Saving and budgeting go hand in hand with financial freedom, and is extremely important to building wealth and achieving financial freedom. Without keeping track of your expenses, you have no way of knowing how much money you can save and use to invest. Just because a person earns a high income doesn’t necessarily mean that they have good financial habits. Living paycheck to paycheck with no budget is the same if you earn minimum wage or if you make a million dollars every year. 



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Rule #1: Always pay yourself first

Treat your savings as any other bill that you must pay. You worked hard for your money, you deserve to pay yourself FIRST before anybody else gets paid. This does not mean that you don’t pay your bills or neglect other responsibilities. It simply means that you get the first slice of the pie (your paycheck) before anybody else does. Many people are too generous with their savings – they spend their checking account down every month and only attempt to save whatever is left over. This is backwards, and will cause you to never save any money. You must be selfish when it comes to saving money. This concept is mentioned throughout Rich Dad Poor Dad and The Richest Man in Babylon. 


Rule #2: Don’t forget Rule #1


Rule #3: Have a savings goal and stick to it

It is easier to save money when you know what you are saving for. It provides motivation and incentive to save. People save money to spend on cars, homes, college expenses, vacations, etc. Whatever you are saving for, have a goal and stick to it.

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Rule #4: Have a safety-net

A rule of thumb for saving and having a solid foundation is to save at least 3 to 6 months of living expenses. Some people may call this an emergency fund or “rainy day” money. Being able to have at minimum 3 months for your living expenses saved relieves the pressure whenever hard times hit, such as losing your job, getting into a car accident, unexpected medical bills, or whatever unpredictable event that life throws at you. Having this cushion will make it so much easier to whether the storm.

After having your rainy-day money stashed away. You can use all of your other savings for investing to earn more money.

Saving 3 months of your living expenses may sound tough, but it doesn’t have to be if you pace yourself. For example, if you save 10% of your check each month, it will only take you 10 months to save 1 month of income. Meeting this goal won’t happen overnight, but it is always better to start saving a little bit than not saving anything at all.


Rule #5: It’s easier to save money that you can’t see or easily touch

-        Open a separate account just for savings

-        Have savings come directly from your check into savings account every pay period

Some people find it very difficult to save money that they can easily access and spend. Now the point of saving money is to be able to have it when you really need it, and not to have it locked away where you can’t get to it at all. However, it has been shown that people are less likely to touch their savings if it is put away in a separate account that they can’t instantly get a hold of.

-        Open a separate savings account.


-        Open a brokerage account and treat it like a savings account. Money may take a few days to a few weeks to get, so it keeps you from spending your savings on impulse purchases.

-        Set up automatic deposits into your savings account


-        Set up direct deposits to come from your check directly into your savings account. This is the ultimate auto-pilot savings technique. Now when you get your check each pay period your savings has already been taken out. This causes you to adjust your lifestyle to only what you bring home AFTER you have already paid yourself.



The catch to saving money is that it is nearly impossible to know how much you can pay yourself each month without knowing exactly how much you spend on your bills and all other expenses. This is why budgeting is necessary for everyone, regardless of income.

How to Create a Budget

(source: https://www.thebalance.com/how-to-set-up-a-budget-2385690)

Step #1: Determine Your Income

How much money do you really bring home? Look at your latest pay stub to see your net income (gross income minus taxes and deductions). This the money that you have to work with each month. If you are starting a new job you may want to use a payroll calculator to determine how much money you will bring home each month.

You may be surprised at the figure. If you have a variable income (you don’t make the same amount of money each month), you will need to set up a different style of budget, and learn to manage your irregular income carefully. It is important to know exactly how much you have coming in so that you know how much you can afford to spend.

Step #2: Determine Expenses

There are two types of expenses: fixed and variable.

Fixed Expenses - Your fixed expenses are items that will not change from month to month. These items can include rent, a car payment, car insurance, your electric bill and your student loan. You should also include savings in this category as well. It is important to pay yourself first. Ideally you should put at least ten percent of your income into savings each month. Your fixed expenses are bills that will not change from month to month, but once you have set up a budget you may be able to reduce those monthly expenses by shopping around for new plans.

Variable Expenses - After you have listed your fixed expenses you will want to determine the amount that you spend on variable expenses.

These items may include your groceries, eating out, clothing and entertainment. These are also considered variable because you can cut back on how much you spend on these categories if you need to each month. You can determine what you spend by reviewing the last two or three months of your transactions in each category.

Be sure that you are including seasonal expenses as you plan your budget. You can plan for seasonal expense by setting aside a bit of money each month to cover them.

Step 3: Compare Your Expenses to Your Income

Ideally, you should create a budget where your outgoing expenses match your income. If you assign every dollar a specific place this is called a zero-dollar budget. If your amounts do not match you will need to adjust accordingly. You may need to scale back on your variable expenses. If you have extra money at the end of the month, reward yourself by putting that money directly into savings. If you have cut back significantly on your variable expenses and still cannot meet your fixed expenses, you will need to find ways to change your fixed expenses. Another option is to find a way to increase your income through an additional job, freelance work or looking for a new better paying job.

Step 4: Track Your Expenses

After you have set up your budget you need to track your expenses in each category. You can do this with budgeting software, or with an online app like YNAB or Mint or on a ledger sheet. You should have an estimate of what you have in each category at all times. This will help to prevent your from overspending.

If you sit down for a few minutes each day you will find that you spend less time then you would if you put it all off until the end of the month. Tracking your expenses each day will allow you to know when to stop spending. You can also switch to the envelope system and use cash so that you know to stop spending when you run out of cash.

Step 5: Adjust as Needed

You can make adjustments easily throughout the month. You may have an emergency car repair. You can move money from your clothing category to help cover the cost of the repair. As you move money around make sure that you do so in your budget. This is the key to making your budget work. it can help you deal with unexpected expenses and stop you from relying on your credit cards if you happen to overspend one month.

Step 6: Evaluate Your Budget

After you have followed your budget for a month, you may find that you can cut back in a few areas, while you need more money in others.

You should keep tweaking your budget until it works for you. You can evaluate at the end of every month and make changes according to the expenses in the upcoming month as well. You should evaluate your budget every month going forward. This will help you adjust your spending as your life changes and your spending increases in different areas.

Budgeting Tips:


1.      When you are working on commission, you will need to follow a slightly different plan you should work with it as a variable budget, but be aggressive in saving to help you cover times when the market is slow.


2.      It can take time to make your budget start working. If you run into problems, you may want to try one of these budget fixes. Starting to budget is just one of the steps you can take to start cleaning up your finances today. You can also try these five budgeting hacks to make it work better.


3.      As you get better at budgeting, it is important to keep your spending, bills, and savings goals in balance. You can do this using the 50/20/30 rule with your expenses. You can also look for new ways to save money each month


4.      Check out these other financial skills that you should have learned while you were in high school. They can make managing your money so much easier. It is never too late to start managing your money and change your situation.