How to budget, save, and still have a life #Budget#money July 11 | Guest post by Natalie Webb Thanks to NativeBacon for uploading this to the Home Flickr pool! If life trips you up, will you be ready? These days you never know when a job loss, medical emergency, or even a cavity will suck your bank account dry and shrivelled. You know how important it is to build up an emergency fund, but you need extra money before you can save any money, right? You might be surprised about the answer. I used to be there, treading water financially, every day. There I was, making decent money at an office job, while my little sister, in college and working as a waitress, jetted off to Australia for a week because some friends were studying abroad, and she happened to have the money available. I'll bet you're wondering if my sister is a stripper. But you'd be wrong. As she tells it, all she did was look to her big sister's example, and do exactly the opposite. Years later, she filled me in on her savings plan. Over the next year or so, I did as my kid sister instructed. Related Post My breakable piggy bank: worked when I was 5, still works to help me save today his year I've been struggling to save any money. Keeping it in the bank meant online shopping was too easy and keeping it in cash... Read more We weathered two cars blowing up on us, loads of sick days from the toxic mold in our old house, two job losses, me having to go back to school full time, and more. While we live well below our small means at the moment, we still have plenty of savings that we haven't touched. In a few weeks I will be done with school, and working full time again to feed the pig. So how did we do it? It's not easy, but it's not hard, either. And once you get everything set up, five minutes per pay period is all you will need to start building your savings and living free. Make your monthly budget Mint.com is a free online budgeting tool, where you can keep track of all of your accounts, income, savings, expenditures and goals, all in one place. It even helps you identify money drips and possible savings. One thing Mint doesn't do is track the cash you're holding in your hot little hand. It's not that smart. If you work for tips, it is absolutely imperative that you keep track of your income and spending. Either keep a little notebook with you, or keep track of it on your phone with a free tool like Evernote link. Be diligent about this for at least two or three months to accurately identify your income, spending and patterns. This is what you need to know: How much money do you need to get through the month (we will call this Need Money). This includes bills, gas, food, pocket money — everything you spend. Be realistic and use Mint to tell you what you usually spend on these items. Pay Yourself and Feed the Pig To feed the pig (your piggy bank/savings), your Need Money has to be less than your income. If it isn't, reexamine your budget and make some cuts. Do you really need cable? How about your daily Starbucks run? For this example, let's pretend you make $2,000 a month on average. Your Need Money is $1,800 a month. That's all you get. Because you know as well as I do, that last $200 is going to magically slip out of your fingers. Any money you make above and beyond your Need Money goes straight into savings. That means that if one month you only make $1850, only $50 goes into savings. If you get a giant bonus, boom. Savings. Pretend that money does not exist. Get set up for saving Having a savings account is good. Having a bunch of them is better. Think of it like the Titanic. It had 16 watertight compartments. It could have stayed afloat with four of them breached, but six flooded and Celine Dion made out like a bandit. The same is true of your savings accounts. If you only had one account, it is really easy to drain your entire savings. Money spread over multiple accounts can keep you afloat. INGDirect offers free online interest-bearing savings accounts. You can make as many accounts as you need. So how many do you need? Answer these questions: What do you want out of life? What do you need to save for? How important is each item to you? Do they have deadlines? To give you a real-life example, this is how I manage my savings accounts: 20% Wedding – Deadline 8/31/2012 20% House – Deadline 12/12 10% Car – Deadline 12/2 15% Emergency 10% Savings 5% The Kid 5% Retirement 5% Vacation 5% Fun 5% Gifts Remember that these numbers are not set in stone. As soon as the wedding, house and car are paid for, that 50% of our savings can go into other accounts instead. Now let's make this easy If this all sounds tricky, here's where it gets simple. All of the money you transfer over from your paycheck does not actually get split between all of those accounts. It goes in your final account. I call mine "Distribution." Every time the Distribution account reaches $100, I split it up by the percentages into the other accounts. So if 20% is going to the house fund, that's $20. See how easy? You don't have to do this super often if you don't mind some really basic math (if there is $500 in Distribution, then $100 goes into the house fund. If you have an odd number in the account, like $128.37, just work with the $100.) This all becomes a game for me. I love to see how fast I can get to the next $100 so that I can fill my accounts some more. It's a challenge, and it's thrilling to watch your savings grow. Even $5 per pay period will get you started. Now start saving! Even though I make less money right now than I did back when the collection agents were calling me every day, I still have a sizable amount of money in my savings accounts today. This process has taught me to live within my means and on a budget, while still living a real life. I budget for fun and vacations, and the things I want to do. And I know that if things go wrong, I'm ready. Money is only worth so much, but peace of mind is priceless. How is your savings plan coming along? Join our community! Reporter Name * Reporter Email * Original text Enter the original text here. Edited text* Enter your suggested copyedit here. Notes You can add a note for the editor here. * Required information. Fix Typo Guest post written by Natalie Webb I am Edward Scissorhands living in a Martha Stewart world, slowly but surely writing the book on growing up, living weird and living well. 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