My Family’s Money

You see, the mechanism for saving money is simple. All it takes is making more money than you spend and spending less money than you earn. Its simple, but not easy. Many of our savings resemble a poor, underfed pig rather than the fat, succulent creatures that put bacon on the table. In fact, 43% of Americans make a habit of spending more than they make (Source: How does your debt compare?) That is a lot of people! For these their saved money equation is all out of whack and resembles something like this:

That is a scary. When this is us, our ship is getting battered by the waves of life or our consumerism has taken over, possessing us with Legion like ferocity. Instead we all want our equation to look something like this:

Nice fat earnings, small spending, and large savings. We may want to save lots of money for different reasons, but we all want to save. Here are five simple (though not always easy) steps to make that equation a reality.

1. Determine what you really need – this is by far the most important step to increasing the amount of money that you can save. Most stuff you simply don’t need. iPods? Nope. Cell phones? Nope. Cheesy crunchy gorditas? Well … maybe … oh well, I guess not. You see, if you can wrap your mind around the notion that you really don’t need all that much to live, be happy, and make an impact on the world around you then you are jet set on becoming a multi-millionaire when you don’t even make that much money. Your power to save increases dramatically when you realize what your real needs are.
2. Set up a family budget – I have already talked about how budgets are wise and help keep you sane, but they also help you save – a lot. Budgets can be extremely simple, especially if you have already pared down your life to the necessities. All you need to know is how much you need to get by on, then pad it a little, and let this number become your spending limit. Let’s just say that you make $1800 a month and need to spend $1300 on food, shelter, and necessary transportation for the month. You might pad this number up to $1400 to cover unexpected or irregular expenses. This is all the money that will be spent for the rest of the month. If you are not disciplined with the use of credit cards, you might want to withdraw that money from the bank at the beginning of the month and keep it stashed at your house somewhere. You cannot go to the bank again (obviously you will in a real emergency) and you cannot use any credit cards. Simple, right? It might be hard psychologically, but it is simple. Your time period could be the time between paychecks, a week, or a day, it really doesn’t matter. It just needs to be concrete, achievable, and helpful for increasing the amount of money that you can save.
3. Transfer all remaining money into your savings accounts – whatever time period you choose for your budget, set up automatic transfers from you checking account to your savings for the amount you expect to have left over. By automating the process you don’t have to remember to do the transfers yourself and you only have to revisit it when you get a raise or a new source of income or category of expense pops into your life. By precommitting your money in this way it may deter you from spending more than you need to.
4. Find ways to earn more -another equally important part of saving more money is to find things that you like to do that earn you more money. Work smarter at your place of employment, pick up a profitable hobby, start a side business, or even work the kinchin lay. All will make you money with some varying degree of success. Don’t kill yourself with work, but be useful for goodness sake.
5. Kill temptations -especially if they are your friends and then take the money that they have in their wallets. The cops will never suspect you! Coffee, computers, Cubs tickets, trips to Circus Circus, Carnival Cruises, and chillin’ like a villain all have their place in your life, but sometimes they are just there to tempt you away from things that you really want. Sometimes it’s just time to show those temptations whose boss by scaring them away with your creepy Suze Orman paraphernalia. Conversely, you can conjure up all the hopes and dreams you have for your future and compare that to the transient pleasure that you will derive from a drug laden beverage that “helps you wake up in the morning.” Your dreams will win if they are worth anything.

Simple, but not easy.

Image: Nieve44/La Luz