Most of us have financial goals. You may be saving up for that long overdue vacation, that new car, or just a rainy day fund. You may also be trying to balance your budget. But do you have a plan to reach those goals? If not, I would like to suggest budgeting as your first step. There are many advantages to doing this. I will go in-depth in this article to explain.
Balancing your finances
Before you can start saving you need to balance your budget. Are you spending more than or close to all of your earnings? If so you need to develop a game plan. First calculate all of your expenses each month. If they are greater than your income you need to cut unnecessary expenses.
You can cut unnecessary expenses in several ways. Not all of them require giving up the things you enjoy. If you eat out frequently consider cooking at home. If you're paying for extra monthly services you don't use you should consider disabling them. There may be a free alternative to many commercial solutions you subscribe to.
Creating a budget
Once you eliminate unnecessary expenses and are able to save [even a little] you should budget for the rest of your expenses. Figure out how much you are spending on monthly bills, gas, groceries, etc. Set aside this amount of money each money in a place you cannot spend from. This will ensure you won't be short on any bills or basic needs by accidentally overspending.
Most large banking institutions do not come with great budgeting tools up front. If you need help with this there are many services available electronically. You can find apps, websites, and even some newer banks dedicated to helping you track and budget your money. Simple is a great example of a bank that's focused on saving and budgeting. Mint is another popular website/app people commonly use.
Creating a savings
After creating a budget you will see exactly how much money you have left each month. This is when you can decide how much you should save and what you would like to save for. Make a list of all the things you need to save for first, then decide the appropriate amount to save based on your new budget.
After that you should also consider creating a rainy day fund. This will cover both unexpected expenses that occur and other things you would like to buy. I find most people are able to handle their monthly expenses just fine, but unexpected expenses can easily push them into debt. It's important to work towards a rainy day fund.
I believe one of the most effective savings plans for people who are just starting is the 52-week challenge. You can do this by saving an amount of money that correlates to the amount of weeks you've been saving. For example on week 1 you save $1, on week 5 you save $5, and on week 51 you save $51. After 52 weeks you will have an extra $1,378 in savings.
This is effective because it doesn't demand a large amount of money up front. Your new budget will have time to take effect before you are expected to save a decent amount of money each week.
I hope these tips and tricks help you to get on track financially and begin saving for the things you really want.