Now that we’ve all safely made it through the holiday season (Happy New Year!!), I really wanted to do a blog for saving on any budget. It’s important. It’s especially important during an age of overspending and feeling obligated to keep up with Jones’. I’m guilty of it myself, and I will always consider myself a recovering over-spender. As a recovering over-spender, I have 5 rules to the game.
Rule #1: Create designated savings accounts
While I am a advocate for putting money into the market place, I recognize that folks have to take baby steps. So a great place to start is by creating designated savings accounts. One for travel, one for home improvements or furniture, and of course one for a rainy day. Never forget about your rainy day fund. Start off with 3 months worth of expenses in savings. After that, slowly make your way up to 6 months, then a year and so forth. Do not, and I CANNOT stress this enough, compare your journey to others – focus on the path and your lane. Be sure to pay yourself first.
Rule #2: Automate your savings
401k & Retirement Savings
You have to automate your savings. If you’re going to have 3 savings accounts, be sure to automate money going into those accounts. It takes some of the pressure off having to be overly disciplined when saving. At a minimum, please be participating in your company’s 401K retirement plan. Be sure that you participating in your company’s full match program. If they will match up to 4% per check, then that’s what you should be contributing, which would equal 8%! There is nothing like seeing seeing savings increase month over month, and year over year. Understand your options, because saving doesn’t have to look any one way!
Another way I LOVE to save is by participating in my company’s ESPP (Employee Stock Purchase Program). If you don’t know what that is, you can read up on it here. In short, an ESPP program is where you buy your company’s stock at a discount, based on a chosen percentage of your salary. Then, during the purchase date / window, your contributions are used to purchase shares. What’s the benefit, you might ask? Well, in my case, shares are purchased at a 15% discount, so I’m already making money when I buy the stock.
If your company does well, and their price per share increases by the time the purchase period closes, then you make that that difference. Example: this past window, I ended up “purchasing” $3.7k worth of stock over a 6 month period, with a 15% discount, bringing the cost to me down to $3150.
In the end (the purchase date) I made an additional $1600 on top of the $3.7k that I saved, due to my company performing well. I then used that money to pay for Christmas. You can choose to do that, pay down debt, or reinvest it back into the stock market.
Rule #3: Automate your bills
I can remember a time where I was vehemently against this, but I’ve since learned it’s the best thing to do. You need to revaluate some things if you’re uncomfortable automating your bills because it likely means you can’t afford your bills or that you’re living a little dangerously with your finances. Especially automate your credit card bills, and do so in a manner that your account shows the lowest balance when it’s reported to the credit bureaus. When your billing cycle ends and when your bill is due, are two totally different dates. Paying your credit card bill before your payment due date helps you lower your overall credit utilization(which is good for your credit score). You’ll also avoid late fees.
Rule #4: Envelope budgeting system
I will be the first to admit that I haven’t used this system in awhile, but it REALLY does help. Especially if you have a smaller budget. One of the main times that I did this was when Mitch and I got married. Y’all, we were broke broke, and at that time, every penny counted. It’s simple: label your envelopes month over month or week over week, whatever works for you. Example labels are things like nails, date night, hair, girls night, coffee, etc. Put your budgeted cash in the envelope, with the expectation that you can only spend what’s in said envelope and no more. It may sound easy, but what you will find is that you start to SEE where your money is going.
Rule #5: Stick to your rules/budget
I try not to do any miscellaneous spending until I receive my second paycheck of the month. It’s not a perfect rule, but it’s one I try to stick to. Your rules can be your own. Get creative, and don’t be too hard on yourself when you’re just starting out. Be firm, not hard. Build your own boundaries, and respect them.
I’m rooting for you, I know you got this!