Every penny counts, and each penny you save adds up. If we want to achieve our savings goal, though, it takes a little more than just deciding to save money each month. Here is a short guide and sample worksheet to get started building your savings and achieving your personal and financial goals.
Assess Your Personal Financial Situation
Your financial goals should align with your needs and values. Your values are the sets of beliefs and ideals in your life that are very important to you, such as family, friends, community, education, health, etc. To make a good financial plan, first evaluate what is important to you and why. If your financial plan does not support what you value, it will directly impact your ability to achieve your goals and can cause mental conflict and stress.
For example, if saving for your child’s college is one of the most important things to you, then it should be one of your top financial goals. If it isn’t included in your plan, or is the last consideration in your plan, you will begin to feel defeated when an expense you prioritized above this goal gets in the way of being able to save for their higher education.
Set Personal and Financial Goals
Take some time to reflect on what your financial goals are and what you need to save for.
- Decide what is important to you, and prioritize your goals, both short term and long term.
- Set goals that fit within your budget and that are attainable.
- Goals should be specific and time-bound to help you stay on track and visualize where you want to be.
Create a Budget Plan
Next, create a budget plan. Use the method that works best for you, and we’ve included this sample worksheet to get you started. Your budget plan should include the following:
- List your planned income and expenses. Add up your projected income for the month. This includes earned income (income generated from employment and retirement funds) and unearned income (money received for no exchange of value, such as a gift).
- “Pay Yourself First.” You should have a regular savings goal as well, and the idea of “Pay Yourself First” is that savings should be a regular part of a budget and should happen before variable expenses. In this area, you will also include other personal goals that you established above.
- List your planned expenses. This includes everything that you spend money on. List what you expect to pay based over the next month: Fixed expenses include rent or mortgage payments, installment loans, and certain bills. Variable expenses tend to fluctuate or do not occur on a regular schedule, such as groceries, gas, cell phone bills, credit cards, and some types of insurance. Expenses also include any money you allot for miscellaneous spending, such as Spring shopping or eating out.
- Subtract your planned expenses from your planned income. There should not be any money left over in a budget. Each dollar has a job, and if you have money left over, put it to work by saving it or increasing another goal.
- Document your actual income and expenses for the month. Next to each planned item, document your actual income and expenses. Subtract out your actual expenses from your actual income and see how each category matched your budget plan.
Compare your actual spending to what you planned. If you consistently spend more or less than your budgeted amount in any category, update your budget to reflect reality. An inaccurate budget can do more harm than good.
Also, be prepared for new financial situations. When your income or an expense changes, you’ll know how it affects your overall financial picture, and what you need to do to cope with the changes. As you reach a financial goal, the money that was budgeted for that goal needs to move to another expense, whether it’s savings, another expense, or a new goal.
Most importantly, recognize that budget should be flexible and change over time as your needs, wants, and values will change. By identifying your goals, and then planning, documenting, revising your budget regularly, you stay in control of achieving your savings goals and financial dreams.