Save First before your Spend at Monday, October 27, 2008

What's the first thing that comes to mind when pay day is near? Most people don't think 'save first'. We think of what our expenditures are and then we check our savings. This is still good considering that savings is still on the list. What's bad is that most of the time whatever is on the end of the list gets kicked out of it.

When I tried a pay day loan once, I was deducted $50 every payday. I figured, if I save that amount, I will have $100 a month and $1200 by the end of the year. The only reason why I am now capable of setting aside the $50 is because I am obliged to do so as supposed to just setting aside the same amount for savings and having a spending relapse the next day.

Which is why we all have to have a new perspective of savings. According to Yahoo! Finance:

1. Put savings (and yourself) first with the budget. A budget allows you to understand where the money goes and may help you free up cash for important savings goals, such as college and retirement.

2. Get Started. How you create your budget is up to you.

The first element of any budget is your income, or how much money you receive each month. This can include paychecks, legal settlements, alimony, royalties, fees, and dividends from investments that you do not reinvest. Once you know what your monthly income is, you can use a budget to make sure you don't spend more than you earn, thus helping to reduce debt and freeing up cash for savings.

Next, you need to know how you spend your money. Start by tracking your spending for a month. Gather bills and receipts, and don't forget to include newspapers from the corner store and trips to the soda machine. Don't assume any expense is too small to record.

Write down your expenses and break them into categories. Using the budget worksheet as an example, we find Fixed Committed Expenses -- mortgage, loan, and insurance payments that stay the same from month to month; Other Committed Expenses -- things you can't live without, like food, utilities, and clothing; and Discretionary Expenses -- things you like but don't necessarily need.

3. Less Spending means More Savings. Begin by canceling magazine subscriptions to titles you don't read. Eat fewer meals out, or choose less expensive restaurants. Across much of the country, you can rent two DVDs for the price of a single adult ticket to a movie and throw in some microwave popcorn for a dollar more.

4. Dig Deeper. Once you've reduced discretionary spending, look at those Other Committed Expenses. Can you reduce the grocery bill with coupons or more economical meals? How about taking public transportation instead of cabs?

5. Your Next Goal: MORE Savings. It might also help to set a savings goal, both for short- and long-term needs. Studies have revealed that families with savings goals tend to save more.