Saving Made Easier
by Julie B. Cosgrove
It seems that the cost of living allowance in salaries never quite catches up with the actual cost of living. Other than clearance sales, it is rare to see a product go down in price. Usually the amount you have to pay for a loaf of bread, a gallon of milk or a hamburger keeps rising.
So how can anyone save? It isn’t easy, but consistent tenacity is the key. In essence, you need a solid goal. There is no magic formula or sure-fire guideline, but here are a few suggestions from top financiers.
Carve out an evening to analyze your expenses versus your income for the past year. A great time to do this is when you are preparing to file your taxes because you have dug out most of the receipts, paycheck stubs and bank statements anyway. If you don’t have a computer program to generate this for you, or haven’t been diligent about regularly entering the information, this will be a bit of a chore. However, you will find it well worth the effort.
Make a list of the mandatory expenses that occur each month: food, housing, insurance, utilities, car payment, gasoline, etc. Include in the budget a tad for entertainment or hobbies and for paying down debt. These are as important as the others.
List what you spent on these items month by month over the past year.
Total each up and divide by 12. Now you know, on average, how much you spend on each item in your list per month.
Armed with this powerful information, you can determine how it compares with your monthly income. You can also see where you might cut back and put some into a savings account instead. Decide to give your savings accounts a paycheck each month, no matter how small. Perhaps set up an automatic transfer.
The balancing act between debt repayment and saving is a delicate one. Both should be simultaneous goals. Don’t try to save enough to then be able to pay off the cards in a year. It doesn’t work well. While you are trying to save, the credit card balances keep inching higher. Paying the minimum each month, even if you vow you will not use the cards again, will keep you perpetually in the debt cycle. It is a good strategy to apply the largest amount you have designated for debt repayment to the cards with the highest interest rate.
Make a plan. Decide how much you realistically can begin to save. For example, start with five percent of your salary as a goal. If you make $30,000 a year, your goal would be $1,500.00 in savings or around $125.00 a month. Most financial planners suggest you have several levels of liquidity (ready to grab cash versus tucked away in a CD you can’t get to) and build them up together. A good three- to five-year plan is to build up three different savings strategies:
For unexpected expenses like medical bills, car repair, etc. Have this in a separate bank account.
For unexpected salary loss. The goal is to have three months’ worth of salary saved up placed in a three- to six-month CD. That way you can get to it, but not as easily.
Retirement/investment funds, be it in stocks and bonds, an IRA/401, CDs or a combination.
You may not achieve this goal in the first year, because spending habits are hard to break and because life happens. As soon as you save $500, the washer conks out. But, keep at it. Don’t allow the bumps along the road of life to jolt your journey to financial security.
Prepare to sacrifice. Set a goal, and post it on your fridge, your car visor or your mirror. Before you reach for the debit or credit card, ask yourself if it’s really necessary, or does it hinder your goal? One tip for handling credit cards is to put each in a sandwich baggie of water, and then freeze it. By the time it thaws out, so may your desire to use it.
Some people take out cash from their paycheck and divvy it in different envelopes such as one for lunches, one for clothes and one for entertainment. When an envelope is empty, you have to do without until the next month.
Tithe. There is a reason donating ten percent of your income is a standard for so many religions—it teaches you discipline. It also helps you budget the other 90%. On average, people who tithe have greater control over their finances than people who don’t. It also keeps the value of money in perspective. If you give ten percent to a good cause—be it your church, a missionary or a nonprofit organization—then you begin to change your point of view. Tithing teaches that money is a tool. There are more important things in life than the almighty dollar.
Keep flexible, but firm. Expenses come up. Janie needs braces, you need a better car, the price of gas changes. Every three or four months, revisit your plan.
See where you are.
Make adjustments to stay on track.
Reanalyze your goals. Are they feasible, or are they a burden weighing you down in a negative slump?
Unless you can see progress, it will be very hard to continue.
Reward your good efforts. Set milestones toward your goal, and when you reach one, give yourself a little pat on the back. Perhaps it is going out to lunch instead of brown-bagging it. Maybe a new outfit. Just be sure to set a limit on your spending so it doesn’t defeat your purpose.
Follow these guidelines, stick to your goals and in a year or so, you can look back and see the results. Sure enough, you are beginning to control your expenses instead of them controlling you.
Besides being a professional speaker, freelance writer and an award-winning author of 16 books, including the Bunco Biddies Mysteries, Julie B Cosgrove is a digital missionary on staff at Cru Canada’s Power to Change. Julie works for The Life Project, assisting 26 plus volunteer writers from all over the world to produce free daily devotionals as well as meaningful testimonies and articles. She also has a blog with readership in 51 countries, Where Did You Find God Today.
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