The problem is likely that by the time you’ve paid for everything else, rent, groceries, utilities, and maybe even a few dinners out—you often don’t have enough left to add it to your savings … at least not until your next paycheck. It sounds like you’re facing a common challenge of budgeting and saving money.
My father used to say quote Ensure you settle your bills promptly to avoid encountering difficulties when seeking loans from the bank. unquote.
My mother used to say quote he who has no debt is a rich person unquote.
And then the financial advisors recommend maintaining a savings buffer equivalent to at least three months’ worth of expenses to prepare for unexpected challenges.
At the age of 20, my financial responsibilities were minimal, mainly centered around my car and phone expenses. This allowed me the freedom to enjoy social activities, meet my girlfriend, and eventually move in together. However, as we navigated the transition from independent living to sharing a household, our financial landscape changed. Purchasing furniture required taking out a loan, and discussions about a house soon followed, leading to another financial commitment.
The arrival of kids necessitated a larger car, leading to yet another loan. Gradually, I found myself consistently running low on funds, prompting me to confront a new reality—I had to establish a budget.
The school didn’t teach me the basics of creating a simple budget! How does one even go about that? Where do you start?
I turned to my father for guidance, but he wasn’t practicing budgeting himself. Seeking advice from friends resulted in puzzled expressions — A Budget? What’s that?
Reflecting on my twenties, the internet was still in its early stages, making it challenging to find easily accessible resources on budgeting.
Sat down and started to compare my expenses against my income, only to realize I was consistently in the red. It became apparent that my earnings were insufficient to cover my monthly costs. Following my father’s advice, I resorted to borrowing money to bridge the gap, inadvertently perpetuating the cycle.
Now, if I were to heed my mother’s advice and strive to be debt-free, I face a dilemma. The house is on a 20-year mortgage, the car on a 7-year plan, but in seven years, I’ll need to replace it—cue another loan. On top of that, there’s the ongoing burden of a school loan, along with potential future expenses that might require additional borrowing. The prospect of living without debt seems almost unattainable.
Fast forward to my 30s, and I still come across advice advocating the importance of having three months’ worth of savings for unforeseen circumstances. However, the question lingers—how am I supposed to achieve that when I’m still living paycheck to paycheck?
While having a three-month emergency fund is essential, my concerns extended to retirement planning. The challenge was figuring out how to save for the future. Recognizing the need for a solution, I delved into books like “Rich Dad, Poor Dad” and several other books. Through this exploration, I eventually grasped a crucial concept.
The first person that I should pay ….” IS MySelf “…
Certainly, prioritizing paying myself before settling financial obligations with the bank has been transformative. By adopting the “pay yourself first” mindset, I’ve established a routine of putting money aside for my own benefit.
To implement this strategy, I opened a second bank account and committed to setting aside $200 each month. Although it required some adjustment, the perseverance paid off, and I now have a savings cushion equivalent to three months of expenses. As this fund continues to accumulate, I’m beginning to view it as a valuable resource for my future.
Initially questioning whether allocating $200 a month might be excessive, I realized it translated to just a $50 difference per week. Surprisingly, adapting to living without that extra $50 became quite manageable. The irony lies in the fact that while banks were always eager to lend me money based on their assessment of my repayment capacity, they seldom inquired about my commitment to saving and securing my financial future.
Our education system failed to equip me with the skills to create a basic budget. Nevertheless, there’s an interesting twist – I had a teacher who dedicated hours to teaching us how to play a game. If you’re currently 20 years old and reading this, consider yourself fortunate. You have an advantage over me at that age. I sincerely hope you take this advice to heart:
~pay yourself first~
In my twenties, the internet was non-existent, and resources for financial planning were limited. However, today, you have a wealth of free tools at your disposal to discover budget samples and craft one that suits your needs. The digital landscape now offers a plethora of platforms and resources, ranging from budgeting apps to online templates, making it easier than ever to gain insights into effective financial management.
Take advantage of these accessible tools to streamline the process of budget creation. Whether you’re seeking inspiration from pre-designed budget samples or utilizing interactive applications to customize your financial plan, the online world provides invaluable resources to empower you on your journey to fiscal responsibility.
To read further about making a budget please click here.
