Budget Basics
Learning to save can be challenging -- but rewarding
February 13, 2006
Budgeting Basics
Boyce Watkins, a professor of finance in the Whitman School of Management at Syracuse University in New York, said people have the choice of saving or not.
"We're broke for the same reasons we're fat," he said. "We don't make the choice to have the discipline."
Watkins said some Americans have been lulled into thinking that because their homes have appreciated greatly in value in recent years, they're financially secure and don't have to save.
"But people like my grandmother, she went through the Depression and she knows the downside of prosperity," Mr. Watkins said. "People 40 and under, they don't know the downside. You take chances when you don't know the risk."
It was Mr. Watkins' grandmother who taught him the basics of saving, he said, including not spending as much as you make, using a credit card only when you have to, paying bills when they're due.
Watkins, who teaches a personal financial planning course at Syracuse, suggests these steps to get started at saving:
-Keep a simple record of where your money is going, perhaps in a pocket notebook
-Make a commitment to learning ways to manage your money better
-Slow down your spending
-Learn that not everything that's fun costs money
-Set aside your savings at the beginning of the month, not the end when there may not be much money left
"Most spendaholics are people who spend beyond the point of satiation, just like overeaters," Mr. Watkins said. "You can design a budget to give you some elbow room so you have the money to do the things you want -- but you have to set a limit, and you have to set it in advance."
Bradd DelMuto, 27, a senior account executive with Gregory FCA, a media relations firm in suburban Philadelphia, said he's been a saver since childhood.
Mr. DelMuto, who is single, is frugal about his day-to-day spending so he can save more. He packs his own lunch, limits the purchase of expensive coffee and even hangs out at bookstores to read books and magazines rather than buy them.
He's also declared his savings account off limits for frivolous spending.
"When I have money, it goes into my savings account right away," he said. "If I get a work bonus, or relatives give me a birthday check, anything like that, it goes right into the account."
"If it's in the account, I won't take it out randomly and spend it."
That doesn't mean he doesn't spend at all. He just spends carefully.
"Take a flat screen TV," he said. "I'd like one, but now they're $1,000 or more. I can hold off for a year or two until they're $500."
