Saving For Future Use

November 16, 2012 | Posted By: Ryan Paredez | Categorized in: Finance

Saving for Now & Later

We live in a fast moving and communicating world; whether by word of mouth or technology. We love to talk about people, products and events. What does this mean to us as consumers? We are surrounded by (indirect) marketing 24/7. You might be thinking...yeah, so what? Iíll tell you whatís up!

When a friend suggests to you, ďHey man, letís go to Vegas this weekend,Ē I think the typical answer might be: ďOh, what! That sounds like fun, but I donít get paid till next week so I canít afford that right now.Ē

Itís the high volume of products weíre exposed to and our personal behavior that really mess up our personal saving Ďgameí (thatís me trying to sound cool). The current national personal savings rate is 3.7%. That means if you bring home $2,500 a month you are only saving $92.50. In the matter of year youíll have less than $1,000 saved up, assuming you donít spend any of it over the course of that year. Unless you start to change the way you think about your money that almost $1,000 wonít ever exist.

Get Started

Think about all of your current monthly expenses; now write them down individually with the amount next to it. You might say, ďI already know all this in my head,Ē but thatís not the point. Knowing something in your head and being able to see it tangibly in front of you are two different things. After your list is complete you might have something that looks like this:
  • Auto loan - $350
  • Insurance - $140
  • Cell phone - $ 110
  • Gas - $125
  • Rent - $1,000
  • Cable - $150
  • Netflix - $16
  • Gym - $40
  • Utilities - $80
  • Food - $125
This comes out to a total of $2,136. Thatís a good chunk of change to be spending on expenses. If you bring together both examples and assume I bring home $2,500 a month, after the usual monthly expenses I should have $364 extra to spend each month. Where does that money go? You may or may not know the answer to that. You can probably account for some of it, but the rest is gone with the weekend.

How much is in your savings account? Probably none, if you do, then go you! Kind of crazy how we donít realize where our money goes every month, huh? Want to do something about it?

Start Off Small

Now that you see your standard monthly expenses and how much they cost you every month, evaluate their importance to you versus their costs. You are spending $166 dollars on month for internet, TV and Netflix. Do you watch a lot of TV and a lot of movies? Really take the time to think about it. Letís say you realize that youíre gone a lot and you hardly use your Netflix account and donít watch a lot of TV. So you decide to cancel your Netflix account and get a smaller cable package.

Letís say that your new cable bill is now only $75 and you canceled Netflix. Youíre now saving an extra $91 every month. This might seem like a small amount compared to the big picture, but the fact is that itís the small amounts that have an impact on the big picture. There is a tool out there called Planwise that can allow you to see the direct impact of saving that extra $91 per month a year or two down the line. If things roughly stayed the same with your finances, by the end of 2013 the lowering of those two expenses would have saved you a total of $1,274. Thatís a good amount of extra money to have just by cutting back on things you donít really use right?

How Does it Fit into the Big Picture

I just gave you a hypothetical situation for what someone could do to save money down the line. We will have different expenses and different scenarios but Iím sure that we could almost all cut back on something in order to save a little money. Itís about looking ahead and figuring out where you want to be. If you would have killed those expenses earlier you probably could have randomly gone to Vegas with your friend for the weekend.

Saving money is really important. If you arenít saving any money how do you plan on buying a house, buying a new car, taking a vacation with your significant other or some friends? How about having a safety net for just emergencies? By no means am I saying become a hermit and donít ever go have fun, just be mindful of how you spend your money because after all it is your hard earned money, make it work for you!

This guest post was written by Ryan Paredez. Ryan works as the ďLeft Hand Man,Ē Blogger and Partner Relations at - an internet tech startup focused on financial planning made easy.
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