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Practical saving strategies

by Shirley Anderson-Porisch

January 20, 2009

The current economic situation calls for all of us to use common sense and be practical with our money. That means evaluate current spending, save money and be purposeful about using money that comes into our household.

People feel insecure about their employment, families are stretched to the limit and the financial futures of many households are uncertain. So what can people do?

Successful money management is not based on how much money you have but rather how you manage the money you have. Some of the best money managers that I've met are members of lower income households.

The first thing to do is detail every dollar you spend.

Start by listing current net monthly income including any money or cash assistance coming into the household. Then list monthly expenses, those that occur every month as well as those that need to be planned for because they occur every few months. An example might be car insurance with a $300 premium paid every 3 months means showing $100 for car insurance each month.

To keep yourself organized, create categories for your expenses, such as housing, food, transportation, health care, personal, payments and recreation.

Once you have your total income and total expenses listed out, you can best identify where changes in spending may start.

Households that can make spending changes put themselves in a situation to protect basic needs like housing and transportation. Establishing a 3-6 month reserve of money to cover basic living expenses is a good goal for every household and money that is saved on expenses could be reallocated to savings.

Unless you are in a situation with very limited income, consider strategies that suggest cutting back rather than cutting out. Cutting back usually reinforces new behavior in a positive rather than a negative way. Commit to strategies that will set you up for savings success.

Shirley Anderson-Porisch works as a family resource management Extension educator at the University of Minnesota and is an expert in family finance. She has long been a media contributor and is an accredited financial counselor.

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