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A Beginner’s Guide to Securing Your Financial Future

Chapter 2 icon
Budget to Save

Vince

What is your net worth?

If you haven’t yet, read about net worth and the language of personal wealth in Chapter 1, before learning about budgeting to save.

It takes as much energy to wish as it does to plan.

Eleanor Roosevelt

In this section, we will demonstrate how you can budget in order to save.

Most people who have built wealth didn’t do so overnight. They got wealthy by setting goals and pushing themselves to reach them.

Setting financial goals can help you when it comes to setting a budget and saving for your future.

Short-term goals are goals you can reach within about five years. A long-term goal usually takes more than five years to achieve.

financial goals icon
 
Tip: Financial Goals

When setting goals:

  • Be realistic.
  • Establish time frames.
  • Devise a plan.
  • Be flexible; goals can change.

Set Financial Goals

See what goals the people of Building Wealth have set.

Anthony

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about Anthony

Anthony would like his net worth to be $35,000 in five years and $55,000 in 10 years. By increasing his net worth, he can meet his financial goals.
Anthony set two short-term goals:
  1. Save $3,000 per year for three years for a $9,000 down payment.
  2. Add $500 to his emergency fund and maintain this cushion.
Anthony also set two long-term goals:
  1. Have $25,000 available to help his kids with their college expenses.
  2. Generate $5,000 per month in retirement income in 30 years.



Anthony

Learn more about Anthony »

What are your short-term and long-term goals?

pencil icon

Using Anthony’s financial goals as an example, complete your own online or download a PDF.

example web pdf


Bess

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about Bess

Bess lives on a fixed income; her major source of wealth is the home that she owns. She wants to reduce her debt and increase her savings so that she has money for emergencies.
Bess set three short-term goals:
  1. Pay her bills on time every month.
  2. Not incur any additional debt (pay off credit cards every month).
  3. Pay her kids back in three years.
Bess also set one long-term goal:
  1. Be debt-free in five years: car paid off, no outstanding bills



Bess

Learn more about Bess »

What are your short-term and long-term goals?

pencil icon

Using Bess’s financial goals as an example, complete your own online or download a PDF.

example web pdf


David

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about David

David would like his net worth to be $250,000 in five years and $500,000 in 10 years. By continuing to increase his worth, he can meet his financial goals.
David set three short-term goals:
  1. Increase their emergency savings.
  2. Figure out where their money is going.
  3. Build their A/C business to the point where his wife can either work part-time or quit her current job.
David also set two long-term goals:
  1. Help their kids with their education expenses.
  2. Build their A/C business to the point where they can sell it and retire early.



David

Learn more about David »

What are your short-term and long-term goals?

pencil icon

Using David’s financial goals as an example, complete your own online or download a PDF.

example web pdf


Gabby

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about Gabby

Gabby would like her net worth to be $15,000 in five years and $75,000 in 10 years. After completing her balance sheet, she realized she needed to set some wealth-building goals. By increasing her net worth, Gabby can meet these financial goals.
Gabby set three short-term goals:
  1. Start saving at least $125 monthly and increase that amount when she gets a raise.
  2. Pay more than the minimum amount due every month on credit card balances.
  3. Make appointment with Personnel Dept. to discuss the company’s 401(k) retirement plan.
Gabby also set two long-term goals:
  1. Buy a home in 10 years.
  2. Have $100,000 invested in stocks and bonds by the time she’s 50.



Gabby

Learn more about Gabby »

What are your short-term and long-term goals?

pencil icon

Using Gabby’s financial goals as an example, complete your own online or download a PDF.

example web pdf


Sonya

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about Sonya

Sonya would like her net worth to be $200,000 in five years and $500,000 in 10 years. By continuing to increase her net worth, she can meet her financial goals.
Sonya set three short-term goals:
  1. Pay her bills on time every month.
  2. Save every month.
  3. Lower the costs of interest on her car loan by shopping for credit and choosing the shortest term with the lowest interest rate.
Sonya also set three long-term goals:
  1. Have enough in savings to substantially contribute to her son’s college education.
  2. Have enough in savings to have a comfortable retirement.
  3. Travel more often.



Sonya

Learn more about Sonya »

What are your short-term and long-term goals?

pencil icon

Using Sonya’s financial goals as an example, complete your own online or download a PDF.

example web pdf


Vince

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about Vince

Vince would like his net worth to be $50,000 in five years and $200,000 in 10 years. After completing his balance sheet, he realized he needed to set some practical goals. By increasing his net worth, Vince can meet these financial goals.
Vince set three short-term goals:
  1. Enroll in a job-skills training course at the local community college so that he can qualify for a higher-paying job with benefits.
  2. Look for a new full-time job.
  3. Save for a deposit for an apartment.
Vince also set three long-term goals:
  1. Write his novel.
  2. Buy a comfortable home.
  3. Buy a sweet ride.



