I just don’t get it. Why don’t people plan ahead and save for items they need and want? They say they want to be wealthy…but do they really?

Some people say you have to have discipline to be able to budget. Others say you have to make a lot to have a lot. My life experience has proven otherwise.

When I hear people say that because it’s Christmas, they’ll be eating mac and cheese (or something equally awful) for the next couple months to make up for the expenses, I am horrified. As they live from paycheck to paycheck, always wondering if they have enough, stress overrides the way life is meant to be.

I don’t ever want to wonder if I have enough in my bank account. I don’t want to be overwhelmed with some major expense because I have failed to anticipate. Nor do I want to miss out on incredible vacation trips because I have funded my creditor’s cruise with interest charges. No, that’s just not me.

Saving When You Have Nothing
When my husband and I first married, he was an American living in Canada and unable to work until immigrated. I made $7.75 an hour. We budgeted and never worried about whether we had enough. We simply weighed our expenses and made hard choices of when to buy and when not to buy. And we never went into debt. Putting purchases we could not afford on a credit card was simply out of the question.

Instead, from the very beginning, we saved. On payday, a portion of my check went into a savings account, and we acted as though it never existed. Once Hubby immigrated and began working, we increased our budget to a normal amount and added the remainder to our savings. As our careers grew, we continued to increase our savings and recently bought our first home with a significant down payment. Now we live off of less than one income and invest the rest into retirement savings and doubling up on our mortgage payments.

But it all started with our rock-bottom $16,000-a-year salary. We knew that saving then would mean big savings later. So, how did we do it? And how did we never worry if we had enough?

Keeping Track of Expenses
We have always monitored our expenses – I know exactly how much I spend on gas and groceries. I know when we’re below budget on one item and can spend extra on another. And - more importantly - I plan year-round for the big annual costs. Every month I transfer amounts for various items into a high-interest savings account: $30 for birthdays, $10 for driver licenses, $240 for car insurance, $200 for vehicle repairs, $50 for house insurance.

Saving $10 a month for my husband’s and my driver licenses feels like nothing compared to coughing up $120 in the one month where both our birthdays fall. We also already have money saved to buy each other gifts and to go out for a special dinner. Financially, it’s a month like ever other because we have already saved for everything.

Paying the Full Amount
As soon as we get the bills for both car and house insurance, we pay the full amount up front. Our budget for every month stays exactly the same – and the large bills feel like nothing.

Rather than paying the extra monthly or quarterly fees many people opt for by paying monthly rather than saving monthly, our savings have made us extra money in our high-interest account.

Preparing for the Unexpected
But how do you plan for surprise car repairs and other unknowns? Looking over past car repair bills (assuming you keep them), calculate approximately how much you spend per year, divide in twelve, and save that amount each month. If you have extra at the end of the year, keep it socked away for your next car purchase.

Every month, my husband and I allocate $100 for general savings. This money is reserved for the unexpected. If we have to be in a wedding party, our computer crashes, or any other large expense comes up, we are already prepared, and it doesn’t hurt our budget or cause any stress.

It’s Not Impossible
When you add it all up, you may think it’s an enormous amount to save each month. However, the reality is that you make all of these purchases anyway, and you are going to pay them off at some point (with an added 18.95% for that creditor’s cruise). By realizing what you’re spending and what you’re saving, you not only eliminate extra fees but also put your money to work to gain interest. And you are on your way to wealth.

Starting a Savings Plan
Sounds so simple… so how do you get there from here? How do you start saving every month while you are also paying off last year’s expenses? Keep all of your receipts, learn your spending habits, and create a budget. When you see where you waste, allocate those funds to credit card payments. And, right away, specify a certain amount that will go to the card every month until you pay it off. Once your balance is down to zero and your budget is accustomed to that amount being gone, you can reallocate it elsewhere – to savings or to the movie and dinner you sacrificed to pay off your debt.

A monthly savings plan quickly results in easy money – and it’s so logical. Really, who eats mac and cheese when they can have a cruise instead? Not you - not anymore.

By Tammy Wood - Copyright Tammy Wood © 2004.