Budgeting 101

“I spent how much at Starbucks this month?!”

“Where did all my money go?!”

“I thought I already paid that bill.”

Are these questions that you find yourself saying often? I have been round and round the budgeting game for most of my adult life. Bottom line is, I stink at planning how to spend our income without it written on paper (or entered on a spreadsheet), and then keeping up with it. I would check our bank account everyday online, but the money still seemed to vanish as quickly as it came. Does this strange phenomenon happen with your money as well?

You gotta do it

The answer that no one wants to hear is budgeting. If you want to stop the financial headache, you must budget. Dave Ramsey says to “spend everything on paper before the month even starts” meaning that every single penny of your budget should be allocated to a particular category of spending, or you will wander and waste your money.

How do I get started?

So how does budgeting work? If you know how to add and subtract, or have access to a computer that knows how to add and subtract, you can budget. Start by writing down all of your monthly income. Make sure you include everything that you normally receive within a month’s time (include things like dividends, interest income, salary, side jobs, etc.). Once you have all of your income totaled, you have a starting point for your expenses.

Begin writing down your expenses, starting with the fixed ones, or the ones that don’t change month to month (i.e. your mortgage is $1000 every single month). After you have those written down, write down the expenses that vary by month (i.e. utilities, gas, groceries, etc.). Based on your previous spending in these categories, estimate a monthly amount to plan for. Don’t worry if you aren’t sure, it will take a few months to get your budget to where it is truly accurate.

After you’ve entered your regular income and expenses, think about your irregular spending that should be planned for (i.e. Christmas spending, doctor visits, haircuts, birthday gifts, etc.). Try to plan an annual amount that is spent, divide it by 12, and set aside that much each month for that category. For example, our family pays car insurance every six months because we get a discount for paying that way. I divide our semi-annual payment amount by six and put that much in a savings account each month. When the bill is due, I just pay it out of savings.

After you’ve put everything you can think of into the budget, review it and see how it looks. Did you plan for savings? Retirement? College? Paying off debt?

Subtract all of your expenses from your income. How much is left over? The goal is to have $0 left over. Every single penny needs to be allocated somewhere. Add in some spending money or simply a miscellaneous category. Review each category until you get to $0 left over.

Practice makes perfect

Now, start entering your receipts. Record everything that you spend. Everything. Put it in the correct category and keep up with it. I made this part of my morning routine so I don’t get behind on recording receipts.

The first month will likely be pretty off. You might have over-funded one category, and under-funded another. Don’t get frustrated and stop budgeting, just adjust your categories and keep moving along. By the third or fourth month, it should be pretty accurate.

Tips and tricks

If you are married, try to budget with your spouse. You could have weekly “budget meetings” after the kids are in bed (romantic, huh?). You are more likely to stick to your financial goals if you work on them together. Plus, it alleviates the temptation to hide spending, or blame your spouse for your financial stress.

Over-fund the grocery category. This seems to be the category that is the bane of my budget’s existence. Unless you have a couponing binder, you probably spend a lot on groceries.

Try software! I asked around for some online tools that help with budgeting. Here were the most popular:

  • Mint.com- The best thing about Mint? It’s free. Not only does it help you create and maintain a budget, but you can also integrate all of your online accounts. This means instead of checking a different website for each checking account, loan, credit card, etc., you can simply log on to mint.com for view every one of them.
  • PearBudget.com- Pear Budget is the simplest budgeting tool I have come across. At $5/month, it’s affordable for any budget. It is so easy to set up your budget, enter receipts and review your spending. Personally, it’s my tool of choice for budgeting.
There you have it. Budgeting 101.

Employee Spotlight: Jack Dawson

Jack Dawson and Buford Banks

Where did you grow up? I grew up in Tipton county, near Stanton. I’m a country boy.

What are some of your hobbies? I think everyone knows I teach Karate (7th degree black belt) and have been doing that for about 27 years. I am a private pilot and have always enjoyed flying, especially when my son was playing ball, because I could fly some of us to the games, which sure beat driving. I still like to draw and paint when I have time and have enjoyed The Bank allowing me to do the bank calendars for the last couple of years. Right now, my favorite hobby is out shooting McCall Wilson with a pistol.

Where did you go to school? I went to Byars-Hall High School in Covington, TN. From there, I went to Mississippi State University, and graduated from Memphis State University. I went through the School of Banking at Vanderbilt and also the School of Banking of the South at LSU.

Are you married? Kids? Pets? I am married to Carla P. Dawson and have been for 37 years. She has put up with me through a lot. I have a daughter, Jill, who teaches at Fayette Academy, along with her husband Jason. They have given me two wonderful grandchildren, Dawson who is five years old, and Ainsley (AKA “Hot Sauce”) who is eight months old. I have a son, Layne, who is an engineer with Smith Seckman Reid, Inc. Layne played professional baseball for the Phillies organization for five years, and then worked for The Bank while going back to the University of Memphis and getting his degree.