Vince

Learn more about Vince »

What are your short-term and long-term goals?

pencil icon

Using Vince’s financial goals as an example, complete your own online or download a PDF.

example web pdf


Complete your own online

You have set short- and long-term goals.
How do you meet them?

Wishers versus Doers

When it comes to reaching your financial goals, are you doing or wishing? The difference is doers put action to their goals. And doers are much more likely to reach their goals and achieve their dreams.

If you are a doer, you are more likely to:

  • Track spending.
  • Live within your means.
  • Stick to a budget.
  • Pay off credit cards in a timely way.
  • Deposit money into savings each month.
  • Make regular contributions to retirement savings.

To maximize your wealth-creating ability, you want to be a doer, like Sonya.

Sonya is a single parent with one child. She budgets in order to live on her modest income and tracks where every dime goes. Saving is very important to her. When her son was born, she started investing every month in a mutual fund for his college education. Sonya is a homeowner, has good credit and never loses sleep over paying her bills. Sonya controls her future.


Sonya and son

Gabby, by contrast, doesn’t put action to her dreams.

Gabby has a good job, makes good money and lives a pretty comfortable life, but her bank statement tells a different story. She has no savings or investments, owns no property and has no plans for retirement. Plus, she’s got a lot of credit card debt, lives from paycheck to paycheck and doesn’t budget.


Gabby shopping

Track Day-to-Day Spending

In order to create wealth, it’s important to become more of a doer, like Sonya, and plan for your financial future. To start, look at your finances to see how much money you make and how you are spending it. Keep track of your daily spending, whether by cash or debit card, check or credit card.

Here are some examples.

Anthony

Learn more
about Anthony

After tracking where his money was going every day, Anthony realized that he could reduce his spending and put more toward his wealth-creation goals.

Take a look at Anthony’s spending log.



Anthony

Learn more about Anthony »

Track Your Daily Spending

calculator icon

Using Anthony’s spending log as an example, record your daily expenses online, or download a spreadsheet or PDF of the blank day-to-day spending form. Include everything you purchase—whether with cash, debit card, check or credit card.

example web xls pdf

Bess

Learn more
about Bess

After tracking where her money was going every day, Bess realized that she was almost on track to meet her goals. She decided she could reduce her spending each month.

Take a look at Bess’s spending log.



Bess

Learn more about Bess »

Track Your Daily Spending

calculator icon

Using Bess’s spending log as an example, record your daily expenses online, or download a spreadsheet or PDF of the blank day-to-day spending form. Include everything you purchase—whether with cash, debit card, check or credit card.

example web xls pdf

David

Learn more
about David

After tracking where their money was going every day, David and his wife realized that they could make a few small changes to save more and pay down debt quicker.

Take a look at David’s spending log.



David

Learn more about David »

Track Your Daily Spending

calculator icon

Using David’s spending log as an example, record your daily expenses online, or download a spreadsheet or PDF of the blank day-to-day spending form. Include everything you purchase—whether with cash, debit card, check or credit card.

example web xls pdf

Gabby

Learn more
about Gabby

After tracking where her money was going every day, Gabby realized that she could reduce her spending and put more toward her wealth-creation goals.

Take a look at Gabby’s spending log.



Gabby

Learn more about Gabby »

Track Your Daily Spending

calculator icon

Using Gabby’s spending log as an example, record your daily expenses online, or download a spreadsheet or PDF of the blank day-to-day spending form. Include everything you purchase—whether with cash, debit card, check or credit card.

example web xls pdf

Sonya

Learn more
about Sonya

After tracking where her money was going every day, Sonya realized that she was on track to meet her goals.

Take a look at Sonya’s spending log.



Sonya

Learn more about Sonya »

Track Your Daily Spending

calculator icon

Using Sonya’s spending log as an example, record your daily expenses online, or download a spreadsheet or PDF of the blank day-to-day spending form. Include everything you purchase—whether with cash, debit card, check or credit card.

example web xls pdf

Vince

Learn more
about Vince

After tracking where his money was going every day, Vince realized that he could reduce his spending and put more toward his wealth-creation goals.

Take a look at Vince’s spending log.



Vince

Learn more about Vince »

Track Your Daily Spending

calculator icon

Using Vince’s spending log as an example, record your daily expenses online, or download a spreadsheet or PDF of the blank day-to-day spending form. Include everything you purchase—whether with cash, debit card, check or credit card.

example web xls pdf

Complete your own online

You know how to track where your money is going.
Do you need to make a change?

Get a Handle on Income and Expenses

Once you have calculated your monthly income, started tracking your daily expenses and determined how much you spend on monthly bills, you can develop a monthly budget. A budget allows you to

  • Understand where your money goes.
  • Avoid overspending.
  • Find money for saving and investing to build your wealth.

Learn how the people of Building Wealth set their budgets.


Anthony

Learn more
about Anthony

Anthony used the information from tracking his day-to-day expenses to develop a monthly budget.

