Simple Must-Know Tips to Rock Your Budget

how to create a budget

How to Create a Budget That Works!

In this article I am going to share simple steps for how to create a budget that works! These are simple steps that even those who hate budgeting or who have failed at budgeting before can do!

 

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Check out these related articles:

 

How to Create a Budget: Simple Steps That Actually Work

I know that if you are trying to figure out how to create your first budget, you might be a little nervous. You may have a strong emotional reaction already when you hear the B word. You might feel nervous at the thought of even trying to get a handle on your money.

You might be afraid of what you’ll discover when you dig into the numbers. You might feel like you’re giving up your freedom by creating a budget. If it helps, use a different term—call it a spending plan. Call it your own personal P&L statement. Do what you need to to start breaking down any psychological barriers you might have to budgeting.

That is important because one of the best things you can do to build lasting financial security and wealth for you and your family is to create and begin to live on a budget or spending plan.

And when you do, you’ll likely feel like you got a raise. Because when you finally really start deciding what to do with your money each month, rather than just wondering what happened to it, you can start to do wonderful things with your money, such as really beginning to clean up your debt, saving, investing, and giving to causes you care about.

This is because, as one financial expert notes, by getting control of your finances—and particularly your spending—you gain control of your best wealth-building tool—your income.

If you managed the finances for a multimillion-dollar company, you wouldn’t dare do it without tracking all of the income and expenses—and if you tried to do your job without tracking the numbers, you would get fired pretty quick. That’s because you would not have the information you need to manage  that money well.

And the reality is that over the course of your life, Your Family, Inc., is literally going to make you millions of dollars! Isn’t that exciting? I mean, really, when you think about it, isn’t that awesome news? So let’s get started making you wealthy! It will take a little time and effort, but you can do it! And I’m here to help you.

 

Simple Steps for How to Create a Budget

Here are the simple steps that you can follow to help you create your first budget (and be successful at it!) so that you can really begin to get control of your finances and work to reach your financial goals and dreams. These simple steps I discuss below will show you how to create your first budget and really begin winning with your money.

 

1. Track what you spend as you work to create your first budget.

Track what you spend for a couple of weeks or a month to really get a good feel for where your money has been going. This doesn’t have to be perfect; just do your best. Use a debit card to make purchases and pay bills as much as possible during this time so that you can go to your bank or credit union website to see what you have spent.

2. Start with a simple, hard-copy budget.

When you very first start budgeting, I recommend using a paper budget. This lets you gives you a simple way to create your first budget by helping you to get a rough idea of what you would like to spend where. You can sign up here for a simple budget that will help you get started.

3. Then switch to a digital budgeting system, if you prefer.

Once you get the hang of budgeting and have done it for a few months, go ahead and switch to a digital system.

Or if you really can’t stand paper and you prefer to do everything electronically, you can build a budget in Excel or use a program such as You Need a Budget (YNAB.com). It’s a great, user-friendly budgeting tool with a lot of awesome features.

Other good options for budgeting are Mint.com and Dave Ramsey’s EveryDollar.

Or, especially if you have begun investing for retirement or intend to soon, you should sign up for my favorite money tracking app, Personal Capital. Personal Capital not only tracks your spending for you and lets you see all of your bank accounts and credit card accounts but it also tracks your investment accounts, as well.

I love that it provides a complete picture of your overall financial situation and helps you monitor your progress  If you’re investing in a Roth 401(k) or IRA or have other investments, then sign up for a free Personal Capital account here.

 

Check out these related articles:

Budgeting Fail? Try This Simple Alternative to Budgeting
13 Surefire Steps to Help You Stick to Your Budget
9 Must-Know Tips to Help You Finally Start Saving!

 

4. List all income sources as you work to create your first budget.

If you have a job where you receive regular paychecks, this shouldn’t take too long. Simply add up all income (for you and your spouse), and write that number at the top of the page. Don’t forget to include freelance income and any money earned from second jobs, overtime, or side hustles.

 

5. List all of your expenses.

Then begin to list your expenses. Don’t forget to include tithing and charitable giving in this category.

Do a zero-based budget so that every dollar you have goes to a designated place. If you don’t, it’s almost certain that the unallocated money will get blown in one area or another. Be intentional with all of your money so that your money really works for you.

First list your regular, fixed expenses. Gather your regular bills, such as mortgage or rent payment, car payment, public transportation pass, utilities, health insurance premium (if not deducted automatically by your employer), cell phone bill, internet bill, car insurance bill, and so on.

Then list your variable expenses. After you add up all of your fixed expenses, figure out your variable monthly expenses such as groceries, gasoline, household expenses, clothing, entertainment and eating out, pet food and supplies, and toiletries.

6. Adjust your budget categories if you go over in an area.

Because you’re going to go off of a zero-based budget, if you decide you have to spend more in one area than you planned for, then you need to pull the money from another spending category. So if something comes up where you need to spend more on your gifts category, for example, because you receive a wedding invitation, then the amount in your entertainment category or fun money or clothing category or somewhere else will need to be adjusted. Your budget needs to balance out.

7. Don’t forget quarterly, semiannual, or yearly expenses as you work to create your first budget.

Be sure to account for irregular or infrequent expenses such as semiannual or yearly expenses. These include expenses such as homeowners and auto insurance, vehicle registration, life insurance, property taxes, and so on.

8. Decide how much money you want to go toward savings.

It’s likely when you first start budgeting that you won’t have a lot of money left over to put toward savings. It’s OK to start small, but as quickly as you can, start increasing the amount that you save toward specific categories. And no matter how little your income, start saving something right from the beginning if you possibly can, to get yourself into the habit of saving.

As long as you make a little more than your fixed expenses each month, then determine a realistic amount to save, and save that portion of your income before you do anything else—known as “paying yourself first.” If you plan to just “save what’s left over,” the chances that you’ll have anything left to save are slim.

If you crunch the numbers and you really just don’t have anything left over to put toward saving (and then paying off debt once your starter emergency fund is funded—see the next section) after paying all of your bills, then you should look at ways to earn additional income.

9. Fund your starter emergency fund (EF) first.

The first thing you should start saving toward after you create your first budget is a starter emergency fund. This is a crucial next step because an emergency fund gets you out of the mode of relying on credit cards and it really does virtually stop emergencies from happening.

It’s not that your car’s transmission never goes out or your roof never springs a leak, but those things are no longer emergencies—they are inconveniences because you have the money saved up to pay for them.

You should put all extra money above bare-bones expenses (that means minimal spending on eating out, entertainment, and so on) into your emergency fund until it is fully funded.

If you have consumer debt, start with a small emergency fund of $1,000 to one month’s worth of expenses (depending on how likely you are to need the money—for example, scale upward if you have an older car or home), and pay off your consumer debt before you build your full emergency fund of three to six months of expenses.

Try to build up your $1,000 starter emergency fund in a month or less by slashing expenses such as your grocery bill and entertainment spending, by selling stuff, and by earning extra money through overtime or a side hustle or second job.

Learn more about how to fund your emergency fund as quickly as possible.

10. Start working to pay off your debts.

After you start budgeting and have all of your expenses written down on paper, you will start to see areas where you can reduce your spending (see this article for more than 35 areas where you can cut your spending) in order to start paying off your debt.

Once you have a good handle on doing your monthly budget, try to set up your budget so that you can pay extra payments on your debt in order to have all of your nonmortgage debt paid off within 18 to 24 months—or faster, if you can! (You may want to find ways to increase your income or find things to sell in order to help you reach this goal.)

In order to pay off your debts, use either the snowball debt payment method or the avalanche debt payment method.

Briefly, the snowball method is where you list all of your debts smallest to largest and you pay just minimum payments on all of your debts except for the smallest one and then throw all of the money that you can toward that smallest debt until it is paid off. Then once that first debt is paid off, you use the all of the money from your budget that you were spending on paying off that smallest debt to attack your next smallest debt. And then so on.

With the avalanche method, you similarly pay minimum payments on all but one debt, but the debt that you attack first is the one with the highest interest rate. You will save on interest if you use the avalanche method, but I recommend that you follow the snowball method because of the motivation that comes from paying off the smaller debts first and getting the emotional boost from those relatively quick wins. The snowball method is the method we used to pay off more than $60,000 in nonmortgage debt.

11. Then fully fund your emergency fund.

After you have paid off all of your nonmortgage debt, then take all of the money that you were throwing toward paying off your debts and use it to fully fund your three- to six-month emergency fund. Try to do this as soon as possible—within six to nine months if possible.

12. Next, start to save toward other financial goals.

If you do not have any debt and you have already created your fully funded emergency fund, then start to save toward other financial priorities. In order to stay out of debt and build wealth, you’ve got to be able to cover your expenses without borrowing money.

And that means you need to have the money saved to cover these costs with cash. For financial well-being, all families should have the following savings accounts in place and be regularly funding them.

