How to Create a Savings Plan You Can Live With
Saving money may not exactly be everyone's idea of a good time, but committing yourself to the task is a critical step towards securing your financial future. It doesn't have to be a chore either, not when you implement a plan for saving that you can live with for the long term.
How long is up to you, of course. That all depends on what your goals are for saving. Are you working towards a down payment on a house? Saving for that dream vacation?
Maybe you're just ready to start squirreling away money for your retirement. Whatever you have in mind, you can get there. All it takes is some serious dedication to reaching that goal.
You may have a tough go of it at first, sacrifice is never easy and you may find yourself doing just that to boost your savings. Instead of enjoying some things in the here and now you may need to set aside those funds for that bigger goal later. It may pinch just a bit, but think about how happy you'll be when you can look at your account balance and feel that unmistakable thrill of accomplishment. We're going to help you get there, here's how:
Set Your Goal
It all starts here. How much do you want to save and by what deadline? Coming up with a specific number and date gives you a clear-cut goal to work towards. When you're vague about how much you need to save it makes it a lot more difficult to devise a plan. This allows you to compromise, put saving off until later and let other things take a higher priority. Simply put, it's not a real plan.
Without a plan you can't accomplish your goals. But when you know exactly how much you need and the date by which you want to have that money in your account you can create and implement a strategy for saving.
The easiest way to get to where you want to be financially is by setting smaller goals for yourself in service of the bigger picture. It's one thing to decide that you need $2400 as a down payment on a new car by December 31st. It's another to break that number down over six or twelve months, putting away $400 by the end of the month for six months certainly sounds a lot less daunting.
Setting these smaller goals for saving can keep you focused on the ultimate goal for your money and allow for a more realistic game plan for getting there.
Take Financial Inventory
Saving means budgeting and you can't budget effectively without knowing what your spending habits look like at the moment.
That's why you need to assess your financial situation, look at how much you have coming in and how much is going out. Audit your credit card bills, bank statements, consider your current debts and obligations, and factor in what you already have in the bank. Calculate it all and then compare the numbers.
There may be some areas where you're spending too much and that money could be put to better use in your savings. This is where you can begin to re-allocate your funds from the frivolous to the frugal, reduce your costs and put that money away instead.
Maybe it means lowering your cable or cell phone bill, cutting out some excessive spending like hitting up the local Starbucks each day or staying in and eating at home instead of going out so much.
Only you know where your budget can lose some bloat and now is the time to identify those areas to make reaching your goals a reality. Budgeting is about ensuring that your essential monthly bills are covered in full, things like rent, loan payments, utilities, and so on. Then you can divert the extra money to your savings and leave it there.
Don't Get Discouraged
Maybe you can't save $400 a month to get to that $2400 goal by the end of the year. That's perfectly fine, you may need to readjust your goals slightly. Figure out how much you can realistically put aside each month and start from there.
Now that you've done some self-auditing of your budget and spending habits, you should be able to get a clearer picture of how much money you can put away each month.
That number may fluctuate as you go along, but putting aside smaller increments may be the only way to get you started and it might seem like your goal is so far off that it's not worth the trouble.
Don't think like that, even a few bucks here and there is a great start. Small amounts quickly grow into larger ones and while it may seem like a longer road to travel than you anticipated, you may find yourself putting more money towards your savings in the coming weeks and months by rethinking some of your priorities, making a few more sacrifices, reducing your spending in ways you hadn't thought of before. Never get discouraged, just keep pushing forth and you'll make it!
Make it Automatic
Saving money is easy when you don't have to think about doing it. That's why you should consider setting up automatic transfers to reach your savings goals. The way to do it is largely dependent on the goals you've set for yourself. You can set up an automatic transfer from one account to another at a set date and time each week or month to save effectively.
If your goals are more about putting aside money for your retirement, there are a few options available to you that can make reaching your goal a cinch.
If your employer offers a retirement plan such as a 401(k), inquire about having a certain amount deducted directly from your paycheck each period. When the money is taken right out of your salary, you quickly learn to work within your means as established by the funds you receive after the deductions are made. This sets a new baseline for your spending and that might require some slight adjustments to your budget. But you can rest assured that your savings will grow on a routine basis, automatically.
Stay on Track
Now that you have a goal to work towards, you'll need to be more proactive about managing your finances. This means staying on top of your spending, monitoring every dollar that goes out and comes in.
It's easy to lose track of your expenses unless you remain diligent about recording each expenditure in a manner that makes it easy to see what you've paid and when. You don't want to get discouraged from saving because you went over budget on certain costs.
There are even mobile apps available that can show you what you've spent from week to week. Watch where you put your money on a regular basis to make sure that it's all going where it should be going with consistency.
Adjust Your Spending
You plan and you budget and you make it all work. But only for the first few months. Then you find yourself spending more than you wanted in places that you hadn't realized were becoming an issue. It happens to the best of us, maybe that credit card is just too easy to reach when you should be leaving it in your wallet.
Perhaps you've had a few unexpected expenditures come up and you were forced to move money around to cover those necessities. In some cases, maybe those necessities weren't actually that necessary and you faltered to a moment of weakness.
To err is human. To keep doing it over and over is just foolish. We're all human but we're not all fools, so maybe you need to take another look at your budget and your finances and find the areas where you keep falling into little traps that are eating away at the money you should be putting aside instead of spending.
Re-focus on your goals. How bad do you want that car? Think about that the next time you're reaching for your wallet to make an impulse buy or paying extra on a bill due to a late payment and a higher interest charge.
Stay Focused in Times of Fortune
Life has a funny way of rewarding you for your hard work. Maybe it's in the form of a raise, you win $100 at trivia night, you got cash for your birthday. We all get a nice surprise from time to time and when it happens the first inclination is to spend that money fast.
But remember, you have a goal in mind, one that you really want to reach sooner than later. Think of this money as a fast forward button to your savings deadline. It may be tough to put that cash away instead of splurging, but just stay focused on what you're trying to accomplish financially and you may realize it's a much smarter thing to save that money before you spend it.