When he reviewed his daily spending and budget, he realized he could cut expenses by $355 each month by:

  • Reducing his monthly grocery budget by looking for sale items and using coupons
  • Canceling his gym membership and exercising at home
  • Eating out less and buying coffee less
  • Shopping less



Anthony

Learn more about Anthony »

Budget to Save

calculator icon

Using Anthony’s budget as an example, track your income and expenses online, or download a spreadsheet or PDF of the blank monthly budget sheet. Identify changes you can make to increase your income or decrease your expenses. Then develop a new budget that includes more savings. Be sure to make changes that you can live with from month to month.

example web xls pdf

Bess

Learn more
about Bess

Bess used the information from tracking her day-to-day expenses to develop a monthly budget. When she reviewed her daily spending and budget, she realized she could reduce her expenses by $45 each month by:

  • Cutting back on miscellaneous costs and entertainment
  • Spending less when going out with friends for coffee
  • Buying fewer small gifts for herself and family



Bess

Learn more about Bess »

Budget to Save

calculator icon

Using Bess’s budget as an example, track your income and expenses online, or download a spreadsheet or PDF of the blank monthly budget sheet. Identify changes you can make to increase your income or decrease your expenses. Then develop a new budget that includes more savings. Be sure to make changes that you can live with from month to month.

example web xls pdf

David

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about David

David used the information from tracking his and his wife’s day-to-day spending to develop a monthly budget.

When they reviewed their daily spending and budget, David and his wife realized they have been building debt each month, not building wealth. They also realized they can reach their goals sooner by:

  • Being more intentional about managing their income and expenses
  • Subcontracting for another local HVAC business at least two weekends per month, which will increase their monthly income by $900; it will also mean higher gasoline expenses
  • Cutting back slightly on their miscellaneous spending and Internet/cable bill
  • Increasing their credit card payments by $150 per month, paying down their highest-interest-rate card first



David

Learn more about David »

Budget to Save

calculator icon

Using David’s budget as an example, track your income and expenses online, or download a spreadsheet or PDF of the blank monthly budget sheet. Identify changes you can make to increase your income or decrease your expenses. Then develop a new budget that includes more savings. Be sure to make changes that you can live with from month to month.

example web xls pdf

Gabby

Learn more
about Gabby

Gabby used the information from tracking her day-to-day expenses to develop a monthly budget.

When she reviewed her daily spending and budget, she realized she was spending more than she earned and could cut her expenses by $170 each month. To meet her goal of saving at least $125 a month, she would have to cut her expenses, earn more money, or both.

She decided to follow these wealth-building strategies:

  • Work overtime, which increased her take-home pay
  • Buy fewer clothes
  • Cancel her cable TV subscription since most of her electronic entertainment is through online media streaming
  • Carpool to work to cut gas consumption
  • Reduce her spending on eating out and entertainment



Gabby

Learn more about Gabby »

Budget to Save

calculator icon

Using Gabby’s budget as an example, track your income and expenses online, or download a spreadsheet or PDF of the blank monthly budget sheet. Identify changes you can make to increase your income or decrease your expenses. Then develop a new budget that includes more savings. Be sure to make changes that you can live with from month to month.

example web xls pdf

Sonya

Learn more
about Sonya

Sonya used the information from tracking her day-to-day expenses to develop a monthly budget.

When she reviewed her daily spending and budget, she confirmed she didn’t have any major changes to make.



Sonya

Learn more about Sonya »

Budget to Save

calculator icon

Using Sonya’s budget as an example, track your income and expenses online, or download a spreadsheet or PDF of the blank monthly budget sheet. Identify changes you can make to increase your income or decrease your expenses. Then develop a new budget that includes more savings. Be sure to make changes that you can live with from month to month.

example web xls pdf

Vince

Learn more
about Vince

Vince used the information from tracking his day-to-day expenses to develop a monthly budget.

When he reviewed his daily spending and budget, he realized he could reduce his spending by $340 each month by:

  • Reducing his monthly food budget by eating out less
  • Spending less on entertainment and gas purchases
  • Looking for a more affordable cell phone plan
  • Cutting back on miscellaneous daily expenses



Vince

Learn more about Vince »

Budget to Save

calculator icon

Using Vince’s budget as an example, track your income and expenses online, or download a spreadsheet or PDF of the blank monthly budget sheet. Identify changes you can make to increase your income or decrease your expenses. Then develop a new budget that includes more savings. Be sure to make changes that you can live with from month to month.

example web xls pdf

Complete your own online

If Anthony, Bess, David, Gabby, Sonya and Vince stick to their budgets, here are just some of the wealth-building choices available to them:

  • Put extra money in a savings account.
  • Invest in a 401(k) retirement plan or individual retirement account (IRA).
  • Invest in stocks, bonds or mutual funds.
  • Use extra money to pay off debt.

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Tip: Saving

To help you maintain the discipline to save:

  • Save every month.
  • Have savings automatically deducted from your paycheck or checking account.
  • Base your budget on what’s left.

In other words, get on automatic pilot and stay there.

You know how to successfully budget to save.
How will you invest your savings?

 

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