Face Facts And Pay The Piper

Most of us wish we could save more money.

So why don't we?

You say you've heard it all, but here you are in the same spot as last year.

This boils down to two things. The first is that most of us don't have a good handle on what our expenses are in relation to our income. The second reason we don't save more is because we're not aware of our money-sucking habits. Here are a few steps you can take to gain control and save more money. They take less time than you think. So why not get started today?

Gaining Control

1. Write Down Why You Want to Save. Write down all the reasons you want to save more money. The obvious things are for retirement, to buy a house, for college education, for travel, and for that special toy you want (car, boat, etc). Other reasons might be to have financial security, peace of mind, the ability to help others, to feel in control, and other non-tangible reasons. By being clear about why you want to save more, you'll be more likely to stick with it. Write these reasons down at the top of your budget and carry this around with you in your wallet.

2. Know Your Income. Know what your exact monthly income is by looking at your net pay. Sometimes we just mentally think of our gross income because it makes us feel better, but we need to look at the actual net number after taxes are deducted.

3. Do an Expense Inventory. Write down all your expenses for the month or type them into an excel spreadsheet. If you have time take a look at a few months to get an accurate average.

4. Calculate Your Monthly Net Income or Loss. Take your net income and subtract your net monthly expenses. That's the amount you are either saving or losing monthly. Congratulations. Now that you know the number, now you can do something about it.

5. Set a Budget. The easiest way is to use this free online budget service, The Beehive. Alternatively, you could use software such as Quicken or Microsoft Money. Or if you like to keep it very simple, use an excel spreadsheet with a column for income sources and a column for expenses (including savings). The goal here is to allocate your monthly income to a monthly maximum for each expense type and a minimum for your savings goal.

6. Free Up Some Money (Cut Your Expenses). After you've tallied your expenses, review each one. Where can you make cuts? For instance do you use all the minutes on your cell phone plan? Could you downgrade? How about your home phone? Could you do without it? Do you watch enough TV to justify all the cable channels you have? Call the cable company to find out how you could downgrade. $20 here, $40 there, another $60, and suddenly you've freed up $100/month that could go towards savings or debt reduction.

7. Pay Off Credit Cards First. If you have credit card debt that charges more than your savings account pays, then the most sensible decision is to pay down your debt first. Switch to the lowest rate you can while you pay it off. After you have paid off your credit cards, only buy what you can pay off at the end of each month. If you have trouble controlling spending, then close your credit card accounts and use cash.