The problem is apparent. A Federal Reserve survey found that nearly half of Americans couldn’t cover a $400 emergency without borrowing or selling assets. Most Americans profess a desire to save, but it can’t compete with their immediate desire for a pizza, Ramsey says. Going into debt to fulfill those immediate desires is even worse than taking money that should go into savings to satisfy the craving.
The secret to saving is to make a zero-based budget before a new month begins and then stick with it. That is the best way to know how much you are currently spending and how you can fit savings into the plan. What’s a zero-based budget? It’s what you have when your income compared with your outgo equals zero. In other words, you are assigning every dollar you have to a category.
Start with the necessaries – housing, food, clothing, insurance and bills. Then fill in the rest of the budget, including saving, with the leftovers. Dave offers a budget app, EveryDollar, that will help. You can track transactions on the go, making budgeting easier.
Finding time to work with a budget is a challenge in our society, but a few minutes every month is worth the effort. The budget program saves time by replicating the previous month’s budget as a starting point. Then you just make adjustments for the current month.
Having a concrete copy of your money income and outgo helps you to make decisions. It doesn’t matter how much money you make. It makes a difference how you decided to divvy up what you have. Keep some goals in mind. College, a major purchase (home, car appliances, etc.), a vacation, whatever, all take money and you get that money by putting it aside. Some for emergencies, some for retirement, some for your future plans.
Starting with a zero-based budget, Ramsay says, makes a statement: “I choose to put my future needs before my current wants.” When to begin? Now.