Saving. We hear about it, we know it's imperative-- but do we actually do it? Forget the concept of having at least 2-3 months’ worth of living expenses stashed; did you know that well over half of Americans don't even have $500 saved in case of an emergency? Right now, if your mechanic said you needed new tires, what would you do? I understand that there are some who truly can't help their current situation, but for those of us who can, we have to do better. It all starts with accountability, organization, discipline…and basic budgeting.
Firstly, you have to hold yourself accountable for your spending habits. All of that eating out and frivolous spending may not actually be in your budget—and you’re well aware. Now, you just have to stop running from your spending habits and financial situation, face it head on and “fix it.”
Once you’ve taken that first step of accountability (which usually comes after the admission and acceptance), it’s time to get organized. I know, I know—some of us can function in chaos, but your finances should always be an exception. Organizing your finances by writing things down will provide a much a clearer picture of your situation. Start by writing down your debts and interest rates (from lowest debt amount to highest), then move on to writing down your monthly expenses and due dates for all payments including rent, utilities, debts, and other significant expenses. This will help you visualize your responsibilities and remember your payment due dates. We'll discuss paying down debt another time, that deserves it's own post.
Once you’ve recognized all of your household/priority expenses and have separated your payments by pay period (which is also helpful), you’re ready for the hardest, but very important part of budgeting—discipline. Typically, you should be saving at least 20% of your earnings per month. I know what you're thinking, "Girl, bye! You TRIPPIN!" but that's only $20 for every $100 made. Think about all of the things you spend money on outside of your household items: eating out, shopping, traveling, going out, movies, hair, nails, lashes, brows, shoes, clothes for going out, clothes for work, bags… the list is extensive. With proper discipline, saving isn't as hard as it may seem. You just have to decide what areas of discretionary spending are more enjoyable and save until it hurts in those that aren't. For example, if you enjoy eating out (this has always been my issue), and shopping (this too), then you may have to cut back on the clubbing, and handbags (and shop sales). That's right, you have to choose. The money that you've cut back on spending, save it. Think about the 50/30/20 rule. 50% for your essentials, like household and living expenses, 30% for discretionary and lifestyle spending, and 20% into savings. Adjusting the percentages may be appropriate, but only as it pertains to your household expenses. Baby steps may help, so you can start by saving 10% each month (direct deposit, so that you don't feel tempted to spend it before making the transfer) and work your way up. Remember, "discipline".
I know you're probably not feeling it, but it does make a little more sense now, huh? In reality, you should have an emergency savings, retirement savings, and a savings for “big purchases” (such as travel, birthday spending, etc.). We never know what curve ball life my throw, so it's important to always be prepared or work towards being prepared. Plus, it feels great to know that you have money in the bank. The next time you get paid, think to yourself, "Have I paid me yet?"
How do you budget? Comment below and let us know how you organize your spending.