Do you know where your money goes?

Before you figure out how much you can channel into savings, you need to know how much money you’re working with. Start by making a note of all of your expenses for a month.

Then split your outgoings into two categories, as follows:

• Fixed expenses: Rent or mortgage payment, electricity, heating, insurance, property and school taxes, etc.
• Variable expenses: Food, leisure activities, clothing, eating out, entertainment, etc.

You might be surprised to see exactly where your money goes. Expenses that are seemingly insignificant can add up to a big chunk at the end of the month.

Start small, but start today

The good news is that the small, non-essential expenses are the easiest ones to cut down. Here are some examples:

• Buying a coffee every morning at the office
• Eating out at lunchtime
• Stocking up on things you don’t need just because they’re on sale
• Buying things on impulse at the grocery store

If you manage to cut an expense, don’t replace it with another one. Instead, set aside the money you would have spent. Even if it’s just five dollars a week, that’s a good start. Over time, you can probably save more, but at least that money will be starting to grow.

More tips to make saving easier

• Scan the grocery store flyers and plan your meals around what’s on sale. Ask for a rain check coupon if a product on sale has sold out.
• Bring your own lunch to work.
• Make your coffee at home and take a travel mug to work.
• Take out the money you need for the week from the ATM and leave your credit cards at home.
• Every day, put your small change in a jar or piggy bank. Every few months, deposit the money that builds up in a savings account.
• Do your own chores, such as mowing the lawn or shovelling the snow from your driveway.
• Try to repair any items that are broken instead of buying new ones.

A budget to help you stay on track

Once you’ve determined what your fixed and variable expenses are, you can set a budget for yourself. It doesn’t have to be complicated. Here’s what to do, based on the month you’ve already kept track of:

• Create categories for your different expenses
• Determine how much you want to allocate to each category
• Stick to your budget

Don’t forget to have a category for savings!