  • Create a vehicle maintenance and replacement fund as soon as possible. Shorter term, funding your vehicle savings account prevents regular car maintenance and unexpected repair costs from becoming financial emergencies. And longer term, this fund helps you save thousands of dollars in interest by paying a car payment to yourself instead of to a bank or other lender.
  • Create a house maintenance or down payment fund. If you are a homeowner (or plan to be a homeowner in the future), then this is a must. Eventually virtually everything in your home will need to be repaired or replaced. And some of those items are really expensive. Yes, homeowners insurance will take care of many things, but whenever you can, you should be your own insurance plan—you should self-insure by having savings to cover those inevitable expenses that will crop up. This will help to keep your insurance premiums as low as possible—so raise those deductibles! And there are some things that homeowners insurance simply won’t pay for (generally), such as burst water pipes, collapsed sewer lines, and damage caue by earthquakes, mold, floods, and more.
  • Create other savings funds. Here are some examples of other savings funds that we have and that I recommend you set up as soon as possible:
    • Save for vacations, Christmas, gift giving, larger household items (such as appliances and furnishings), and more. Once you have the essential items covered in your budget (food, clothing, shelter, transportation, and utilities, for example), begin saving for things like vacations, Christmas, household furnishings and appliances, and so on. The easiest way that I’ve found to do this is by having separate savings accounts for each category. Shortly after I got my first job I signed up for an ING checking account. What I loved about ING is that I could add as many different savings accounts as I want, and see them all together (and the sum total of the money in our various accounts). ING has since been bought out by Capital One, and even though I don’t generally recommend really big banks, I have to say that I’ve never had a problem with my Capital One 360 account. In fact, the one time I did have a problem (which was completely my fault—user error), they fixed it in about a minute. Their customer service was great. I know it’s going to sound a little crazy, but we have over 10 savings accounts for different things—for me, I just like to know we won’t accidentally spend money we have designated for one thing on something else.
    • Create a dream fund. When you are out of debt and have begun to save for all of the above items, begin funding your dreams. Because learning to be financially savvy isn’t just so you can pay all your bills and retire with dignity and give to the causes you support—though all of those things are extremely important. It’s also so that you can really enjoy the many things money can buy, guilt free and without debt. This might mean saving for a motorcycle, a nice car, an RV, a boat, an exotic vacation—whatever you want. If you’re young or have a lot of debt it may be years before you can fully fund or maybe even start these savings funds, but if you keep it in the back of your mind, it will help you stay on track financially.

13. Begin long-term investing for your retirement and kids’ college, or ramp up your efforts in those areas.

There’s a saying in the personal finance industry that the best time to start investing was yesterday—and the next best time is now. So as soon as you can, start investing for retirement in a 401(k) or Roth IRA (or both!), and start saving for your children’s college expenses in an educational savings account (ESA) or college 529.

Even if you start with just $100 a month, the savings begins to grow quickly, and by seeing the progress you make, you’ll be motivated to save even more. We have investment accounts with both Schwab and Vanguard. Both are inexpensive, excellent options to help you start investing for retirement and saving for college today.

14. Automate your finances.

To avoid getting overwhelmed, automate as much of your finances as possible. I don’t have any bills that I regularly pay with a check—we use bill pay for all of our expenses, including tithing and charitable donations. Automating our financial transactions saves time and makes life much simpler (and helps me avoid forgetting to pay my bills!).

If you want to learn more about how to automate your bill paying, saving, and investing to simplify your life and start to build wealth, I recommend The Automatic Millionaire by David Bach. It’s one of my favorite personal finance books because it gives simple, actionable steps you can follow. And check out this article for more information on automating your finances.

 

15. Use cash for areas you learn you tend to overspend on.

Some areas that you’ll probably want to use cash for in your budget include food, entertainment, clothing, and personal fun money. You can use envelopes to keep your cash for the week or month or a wallet with different compartments.

16. Continue tracking your spending each month, and adjust your budget as needed over time.

It will probably take about three months to work out the major kinks in your budget, but then it will really start to work.

You should create a specific budget for every month because no two months are exactly the same, but once you’ve been budgeting for a while, your budget will be mostly set and you’ll only have to make minor tweaks from month to month.

However, when major events happen in life that cause big changes in your finances, be sure to adapt your budget accordingly.

17. Cut yourself some slack.

I mentioned this briefly above, but it’s worth repeating. You’re probably going to mess up when you first start budgeting. You’re likely going to overspend sometimes. Some months life may get so hectic that you forget to budget at all. But just keep working at it and giving it your best, and you’ll make huge strides and ultimately reach your financial goals and dreams.

 

Conclusion

As I said at the beginning of this article, by learning how to create a budget and learning to control your spending, you’ll have the means to be able to do some amazing things with your money.

You’ll be able to save for emergencies, give to causes you truly care about, retire in comfort, help your children pay for college, and buy a lot of fun toys and fund a lot of amazing experiences along the way.

But you’ve got to get to that point first—and the way to do that is with a budget or spending plan. So get started with it today! 🙂

 

What are your biggest struggles when it comes to how to create a budget? What has worked for you in the past when you have made a budget? Leave a comment below and let me know! I would love to hear your thoughts and ideas!

 

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Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help others? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being. Thank you!

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5 Financial New Year’s Resolutions to Save More Money!

financial New Year's resolutions

Financial New Year’s Resolutions

In this article I am going to talk about financial New Year’s resolutions that you can make to set yourself up to win with money this year (and throughout your life)!

By following these financial habits, you will be able to begin to save more money, and over time you be able to build financial stability and find financial peace. And as you continue to follow these habits, you will build wealth over time so that you can attain ultimate financial freedom, where you are able to choose to a large extent the kind of life you want to lead and if, when, and how you want to work.

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Why Have Financial New Year’s Resolutions?

The new year is a great time to begin again and have a fresh start. It is a great time to reflect on where we are and where we want to be.

New Year’s resolutions can be a powerful way to decide what is really important to you and to make a plan to get there. And since money and personal finance touch virtually every aspect of our lives, making one or more New Year’s resolutions related to money (and then keeping them!) is a great way to improve and make progress in vitally important ways.

 

How to Keep Financial New Year’s Resolutions

Making financial New Year’s resolutions is a great start. But the power of financial New Year’s resolutions comes only as you make progress on them. Sadly, I have heard that most people give up on their New Year’s resolutions by Valentine’s Day.

These things can help you stick to your financial New Year’s resolutions:

Make sure you set realistic goals so that you aren’t just setting yourself up for failure! If you make $20,000 a year, it probably isnt realistic to have a goal to pay off $15,000—unless you get an awesome side hustle or increase your income in other ways.

In order for you to keep your resolve and keep working toward your financial goals, write them down! That is a huge first step.

Then make sure you put them in a place where you will see them often. Put a reminder in your phone to help you continue to think about and work toward them.

Set up simple rewards you give yourself to keep yourself motivated to keep working toward your goals. For example, if you have a goal to pay off a lot of debt, then set up milestones along the way to help you get there, and give yourself a simple and inexpensive (or more expensive, if you can afford to and you crush a huge debt) reward when you reach each milestone. For example, you could go out for ice cream, go out to dinner, buy a new movie or video game, go out to the movies, buy a handbag or purse, and so on.

Get the help and support of others. Especially if you are married, work on your financial New Year’s resolutions together. If you are not married, get a family member or friend to help you and keep you accountable and motivated to stick to your goals!

 

5 Financial New Year’s Resolutions to Help You Save More Money!

If you will commit to making (and keeping :)) financial New Year’s resolutions in these five areas of your money, you will be able to reach your financial goals and move steadily toward financial stability and obtaining financial freedom and building wealth for you and your family.

The five financial New Year’s resolutions are these:

1. Determine your why and set financial goals.

This first financial New Year’s resolution is so important. Your why helps you know what is really important to you and your family and gives you the motivation to stick to the financial goals that you set.

Without a powerful why, there’s a good chance you’ll quit before you reach your financial goals. So what are your core values? What is most important to you in your family and in your life? If you align your financial efforts with your core values, you will rock your financial goals.

Perhaps you want to get out of credit card or student loan debt. Maybe you really want to be able to purchase your own home. Maybe being able to retire with dignity and comfort is super important to you. Perhaps taking control of your money and your income is your current driving motivator.

Or maybe it is the fear of what will happen if you are not able to pay your bills or if you continue to be unable to pay all of your bills that will give you the motivation to finally really make change.

Having fear be your motivating factor is not the best why, but sometimes it is an effective one. Before we started learning about personal finance my husband and I had made some financial decisions that weren’t the best, and we had over $60,000 in debt (this was before we bought our first home).

And when I finally kind of realized the magnitude of that financial burden, there were definitely nights when I was so worried and scared that it was difficult to sleep. There were days when the knot in my stomach never seemed to completely go away.

That was because at the time I didn’t know if it really was possible to get unburied from so much debt. So admittedly, part of my why—and one of my now core values—is a super strong drive for financial security.

Two more why’s that drive how I spend money (or rather, don’t spend it) are more positive ones than the power of fear—they stem from a desire to have a comfortable retirement and a strong drive toward independence and self-sufficiency. I have a strong need to be responsible and to be able to care for myself.

Take the time to figure out your own why. Why is it worth it to you to save money? Why is it worth it to invest? Why is it worth it to have an emergency fund? Why is it worth it to get out of debt? Why is it worth it to spend less than you earn? Why is it worth it to save for retirement? Why is it worth it to save to help pay for your kids’ college?

