by Jimmy Nightingale

Created on: January 12, 2010

In 1789, Ben Franklin famously wrote that "there is nothing certain in life but death and taxes".

Thanks to our modern day obsession with having the newest and best of everything, combined with the impacts of the global financial crisis and relaxed lending standards, you can throw in a third element to Ben Franklin's immortal words - debt.  Many of us are drowning in debt and the concept of a savings plan seems to be an abstract and unattainable concept, but it is the best time to start. 

1.  Budget
Yes, the dreaded B word, a necessary but essential evil if you are serious about sticking to a savings plan.  A budget is a plan of what you earn, less what you spend and this will help identify your potential savings.  There are hundreds of free budget software programmes available for this, however it doesn't have to be anything fancy - a ruled sheet of paper will do the trick.  Rule a line down the middle of the page - income is on your left and expenses on the right (rule another couple of vertical lines down each side to split the page into four columns if you want to keep track of what you actually earn and spend.  An exercise book or legal pad is excellent if you want to keep a record and you should keep a page for each pay period.  Total the two and the difference is the surplus available for savings.  If you have a deficit, where expenses exceed your income, you have a problem.  This is not sustainable and means that you are financing your living expenses on debt (and most likely a high interest credit card). 

Review your expenses to differentiate between essential and discretionary expenses.  If you want to save, some of these discretionary expenses have to go.  The greater the surplus the better and you should try not to think of it as having to go without, but rather paying yourself and creating wealth.

2.  Be a Master of your own Destiny
With your budget sorted, it should be a simple case of sticking to it.  This is your plan to wealth and it is now a question of what to do with these surplus funds.  If you have any debt, the straight-forward answer is to pay any extra off this debts (or these debts).  You would normally start with your highest interest debt and, when this is repaid, move on to the next highest (and so on). 

Banks make their mega-profits through a combination of fees and charges and the differential between what they charge on loans and pay

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