Do you find yourself with too much month at the end of your money? Would you like to “Pay Yourself First” but haven’t figured how? Would you like to S-T-R-E-T-C-H your paycheck or income? If you answered “Yes” to any of these questions, the good news is that it will only take you half an hour to start feeling financially fit. Isn’t that time worth it to get out of debt, build your savings or save more for your retirement? Fulfilling many of your financial goals is within your reach – or at least your personal spending. You can control every penny that you spend; while it is much more difficult to increase your income. There is money to be found in every spending plan, which is the foundation of our financial health. To uncover that found money, complete the following exercises – especially the first! It should take no more than half an hour. You will find that once you accomplish these exercises, you will breathe a sigh of relief and have the energy to tackle the rest of your finances!
Jot Down Every Dollar Detail
On a sheet of paper, write down everything you spend for the month. The goal is to come up with one monthly number that reflects all your spending (i.e. to walk out your door, it costs $3,000 per month). While this sounds simple, there are two areas that most people forget: annual expenses and small purchases. Annual expenses that are usually forgotten include: vacation, insurance, holiday gifts, professional services, school, medical expenses, clothing purchases, taxes and charitable contributions.
Then take this number and divide it by 12 to figure out how much this adds to your monthly expenses. You might spend $1,000 a year on clothing for your family; therefore, add $83.33 to your monthly expenses. Now tackle the small purchases, such as all food and meals. Perhaps you buy a $3 coffee daily. That equals $60 per month ($3 X 5 times/week X 4 weeks). Don’t forget about clothing, taxis/transportation, gifts, personal beauty, books, CDs and magazines/newspapers. Once you have that monthly number, see how it compares to your income.
Five Places to Plug
Now comes the fun part. Find five places to plug in your monthly spending. Don’t eliminate, just prioritize. Set a spending limit for what you really want to buy. If you love to shop and are spending $200 per month on clothing, lower it to $100 per month. Therefore, you are not depriving yourself, but you now have a set amount that you can spend everything month. By finding five places to plug in your budget, you can squeeze out at least $100 - $300 extra per month from your spending – if not more.
What to Do with the Found Money?
Now that you have your “Found Money”, what should you do with it? Divide that amount into the following categories:
• Retirement Savings
• Other (children’s college savings)
If you have debt, most of your Found Money should go towards your debt, but you should still save some money every month. If you are debt-free, make sure you have an emergency savings account and a retirement account as well. Next: saving without thinking.
Make it Automatic
Setup an automatic savings account. Most great savers do not think about saving, it is done automatically. Ask your bank to automatically transfer a set dollar amount from your checking account to a money market account. For example, on the 15th of every month, they will transfer $50 to a money market account. This money can be used for your emergency savings or holiday gifts. Check out www.bankrate.com for a higher interest rate money market in your area. You can still link it to your checking account and get that money out automatically.
Still worried about finding that extra money? Don’t fret, just take ½ hour from your schedule this week and get started. Enlist a friend and do it together over a cup of coffee. Call your sister and do it together over the phone. Make it a priority and get ready to start sleeping better at night once you do!
©Copyright 2007 Down to Earth Finance, LLC