Budget

Can you save a year’s worth of income?

Can you save a year’s worth of income for your emergency savings account? Yes, you can. Here are some steps to get started:

Be patient. You won’t save a year’s worth of income in a single year. Work out how long it will take by determining how much you can set aside each month. If it takes 3-5 years, then so be it. Five years will go by whether you save money or not, so you might as well have something to show for it.
Set aside a firm amount from each paycheck. Think of it as a monthly or weekly bill you owe yourself. You can even automate the process so it’s deducted from your paycheck like taxes or insurance.
No take backs. Your savings account deposit should be just as irrevocable as your mortgage payment or utility bills. You can’t call the gas company and ask for your payment back so you can buy a new outfit. Don’t take money out of savings for anything less than a real emergency.
Reduce expenses. There are so many ways to cut back, especially when you know it’s temporary. Do you have cable TV, a gym membership, an expensive stylist? Give those up for a few years. As soon as you have a year’s worth of savings, you can go back to the way things were.

Remember, saving money is not a sacrifice because the money is ultimately yours.

The holidays are here.

The holidays are here. If you need to stay within a budget, start early.

First, make a list of all the people on your holiday gift list, then see if you can make changes.

Could you give a family gift instead of individual gifts?

Can you go in on a gift with someone else and share the cost?

Would a name draw work for the family party? With a name draw, each person buys only for the person whose name they drew. It’s fun and inexpensive. Do a separate drawing for the children so each child receives one gift and gives one gift. Make sure to set a dollar limit that everyone can afford.

Once your list is complete, set a firm amount for each person and don’t go over. The grand total of all your gifts should be a realistic amount that you can afford. Be honest with yourself.

When shopping, keep your list of people and your budget amounts with you. Check the sales fliers now because holiday sales are already starting. Big retailers are also adding holiday layaway plans. Layaway plans work great if you know your budget. They allow you to make affordable payments without using a credit card.

You could also try giving gifts that don’t cost a lot of money. Service coupons are a wonderful gift. For example, you could cater a meal for a family that has a busy lifestyle. Try an inexpensive but meaningful gift, like a photo CD or memory album. The choices are endless if you take the time to think of what each person might enjoy most.

The most important thing this holiday season is to have fun and enjoy your time together. Create new memories instead of new debts.

You CAN Lower Your Out-of-Control Expenses: Part 2

Using instructions from last week’s column, you figured out your average monthly expenses. Now, you need to ask yourself two questions:

1.) Are you spending too much on some items?

2.) Can you lower the amount you spend on some items?

Some fixed expenses can’t be lowered. Your loans and mortgage/rent are legal agreements, and full coverage insurance is mandatory with some loans. But, you do have some control over your utilities. You can choose a different phone company. You can also control how much water, gas, and electricity you use by making small changes. Try line-drying your clothes, using a fan instead of air conditioning, or running the dishwasher only when it’s completely full.

Look to your variable expenses to save money.

Do keep up your auto and home maintenance, but try to cut back on groceries, entertainment, gifts and clothing.
Try using the library, buying cheaper food brands, and buying seasonal clothes at the end of the season.
Instead of buying expensive gifts, give “service coupons.”
If you’re spending more than you earn, some of these changes will be mandatory.

With some creativity, it’s possible to reduce expenses without feeling deprived.

You CAN Lower Your Out-of-Control Expenses: Part 1

Not sure where your money is going? Let’s find out.

First, make a list of your fixed monthly expenses. (“Fixed” means the dollar amount is the same every month.) These include items like:

mortgage/rent
loans
and insurance.

Utilities go under fixed expenses because they only vary by season. If you’re on a utility budget plan then you already know the amount. If your utility bills vary month to month, then add up the last 12 months and divide by 12 to get your average for each utility company.

Now, make a list of your variable expenses. (“Variable” means the dollar amount changes every month.) These include items like:

your groceries
entertainment
auto/home maintenance
gifts
clothing
and more.

The amount will vary each month, so get the average monthly expense for each item by adding up the last 12 months and dividing by 12.

Were you shocked by how much you spend and how you spend it? Most people are. We’re busy people and we like convenience, which means we tend to spend more than we should. Check back next week for Part 2 to find out what to do with this information.