7 Steps for Taking Control of Your Finances

1. Create a Budget

A budget starts with an inventory of your income and where you’re spending it. It’s also important to lay out your short- and long-term financial goals, so you know how much you need to commit to savings. Analyzing your current expenses and spending habits by category will show you where you might need to make changes to fulfill your goals.

When creating a budget, consider the 50/30/20 budget rule: Allocate 50% of after-tax income to essential expenses—rent, food, utilities—30% to things you want, and 20% to savings.

2. Build a Financial Safety Net

Life is anything but predictable, which includes situations that require quick access to cash. Instead of using a credit card to pay for a major car repair or an unexpected medical expense—and running up more debt—it’s far better to tap an existing emergency fund. Building an emergency fund will take time, but strive to eventually save three to six months of your current living expenses; people who are self-employed may want a larger financial cushion. Keep the funds in a savings account, such as a Fifth Third Momentum^® Savings Account, so you can access your money when you need it.

3. Pay Off Debt

Carrying debt, especially from credit cards, will put a major drain on your finances until you’re out from under the high interest rates you’re paying each month. Make a realistic plan for how long it will take you to pay off credit card balances and other loans and chip away at that debt every month. Start by making extra payments on the credit cards with the highest interest rate. Going forward, only charge what you can pay in full each month. Keep going until you’ve eliminated all debt, except long-term loans such as your mortgage, which will take many years to pay off.

4. Invest in Your Future

Try to save at least 10% of your gross salary each year for retirement—and more is even better. To be financially secure, you’ll need to create a large enough nest egg to support your lifestyle throughout retirement. One way to save is through a 401(k) plan or a 403(b) plan, if offered by your employer. You can choose to receive an up-front tax deduction on your contributions, and your employer may match a portion.

5. Take Advantage of Tax Breaks

Saving in a tax-advantaged way means you keep more of your hard-earned income. Depending on your income level, you may qualify for an up-front tax deduction when you contribute to an individual retirement account (IRA)—even if you’re already contributing to a 401(k) at work. Consider funding an IRA with a tax refund. Another option is to contribute to a Roth IRA or convert a traditional IRA to a Roth; you’ll pay taxes now, but not when you withdraw the money at retirement when you may be in a higher tax bracket. And if you are saving for a child’s education, you may be able to take a state income tax deduction by contributing to a 529 savings plan.

6. Automate Your Savings

By putting your savings on autopilot, you don’t have to worry about making monthly deposits to your savings account every month—or being tempted to spend it. With a Fifth Third Momentum^® Savings Account, you can set up scheduled savings through mobile or online banking, or automatically transfer money from your Fifth Third Momentum ^® Checking Account—such as a portion of your paycheck—to savings. You select how much and how often you’d like to save. You can even designate that your savings be applied to different goals within your account, such as an emergency fund or a down payment on a house.