budgeting your money the painless way: Pay yourself
Budgeting your money starts with your savings account. If you are asking, “what savings account?” this article is for you. Saving is a financial must that many people place quite low on their priority. It takes a high degree of financial discipline so if you are one of those who has a savings account, take a second to congratulate yourself.
Financial advisors differ on how much money we need in our emergency funds but they seem to agree on a 6 to 10 month range. How do you calculate that? First you have to know how much you spend each month. You will always estimate low so get your bank and credit card statements out and add it all up.
Take that number and multiply it by 8 months (or somewhere in that 6 to 10 range) and that’s your goal. Once you’re there, keep it in a savings account. It can’t be tied up in a CD and you can’t risk losing it in the stock market. (By the way, I strongly suggest that you add disability insurance to your monthly expenses. It’s cheap and if you became sick or hurt, the monthly bills will be out of your mind)
Now that we know how much you should save, you brain might be in overdrive thinking about how you will fund your savings account. That starts with budgeting your money properly. It’s going to take discipline but here’s a fun way that will put some big money in your savings account over time.
You can think of it as my Chick-fil-a method. I love Chick fil a in part because the food is good (hey chick fil a, are you reading?) but also because they give out coupons all the time. I would have gone to Chick Fil a and paid full price without the coupon but with it, I saved $4. That $4 goes in to my savings account.
Because I put everything on my credit card and pay it off at the end of the month, I get rewards points. I always buy $50 gift certificates with those points. Guess where that $50 goes? Let’s take it a little further. Rather than going to Chick Fil a and getting a chicken sandwich and waffle fries and a diet coke for $9, I go to the grocery store and pick up a pack of chicken breasts and a couple of potatoes and drink water.
First, I’m saving calories but I also saved $5 by not eating out. I ironed my own shirt rather than taking it to the dry cleaner, $2. So let’s see; in this article alone I saved $70 and have a sizeable amount for my savings account and budgeting your money becomes much easier when you have more money to work with.
Keep a 1 week journal and see what you can do to pay yourself. It’s fun, it’s a challenge, and you will feel better about getting closer to your financial goal. We are not in an economy where we can count on having a job tomorrow. Economists predict that 1 out of every 10 working Americans will not be working at some point. This is why budgeting your money is so important. Find those hidden costs that can easily be saved.
This is a great article on other ways to save money
http://adriatictravelcompany.com/2009/01/19/100-ways-to-save-money-for-your-next-vacation/
Hey, nice article. I like the great everyday examples you used to demonstrate how little things add up quickly.
Nate’s last blog post..100 Ways to Save Money For Your Next Vacation
Hi,
Thanks for your comment on my blog, your link didn’t go through so please leave another comment or email me the link and I will add it.
I use my credit card for the points as well and did a post on it here. Great blog, I can’t wait to read more!
Liz
Liz’s last blog post..Menu for the week
Thanks for the comment on my blog! I agree – this is a great strategy- I think we all need to be aware of finances and how to save to get ahead- and I wory about people who are just now waking up and smelling the coffee, so to speak- but best they do it now rather than never.
Whitney Hoffman’s last blog post..The Small Things Matter Most
Hey Tim,
Good article – it’s important to be able to look at ways to cut out some of your “nice to have” expenses in order to pay yourself first, but it’s also important to remember that extremism can be un-healthy.
Maybe you don’t need to buy a coffee every day, you can make your own at home or work for a lot less, but a treat once in a while is a good way to make sure you are still enjoying life.
I totally agree Adam
Go ahead and treat yourself but if you don’t have an emergency fund, don’t treat yourself too often. Don’t be that person when the emergency does arise who says, “I wish I would have saved more.” Currently 76% of Americans WOULD be saying that if a financial emergency were to arise in their lives.
great article..thx for visit and comments..
It is realy hard to find a good home loan. I found your blog on google and read a few of your other posts. I just added you to my Google News Reader. Keep up the good work. Look forward to reading more from you in the future. Thanks!
This is good advice that I’ve been given in the past. If you have the self discipline to stick to it, this can be a fantastic way to save money.