When it comes to creating a budget, it’s common knowledge that you’ll need to track your money and where it goes. However, the most effective budget plans consist of more than just expense tracking; they also incorporate long-term savings goals. For the most part, these will be unique to each individual budget and lifestyle, but there are also some general goals that everyone should include. Here are 3 of the must-haves:

Goal #1: Eliminate Toxic Debt to Build Up Your Savings

 Some expenses are inevitable, while others are simply a waste of money. The poster child for this second category is toxic debt. According to MSN Money columnist Liz Pulliam Weston, debt is considered to be “toxic” if it meets the following criteria:

          – The lender can change rates and terms at any time, with little or no provocation. 

          – The standard or default interest rate is in the double digits, or higher, which typically prolongs the time you remain in debt. 

          – Initially easy payment terms encourage you to rack up more debt than you can comfortably repay.

 Toxic debt hinders your financial growth by sticking you with sky-high rates and nit-picky fees. Examples of this are payday loans, credit card debt and car title loans. If any of these debts are part of your current expenses, set aside as much as possible to pay them off ASAP. By doing so, you’ll eliminate unnecessary fees and interest rate payments and can use the money you save to further your long-term financial goals.

 Goal #2: Put 10-20% of Annual Income in Retirement Savings

 As a future retiree, your golden years won’t be anything if you’re forced to rely on Social Security or a pension for your income. In order to afford your current standard of living as an old timer, financial experts recommend putting at least 10% of your annual income in a retirement account if you begin saving in your 20s or 30s. If you wait until your 40s to save for retirement, plan to set aside at least 20% of your annual income. Keep in mind that these percentages are only the minimum of what you should be saving, so put away even more if you can afford to.

 Not only will you be better off the more you save, but the sooner you start the more you’ll end up having. This is due to the magic of compound interest, which turns time into your biggest ally for increasing your earnings. For example:

          – Investor A deposits $200 every month in an account averaging 8% in interest earnings. He makes these monthly deposits for 35 years, depositing a total of $84,000 in his account. 

  Investor A’s account total (35 years, 8% average return, $84,000 in total deposits): $462,000

 Investor B also deposits $200 each month in an account averaging 8% in returns.

             He does this for 40 years, a total of $96,000 in account deposits. 

Investor B’s account total (40 years, 8% average return, $96,000 in total deposits): $703,000

 After 5 additional years and $12,000 more, Investor B’s account total is $241,000 more than Investor A’s – a windfall well worth the price of admission.  

 Goal #3: Establish an Emergency Fund

 Today’s poor job market makes it more important than ever to save for a rainy day. Along with your retirement account, an emergency fund is another fundamental savings goal. Establishing an emergency fund will help you to weather the unexpected layoff, medical emergency, or other financially draining catastrophe. Experts recommend putting a minimum of 3 to 6 months worth of living expenses in your emergency fund. Due to the current recession, however, 8 months to 1 year is a better goal to strive for.

Source: Flickr

Fred Schebesta writes for Savings Account Finder where he helps people save money and compare savings accounts.

When you are saving for a goal or to build up a financial buffer in the bank, it is not enough to simply open a high interest savings account and expect your savings to grow exponentially. Instead you need to develop and stick to certain savings strategies which will keep you on track and help you reach your goal, but before you think that this is all getting too complicated, the right savings strategies are easy to put in place, and even easier to stick to when you follow this advice.

Strategies for Long Term Saving

Everyone’s savings goal is different, but a long term savings goal is also very different to a short term goal . In the short term you don’t have to worry about losing focus, you don’t have to combat inflation and you don’t have to worry about the security of your savings account investment because you’ll probably remain covered by the government’s deposit scheme. However, when planning a long term savings goal, you need to keep these strategies in mind:

• · Look for a high ongoing interest rate as promotional rates are only competitive for a short time. Savings account providers will offer promotional or introductory interest rates on their savings accounts, but with a long term savings goal you are more likely to benefit from a higher ongoing rate, because after the promotion ends, the standard rates from these providers are not very competitive, and you’re in this savings plan for the long haul.

• · Be clear about your savings goal so you can remain motivated. An important strategy in long term savings is to remain focused because it is easy to lose your motivation over the course of several years of saving. Instead, choose a savings account which gives you strategies to track your savings and stay motivated – these savings strategies could be as simple as entering your savings target when you open the savings account so you can see your goal clearly, or your savings account may chart our progress on a graph in internet banking, or on your statements, so you can see how much you’ve saved, and how much more you have to save to reach your goal by your deadline.