And also figure out your own financial values. Then set goals and plans that align with your why and those financial values. And then you will start to win with your money!

 

2. Make (and then follow :)) a budget.

Another super important factor in being able to succeed at your financial New Year’s resolutions is to create a budget. A budget, or spending plan, is basically a list of monthly goals for your money. It is where you decide what you want to spend for each area of your finances. If you are living paycheck to paycheck, you might want to estimate a little high for the different budget categories right at the beginning, just to give yourself a little wiggle room. And we’ll start working on ways to find more money in your budget during the next step.

As you create your first (or new) budget and then work to tweak it, don’t shoot for perfection and don’t be too hard on yourself.

It will take a few months for you to get most of the kinks worked out and for you to start really budgeting effectively. But when you do, chances are that you will feel like you got a raise, even before you start adjusting your budget in order to spend less and save more. And that will feel amazing! Find steps for creating an effective budget here.

One tool that I love to use to track our finances is Personal Capital. With Personal Capital you can see the activity from all of your banks and credit cards and so on in one place, which is awesome. And you can also link your company 401(k) or retirement plan and your IRAs and other brokerage accounts, as well. It’s a great way to get an easy, complete picture of your finances. And it’s free! You can sign up for Personal Capital here.

 

3. Decide to spend less so that you can save more.

Another crucial financial New Year’s resolution for most people is to spend less money. According to a 2017 study, almost 80 percent of Americans, for example, are living paycheck to paycheck. And that is not an ideal place to be.

In order to have more money to reach your financial goals, decide where you can reduce your spending. To keep things simple to start with, look at these three areas first where you are likely to be able to most easily cut your spending quickly: 

  • Food 
  • Transportation 
  • Entertainment 

Food. One of the easiest ways that you can find room in your monthly budget is to choose to spend less on food. First, if you are spending much money eating out, decide how much you will save in this area. The average American family spends about $300 a month eating out. In contrast, our family spends less than $30 a month eating out. Could you (will you) bring your work lunches? Could you find other means of (free) family entertainment? Could you have a movie and popcorn night at home? Could you have more potluck dinners and game nights instead of going out to eat for family gatherings? Read this article to find ideas for how to save money eating out. 

And now let’s look at your grocery budget. The average family of five spends about $700 a month on groceries. And our family of five spends on average less than half that. There are many, many things that you can do to cut your grocery bill. You can buy less meat and buy less expensive meat. You can limit the amount of junk food, soda, and alcoholic beverages you buy. You can buy more inexpensive staples like brown and white rice, pasta, potatoes, beans, other grains, and eggs.

You can buy only fruits and vegetables in season. You can shop less often, shop with a meal plan (sign up below to receive free, awesome meal planning worksheets to help you start to meal plan like a pro!), use a grocery price comparison chart (sign up for the free worksheet below!), and buy less food. Read this article to learn more about these and other ideas; it discusses more than 60 ways that you can save money on groceries. 

 

Transportation. Look at your driving habits. Could you drive less? Could you carpool more? Could you bike or walk more? Could you sell one vehicle to become a one-vehicle family? We have had only one vehicle for most of our marriage, which has saved us several thousand dollars over the years.

If you have loans on one or both vehicles, could you sell one or both of them and buy less expensive vehicles for cash (or with a small loan you could pay off quickly)? Could you stay closer to home when you travel for vacations? Read this article to find more than 30 ways to save money on transportation.  

Entertainment. Where does most of your entertainment budget go? What could you spend less on or cut out completely? Will you cut your cable or satellite and find cheaper options? Will you find free and cheap options for entertainment to replace eating out if that is a big pastime for your family? Will you look at ways to lower your smartphone bill? Will you cut your gym and other memberships and find less expensive alternatives for exercising? Will you cut magazine and gaming subscriptions? Will you buy fewer video games and get your DVDs and books from the library? Will you go on less expensive vacations? We save a lot of money by using Airbnb. I love Airbnb! Sign up here to save $40 on your first stay!

For ideas on how to save money on entertainment, read this article. 

 

Check out these related articles: 
73 Totally Fun Free and Cheap Activities for Kids
13 Best Tips for How to Raise Kids without Breaking the Bank 

 

Once you have found ways to slash your budget in those three areas, work on reducing the money allocated to your other budget categories, as well. Find more than 20 ideas for how to spend less money in virtually every budget category. 

 

4. Build an adequate emergency fund. 

A fourth important financial New Year’s resolution is to create an emergency fund (and then fund it! :)). As you are working to improve your financial situation, begin to build a small emergency fund. I recommend building a starter emergency fund of at least $1,000 as quickly as possible by taking on extra work, selling stuff around the house, reducing your spending on things like food and entertainment, or (ideally) all of the above.

At first you may feel like you can put only $50 or $100 a month toward your emergency fund, but increase this amount as quickly as you can. Try to have $1,000 (or $500 if you make a household income of less than $20,000 a year) saved within a couple of months.

If you feel more comfortable with a little more of a safety net, then you can increase that to up to one month’s worth of expenses. And then save a fully funded emergency fund once you are out of consumer debt. Learn here how to build a three- to six-month emergency fund.

Do you want to turbocharge your saving so that you can get that emergency fund built up faster? Do a no-spend challenge.

 

5. Work to get out of nonmortgage debt as quickly as possible. 

And finally, as a last financial New Year’s resolution that will really help you to win with money in your life, work to get out of debt.

Once you have extra money in your budget from reducing your expenses and increasing your income, start really working on paying off your debt.

In order to accelerate your debt payoff plan, you can use either the debt avalanche method (pay off debts with the highest interest first) or the debt snowball method (pay off the smallest debts first).  You will save some money on interest over the debt snowball method if you use the avalanche method, but for most people, I would recommend the snowball method.

Or you could also try a combination of the two methods, where you begin with the snowball method and then switch to the avalanche method once your commitment level to getting out of debt is rock solid.

The snowball method is the one we used, and I feel that it works best in most cases because it keeps your motivation high because you have more frequent debt payoff wins, especially at the beginning.

Find out more about the debt snowball and debt avalanche method of paying off debt here. And read this article to learn more about how to get (and stay) out of debt.

Conclusion: Go After Your Financial New Year’s Resolutions!

By making (and sticking to!) to these five New Year’s resolutions, you will be able to get control of your finances and really will be able to win with your money this year and throughout your life.

By determining your financial why and outlining your financial goals, making and then sticking to a budget, reducing your spending in order to save more money, creating an emergency fund, and eliminating your nonmortgage debt, you will have a firm foundation to succeed with your money and be on your way to ultimate financial freedom!

 

Which step are you on in this financial journey outlined above? What is your most important financial priority this year? What could you use the most help with? Leave a comment below and let me know! I would love to hear your thoughts!

Invitation to Share

Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help others? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being. Thank you!

Join Our Facebook Group!

Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.

7 Simple (and Crucial!) Steps to Automate Your Finances to Save More Money

how to automate finances

How to Automate Your Finances

In this article I am going to share my best tips for how to automate your finances.

I am also going to share why it is so important that you automate your finances to help you build wealth! If you have the goal to become a millionaire, then automating your finances is a crucial step to help you get there!

 

Tip: Save this image to Pinterest so that you can easily refer to this article on how to automate your finances later!

 

 

 

Why Is It So Important to Automate Your Finances?

If you want to reach your debt-payoff goals, your savings goals, and your retirement goals, one of the most important things you can do to help ensure your success is to automate your finances, particularly your saving and investing.

The reason that automating your finances is so powerful is that it takes willpower out of the equation. And even the most disciplined of us only have so much willpower. That’s why it’s better to put systems in place in your life where you can set it and (mostly) forget it. It makes the likelihood of success much higher!

Read on to learn simple things that you can do to automate your finances so that you can get your debt paid off and start to save and invest your money to reach your financial goals!

 

7 Simple Steps for How to Automate Your Finances to Build Wealth

In this article you will find 7 steps to help you automate your finances to save money, get out of debt, pay your bills, and invest for future wealth.

 

1. Set up direct deposit.

The very first step as you begin to automate your finances, if you don’t have this done already, is to set up direct deposit with your employer so that your paycheck is deposited automatically into your checking account. This will prevent you from being tempted to spend any of the cash you receive right away, before you have time to allocate your money to the places where it needs to go according to your monthly budget. (More on that below.)

 

2. Transfer money directly into savings.

The next step as you work to automate your finances is to transfer a certain amount of money each paycheck into savings. So let’s say you just barely created your new budget, and after reducing spending on your groceries, eating out, clothing, and entertainment, you now have $300 a month to start with that you know you can put toward building your initial, starter emergency fund.

So with the money from your first paycheck (if you get paid twice a month, for example), set up automatic transfers with your bank to transfer $150 directly into your savings account designated as your emergency fund.

If your bank or credit union doesn’t offer very good interest rates on savings accounts, look into Capital One 360. We’ve been banking with them for 14 years (from the time when they were still ING Direct), and they’ve been a great bank for us (despite my reservations when Capital One bought them).

One of the things that I love about my Cap One 360 account is that you can have multiple savings accounts for your various savings goals (we have more than 10). And one of those is our emergency fund. They also have one of the best interest rates around.

