Ever wonder where all your money goes right after payday? Spending money is way too easy. It is so easy that it makes saving it look extremely hard! It is very simple to save money though it isn’t something that happens over night, you need to work on changing a few habits. There are several steps you can take to help you along the way on the road to financial success. You don’t need to be a mathematician to sit down and take an hour to analyze your spending and income to create a budget.
You can start by stepping back and going over your bank statements, or have an app categorize them for you. Divide them up into sections such as fast food, bank fees, bills, etc. When you actually take a look at what you spend and have an actual dollar amount on things, it will open your eyes. After you have seen where you spend your money, it would be best to set a budget.
To set a budget, you need to compare how much you are spending and how much you actually make. Set money aside to take care of yourself and your well-being first. This will include expenses like your bills (food, utilities, rent) and putting money aside in a retirement fund. From there make sure you give yourself an allowance because, well, living frugally is not fun.
After you have set some money aside for your well being, your fun money fund, and your savings, you need to make sure that you are thinking about your debt to income ratio. Take a look at all what you owe everyone and how much time and money it will take to pay them back. A majority of these expenses are going to be credit card companies and student/bank loans. The sooner you pay it off the better it will look in your bank account and also on your credit report. Don’t pretend that credit isn’t something that affects you, it affects everyone. So don’t cancel all your credit cards once you pay them off, keep them open. An open line of unused credit looks good if you are looking to buy a house or a car in the near future. Saving for the down payment and the interest will be a lot better.
Some of you are thinking that the Fun Money Fund (FMF) is a little ridiculous, but it is necessary! You want to make saving easier so that you will keep doing it. You have lived off an allowance before for things that aren’t a necessity (most of the time it was no more than twenty dollars here and there) and you can do it as an adult. Want your FMF to grow? Pay off more of your debt and you will have a little wiggle room. Seventy five percent of that monthly payment to unnecessary bills and services could be going to other areas that need to be paid off, and the other twenty five percent of it can go into your FMF!
You may be thinking, where can I get the extra money from to pay the rest of my bills? The answer is in cutting back spending in your daily habits. Here are some common money mistakes people make everyday. See if any of them sound familiar:
You keep putting off paying off your credit card debt
You don’t have a savings account for emergencies
You go grocery shopping when you’re hungry
You enjoy frequent shopping for retail therapy
You don’t maintain an allowance for fun spending
You don’t define the difference between want vs. need
You never read fine print
You’re always trying to keep up with trends and fashions
You’d consider going into debt for a wedding
You prefer to buy a meal instead of preparing it
You haven’t made a plan before taking out a student loan
You don’t think you need to have a budget
You haven’t been paying attention to your credit score
You buy items based on the price and not the quality
You spend more than you make
You want to get a larger house and mortgage than you need
You are dependent on one source of income
You’re not saving for retirement
You replace things that aren’t broken
You’re not paying attention to your debt to income ratio
Featured photo credit: 401(K) 2012/mmoney via flickr.com