This is absolutely the most fundamental principle of successful cash flow management and savings growth.  The very first expenditure item in your budget plan should be you for your savings.  All other expenditures should be budgeted around it.

Strike a Balance

If you also have a debt reduction goal, then a portion of that could go towards paying off debt, but never at the expense of your savings.  This would be over and above your regular monthly debt payments.  Find a balance between the two and divide your payment to yourself between the two. (i.e., 60% to savings and 40% to debt reduction). The important thing is to maintain the balance and stick with it each month.

Stick with the Plan

The key to successful budgeting is maintaining the discipline to keep your expenses in line.  If you exceed a planned expenditure one month, you need to find another one to cut, this month, but you need to avoid cutting your savings expenditure.

Manage Your Savings

Once you have accumulated enough savings to meet your short term goals, you can begin to allocate additional savings to longer term accounts that offer better rates of return.  These longer term accounts, such as money market accounts and certificates of deposit, require longer term commitments, but, in return, you are rewarded with higher rates.  Money market rates and the rates on certificates of deposit tend to be higher than short term savings rates.  By laddering your savings to higher yielding accounts, you are effectively locking them in and enabling them to work a little harder for you.

Managing Your Budget like a Pro

With all of the personal finance tools that are available to you, both online and in software packages, you’ve pretty much run out of excuses not to manage your budget and cash flow.  Budgeting can be tedious, and, at times unpleasant.  Cash flow management requires the ability to view a snapshot of your finances on a frequent basis.  The two tools everyone has available to them can actually make budgeting fun and they can nearly automate the cash management process.  And, the more paperless you can make your world, the less chaotic your personal finances will be.

Related articles

• A Get Out of Debt Strategy That Works (lifehack.org)
• How Do Money Market Accounts Work? (ally.com)

By: Timothy James.