Starting Your Savings in 3 Easy Steps

Having a positive attitude towards savings is one of the greatest behaviors that you can have around your finances. In basic financial advising we learn that clients should establish an emergency savings fund equal to three to six months of their living expenses.  

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Savings for your emergency fund is one of the most important concepts in financial advising.  Too often, an individual’s finances are ruled by their emotions and biases, we often overlook the boring future of saving for a rainy day when we can get instant gratification (something now). Unfortunately, no one can predict when an emergency situation might pop up, from the car breaking down to a medical emergency of yourself or a loved one; and if you don’t have the money set aside you may have to charge the expense on high interest credit cards or shuffle other bills around so that you can get back to work to pay those expenses off. The good news is that wherever you are financially, you can begin saving in three easy steps. 

1) Begin your budget / know what you can do and what you need

Knowing and executing your personalized budget is one of the keys to your financial success.  You want saving money to be fun and rewarding, as your balances increase they will become something that you can be proud of. Recognize and celebrate the milestones that you accomplish. 

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2) Have a specialized account

Have an account at a second financial institution that is just for your savings. If you are loyal to your bank or credit union, or if you get special pricing or discounts where you are you can even go as far as removing your specialized savings account from your online banking so that you are not tempted to move the money when the budget gets tight. 

3) Move the money / make it automatic

Pay yourself first, save time and your money by making savings automatic. Set up an automatic transfer, have a separate direct deposit from your paycheck, make it a game each time you spend on something that may bring you guilt (that $8 gourmet coffee) transfer the equal amount to savings.  

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At first, it doesn’t matter how much you are saving as long as you start. As time goes on and you have a good handle on your savings it’s time to crank down, reanalyze your budget.  A good motto I learned years ago is “save until it hurts”. Continue to contribute to your savings, in some manner, until your financial life is feeling tight. Focus on the process and the outcomes will take care of themselves. 

Start your savings and let me know how it’s going.

Basics for a Budget

We are in a world where we have immediate access to our balances with our smart phones and online banking many of us have stopped budgeting taking the mentality of if there we can spend it and hope that we can make it to the next paycheck.  We are in a place where a report on the economic well-being of U.S. households by the Federal Reserve states that 4 in 10 adults would have difficulty covering a $400 emergency expense. Create your budget and begin to take control of your financial life.

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Creating and sticking to a budget is what my most successful clients attribute to their financial success. Having and sticking to a budget puts safeguards in your financial life to help ensure you will have the money you need for the emergencies that arise and for your desired financial life.

What is a financial budget?

As defined by Merriam-Webster dictionary, a financial budget is “a plan for the coordination of resources and expenditures; or the amount of money that is available for, required for, or assigned to a particular purpose.”  In simpler terms, this means having a plan for all of the money you make. Everyone has their own beliefs on how to budget, but it really comes down to figuring out the method that works best for you.   The simplest way to begins is with this equation: Income – Expenses = +/- savings. The income you make less the money you spend equals the money you save from savings or borrower from savings or other debit instruments.

What is your budget’s purpose?

The first thing in knowing what you are doing is why you are doing it. What are your goals? What do you want your money to do for you? What does your money represent? Are you working for your rainy day fund, paying off debt, a car, a home, retirement? Place these financial goals in writing, write down the why behind each the more detail you can create behind these goals and actually see in writing the more likely you are to stick to them. When starting out on your goal being realistic in what you are saving for in relation to your income within a specific time frame is going to help start the process.  Once you have a clear vision on what you are budgeting for you can set up your budget.

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 What information is needed to create a budget?

Setting up your budget will be the easiest part of the process you will need to know your income, expenses and what you will need to add to savings to reach your goals.

Income. Truly knowing your income, this is your inflow in the income equation, for some this is an easy equation and doesn’t change much from month to month. For others, there may be variation and volatility in their incomes if it’s based on tips or commissions, here I recommend that you track your last two years history to look for seasonal trends. For your income section of the equation, use your net income, what you actually receive into your account after taxes and other items are removed from your pay.

Expenses. Today, it’s relatively easy to see where your money is going thanks to digital banking. Track every dollar with the use of online banking to make things easier many banks have budgeting tools or allow you to download your budget directly to an excel platform where you can get a clear picture on your most common expenses.  Once you have a clear picture where your money is going you can see any irregularities and where you can cut expenses to move towards a saving mindset for your financial goals that you have set.

Savings. Now that you know the answer to the question of how much you have left, it’s time for the hard part, following your budget. This is why you wrote down clear concrete financial goals that you are striving for.  Start with paying yourself first with the money that you budgeted to your goals. Every dollar counts.

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Track and review the process. You will need to continuously track your progress as you move through the process so that you can continually reevaluate your budget and make adjustments as you move along. It is best to review and plan out your next month’s budget before the next month begins. Also as time moves forward, hopefully, your income does as well, often your expenses change with time as well. While you continue to track your expenses and income, make adjustments, and begin to reach your financial goals take the time to reflect and realize your successes.

Let’s have a conversation, how can help each other find better ways to budget. Post a comment, provide a recommendation, or ask a question. Let’s learn together.

The Mission Behind Better Money Discussions

My passion is in helping others understand finances, while attempting to simplify the complex world of banking, lending, and investments.

There is so much information being bombarded at us­, corporate advertising, advice from friends and family, and worst of all advice from inexperienced bankers and subpar advisors that are supposed to be our go to professionals. Additionally, there is an abundance of inexperienced individuals in the financial industry that the public relies on for professional advice; and even more professionals who attempt to make a convoluted industry more confusing, by using complex processes, products, and jargon that deliver below average returns while charging exorbitant fees.

After several years in the financial industry, I have witnessed to many people giving bad advice based on their personal opinion, lack of knowledge, or for the sole opportunity to earn a commission. In fact before coming to the financial industry I experienced this first hand and have been a victim of catastrophic losses due to professional advice of my “trusted” advisor. Following this advice blindly caused irreparable damage to my financial future at that time. I whole heartedly trusted my advisor to do the best thing for me, I never questioned their advice even when they were recommending products and services that I either did not fully understand what the charges were and how those charges would affect my returns. However, this was the catalyst for me to begin my mission. 

My mission is to educate my clients and readers to help improve their financial literacy that will allow them to make informed financial decisions that will empower them to take control of their financial lives. Serving others to better understand financial concepts in regards to banking, lending, and investments. In an effort to help others fully comprehend: the what, the why, and how much it cost. I truly have a passion to help others learn financial security in the present and financially plan for their futures.

It is my hope that you will use this information as a stepping stone in your financial education. Don’t let it be your last stop in learning process or on your mission to creating the optimum finical future for yourself, make it your starting point. I welcome your questions and comments not only to help you understand finances better but to assist me in my mission to better help my readers and clients through my commitment to continually learn and provide you with more knowledge, comfort, and empowerment.