Personal savings are reaching an all time low these days as people are spending more, yet earning less. Savings are an integral part of a steady future and should never be ignored, no matter how dire things look at the moment. The best way to ensure that you are on track and staying within your means is to plan a monthly and yearly budget.
This is a great way to incorporate the “pay yourself first” method instead of just waiting to see what is left over and keeping it in your savings account. Here is a quick and easy look at how you can create a monthly budget to suit your needs.
Before you Create a Budget
Before you start creating the perfect budget it is important to speak with everyone in the household and make sure you are all on the same page. Everyone, even children, may prove to have some valuable input in terms of saving money. And if even just one person is not committed to the process it can throw the entire budget off balance. You should also look ahead before planning and commit to putting aside any extra income that may come your way. Once you have a budget planned and are in a steady routine, it should be easy to stash away certain windfalls to help you pursue future goals.
Savings Need to Come First
The reason that it is often so difficult to save is that there seems to be no money left over at the end of the month. Many of us are hardwired to spend all the money we have in our wallets, or make a big purchase at the end of the month if there is money left over. With a budget you can incorporate a certain amount of savings each month and tack it on as an expenditure. This way you won’t forget to save and will even forget that you are putting aside a certain amount of money each month.
Getting Started With a Budget
It is important to not enter the budget making process thinking that it is going to be easy. A steady budget will take quite a bit of work, will call for a few sacrifices, and will take discipline. The good news is that you can make the budget in whatever way you feel comfortable. There are a number of programs and budget software you can use or you can just jot it down in a daily planner if you find that to be easier.
For starters you need to come up with your monthly income. This is a combination of all payments that come in including dividends, alimony, paychecks, and everything in between. Once you have your monthly income figured out you should try and track how much you usually spend on necessities such as groceries, utilities, and other common bills. Gather old receipts and bills and crunch the numbers. It is tedious work, but will pay off in the long run. Try to remember that no expense is too small either.
Cutting Down to Save More
Now that you have an idea of where all your money goes it is time to cut out certain expenditures. If you notice that your spending outweighs your debt it is time to seriously cut down. If you notice you are still in the plus, you should still look at other ways to save. Committed expenses are a tough place to cut down so you can start to look at entertainment expenses and other add-ons. Cut out your morning trip to Starbucks or rent DVD’s instead of a night out at the movies.
Big Cuts for a Better Future
Once you have cut out some unnecessary, and easy to reduce, expenses it is time to look further into the future. While it may be slightly easy to cut down on your grocery bill or take the bus to work rather than your car, there are harder matters to consider. A budget is a good way to start looking to things such as credit card debt. Without a budget it is easy for these types of problems and bills to go unnoticed, but now that you have everything in front of you it should be easier to see what is going on.
In many cases a high credit balance can prevent you from saving at all. You can combat this by calling your credit company and inquiring about rate deductions, or even shopping for a new card. Just ensure you aren’t fooled into low introductory rates that jump high in the future.
If you still cannot find a way to cut down on costs then you may need to consider financial help. It may not be feasible to hire a financial planner or seek out professional help but there are certain routes you can take. There are some Non-Profit Credit Counseling agencies that are in place to help people better understand their finances and plan for the future. While there is a fee attached to the services it is much more affordable than other options and can be very beneficial in the long run.
A Key for Budget Success
Once you have determined ways to economize it is important to remember how much you are saving and that you are building for the future. People often get stuck in a rut as they feel depressed about cutting down, or don’t see benefits right away so they give up. Set realistic goals that are attainable and watch yourself creep closer to them. Simple changes can lead to you be able to afford to retire earlier or allow you to send your kids off to college. Saving money shouldn’t have to be a drain but instead a very positive experience.
Keep in mind that your budget can change, just like your finances and lifestyle will. Once you have created a budget review it every few months. If you notice you are struggling to get by, you can save a little less. On the other hand if you notice you can cut down more, add a bit more to the savings. Remember that saving money is never a bad decision.