Saving money while living on your own already sounds difficult. But saving money while there’s a baby in the house, that’s another thing. With all the diapers, baby creams, baby soap, clothes, etc. you might feel that you are overwhelmed and that all the money you have is just evaporating. In this article series, we are going to learn step by step how we can save money without compromising about the quality of the things we buy. For today, let’s learn how to set a simple financial plan in 5 simple steps.
Step 1: “Ten percent of your paycheck, where does it go? In the bank.” Always keep in mind this famous advice that Mr. Geller gave us in the Friends series. Why? Having a baby now in the house means that a lot of surprises can happen out of the blue. That’s why we parent always must be ready with some spare money aside for such surprises. If for a month you did not need any of the spare money then leave it where it is: in the bank. You can create at the bank two sequences for your account: one sequence from where you spend and another where you put your spare money.
Step 2: Set a goal. It’s never fun to do savings without having a goal. You might be saving for example to be able to travel after a year, to buy a new car or to start any of your dream investments.
Step 3: Prioritize your needs. We buy a lot of stuff, but do we use all of them? How frequent do we use the things we buy? Every day? Once per month? Never? Ask yourselves all these questions to be able to prioritize correctly.
Step 4: Set a budget. Now that you know your priorities, set a budget to be able to buy these priorities. If there is still some money left after step 1 and step 4, you can set another budget for the least important things and put another 10% of your money in the bank. Now we have saved 20% of our income.
Step 5: Monitor your spending. Now that the plan is set, it’s time to act. Write down every day how much money you have spent. Then ask yourself if this spending was a priority and if it was within the budget. If the answer is yes, then you are on track. If the answer is no, then ask yourself why you spent this money. Was it necessary? If the answer is yes, then go back to step 4 and correct your checklist. If this spending was not necessary, then you will have to deduct it from the budget of the least important things (refer to step 4) which is fine, yet you’ll have to bear in mind to try and stick to the plan.
You might no be able to save from the first month as you might need some time to know how to prioritize and how to set a budget for your essential needs. But, once you start to save successfully, it will become your new addiction. Wait for us in our next article (How to save money on clothes? 101 Guide for mothers.).