Create a Monthly Budget to Kickstart Your Savings
For some, saving money comes naturally. I am one of those people. It’s always been easy for me to put my extra money into a savings account and let it sit there for when I need it most. However, the more confident I get in asking other people about their savings, I’ve noticed a pattern.
A lot of people don’t save money.
Actually, a lot of people don’t even take advantage of their savings account, let alone have one. This realization baffled me.
How can people not put money into a savings account? What happens if there is an emergency? How do people end up affording big purchase items such as a house or car? Do people just have all their money in a checkings account, or do they spend it right away? I discovered that the answer to this question varies, but one pattern stuck out the most.
Many people who don’t currently save money simply don’t know how.
Realistically, it’s hard to save money when it feels like you’re barely getting by. This is why my mindset differs from a majority of people. If at the end of the month I only have $100 left over after paying my bills, I still put that $100 into my savings account. I personally aim to save as much as I can each and every month.
However, my saving habits didn’t happen overnight. Like most people new to savings, I started my money saving journey by putting myself on a rather strict budget.
Before I settled into a budget that worked for me, I tried other outlets such as using budget apps to track all my spending or documenting everything on an excel sheet. None of that worked for me. It all felt too tedious and overwhelming.
Instead, I laid out all my income and expenses and picked a realistic number that I could save each month, and I stuck to it. Sometimes that number was more because of overtime work, but I never saved any less than the number I set for myself. And guess what, this worked for me.
By saving money like this, I was able to pay off my student loan debt in two years, and I saved enough money to comfortably start a business without it hurting my wallet.
How can you save money each month? It starts with a budget. If the reason you haven’t started saving money before was that you didn’t have much money left over after paying your bills, or because you live a paycheck to paycheck lifestyle, a budget will help make space for savings.
The most important part in all of this is to decide you’re going to start a budget and stick to it. I guarantee if you stick to your budget goals your savings will grow in no time and so will your peace of mind.
Here is how to start a budget in order to kickstart your savings:
1. Total Monthly Income
Your total monthly income is all the money you bring home in a single month. This includes your full-time job, any part-time jobs, income from a side hustle, and government based checks. This step is the base of your budget, which will lead to the ultimate amount you can save each month.
Because of this, it’s important to be honest about the amount of money you make. If at times you are uncertain about how much you make in a month, don’t overshoot it. It helps to be conservative. For salary workers, it’s easier to know an almost exact number of your income. For us hourly workers, there is more of a guess factor. Just make sure the guess is accurate and realistic.
2. Monthly Bills/Debt
Compile a list of all your monthly bills and debt. When listing all your bills/debt, it’s vital to remember everything. To make this easier, check your bank statements from the past few months as a reminder of what reoccurring bills you have. Here is a list of potential monthly bills:
– Car loans
– Credit card debt
– Student loans
– Phone bills
3. Additional Expenses
List all additional expenses including costs such as gas, groceries, and entertainment. To be clear, entertainment is a broad section that includes dates, going to the movies, eating out, trips to amusement parks, and so much more. Also, the additional expenses category is a good place to add any charitable or church donations, such as tithing.
If you’ve never taken the time to list out how much money you spend in this category, it might be difficult. Each month tends to vary due to the entertainment portion of this section.
However, it’s important to remember that when creating a budget you need to limit your spending so that you can maximize your savings. Spend a little extra time on this category if necessary just to ensure you come up with the most accurate number for your monthly spending in this category.
This step is optional, but it sure does help with organization. Since you’ve listed out all of your expenses, put them into what I like to call ‘Major Categories’. These major categories include household, automotive, subscriptions, utilities, etc.
The reason for this extra step is to compile your sending in their major category and see where spending may be high or where you can make cuts. However, if you don’t feel the need to be this organized, go ahead and skip this step.
Get out your calculator and total up all your expenses. Since we are creating this budget with the intention to save money, see where you can cut some spending.
Most likely it will be from the “entertainment” section and additional fun things such as subscriptions. Since bills are rather concrete and necessary, the money you spend on having fun each month can most likely be cut and limited for saving purposes.
6. Leftover Monies
Now that you know how much you spend each month (hopefully it’s not too much of a shock for you), determine how much money you have leftover. To do this, subtract your monthly income from the money you spend each month (step 1 minus step 5).
Example: if you make $1500 a month and have $800 in bills, your leftover money is $700.
Based on your leftover money, decide how much of it you will set aside. If you have $700 leftover and all your bills are accounted for in your budget, you can realistically put $500 into your savings each month. Whatever number it is that you come up with, decided right now that you will commit to saving that amount each and every month.
8. Automatic Transfers
To make savings a no-brainer, set up automatic transfers from your checkings account to your savings account. Most banks offer online banking options, which makes setting up automatic transfers easy to manage.
The other benefit of automatic transfers is that each month, on whatever day you choose, you know that your allotted money will be transferred into your savings account without you having to drive to the bank to do it manually. If you’re dedicated to sticking to your budget while building your savings, you can be confident in transferring a consistent amount into your savings monthly.
Those are the 8 steps I took when creating a budget that led to my abundant savings. If you follow these steps, this can also work for you. Remember, your budget is not set in stone. If something isn’t working for you, or you take on more bills, feel free to adjust it so that it works for you. The goal is to create a healthy savings, and to do so, you need a healthy budget. So, adjust accordingly.
I really hope this works for you and that you have great success with your budget and savings account!
Save on, my friends!