It's Your Money - Why Not Keep It?

What is one thing you can do right now to have more money every month? It's simple - save more money every month. One of the first things you should do when you get your paycheck is pay yourself. Each pay period, you should set aside at least 10 percent of your income (more if you can afford it) in a savings account. How do you find an extra 10 percent if you are living from paycheck to paycheck? Fortunately, you don't have to. The key to saving more money on a fixed income is spending less money.

The first step in spending less money is to track your money - every penny of it. Start by listing your income and expenses in separate columns of a spreadsheet like Microsoft Excel, or even on a piece of plain paper. For income, in addition to tracking wages earned, include any recurring sources of income like interest on savings accounts or other investments.

Expenses should include set expenses and estimated or anticipated expenses. Begin with recurring known expenses like mortgage or rent, phone bill, internet service, car payments, home/renters insurance, vehicle insurance, vehicle registration fees, etc. and then estimate the unknowns like groceries (list junk food separately), entertainment, clothing, gas, incidentals, etc.

Once you have the two lists, with actual or estimated dollar amounts attached, you are ready to begin tracking. You can use something as simple as your check register or as complex as some of the all-encompassing software programs that will even download information from your internet accessible bank accounts and sort it neatly into expense categories for you. For those interested, there are sites online like www.mint.com that will teach you more about finances and offer free online tracking software. In any case, it doesn't really matter how you track the money (everyone will find a different method that best suits their circumstances); what matters is that you faithfully track it.

Remember how I said to track every penny of your money, well I meant it. Set up a record for your credit accounts, savings, checking, investments, and even cash on hand. That means even the $10 you got in a birthday card or the quarter you found on the sidewalk. At any given point you should be able to add the cash in your pockets, purse or wallet, on your dresser, etc. and match it perfectly against the recorded amount. This level of detail will benefit your efforts immensely.

Tracking your money will allow you to compare actual expenses with those you estimated. You might be surprised to find out just how much you spend on groceries or entertainment each month. It will further enable you to set budgeting goals if you feel you are spending too much in a given category. You should not establish a budget based on what you think you spend. Instead, set one once you know how much you spend and it will be a much more realistic budget goal for you to attain. As you set financial goals based on new information you are gathering, be sure to include the savings we were talking about earlier. Put your money to work for you earning interest.

As a fortunate side effect you may also find you are spending less money simply because you are conscious of the fact that you are indeed spending money. In the credit era it is far too easy to swipe a credit card and not even think of parting with that money the same way you would when taking the same amount of cash out of your pocket and handing it over to the cashier. You'll start to ask yourself financially appropriate questions like, "Do I really need this?" or, "Do I want this item more than I want to meet my financial goals?" or, "If I really do need this, can I get it cheaper somewhere else or at a later date?" or, "Does it have to be new or will a less expensive used one work just as well?" Finally, the simple thought of having to go home and take time to record spending 50 cents on that candy bar at work might even be enough to deter you from making the purchase in the first place.