Financial freedom is a dream for just about every person with a job. It can be hard to feel like you are reaching that dream though if you are not tracking where your money is going. Any successful money manager learns two basic skills to reach their goals: how to create a budget and how to save money.
Tracking how much money you spend, what you should spend it on, and how much to save are the basic foundations of budgeting and saving. Mastering these skills keeps you on track so you can track your money wisely to provide for your family and live prosperously.
The first step to managing your finances is creating a budget. A budget is simply a spending plan that tells you how much to spend and on what, either within a certain timeframe or on an ongoing basis.
Let’s start with the basics: your family’s monthly budget. This budget directs where your income should go, according to your monthly expenses. Make a list of all your expenses for the month, how much they are, and when they are due.
The chart below shows some common household expenses as well as what is left over after those expenses are paid.
Once you have covered the essentials, if you have money left over, it is a smart idea to take at least half of your leftover income and put it in savings. After you have put money aside to save, what you have left can be used for other, non-essential expenses – the fun ones! Just know how much you can spend on them, and stick to it. Here’s an example:
LEFTOVER (after paying expenses, setting aside savings, and paying for extras): $175
Still have some leftover? Put more money into your savings (a great way to get to your saving goals faster), send more home to friends or family in need, or give yourself more extras.1 The choice is yours!
Brightwell’s Smart SeafarerTip:
Beyond the basics, check out financial planning blogs for all kinds of ways to think about budgeting. The list at the end of this article is a great place to start.
Once you know how much money you have to spend on expenses and a few fun extras, you can start to think seriously about saving. A savings fund is a smart way to make sure you are always able to cover those unexpected medical expenses, home or vehicle repairs, or to help work toward a larger financial goal.
Using the first sample budget above, you were left with $480. This is the point where you would first add money to your savings – before any extras. Paying yourself first (think of it as investing in your future self) ensures that money always makes it into your savings. Here is an example of how your savings can grow over 6months:
SAVINGS TOTAL AFTER 6MONTHS: $1,440. Just imagine what you could save after one year, two years, or five!
It would be great to save exactly the same amount every month and keep that pattern going. But life is unpredictable. Sometimes you will make less. Other times you will have more expenses or pay for a few more extras. All of these things are okay. As long as you put aside a portion of your income – whatever portion you can – to your savings, you are doing a good job.
Here is an example of how your savings can grow, even with different amounts from each check:
SAVINGS TOTAL AFTER 6MONTHS: $1,297.50
The point: Even if all you can spare is $10 for the month, try to put a little something into your savings to keep the overall amount moving upward.
Saving money can even be a game, if you look at it the right way! A great way to make it fun is by participating in online competitions where you save a certain amount each week(or even each day). By competing with your friends about how much you have saved during the competition, saving becomes a fun way to stay on-track with your savings goals and get support from other people trying to do the same thing.
Brightwell’s Smart Seafarer Tip: Sound fun? If you would like to try it out, some examples of online financial competitions can be found here.
Once you have your budget and savings aligned, a new door will open for you: the ability to successfully plan for the future. For some, that is retirement. For others, that is home ownership, funding you or a family member’s education, or leaving ship life to return shoreside. All are more possible with a little planning.
It all comes back to learning those two main financial skills: budgeting your expenses and actively saving money every day, week, or month. Master these, and watch as your goals become your reality.
1Restrictions may apply. See transfer terms and conditions for details.