If you are struggling to save money, you are not the only one. For most, the thought of saving money usually is one of the last. Yet, before we even begin to pay bills or head to the grocer, we can set out some time and create both a spending and savings plan. It will surprise you just how much you have save it you adhere closely to your budget.
Daily expenses and bills can add up quickly, as most of us know. In the following article, we will review 7 easy stops to getting your finances in order and begin to build a fruitful savings while still taking care of your financial (like debt) obligations. Once you have crated your financial plan, by setting clear priorities and goals, then based on your needs and lifestyle, you can set up your money-savings plan.
1. Know Your Income and Expenses
Basic rule, know both income and expenses. In other words, know how much money you earn and how much money you spend, including what you spend it on. Know different means of income, if it’s from a part-time or full-time job(s), investments, or any other sources. Knowing both sides of your balance sheet can help, what comes in… and what goes out. Income and expenses.
You should consider all of your various bills and expenses (also called expenditures). Simply begin to note (including logging in a notepad or ledger) each time you spend money, nothing the amount and the type of item purchases and the exact purchase item. For instance, most of us need to make a rent or mortgage payment in the beginning of each month. Other expenditure examples are: credit card payments, car payment, insurance, student loans, and medical expenses. Then, we should recognize the relatively fixed costs, like many of our examples, compared to those that are not. Rent is clearly a fixed type of cost, while eating out last Monday night might not be as regular or fixed.
Typically, whatever money is left-over from our relatively fixed expenditures, we use the remainder for miscellaneous daily expenses. Amazingly, we often watch as our left-over money seemingly vanishes before our eyes. If we are taking notes though, we can now see where this money actually goes, which gives us more freedom to make conscious decisions on how to spend it. If you keep at this habit of writing it all down and reviewing your purchases, you will find areas where you can begin to make cutbacks and implement your savings plan.
2. What Are Your Primary Concerns?
Identifying your primary financial concerns is an important factor in creating an efficacious savings plan. Is there something in particular that keeps you up, worrying at night? For example, perhaps it is job security, credit card debt, student loan payments, medical bills, retirement funds or lack of savings.
Make a list, and prioritize. Find out which items are more urgent and require the most money expenditure. Consider different ways you might address and overcome your financial concerns. What if job security is a major concern? There are several things you can do to help, like simply putting some money away in an emergency savings fund in case you loose your job. You can also consider taking on a second or part-time job to make additional income. Or, start to put money away to go back to school and get the education that will allow you to make more money in your current field or in an entirely new one.
Do not loose hope, no matter how seemingly difficult it might seem, no matter how much debt or how little savings you have. You always have the power to change the way you look at and manage your finances. Once you have consciously identified those items of concern, you can create a plan and implement it. You can tackle your financial worries and work toward a more secure future outlook.
3. Figure Our Your Priorities
We all have different personal financial priorities, often times depended on age, income, and savings goals. Decide the purpose and goal for which you are saving – if it is for an education, a wedding, or a vacation. Is it paying off debt, like credit cards, student loans, or a mortgage loan? Or, saving for retirement?
You will want to put your spending habits under the microscope and take a very close look. How does your outgoing income balance with your financial priorities list? Consider you timeframe and re-evaluate our budget. Perhaps you might have to take out a loan. If so, “borrow smart”, making sure you do all of the necessary research to make an informed decision and know exactly what you are stepping into.
As any sound financial advisor will tell you, a priority is to get out of debt. First and foremost, identify debt with he highest interest rates and tackle those first, making higher payments toward these accounts, and paying lesser on lower interest rate debt. And, you can still work on savings, even if it might seem like a small amount each month, keeping some for retirement and emergency fund. And, as we have discussed, examine your outgoing income or expenditures will help you identify those areas where you can save. Even if seemingly a tiny amount, they add up over time, and will be a huge benefit to you at some point.
4. Set Your Financial Goals
Establishing financial goals and financial priorities often go hand-in-hand, in some circumstances they overlap and become the same. Conscious identification of your financial priorities is the first step, making a financial plan the second, and then implementation, setting out to establish the future you envision. And, no matter what your fixed expenses we consider necessities, like health care and groceries, we can always find way to work at spending less and saving more.