• · Save for a good reason and one which will inspire you in the long term. You may choose for your savings plan to be a long term one because your target is quite large and you need to make a lot of savings to reach it. However, an important strategy in saving is to make sure that by the time your reach your goal, you’ll still want to achieve that goal. Perhaps you have set a savings target for a new engine for your car, or a kitchen upgrade – make sure you think about what you will be doing in your life in the year or two years later when you reach your savings target for this dream. Will you still be in the same house or will you have sold it and moved to a house with a better kitchen? Will you still have the same car or will you have grown out of it? Staying motivated in your savings goals is not only about making sure you are able and willing to make regular deposits to your savings account, but also that you are saving for something worth all the trouble too.

• Set up regular transfers to your savings account to keep you saving. This is one of the most important pieces of savings advice you will find anywhere because it means you can keep your savings on track without being tempted to let your deposits slide. If you set up a regular transfer from your transaction account to your savings account on payday, you are paying yourself first and ensuring that no matter what else you are tempted to buy that week, your savings contribution is taken care of. This strategy is particularly important with a long term savings goal as it is easy to lose interest in making your contributions, or simply forget.

Strategies for Short Term Saving

Saving for short term goals is an important financial skill to have because it allows you to develop good savings habits and still buy things for yourself and your family. By saving up for the short term for things you want and need, you can also avoid using your credit card, and can instead pay with your own money and buy things you can actually afford and this further cements your financial security, and sets a good example for your family.

• · Choose a high promotional rate on your savings account to get you to your goal faster. If you have a short term savings plan, you need to reach your goal as quickly as possible and a high introductory rate will help you do that. Promotional rates tend to run for three or four months and this is the perfect length of time for a short term savings plan – long enough to save without sacrificing too much, and short enough to remain motivated and fulfil your goals. A promotional interest rate on a high interest savings account can be almost 2.00% higher than the standard interest rate, and with interest calculated daily your savings can be steadily boosted from the moment you open the account.

• Calculate your contributions and make an automated plan. Whether you are setting a short term savings goal to get a feel for high interest savings accounts, or because you’ve seen something you want and want to avoid credit card interest, no matter how short your savings term, you still need to plan for it to keep on track so set up regular contributions from your transaction account to your savings account each payday. This means you can be saving without having to manage your savings and when a savings plan is easy, you’re more likely to stick to it.

• · Budget for your contributions to reach your goal and use your interest earned as ‘cream’. The cream on top of your savings is the interest – the extra money you’ll have in your account on top of what you were expecting from your own contributions. To make a real difference to your finances, budget to reach your goal with your own contributions, not taking into account the interest you will earn. When you have reached your goal, withdraw your contributions and use your interest earned to kick start another savings goal, or reinvest it in a term deposit

When you have these few simple strategies in place, it is easy to win the war against all the obstacles which are stopping your from reaching your savings goals – time, motivation, focus and flexibility.

But first we will start with me.

Before I started my Netflix account, I signed up for the two week free trial from Blockbuster to rent movies.  I would then rent 1-2 movies a day and burn the  DVD’s so I can keep the movies for the future.  Once the two week trial ended I discontinued my service.  I was able to get a bunch of free DVD’s that way.

Now here are some of yours.

Crys

My personal money grubbing secret is to not buy things I want, but only need, and then ask for the wants as Christmas presents. For example, I love smelly soaps, but they’re expensive, so I buy the super cheap not nice ones. But for Christmas I ask for smelly ones.

Evolution of wealth

This book sounds funny so pretty funny. I’ll have to chime in for a shot at it. My secret is that I love McDonald’s straws. Whenever I go I like to grab a huge handful of straws to take with me. I admit it.

Mindy

I am a strictly clearance shopper and not just any clearance is good 75 percent off or better thanks

Carol

I take the clothes out of the dryer after they’ve been only a few minutes and I hang it all.

Mia

Go to Costco at lunchtime and make a meal out of all the freebies.

