How to Save

Write Down What You Want
If you want to turn dreams and goals into reality, start by writing down everything that you want to save for. Seeing what you want on paper makes it real and let's you decide which goals take top priority. 

Don't be overwhelmed by the large amounts of money that may be involved. Remember that once you start saving, your money will also begin growing through interest payments or price appreciation, helping speed you on your way to getting what you want. To wind up with a million dollars at retirement, for example, it isn't necessary to save a million dollars. Just make up your mind to invest carefully and regularly, and watch your money grow.

Begin With a Budget
Figuring out a budget is a simple, step-by-step process. As you work out your budget, you will find some surprises about where your money is going, and see where to cut some expenses that can result in significant savings over time. That frees up money to invest and save for what you really want.

Step One - Figure Out Your Cash Flow
Begin by tracking how much comes in every month. That can often be as easy as adding up your pay stubs, but don't forget to also include such items as dividend and interest income, child support, and any other money that you may receive during the year.

Then comes the more difficult task of tracking how much goes out.  Include all fixed expenses, such as your rent, car payment and average utility bills. Then figure out what you will be paying on credit cards and other bills over the next year. Next, add in big expenses that you see coming up, such as car repairs or day care costs. Then you need to see how much you are spending out-of-pocket each month. The best way to do this is to write down every penny you spend for one or two months. 

Add up the income and then add up the expenses. Hope that they are equal, or that income is higher. If your expenses are exceeding your income, don't despair. You're not alone. But get ready to do some cutting.

Step Two - Adjust What You Spend
Now it's time to take a hard look at the numbers and to trim areas of over expenditure and free up some money for investing and big ticket purchases. As a general guideline, some experts suggest that you spend about 65% of your take-home pay on housing, utilities and food; about 20% for repairs, recreation and vacations, clothing, gifts; about 10% for insurance premiums and property taxes, if you're a homeowner; and at least 5% for savings. Two-income couples should save a minimum of 5% each and higher income couples should be save 10% each.

One trouble area that often comes to light during the budgeting process is high credit card debt. Don't get nervous if 10% or less of your take-home pay is directed that way, but if it's much more than that, it may be time to focus on paying them down for a while.

Step Three - Analyze and Adjust Again
Make a draft budget plan and try living on it for a couple of months. You may find that you've been impossibly hard on yourself, or you may find that by cutting out unnecessary expenses you actually have more to put away for a rainy day than you expected. Make final adjustments at this time, so that your budget becomes both something that you can live with now and something that will get you to your long-term goals.

Automatic Investing Helps
Determining to stick to your budget  isn't always the easiest thing to do. One way to make sure that you stick to your plan is to have your bank automatically withdraw the amount you plan to save from your checking account and transfer it to the savings or investment account on a monthly basis.  Another way to keep your self committed to your goals is to remind yourself how happy you will be once your dreams and goals are achieved.







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