"I don't make enough money to save."
This statement is arguably the most powerful statement an individual can make as it relates to their finances. The one who makes a statement such as this has already thrown up the white flag in their quest to move forward economically. It is a defeatist statement that gives in to the self-fulfilling prophecy that one has no power, control, or authority over their state of poverty. Poverty is not only a physical state of being; it is more a mental state of being. What is happening in the mind, as it relates to ones belief in their ability to change their current fiscal state for the better, is the Alpha and Omega of the financial battle. With this in mind, although it seems like squeezing water from a rock, we must prepare our mind to believe that you will actually have the ability to save... even if it is only $1 per week.
There are only three actions that can be taken with your money:
- You can save your money.
- You can give you money away.
- You can spend your money.
The three actions above represent everything you can do with your money; it also represents the most basic budget you can assemble. How much you are putting into each category will determine your progress to meet your financial goal. Putting your budget together that allows you to save begins with these three actions.
Many times the working poor (i.e., individuals who are employed but who despite their employment are still living in poverty) wrongfully suggest they don't have enough to save or to give. I wish I had a dollar for the number of times I have put together a budget and discovered there was actually water in that rock if we squeezed hard enough. Here are three basic steps you can take to put together a responsible budget:
- Put together an estimated budget by placing every forecasted revenue and expense on a piece of paper.
- Complete a 30-day spending diary where for the next 30 days you write down every revenue and expense on a piece of paper. Whether you pay a bill, go shopping, get paid, or throw a penny in a well to make a wish you must write it down. (Try to do this exercise during a "normal" month where you are expenses are not too erratic such as the holiday season or when you are doing excessive traveling.)
- Now put together an actual budget at the end of the 30 days by writing down your actual expenses making adjustments according to what you learned about your spending patterns from the diary. Perhaps you are spending too much on take-out dinners or perhaps your "miscellaneous" spending is unnecessary. I guarantee you that when looking at your spending patterns objectively you will see some unnecessary expenditures. Bottom line, once the adjustments are made to your original spending patterns, the actual budget should include money in each of the three action categories (saving, donating and spending).
There are many ways to create a budget. You may not want to use a piece of paper for your budget, but instead feel more comfortable using an excel spreadsheet. You may want to use websites like mint.com which is a free tool. You may want to use the envelope method which is a popular method for visualizing and maintaining a budget (The key idea is to store the cash to meet separate categories of household expenses in physically separate envelopes.) No matter which method you use there are two criteria to look at once your budget is in place to ensure that you will maintain the budget over time.
- Ease/Convenience -- If your budget system is not easy or convenient to use you will be discouraged from maintaining it over a long period of time.
- Supported -- Pull family and friends together to make sure you support each other as you budget. Husbands and wives have a natural support system. Children can be involved in the process to get early exposure to money decisions. Friends can come together just as weight watchers have done to ensure the other is not spending excessively. I have even seen churches put on "money fasts" where the congregation agrees to stay away from excessive spending for an extended period of time.
- Cancel the gym membership and work out from home.
- Get a second job if possible.
- Downgrade your cable plan or cut it off completely.
- Cancel those online or magazine memberships that you never use.
- Take up extreme coupon usage. Many people save hundreds of dollars each month because of coupon shopping.
- Forgo the weekly eating out at restaurants and reserve a place in your budget that allows for inexpensive monthly entertainment.
- Record each debt you owe on a piece of paper, then call and negotiate each interest rate.
- Call your creditors and negotiate interest on your debt lower. I believe that every interest rate is negotiable. My grandmother used to say, "A closed mouth don't get fed!" With that in mind at least make a few calls on each item of debt to attempt to get that interest rate lowered. I have helped many to save as much as $200-300 per month through this measure alone.
- Take a close look at the due dates for your bills since paying a bill late will almost always result in a late fee and those late fees add up.
Again, budgeting is a mental exercise that starts with a positive attitude. I can teach you the mechanics of how to do it, but I can't make you believe it will work. I pray that you will be as positive as you can about this process as you move forward and soon enough, with enough optimism, you will see that rock start to drip!