We can probably all agree that the overall goal of creating and sticking to a budget is to save money. Often the goal is to pay off debt, credit card or otherwise, which ends up saving money that would have been paid in interest. Once goals such as these are met, the real saving begins. While budgets can help with immediate problems, the best results are achieved when they are followed long-term, enabling those adhering to them to save for the future.
In setting up your budget, the first step is to set realistic goals
Personal savings accounts in America are steadily becoming scarce, and the balances of those accounts in existence are also declining. While it's true that more people are getting involved in alternative investments, real estate and the stock market, for instance, Americans are also spending more than ever, putting off saving for another day. Separate yourself from the rest and begin saving today.
In setting up your budget, the first step is to set realistic goals. It's important to know how much you have coming in each month, really, and find out how much is going out. The first stage of your budget will be analyzing how much you really do spend by tracking your purchases.
How much do you spend?
It's essential to know your current spending status so that you can take steps to lessen your spending and increase your savings. While it's important to be financially conscious always, the focus of the first week to month of your budget should be on establishing how much you spend. You may find that in keeping close track of your spending habits, you actually begin to spend less than you did before. Being accountable to your notebook or computer, or wherever it is you keep your records, can be helpful in this way.
Once you've established how much you're spending, you can go through your budget and find ways to slim your spending and add funds to your savings. If you're in the habit of grabbing a coffee on your way to work, consider making your coffee at home and drinking it there. Likely, you'll save both money and calories. You might also consider bringing a lunch to work instead of heading out. If your car insurance seems high, try shopping around to see if there are cheaper offerings available to you. If you're considering purchasing a car in the near future, consider a previously owned one, as much of a new car's value is lost in the first year. There are countless ways to cut down on spending, and some are more dramatic than others. The cuts you make will depend on the changes you want to make and the obstacles you have to over come.
Pay others down
If you truly want to start saving money, it's important first to take a look at the debts you have in your name. If credit card debt is piling up, it's probably most important to take care of those first. Most likely, the interest rate you're being charged there is higher than the interest your money might gain in a savings account of any type. By cutting out unnecessary spending habits, you can put the money you've saved in these arenas towards paying off your debts, enabling you to save more in the future.
Many find it effective to tackle their smallest debts first. Using this method, budgeters pay the minimum payments on all their accounts and put any available funds towards their smallest debt. Once this debt is paid off, the pattern continues, with the available funds now going to the second smallest debt. The same amount is paid each month, but the amount going towards the smallest account slowly rises, making it possible to tackle all debts eventually.
You owe yourself
When you have your debts out of the way, you can begin saving for yourself and your family. List your savings on your budget and allot a certain amount each pay period. This way, there isn't “extra” money available for careless spending. Try for a zero balance on your budget; every dollar should have a purpose. This doesn't mean that every once in awhile you can't do something fun for yourself. In fact, it's a good idea to allot a certain amount of “fun money” each pay period, as well. The important thing, however, is not to do so in excess.