It does not take an economic expert to see that today’s US economy is growing at a slower pace than it was 10 years ago. In 2008, the world economy was rocked by an economic crisis. Some economists have dubbed this phase the “Great Recession”. While we haven’t reached Great Depression era levels, we are certainly feeling the ill effects of today’s economic downturn. Wages are stagnating and poverty levels are rising. We do not have a miraculous recovery in sight. As such, personal finance (and saving money, in particular) is more important now than ever before.
In later posts, we’ll delve into how you can earn more money and then subsequently invest it; today, however, we’ll discuss the importance of saving more money.
Create a Budget
Carve out a few minutes in a quiet space with a pen and paper handy so you can focus on creating your budget. You will return to this budget frequently, so use a designated notebook if you like to keep everything on paper, or create a digital document that you can refer to repeatedly. I like to use Google Docs for my budget planning. It’s free and can be pulled up from any computer.
Start by creating a few lists. First, create a list of your fixed and variable expenses for the month. These are bills you have to pay without fault every month, such as your cell phone bill. Second, create a list of the money that you have coming in every month. If you get paid on the 1st and 15th of the month, list the dates and amounts of your pay days. If your earnings vary by month, use a smart estimate. Third, create a table incorporating this information.
Here is a sample budget I created. You can view, save and print from Google docs.
This basic table provides me with an easy way to see what my monthly budget looks like at a glance. Feel free to customize it to fit your individual needs. By creating this table and referring to it regularly, you’ll know exactly where your money goes and how much money you have to play with throughout the month. Most importantly, you’ll want to set aside a chunk of your monthly earnings for savings. How much should you save each month? A widely used standard to figure this out is the “50/30/20 rule”:
Ideally, 20% of your earnings should go into your savings. However, if this feels like a hefty amount for your situation, start by saving an amount that is feasible for you.
What if you don’t have the money?
If you don’t have the money to allocate for 20% savings each month (let’s say for example you are paying more than 50% in rent and necessities, or you are not making enough money to cover all your bases) then alternative solutions include moving to a place with lower rent or finding a job that pays more, or making extra income with a part-time job. We’ll get into more detail on finding the perfect “side gig” for you in future posts.
In the meantime, start creating your budget if you haven’t already. It’s the first and easy step to getting control of your personal finances. Your future self will thank you.
Additional Links Regarding Saving Money in Today’s Economy:
25 Ways to Save Money on a Tight Budget
How Can I Trim $500 from My Monthly Spending
Live Within Your Means