Decide how much to pay yourself

Now that you know how much you have left over, you can decide how much to pay yourself. Experts recommend differing amounts. In the famous personal finance book The Wealthy Barber, the author David Chilton recommends paying yourself 10% of your net or take-home income. Other experts recommend anywhere between 1% and 5%.

Set a savings goal

For example, you may want to save for a $50,000 home down payment. If you have $600 left over every month and choose to save $300 of that, it would take you a very long 13 years to save $50,000.

• In that case, you could boost your savings amount to $600 to drop the time in half (since you have $600 left over).
• Keep in mind that if you invest your money in a high interest savings account, or in other types of investments, the return you get would further shorten your time.
• To figure out how fast your saving amount will grow at a certain rate of return (say 2% per year), go online and search "Compound Interest Calculator."

Create an account that is separate from all your other accounts

This account should be only for a specified goal, usually saving or investing. If possible, choose an account with a higher interest rate — usually these types of accounts limit how often you can withdraw money, which is a good thing because you're not going to be pulling money out of it anyway.

• If you have high-interest debt, like credit card or hire purchase, your main goal should be to pay that debt off first and as soon as possible. This could involve - re-structuring your debt into lower-interest loans.
• Saving two to three months income for an emergency fund can help you and your family if anything unexpected happens. It’s a good idea to have this fund in a savings account separate from your normal everyday bank account.
• If you have a mortgage and can afford to increase your repayments, your goal may be to save on interest by paying off your loan faster.
• The earlier you start saving for your retirement the better. Even a small amount saved every week or month can add up to a lot over time.

Actions to achieve your goals

Actions are the steps you take to reach your goals. Here are some examples:

• Consider opening a high interest savings account. Many institutions offer these, and they typically pay rates that are well above a checking account.
• You can also consider opening a Roth IRA for your savings. Roth IRA's allow your wealth to grow tax-free over time. Within a Roth IRA, you can purchase stocks, mutual funds, bonds, or exchange traded funds, and these products all offer the opportunity to earn a higher return than a high interest savings account.
• Other options include traditional IRAs or a 401(k).

Put that money into the account as soon as it is available

If you have direct deposit, have a portion of each paycheck automatically deposited into the separate account. You can also set up an automatic monthly or weekly transfer from your main, active account to your separate account, if you can keep track of your balance enough to avoid overdraft fees. The point is to do this before you spend money on anything else, including bills and rent.

Leave the money alone

Don't touch it. Don't pull money out of it. You should have a separate emergency fund for just that — emergencies. Typically that fund should be enough to cover you for three to six months. Do not confuse an emergency fund with a saving or investing fund.