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Division of Banking

Money Management Frequently Asked Questions
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Q. What is a budget?
A.

A budget is a record of how much money flows in and out of a household. It brings into focus how money is being spent and identifies bad spending habits.

Q. How do I keep track of my spending?
A.

Write all of your spending down. Keep track of your monthly expenses on a budget sheet.

Q. Will a budget work for me?
A.

A budget will work as long as you stick to it. Make sure to write everything down in order to define your spending habits. Find an investment plan with a good interest rate that works for you. Keep your goals realistic.

Q. What is disposable income?
A.

The amount of money a household has after essentials (i.e. groceries, bills, mortgage/rent) are paid.

Q. What is net worth?
A.

A person's assets minus their liabilities (what a person owns minus what they owe).

Q. How much income should be invested every month?
A.

Ten percent of a person's gross income should be invested each month. If this is not feasible, a smaller amount may be contributed to meet the investor's comfort level.

Q. What is cash flow?
A.

The households net income minus monthly bills and expenses.

Q. Is it a good idea to keep money solely in a checking account?
A.

No, don't keep extra money in a checking account where it may not be earning interest. Invest money in places where it will work for you (savings account, money market, bonds, stocks, retirement plans, etc.)

Q. When is a good time to start investing?
A.

Immediately! The earlier you start, the longer your money will work for you. However, it is not a good time to start if you have any high interest debt. Eliminate high interest debt before you start investing.

Q. Should I get long term disability insurance?
A.

Do you have enough savings to provide for you and your family for six months, how about longer? If the answer is "no" then you need long-term disability insurance.

Q. Why should I invest?
A.

To secure a sound financial future, to fund a major purchase, to supplement income, to pass money to future generations, to deal with emergency situations…

Q. How much risk should I incur when investing?
A.

The amount of risks depends on your comfort level. The general rule is the longer you plan to invest the more risks you can take.

Q. When should I start saving for retirement?
A.

Now! You are never too young to start saving for retirement. There is no age limit to open a Roth IRA. The earlier you start, the fewer contributions you will have to make in order to reach your retirement goals. Keep in mind that most retirement funds require contributions of earned money

Q. Should I invest in a mutual fund?
A.

Mutual funds offer security for less experienced investors. However, they under perform the market average by 2% on average. The choice is up to the investor.