### Are you leaving 2017 with less money in savings than you anticipated?

You may have had lofty goals at the beginning of the year, but didn’t have the proper tools to approach how to really make your hard-earned money work for you.

As you may be aware, the amount of money you make has a small impact on your future wealth equation.

## #1. Increased income = Increased savings potential

True. The potential to save more money as your income increases makes this a true statement.

This may not translate to reality. Let’s say, my take-home pay is 100k a year. I have the potential to save \$100k minus my expenses, but what if my expenses were \$110k? (\$100k – \$110k = \$10k deficit)

## #2. Reduced income = Reduced savings potential

True. The potential to save less money on less income makes this a true statement.

Again – there are variables. Let’s say, my take-home pay is 50k a year. I have the potential to save \$50k minus my expenses, but what if my expenses were \$40k? (\$50k – \$40k = \$10k surplus)

Are you still with me?

You will notice that with the \$100k income there were no savings. In fact, there was debt! With the income cut in half to \$50k, there was still a \$10k savings.

This goes to show you that even with increased income, it does not equate to more savings – only the potential…

Of course, it depends largely on your circumstances, but a good step forward is knowing that just because someone makes more money than you doesn’t mean they are in a better financial situation. Alternatively, just because someone makes less money than you does not mean that they are living paycheck-to-paycheck.

## #3. Increased expenses = Less money saved

True. The more the expenses go up, the less money that makes it to potential savings.

If my take-home pay is \$50k a year and I spend \$45k when I could spend \$35k, I’m leaving \$10k on the table that could be saved and invested to build wealth. (\$45k – \$35k = \$10k that could grow into a much larger amount…)

## #4. Reduced expenses = Increased savings potential

True. If expenses are reduced, more money makes it to potential savings.

If my take-home pay is \$50k a year and I choose to spend \$35k when I could spend \$50k, I’m leaving \$15k to be saved and invested for the future. (\$50k – \$35k = \$15k)

The moral of the story here is that any amount of money that is set aside from being spent will make a difference. A chunk of money like \$10k or \$15k today, if properly executed in an investment vehicle will compound year over year.

Compound interest is the interest earned on both the original contributions and any growth thereafter.

Using an investment calculator, \$10,000 contributions yearly over a 30-year time horizon earning a conservative 4% annual rate of return will yield \$583,050. That’s the effect of saving + investing and doing it consistently.

Which leads me to the next part…

# What Is The End Goal?

Now that you have an understanding that your potential savings are directly correlated to how much you spend (and not how much you make), you are ready to start budgeting your money!

Budgeting is simply a way to account for where your money goes. If you start accounting for all your income and expenses, you will start seeing the bigger picture. How motivating would it be to know that you could save \$10k, \$20k, even \$30k a year from just having more knowledge surrounding your finances?

It always helps to have a plan of action. If you don’t have a goal, you will likely falter eventually.

Is the extra savings for your future so you can have fewer money worries? Smart!

How about a future purchase that you need extra funds for? Yes!

Is it to pay down debt so you can demolish it once and for all? There ya go!

You work in a cyclical job and you may get laid off, so you want to make sure you have money to pay the day-to-day bills. We are on the same page!

Though I don’t have to be motivated to save, I know that it varies greatly from one person to the next.

Set yourself on the path of success by coming up with a plan centered around the reason you are saving and set out to meet that goal.

For a more thorough action plan refer to Set Goals The Right Way And Succeed Every Time.

For now, let’s discuss the topic at hand, which is getting your hands on the budgeting and tracking tool that is going to help you change your financial life…

# Take Control of Your Money

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### I wanted to provide my readers my very own ( new and improved ) budgeting tool.

I have been budgeting my money since my mid-20’s. Now that I am in my early 30’s, I can look back at all the data from the prior years – see how much was spent, what I spent money on, where I shopped…and so on.

My spending has been maintained at a reasonable level, even when my household salaries increased (and decreased). This is all from budgeting and tracking my money.

I kept the colors neutral here, but my own sheet has a lot of different colors (because I can be a little extra). Give it a try and start budgeting and tracking your money for the future YOU.

Are you ready to start using the budgeting & tracking tool that is packed with features and instructions?

The spreadsheet is available in Excel and Google Sheets. Both are available for download in the FTD Resource Library – available for subscribers!

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