As for pets…most of our employees know that I have one pet: Buford Banks, Esq., my English Bulldog. A big bunch of our wonderful employees got together with Joe Burnette and bought him for me five years ago, after my other bulldog, Junior, died. He has been a really good friend. The biggest challenge with Banks is trying to keep him from eating something he shouldn’t (i.e. tennis balls, watermelons, cantaloupe, ropes, napkins, wheat, corn, shoes, bullets, coyote drippings, etc., etc., etc.).

What is your favorite book? One Second After by William Forstchen. McCall gave it to me and it will scare you silly. It makes me want to go out and buy guns and ammunition. At least that is the excuse I have given Carla for the guns and bullets I have bought. “It’s McCall’s fault!” I would rather read magazines, like Guns of the Old West.

What TV shows do you watch religiously? Anything on the Western Channel. That’s channel 538 on DirecTV®.

How long have you worked at The Bank? I worked at the Federal Reserve Bank while I was in college. From there, I went to First State Bank of Fayette County in 1974. I became President and CEO in 1982 and in 1993, Union Planters merged with us and I was the regional president until 2002 when The Bank of Moscow was kind enough to hire me and put me back into a community bank.

What do you do at the Bank? I am a loan officer, resident artist, babysitter for all of the Somerville branch employees, and marksmanship instructor for the bank president.

What is your favorite thing about the Bank? Honestly, and no joking, my favorite thing about The Bank of Fayette County is the people who work for it. I have been doing this kind of work for a long time, and I have never worked around a better group of people. The care and concern that everyone has for one another is really special. I am very proud to be one of the lucky people working for this bank.

Saving for College: 529 vs. UTMA

So you’ve decided that you need to plan for the future, and you’ve got your retirement plan in order. Now it’s time to decide how exactly to save for college. There are two main tools to chose from when making your college savings plans:

  • College 529 Plan- A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. The appeal of the 529 plan is that it grows tax-deferred, and the distributions used for college expenses are also tax-deffered. This means that as long as the funds are used for college and college-related expenses, no tax is paid. Another benefit of the plan is that the owner of the plan (not the beneficiary) maintains control of the distribution and use of funds. The plan even allows for the funds to be used for non-college expenses (but those distributions are taxed). The downside of the plan is that if the funds are not used for college or college related expenses, a 10% penalty is assessed, as well as tax on the gains. To avoid this, the owner may transfer to a different beneficiary at any time.
  • Uniform Transfers to Minors Act (UTMA)- An UTMA is an account in which a donor may give toward a minor until the minor reaches a set age (between 18-27 as stated by the custodian). Upon that age, the beneficiary gained full control of the funds and may use them however they deem fit. The benefit is that the funds are not tied to only college-related expenses. The downside is that the donor/custodian has no control over the funds after the child reaches a certain age, so if the kid wants to skip college and travel Europe, they can fund their trip with their UTMA.
I can say that I went with the 529 plan for my daughters and have a small amount automatically drafted from our checking account monthly.
I hope that this information has been helpful as you plan for the future.

Employee Spotlight: Judy McQueen

Hard at Work

Where did you grow up? I grew up in La Grange and was a tomboy when I was little. I cried when I couldn’t go to the farm. Then I would “run away” to the gin to play on bales of cotton. The workers would have to catch me and walk me back home. The “switch” in my mom’s hand would be waiting!!

What are some of your hobbies? I like golf but working full time to support my husband’s golf habit keeps me from getting to play much. Also, going to Ole Miss Football games is one of my hobbies! I ride bikes and enjoy reading.

Where did you go to school? I went for two years at Fayette County High School then graduated from Brenau Academy in Gainesville, GA. I also graduated from University of Mississippi with Archie Manning as one of my classmates. That is my only claim to fame.

Are you married? I am married to Ricky McQueen, the golfer, and have been for 27 years. He has a son who is an Internist with Oshner’s Clinic in New Orleans. Molly, our 14 year old Rat Terrier, rules our home.

What’s your favorite book? What are you reading now? South of Broad by Pat Conroy is my favorite book right now. I have just started reading One Fine Summer by David Baldacci which I believe is going to be good, also.

What TV show do you watch religiously? I love House, Grey’s Anatomy, The Good Wife and The Closer.

How long have you worked at the Bank? I have had the privilege of working here for 6 years and hope I can continue for awhile!

What do you do at the Bank? I am the Human Resources person. I prepare the payroll and the insurance for the employees. I lend a shoulder sometimes and Kleenex when needed. I listen and let the person vent but do not give advice since I can look back on my own life and know that would not be a good thing to do!!

What’s your favorite thing about the Bank? The atmosphere at the bank makes you feel like a part of a big family. Everyone pitches in if there is a need for one of the fellow employees. We all do have our unhappy moments but that also goes along with being a part of a family. It is just a good place to work!

