Once you know what money you have to work with and where it goes, you get to shift focus from what is to what could be. Where do you need and want your money to go?
Pay yourself, first
You have to pay everyone else — why shouldn’t you get your share? The answer is, you should. Your spending plan helps you pay yourself.
Make it a goal to set aside a minimum of 10% to 15% of your monthly gross income — meaning your pay before deductions are taken out — to reach your goals.
When you’re just getting started, you’ll be saving into a savings or money market account to secure yourself against the unexpected. If you’ve got consumer debt to deal with (think credit cards, personal loans, and auto loans), build up a small emergency fund (perhaps $1,000), then focus on debt reduction.
Once you’ve got an emergency fund and your debt is under control, you can start saving towards things you want in your future. It’s fun because now you’re getting to keep some of your money!
Work up to it
To reach your savings goals, you may have to cut back — or cut out — spending in other areas. Look back to your budget and ask yourself, “What can I cut to free up the funds I need for savings?” Examine every single one of your expenses.
You can often create space for saving, investing or debt reduction by cutting back on “wants.” Dining out. Sports events. Coffee shop stops. It might be easier than you think to cut these when you consider the alternatives.
More dramatic cuts might include changing what you drive or where you live. And if you find you can’t free-up enough funds by cutting expenses, it’s time to find additional income.
Whatever savings amount you can squeeze out of your spending plan is a great start. The best savings trick is to “set it and forget it.” If you don’t have to think about savings and you never see the money, you’re more likely to leave it alone.
You can set up an allotment — similar to a civilian direct deposit — so that some of your money goes directly to savings each month. Or, if your goal is long-term retirement savings, you can fill out form TSP-U-1 or go on myPay and begin contributing to the TSP.
Go for it
Now that you know what you should be spending, and what you want to be saving, it’s time to make it real. A budget is just a bunch of numbers until you actually follow it. Let’s do this thing!