It’s always the right time to create a saving and spending plan (aka a budget). It’s also a good idea to revisit that plan annually or when a major shift occurs in your income or expenses.
We’ve created an easy to use, but thorough, Spending and Saving Plan tool to use. Before you get started, here are some tips to help you #ThinkLikeASaver, ensuring that your money is working smarter and harder for you.
Step 1. Determine your income.
To create an effective budget, you need to know exactly how much money you’re bringing in each month. Calculate your monthly income by adding your paychecks and any other source of income that you receive regularly. Be sure to use your net pay rather than your gross pay. Your net pay is the amount you receive after taxes and other allocations, like retirement savings, are deducted.
Step 2. Track both your expenses and your spending.
This step is essential. It’s not enough to write out your actual expenses, like rent or mortgage, food, and auto insurance, you must also track what you are spending.
If you’ve ever felt like your money “just disappears,” you’re not the only one. Tracking your spending is a great way to find out exactly where your money goes. Spending $10 a day on parking or $5 every morning for coffee doesn’t sound like much until you calculate the total cost per month.
Tracking your spending will help you pinpoint the areas you may be overspending and help you quickly identify where you can make cost-efficient cuts.
Once you’ve written out your expenses and tracked your spending habits, you’re ready for the next step.
Step 3. Set your financial goals.
Now you get to look at your present financial situation and habits and decide what you want your future to look like. Ask yourself what’s most important to you right now? What financial goals do you want to achieve?
Some common goals include building an emergency fund, paying down debt, purchasing a home or car, saving for education, and retirement.
Step 4. Decrease your spending or increase your income.
What if you set your financial goals and realize there’s not enough money left at the end of the month to save for the things you want?
You essentially have two choices. You can either change the way you manage your current income or add a new source of income. In today’s gig economy, it’s easier than ever to add a stream of income, but we know that everyone’s situation is different, and that’s not always an option.
Even if you can add income, you may have identified some spending habits you’d like to change by decreasing how much you spend.
Take a look back at your expense tracking. For the nonessential items, consider reducing your spending. For example, if you find that you are spending quite a bit on entertainment, like movies or dining out, reduce the number of times you go per month.
Then apply the money that’s been freed up to your savings goals.
For more ideas on how to increase your savings, read 54 Ways to Save.
Step 5. Stick to your plan.
Make sure you stick to your spending and savings plan. To make saving more efficient, set up automatic savings so that you can set it and forget it! Saving automatically is the easiest way to save.
Reassess and adjust your plan whenever you have life changes such as marriage, a new baby, a move, or a promotion.
Following your plan ensures that you’re financially stable, are ‘thinking like a saver,’ and better prepared for those unexpected emergencies.
Want a savings accountability partner? Take the America Saves Pledge or re-pledge and commit to saving successfully. America Saves will support you by being your “Savings Accountability Partner” with tips, resources, nudges, and email and text communications to help you stay on track of your savings goal.
Written by Kia Young
Other Resources:
Blog: 5 ways to teach kids how to save at home
Video: Save as a Family
ABOUT THE PERSONAL INVESTMENT ENTERPRISE (PIE) PROGRAM
The Personal Investment Enterprise (PIE) program is a local savings program provided through Community Action Programs of Boulder County and Mile High United Way. The program is designed for low-income families to enroll in financial literacy classes and save through a matched saving account at a rate of 4 to 1. The first step in applying to the program is to attend an orientation meeting with Nino Gallo at Community Action Programs at Boulder County. Nino may be reached at 720-672-5961 or at [email protected]. For more information on the PIE program visit Boulder County PIE webpage or Mile High United Way PIE webpage. To see if you qualify, take this survey: https://www.surveymonkey.com/r/PrelimPIE.
