Have a real budget
As the Motley Fool
recommends, it’s important to have a budget, and stick to it. Many people say budgets don’t work for them, but that’s often because they aren’t budgeting for what they do spend, they are budgeting for what they wish they’d spend. For example, they might say they’ll pack a lunch for work every day of the week, while knowing full well that it’s a habit they won’t be able to follow through on.
A good way to get a handle on your budget is to track your spending for a few months; you can keep track on a spreadsheet, with software, or even by going through your budget. Tally up what you’ve spent on all categories, from entertainment to housing expenses. Then start to make decisions. Are you spending money the way you want to? For some people, being able to dine out a few times a week is an important part of their mental well-being. If that’s true, consider what you’re willing to give up to make that happen.Get out of debt before you saveFamily Money Magazine
is one site that continually offers good financial advice, it’s targeted towards those who are already in a moderately positive financial position and families that struggle with their financial management. The site offers great piece of advice on how to manage your spending and reach financial goals.
One frustration many people have with financial advice is the various ways that columns suggest that people save their money. Dave Ramsay
, who has been a famous financial advisor for decades, has always been very clear: you have to get out of debt before you start to save. He recommends building an emergency fund, so that when something happens you don’t have to rely on credit cards, but once you have a thousand dollars or so set aside, your next step is to pay down all your debt as quickly as possible.
He considers this crucial, since interest rates cost you money every single month. Getting rid of interest payments is its own savings method, and can make a huge difference in your quality of life more quickly than you think.Find the method that works for you, and stick to it...
There are dozens of different programs and options out there to track your spending and see what you can do to modify it. For example, many people are fans of YNAB, which is similar to the famous envelope method
, updated for a debit card age. This method suggested that you divide up your cash based on what you needed to do with it. You might put $100 in your electric bill envelope, $200 in your groceries envelope, and $50 in your dining out envelope.
When you went out to eat, you would use the money in your dining out envelope; if there was no more money there, you had to take it from another envelope, which made you think: do I want to eat out more than I want to splurge on groceries this week, or can I eat very cheap this week?
YNAB does this through computer software, and advertises that it “gives every dollar a job.” The site also has a great blog with lots of financial tips and success reports from people who’ve gotten out of debt and moved into healthier and happier lives....unless it doesn’t work for you
Sticking with your budgeting and saving method is a great plan, unless it isn’t working for you. If envelope systems aren’t getting your finances where they need to be, a 50/30/20 plan, described on CleverGirlFinance
might work better. It doesn’t matter how you budget, as long as you do budget.Take advantage of employer sponsored retirement plansNerdWallet
is another good site that continually offers good financial advice, although it’s often targeted towards those who are already in a moderately positive financial position.
You can have your contribution automatically deducted from your paycheck, and money is deducted pre-tax, so you barely feel it in your actual take-home pay. You should save at least as much as your employer will match, since they're basically giving you free money.Know why you’re investing
When you’re out of debt and you’re starting to save, it’s important to consider what you’re saving for. If you’re planning for income during your retirement years, the type of investments you choose will be different than if you are saving in order to help put a child through college. There are so many different types of investments; IRAs, stocks and bonds, even real estate, but proper investment requires careful planning and a solid exit strategy for when your investment goals have been achieved.