Geri

I use coupons whenever I can if you would consider that “money grubbing”…This looks like a great book that hopefully I could use some tricks to be cheaper yet…

Darcy

If I like a product I let the company know it–and often I’m rewarded with great coupons (often for free merchandise)

Jennifer

I grab an extra set of plastic flatware when I get takeout and keep it in my office.

Red

I ask for ketchup and BBQ packets when I go out, even though I have a large stash at home. I take plasticware with me from restaurants and use it as needed at home or at work. I don’t buy paper plates anymore because it’s much cheaper to just wash the real dishes. And lastly (and most disgustingly, I know), I don’t buy tampons to keep at home because my office stocks them in the ladies restroom. I just use them at work and then take one home with me.

Susan

I cut coupons, and recycle plastic forks…

Nicole

I make my own coffee, instead of going to Starbucks everyday. I also shop at thrift stores for clothing.

Miranda

I reuse my ziplock bags

Wendy

I take home the condiments that you get from fast food restaurants and use them instead of buying the full size version.

Ctreit

I cut the toothpaste tube open, when it is almost empty so that I can get a few more helpings.

Kelly

Store brand, store brand, store brand. I’ve discovered that some store brands are infinitely better than the name brand items!

Caren

I get free samples of new grooming products from sample offers off the Internet. My resulting collection of mini toothpastes is great for air travel.

Source: Flickr

This is a guest post by Charissa Cowart from eBillme | Secure Cash Payments

This holiday season you’re probably trying to find ways to spend less but still show your family and friends how much you care about them. Well I have a few ideas to help you on the way. Some of these are simple party ideas, some are gift-buying ideas and some are Do-It-Yourself ideas. So here they are, I hope they help… Knock your socks off!

1. Family Secret Santa – If you have a big extended family, like several aunts, uncles, and cousins who will all be with you on Christmas day but you don’t know them well enough to know what to buy… a good idea is to arrange Secret Santa!

Here’s how it works:

Everyone bring a wrapped gift (men bring a man’s gift, women bring a woman’s gift) and have them in two separate piles – decide on the price point ahead of time. One at a time each family member goes to the pile of gifts and picks one gift (don’t open it yet). Then after everyone gets a wrapped gift (you can not pick your own gift), everyone opens the gifts at the same time to see what you got.

This way you only have to spend money on one gift, but everyone in the family gets to go home with a gift.

1. Gift Cards – Gift cards can seem like very impersonal gifts, but there are ways to make them fun! You can attach a gift card to a canvas and paint around it to make it more personal and unique. You can create your own gift basket with small things like inexpensive candles, candy, magazines, etc. and include the Gift Card. Gift Cards are great gifts because it allows the recipient to get whatever he/she wants and it eliminates the need for him/her to have to take back a gift that doesn’t fit or they may already have.

1. Create Your Own Board Game – This is a neat idea! Check out this eHow article on How to Make Your Own Board Game. It could be really fun if you create a game about your family and give it to mom & dad, or grandma & grandpa but explain that it’s a game for everyone to play! They family would love it and might start putting in orders for their own game!

1. Shop Online – Decide to do all your shopping online this year! There are many benefits to shopping online. You don’t have to fight for a parking spot in the holiday traffic for one. eBillme.com is a great site for shopping online and you can pay cash online! The cool thing is, you can even earn 1% cash back on every order you make. You’re practically making money while shopping!

1. Bring out the Cookbooks – Your local Kinko’s can be your best friend when it comes to making things yourself. Gather up old recipes, family recipes, or new recipes from Paula Dean and Rachel Ray then take them to Kinko’s and have them printed in the form of a cookbook! It would make a great gift for any females in your family.

These are just a few ideas to help you give great gifts this year but not have to take out a loan to do it.  Plus, you’ll have fun making your own gifts or playing Secret Santa with the family.

Let us know your money-saving tips for holiday shopping in the comments.

By Mala Lal

As a freelance writer, I am always looking for ways to keep my finances in order. Here are my top 10 benefits of using an online personal finance tool.

10. It works on my time: With my tool being online, I never have to make an appointment to go over finances. There are times when I can’t sleep because I think I may have forgotten about a bill or wanted to make sure my paycheck went in the bank. Regardless of what time I want to update or check my finances, I am able to help myself without interrupting someone else’s schedule or having to wait.

