Personal Budget Makeover: Become a Saver Instead of a Spender in 2014

Americans overwhelmingly prefer saving money to spending money, at least according to a Gallup Poll reported in May 2013. Overall, 37% percent of Americans prefer spending money, with 63% preferring saving it. The saving vs. spending enthusiasm carries fairly strongly across all demographic groups including age, gender, political party, and education level.

But while Americans say that saving money is the way to go, is this how they actually behave? The truth is, it's hard to save money, and there aren't many incentives to do so. With interest rates on savings rarely beating inflation, many people figure, "Why bother?"

However, just because interest rates on savings are anemic doesn't mean saving is pointless. Emergency savings can mean the difference between handling financial emergencies fairly easily versus long term financial strain when loans or credit cards have to be used. Here's how you can create a personal budget and go from spender to saver in 2014.

Change Your Attitude

Most of us think of ourselves as smart shoppers, and while this is a positive, it still focuses on spending. But while the frugal spender thinks, "I want to get the best deal," the frugal saver thinks, "Maybe I don't need to buy this at all." The frugal saver, as profiled in this Hands On Home Buyer article asks several questions before parting with money:

•Do I really need this?
•Could I make one myself?
•Could one be had for free, through Freecycle or Craigslist?
•Do I have something I could use instead?
•Can I make the one I own last longer so I don't have to replace it?

Once you change how you look at spending, it's time to make concrete plans.

Start With a Plan

Setting realistic, defined goals is the first step in creating a personal budget that helps you reach those goals. Make short term as well as long term goals, and make them realistic for your situation. If saving $200 out of every paycheck is unrealistic, perhaps your short term goal should be saving $50 out of every paycheck. It's far better than nothing.

Your long term goals should be concrete as well, such as paying off your credit cards in 2014, or saving $X toward a down payment on a house. Write down your goals, or better yet, use a personal budget app to help you steadily work toward them every day.

Create a Personal Budget

The most certain way to save is to set up a direct debit that takes money directly from your paycheck or account on payday so that you don't give yourself the chance to spend it. Whether you have $10 or $100 debited this way, you'll steadily put money aside into savings.

If you've never created a personal budget before, it's OK. Today's personal budgeting tools take the hassle out of the process, and can even keep an eye on your accounts so that unusual spending is flagged, and so you're notified if your checking account balance gets low.

Commit to Financially Educate Yourself

While setting up a personal budget can revolutionize how you handle money, improving your personal financial knowledge helps you even more. Setting goals for learning about money is another way to go from the spending to the saving mindset.

You could commit to learning about comparing credit cards in January, finding the best mortgage in February, maximizing retirement savings in March, etc. Or you could commit to learning about the different types of investments, including stocks, bonds, mutual funds, and real estate. When it comes to maximizing saving and minimizing spending, knowledge is power.

Teach Kids to Save

Helping your children learn to save is one of the most valuable lessons you can teach as they grow up. Start by setting a good example, and as kids grow old enough to have an allowance, you can give them practical lessons on how to save.

Young school age children are capable of learning basic concepts like comparison shopping and saving up to buy something special. Some parents set up separate jars or piggy banks for saving, spending, and charity. Others may teach kids to keep a written record of where their money goes. There are even some great books that teach children lessons they can understand about spending and saving.

Going from being a spender to being a saver requires a change in attitude and a change in behavior. Deciding to become a saver is where it all starts, and much of the work of saving can be accomplished with a realistic personal budget. The year is young, and you have plenty of time to make the changes that will lead to a much brighter financial picture for you by the time you ring in 2015.

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