Inside This Article:
1. Introduction: Building Wealth
2. Wealth Creation: Learn the Language
3. Budget to Save
4. Save and Invest
5. Take Control of Debt
6. Review
7. Resource Guide
8. Glossary

What would you like your net worth to be:

5 Years from now?
10 Years from now?

Set Financial Goals

Most people who have built wealth didn't do so overnight. They got wealthy by setting goals and striving to reach them. Bob set two short-term goals: (1) to save and invest enough in four years to have $6,000 for a down payment on a house, and (2) to pay off his $3,000 credit card debt within two years. Bob also set two long-term goals: (1) to save and invest enough to have $25,000 in 15 years for his children's college education, and (2) to have $5,000 a month to live on when he retires in 30 years.

A personal wealth-creation strategy is based on specific goals. In preparing your goals:

• Be Realistic
• Establish time frames.
• Devise a plan.
• Be flexible; goals can change.

In the space provided, list your top goals.

My short-term goals are:
1.
2.
3.

My long-term goals are:
1.
2.
3.

Now you, like Bob, can choose how to meet those goals. This is where budgeting to save comes into play.

Develop a Budget and Live by It

When it comes to finances, people generally fall into the following groups. Where do you fit in?

Planners control their financial affairs. They budget to save.

Strugglers have trouble keeping their heads above rough financial waters. They find it difficult to budget to save.

Deniers refuse to see that they're in financial trouble. So they don't see a need to budget to save.

Impulsives seek immediate gratification. They spend today and let tomorrow take care of itself. They couldn't care less about budgeting to save.

Knowing what kind of financial manager you are will help determine what changes to make. To maximize your wealth-creating ability, you want to be a planner, like Betty.

Betty is a single parent with one child. "I have to budget in order to live on my modest income. I have a little notebook I use to track where every dime goes. Saving is very important to me. When my son was born, I started investing every month in a mutual fund for his college education. I am proud to say that I control my future. I have bought my own home and provided for my son, and I've never bounced a check. You must have common sense regarding money!"

Lynne, by contrast, is a struggler. Lynne has a good job, makes good money and lives a pretty comfortable life, but her bankbook tells a different story. She has no savings or investments, owns no property and has no plans for retirement. Plus, she's got a lot of credit card debt, lives from paycheck to paycheck and doesn't budget.

You can choose to be like Lynne, or you can follow Betty's road to wealth creation by learning to budget and save.

A budget allows you to:

• Understand where your money goes.
• Ensure you don't spend more than you make.
• Find uses for your money that will increase your wealth.
  

To develop a budget, you need to:

• Calculate your monthly income.
• Track your daily expenses.
• Determine how much you spend on monthly bills.

Track Day-to-Day Spending

One day Lynne, the struggler, realized that to create wealth she had to become more like Betty and plan her financial future. To start, Lynne analyzed her finances to see how much money she made and how she was spending it. She set a goal to save $125 a month to put toward her wealth-creation goals. First, she calculated her income. Then she added up her monthly bills.

She also carried a little notebook in her purse for jotting down her daily spending, whether by cash, check or credit card. Here is a page from her notebook.

Click here to create your own day-to-day expense sheet!

You can study your own spending habits by using this sheet to track daily expenses. Be sure to include items purchased with credit cards, as well as those purchased with cash or check.

Get a Handle on Income and Expenses

Lynne used the information from tracking her day-to-day expenses to develop a monthly budget. When Lynne reviewed her budget, she realized she was spending more than she earned. Lynne knew if she were ever going to save $125 a month, she had to cut her expenses, earn more money, or both. She worked overtime at her company, which increased her take-home pay. She bought fewer clothes, discontinued premium cable TV channels, carpooled to work to cut gas consumption and reduced her spending on eating out and entertainment. Tracking her expenses paid off. Lynne successfully developed a budget that enables her to save $125 each month.

Here is her budget. If Lynne sticks to it, she will have $125 a month that she can:

• Put in a savings account.
• Invest in a 401(k) retirement plan at work.
• Invest in an individual retirement account (IRA).
• Invest in stocks, bonds or mutual funds.
• Use to pay off debt.
  

These are just some of the choices available when you budget to save.

Using Lynne's budget as an example, track your income and expenses. Identify changes you can make to increase your income or decrease your expenses, and develop a new budget that includes more savings. Be sure to make reasonable budget changes that you can live with month to month.

Click here to create and calculate your own monthly budget!

To help you maintain the discipline to save:

• Save every month.
• Have savings automatically deducted from your paycheck or checking account.
• Base your budget on what's left.

In other words, get on automatic pilot and stay there.

How much do you currently save each month? $

How much are you going to save each month? $

You have now successfully budgeted to save. The next step is saving and investing.

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