9. Organization: At times, my life is going a million miles a second. And sadly, my house doesn’t look like Martha Stewart’s. With an online personal finance tool, I am able organize my bills in one convenient location that I can constantly refer to, even if the rest of my home isn’t so organized.

8. I am in control: When I first established my budget, I was able to look at all sorts of variables. Just like a new game, book, or song, the more times you listen, play or read it, you get different things out of it; the same is true for a finance tool. You can play around with your numbers, and can explore different options for yourself without making a decision. You get control of your money.

7. It’s private: While some people like sharing their money concerns with others, I am a private person. Aside from my husband, I don’t want other people in my financial business. When my husband and I received a sum of money that wasn’t expected, we didn’t feel obligated to talk with anyone about what to do with the money. Our online personal finance tool helped, but we were in charge and were able to keep our privacy.

6. There are no hurt feelings: If you hire a personal financial specialist, you might be expected to go with their decisions. I am all for listening to a teacher about ways to educate a child; however, I don’t want to hurt anyone’s feeling if I choose to take a different route than what my financial specialist suggested. With an online personal finance tool, I feel o.k. if I don’t listen to my computer.

5. It’s user friendly: I won’t call myself a technology guru; in fact, some may consider me technologically challenged. But, my tool is easy to understand and use without having to call for technical support.

4. There’s no contract: God forbid, but if I ever lost my job, I probably couldn’t afford a personal financial specialist. With my personal finance tool, I am not under a contract or have a financial obligation to keep.

3. There are lots of options: While I use BudgetPulse.com, there is a plethora of free programs out there to choose from. What I like about mine is that it is not connected to a single computer. If I am away on business or like to maintain things from work and home, as long as I can connect to the internet I am able to take care of my financial business.

2. Budget, Budget, Budget: I never have to worry anymore about money because I am in total control. An online personal finance tool helps me keep my credit score up, and helps relieve some of the stress in my life.

1. It’s free! Aside from the expense of my internet connection and the electricity needed to power my laptop, my tool is free. Enough said.

When I look outside the window, I am amazed at how beautiful my neighborhood is. There is a park nearby where I can take my dog and daughter. A library that is a short walk from our home, and flowers in everyone’s yards. It seems everyone around me is trying to keep Mother Earth happy and content. Inside most homes, people are beginning new habits in attempts to save money and help the environment. My city gives us a garbage can outside for us to take our trash and also a blue recycling container for our paper, plastic, and aluminum. The three R’s of green life are reduce, reuse, and recycle. For me, that means refilling my plastic bottle of water to use all day, keeping lights turned off when not in use and recycling paper at my local recycling center.

It seems grocery stores have attempted to get on the green train by selling reusable shopping bags. Unfortunately, while it seems like the green thing to do, for them, the green is in the money you spend buying the bags while thinking you are helping the environment. While it does seem that plastic is everywhere, you can be more green by using a plastic shopping bag instead of the canvas bag they are selling.

Before you begin to think I am not an earth loving conserving American, I want you to think about the costs and hassles associated with canvas reusable shopping bags. On a typical grocery shopping day, I walk out with about 10 bags of groceries. And that is for my family of three. If I purchased enough bags for my groceries, I would need 15. At my grocery store, they are sold for $1.00. That may seem inexpensive, but there is another added expense when you use these bags. You come home from the grocery store with produce, eggs, meat, frozen goods, and pantry items, and realize your canvas bags are wet, dirty, or covered with leaky meat juice. That means you will need to wash and dry your bags every time you use them. That means more laundry which then leads to using more energy and water to help our environment. Instead of using canvas bags for groceries, use those bags for books from the library, taking toys to the park, or shopping for clothes.

One more reason not to use reusable shopping bags for your groceries, what is the company doing for you? I have never been to a grocery store that had a sign posted with “don’t need our bags, here’s x amount of dollars off your groceries.” Unless they are going to charge you for bags, which some groceries do, don’t bother buying the canvas bags at the check out.

And if you’re still not convinced, you should know that plastic bags are almost always recyclable, so all you have to do is gather a bunch of the plastic bags and make a trip to the local recycling plant. You won’t be saving money per say, but you may actually be doing more of a service to the environment this way than with the reusable bags.

My advice, for what it’s worth, use the plastic grocery bags, but more than once. I use my plastic grocery bags to line small rubbish cans in my house, to pick up my dog’s droppings, to wrap my daughter’s less than stellar smelling diapers, to bring in lunch and at the grocery store where they charge you for it. I do love the environment; but, plastic bags are still my friend (unlike standard light bulbs).

