Your Guide to Saving & Budgeting

Embarking on a financial wellness journey is like building a house from the ground up. The foundation? Budgeting and saving.

Knowing where your money goes every month can help you take control of your finances, achieve your goals, and be prepared for the future. Consistent saving creates a foundation of stability and security, offering a comforting buffer for unforeseen circumstances. Maintaining an emergency fund not only grants you peace of mind but also serves as a safety net for life's unexpected twists and turns.

Combine budgeting and saving, and you’re working towards a recipe for success. But there are so many different philosophies out there on budgeting and saving, how do you find the right way to go about it? Below, we’ll dive into some core concepts, perspectives, and tips for both.

How to set financial goals

It’s hard to reach any destination without a plan on how to get there. Budgeting and saving are no different. First and foremost, let’s explore how to set goals.

Start with the basics: What do we mean by the basics? In the world of personal finance, we think of this as setting up a budget and establishing an emergency fund of 3-6 months of expenses. Take these general guidelines and apply them to your unique financial situation.

Motivation: Financial goals are hard to achieve without proper motivation. Connect each goal to a deeper motivation and reflect on the potential impact. For example, writing a will or setting up a trust may be linked to a deeper motivation to provide security for your family.

Prioritize: You can only take on so many goals at once. Trying to juggle too many can result in accomplishing nothing. Once you've considered your goals and motivations, start to prioritize. Consider timeframes (short vs. long term) and their importance (i.e. essential vs. nice to have). This way, you can get a bit more organized without feeling overwhelmed. If you need help prioritizing your goals, we recommend using the Eisenhower Matrix.

Layout your options: Take inventory of what you have and consider what you need to hit each of your goals. Ask yourself: Do you have a budget in place? Are you already investing? Do you have a retirement plan? Understanding what you have and what you need can help you break down your goals into smaller steps.

Set micro goals to boost motivation: Breaking down your ultimate end goal into smaller, more immediately achievable ones can keep the momentum going. While the big picture remains at the forefront, those little micro goals are the steps that get you there. Say you have the goal of saving $10,000 a year — start with saving $1,000/month as your first micro goal, or maybe a bit less.

Tracking income and expenses

A budget consists of your income and your expenses. Tracking both those numbers is an essential part of following your budget and evolving it.

Sure, you can do this manually by inserting your expenses and income into a spreadsheet, but Origin can do this for you automatically. All you have to do is create an account and link your financial institutions (i.e. checking account, credit cards, etc), and we’ll categorize your expenses and note your cash flow (money coming in and out of your accounts).

Why does cash flow matter? Cash flow is a direct indicator of whether or not you can cover your expenses and if you’re on track for your future goals. Knowing your monthly cash flow can empower you to manage debt effectively, reduce overspending, and continue building your financial foundation.

How to create a budget you’ll use

In the process of creating your budget, you’ll also want to make sure you’re building something that you’ll use.

Top reasons people don’t stick to their budget:

• It’s not specific enough.

• It’s unrealistic for their unique financial situation.

• It’s not a top priority.

To avoid falling into this all too common trap, here are a few tips:

Be specific. Define dollar amounts and categories. The more specific you can get, the better off you’ll be.

Determine the budget for each category based on your income and what proportion you’re comfortable spending on each. For example, housing might represent 30% of your budget. Start with essential items, including any debt repayments, and then focus on discretionary spending.

Include debt in your budget. Not accounting for debt is a trap many budgeters fall into, resulting in excessive interest costs and a pile of debt that continues growing. Aim to include at least your minimum payments (credit monthly budget, and contribute even more if possible.

Be accurate. Don’t over or underestimate your expenses and income.

Make a routine. Make your budget a part of your routine. Check it often. If it’s not serving you, change it to better fit your needs.

Saving Strategies

Two types of savings hold priority over everything else: retirement and emergency funds. The rest (like excess savings, saving for a want rather than a need) is extra.

They serve two different purposes, one is an insurance policy while the other is a full income replacement strategy, and everyone’s life has different needs.

So, here are some general rules to apply that can help:

✅ Establish an emergency fund of 3-6 months of expenses first, as a safety net.

✅ Put away 10-15% of your gross income at minimum for retirement planning, and more if you wish. The later you wait, the higher you’ll need to adjust to meet your retirement goals.

✅ Contribute to your company’s 401(k) or 403(b), especially if they offer an employer match. It may seem like a small percentage, but that free money compounds over decades. An employer match you aren't taking full advantage of is like not accepting free money.

✅ Based on your income, consider opening an IRA or Roth IRA. Go for an IRA if you plan to withdraw the funds at a later date when your tax bracket is lower, and consider a Roth if you predict your tax burden will be higher in the future than it is now.

✅ Already checked all of these boxes? In that case, there’s nothing wrong with socking away even more money into a savings account — just make sure you find a solid yield.

How much should you have in savings? How much should you have in an emergency fund?

There is no one-size-fits-all rule in regards to how much you should have saved, whether it’s an emergency fund or savings accounts in general. Whatever number helps you to sleep comfortably at night is likely correct but keep in mind this number is different for everyone.

Origin planners recommend having 3-6 months of expenses stored in an emergency fund, depending on whether you are a single or dual-income household. Single-income households should stay close to 6 months while dual-income families should target at least 3 months. This amount may need to be larger if you have high monthly expenses or large expenses that are coming up in the next 1-3 years.

Your total savings amount is best thought of as a ratio. If your savings are disproportionate to what you’re investing, you likely end up robbing yourself of future growth. For example — if you’ve already got 6+ months of expenses saved up and are only contributing 5% per month toward retirement while still adding 20% of your income to savings, this might be extreme.

More tips

Autopilot savings: You might want to consider creating an automatic transfer into your savings account on a weekly or monthly basis, so you can effectively prioritize saving.

Keep it personal: There are a lot of guidelines and rules of thumb out there, but they’re not for everyone. Research common guidelines like the 50/30/20 rule, then take what you’ve learned and apply it to your situation. These rules are great guidelines, but we recognize that a one-size-fits-all approach isn’t always the best.

Don’t always think in dollar signs: Dollars don’t often tell us as much as percentages do. Thinking in dollars can often lead us to an illusory feeling about how much we’re spending, so context is important.

Get started with Origin

Congratulations, you’re now a master of two of the most important aspects of personal finances: budgeting and saving. That’s a summary of what you need to know, but of course, there’s always more to learn — and we’re here to help.

Ready to embark on a journey towards smarter saving and budgeting? Origin is the all-in-one money management platform, where you can build a personalized budget and hit your financial goals with expert guidance.

Get started with a 30-day free preview today.