By Vera Wilson
of the secrets to a healthy financial future is to develop strong
money-savings habits now to be used over your lifetime. The key to real
savings is understanding all aspects of your finances, using that
knowledge to your advantage, and exercising some financial discipline.
Get a grip on your spending
There's an old self-help book titled If You Don't Know Where You're Going, You'll Probably End Up Somewhere Else
(Thomas More Association, 1990). It's never more true than with your
finances - therefore, a budget is a must. To begin, track your spending
for a three-month period. This means analyzing your checking account,
credit and debit cards, and even your pay stub for deductions like
health insurance. Always keep a piece of paper or ledger in your wallet
to record cash outlays.
Once you get over the shock of how much
you spent on going to the movies, closely examine all of your spending
habits and determine whether they're in line with your short- and
long-term goals. If you want a new car, how much do you need to set
aside each month to make the payments? What area realistically can you
take that money from? Numerous resources are available, such as
Mint.com, to guide you in developing a meaningful budget.
it's time to put your budget into action. One tried-and-true method is
the envelope system. Label an envelope for each budget category, and
where practical, put cash in each envelope equal to your monthly budget.
When it's gone, that's it - no reaching for the credit card! This
visual approach can save users up to 15 percent.
tech-savvy approach would be to use a phone app, like BillGuard, that
automatically tracks your spending and allows you, with a quick glance
at your phone, to see what's left in your budget before you make that
Planning for spontaneity
buys are the bane of every budget's existence. The 48-hour rule will
prevent you from sabotaging your budget, and it's simple: Wait 48 hours
before you actually purchase a coveted item. Often, you'll find you've
forgotten all about the coffeemaker you just had to have, or you've come
to your senses and dodged some serious buyer's remorse.
about those times you just can't fight it? A budget has to be realistic
to work, so to ensure you don't break it, go ahead and label one of
your budget envelopes “splurge fund,” so, in theory, you're planning
Regular checkups mean more money in your checking account
important to get in the habit of regularly reviewing your finances,
some more often than others. For example, if you're consistently
spending more money than planned on home maintenance, you need to either
divert budgeted funds from somewhere else or maybe pick up that hammer
yourself and pocket the savings. The important thing is to quickly
adjust any changes in spending habits before they get out of hand or
your best-laid plans will fail. Schedule weekly reviews of your
household expenses until you feel you've gotten a handle on your new
budget, then shoot for monthly reviews.
Just as important are
annual reviews of financial contracts - insurance and tax obligations,
as well as bank agreements. You don't want to miss an opportunity to
save as your situation changes.
For instance, insurance agents
don't always specifically mention all the discounts their company might
offer, such as a good student discount, so do your necessary research to
take advantage of offers for which you're currently eligible. As
insurance goes up, a move to a larger deductible might be in order.
Question the replacement value of your home, which usually automatically
goes up each year.
Does the tax value of your property seem
reasonable to you? Review for accuracy the details about your home, such
as acreage and heated square footage (found on your local government's
website), and report any discrepancies. Search car-selling websites; if
your car's appraised value seems out of line, schedule a meeting with
your tax assessor to show him the data and your car.
arrangements are notoriously tricky; one late payment substantially can
raise your interest rate. Do you know your current rate? If you
regularly incur interest, and it's higher than what you think you can
get elsewhere, contact your company and tell them you're cutting up your
card if they don't lower your rate. Have a high balance? Check out
balance transfer options that offer no or low interest rates for a
period of time.
Look at your bank statements - are you paying more
in fees than you're earning in interest? If so, check out Internet
banks for lower expenses.
The bottom line is, if you're not
watching your bottom line, nobody else is, and it quickly can spiral
downward. Adopting these easy money-saving habits will help you secure
your financial future.