If you have the option to set up your direct deposit from your employer so that you can deposit money into more than one account, then you should transfer a certain amount of money directly from your employer into a savings account each paycheck unless you are working on paying off nonmortgage debt.

In addition to saving for you emergency fund, as soon as you can work it into your budget by continuing to reduce your spending, you should also start saving for larger, irregular purchases and expenses, such as saving up for appliance and furniture repair and replacement, car repairs and replacement, home maintenance and enhancements, Christmas and gift giving, vacations, and a down payment for a home purchase.

Tip: Check out these 9 savings accounts every family should have!

And again, the best way to do this is automate your finances in order to take out the need for discipline as much as possible. When you’re just starting to budget and are used to living paycheck to paycheck, you may not have much money for these different categories. But as you get your debts paid off and as your income increases over time, you will be able to find more money in your budget to save up for these things so that you can fund them yourself rather than relying on credit card and other debt.

 

3. Transfer money automatically from your checking account to pay off debt.

Once you have at least $1,000 in your emergency fund (or up to one month’s worth of expenses, if you’re in a situation where you want a little more of a buffer), then you should automate your finances in such a way that you can start working diligently to pay off your nonmortgage debt.

You can take the money that you were paying to fund your mini emergency fund and use that to start paying extra on your debts. So if you had gotten to the point where you were able to put $500 toward your emergency fund each month, for instance, then you would use that same amount to pay toward your debts. So you would set up an automatic transfer from your checking account to start paying off your debts as fast as possible.

There are two methods you can use to pay off your debts more quickly: one is the snowball method, where you pay minimum payments on all of your debts except for the smallest one, and you then throw all available money at that smallest debt to pay it off as quickly as possible. Then when it’s paid off, you move on to the next smallest debt, and so on.

The avalanche method, on the other hand, is where you pay minimums on all of your debts but throw all money that you can at the debt with the highest interest rate, and pay it off as quickly as possible. Once you pay off that debt, then you work to pay off the debt with the next highest interest rate, and so on.

Tip: Learn more about the debt snowball and the debt avalanche, and decide with debt payoff method is best for you!

For most people, I recommend using the snowball method because it has the benefit of helping to keep you motivated as you are able to more quickly pay off smaller debts. However, if what will really keep you motivated is to work on pounding down the debts with higher interest rates, then use that method. Just do whatever will help you stay motivated to reach your financial goals and win with your money!

The benefit of building at least a small emergency fund and then paying off all of your debt before you work on other bigger and more long-term financial goals is that you build a strong financial foundation that will allow you to gain financial stability and better reach those financial goals.

By building a strong foundation, the beautiful financial tower of wealth that you are going to build over your lifetime will not crumble like a house of cards. And unfortunately, I bet you know people who have had exactly that happen to them because of poor financial planning, when they didn’t have an emergency fund to fall back on.

 

 

4. Transfer money directly into your 401(k).

Once you have paid off your nonmortgage debt and built a fully funded emergency fund of three to six months’ worth of expenses, then the next thing you should focus on as you automate your finances should be to start saving 10 to 15 percent of your income for retirement. (Work up to 15 percent as soon as you can.)

 

If you receive a company match for your retirement investing, then you should start with your company 401(k) or Roth 401(k) (or similar) plan, and have the amount matched by your company automatically taken out of your paycheck and invested in your company retirement plan.

Learn more about how to start to invest for retirement here!

 

 

5. Transfer money automatically into Roth IRA or other retirement investment accounts.

Once you have invested up to your company match in the company retirement plan, then you may want to automate your finances so that any additional money above the company match (up to 10 or 15 percent of your income) is automatically transferred to a Roth IRA.

The reason that investing in a Roth IRA instead of putting all of the money you invest for retirement in a company 401(K) is that you will generally have more options for what mutual funds to invest in with a Roth IRA than with a 401(K).

And with more options for mutual funds, you will likely find mutual funds that could outearn those offered by your company retirement plan. You also have more options for what you can do with the money invested in your Roth IRA (such as being able to use the money for some things besides retirement, if you follow the required guidelines).

To invest in your Roth IRA, use direct deposit into a Roth IRA, if your company offers direct deposit into bank and investment accounts, so that your money will be invested automatically before you ever even see it or get tempted to use it for other things.

If you do not receive a company match, then you may want to have all money designated for retirement saving automatically transferred from your paycheck to invest in a Roth IRA instead of your 401(K), if you can do that. If you can’t have money from your paycheck automatically deposited into your Roth IRA account, then you can use automatic withdrawals by your brokerage firm to accomplish the same thing.

If you earn enough money that you cannot invest the full 15 percent of your income into your Roth IRA and the Roth IRA of your spouse, then look into putting the rest of the money designated for retirement into non-tax-advantaged accounts. (But invest as much as possible into tax-advantaged accounts as you can first.)

I have been investing with Schwab for my Roth IRA for years, and that is where we have our nonretirement investment accounts, as well. They’re a great brokerage firm because of their amazingly broad range of low-cost mutual funds available to invest in and their great customer service.

We also have nonretirement investments with Vanguard. They are a good company as well, but personally I prefer Schwab. They just seem to make investing easier, perhaps largely because I feel that their website offers a better, more intuitive user experience.

Learn more about how to invest for success here!

Once you begin investing for retirement, I recommend that you check out a great free app called Personal Capital in order to track your progress toward reaching your retirement and other financial goals. With Personal Capital, you can see not only all of your bank checking and savings accounts and even your credit cards and other finance accounts, but you can also link your retirement and regular nonretirement brokerage accounts.

This allows you to have a complete, overall picture of your current financial situation. And you can also view your account history to see how your accounts and overall portfolio have done over time. I love this very helpful tool and use it regularly! Sign up for your free Personal Capital account here.

 

 

6. Automate your finances by transferring money automatically into additional savings accounts to save up for larger purchases and expenses.

As mentioned above, particularly once you have your emergency fund in place and you are out of nonmortgage debt, you should automate your finances to start saving for larger expenses and purchases, such as replacing your car with one you buy for cash, replacing appliances and furniture, doing home maintenance, paying for vacations and Christmas and other gift giving with cash, and so forth. Learn how to save for large expenses and purchases and why you need to (because you do need to!).

Learn the 9 savings accounts that every family should have for financial success!

 

7. Transfer money automatically into nonretirement investment accounts for additional wealth building.

Once you have saved at least 15 percent of your income in retirement accounts and (in most cases) after you have paid off your home, you might want to automate your finances to invest in additional nonretirement investment accounts to build additional future wealth.

Or if you have not yet purchased a home and you have a time frame of at least five years before you intend to buy a home, then you might consider using investment accounts for your future home purchase.

Especially if you’re intending to follow the 100 percent down plan (in other words, you decide to buy your house with cash to avoid a mortgage :D), then your time frame may be longer and investing your money in good stock mutual funds in the meantime can be a good way to go.

This is what we are doing as we save up to purchase our next home with cash in about five to eight years—we’re investing what used to be our mortgage in stock mutual funds with good long-term rates of return until we have the money needed to buy a little bit larger, nicer, newer home with cash. #debtfreeforlife

Begin your path to automatic wealth building today: See an example of how to automate your saving, debt payoff, and investing.

One of the best things you can do to help ensure that you consistently work toward and reach your financial goals is to automate your finances in such a way that it helps you succeed. One of my all-time favorite financial books is The Automatic Millionaire, by David Bach. If you want to win at money, you need to take willpower out of the equation as much as possible and replace it with a system that won’t allow you to fail.

So, let’s say, for example, that for now you have four main savings goals that you want to work on: you want to pay off your credit card debt, build up a three-month emergency fund, start saving for retirement, and start saving to purchase a five-year-old car in a couple of years. So this is how you could go about doing that.

Set up direct deposit.

First, automate your finances by setting up direct deposit with your employer if you possibly can and if you don’t already have it set up (for convenience, but more important, so that you won’t spend money right from your paycheck that would have been better off going to something else more important).

Then, set up an automatic transfer to start saving.

Next, set up an automatic transfer from your main checking account into a separate savings account that will be used for your emergency fund. Transfer as much money as you can each paycheck into this EF savings account until you have at least $1,000 but up to one month’s worth of expenses in this account.

A great way to do this, if your current bank doesn’t offer the option of having multiple savings accounts linked to your checking account, is to open a savings account (and then more savings accounts, as you are ready to use them) with Capital One 360. We currently have over 10 different savings accounts for our various savings goals, and I love knowing that I won’t accidentally spend the savings for one item or category on something else.

In order to build up your initial emergency fund as quickly as possible, see if you can sell anything around the house or in the garage that you don’t need. And look into ways to earn extra income.

Next, automate your finances to pay off debt.

Then after you have a small starter emergency fund in place, further automate your finances as you work toward paying off all of your credit card and other nonmortgage debt, and get that paid off as quickly as you can, as well. If you haven’t gotten a second job or side hustle (such as blogging! There is awesome earning potential :)) before this time, consider getting one now so you can get out of debt sooner. To begin paying off your debt, automatically transfer the money that was going into your emergency fund toward paying off your debts.

