A Few Steps Toward Saving
Contributed By: Geoff Stam, Director Default Management and Financial Literacy, Office of the Chancellor
We previously discussed tracking down our money in the article “What Happens to the Money” and suggested using a budget to accomplish that goal. Now let’s explore ways to save some of that money for emergencies, futures expenses (e.g. the Holidays), and/or retirement. The basis for doing so will be our budget.
First, create a budget.
Build a budget or spending plan to help keep you on track with your finances. Just as important, a budget will help identify how much you can afford to save effectively without it hurting your ability to take care of your expenses. A spending plan can also identify items where you may be able to reduce expenses hopefully creating more opportunities to save. Most importantly, within your budget find a way to make sure you are paying yourself first; at the very least creating an emergency fund.
Second, eliminate the debt.
Debt elimination will not be easy. Once you have an emergency fund of at least $1,500-$2,000, begin to pay off credit cards, car loans, student loans, essentially anything that isn’t tax deductible. If you’re leasing a car and you can’t write it off as a business expense, you’re pouring money down a black hole. Consolidate debt if you must, but get out of debt as soon as possible. The Debt Snowball as suggested by Dave Ramsey (www.daveramsey.com/blog/get-out-of-debt-with-the-debt-snowball-plan) is a very effective tool. Dave recommends the following:
- List you debts in order from smallest total balance to the largest balance.
- Pay as much extra as you can on your smallest payoff balance to eliminate it quickly. Continue to make minimum payments on all the other debts putting everything extra into the smallest.
- Once something is paid off, move that entire payment to the next item on the list, adding to the payment already being made. Continue on until all debts are gone. Each completed payoff will give you the desire to pay off more.
Third, change your money mind set.
Saving money requires a change in how you think about money. Many people think that money can buy them happiness in the form of new TV’s, fancy cars, large houses, etc. There are many things that we want but do we really need them. This is what can cause trouble for a lot of people. And many times is the reason saving is difficult.
The next time you go shopping, even if it’s only to the grocery store, ask yourself two questions: Do I want it? Do I need it?
For example, if you’re looking at a gallon of milk and there’s no milk in the house, it’s most likely you need it. If, however, you’re looking at another jar of jelly when you already have three half-used jars in the fridge, you might want it, but you definitely don’t need it.
If you begin the habit of asking yourself these questions before buying anything and answer them honestly, you will be well on your way to saving money!
Please feel free to contact me if you have any questions or need additional assistance. I can be reached at (904) 296-3440 extension 139, or [email protected].