Successful savers start by creating a savings plan. Written plans help you visualize the path to your goal, and you are much more likely to stay on course. Here are the key ingredients to creating a successful savings plan:
- Know why you want to save. The goal needs to be important to you. Whether you are saving to build an emergency fund, feel more financially secure, travel the world, or go back to school, knowing why is a critical component of your goal.
- Know where you stand. Assess your financial situation by adding up your expenses and subtracting them from your monthly income. This will give you an idea what income you have left over to support your savings goal.
- Create Your Plan. Once you’ve determined how much you need or want to save, decide how much you will put towards that goal each month and how long it will take to reach the goal. Next, write down the goal as a pledge to yourself. The pledge should be both specific and measurable. For example:
“I pledge to save (amount) by (date) in order to (reason for saving). I will reach this goal by savings (amount) each month.”
- Track Your Plan. Each month, track your progress. If you are on target or ahead, reward yourself. If you fall behind in your goal, don’t beat yourself up over it. Instead, adjust your plan so that you can reasonably make up the ground over the next month or so. The most successful tracking plans are usually the ones that are the simplest. We’ve created this sample plan tracker to help jumpstart your savings.
Day 2: Make Saving Automatic
Saving money requires discipline and this can sometimes be a challenge. There is an easier way to save and not miss the money by making your savings automatic. Decide how much you can afford to automatically save each month and set up an automatic electronic transfer from your checking account to your designated savings account.
Day 3: Create an Emergency or Rainy Day Account
Consider having a separate savings account for emergency savings. If you already have an emergency savings built up, open an account to place money for rainy day purposes. Rainy day accounts are good for non-emergency purchases you may have in the future that won’t require you to tap into your regular income or affect your monthly budget.
Having an emergency fund is an important part of being financially fit. Not only that, it can help improve your physical and mental health fs well by reducing stress and allowing you to focus more energy away from financial worry. Emergency Funds should:
- Be separate from regular savings
- Be easy to access in emergency situations
- Have at least 3-6 months of your monthly income (you can build this as part of your savings plan from Day 1)
Day 4: Save the Extra
Sometimes we find ourselves with a little extra or unexpected money. It’s easier to save money we hadn’t planned on having than to
Day 5: Save for Retirement
If you already have a retirement account set up, now is a great time to consider increasing the amount you save, even if it is only a small increase. Consider increasing by a percentage, such as 1-2%
Saving for retirement is important to ensure that you have enough money to live comfortably when you retire or when you reduce the amount of hours you are accustomed to working before retirement. Many employers offer a 401(k) option, and advisors can help you navigate the ins and outs of setting one up. Most financial institutions offer Individual Retirement Accounts (IRA’s).