There are a couple of ways you can do this: attack your highest-interest debts first or your smallest debts first. You can do whichever will help you to best stay motivated, but my recommendation would be to attack your debts smallest to largest because of the quick wins that you get and the extra motivation that gives to stay focused and keep working on getting out of debt. As you work to pay off all of your debts, reexamine your spending, and see if there are places where you can cut your spending in order to get out of debt sooner. Here are some ideas of how to reduce your spending.

Then automate your savings to build a fully funded emergency fund.

Then once you have paid off all of your debts, continue to automate your finances by transferring more money into your emergency fund, until it has at least three to six months’ worth of expenses in it. In order to save more money toward your emergency fund, take all of the money that you were using to pay off your debt and now use it to fully fund your emergency fund. Try to fully fund your EF as quickly as you can—in three to six months if you can. And then you can begin investing for retirement, saving toward your children’s college, and saving (to pay cash!) for large purchases such as a newer vehicle, awesome family vacation, new furniture, and more.

Automate your investing for retirement.

Once you have a fully funded emergency fund, start saving money in your 401(k) at work (or Roth IRA or other retirement account available to you), or increase your contributions, to at least 10 percent (and, if possible, 15 percent) of your income. Here, again, automate your finances by setting up automatic electronic transfers so that the money will leave your paycheck before it has the chance to get spent.

Then, once you have invested enough to receive the full match from your employer in your Roth or traditional 401(k), invest the rest of the money allotted for retirement savings, until you reach 10 or 15 percent of your income, in a Roth IRA. The reason to invest in a Roth IRA once you have invested enough in your 401(k) to reach the match is that you will likely have a lot more options available to you through a brokerage firm that offers Roth IRAs than you do through your company retirement plan. And that means you should be able to earn higher returns. For more information on investing for retirement, read this article.

Automate your finances to save for large purchases and expenses.

Finally, at the same time as you are working to increase your retirement account contributions (or sooner, if you can fit it into your budget), start saving for larger purchases and expenses. For example, begin automatically transferring money each month into a savings account for that used car that you want to buy in a few years to replace the one that you are currently driving, that I mentioned above. If you can save $200 a month toward the car that you want to purchase in two years, then you would have about $5,000 to go toward that newer car, plus the amount that you can sell your current car for at that time—let’s say that that was also $5,000. So that would give you $10,000 to buy the five-year-old car. So you would transfer automatically each month that $200 into a savings account, and allow the money to grow for the next couple of years.

And that is how you automate your finances in order to save, pay off debt, and invest in order to gain financial stability and build wealth!

Conclusion

Automating your finances is one of the best things that you can do to save, pay off debt, and invest for the future. When you automate your finances, you set up systems that help you to reach your financial goals effortlessly, and you take the temptation to spend the money on other, short-term pleasures out of the equation.

 

What do you think about these tips for how to automate your finances? Are you doing these things already? What would you do differently? Leave a comment and let me know! I would love to hear your thoughts!

 

Invitation to Share

Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help a family member or friend or people in general? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being with others. Thank you!

Join Our Facebook Group!

Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.

7 Simple Steps to Achieve Your Financial Goals for 2020!

steps to achieve financial goals

Steps to Achieve Your Financial Goals in 2020!

Are  you ready to roll up your sleeves and get to work in order to achieve your financial goals in 2020? Awesome! Then let’s get started. In this article I share 7 simple steps to achieve financial goals for 2020!

 

7 Simple Steps to Achieve Financial Goals

Here are 7 simple steps that you can follow to achieve your financial goals!

1. Ensure that the goal is specific and measurable.

If you are familiar with the SMART model for goal setting, then you will recognize these first two items in this heading: specific and measurable. A SMART goal is one that is:

Specific

Measurable

Attainable

Relevant

Timely

In order for a goal to be effective, it has to be specific. So, instead of setting a goal of “I want to be financially secure,” which is not specific or measurable, a specific and also measurable goal would be “I want to have a net worth of $1.5 million dollars by the time I retire in 17 years.”

 

2. Make sure that the financial goal is realistic for your circumstances.

It is also necessary that the goal be something that you can actually realistically accomplish.

If you have a goal of paying off your $120,000 of massive student loan debt in five years but you make $18,000 a year at a job that you love but where there is virtually no potential for increasing your income and you can’t do overtime and aren’t willing to get an extra job or do a side hustle, then the goal isn’t really realistic—at least not without some pretty drastic changes in your circumstances.

Now, if you instead set a goal to get a job making $75,000 a year using that great degree you earned while acquiring that $120,000 in debt and then also committed to live on $15,000 a year and wait tables five days a week to earn an extra $2,000 a month and then you set a goal to have your debt paid off in 2 years, then with those numbers and assuming nothing changed, that would be a realistic (and rocking awesome!) goal.

 

3. Determine how soon you want to achieve the financial goal.

When trying to figure out a timeframe to accomplish your financial goals, be realistic but aggressive. If you have $35,000 in credit card debt, don’t take 7 years to get it paid off!

Instead, bust into that goal, turn your life around, and pay off that $35,000 in two years or less by getting an extra job or side hustle (or more than one), by cutting your lifestyle, by working hard and seeking a raise or promotion, by doing overtime if you can, and by finding a higher-paying job if needed.

You can wander your way into debt, but as finance guru Dave Ramsey says, you can’t really wander your way out of debt. It takes dedication, determination, discipline, and drive.

 

Check out these related articles:
Must-Know Tips to Rock Your First Budget
9 Simple Steps to Help You Finally Start Saving Your Money

 

4. Decide how much money you will need to save each month to achieve the financial goal.

Once you know your goal is realistic and once it’s specific and measurable and you know how soon you want to accomplish it, then you can figure out how much you need to put each month toward your goal.

If your big financial goal you are saving toward is to save a 20 percent down payment for your first home, for example, and you want to be able to buy a $150,000 home within five years, then you know that you need to save $6,000 a year, which is $500 a month.

I know that $500 a month is a significant amount of money, but it’s also definitely doable if you have a decent-paying job and minimize your spending in others areas

 

5. Open separate savings accounts to help you achieve your financial goals.

So that you don’t accidentally spend the money that you meant to allocate for your financial goal or goals, set up separate savings accounts so that you can set up automatic transfers from your checking account to each new savings account.

I love our online bank accounts with Capital One 360 because we have been able to set up several separate savings accounts for our various financial goals, such as fully funding a (six-month) emergency fund, purchasing another vehicle, saving for home maintenance and car maintenance, saving to replace furniture and appliances when needed, saving for vacations and gift giving, and more.

 

6. Display a large visual reminder of your financial goal or goals that you can update as you make progress.

A great way to help you get and stay motivated to reach your financial goals is to track your progress. You could use construction paper loops that represent every $1,000 you pay off in debt, for example, or you could use a thermometer or similar visual representation that can show your progress toward achieving your financial goal.

Tip: Download the Savings Goal Tracker below to help you get and stay motivated to achieve your financial goals!

Put that visual reminder where you will see it often (such as on the fridge door, bathroom mirror, or similarly frequently seen area), and make sure to update it frequently to show how you’re winning with your finances!

My favorite way to track or simply see at a glance our financial progress over the last few years is with an awesome free app called Personal Capital. With the app you can monitor your progress and see your investments grow over time (and also see your savings accounts and checking account balance grow as well). This personal finance app lets you see not only your balances in all of your various checking and savings accounts and for your credit cards and things like that, but it also links to your investment accounts, including your company 401(k) plans and Roth IRAs, so that you can see your complete financial picture and know your net worth at any time. It’s pretty awesome! You can sign up for a free account here! 

 

If you are specifically working to pay off debt, get the free Debt Payoff Thermometer Tracker!

7. Celebrate milestones along the way.

In addition to having a visual indicator of your progress, you can also set up milestones along the way at specified intervals, and then do something fun to celebrate each one, such as going out for ice cream as a family, going to the movies, buying a new dress or video game, or going out to lunch or dinner.

This can be a great way to help you to be and to stay motivated to achieve your financial goals!

 

Conclusion

In the same way you would work to reach any other type of goal, sticking with the steps to achieve your financial goals takes motivation and determination.

But if you diligently follow these steps to achieve financial goals, you will be amazed at the progress you make and the financial success you achieve! Let’s work together this year to crush your financial goals! I’ here to help you every step of the way!

If appropriate, you could also share your financial goals with friends or family, and this might inspire you to be able to achieve your goals even faster than you had planned. And share them with us on the new, closed Families for Financial Freedom Facebook group. We would love to cheer you on!

Check out these related articles:

13 Surefire Steps to Help You Stick to Your Budget
Budget Fail? Try This Simple Alternative
9 Must-Know Tips to Help You Finally Start Saving!

 

What financial goals do you have for this year? What have you found in the past helps you to achieve financial goals? Share your successes and your challenges in the comments section below! We would love to cheer you on and help you succeed!

Invitation to Share

Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help others? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being. Thank you!

Join Our Facebook Group!

Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.

To Save More Money, Be Lazy: 7 Powerful Tips to Help You Save More Money!

simple money tips for financial success

A Simple Way to Save Money: Be Lazy

With the new year, it’s a great time to recommit to spending less money and saving more money in order to achieve financial success. And some of those ways that you can save more money are pretty simple—they are ways that doing less will save you more. In this article I’ll talk about 7 ways that being financially lazy can actually fatten your wallet. Pretty cool, right?

