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Few things impact your life like how and how much you're able to save. Let Chelsea and Lauren steer you in the right direction when it comes to getting better at saving money.

"A Breakdown Of How I Budget An Income That Varies Month-To-Month" http://thefinancialdiet.com/a-breakdown-of-how-i-budget-an-income-that-varies-month-to-month/

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Chelsea: Hi I'm Chelsea.

Lauren: Hi I'm Lauren.

Chelsea: And we are

Both: The Financial Diet!

Chelsea: And today we are talking about one of the most important, yet most sucky elements of personal finance, which is yes, savings. Part of the reason I started the financial diet last year was because I basically had nothing in savings, despite having a pretty good salary job and almost no student loans.

Lauren: And when I came on to join TFD full time, I was able to do so easily because I had so much money in savings.

Chelsea: So we come from pretty opposite backgrounds when it comes to savings. But one thing we've definitely learned, is that few things impact your life like how, and how much you are able to save.

Lauren: As we've mentioned in our last video, having savings is the first of the five key steps to have the financial freedom to follow your dreams.

Chelsea: But how do you save? And how do you get that financial safety net that comes from having a bunch of money put away, and from having the money that's kinda working by itself to earn you more. And for us we think that the biggest and most important step is to not see the money that you are going to be saving.

Lauren: So whatever you're saving should be transferred from an account into a separate account so you can't see it everyday.

Chelsea: If you see it, you can spend it, and trust me because I spend most of which should have been my savings on Forever21 jewellery that stains your skin green.

Lauren: So to save I create an Excel sheet where I can track my monthly bills and my spending behavior and this allows me to create a plan and a budget for myself and allows me to really see the numbers.

Chelsea: And I can't even open Excel, so I use an app called Mint that helps you look on your money as you spend it. It makes it into a nice little pie chart, so you can see that you are wasting all of your money on alcohol.

So once we have two or three months of spending habits down you can kinda look at it and see where should I cut and work backwards from there. It is a lot easier than picking a random percentage saying:"Okay, that's what I'm gonna save because I definitely did that mistake."

I thought to myself: "I guess 20 % is how much money someone saves out of their paycheck and then, within the first week I was going into my savings account to buy a romper. But once I actually said: "Okay, this is what I spend and work backwards slowly from there", it actually stuck.

Lauren: To be honest with yourself about where your money is going each month, and make sure that you are focusing on building yourself a safety net. Even if you have something very high, like a student loan payment, make sure that a safety net is a priority, because everyone needs an emergency fund.

Chelsea: You never know when you're going to get fired, or break a leg, or both in the same day. So we recommend having about 6-9 months of after tax income ready, so that no matter what happens, you're not on the street. And even if your income is different every month, like mine is, there is definitely still a way to make a budget.

I find that you just kind of, turn it into good months, and bad months, where some months you add more things to your budget, and when you're earning a little less, you know what you can cut.
I broke down how I budget my month-to-month income in an article, and the link is in the description.

Lauren: Even if you have greater goals for your money, which you should, there are ways to make your money work more efficiently than just sitting in a regular savings account.

Chelsea: You do need the regular savings account, because that's where you keep everything that needs to, maybe, be taken out right away in cash. Your regular savings account is for things like the emergency fund, or any money that you might need on a moment's notice. But if you want to have your money doing fun, cool, rich person things off an account somewhere, earning their own money, there are many other kinds of accounts that can be really good for that.

So you have things like CDs, or Time Deposits, which give you a better interest rate in exchange for holding your money for a period of time. It's usually anywhere from a month to five years, but in that time, it is not accessible. You can't touch it.

But then, you have things like retirement accounts, which I know sounds like they don't matter right now, but they definitely do. Things like 401ks or IRAs, which give you tax benefits and allow you to invest pre-tax income.

And some accounts like 401ks, even provide a match from your employer, which means that for every dollar you put in, they'll put in a certain amount too. And it's free!

We no longer have employers though, so you have to take advantage of this free money, because we can't anymore.

Lauren: So at the end of the day, you're going to have to find out how much of your monthly income can be portioned out to savings, based on how much you earn and your savings goals are.

Chelsea: And don't forget, that the most important thing is the emergency fund. Once you get that emergency fund in place, then you can start focusing on other things. And if you had big dreams, like Lauren and I, quitting our jobs to run TFD, you're going to have to focus on savings, probably more than you want to.

Lauren: Savings can suck, but it doesn't have to. Keep your eye on the prize and don't get down on yourself if you slip up.

Chelsea: No one's perfect. And don't forget to go to thefinancialdiet.com and hit subscribe below for more.

Both: Bye. See ya.