Keeping More of Your Money

keeping-more-moneyKeeping more of your money is an art. The art is learning how to keep more for yourself especially since it seems everybody else wants a piece of it.

At COSTEP, we want you to reach financial confidence. We are a not-for-profit organization based in McAllen, Texas that provides financial literacy information and resources at no cost. Here are some useful tips to help you reach your financial goals:

First, you’ve got to keep up with how much you spend. This means you’ve got to write it down and the best place is on your phone. There are a few apps that you might like.  Check out: AndroMoney, Mint-Personal  and Spending Tracker. Apps can also help you with making a spending plan, which we will talk about next.

Making a Spending Plan Simple

The key to keeping a spending plan is to make sure you enter all the money you spend—including ATM withdrawals and credit card purchases.

A spending plan is cool because it helps you save money to do the things you want. Wouldn’t you rather live life and create memories instead of having to worry about saving every last dime?

Now, with the goal of living life, let’s build a spending plan that will help you do the things you want while avoiding debt.

You only need to follow four steps to build your spending plan:

Step One: Identify Income

Step Two: List Expenses

Step Three: Compare Income and Expenses

Step Four: Set What’s Important To You

Ready to create your own spending plan? Click Here

Here’s a creative way a couple kept more of their money:

The couple took a big jar and kept it in the kitchen. Every time they decided to sacrifice going to see a movie or attending a concert they would write down the amount they saved on a piece of paper and put it in the jar. Each month they would add up the amount saved in the jar. Then, if they stayed on their spending plan for that month, they would transfer the amount saved in the jar from their checking account to their savings account. They saved $10,000 over two years.

Debt to Income Ratio – What is this and how will it help me?

Young Adults Using a CalculatorFirst, you need to know all types of lenders look at your debt-to-income ratio percentage. Second, lenders know nothing about you personally other than your credit history and your reported income. They review your credit history to see how much credit you have and how you pay your debts. They have to decide whether or not to lend you money. BTW—a credit card is considered a loan and is reviewed by a lender. If you charge on your credit card and don’t pay the minimum on time then you’ve just flushed your credit. Get the picture?

How to figure your debt-to-income ratio? If you already filled out the spending plan template, you can find your debt-to-income ratio there. If not, click here. This is the step-by-step process:

  1. First you will need to add all of your monthly debt obligations (mortgage, car loans, student loans, minimum monthly payments on credit cards, and any other loans you have like, furniture, stereos, television; stuff like that).
  2. Once you have that total, divide it by your gross monthly income. This is the amount of money you earn before taxes and deductions.

Here’s an example: Let’s say you pay:

  • $900 per month for your mortgage
  • $275 a month for an auto loan
  • $75 a month for credit card debt
  • $75 student loan

Your month debt is $1,325

Let’s say your gross monthly income is $3,500. Divide your monthly debt by your monthly income: 1,325/3,500 equals 37.9%. This person is a little over the 36% rule, so they are really on the cusp. They really don’t need to add any more debt.

About the 36% rule. Your debt should not exceed more than 36% of your income. So if you’re applying for additional credit add the new monthly payment to your debt and see what it does to your debt to income ratio.

How to Begin Saving

Saving money is one of those New Year’s Resolutions that fall through the cracks by the second week of the year. Why is that? It might be because the hardest thing about saving money is getting started. Or, we usually feel that we don’t have enough money to save in the first place.

It’s important to check your spending plan to determine how much you can save. In just a few easy steps you can begin your savings plan:

  • Set savings goals. Make a commitment to a plan (emergency fund, home purchase, car purchase, vacation, or retirement).
  • Set-up an online savings account. You can set up automatic transfers from your checking every time you get paid. Start by trying $25 a paycheck. Your money will still be accessible to you but it will not be as easy to spend.
  • Set-up a direct deposit. By visiting your payroll office, you can ask that a certain amount of your paycheck be directly sent to your savings account.
  • Start small, and slowly increase your savings amount. By starting with a small amount your overall spending plan will not suffer. You can take these amounts from your entertainment or eating out budget. The national averages reflect that we should be saving 5-15% of our income.

Whatever you do, just make sure you KEEP SAVING! You’ll thank yourself in the long run.

Retirement Savings

Are you depending on Social Security to provide for you and your significant other’s living, medical and emergency expenses during your golden years?   Did you know that retirement can last for 30 years or more? That’s why, it’s very important to start saving at an early age. Before we give you tips on how to start saving for retirement, here are a few important terms you’ll need to know.

401 (k) – is a retirement savings plan sponsored by an employer. It lets workers save and invest a piece of their paycheck before taxes are taken out. Taxes aren’t paid until the money is withdrawn from the account. A big advantage of most 401(k)’s is the employer usually matches a certain portion of your contribution. Check your company’s plan document for the specifics.

IRA – is an account set up at a financial institution that allows an individual to save for retirement with tax-free growth or on a tax-deferred basis.

There are three types:

  • Traditional IRA
  • Roth IRA
  • Rollover IRA

You might ask, what if I switch jobs?

You can keep the account with your old employer (assuming they let you), you can roll your funds to your new employer (assuming it has a qualified plan that accepts rollovers) or you can roll your funds into an IRA. 

Or, what if I get married and/or have kids? New people and responsibilities do not lessen the need to make retirement a financial priority. So don’t get distracted!!

We recommend you automate everything you can, and check in once in a while.

  1. Put your retirement savings on autopilot.
    • If you’re saving in a workplace plan, your contributions will automatically be taken out of your paycheck.
    • You can also set up automatic bank transfers to an IRA on a monthly or weekly basis. This way, you won’t even get a chance to spend it!
    • Forgetting to contribute to your IRA a few times a year can greatly impact your retirement balance. Be sure to always deposit!
  2. Resist the urge to make changes to your account.
    • Stick to your plan. From time to time, some type of investments will do better than others.
    • Pay attention to the markets, but don’t make drastic changes just because the markets are trending downward. Force yourself to invest the same amount and diversify your investments to help you insulate your portfolio against the ebbs and flows on Wall Street.

Balancing a Checkbook

The main reason for you to balance your checking account is to make sure you and the bank agree on how much money is in your account. It is easy to lose track.


  1. Write every transaction in your checking account register (Apps are good)
  2. Your bank statement is sent to you some time each month
  3. Open the statement. The statement will show your deposits, ATM withdrawals, checks that have been processed through your account and bank charges will appear on the bank statement. Compare transactions on your statement with your check register. Make a checkmark in your register for every transaction included on your statement. This will let you know what checks have not cleared your bank statement.

Here’s what a simple checking account balance sheet looks like when using checks:

Previous Bank Statement Balance Amount$700
Pay check$1,500
Pay check$1,500
Gift from Dad$300
Total Income$4,000
Checks that cleared the Bank Statement-$1,763
ATM Withdrawals-$700
Bank Charges-$35
List checks that have not cleared your statement-$800
Check # and amount
Total Expenses-$3,486
Subtract expenses from income

Your credit card charges are not on your bank statement. Those charges will be on your credit card statement.

How to balance an electronic account?

If you are using bill-pay and/or running all transactions through your debit card, then it is a good idea to review your debit transactions and fees on a daily basis to make sure all transactions are valid and you are aware of your current bank balance.

Good ideas to follow

  • Make sure that you get a savings account with your checking account. This way you can transfer funds from one account to the other with ease.
  • Transfer money from checking to savings each month so you stop thinking of ways to spend your left over money.
  • Set a goal from your spending plan of how much you plan to transfer from checking to savings each month.