Financial Planning Guide

One of the most stress inducing factors in any household involves the struggle that debt and bills bring to one's life. The stress from being in debt can cause severe physical and mental ailments, tear down a marriage, and impact a credit score to the point where even obtaining a loan for a used car will become difficult at best. While there are many ways to get out of debt, one of the best methods involves simply saving money. While it may sound easier said than done, these three simple steps will have you on the pathway to saving money and getting out of debt quickly.

Step 1: Outline Your Expenses & Create a Budget

Admittedly, this can often be the hardest step to overcome when attempting to save money. Every expense may seem like a worthwhile expense initially, but ultimately there is almost always room to cut back. Start by first totaling up your monthly income. All bills, mortgages/rent payments, utilities, car notes, car insurance, etc. should be added up and subtracted from your total. For many people, credit cards are a way of life and a necessary evil. This likely means that you have at least one, if not multiple credit cards that need to be paid off. Start by factoring in the cost of your minimum payments on all credit cards into your list of expenses. It may help to consider consolidating multiple balances onto one or two cards if possible.

After you have determined your monthly expenses it is time to create a budget. This is where you will need to honestly examine what your true needs are. After you have outlined what your expenses are, identify the three most important areas and focus on them, anything can be cut back even if only a little. For example, is it necessary to have a $70 a month cell phone bill plus an additional $30 for a mobile internet plan, or would a $60 a month standard cell phone plan be worth the additional $40 in savings? Is it necessary to purchase the national brand of your favorite chocolate cookies, or would purchasing store brands provide you with more revenue to spend on other areas? While it may sound clich, every last penny saved will add up in the long run.

Step 2: Pay Yourself First

While there are many bills that you must pay, such as your mortgage, utilities, etc., it is important to keep in mind the concept of paying yourself first. Many Christian churches practice the act of tithing, giving ten percent to the church. Modify this practice by putting 10% of your monthly income into a dedicated savings account, if possible look for one that accrues daily compounded interest. Many savings accounts will require a minimum deposit that may be well above the 10% you have available to save that month. If this is the case, simply set aside your 10% until you have accumulated your minimum deposit. Once started, continue to pay yourself 10% each month. In addition to the daily compounded interest that you are earning your nickels and dimes will in time turn into tens and hundreds of dollars each month.

Step 3: Start Now!

A common statement made be people wanting to start saving is that they would "like to save some money someday." This is hands down the worst thing that any person interested in their future financial portfolio can hope to do. Even $10.00 in a savings account today could be worth hundreds in fifty years. As the old saying states, every penny counts. Every cent added toward your savings account will work toward earning you money in the long run, don't wait until tomorrow to start saving when you can do so today.