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The Save/Spend Plan

How much of your income should you stash away in savings? You may think: I'll just put money into savings whenever I don't spend it. And how often do you think that will happen? Remember to pay yourself first.

Step 1: Where to begin? Start by pledging to come up with a plan and to stick to it. Next, try out the Money Diary in the Tracking Section. It will help you figure out how much money you have coming in each month and how you are spending your money. Then work out how much you want to spend on everyday items. If you're spending more than the limit, think about where you can cut back.

Step 2: What money do you have coming in? Depending on your age and life at the moment, this may change from month to month. Your allowance may be set, but the income you get from baby-sitting or odd jobs may change a lot. Start with what is average or what you can count on.

Step 3: How much would you like to save? Divide that money into different savings categories: saving for everyday expenses, short-term saving for emergencies, long-term saving for college, and longer-term saving for the future. You may want to set aside money to give to a charity. Several piggy banks or envelopes for your cash may help you keep your money separate. It may make sense to keep a stash of cash for everyday expenses in your bedroom. The rest should be kept in a savings account so you can earn interest.

Do you have a goal in mind, like saving for a car or new touring bike? Check out the Saving Calculator. It will calculate how long it takes to save an amount of money. The calculator can also tell you how much money you need to save each month to reach a goal in a certain time period.

Step 4: Put it in writing. Writing your plan in your money diary gives it more power. Also by keeping a money diary, you'll be able to see how much money you have coming in, how much money you spend, where it all goes, and how much money you save each week or each month. Keep notes to yourself that compare your savings account balance with your savings goals. Keep it in your Money Diary.

You might not like these new boundaries on your spending. In fact, you may think that you don't have enough spending money. Everybody feels that way. We all have a limited amount of money. Now that you're getting older, you are learning that you have to make choices when it comes to money. It is easy to say, “I just need more of it!” You have to manage your money – so you can get the most out of the dollars you have. Ready to learn more? Learn how to live on a budget.

Step 5: Adjust. If your plan isn't working, you can always make changes. But be honest with yourself about why the plan doesn't work before you change it. What's wrong? Maybe your numbers weren't realistic, and you have to be more practical. On the other hand, maybe the numbers are right, but you're having a hard time sticking to them. Maybe you have to change your habits to make it work.

By taking a hard look at what you do with your money, you can begin to set some limits and shift money around between spending and saving – that's called managing your money.