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.