Five Tips to Finding the Balance Between Saving and Spending

by Sean Bryant on February 24, 2017

Saving and Spending

While most people realize the importance of saving money, that knowledge often goes out the window when coming face-to-face with some killer deal on something they simply have to have.

To be as smart with your money as possible, it is important to come up with a decent balance between saving and spending. Yes, saving is definitely important, and you always want to have enough set aside to take care of your bills and rainy day emergencies, but you should also enjoy life and reward yourself for your hard work. Fortunately, it is not impossible to find this balance in finances — check out the following tips:

Determine How Much You Make and Spend

The first step is to determine your income — jot down how much money you bring in every month. Then, make a list of all of your “must pay” expenses — this includes your mortgage or rent, groceries, car costs including insurance and gas, electric and garbage bill, smartphone and credit card payments. Subtract this total from your income, and what is left is called your discretionary income, or in essence, the money you have leftover.

Determine Your “Wants”

If you put all of your money into either bills, a savings account, or even different smart investments, you may feel like you are missing out on life, and with good reason. This is where assessing your “wants” comes into play. As Get Rich Slowly suggests, make a list of the things that you like to have, but don’t technically need to survive. It may include things like eating out, cable or satellite TV, designer clothes, lattes — you get the idea.

Then, Decide on a Savings Goal

Now that you know your financial needs and wants, it is time to make a realistic goal for saving. Many financial experts suggest setting aside 10 percent of your income in savings — and, depending on how much discretionary income you have, this might be a realistic goal. But if you have a lot of bills each month, including a great deal of credit card debt, it might be hard to save that much. In this case, use 10 percent as a realistic savings goal to work toward, and focus instead on putting away $50 or $100 a month.

Create a Chart of Financial Balance

With your needs, wants and savings goal clearly on paper in front of you, you can now create a pie chart that will help you stay in balance. If you realize that you spend 60 percent of your income on your essential bills and you want to save 10 percent of your money, that leaves 30 percent for your “wants.” Use this percentage to calculate the dollar amount that you can spend each month on the fun things in life and strive to stick to your saving and spending budgets every month.

A Few Words About Debt

One of the easiest ways to increase your monthly bills is to fall into the credit card trap. In addition to requiring you to spend more of your hard-earned money each month to pay off your credit card bills, the high interest rates many cards charge will make it harder to pay off the balance. As an alternative to putting that needed or desired item on a credit card, look into which stores have layaway programs. These programs can help put more expensive items within your reach while getting you in the habit of spending money and seeing it leave your account. As a major bonus, layaway programs help you prevent interest charges associated with using a credit card.

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Sean Bryant

Sean Bryant created in 2011 to help pass along his knowledge of finance and economics to others. After graduating from the University of Iowa with a degree in economics he worked as a construction superintendent before jumping into the world of finance. Sean has worked on the trade desk for a commodities brokerage firm, he was a project manager for an investment research company and was a CDO analyst at a big bank. That being said he brings a good understanding of the finance field to the One Smart Dollar community. When not working Sean and his wife are avid world travelers. He enjoys spending time with his two kids and dog Charlie.

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