How can I make a budget and stick with it?

Question

we are financially stable but really don't save that much money. We want to start this year. I have heard of the envelope system. Any suggestions? How do you get ahead financially? Should we make lont-term savings goals?

Answer 1

Begin by looking at your expenditures for the last year. How much did you spend on groceries, insurance, paying back loans, medical, etc. Approximately how much is that per month? These are more or less stable expenditures. What miscellaneous expenditures did you encounter on average per month? These are likely the ones you can attack. Putting your averages together, how much do you have to have each month to pay these bills? Add in some wiggle room (an extra 5-10 dollars per category per month). That is your estimated cost of living.

Many people have a cost of living that exceeds their monthly wages. You need to find a way to cut back on your expenses, as that is often easier than finding a higher paying job. Begin by working on the miscellaneous items. What do you find yourself buying often that you could cut back on? Do you go out to dinner often? Cook at home instead. Do you buy DVD's/CD's several times a month? Try to cut back. Look for creative ideas.

Next, you may be able to cut back on your more stable monthly expenses, so look at those and see what can be done. Now you should have a lower estimated cost of living. If you are paid biweekly, cut your estimate in half, and take that from each paycheck you receive. All the excess, place into a savings account that you will promise yourself not to touch for a year. As the paychecks come in and you squirrel this money away, you might be surprised at how fast it quickly grows. Even just $50 a paycheck put into the savings account becomes $100 a month, or $1,200 a year, plus interest.

At the end of the year, decide what you will do with this money. You may want to open a high yield account, such as a CD. Or you may want to put some of into an education account for children or a retirement account for yourself. Every penny you can find a way to save now (and it may mean tightening your budget belt a little) will be a blessing later on.

Answer 2

What I did is I got a savings account and put 100 dollars from each pay check in there. 100 dollars adds up. I can pay for college now because i was responsible with my money. I got an ATM card, but i never used it. I would suggest if you have problems with self control, not to get one, or you could have one for emergencies, and put it in a drawer at home. You want to save money, a good amount too, but you want to have money to spend. I guess what i'm saying is, don't save to the point where you guys are eating rice and beans for dinner every night!! That budget won't last long. Get a REALISTIC budget, those are the more likely to last.

I would make goals, maybe by next year to have 3000 in savings. Be realistic though. you and your spouse (partner) go through your bills and decide how much you want to do. Make sure you guys put a date to your goal. It will help it get done. And I would suggest maybe a short term one in the beginning. It will be more motivation to get it done. It's easy to forget about a goal that has to be completed a year from now. Set one for 3 months or so...

Answer 3

Create goals, figure out a plan to reach those goals, then create a budget so that you can meet that plan. If the plan is too difficult then you need to decide if your goals are too high or if you need to make changes.

I like the tools and calculators on CNNMoney.com. They are very user friendly and helpful. One basic rule of thumb is to save the first 10% of your income every month. Some experts say that is not enough, but it is perfect if you are just getting started.

Also, speak to a financial adviser to discuss a plan to invest your 10% fund. Remember, think long-term. You have a long time before you retire. Look at long-term results and be prepared to invest your money for a long time. Good luck!

Answer 4

The envelope system certainly works. Someone has even computerized the system and it tracks both cash and credit accounts. http://www.credit-yourself.com/mnvelopes

Another way is to track every cent you spend every day, whether in cash or by credit. You will be able to identify areas where things can be cut. Use that money to start a savings fund.

Also take advantage of 401K's and IRA's. Have your bank account automatically debted the first of each month so you never get your hands on the money.

You should have long term goals, mainly either buying a house or retirement.

Answer 5

First, you have to REALISTICALLY list all of your required expenses. You have to include gas, lunches and entertainment expenses. From there you can determine how much discretionary money you have available. Then, start by paying yourself first. If you have $500 per month of discretionary money available, start by putting $50 a week into a savings account. If possible, have your bank automatically transfer the money so you don't miss it. Everytime you get a raise, increase your savings allotment by that amount. The important points are to be realistic about what you can save without feeling in a pinch, and increasing your transfers when you get a raise.

Answer 6

Save. Save. Save.