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Budgeting and How to Save Money

There are dozens of tools to help us navigate saving but most of us don’t have enough money stashed away to cover more than one large, unexpected expense. It might be easy to be comfortable without savings until you need it. In the spirit of giving, do future you a favor and use the tips below to kick start a realistic savings plan.

Wants, Needs, Savings

A practical budget allocates a percentage of your income, rather than a set amount, to wants, needs, and savings. One common division allocates 50% of your income toward needs, 30% toward wants, and 20% toward savings. The tricky part of this equation is deciding what counts as a need versus a want. Mortgage or rent payments, car payments, insurance, water and electricity bills are clearly needs but other services blur the line between need and want.

Basic internet and cell phone services are needs because we rely on them to communicate with co-workers, family, friends, doctors, bosses and more. However, we only NEED the basic versions. Anything more than that, such as an unlimited data, text and call phone plan is a want. So, if a basic phone plan costs $35 and the unlimited data, text, and call plan costs $55, the extra $20 you spend to get the nicer plan counts as a want while the basic version’s cost is part of your needs spending.

Minimum payments on credit cards count as a need since skipping out on those will likely damage your credit score. It’s almost always best to pay more than the minimum payment if you can though. Double check your account terms to see if you may suffer pre-payment penalties. If not, count the extra (more than the minimum due) money you put toward paying down or off debt in your savings allocation since it will save you money in interest charges.


Many of us have heard the expression ‘living beyond your means’ but what does it mean? If allocating 20% of your total income to savings is impossible, you might be living beyond your means. If your wants are costing more than 30% of your income, you’ll need to sacrifice some of your wants or replace them with similar but cheaper products/services. With a few changes to your spending on wants, you might have 20% left to commit to saving.

If your wants are totaling under or at 30% of your income but your needs are costing more than 50% of your income, a bigger change may be necessary. First, you can try increasing your income. Are you qualified to work a better-paying job? Would your current supervisor be able and willing to give you a pay raise or more workable hours? Do you have a hobby that could bring in extra cash? If increasing your income isn’t possible, you might need to consider moving to a smaller apartment, finding a roommate, or trading in your car for a cheaper, but still reliable, one.

Every Penny Counts

Saving ANYTHING is better than saving nothing. If the amount of money you are able to save each month seems small, remember it adds up! Plus, once you have a good bit of money saved up, you can start investing in Certificates of Deposit which generally earn interest at a higher rates than traditional savings account.

There are dozens of apps and blogs to help you start saving in a variety of ways from coupon and discount hunting to tracking tools and calculators. Centennial Bank has programs that can also help you save like our Save the Cents and Christmas Club savings programs. We also offer budgeting tools.

Centennial Bank, Member FDIC.

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