With credit card use on the decline, more and more people are discovering why savings are so important to the household budget.  Not only does having a well funded savings account afford individuals and families a bit of breathing room should they face unexpected expenses, it also makes it possible to avoid going in debt in the future.  Millions of people are currently trying to eliminate debt, therefore any opportunity to avoid future indebtedness should be considered for financial security.  The best way to do this is by incorporating your savings into your budget.  

Here are a three tips to help consumers budget for savings. 

• Open a high interest savings account-  The first thing you must do when you begin saving money is to have an appropriate place to save and grow your money until it is needed.  While many people “think” they can simply put it in their regular checking account, the reality is without a specific savings account the likelihood of using “saved” money for other expenses is very high.  To find the best rates look beyond you local bank and consider online savings accounts which often offer a higher interest rater, therefore more growth.

• Make every dollar work-  When creating a household budget, we often focus on covering our bills and day-to-day living.  Any remaining money is often left to use at our own discretion.  If you are not assigning a certain amount of money toward savings, you will more than likely find yourself spending any leftover cash on unnecessary purchases simply because you have the money available.  You must assign a certain amount of money to go into your savings to assure you are not spending it elsewhere.

• Finding more money-  The reality for many people trying to recover from the effects of the recession is that every dollar already has a job.  This is especially true for individuals trying to eliminate debt while building savings.  If you are in this position and haven’t already taken the necessary steps to free up additional money, the time to do so is now.  Start by reviewing your current budget to see where you can cut costs.  If you cannot cut costs, then you should certainly be contacting certain vendors to see if you can negotiate lower rates.  Any opportunity to save money or in other words not spend as much money will free up extra cash toward savings.  

The truth is that-most people unless facing a severe financial hardship have the ability to save money.  Many people either do not know how or choose not to make the necessary adjustments needed to build their savings.  By following these three simple tips everyone has the opportunity to take the first step toward building their savings account to put them on the path toward financial freedom.  

What are some steps you take?

Uncertainty about the current and future economy has pushed many Americans to start saving more and paying off more of their debt. Recent studies in 2008 and 2009 have indicated that as Americans are feeling less secure about their financial stability, they have begun to change their spending behavior. As confidence falls, many have chosen to exercise prudence, paying down debt and setting aside some of their money in savings accounts and money market funds rather than spending it all.

As consumer’s personal investment losses mount, the amount of money put aside in short-term savings rose from consistently low averages and Americans also increased their contributions to their personal retirement accounts. In addition, the amount of money Americans are using to pay down short-term debt has increased as people tighten their belts, reduce spending, and warily watch the economy.

Here at BudgetPulse, we say, “It’s about time!”

It’s about time that Americans start saving more. It’s about time that everyone has a budget plan too. A solid budget can help you save more – quickly and easily. With a solid financial plan in place, you  can worry less about the short-term dips in the economy because you’ll have some of the time-honored essentials in place, including:

1 An emergency fund - start with a little bit and keep growing it steadily until you have at least 3 months’ worth of expenses saved – some economists recommend 6-9 months’ worth, so get started!

2 Reduced debt – by paying down the debt with the highest interest rate, you gain speed in paying down debt. Once that one is paid off, move that payment amount to the next highest interest rate debt, and so on. Reduced overall debt will give you great peace of mind in these troubled times … and it works great when the economy is rockin’ too!

3 A controlled spending plan – by outlining a budget and sticking to it, you know what you can afford and you know what you need to keep yourself and your family safe.

4 A savings plan for future items – whether it’s a vacation or going back to college, you can’t get anywhere without saving for it, so get started right now.

Of course, it’s not just Americans who need to make changes in their financial habits – we all do. But we thought it was good to see that the turn around has started and we hope that all Americans take heart and start applying some good financial common sense to their spending and savings habits.

Two of the most important things you must do  after college are:

•  Conduct a “State of the Union” for your finances, sign-up (sic) for an online money management system”
•  Develop sound saving habits from the start”

… and we couldn’t agree more.

•l  Set up an online money management system

Treating your finances seriously is crucial to your ability to create a sound financial future for yourself, and for your family later. One of the best – and easiest! – ways to do this is to sign up for an online money management system that gives you an entire view of your finances.

