Do you tend to avoid the B-word—budget—at all costs? You are not alone!
It was once a standard practice for our Spokane fiduciary financial planning firm to ask clients to put a budget together and report back to us with a living-expense number. We quickly learned, however, to change our tactics. Why? Because very often, we never heard back from those clients! They felt overwhelmed by the task of reproducing their spending practices in the form of a written budget.
With this in mind, we want to share some simple tips and tools to help you start saving and stay in control of your finances, even if a written budget is your worst nightmare. We’ve learned it does not need to be that hard!
- Spend less than you make. This might sound easy or intuitive, but in practice, plenty of people struggle to set limits on monthly spending. It takes some discipline, but it can be done.
- Pay yourself first. Pick a dollar amount that you can afford and put it into a savings account as soon as you get paid. This will keep you from saving only whatever is left over at the end of the month (i.e., whatever was not spent on food, bills, and entertainment). By paying yourself first, saving monthly will become like clockwork, and your savings account will grow much faster.
- Make it automatic. To build on the previous point, it is a great idea to set up an automatic monthly transfer from your checking account to your savings account. This ensures you’ll pay yourself first even if you’re too busy to manually move the money, and it’ll keep you committed to the plan.
- Take advantage of your employer’s retirement plan. Many companies offer to match your retirement saving contributions up to a certain percentage. By enrolling in the plan, therefore, you’ll not only build in an automatic saving strategy (plan contributions will come out of your paycheck and be invested even before your paycheck hits your bank account), but you’ll also take advantage of matching contributions (free money!).
- Make it hard to get. When setting money aside for an emergency fund or another critical savings goal, it is a good idea to house the savings account at another bank—separate from your regular checking account. This will make it a little harder to pull the funds out of the account and therefore increase the probability that the funds will remain untouched.
Saving for the future and other critical short-term goals is an important life skill, yet it is not the easiest thing to do. Sometimes we have to play a game with ourselves to trick ourselves into saving—but whatever it takes to reach the goal will be worth it!
Habitually saving up is a learned behavior that anyone can master. We hope these strategies help propel you toward your savings goals and lead you toward financial freedom.