Beyond the Budget - Strategies for Saving

We explained how to create a basic household budget in the last article; now we'll show you how to work within this financial blueprint and make some financial progress.

Taking control of your daily finances can be tedious work, but always remember the big picture. It will go a long way toward helping you save for the things you really want in life.

Follow the money

To get where you're going financially, you first need to know where you are right now. That means making a commitment to actively managing your budget.

Keep track of where your money goes and reconcile your bank statements every month. You have to follow what goes through all your accounts for this to work - including cheques, debit card transactions and credit card charges.

You can let a financial management software package do some of the administrative work for you. To make things even easier, many financial institutions let you download your transactions directly from their Internet banking services to this software.

Go electronic

Electronic banking is a very convenient way to keep track of your money. You can get instant access to your financial information by banking online, at a bank machine, over the phone or by wireless device.

And while you're there, you can complete a wide range of banking transactions, from transferring funds to paying bills.

The big attraction: It makes your life easier. No one has the time to run around these days and electronic banking helps out by letting you manage your finances when you want, how you want.

Electronic banking - safety tips

To maximize your security when using electronic banking, it's a good idea to follow these safety guidelines.

Keep a back-up of your information
Keep a record of confirmation numbers given at the completion of each activity for your verification
Don't give your PIN or access code to anyone else
Don't bank from your computer at work without completely erasing your records from your Web browser's cache at the end of the session

Getting ahead

The destination is clear - a European vacation, a new car, maybe even a cottage on the shore of your favourite lake. The route to get there, however, isn't always quite so evident.

It may even seem impossible from a financial perspective. Don't lose heart. The trick is to start small, stay focused and continue to build.

Once you develop the discipline of working within your monthly financial plan, you'll be amazed by how you can start to build your savings - without feeling like you're making difficult sacrifices.

Analyse and trim

People who decide to take control of their cash management and track their finances are often shocked by how much they spend on impulse: that cup of coffee every morning on the way to work, those drinks with friends, those candy bars or magazines picked up on the fly.

These purchases can add up to real money in a hurry. Consider the following cost-cutting examples:

Find $390/year - Skip one $1.50 coffee each weekday; drink water instead, or take a walk to clear your head
Find $780/year - Brown-bag your lunch 3 times a week; save $5 a day and trim your waistline
Find $2,000/year - Organize a 5-person carpool and save $10 in parking costs (and the driving headaches) each day you don't drive

If you need some motivation for making these small sacrifices, just keep those big goals in mind. If you skip one dinner out a week, you could deposit $20 into your savings account and have $1,040 in a year for your dream trip to Bali. Wouldn't that be something!

Paying yourself first

There's another way to find more room in your budget. It's a deceptively simple approach called "paying yourself first", and those who do swear by it.

The idea behind it is this: Each month you have a number of financial obligations that require attention, such as rent, car payments and phone bills. By the time you've paid the bills, the financial goals have often slid down the priority list and there's nothing left to set aside.

When you pay yourself first, you move yourself up that list. You deduct your savings (the dollar amount is up to you) before you pay the other guy and put it in another bank or investment account.

Now your goals and dreams are on the front burner. And that's what working is all about, isn't it?

Paying yourself first might seem like quite a hit to your pocketbook at first. Remember, you still have to pay those monthly bills.

But since expenses have a way of matching your income, you'll adjust more quickly than you think. And if you don't pay yourself first, the money will disappear anyway - without leaving much satisfaction behind.

It's your plan

Like a budget, you don't have to look at your tracking and saving strategies as hard and fast rules. But, at the very least, they will teach where your money is going and help you to get closer to your dreams.

September 2002

Tips
To keep a closer eye on your finances, try CIBC Online Banking. There's no registration fee and you can download your transaction records into your favourite financial management software.

When you start to pay yourself first, open a Premium Growth Account. The higher interest will help your savings grow as you continue to put money away.

The information in this article is general only; it is not intended as specific investment, financial, accounting, legal or tax advice for any individual.