Budgeting - You will save more money with a personal budget
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Assuming that you see the value in understanding where you spend your money, saving more money becomes second nature. Most people believe that they are saving enough money, but in most cases you should always be saving more. With that said, after you have a good understanding of where you spend your money you will now have the ability to make decisions on where to cut back, where to spend more and where to save more. If we use our previous example of spending $500 per month on eating out, a simple action of allowing yourself $400 (instead of $500) to eat out can instantly net you an additional $100 in savings per month. This may seem like a trivial example, but nearly everyone will have one area where they drastically over-spending. Once you have identified that you can then do something about it and turn that into more savings!
The other statement I often hear is, “I save $X per month into my savings.” Great and you should continue to do this, but where did that number come from? It often comes out of thin air as a trivial number that seemed like a reasonable amount to save at the time. This is not how you should budget for savings or anything else for that matter. Make a conscious decision about the amount of money you want to save and why. For example, if you want to build a safety net of 2 months worth of salary (need to add link to Brad’s blog about emergency fund), you will need to save 2/12th’s (2 months worth) of your money during every paycheck over the course of a year. This is a well thought out savings plan and a good goal.
To read about the last of the Three Values of Budgeting click here: You will decrease your financial risk and increase your financial security
