Most people are aware that developing a solid budget is one of the core strategies to building a healthy savings fund, but the confusion often lies in how to create a sound spending plan. When individuals are faced with daily expenses, housing costs, insurance and bills, saving money can be challenging and consumers may feel hopeless about their ability to plan ahead for the future. If additional factors play a role in their finances, such as credit card debt, bankruptcy or medical bills, these feelings may be greatly exacerbated. By developing a money management plan, individuals can take the first step toward disciplining their spending and making determinations about their financial conditions.
The first step when creating any budget is to tally up and examine all expenses. This ranges from what consumers are paying for groceries to their heating bills, mortgage and credit card balances. All expenses should then be placed into a fixed or variable category, with those fixed expenses representing amounts that will never fluctuate, such as mortgage payments and student loan bills. As for the variable expenses, such as groceries, gas and some utilities, consumers should try to focus on ways to cut down on these costs. For example, groceries represent a larger expense than most people may realize, and small steps, such as shopping with a list, relying heavily on coupons and purchasing seasonal items can make a significant difference in how much they spend.
Other steps, such as switching to more affordable service providers, carpooling with co-workers and eliminating pricey cellphone and cable packages can also free up more income to devote toward savings. Paying close attention to discretionary purchases, such as clothing, entertainment and eating out may also alert individuals to excessive spending that inhibits them from putting money in the bank.
Making tough decisions
Budgeting can be a smart first step toward freeing up more income, but if after setting a money management plan individuals are still strapped for cash, the problem may run deeper and require professional assistance. Credit counselors can help consumers make decisions about how to handle debt and other burdens that are slowly forcing consumers to go under, and suggest a number of solutions, such as debt management or consolidation programs. In some cases, downsizing to a more affordable residence or vehicle may also be necessary. However, speaking with a professional and knowing all the options can help individuals feel more empowered and in control of their financial futures.