How to Budget & Save
As a consumer, you face many choices on how to manage your money.
Knowing how to manage money can help you make smart choices. Your money will work harder for you. You'll be more likely to avoid traps that can undermine your ability to attain your financial goals. You'll be in a better position to pay off debt and build savings.
Being smart about money can help you buy a house, finance higher education or start a retirement fund. A money management game plan can help you get started and stay with it until you achieve the goals you set for yourself.
A game plan for learning about money management
A few simple steps can make a big difference in making your money work harder for you.
Establish goals. Where do you want to be?
Use the work sheets directly below to help you identify your goals. Print them and fill them in.
Without goals, it's difficult to accomplish anything. When you think about your future and what you want to achieve, it's helpful to establish a timeframe.
- Short-term: such as paying off credit card debt, saving for a vacation or buying new clothes
- Intermediate: such as saving to buy a car
- Long-term: such as saving for education or for retirement.
Estimate the cost of each goal and the date you want to achieve it. Then figure out how much you need to save each month. Try to set realistic goals and saving requirements.
Create a budget. Determine your current situation. Where are you today?
Now that you've figured out your financial goals, you are ready to create a budget that will help you attain them. Print the budget work sheets below and write in your budget figures. Start by writing down your expenses (under Current Monthly Expenses).
Monthly fixed expenses
Start with monthly fixed expenses such as regular savings, housing, groceries, utilities, and car payments. Put these continuing obligations under the heading: Fixed.
Use checking account statements, credit card statements, receipts and other records to help you complete this estimate. Be realistic - it's better to estimate high than low.
Remember that savings is considered an expense even though you keep the money. You work hard. You deserve to keep some of what you earn every month. Savings is the key to meeting your financial goals.
Make estimates for all money spent - regardless of how you pay: cash, check, credit card, debit card, automatic checking account withdrawals or savings through work plans such as 401K or 403B plans.
Monthly variable expenses
Once you have noted all your fixed expenses, write down your expenses that vary each month such as clothing, vacations, gifts and personal spending money. Put these expenses under the heading: Variable. You might have these expenses every month, but the amount you spend could change.
Get a handle on variable expenses by writing down every expense for a month - even small purchases. Use a small note book or other informal method to track your spending. This is very important because it's the best way to understand your current spending behavior. Get receipts for all purchases - especially those you make with cash. Record and categorize each transaction. You may be surprised at how much you spend in certain categories.
Use a notebook to write down every purchase you make for one month. This is the best way to understand your current spending behavior.
List your monthly income
Now that you have figured out your expenses, write down your monthly income after all taxes and deductions. Write this under the heading: Monthly Income. Make sure this figure reflects the total take-home pay for your household after all taxes and deductions.
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