Tip: Save this article on how to save more money by being lazy to Pinterest so that you can easily refer to it later!

7 Simple Ways to Save More Money by Being Lazy

 

Here are 7 simple ways that you can actually save more money by being lazy!

These simple tips, if you follow them, really can help you to save more money and build wealth over time so that you can work toward financial security and ultimately financial freedom for you and your family!

 

1. Shop less often.

One of the most important ways you can spend less money so that you have it available to pay down debt and save and invest is to simply shop less often. That applies to both shopping offline and shopping online. And it applies to grocery shopping, clothes shopping, gadget shopping, and more. The fewer times you go to the store, the fewer chances you have to make impulse buys and to overspend. How many times have you come home with a $48 gallon of milk? I don’t really mean that milk actually costs $48. But you “run to the store” to get just one thing, and you leave with a cart half full of stuff you never intended to buy (and don’t need). You can cut your grocery bill and similar bills by reducing the number of trips you make to the store. 

Do you want help to slash your grocery budget? Find more than 50 ways to save money on your groceries. 

And also get in the habit of making do with whatever you already have. (That includes substituting foods you have on hand if needed when making your favorite meals so that you don’t have to run to the store for just one thing.) Remind yourself often of the wonderful old saying “Use it up, wear it out, make it do, or do without.”

Yes, I know that’s not overly cool in our disposable modern economy, but the less money you spend on stuff, the more money you can spend on building your financial stability and wealth. Would you rather have more gadgets or other toys, electronic games, purses, clothes, cars, and other paraphernalia, or would you rather have the money available to fund your awesome financial goals and dreams? 

By shopping less often, you can also spend less money on gas, wear and tear on your car, vehicle maintenance, and more. Learn more than 30 ways you can save a ton of money on your transportation costs. 

 

Check out these related articles: 

65 Must-Know Tips to Slash Your Grocery Bill in Half!
35 Easy Ways to Slash Your Transportation Costs

2. Stay home and shop online more. 

A great way to help ensure you don’t impulse buy is to shop online (with a shopping list). You never have to shop on an empty stomach that way so you won’t be tempted to buy more than you intended because you are hungry, you are one click away from “delete” so you can easily put back items you really don’t need or that don’t fit into the month’s budget, and you can know exactly how much your total is at any time so you won’t go over your planned spending amount. 

In our family we buy many of our nonperishable food items and other household items from walmart.com, and I know that Amazon is another option for that as well (though from the little bit that I’ve looked into that, their prices aren’t as good, so we have not really used Amazon for that).  

 

3. Shop online less. 

Conversely, if you shop online when you are bored or stressed or just as a means of passing the time, then stay offline to help you have financial success this year. Get on only when you have a specific purpose to buy budgeted-for items. If you shop recreationally, then let’s help you find some free hobbies and pastimes that you can do instead. Discover more than 70 ideas for fun free and cheap activities that you can do with your family. You can also find great ways to save money on entertainment. 

 

Check out these related activities:
103 Best Fun Free and Cheap Fall Activities for Kids
61 Awesome Free and Cheap Winter Activities for Kids
12 Top Tips to Save Money on Entertainment 

4. Enjoy free entertainment at home.

Related to the point just above, it’s also a great idea to find ways to save money by spending more time in worthwhile activities at home. Start a weekly family game night. Read more to your children. Read more yourself. Watch movies online or on (free or cheap) TV rather than going out to the movies. Cancel cable or satellite and find free and cheap options (like Netflix, Amazon Prime, and Sling). Cancel magazine subscriptions and get them from the library instead. Spend less money on your smartphone plans. 

And cook and eat at home more. I know it’s fun to eat out as a family, but wouldn’t it be fun to help your kids have the outstanding experience of a debt-free university education by saving for their college instead? Or to pay your house off decades early and be in complete control of your income? Or to retire decades early and have true financial (and time) freedom? Or to help your children buy their first home with cash so that the cycle of debt in your family ends for good? How amazing would that be?  

The average American family spends about $300 a month eating out. But what if this year we forget about average and we focus on being incredible? What if you make a goal to spend $300 a year total eating out? (Our family spends less than that each year eating at restaurants. Learn how we save money eating out.) If you were previously spending as much eating out as the average American family, that would give you close to $300 per month, more than $3,000, per year, that you could use to pay off debt (learn how to get out of debt), build your emergency fund, buy an inexpensive car with cash, put money in your Roth IRA, and save toward your kids’ college 

Learn great ways to save money on entertainment. 

 

Check out these related articles:
7 Ways to Slash Your Cell Phone Bill (We Saved over 75% with Our $3/Month Smartphone Plan!)
37 Ways to Slash Your Utility Bill
21 Must-Know Tips to Help You Spend Less Money 

 

5. Automate your finances.

One of the best ways you can find financial success and build wealth over time is to automate your finances. Putting your money on autopilot helps you to effortlessly reach your financial goals over time. To help you win with your money, you should automate your saving, debt repayment, investing, and more. 

Automate your saving. The first thing you should automate if you haven’t already is your saving. If you don’t have an emergency fund, start with that. Build a starter emergency fund of at least $1,000 and up to one month’s worth of expenses (depending on the stability of your current financial situation and your personal desire for security and tolerance for risk). 

How quickly can you fund your starter emergency? Try to get that taken care of in a month if you possibly can. Are there things around the house that you can sell? (Of course there are!) Where can you reduce your spending? If you haven’t already set up your monthly budget yet, then let’s get that taken care of.  

And do you want to really supercharge your saving or debt repayment (see the next paragraph)? Then participate in a no-spend challenge for a week, two weeks, a month, or more. (I am planning to do a no-spend challenge with our family in February—will you join us?)

Automate debt repayment. Once you have a starter emergency fund, get really focused on tackling your nonmortgage debt, and get it out of your life. Release yourself from those shackles so you can marathon to your financial freedom. 

Automate bill pay. To help you make sure you manage your money well and don’t have to pay late fees, automate as much of your bill paying as possible. You’re not still writing and sending your bill payments yourself, are you? We seriously write about two checks per year. If you haven’t automated your finances yet, simplify your life by setting up bill pay today for all of your recurring bills. 

Automate investing. If you are participating in your company 401(k) or similar plan, then you are already doing this. Awesome! But now let’s take that a step farther. Have you opened a Roth IRA yet for you and your spouse? Once you have contributed up to the company match if one is available in your company retirement plan, it is a great idea to invest additional income (until you are investing at least 10 and ideally 15 percent of your income) for retirement in a Roth IRA. (The reason is that a Roth IRA generally offers a lot more options for mutual funds—and therefore potentially better returns—than company retirement plans do.) 

If you haven’t done so already, you should open a Roth IRA today. (Sign up below for the cheat sheet for how to open a Roth IRA—opening an account takes less than 15 minutes!) 

Automating your finances is a huge help if you want to achieve long-term financial stability and prosperity. Learn even more with these 7 steps to automate your finances. 

 

6. Leave your investments alone.

Once you have set the asset allocation you are comfortable with for your retirement investing, set it and forget it to help you achieve financial success. I recommend a simple allocation of all stock mutual funds, with 25 percent of your investing going into each of four categories: large cap stock mutual funds, mid cap stock mutual funds, small cap stock mutual funds, and international stock mutual funds (which follows the recommendations by financial expert Dave Ramsey). Learn more about how to start investing for retirement here. 

If you are investing, you should be investing for the long haul (a minimum of five years in the future). So don’t worry about what your investments are doing right now. As long as you are confident that you chose good mutual funds, then looking at your statements every quarter or every six months is plenty. Even reviewing your portfolio performance once a year is probably enough. Stop looking at your monthly balances, don’t check the stock market daily, and turn off any investment updates you get (like the helpful but potentially nerve-racking weekly email net worth updates we get from Personal Capital). All you need to know is that your mutual funds are continuing to perform well over time. What they are doing this week or this month really doesn’t matter very much. 

 

I love this investment advice paraphrased from Dave Ramsey: Investing in the stock market is like riding a roller coaster. You won’t get hurt if you don’t jump off during the middle of the ride. What this means is, when the stock market is diving like it has been in recent weeks and months, just hang on. Don’t pull out your money! If you do, you just locked in your losses. Again, ignore the news and your portfolio statements and things like that, and just remember the long-term potential growth. Over the last 70 years, the S&P 500 has returned a historical average annual rate of return of about 12 percent. So focus on that positive bit of news and the goals that compound interest can help you achieve, and again, ignore what is happening in the stock market this week or month.

Want to know how we choose our mutual funds? Sign up below and I’ll email you the cheat sheet! 

 

7. Be content with what you already have.

When you learn how to be content with less, you can save more money. Sometimes a lot more money. (Check out these people who do just that and as a result are able to retire in their 30s and early 40s—literally decades younger than the norm!) Living on less and saving more makes many more options available to you throughout your life. If you are happy to live below your income, you will be able to do things such as the following: 

  • Retire with dignity. 
  • Take a lower paying but more fulfilling job. 
  • Retire earlier or work less if you choose in order to pursue various dreams and goals. 
  • Pay for or help pay for your kids’ college. 
  • Stay home to be with your children or to take care of elderly parents. 

