Saving Money on a Monthly Budget
Many people use living on a limited budget as an excuse not to start saving, but this does not have to be so. By using a carefully maintained budget it is possible to achieve your savings goal.
1. Calculate your Expenses
The First step to saving money while on a monthly budget is to calculate how much you have to spend every month. This list of expenses should include food, rent or mortgage, bills, entertainment, and miscellaneous expenses. Anything that you have to pay every month should go onto the expenses list.
2. Set Up a Budget
Once you know how much you have to spend every month you should set up a monthly budget. This budget should include the entirety of the monthly expenses list you wrote. After you have added the list of expenses to your budget, subtract the total expenses from your monthly income. The difference is what you have available to save every month. So for example, if your monthly expenses are $973 and your monthly income is $2509 that leaves you with $1536 available for savings. You should set some of this aside for savings, and some for a rainy day fund.
The rainy day fund is separate from your savings, and is designed to be used in case of emergencies so you will not have to dip into your savings.
By using personal monthly budget worksheet you can quickly set up your monthly budget and identify your expenses and savings.
3. Set up a Savings Account
Once you have established a monthly budget and calculated how much you should set aside so you can meet your savings goal, you should set up an interest earning savings account. This account should be separate from your main account, so it is easier to distinguish what is savings and what is available under the monthly budget. If you are saving for retirement you might check to see if your employer has a program where they will match your savings investments. This will allow you to double the amount saved each paycheck.
4. Stop Using Credit Cards
While credit cards can be useful they also quickly gain interest, make it easier to gain debt, and to blow your budget. If you must use a card be sure to pay it off quickly and add that bill to your monthly budget. For more information, read our article about advantages and disadvantages of credit cards.
5. Find ways to Trim Expenses
Finding ways to reduce the amount you have to spend every month will increase the amount you have available to put aside into savings.
Some ways you may be able to cut expenses are; cooking at home instead of going out to eat, consolidating your debts to cut down on the amount of interest owed, reducing the amount of electricity used by adjusting the thermostat, cutting down on your entertainment budget by finding free fun activities and clipping coupons saves on retail and food expenses.
6. Pay Yourself First
Before adding anything else on your budget you should always make a payment into your savings account first thing every paycheck. While it might seem logical to wait, and pay other expenses first, that will make it tempting to spend the amount you are supposed to save. Instead, put the money into your savings, pay everything else on your monthly budget, and then at the end of the month, anything extra you have can be added to your savings.
7. Don’t Become Discouraged
Saving money can be hard, so it is always important to keep yourself motivated. Remind yourself about your savings goals, and occasionally it is okay to splurge a little on something fun. Saving money and maintaining your monthly budget will not be as difficult if it doesn’t seem like a punishment.