Saturday, February 21, 2015, AM | Leave Comment
The end-of-the-year holiday season every year puts a lot of pressure, sometimes unnecessarily, to continually shop. You can’t stop shopping and when you stop, you are so tired you feel you have no more life in your legs. It can be a particularly challenging time to manage your money and savings.
As a result, now is an ideal time as ever to get your financial house in order, not only this year but for years to come.
There is decent way of saving and there is indecent way of saving. The decent way is to save before you spend and the indecent way is to spend before you save.
In the first case, you always save and may save big. In the second case, it’s almost impossible to save.
If you follow the indecent way, you will be deceiving yourself and living a deceptive life is no living at all, not financially anyway.
The following tips will help you start and hopefully will convert into saving habits that can be fruitful in the future.
Create a budget
If you can follow a well-thought-out budget, you can definitely benefit from it. But let’s face it. Many folks start creating one, follow it for a month or two and then forget about it.
The important thing is to follow it weekly, monthly and yearly and be consistent with it. It will help you lead a more comfortable and financially worry-free life. Well, almost.
If you are like most people, you have one source of income and that is your weekly paycheck.
After saving for retirement – 401(k) and other plans, you are free to either spend it all and regret why you did it or begin by tracking your spending for a month.
The reason for doing so is to identify where the money goes. Don’t do anything else, just tabulate the expenses in different categories.
After a month, you sit down with yourself at the kitchen table or perhaps sit with your family around the fireplace.
Look at all the categories. There may be some that are important like food and what kind of food – cook at home or eat out and entertainment.
Cook at home is important, eating out and entertainment are all important. The question is how much you spend on it.
If expenses from eating out are more than those when you eat at home, then hey man! You gotta stop.
If you have an iota of concern for your future, then you would stop and turn around.
I am not saying eating out and spending on entertainment have to stop completely. Hey, for God sake, this is America.
Two-thirds of the national economy is dependent on consumers spending. Spending is good, wasting is bad.
I strongly believe you know what the difference is and how to narrow down the difference in favor of less wasting.
Take advantage of direct deposit
Your bank would prefer you do that. That’s one way for banks to not only attract customers but to retain them as well.
It’s definitely in the bank interest but hey! you can benefit from it too.
Direct deposit not only saves you a trip to the bank, it can also make it easier to pay your bills.
Also, arranging for automatic payments to other accounts saves you the hassle of making each transaction individually.
Save Now, Spend Later if need be
Man! you already know these things. I am just reminding you in case you forgot or not doing it at all.
I am not putting a condition on “Save Now.” The condition must be on “Spend Later if need be.”
Save before you spend. [That can be a good motto for this blog.] Hey! We are all Americans, ain’t we? We were born to spend. There is no getting around it. That’s in our genes.
What I am saying is spend but spend wisely, not like the world is gonna end tomorrow.
Don’t start spending before you save because otherwise it’s almost impossible to save.
So then your goal should be to set aside some amount in saving, no matter how small, from your paycheck.
The important thing is devise a saving plan for yourself and stick with it. That’s the real magic, to be consistent in your saving.
Maintain emergency savings
Everybody knows how important it is. Remember you must survive before you die. I think I said that right.
If you don’t maintain emergency savings, you would be at the mercy of others.
Worse, you would be at the mercy of the state and we all know they have problems of their own.
So your next stop might be in the twilight zone, better known as gutter. And nobody wants to live there.
Fund the emergency savings account with enough money that you are not a burden on the state.
Three to six months fund is what seems to be the right duration in case you are out of work. No sweet talk. I am telling you like it is.
Keep a credit cushion
Remember holidays and buying gifts are very tempting. Many folks use it as an excuse to step into the debt shit.
Never max out your credit, holidays or not.
Always try to have at least 15% of your credit limit available in case of emergency.
That’s on top of the emergency savings we just talked about.
After paying off loan, always pay yourself first
I think we covered that partially above. After you pay off a loan, continue making a monthly payment in the same amount to yourself, that is, your savings account.
Manage your mortgage
The more often you make mortgage payments, the sooner you can pay off your home loan.
Try to get ahead now by arranging for payments to be deducted from your account on a weekly or bi-weekly basis rather than monthly.
You would not only pay it off sooner but you would save a huge amount in interest charges.
In a Nutshell
Everybody has different income and expenses. But there are certain things that can be common to all. So save before you spend no matter how small an amount.