Saving for College: College vs. Retirement

If you are anything like me, as soon as the baby was born, a savings account was opened. It just felt like the right thing to do. So what if it only had $3.76 in it, it was something.

Yes, the earlier you start saving, the more compounding interest you will gain, but is college savings really the best place to start saving? After all, there is retirement looming over the heads of most of us. To best plan for both retirement and college, two questions must be considered:

  • Which goal is more important?
  • How can I save for both?
Which goal is more important?
We all want the best for our kids. We don’t want to deprive them of any potential opportunities that may come about. We want to release them into the world as competent, educated members of society. We also don’t want to work at McDonald’s® when we are 72.
Deborah Fox, who runs Fox College Funding in San Diego, says “No one can borrow for their retirement, but if push comes to shove, they can at least borrow a portion of what they need for college funding,” she says. In fact, Fox recommends parents have their kids take out at least some of the government guaranteed college loans available to them “so they have some skin in the game.”
Deb has a point. College may come first in the chronological order of life, but college also has a lot more cushion as far as how to foot the bill. There are literally thousands of reputable, accredited schools available that run the gamut in terms of tuition. There are also guaranteed federal loans available to students, ranging from $5,500-7,500 per year. Tennessee also has the HOPE scholarship and Lottery scholarship programs. Not to mention academic and athletic scholarships that vary by school. I am definitely not saying to neglect saving for college, but there are many more options when it comes to funding college than there are to fund retirement.
If you give retirement the priority, not only will it ease the burden on yourself in the retirement years, it will also ease the burden on your children. If retirement savings runs out prematurely, options are usually limited to going back to work or relying on children. Adequate preparation ensures that your children do not have to bear the financial burden of your retirement, and can in turn save for their own.
How can I save for both?
First, set up a plan to save for retirement. Meet with a financial advisor and talk through the options and get things moving down the yellow brick road to retirement. After retirement is going, develop a plan for college. If you have enough disposable income, you can budget monthly/bi-weekly contributions into your college account (we will discuss different account options next week). If your budget doesn’t allow for college saving on a regular basis. enlist help
Think about how much stuff your kids get throughout the year from family and friends (i.e. birthdays, holidays, graduations, etc.). A lot right? Take advantage of all of the people who love your kids, and redirect their gifts into savings. Ask your friends and family (the ones you feel comfortable enough around) to only spend half of the money they were going to spend on a gift. Let the other half go toward a college savings account. Contributing a few times a year can add up substantially over 18 years!
Get the kids involved! Start talking about saving for college at an early age, and let them know that they will be responsible for paying for part of their college. Make a big deal about it: open their own account at the bank, show them with charts how much they have saved, reward their efforts, match their giving, etc. If kids are financially invested in their education, they are more likely to try harder in maintaining good grades.
I hope this helps to get you thinking about how you are saving for college and retirement. Next week, we will talk about specific plans available for college savings.

New Debit Cards

The Bank mailed out new debit cards and ATM cards to our customers on August 31, 2011. PINs were mailed separately on September 2, 2011. Upon receiving the card, please activate using the phone number included with the card. The new card will work on Monday, September 12. Please use your current card until Monday. If you would like to change the PIN for your card, please call the number included with the PIN and follow the prompts. If you have any automatic drafts set up using your old card (for example, your cable bill is paid on the 15th of every month automatically from your account), those accounts will need to be updated with the new card information. Please note, the debit cards are MasterCard® rather than Visa®.

Employee Spotlight: David Robertson

Where did you grow up? I grew up in the Mississippi Delta in Cleveland MS
What are some of your hobbies?Right now, going to watch Taylor play sports.
Where did you go to school? I went to high School at North Sunflower Academy and went two years to Mississippi Delta Community College.
Are you married? Kids? Pets? I have been married to Tricia for 16 years.  We have one daughter, Taylor who is 14.  No pets at this time.
What’s your favorite book? What are you reading now? I enjoy John Grisham novels.  Right now, all I read are bank loan memos and past due lists.
What TV show do you watch religiously? Pawn Stars and college football
How long have you worked at the Bank? Almost 3 years.  I retired from the Postal Service after a 28 year career and decided to start another career.
What do you do at the Bank? I am Special Assets Officer and do collections for the Bank.
What’s your favorite thing about the Bank? The employees.  It’s great to be able to go to work and like going there because of all the people you work with.

 

 

College: How to Save

College.

If you have kids, chances are this word has crossed your mind a time or two. With two small kids of my own, it’s definitely something that I want to plan for the best that I can. There are lots of questions that need to be answered when it comes to saving for college. How do you save on a budget? Should you save for retirement or college? What products are the best for saving? When should you start saving? All of these are valid questions, and all can be answered with a little research and planning.

Over the next few weeks, we will be talking about all of these questions (and more) here on the blog. If you have any questions that you  would like to be addressed specifically, please leave a comment on the blog, or on our Facebook page.