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Spending and Savings Plans

December 19, 2006

By: Jim Oosterman
Melrose Bank

The Key to Financial Management Today and for the Future

Almost everyone wants to manage their money better. Money is hard earned and we deserve to get the most out of it. A savings and spending plan (as financial planners refer to it) can help you see where your money is going and put you in control over your financial life. Whatever your goals are, creating and adhering to a plan can help you achieve them.

Before you make your plan, you'll need to know exactly how you are spending your money. Keep a spending diary for two to four weeks, by writing everything down that you spend, no matter how small. This exercise will often lead to some surprises, such as how much you spend on eating out, clothing, and other categories. When making your list, rank your spending priorities. Include major bills such as rent or mortgage, utilities, cable and internet costs, car payments and insurances. In addition, include all other expenses and miscellaneous purchases. Once you have identified all of your expenses, you will see exactly what you are spending your money on and if you are living beyond your means.

After you have tracked your spending, you can begin to set up your savings and spending plan. Money management software or a spreadsheet, are easy ways to create your plan and track your expenses. A filing system is also a good tool, using simple file folders to hold receipts, bills and other documentation. Savings and spending plans, like many things, are ongoing projects, and should evolve as your circumstances change. Create a budget that fits your specific needs and goals, knowing that you can adjust it accordingly.

If you find that you are living beyond your means or month to month without any extra money for an emergency, savings, or a vacation, consider where you can trim spending or cut back altogether. Once you have your plan in place, begin to look at ways to save money for those long-term things that you want. It is important to be realistic. Do not set goals that you know you will never reach, and distinguish wants from needs. Planning and saving are the only ways to get to your big financial goals in life.

Control Spending:
Making small changes in everyday spending habits can add up to big savings. Most people spend at least $5 a day on their morning coffee, snacks, or going out to lunch. This is known as the “Latte Factor”. By cutting down or cutting out these expenses, you can save $1,500 a year or more. Eat at home more often and save the difference from what a restaurant meal would cost. This can add up to a $600 savings per year. This is a quick way to save for an emergency fund, invest in stocks or mutual funds, or a vacation fund.

Shop around for the best prices and sales. If you must have a brand name, plan your purchases in advance and look for the best price. Shop at discount stores, thrift shops, or online websites such as Ebay or Retailers who carry brand name products often have sales, rebates or coupons. Make sure you ask about any rebates. Use the 24-hour purchase rule to avoid buying an item on impulse. If you see something you want, wait 24 hours before making the purchase.

Start Saving:
Pay yourself first each month. Even saving $5 to $10 per month adds up. Direct deposit is a great way to make saving easier. Have your paycheck deposited directly into your checking and savings account, with preset amounts. For example, $50 from each paycheck can be directly deposited into your savings account, with the remainder deposited into your checking account. Many people find this an easy way to save and are not as tempted to use the money. Participate in a work related 401(k) program or open an IRA, since many employers match a portion of your contribution.

Save all of your “bonus” money. Try to save tax refunds, overtime pay, gift or bonus money, promotional refunds, rebates, and your loose change. Invest them for growth, pay off credit cards, or put it into savings for that special something you want.

Like all aspects of your life, it is wise to check your plan with some regularity to make sure that it still fits with what you want to accomplish. By creating a workable and somewhat flexible plan, and following some easy guidelines for savings and spending, you will be on your way to achieving your financial goals now and in the future.

James Oosterman is the Vice President of Melrose Bank. He can be reached by telephone 781-665-2500, online at or on Facebook at

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