How to Save on a Tight Budget

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How to Save on a Tight Budget

• Kathryn Greiner
• Director of Credit Education
• University of Michigan Credit Union
• 305 E. Eisenhower, 200
• Ann Arbor, MI 48108
• [phone] xt 2741 kathryng_at_umcu.org

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Step 1 Budget Analysis, or Where the Money Goes
Jane Doe Single, No Kids, Gross Annual Income
24,000









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Spending Plans

• Use the information gathered from the budget
  analysis and your immediate bills to develop a
  monthly plan for
• Spending allowance
• Bill paying
• Saving for
• a) long term goals retirement
• b) emergency fund
• c) set aside

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3 Reasons to Save

• Long term savings/retirement
• Emergency fund
• Set aside/short
  term savings

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Long Term Savings

• Long term goals
• Retirement
• Childrens college fund
• House down payment
• Start a business

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Precautionary Savings

• Emergency fund
• To be used if you loose your job
• or cant work.
• 3 to 6 months of take home pay
• - Initial goals one months rent,
  then 1 months net pay

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Short Term Savings

• Set Aside fund
• Holiday gifts
• Vacations
• Home and car repair

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Short Term Savings

• Set Aside fund
• Special events such as weddings
• Car or computer replacement
• Insurance or non-monthly
• and irregular bills

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Monthly Plan for Spending, Bill Paying, Saving
Bills
Spending Allowance
Savings

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Weekly Spending Allowance

• Helps end the financial binge/starve cycles.
• Something to look forward to when you spread
  spending money throughout the month.
• Avoid augmenting income by charging basic
  living expenses.

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Saving Methods

• 1. Savings withheld from paycheck
• 2. Saving as a fixed expenditure
• 3. Saving what is left over after all other
  expenditures are paid

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Set Aside Fund Worksheet
Goal Amount Needed Mo/Yr Needed Months to save When to Start Monthly amount
Travel 375 April 2009 15 Jan 2008 25
Xmas gifts 120 Dec 2008 12 Nov 2007 10
Car repair 600 Each year 12 Jan 2008 50
Set side each month 85
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BI-WEEKLY PAYDAY PLAN
Jane Doe takes home 1,465/mo 732.50 every
other week
Payday
Who Gets Paid
Check Amount
Payment
Descending Balance
732
1st paycheck 732 ..

1,052
renter 320 ..
Weeks allowance - 108
944
Rent - 550 394 Heat - 20 374 Electric -
40 334 Phone - 35 299 Cable -
22 277 Hudsons - 20 257 Target -
40 217 Visa - 50 167 Student loan - 35 132

HOLD for next week
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7th Withdraw weeks allowance - 108
14th paycheck 732 .
.
756
Weeks allowance - 108
648
Car loan - 275 373 Car insurance -
65 308 Dentist - 50 258 Mom - 25 233
Savings 125
1) retirement - 10 223
2) emergency fund - 30 193
3) set aside (travel, gift, rep) - 85 108
HOLD for next week
21st Withdraw weeks allowance - 108
0
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Get Money to Save and Invest

• Pay yourself first treat savings and investing
  as a fixed expense.
• Make saving automatic automatically transfer
  funds from your checking to savings account.
• Save-dont spend-
  extra funds.

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Get Money to Save and Invest

• Make installment payments to your savings when
  debt is paid off.
• Break a habit put aside the money you would have
  spent.
• Scrimp one month a year
  to free up money to save toward
  your goal.

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Rule of 72

• Invest 3,000 at a rate of 9
• 72 divided by 9 is

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Rule of 72

• Invest 3,000 at a rate of 9
• 72 divided by 9 is 8 years

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Rule of 72

• Invest 3,000 at a rate of 9
• 72 divided by 9 is 8 years
• So 3,000 invested at 9 doubles to 6,000 in 8
  years.

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How 3,000 at 9 Grows

• In 8 years 3,000 x 2 6,000
• In 16 years 6,000 x 2 12,000
• In 24 years 12,000 x 2 24,000
• In 32 years 24,000 x 2 48,000
• In 40 years 48,000 x 2 96,000 !

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For More Ideas

• How To Save on a Tight Budget
• http//www.americasaves.org/strategies/tight_budge
  t.asp
• 66 Ways to Save Money
• http//www.pueblo.gsa.gov/cic_text/money/66ways/in
  dex.html
• Eight Ways to Save Money Even on a Tight Budget
• http//www.associatedcontent.com/article/56969/eig
  ht_ways_to_save_money_even_on_a.html