Saving money is an honoring of self. This action originates from a belief that one is worth taking care of in the here and now and in the future. Last month’s article highlighted why it is important for every woman to pay herself first. This month’s article will be the first in a three part series on how to do just that!
Basically, there are three savings pots you need to fund. This article addresses the first which I call the “In / Out” savings. What goes in will come out. The “In / Out” savings’ purpose is to keep you out of credit card debt, or from borrowing against your 401K or home equity line of credit, or burning through long term investment savings.
Funding your “In / Out” savings is your first step to financial freedom.
This savings account is used to finance your irregular, non-monthly expenses. Examples of these expenses are listed below. To create your customized “In / Out” expense calendar click on http://www.DeniseHughes.org to download and print a blank form. Once you’ve done this take pen to paper and follow the directions below.
Step One:
Begin by planning forward 12 months, brainstorming all your irregular expenses. Itemize these expenses in the “expense” column.
Step Two:
Write the amount of the expense in the quarter in which it comes due. You may need to refer to old records to find the most accurate estimate of the expense.
Step Three:
Add up the expenses by quarters and place the final number in the total column.
Step Four:
Add up all the “sub-totals” to get the “Grand Total.”
Step Five:
Take the Grand Total and divide by 12 (months in a year). The number you reach will tell you how much savings you need to put away each month to fund your annual “In / Out” account. In the example below you would need to save $3423/month to fund all your irregular expenses.
Step Six:
Find ways to finance this account. Be creative! Use bonus money, work a couple extra days a month, raise your rates or create new business. You may also adjust your current monthly expenses to make room for this savings account in your money life. For example, exchange manicures with a friend, teach your husband the fine art of pedicure, wash your own car, visit your local library instead of the bookstore or join a vacation house exchange program.
Now, sit back and review your work. Congratulate yourself! You’ve just stepped into more of your power by taking an action step into “knowing” what expenses to save for and the amount of those expenses.
If you feel overwhelmed, take a deep breath. You are viewing in black and white what already exists. Any time we begin the process of moving from vagueness to clarity it can produce anxiety as we begin to move beyond denial. Frequently, what we imagine we need for savings is very different when putting pen to paper. Clarity will become your friend, and eventually will bring you a sense of control and peace of mind.
Next month, stay tuned for figuring out how to fund your emergency savings!
