By Lynnette Khalfani-Cox, The Money Coach®
If budgeting and saving money seem like difficult tasks to conquer, perhaps the issue is that you’ve not yet created a financial strategy for achieving these goals. Here are some ideas to improve your savings, and make you a better budgeter, by creating a financial strategy that works for your lifestyle.
Evaluate your current financial position
Money management is more than a complex budget spreadsheet and some good calculations. It’s about a certain frame of mind — one that begins with an awareness of your overall financial picture. So start by evaluating your current economic position. Ask yourself questions like:
- Do I spend too much?
- Do I have enough savings to cushion me or my family in case of an emergency?
- Have I truly tried to create and stick to a budget? If I didn’t succeed at budgeting, why not?
- Am I building wealth for the future, or am I just living from one paycheck to the next?
Be brutally honest with yourself during this process. If you’ve made previous financial mistakes, accept them — without wallowing in the past or needlessly beating yourself up about prior bad choices.
Now is the time to put the past where it belongs (in the past!) and to look forward to becoming a master of your money.
Formulate a financial strategy
After you’ve evaluated where you presently stand in terms of money management, it’s time to strategize for the future around saving money and budgeting.
Follow the steps below to outline a financial strategy that will work for you:
- Adopt the right budgeting mindset: When you create a proper budget, it doesn’t mean you can never have any fun. Nor does it mean all your money simply goes toward bills. Instead, when you budget the right way, you become aware that a portion of your income will go to your needs, a smaller portion goes to your wants, and a specified amount gets allocated to your savings or other goals. This is the healthy way to approach budgeting so you don’t mentally feel so restricted while living on a budget.
- Choose a budget system and just get started: There are lots of budgeting systems out there, such as the zero-based budgeting, the Envelope System or the 50-30-20 method. If you are new to budgeting, don’t stress over figuring out the “best” one. In truth, any budgeting program can work if you’re willing to stick with it. The key is to make sure you’re managing your cash flow, and not spending more than you’re earning.
- Track your monthly expenses: It can be incredibly insightful to see where your money goes each day. But if keeping daily tabs on your dollars spent is simply too hard, or doesn’t fit your lifestyle, then just track your expenses on a monthly basis. Likewise, some people like to track their budget using paper and pencil; other prefer spreadsheets or online programs. Again, don’t worry about selecting an “optimal” method. It’s way more important to just do it!
- Look at where you can save: By evaluating your expenditures monthly, you’ll begin to see patterns that might not otherwise be clear. When you know what you tend to overspend on, you get a better idea at where you can save.
- Allocate some funds for debt elimination: When examining the expenses in your budget, it pays to be aggressive in paying off outstanding debt. Getting rid of big chunks of debt is part of a smart overall financial strategy because every time you eliminate debt that frees up money for savings or other long-term goals.
- Separate your spending money and your savings: Don’t consolidate all your income in one account. Instead, consider having separate accounts for your spending money and your savings. That way, you’re less likely to spend money you were intending to save. Even better, if you can automate your savings, you’re more likely to see those dollars grow over time.
- Set goals for the future: You can’t live paycheck to paycheck forever. Prepare for your future by opening an Individual Retirement Account (like a traditional or a ROTH IRA), or signing up for your employer’s retirement savings program, such as a a 401(k) 403or an IRA account. Compound interest is a powerful ally, and it can help you with your future financial stability.
Budgeting and saving money are definitely not impossible tasks. But they do require your commitment. That’s why having a financial strategy, like the ideas outlined above, will make you both a better budgeter, and a better saver too.
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Extra Credit provides general information to help improve our Member’s financial lives. Every situation is different, so please contact us for guidance on your specific needs. The advice provided in Extra Credit is not intended to serve as a substitute for speaking to a loan representative, financial advisor, or GreenPath Financial Wellness counselor who can help tailor a solution for you.
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