A. Budgeting – A budget is a formal plan that compares one’s income less deductions to one’s expenses.  All expenses should be included as well as savings and investment.  A budget will provide realist insight into if you are living within your “means” and point out why you may have financial difficulties.  For beginners, the goal would be to save 20% first, pay expense with 70% and have 10% for investments and charity.  Be consistent!!

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B. Emergency Fund – You should have a cash emergency fund for just that, it should be 4-6 months of budgeted living expenses.  This may take some time to achieve.

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C. Savings – as stated in the explanation above for budgeting, 20% of your income should be saved.  This could later be transferred to your emergency fund or investments.

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D. Living Expenses –Living expenses should include transportation costs, gas, utilities, mortgage/rent, food, health and any other necessary recurring expenses. This category is important because these are usually your core expenses and you need to understand them in totality. 

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E. Interest – is a fee to or from someone for the use of money.  The fee increases as one’s credit rating decreases so that at some point you may be DENIED CREDIT.

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F. Debt – an obligation that requires one to pay back money and often at a predetermined rate of interest.  This includes credit cards, mortgages, car loans etc.  If possible, you should pay off debt early using your discretionary income.

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G. Credit – the ability to obtain goods or services prior to payment usually based upon one’s reputation or Credit Score.  Your credit score is based on how you pay current and previous debt as well as the amount of debt that you have outstanding in relationship to your income.  This helps to determine your interest rate on future debt.