New Year, New You!

Savings Experiment: New Year's Saving Resolutions
As you ring in the New Year, you'll probably make some personal resolutions to lose weight, volunteer more, and clean behind (and not just around) the furniture. (That last one may just be me!) These are all sound goals, but don't forget to add saving money to the list. Learning how to save money will offer you peace of mind, so you'll basically be checking off two resolutions for the price of one.

Take Back Your Expenses

Considering that most of us are part of the 99%, it's critical to budget. It's also as simple as setting up and checking your Facebook account. The beginning of the year is the perfect time to start budgeting: If you begin now, it'll be easy as the year goes on to track your expenses and make more conscious decisions about what you spend.

There are a number of ways to budget. There's also an app for it; in fact, there are several. For starters, try TipB or Mint. Mint enables you to upload your bank, credit, loan, and retirement accounts to help you categorize your transactions. It's also free. Some credit cards, like American Express (AXP), provide tools to see where you're spending money. Of course, you can always set up a budget on a Microsoft (MSFT) Excel spreadsheet, or the old fashioned way, with a pen and paper.

Take back your expensesFinancial experts recommend creating a pie chart of your spending ratios. The basic rule of thumb is to cut your expenses into a 50/30/20 budget, divvying your monthly household income into essentials, savings, and splurges.

To get started, add up your total monthly household income, including your salary (after taxes) and any other sources such as child support, tenants, consulting and freelance gigs, and even selling stuff on eBay (EBAY). Next, you'll need to add up your essentials.

Then break down your expenses. Fifty percent of your total income will go to basic necessities such as rent, utilities, transportation, groceries, health insurance and student loans. After you account for these essential items, set aside thirty percent of your income for what you enjoy doing, such as buying seasonal basketball tickets or having cocktails with friends. Sometimes it's difficult to determine what goes into this column: You may need internet access if you work from home, but do you need cable? If it's merely a burning desire, the item is considered inessential. Most of your purchases are inessential -- even clothes, gym memberships, gifts for friends, and vacations.

Last, but not least, find out what the remaining twenty-percent of your total income is, and siphon off that amount for savings and emergency funds. It's easier to save money if you deposit it directly into a savings account as soon as you get it. There's no need to tempt yourself, and that money can accrue interest, so you'll actually grow your savings.

Budgeting is a lot like dieting: Everyone has different needs and approaches it with different constraints, challenges, and choices to make. Some folks need to weigh in every day, others weigh themselves a couple times a week (or even month), and there are those who don't need an external reminder. You may want to keep a diary at first to see how you're spending. Initially you might find yourself obsessed or hesitant, until thinking frugally becomes second nature. And you might fall off the wagon. But generally speaking, the more disciplined you are, the easier it will get. It's a critical skill to master, and, luckily, a straightforward one. If only winning the lotto was this simple.

What's your 50/30/20 budget? Use this worksheet to figure it out.

Budget worksheet

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