Saving and Budgeting

How to effectively Save and Budget

First Save

My first recommendation is for you to become comfortable with doing things differently, don't let fear get in the way. 

We must learn to respect every dollar that we make. If we don't, we will keep working till we die. Progress comes from change. 

The first rule to successful budgeting and saving is to get in the habit of not giving away everything you make to others. Think about it, you had money come in at the beginning of the month but had nothing left over in the end.

The biggest problem is spending before saving. Even your pets get fed but you have nothing in the bank! Learn to pay yourself first!

The key is to start small if this is something you are not accustomed to by putting away a small amount from every paycheck. Don't touch the money unless there is a real emergency! 

Start with $50-100 otherwise use whatever amount you are comfortable to pay yourself from each paycheck!

Ideally you want to leave this money in a high yield checking/savings account. It's easy to earn 4-5% APY in our current interest rate environment from an online bank. But leaving it even in a regular savings account or even just as cash will do since the key is to first build the right habit!

This is the first step needed to succeed in the saving part of saving and budgeting.

Principles behind Budgeting

You may ask what to do next when it comes to the budgeting side of the equation. 

The key principle here is to live below your means. What does this even mean? Here is a good way to practice living within or below your income level:

• Focus on needs not wants. Don't let unnecessary shopping become a habit and build a level of self-awareness around the purchases you make.  

• Every time you are about to click the pay button or before you add something to the shopping cart ask yourself if I can live without this.

• Don't overpay. Figure out if the item is a good value. Do I need the $100-200 pair of sneakers or will the $50 pair work just as well?

Real World Budgeting

When creating a plan for your money it's best to build a system that works for you or you and your family. 

You have to figure out where your values are for yourself. I won't tell you the precise dollar figures or percentage of your income to spend on things like food and shelter.

But you still need a system of budgeting, regardless of the system we want something.

A good process for this is to first figure out how you spend day to day, month to month. Write down your daily purchases for 2-3 months. 

Review this list. Add up everything you spend on that is not essential. Cable, Netflix, etc.

If these items are "too expensive given your income". What are you comfortable living without?

Cancel subscriptions and avoid other unnecessary expenditures. This is living below and within your means. 

Remember to also spend a little on things you actually do not need. You also don't want saving and budgeting to become so boring or overwhelming where you're not spending any of your income on wants.

Stick to your Plan

Remember to stick to the plan and remain consistent. Don't catch the spending bug! If you lived without something before, why do you need it now?