Friday, August 16, 2013

Extract from Chapter 8. Tips on Budgeting and Saving Money


1.      Big scale only
A couple agrees on shared financial goals and understands the amount of money needed to reach the goal.
For instance, Lou and Oki want to create an emergency fund of $20,000. Knowing their monthly net profit, they decide that the fixed amount of $500 is a realistic amount that they are able to put aside each month. It will take them 40 months ($20,000 divided by $500 per month) to reach their Emergency Fund goal. Hence, they set their goal and will track its progress each month:

No other budgeting entries were created. Of course, it doesn’t mean that Lou and Oki are ignoring monthly analyses and don’t think about the possibilities to increase their monthly profit.  It’s just that they tend to make decisions by analyzing actual monthly results without setting budget constraints on expenses in the system. 


“A penny saved is a penny earned.” — Benjamin Franklin.

If saving money sounds like something totally new, you’d better start with small goals. Just like you would do a 5K run before running a marathon. Saving for a romantic two-week vacation can be a good start. Or, if you are expecting a baby, it is not wise to set a goal for your child’s college fund right away, because it might overwhelm you. While big goals are fine and admirable, small steps will do the trick to help you stick to accomplishing your goals. 

The real savings Benjamin Franklin meant in his above quote comes from funds you invest and make them work for you. We will discuss investments later in this book, as we are going to focus on saving tips in this chapter. Just remember that $20 saved today is worth a lot more in 20 years’ time.

I am not going to cover savings tips from A to Z, since you can find hundreds of them by a simple Internet search. In fact, you can download the free eBook called How to Save Money on Everything from David Ning shares more than 70 money-saving techniques in version 1.4 of the book. 

Below are some of my personal favorites:
a.       Savings Tip #1 (by popularity): Make a list for your grocery shopping before going to the supermarket. This will save you from buying things you see displayed prominently and appealingly on the shelves, but you don’t really need. Remember the golden rule of shopping: Buy only what you need.
b.      If you smoke cigarettes, this is the easiest (and obvious) expense to cut. Many people have radically improved their lives (health-wise and money-wise) by quitting this unhealthy habit.
c.       The next easiest cut is alcohol. While moderate use of alcohol is normal, the typical family can save a lot by limiting alcohol consumption, particularly while dining out. Beverages add significantly to your restaurant bill.
d.      Use a drawer or jar for change. It won’t save you much, but it is neat to have all your coins in one place at home instead of hundreds of different places.
e.       Shop online instead of brick and mortar retailer (not applicable to all goods yet).
f.       Don’t rush to buy a new device when it’s first released on the market. More often than not, prices drop a few months after its release.
Exercise 8.1. Read the money-saving tips from David Ning’s eBook. Select at least one new saving tip you like and apply it in your household. 


I plan to publish my book "HOME FINANCES for COUPLES. Resolve Money Problems in Marriage and Learn Easy Steps to manage Family Budget" on August 20th, 2013.

At this blog you can taste pieces that are ready.

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