Money saving tips for the first time budgeter

Posted in: Personal Finance, Banking
By Bonnie Conrad
Jan 12, 2009

As the economy has continued to spiral downward, the pain caused by the economic crisis has spiraled upward. This latest economic downturn is hitting people of all income levels. Everyone, it seems, is struggling to find a way through the current difficulty, and many people are finding themselves faced with making a budget for the first time.

When times are good and the money is flowing well it can seem superfluous to create a monthly budget. But when the money gets tight, a realistic family budget is an absolute must. Planning a budget – and sticking to it – is one of the best ways to make it through the current downturn and emerge relatively unscathed on the other side.

Don't Stop Saving

When times are tough it is all too tempting to look to regular savings, like the money diverted to a 401(k) plan, mutual fund or other investment, for extra cash. It is vital to resist that temptation and to continue saving during the tough times whenever possible. The savings that you can manage to accumulate during the downturn can leave you in a much stronger position when things finally do turn around.

It is, however, a good idea to divide savings into short-term and long-term categories. A prime short-term goal should be to establish an emergency fund equal to a minimum of three to sixth months worth of living expenses. This cushion will help you sustain a sudden economic shock – like the loss of a job – without the need to dip into your longer-term savings.

Look at Your Neighbors

Affluent workers dealing with a first-time budget would do well to take a page from their friends and neighbors. Many working class people have long understood the difficulty of making ends meet, and learning their habits can help get you through even the most severe downturn.

Take a good look at some of the money-saving habits employed by the smart and frugal. Before you head out to the grocery store take the time to make a detailed shopping list. Also take the time to clip out those money saving coupons and match those coupon savings with sales at the local stores. Many smart shoppers have been trimming 50% or more from their family's food budgets for years simply by using these smart shopping techniques.

The same is true for big ticket items. Comparison shopping can save you hundreds or even thousands of dollars, as can saving up until you may be able to afford to pay cash for the things you want. The high interest rates charged by credit card issuers can become even more egregious when the economy is showing signs of a downturn.

By paying cash you avoid these potential problems and help instill the discipline you will need to live a more frugal lifestyle. If you need some motivation you may want to divert a small part of each paycheck to a dedicated savings account in anticipation of your big ticket purchase.

Watch the Big Things and the Little Things

When it comes to creating and maintaining a budget the little things can make just as much a difference as those big ticket items. Keeping track of small and seemingly insignificant expenditures – like that morning cup of coffee or that daily lunch at your favorite upscale restaurant – can free up literally hundreds of dollars a month. It may also be a good idea to take a close look at where your money is going and where you may be able to cut back.

Saving money is not always easy – especially for the first time budgeter – but it is important to persevere. The money-saving strategies you learn during the current economic slowdown will serve you well – not only now but also after the economy turns around.