The easiest way to make sure you do what you should when it comes to saving is to create a plan using a monthly budget. Use these smart tips to get your spending under control so it’s simple to find the money to put in savings.
Set a Goal. Understanding what you’re saving for can motivate you to stick with your savings plan. Think about when you want to be able to retire and what you want your life to look like then. Will you want to stop work all together? Will you want to travel? Will you possibly have grandkids you’d like to spoil? All of these things will require a comfy cushion of funds that it’s smart to start on now. Maybe you’re also saving for a more specific goal that you want to hit sooner, like a dream vacation. Whatever your goals are, write them down and discuss them often to stay committed. And check out MAX’s multiple savings account options, including Club Accounts, which let you put money away for a specific purpose, and Certificate Accounts, which yield a higher interest rate for those who don’t need immediate access to their funds. If your goal is money for retirement, consider a MAX IRA, CD, money market account or other investment options.
Figure Up Your Income. Knowing the exact amount of money you bring home each month (after taxes) is the first step.
Find Your Fixed Expenses. Make a list of the things you must pay for every month: your rent, mortgage, utility bills, car payments, etc. For fluctuating bills or expenses (like groceries or gas), use the highest they’ve ever been as your benchmark. When they are lower, you’ve got a little extra to save. Make sure to set specific amount to go into your savings account each month as a fixed expense, and “pay” your savings account at the beginning of the new budget cycle to help avoid the temptation to use that money somewhere else.
Examine Your Non-Essential Spending. Divide your discretionary spending into categories: travel, dining out, entertainment, clothes, etc. Don’t just guess. Use credit card statements or your check register from the past three months to arrive at an average amount spent. Use that number to determine a realistic monthly allowance for each category. And don’t forget the small stuff that you pay cash for: those lattes from your favorite coffee place, the pack of gum at the gas station.
Include a Small Emergency Fund. Add a budget category for unexpected expenses. When and if there are no surprises, you’ll have bonus savings that month.
Set Your Limit. Now that you have your income and expenses, set the total amount you can spend each month to stay within your income and hit your target savings. Work from that to determine how much you can allocate to each discretionary spending category and stay within your budget. You’ll have to prioritize, and there will be sacrifices, but everyone is different.
Track It. Once you’ve got a budget in place, record every penny spent and make sure you’re staying within your limits. Use MAX’s Smartfolio. It puts all of your financial information in one place so you can always see the big picture simply and quickly.
Review It. Check your budget at the end of each month to see if it needs tweaking. Over time, your needs might change; your budget should change with them.
MAX Credit Union is a full-service financial institution serving Central and East Alabama, including Montgomery, AL; Auburn, AL; Opelika, AL; Prattville, AL; Wetumpka, AL; and Troy, AL.