Saturday, March 8, 2014

Saving Money and Debt Repayment - Start small

One thing I have learned over this past year, is that its often the small things that make the biggest difference.

When saving money, do not get discouraged if you are only able to save $10 a week. Heck, $5 going toward savings is better than spending more than you have. We are working the Dave Ramsey FPU plan. The first "baby step" is to save $1000 as an emergency cushion. He also says that in order to start saving, you must be caught up on all of your "bills" such as rent/mortgage, utilities, car payments. Once caught up, you move onto your $1000 beginner emergency cushion.

I am a planner. I need to know exactly how we are going to get things caught up and how we are going to save money. I have come up with this plan (through a lot of research and just gut instinct) and this is what we are working on doing.

Step One: (Beginning of Month 1)
Take $25 and open a savings account at the bank. DO NOT have it linked to your checking or available on your debit card through the ATM. This will be where you put your savings through all the little snowball things you will be doing. Do not have your baby step one in a jar at the house. It is way to easy to use.

Step Two: (End of Month 1)
Get a jar, put all of your loose change in it. Once a month take it to the bank and have them deposit it into your savings account. Make sure that the people in your family aren't raiding it for soda money every day. Come together as a family and agree that this is your starter savings. Continue to do this every month of the plan until you have reached your "baby step one" of $1000.

Step Three: (Beginning of Month 2)
Have 3% of your check direct deposited into this account. If you make $400 a week, that is only $12 per week. You may think that this percentage is not worth it. However, when you are going from not being able to pay your bills, to trying to develop a savings, its things like this that will get you moving in the right direction. The important thing is to have it automatic, so you stop "missing" it. Every month, raise this percentage until you get to 10%.

Step Four: (During Month 2)
Find stuff around the house that you can sell. Maybe mow a few lawns. Watch a few of the neighbor's kids. Do something to make some extra money. Put this directly into the savings account you opened in month one. You may not think you have anything to sell, or time to do extra work. There is always something you can do. ALWAYS.

Continue to do steps two through four until you reach your goal. Move onto baby step 2 (debt repayment), funneling all of the money you were putting toward your baby step one, into paying off debt. My next post on this topic will include specifics on that plan.

One thing I want to add is that once you have reached your $1000 goal, I like the idea of using the change jar for family fun. At the end of every month, cash in your jar and decide as a family, one fun thing you want to do. Go to the Zoo, the movies, save it for another month to do something bigger.

Everyone get saving. Start small. Don't get discouraged. We will do this!