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 (734) 662-8200 xt 2741 [email protected] Average Monthly Expenses. Average Monthly Income. Monthly Take Home Pay. $1,465.

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How to Save on a Tight Budget

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How to save on a tight budget

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

(734) 662-8200 xt 2741 [email protected]


Step 1 budget analysis or where the money goes

Average Monthly Expenses

Average Monthly Income

Monthly Take Home Pay

$1,465

Partner’s Take Home Pay

-0-

Other Income - roommate

320

(include child support, alimony, Social

Security, direct deposits for savings

Total Monthly Income

$1,785

Monthly Income

$1,785

Less Monthly Expenses

-

1,450

Amount Available for debt

$335

Step 1: Budget Analysis, or Where the Money Goes

Jane Doe: Single, No Kids, Gross Annual Income: $24,000


Spending plans

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


3 reasons to save

3 Reasons to Save

  • Long term savings/retirement

  • Emergency fund

  • Set aside/short term savings


Long term savings

Long Term Savings

  • Long term goals:

    • Retirement

    • Children’s college fund

    • House down payment

    • Start a business


Precautionary savings

Precautionary Savings

  • Emergency fund

    • To be used if you loose your job

      or can’t work.

    • 3 to 6 months of take home pay

      - Initial goals: one month’s rent, then 1 month’s net pay


Short term savings

Short Term Savings

  • Set Aside fund:

    • Holiday gifts

    • Vacations

    • Home and car repair


Short term savings1

Short Term Savings

  • Set Aside fund:

    • Special events such as weddings

    • Car or computer replacement

    • Insurance or non-monthly

      and irregular bills


Monthly plan for spending bill paying saving

This Month’s Net Income:

$1,785

Less This Month’s Bill & Saving Total

-

1,352

This Month’s Spending Allowance:

= 433

Divide month’s spending allowance by

= $108

4 for your weekly spending allowance

Monthly Plan for Spending, Bill Paying, & Saving

Bills

Spending Allowance

Savings


Weekly spending allowance

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.


Saving methods

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


Set aside fund worksheet

Set Aside Fund Worksheet

Set side each month: $85


Bi weekly payday plan

Jane Doe takes home

$1,465/mo =

$732.50 every other week

BI-WEEKLY PAYDAY PLAN

Payday

Check & Amount

Who Gets Paid

Payment

Descending Balance

$ 732

1stpaycheck +$732…………………………………………………………………………..

1,052

renter+ 320…………………………………………………………………………..

Week’s allowance- $108

944

Rent- 550394

Heat- 20374

Electric- 40334

Phone- 35299

Cable- 22277

Hudson’s- 20257

Target- 40217

Visa- 50167

Student loan- 35132

HOLD for next week

$ 24

7th Withdraw week’s allowance- 108

14th paycheck+ $732.………………………………………………………………………….

$ 756

Week’s allowance- $108

648

Car loan- 275373

Car insurance- 65308

Dentist- 50258

Mom- 25233

Savings $125:

1) retirement- 10223

2) emergency fund- 30193

3) set aside (travel, gift, rep)- 85108

HOLD for next week

21st Withdraw week’s allowance- 108

$ 0


Get money to save and invest

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-don’t spend- extra funds.


Get money to save and invest1

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.


Rule of 72

Rule of 72

  • Invest $3,000 at a rate of 9%

  • 72 divided by 9 is


Rule of 721

Rule of 72

  • Invest $3,000 at a rate of 9%

  • 72 divided by 9 is 8 years


Rule of 722

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.


How 3 000 at 9 grows

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 !


For more ideas

For More Ideas…

  • How To Save on a Tight Budget

  • http://www.americasaves.org/strategies/tight_budget.asp

  • 66 Ways to Save Money

  • http://www.pueblo.gsa.gov/cic_text/money/66ways/index.html

  • Eight Ways to Save Money Even on a Tight Budget

  • http://www.associatedcontent.com/article/56969/eight_ways_to_save_money_even_on_a.html


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