As part of an intentional decision to be content with less, decide to appreciate the little things in order to more easily live within your means. One way to do this that will have a powerful effect on your money is to turn what are probably now regular occurrences to occasional, mindful splurges. So, for example, instead of eating out regularly, choose one night a month to take the family out to an inexpensive but fun restaurant.  

Instead of buying the kids toys or video games or electronics regularly, save them for birthdays and Christmas. (And while you’re at it, lower the expectations for Christmas and birthday gifts, too. And don’t feel guilty about doing so! Use the money you save to pay for your child’s college education or even your own retirement, and your children will thank you down the road.)

Instead of going to the movies every weekend by default, choose just a few of the best movies of the year to indulge in (or just wait till they all come to Netflix or even the local library—that’s what we do!). Instead of buying the latest and greatest smartphone, use the one you have until it dies. 

Deciding to be content with what you already have really can have a huge impact on your financial well-being and help you attain financial freedom for your family—perhaps literally decades earlier than the average.

Read this article to learn powerful principles of contentment that will help you to win with money. 

 

Conclusion 

This year, let’s be lazy—in a good way. Let’s be lazy so that we can work toward financial success. Let’s work to achieve our financial goals and reach our dreams by spending less money on stuff and saving more money in order to bolster our bottom line. Let’s shop less to save more.

Let’s find inexpensive ways to spend more meaningful time with our families. Let’s focus on (less expensive) experiences instead of on things. Let’s automate our finances so that we are saving, spending, and investing intentionally in ways that are moving us toward our financial goals—and ultimately, our financial freedom. 

 

What do you think about these tips for ways to save more money by being lazy? I would love to know your opinion! Leave a comment below and let me know your thoughts!

money tips for financial success

Invitation to Share

Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help others? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being. Thank you!

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Savings Tracker: Free Savings Goal Tracker to Help You Save Money Quickly!

savings tracker

Free Savings Tracker

In this article you can download an awesome, free savings tracker. I will also share ways that you can make easy spending cuts in order to have more money available to save toward your awesome savings goals. And I will include some of the top things that you might want to save money for!

**Important note: Be sure to download your free savings tracker at the end of this article!**

 

Tip: Pin the image above so that you will be able to refer to this article about the savings tracker easily later!

 

Simple Ways to Save Money to Reach Your Goal with a Savings Tracker

In this section I am going to list some of the ways that you can find the biggest savings in order to reach your savings goal. And then you can use the savings tracker to track all of the money you are able to save toward your goal from slashing these various budget categories!

 

Save money on entertainment.

There are many, many ways that you can save money on your monthly or yearly entertainment and related costs. This is the first place that I recommend that people look to if they want to save more money or need to reduce their expenses. Here are some of the biggest areas to cut costs:

  • Ditch your dish (satellite) or cable service. Find cheap or free alternatives instead.
  • Save money on your cell phones or smartphones.
  • Save money on your internet service.
  • Go to the movies less.
  • Buy fewer books and movies (go to the library instead :)).
  • Go to fewer and less expensive music concerts.
  • Go to fewer and less expensive sports games.
  • Spend less on personal hobbies. (Where could you make cuts? Any expensive hobbies you might give up, at least temporarily?)
  • Spend less on video and computer games.
  • Spend less on electronic devices.
  • Spend less money on toys for your sweet kiddos. (They probably have too many already; am I right? Or maybe I am just projecting my own family situation here. :)) Buy fewer toys, and buy them at thrift stores, garage sales, and the like. Consider doing toy swaps with family members and friends or members of your church.
  • Cancel your subscriptions to magazines and paid TV services (Netflix, Sling, and so on—again, videos from the library are free!).
  • Consider canceling your memberships to the gym, rec center, museums, aquariums, zoos, and the like.
  • Spend less money on recreational activities like skiing, bowling, miniature golf, playing arcades, and so on.
  • Spend less on your pets. (I know they are like members of the family for many people; but I don’t spoil our kids, and you can bet that I don’t spoil our pets, either!) See if you can trim spending on pet food, grooming, toys, accessories, and other pet expenses. 
  • Spend less on Christmas shopping.
  • Spend less on gift giving (see if you can make a gift, or give a heartfelt card or baked item instead).
  • Spend less on family vacations.
  • Reduce the amount allocated to your personal monthly spending money (your fun money or blow money).

 

Save money eating out.

The average family in America spends about $3,000 a year eating out. That means there is a lot of money that can be saved here! I know it probably sounds crazy, but we spend less than $300 a year eating out. And I don’t feel deprived! Want to know why? The reason is that that frugality has helped us to be able to reach other financial goals that we have—and to do it on one average income.

The best thing you can do to save money eating out is to simply do less of it. 🙂

But there are lots of other ways that you can save money eating out, as well! For example, you can share an entree. You can eat an appetizer for your meal.

You can buy ice cream on the way home instead of having dessert at the restaurant (you can buy a whole gallon of ice cream for the cost of an average dessert!) You can use coupons (check out Groupon, Living Social, and similar sites). And be sure to use the gift cards you receive to restuarants, as well!

Read this article to learn many more ways to save money eating out.

 

Save money on groceries.

There are so many—so many!—things that you can do to reduce your grocery spending. I discuss more than 70 ways that you can save money on groceries in this article.

But here are some of the things you can do to save the most money:

 

Check out these related articles:
31 Budget-Friendly Easy and Cheap Dinner Recipes for under $5
42 Cheap and Easy Budget-Friendly Meals for under $5
13 Ways to Save Big When Eating Out!
73 Easy Ways to Save Money on Groceries without Coupons!
59 Must-Know Tips to Slash Your Grocery Bill in Half!
151 Easy Ways to Save Money: Your Ultimate Guide to Saving Money! 

Save money on transportation.

 Another way you can reduce expenses in order to have more money toward reaching your financial goals is with your spending on transportation. The average car payment in America is close to $500 a month! Is is any wonder that nearly 80 percent of Americans are living paycheck to paycheck? Our savings accounts and emergency funds and retirement funds are sitting in our garages!

So here is what you can do to turn things around and save money on transportation costs:

Find more than 30 tips for how to save money on transportation costs here

 

Save money on housing.

For many families, housing is their single largest expense. But there are also many things that you can do to save money on housing. Here are some of my best tips for saving money on your housing:

  • Shop around to see if you can lower your homeowners insurance premiums.
  • Look into refinancing your home if interest rates have dropped. (But don’t lengthen the term of your loan! If anything, shorten it!)
  • If you are renting, find a cheaper place.
  • If you bought too much house, look at downsizing.
  • If you really want to save money on housing, consider renting out a spare bedroom (or bedrooms) either long term or on sites like Airbnb and Booking.com.
  • Save money on alarm monitoring with inexpensive services like SimpliSafe. (I love SimpliSafe!)

Check out this article for more than 30 ways to save money on housing.

 

Save money on utilities.

You can pretty drastically reduce your utility bill if you want to. Years ago I heard about a professor of economics who just couldn’t bear to see the money spent on utility costs go down the drain because he knew what that money could grow to if it were invested, and so he kept his AC up and his furnace down, and his family wore sweaters and bundled up during the winter and found ways to stay cool during the summer.

We haven’t gotten that extreme in my family (not yet, anyway; ha! :)), but it’s a little tempting! Because I hate spending money on things that have no lasting value, too! Sigh. In any case, here are some free and easy ways that you can save money on your utility bill:

  • Turn down (to 62 degrees or lower, if you can) and turn up your AC (to 78 degrees or higher, if you can).
  • Wash all of your clothes in cold water. Washing machines are so powerful these days they will still get your clothes clean even with cold water.
  • Hang your clothes out to dry.
  • Use your dishwasher less. Wait till it is full to run it, and consider using your dish drain and washing the dishes by hand.
  • Turn off lights, TVs, computers, radios, nightlights, and so on when they are not in use.
  • Unplug appliances and electronics when they are not in use.
  • Open your curtains during the day to let in the sun to warm up your house during the winter or keep them closed to keep out the sun to help keep it from heating up too much during the summer.

Also, read this article for more ideas on how to save money on utilities during the summer and this article for more ideas on how to save money on utilities during the winter.

Save money on clothing and shoes.

Some people just love to buy designer clothes and shoes. And they look really nice! But so does a paid-for beach house in retirement. 🙂 So we buy most of our clothes, for us and the kids, either on sale or from thrift stores or the classifieds. For now our kiddos are young, so they don’t know the difference (and I hope that even when they are older, they won’t care—and I hope they never do :)).

My sisters and I also swap clothes back and forth for our kiddos that are the same ages, which is awesome! I love to see the clothes that my kiddos wore on my nieces and nephews; it brings back such fun memories! If you have family or friends with kiddos the same age as yours, see if you can set up a kids clothing co-op!

Read this article to learn easy ways to save money on clothes.

 

Savings Accounts That Everyone Should Have

When you are considering what savings goals to work toward with your savings tracker, here are my top recommendations. Below I list the different savings accounts I feel that virtually every family (and everyone) should have (and that we ourselves have).

 

Emergency fund

Of all the savings accounts that every family should have and of all the things that it is important to save money for and record progress toward with a savings tracker, the emergency fund is I feel the most important.

