If you would be wealthy, think of saving as well as getting. –Benjamin Franklin
We often hear “A penny saved is a penny earned”, but true saving is a little more complicated than just pinching your pennies.
Step 8: Saving for now: Once you have mapped out your weekly or monthly spending, it’s time to make sure that you’re paying yourself first. This doesn’t mean skirting around your regular payments. Once your necessary bills are taken care of, make sure to set aside money for a “rainy day” or in some cases a leaky roof, bad plumbing, or new HVAC unit. I know Dave Ramsey recommends putting $1000 into an emergency account, which is a great start, but you also need to make sure that you’re consistently adding to that amount each pay period. Emergency situations don’t usually coordinate with each other to make sure that you have enough to cover them all at the same time.
Step 9: Saving for the Future: In the first post in this series, we discussed setting financial goals. I’m hoping you set your objectives on something more than just the here and now. Depending on your current season of life, you should be saving up for a newer car to replace your current one (should something happen to it), funding your child’s college account, or building up your retirement nest egg. There are a number of ways to accomplish any of these goals, so I’ll go into more specifics about that in later posts. If you’re not in a position to be saving for these things right now, you need to take a hard look at how you can get to a place where you can in the near future. Start small and make sure you have some savings set up for the present time.
Step 10: Other People’s Money: I’ve mentioned before that a great way to add to your savings, retirement, or overall budget is to live by the principle of “Other People’s Money” . I’m not talking about being a cheapskate or trying to bamboozle money that doesn’t belong to you from someone. I’m talking about creating or finding assets that make money for you. For instance, if you use $1.00 off coupon for a box of cereal, that dollar was the manufacturer’s money. If you own rental property, you receive the renter’s money by doing little more than providing the building. If you have a yard sale or consign your clothes, you’re getting other people’s money for something you were getting rid of anyway. Using this principle once or twice will not garnish big results, but using it as a way of life will pay off little by little.
Now that you’ve reached step 10, it’s important to remember that this is just the starting point. The plan doesn’t end here. Even after you’ve set it up on paper, you’ll need to constantly re-evaluate your plan as things change and make necessary adjustments as your season of life requires. I highly recommend designating a weekly or monthly day to sit down and go over your budget, assess current spending trends, and adjust for that week or month’s situation. This is torture to most people, even The Budget Maven gets tired of doing it sometimes, but it’s paramount if you want to stop working so hard for your money and let it start working more efficiently for you. Make a fun date of it with your spouse and go over your finances at the local coffee shop. Come up with a small reward for yourself if you can find a way to save an extra 20 bucks a week. Post a picture on your fridge of the tropical island getaway you want to take after your student loan is paid off. Whatever you’ve got to do to motivate yourself, do it. In the immortal words of The Doors, “The time to hesitate is through.”