Tactics of saving Plan Setting Up
We know the feeling—we’ve all suffered the uncertainty of not having enough saved for a comfortable financial future or the dread of not having enough in our savings for emergencies. This is the situation that many find themselves in and, while people want to save, actually becoming set up on a savings plan can often be overwhelming. The good news? It doesn’t take a financial expert to get started. There are a few simple ways to set up a savings plan that works with your life and grows.
In this post, I breakdown simple strategies to create a savings plan which works for you, with relatable examples and practical advice. Let’s get started.
1. Start with a Goal in Mind
If you’re serious about saving, first you need to determine what you’re saving for. Having a goal gives you something to work towards, and keeping you motivated.
For instance, suppose you want to save money for vacation. By having something that you are working to, like knowing that you have $2,000 that you want to go pick up and figure out what you need for a trip to the beach—so now you have something to aspire to. After you’ve defined your goal, you can figure out how much to put away every month to attain it.
Tip: Break big goals down into bite sized goals. If you’re hoping to stash $5,000 for an emergency fund in one year, that’s roughly $417 per month. But if you need to have $500 saved for an emergency today then that becomes much more digestible.
2. Habit, Not Choice — Make Savings
Consistency is the key with an effective savings plan. Automate it because the best way to save regularly is to simply force it to happen. Saving automatically eliminates the need to think — you just do it, and it’s non negotiable in your financial routine.
Automating the flow of funds into your savings account, for example, would ensure you automatically move money from your checking account into your separate saving account on payday. It all adds up even if it’s just $50 or $100. By doing it this way you won’t have to think about the money or resist spending what’s left.
Take Sarah, for example. First, she automatically saved $100 a month into a high interest savings account. At the beginning, it wasn’t a lot and it wasn’t something she really noticed being consumed, but outside looking in it was taken from her over a year without her realizing it. The best way to do that is to start small and be consistent. If you’re paying yourself first and putting more money into your automated savings, the fund will grow larger as you earn more income.
3. Budget for Your Savings
Savings are crucial because some people tend to overspend or miss the chance of saving. The best way to achieve any financial goal is to think of this savings as an expense. First you pay yourself and then you can start paying for everything else.
A simple budgeting technique is the 50/30/20 rule. Here’s how it works:
- And 50% of your income goes toward necessities (rent, groceries, and utilities).
But 30% of it goes to discretionary spending (entertainment, dining out, and travel).
From there, 20% will be allocated for savings and paying off debt.
If you stick to this formula, you will guarantee your savings come first in your budget. Say you make $3,000 per month, so that’s $600 a month to put away. You could use it on an emergency fund, retirement savings or for a short term goal such as a vacation.
Tip: Begin with a realistic percentage… If 20% seems too high at this time, start with 10% or even 5%. Saving is the most important, no matter how little you save. But over time it will make the habit easier to increase.
4. The First Step Is to Build (…) An Emergency Fund
Before putting your hard earned money away for long term goals like a vacation or a house it’s imperative that you create an emergency fund. This is cash you can use for things you didn’t plan for—like a car repair, medical bill or loss of income.
For a rule of thumb, it’s between 3 to 6 months of living expenses. Say your monthly expenses are $2,000. Then you should designate at least $6,000 to save for before other goals.
Tip: Begin slowly and build your emergency fund.
Alternative:
How To Start Building Your Emergency Fund
Start small and build your emergency fund gradually. You don’t even have to set aside $100 a month to create some kind of safety net. Once that emergency fund is a strong brick in your foundation (don’t consider a singles stack), you can move on to other goals like buying a house or saving for retirement.
5. It’s Easy to Track Your Progress and Adjust as Needed
Ideal is to have a plan, but how come you’re sure you’re getting anywhere? It’s also important to track your savings. You don’t have to make this complicated, you can just review your bank statements or use an app to see how much you’ve been saving each month.
Imagine that James was trying to save up for a new laptop. He would check how much he saved each month and base his spending habits from there. Dining out less could save you another $50 a month, he found. All this helped him eventually achieve his goal much faster than he thought he could.
Tip: If your savings aren’t increasing as smoothly as you would appreciate, it could be a good idea to reassess your budget. Could you bring your expenses down to the bare minimum? Can you bring home extra money by picking up a second job or selling what you don’t need anymore?
6. Some Of the Ways I Make Savings Fun & Reward
Saving doesn’t always have to be a chore. So you can either add milestones and celebrate when you hit them, so long as they don’t snag you away from the real task. For example, if you’ve put $500 into your emergency fund, treat yourself to something special (like a nice dinner or a movie night). It gives you something to look forward to and it keeps the habit of saving.
You don’t need to spend a lot, but you will be kept motivated by celebrating small victories. An alternate option would be to be have a savings challenge with a friend or family member. That can make saving way more interactive and fun if youCompare progress and cheer each other on.
7. Invest your Savings and your Savings will Grow
Once you have a solid emergency fund built up, and have some savings, you can put that money to work by investing. Saving money in a high interest savings account is useful, however, it won’t provide you with the longer term growth potential of investments.
For beginners, consider the low risk related index funds or retirement accounts. Your money will grow with more rapid over time compared to what you would get in a standard savings account.
Tip: Investigate basic investment options and get started on small. Doing so can also help you to receive tax benefits and benefit from long term growth even if you contribute to a retirement plan like a 401(k) or IRA.
Finally: Stay Committed and Flexible
It’s not necessary to make setting up an effective savings plan complicated. With clear goals, automated savings, and realistic budget, you’re on a good path to financial success. Remember when I said it was the small, consistent actions over time that create big results?
Therefore, start today — whether you want to build an emergency fund, save for a vacation, or start investing for the future. If you’re committed and flexible, you’re headed towards meeting your financial goals.