Not only make a detailed list of expenditures, also make a list of those items for which you must save more, if it is college tuition, retirement, a new car or home, a vacation, or specific investments. Key is to consciously identify your goals, and know the associated cost. Some of these larger goals and expenditures, like a new home or vehicle, could mandate a loan, and factoring in a down payment is an important part of your budgeting process and financial planning.
TIP: Never forget your emergency funds! This is an aspect of your financial planning that should not be neglected. Although it is usually easier to consider and spend time planning on how we want to spend our money, any smart financial advice and planning is to always have an integral, smart savings plan. Unforeseen expenses are a part of life, and having extra money set aside can help soften the blow when ‘things happen’, like illness and associate medical bills or home repairs.
You will simply need to find areas where you can cut back and work hard toward implementing your savings plan. Changes in your budget, large or small, will depend on your needs and goals. Look at your financial goals as a whole and see how or if it matches up with your target for savings. Are you close to meeting your goal? If not, either you rework you plan or goal. You will want to review and revise your savings plan every so often, especially as your financial circumstances change, as they seemingly always do for most of us.
5. Determine a Timeframe
You should be always consider a timeframe when looking at your financial priorities. Consider how long it will take you to achieve your goal. Establish target dates for either partial or total completion. Identify the savings window for all listed targets and assign a timetable to each one.
Keep in mind priorities, as some items, like credit card debt, is time-sensitive, more so than others.
The time it takes to reach your goals will be dependent upon the types of goals you set, while at the same time, you will be saving for multiple items. Some goals, perhaps more short-term, like a down payment for a loan, might mandate you keep some money in a certain investment account, perhaps a low-risk account. And yet, some long-term goals might have you consider higher-risk investments, as the larger savings window allows for greater risk to be taken, as recovery time can be allotted for any potential losses or market fluctuation. It is common financial advice that as you come closer to accomplishing your financial goal, the more funds should be transferred to lower-risk accounts or investments.
First and foremost though, its critical to start saving money now! Thanks to compounded interest, the more money your savings will ear the sooner and longer you have your savings plan in place. The longer you put off implementing a budget strategy, the more difficult it will be for your to achieve your financial goals.
6. Creating a budget
Each of your financial goals will require a certain amount of money to be saved each month. Your timeframe, income, and cuts in current spending habits or patterns will determine the amount of funds you set aside. Create a realistic monthly budget. Organized financial goals by importance, cost, and duration, perhaps using a budget an savings worksheet or ledger.
Being organized about your spending habits is an integral part of living on a budget. Track your expenses, each and every dollar you spend. Set spending limits and save whatever left-over money remains. Some areas will be easier for you to cut back on, perhaps transportation or miscellaneous shopping. You might consider getting a side job to hep you reach your financial goals. Always look for ways and opportunities to lower expenses, like coupons or rewards programs. Or, perhaps consider selling some of your personal or household items, maybe a garage sale or online, which can help create extra money.
And, remember, keep saving. The tiniest amount each week or month can make a huge difference on your future fiscal well-being. Create a budget and stick to it, checking your progress on a regular basis and remembering to make adjustments when necessary. Savings should become an integral aspect of your lifestyle. One day, you will wake up and realize how much money you actually have saved, and you have made progress on securing your future.
7. Make Saving Automatic
To keep your budget on track, calculate your savings each month and set up an automatic savings plan. Financial experts often recommend you should utilize 90% of your paycheck for living expenses, and remaining 10% should go toward savings. Regardless of the amount of money you save, if auto-depositing $35 or $350, keep doing it on a regular basis. And, make an promise to yourself not to touch your savings for any reason, aside from successful fulfillment of your financial goals.
As a wise Chinese proverb has said, “The best time to plant a tree was 20 years ago; the second best time is today.” The perfect time to re-evaluate your financial plan and budget is now. It is all up to you to make saving a priority, and following the simple advice in this article can help you with direction toward lowering debt and saving money.