Sound a little obsessive-compulsive? Well, perhaps it is, but you won’t find a financially successful individual who hasn’t done something similar and why not use the free Internet tools that are available to help you with this chore?

•l  Develop good savings habits

Starting with good savings habits right from the start is important. So, what do you need to save for right now? Well, here are a few you probably can’t get away from:

- You need an emergency fund right now. Otherwise, how will you pay those bills on time if you lose your job?

- If your are employed, you need to begin retirement planning right now. You can’t count on social security and there are no more gold watches with a comfy retirement after 30 years.

- If you plan to purchase anything of any value in the future, you need to start saving right now. Do you really want to stay in that rat-trap you call an apartment forever?

So, let’s break these requirements down into bite-sized bits:

1 Setting up an emergency fund, even if you put only a little into it each month, can be a great way to ensure you will be able to pay your bills in the event a problem occurs. Saving while paying down debt is the only way to ensure you’ll be able to pay for the unexpected expenses that will happen as you continue to pay down your debt.

2 Retirement planning can never begin too early and if you are lucky enough to be working for a company that contributes a matching percentage to your retirement account, you are throwing away their good dollars if you don’t match it. So start investing at least the match and see “In the future …” below for hints to improve those dollars.

3 Saving for the future has to start right now. No, it doesn’t have to be a lot, but for every debt you pay off, put a little more into your future savings funds. For every expense you clear off your monthly list, put a little more into your future savings. When it comes time to put money down on a car, or a condo, or an engagement ring, you’ll be prepared.

• l In the future …

As you get raises, pay yourself first – increase your 401(k) contributions by just 1% with each raise, and you will be contributing the maximum in only a few years. Increase your savings percentage with each raise as well. Don’t use your raises only as a way to ‘get out of debt faster’; use some of that money to improve your financial growth too.

 Even with the best of intentions, credit cards can lead to bad trouble. Whether impulse control or financial desperation is the culprit, many people end up in a pickle over credit card debt. New laws to curb sneaky industry practices were passed late last year; unfortunately, they won’t go into effect until July 2010. In the meantime, credit card companies are using every trick in the book to get more of your money, even blaming the economy as the reason for their shady policies. The industry’s talking heads make it seem like every Tom, Dick, and Harry is defaulting on payments, although recent reports confirm that just 9% of card holders are in default.

 Don’t feel bad if you’ve fallen for the alluring trap of seemingly free money. Many Americans do. As reported by the Associated Press, CreditCard.com found that the average outstanding U.S. credit card debt per household was $10,679 at the end of 2008. Furthermore, data from the New York Times reveals that 40% of American families carried a recurring monthly credit card balance in 2008 and that the average household had 13 cards.

 Things have only gotten worse in 2009. The credit card companies have chosen to play hardball with consumers in order to protect themselves from future losses, in some cases demanding credit scores of 740-750 for the privilege of charging your next purchase to their piece of plastic. Other tactics include increasing penalty fees, upping interest rates, and slashing credit lines, even for cardholders who have good credit and always pay on time. This is in addition to existing aggravations like the universal default rate, which will be eliminated in 2010 but for now allows companies to increase your interest rate if you pay late on ANY of your bills, even if the late bill payment was on an unrelated account.

 What all of this means is that you should limit your credit card usage (but don’t close your existing accounts), at least until the consumer-friendly 2010 laws go into effect. For starters, don’t make any new credit card purchases unless: a) it’s an emergency; or b) you can afford to pay off the balance in full. Also, pay off any existing balances as quickly as possible to avoid paying unnecessary fees. For example, let’s say you have a $5,000 credit card balance with a 14% interest rate. If you only make monthly payments of $100, it will take you 6 years and 4 months to pay off the balance, plus cost you $2,548 in interest fees. However, increasing your monthly payment amount to $500 allows you to pay off the balance in 11 months, which lowers your interest fee costs to $348 – a savings of $2,200.

 In addition, plan to periodically review the fine print of your credit card agreements in order to stay on top of changes to your interest rate and/or credit limit. Card issuers can change agreement terms at any time, and they’re only required to give you 15 days’ notice of these changes. Finally, make sure your credit card balance stays under 30% of your credit limit. Going above this amount may lower your credit score and increase your interest rate.