An NSF fee is a non-sufficient funds fee. This is a fee that banks charge if you overdraft on your account. The amount of the fee will depend on your specific bank and its terms and policies. Oftentimes, the fee will be charged directly to your account if you’ve over-drafted.
Unfortunately, the only way to avoid a fee like this is to avoid overdrafting in the first place. And that will come down to monthly budgeting. Creating a budget and sticking to it is an extremely important part of your financial health. Knowing how to budget can help you better manage your finances, help you save money, and create good financial habits that will help you for years to come.
The first step of creating a budget is figuring out exactly how much money you make every month. This probably won’t take too much work, as most people know offhand how much they make. Add up all of your income for the month and write it down. This includes your regular income from a job, as well as any additional money you make from side jobs, social security, etc.
Next, it’s time to calculate your monthly expenses. Write down every single monthly expense you can think of. For now, just start with the regular, recurring expenses that you owe. Things like utility bills, rent or mortgage payments, kids’ school costs, etc. Next, subtract your total monthly expenses from your total monthly income. This will show you how much money is left over after all of your bills and expenses.
Once you have this number, and there’s nothing else you have to use this money for, you can decide how best to spend it. Maybe some of that goes into your savings account, maybe you make an extra payment on a loan, or maybe one month you use it for new clothes or a trip. That’s up to you. This is what’s referred to as “disposable income.” Basically, it’s the money you have leftover after all of your bills.
We always recommend using some of your disposable income to save up for emergencies. Having an emergency fund is another big step in your financial journey.