Before you start saving for anything else (unless you have an immediate expense you know is coming, such as a crucial home repair), save up a starter emergency fund of at least $1,000.

Then after you have paid off all of your nonmortgage debt, go back to saving for your emergency fund until you have three to six months’ worth of expenses saved in your fully funded emergency fund. (I explain whether you should save three months’ worth of expenses or six months’ worth of expenses in this article on how to create an emergency fund.)

 

Vehicle maintenance and repairs

Another important category to include when determining what to save money for and track with your savings tracker is vehicle maintenance and repairs. We all love our cars, but the simple reality is that they need regular maintenance and eventually they need repairs. So rather than having to put the bill on your credit card the next time your battery dies or your brakes need to be replaced or your transmission goes out, pull the money from your vehicle maintenance savings account.

 

 

Vehicle purchase

An additional item to include when deciding what to save money for is the purchase of a vehicle. Do you want to know where most people’s wealth is? It’s sitting in their garage. Really. I don’t mean that our vehicles make us rich. I actually mean the exact opposite, because vehicles go the wrong direction—they go down in value. They depreciate. And yet the average car payment in America is more than $400 a month. Did you know that if you paid yourself that $400 a month for 40 years instead of paying it to the bank in car payments you would have invested $192,000 (can you believe that people spend that much on this depreciating asset?!), and at an average annual return of 11 percent, which is very realistic over the long term, you would have $2,907,969! Isn’t that amazing?

So instead of paying the bank that much money and all of the interest included when you finance a vehicle, set up a vehicle savings account and pay yourself a monthly car payment. That may mean that you want to sell your current vehicle that has a car payment and buy an inexpensive car to get around in until you can buy yourself a car for cash in a couple of years.

If you can pay yourself $200 a month for 2 years while you drive you $1,000 to $3,000 get-around car, you would have about $5,000 to buy a little bit nicer car. And then if you drive that car for two more years, you could then buy a $10,000 vehicle ($5,000 from the value of the current car plus $4,800 from saving $200 a month for 24 months = ~$10,000).

And then if you drive that $10,000 vehicle for four more years, you could then buy your next car, with cash, for $20,000. And because you’re going to buy a car that’s at least 2 to 4 years old, since you don’t want to take the huge bite that happens when you buy a new car (save that for when you have a net worth of at least $1 million and can really afford to take that kind of financial hit!), you can get a great vehicle for that price—and you’re just eight years into your vehicle saving plan.

If you want to buy a vehicle for even more than that (though personally I hope to never spend more than that on a vehicle unless it’s an RV or sailboat or something—I like to use my money for things that go up in value), you could save more, such as $300 a month. If you saved $300 a month for eight years and earned a little interest on that, you would have about $30,000 to pay toward your vehicle, plus the resale value of the current car you were driving.

And of course you could increase that by about $10,000 for every additional $100 a month that you chose to save—so if you wanted to buy a $50,000 vehicle with cash, you would need to save just $500 a month for eight years.

I know that having a car payment in America is normal, but you don’t want to be normal! Normal is broke and in debt and living paycheck to paycheck. Normal kind of stinks. So don’t be normal. Be awesome. And one of the ways you can do that is to get out of debt and never look back. Find out how you can save on the many costs related to car ownership by reading this article.

 

Down payment

Probably the biggest purchase you will ever make is your home, so a down payment is another important item to include on the list when determining what to save money for. If you hope to be a homeowner in the foreseeable future, you should start to save toward the purchase of your home. This is another awesome goal to track with a savings tracker!

To be able to save as much money as possible in your down payment fund, rent as inexpensively as you can. Rather than rent a posh place with all of the awesome amenities, rent an inexpensive (but reasonably safe) place for as little as you can, and save the difference. There’s a lot you can put up with if you know that it’s only for a certain amount of time (say two to five years, as you save up a good down payment) and if it’s for a great cause. To learn more about saving up to buy a home, check out this article.

If you know that you are at least five years (and the closer you get to ten years or more, the more this might make sense) away from purchasing a home, you might even consider investing the money in mutual funds to earn more money on your money.

You might even consider what we’re planning to do for our next home purchase—the 100 percent down plan! We are planning to stay in our modest, three-bedroom, 1,300-square-foot home for the next five to eight years (we’ve lived there almost eight years now) so that we can buy our next home (that will probably be close to twice the value of the one we live in now) with cash.

It’s maybe a sacrifice to stay in a smaller than average home with our three kiddos, but the payoff of never being in debt ever again is worth the trade-off. And as we save that money for the next several years, because it is a mid-term time frame of more than five years, we are investing the money in mutual funds in our Schwab brokerage account.

If you want to know how we choose the mutual funds that we are investing in to diversify our investments, enter your information below and I will be happy to email it to you, no strings attached.

Home repairs

When you buy a home, you not only sign up for 15-plus years of hefty payments but you also sign up for the upkeep and repair that a home requires. Home ownership (generally speaking) is definitely worth it, but you need to be prepared for the extra expense of home maintenance in your budget.

You should save about 1 percent of the purchase price of your home for home repairs and maintenance each year. So if you purchase a $250,000 home, that would be about $2,500 a year that you should save, or about $200 a month. This money can then be used for the deductible of your homeowner’s insurance if you need to make a claim, for example.

 

Note: You should consider putting your homeowners insurance deductible high enough that you never want to make a claim unless it’s something pretty catastrophic. So put your deductible at about $2,000 or more. That will keep your premiums significantly lower, but perhaps more important, it will keep you from making insurance claims that you should not make for things that you should instead pay for out of your house maintenance and repairs savings fund—or even your emergency fund if needed.

If you make too many claims, not only will your insurance premiums get raised significantly, but you might even get dropped from your insurance company. And because your claims are visible to other insurance companies (on something called the CLUE, or Comprehensive Loss Underwriting Exchange, report), making too many claims will also make other insurance companies less likely to be wiling to take your business.

So instead, self-insure by having a fully funded emergency fund and then by saving monthly for the home repairs that you will need to make throughout your time in your home.

To find helpful information on saving money on housing, read here.

 

Furnishings and appliances

It is also a good idea to include a category in your budget for furniture and appliances as you are determining what to save money for.

You need to plan to do periodic repairs and replacement of your appliances and furniture. And you don’t want to have to rely on credit cards to do that. So instead, save up regularly for these eventually anticipated expenses.

You’ll get a good feel for how much you need to save once you start paying attention to this, but if you’re unsure, start saving $50 a month. If you buy gently used furniture and appliances, you’ll get a great bang for your buck and be able to buy a lot of great things for $600 a year.

 

Christmas and gift giving

Another savings account to consider setting up and recording your progress on with a savings tracker is a Christmas and gift giving fund (or one for each).

The way many people act, you would think they don’t realize that Christmas (and the cost of it) are coming until at least Black Friday. But you can plan better than that! If you spend the average $900 that most families in America do, then you can save up for Christmas for just $75 a month. Sweet! So get it done.

Or, you might also consider cutting back on your Christmas spending so you can save less each month and put the money toward other great causes (such as your children’s educations or your own retirement—now those are gifts that keeps on giving). Read this article for ideas on how to save on your Christmas spending and this article on how to open an educational savings account for your child.

And then you might want to save some money each month for additional gift giving such as birthdays, weddings, and so on. Either that, or make it a line item in your monthly budget when needed.

 

Vacations

Another category to consider setting up is a vacation fund. And once you know the specific vacations you want to take, recording your progress toward saving up the money to take them with cash with a savings tracker is an awesome way to go, to enjoy a debt-free vacation!

 

The best kind of vacation is the one that doesn’t follow you home in the form of credit card payments! So set up a savings account to save up for your vacations. You can estimate how much to save each month by looking at how much you have spent in the last year or two on family trips and vacations, but $100 to $200 a month is probably a good place to start.

 

Miscellaneous/other short-term savings

We also have a savings account for miscellaneous purchases and expenses. You may want to have one to cover things that come up somewhat less frequently like purchasing electronics or bikes and recreational gear or things like that.

Learn what other things you might to save up money for.

 

 

Conclusion

As you use your savings trackers to track your progress toward your financial goals, you will be able to move yourself and your family steadily toward financial freedom. Best wishes as you work toward reaching that ultimate financial goal!

 

What are your most important financial goals currently? What savings goals do you intend to use the savings tracker for? I would love to hear your best ideas for what you are going to use your savings tracker for!

How to Use the Free Savings Tracker

The Savings Goal Tracker is fun and easy to use! All you have to do is write down what you are saving for, how much you want to save, the amount that you want to save each month, and your desired date for reaching your savings goal.

Then, write your savings milestones in that area of the worksheet. One thing you can do to help you stay motivated to keep on saving and to reach your savings goals is to celebrate when you reach certain milestones. So, for example, you might go out for ice cream as a family when you reach certain milestones. Or if they are bigger milestones or you have more room in your budget, you might go out to dinner or a movie. Or you might buy yourself a video game or book or favorite treat from the grocery store.

Knowing that you are going to get a reward is a great way to help keep yourself motivated to save and reach your financial goals! Sign up to receive the free Savings Goal Tracker below!

Invitation to Share

Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help others? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being. Thank you!

Join Our Facebook Group!

Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.