Financial Planning

Living from paycheck to paycheck is a habit some people get into early. It's hard to get over that habit unless you create a financial plan—a budget that helps you live within your income and put some savings away for the future. A financial plan doesn't have to be complicated, but it does have to involve everyone in your family who contributes to your income or benefits from your paycheck. A plan will include setting your children's allowances, how often you'll go out to eat, and how to save for big expenses like college education and a house.

Why do I Need a Budget?

A budget is the most fundamental and most effective financial management tool available to anyone. Without it, you will have trouble controlling your finances and many times fall short of your goals.

If you feel like your life is getting out of control financially, developing a personal budget system will allow you to better manage your personal finances. The first step to managing your money is to understand where it all goes each month. Budgeting is about planning, and planning is crucial to produce a desired result.

Even if you are one of the lucky few who manages to pay your bills each month without any worries, a personal budget can still be a useful tool. By budgeting your money, you can plan ahead and work toward financial goals, including retirement, vacations or other major purchases. A budget is the first and most important step toward maximizing the power of your money.

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Choosing a Bank for Checking/Savings Accounts

The most important factor in choosing a bank is access to your money.

Consider only those financial institutions that offer round-the-clock ATM, telephone and online access to your accounts. A perfect institution would allow you not only to transfer funds between accounts, but also to pay your bills, make loan and credit card payments and even apply for credit, no matter where you are or when you are available. Of course, costs and minimum-balance requirements should be low.

Generally speaking, banks offer all these services, but at higher cost and with substantial balance requirements. Credit unions offer most (if not all) of the desired services at lower cost, but you must qualify to become a member. The good news is that membership is not difficult.

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Checking/Savings Accounts

The Big Picture

Checking Accounts are for buying and paying bills short term.

Savings Accounts help you save for emergencies and medium- to long-term goals.

Joint accounts allow another person complete access to your account. If you die, all the money in that account is under the control of the joint account owner.

Electronic banking is convenient and easy, but may have charges for use.

For all types of banking, check your monthly statements carefully and correct mistakes promptly.

Check 21

A federal law known as Check 21 makes it easier for banks to electronically transfer check images instead of physically transferring paper checks.

How Check 21 Affects You

Because of Check 21 and other check-system improvements, your checks may be processed faster—which means money may be deducted from your checking account faster. Before you write a check, make sure your checking account has enough money in it to cover the check.

You may be one of the majority of consumers who do not receive their canceled checks with their account statements. Instead, you may receive "pictures" (known as digital images) of your checks, a list of your paid checks, or a combination of these items. Check 21 will have little or no effect on these practices.

On the other hand, if you do get your canceled checks back in your regular account statements, you may notice some changes under Check 21. For example, your bank may start sending you a combination of original checks and substitute checks in your account statements. You may use a canceled substitute check as proof of payment just as you would use a canceled original check.

By law, your bank may not pay a check from your account unless you authorized that payment. In other words, you are protected from having your bank pay the same check from your account more than once or from having your bank pay the wrong amount for a check. Check 21 does not change these protections. However, Check 21 does give you special rights if you receive a substitute check from your bank. This guide explains your rights regarding substitute checks. For your rights in other situations, contact your bank.

Substitute Checks

A substitute check is a special paper copy of the front and back of an original check. The substitute check may be slightly larger than the original check. Substitute checks are specially formatted so they can be processed as if they were original checks. The front of a substitute check should state: "This is a legal copy of your check. You can use it the same way you would use the original check."

Can I require my bank to return my original check?

No. In general, the law does not require your bank to return your original check. Many banks destroy original paper checks. Other banks may store original checks for some period of time and then destroy them. Check 21 ensures that you have the same legal protections when you receive a substitute check from your bank as you do when you receive an original check.

Problem with Substitute Checks

Check 21 provides a special process that allows you to claim a refund (also known as an expedited recredit) when you receive a substitute check from a bank and you think there is an error because of the substitute check. For example, you may think that you were charged twice for the same check.

You may use the special process to get a refund of the money you lost. The amount of your refund under the special process is limited to the amount of your loss or the amount of the substitute check that you received, whichever is less, plus interest on that amount if your account earns interest. If your loss is more than the amount of the substitute check, you may have the right under other laws to recover additional amounts of money.

If your bank finds that your claim is valid, you should receive your refund by the next business day after the bank's finding. Unless your bank finds that your claim is not valid, you should receive up to $2,500 of your refund (plus interest if your account earns interest) within 10 business days after your bank receives your claim. You should receive the rest of your refund (plus interest if your account earns interest) no later than 45 days after your bank receives your claim. If your bank finds that your claim is not valid, it will send you a notice explaining why.

Your bank may reverse the refund (including any interest on the refund) if it can show that the substitute check did not cause an error in your account.

Filing a Claim

If you notice a problem with a substitute check, you should contact your bank as soon as possible. In general, to use the special refund procedure for substitute checks, you should contact your bank no later than 40 days from the date your bank provided the substitute check or from the date of the statement that shows the problem.

Additional Information

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Understanding Credit Cards

A credit card allows you to make purchases up to the limit set by the issuer. You then pay off the balance in installments with interest payments. Your monthly payment can range from a minimum amount, set by your bank, to your entire outstanding balance. The longer you wait to pay off the entire amount, the more your interest charges add up.

Most adults use credit cards because they are convenient. You don't have to have cash or checks when you have a credit card. But credit cards also come with the temptation to buy something that you don't have the money for. Before you begin to build up credit card balances, know what you are getting into. Credit cards used wisely are a great help in budgeting. Used unwisely, they create a nightmare of debt.

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Keep Track with Software

The use of a computer software package for tracking your income and expenses is the most efficient and easiest way to control your spending. The leading package for individual consumers is Intuit Quicken. QuickenŽ Deluxe 2010 helps you better manage your finances. "Find ways to save more, so you can afford the things you and your family really want." (Intuit: QuickenŽ Deluxe 2010 for Windows, 2010).