Whether you are saving for a new car, a special holiday or a new baby, you need a plan to get you there. It will likely mean sacrificing some of your monthly luxuries for a while, but most of us have corners we can cut somewhere in our budgets. If you plan ahead you can make it work and you might not even notice where you have cut back.
Step One: Take a good, long look at your monthly spending
Track your spending religiously for a month if you don’t already have a good idea of what you have going out. Once it is all on paper, you will see exactly why you don’t have any money left at the end of the month, and it will be obvious where you should be cutting back. It’s all about shifting priorities. Take a few hundred off the entertainment budget and move it over to make a credit card balance disappear. Cancel your gym membership and do home exercise videos or go for long walks instead. Remember to pay off your credit card balance each month going forward, so it doesn’t get out of control.
Step Two: Set a goal and visualize yourself reaching it
Maybe your goal is to reward yourself with a new car. You work hard, and you should be able to drive your dream car one day. The small sacrifices you are making in order to put money away for a new car will be much easier if you spend time visualizing yourself driving that Dodge Challenger down a long, winding road into the sunset. If your goal is a once-in-a-lifetime trip to Italy or Australia, print out some photos and put them up on your fridge where you will see them every day. Better yet, put them in your wallet to remind you why you aren’t doing any impulse spending.
Step Three: Make your money work for you
“Spend” your money ahead of time. That is, have each dollar allocated to either a regular monthly budget item, your retirement savings account, your special savings account, or bills. If all of the money is spoken for, there won’t be any lying around, tempting you to overspend. Many people find that living on a Zero-Sum Budget works wonders in helping them save for their goals.
When you are getting used to your new budget, you will have to work on your willpower. Know where you are tempted to spend in excess of your budget, and avoid those places altogether. And if you see something you really want to buy but it will mean breaking the budget you have set, ask yourself, is it worth more to me than my goal of a new car or a trip to Italy? If the answer is no, your budget is safe, your goal is in sight and that thing you thought you wanted will still be around when you have reached your savings goal.