improved. In 2022, the average credit score of individuals in Gen Z was 679 (fair), compared to 714 (good) for all consumers. If your score needs improvement—or you haven’t established credit yet—here are a few things you can do: 

• Pay bills consistently and on time.
• Pay down existing debt.
• Avoid overspending on credit cards to keep your credit score up.
• Monitor your credit regularly
• Finally, to show credit bureaus you’re good at managing credit, you can utilize a credit card.

This last recommendation should only be used after you have a handle on all the others. Credit utilization is part of a credit score, and credit reporting agencies want to know how you manage credit. However, you’ll want to develop good money habits before taking the next step.

Looking Beyond Graduation: Long-Term Financial Health

Whether you’re entering the workforce after high school, attending a four-year college or trade school, as you transition from your studies to career, you’ll need to expand your financial practices to consider the long term. This can include saving for distant goals like retirement, creating a plan for paying off student loan debt, budgeting for your own apartment or car purchase, or laying down the groundwork for big milestones like buying your first home.  

Planning early can mean doubling your retirement funds. Sure, starting a career while thinking about the retirement party may seem odd, but you can gain significantly more. Many full-time employers will offer some kind of retirement plan—sometimes even with matching contributions. Plus, if you start investing $100 a month at age 25 vs. age 35, you’ll have saved nearly twice as much by age 65. Twice. As. Much!

Always maintain an emergency fund as you begin to establish your independence. If you hit a financial rough spot, like a job loss or a big expense, you’ll be prepared. As soon as you start earning an income, you should begin setting aside money in an emergency or rainy day fund. Aim for 3-6 months of living expenses, starting with an initial goal of $1,000. 

Create a plan for long-term goals. Start by writing it all down. Then, work with your budget to create a realistic path forward to achieving them. Not sure where to start? Don’t hesitate to lean on the resources and guidance available to you:

• MavCENT$ Financial Literacy Program through the University of Nebraska Omaha offers tools and resources aimed at aiding the financial success of students. 
• Urban Financial Services Coalition of Omaha’s blog offers tips on a number of topics for 20-somethings including purchasing a car and budgeting. 
• Family Housing Advisory Services of Omaha offers courses designed to teach the fundamentals of personal finance.
• Discount shopping apps like Ibotta, Raise, and Honey can also help you stay on budget by cutting the costs of everyday purchases. 

Intention and follow-through

Your next steps will take a small amount of effort, but they’ll literally be worth it. In fact, the hours you spend budgeting could be the most profitable of the year. So, start small, be consistent and, bit by bit, your financial foundation will be established and ready to handle more. You’ve got this.

Articles contained in our news section are not intended to provide recommendations or specific advice. Consult with a professional when making financial decisions. Once published, articles are not updated; information may be outdated.