How to Start a Successful Savings Plan
Need to save for something big? Or, maybe you’re looking to start on the path towards financial independence. Whatever your goal, you’ll still need to manage your day-to-day expenses and occasional unplanned costs, like car or home repairs and other urgent bills.
That’s one of the main reasons why starting a new savings plan can be such a daunting task. After all, how can you save for the future if you’re behind on bills or don’t have a clear picture of your finances?
While it may not be easy, achieving your savings goals can be incredibly rewarding. Making your dreams come true is well worth the effort. Follow these tips to make your new savings plan a success!
Phase One: Prep for Success
Your new savings strategy will require you to plan ahead and make some real changes, but success is well worth the journey! Here’s how to start your new savings plan on a good note.
Set a Goal
Understanding what you’re saving for will help you to stay focused and on track throughout your savings effort. While each person will have different objectives, it’s important to identify goals that are important to you so you can have those goals at the forefront of your mind. Allow your motivation to help guide your daily decisions.
See Where You Stand
Knowing where you are is crucial to knowing where you’re going. Take a big-picture look at all of your bank and credit card statements, debts and savings funds. If you notice something you’re spending too much money on, now is the time to cut it. Then, figure out how much you were previously spending on that unnecessary excessive expense and automate it so that amount is transferred into your savings account each month. That way, the money goes into savings before you have a chance to spend it.
Create a Budget
If you don’t yet have a budget, take the time to carefully plan out your monthly expenses. The best way to do this is to take care of the essentials first — think rent or mortgage payments, utilities, food and other necessary items — before other entertainment or frivolous purchases. Start by creating spending categories based on previous months’ expenses, then tweak your limit a bit if you had any expenses in your statements that didn’t align with your goals.
Keep your budget top-of-mind, and make adjustment as you go along from month to month. You may find that you can go even further with your savings goals as you find new ways to save and stretch your money further!
Phase Two: Implement Your New Budget
Now that you know your goal, budget and current financial status, it’s time to dive in and make the change! Follow these steps for phase two of your new savings plan.
Stay on Track
Now that you’ve created a budget, consider it part of your new savings plan moving forward. Your budget should help you work toward that larger goal you created initially. From that goal, work backwards. Let’s say you wanted to save $12,000. If you make $2,500 per month in net income (roughly $50,000 a year), and save 10% each month, you’ll be able to save $250 a month and hit your goal in four years. Or, if you wanted to save half that amount and invest the other $125 into a brokerage account, you can go that route. Regardless of how you decide to save or invest your money, the important thing is that you create a reasonable, achievable plan and stick to it.
Learn from Your Mistakes
Slipping up from time to time when you first start saving money is to be expected. Just resolve to get back to good practices as quickly as possible. You’re trying to create better habits, so it makes sense that it can take time. If you happen to make a few financial mistakes, just take it in stride and commit to doing better in the future.
Get Some Support
Whenever you’re attempting to make a change in your habits, it’s easier stick to your new routine with the support of family and friends. By surrounding yourself with people who encourage your savings plan, you’ll be much more likely to achieve your goals.
Phase Three: Optimization
It’s easier to stay motivated when you’re able to reward yourself and watch your progress along the way! Here are some ways to stay focused and grow your savings as you continue your savings plan.
Make Your Savings Work Harder
Once you start to build up your savings, consider looking for ways to earn more on your money. While some assets are more volatile or risky, others can provide a more risk-averse approach to investing. For short-term investments, a high-yield savings account or certificate of deposit are reliable options that can help you earn a return on your saved cash. If you’re saving for retirement, a retirement account like an IRA (individual retirement account) can be a safe bet.
Reward Yourself Appropriately
Having a little bit of fun built into your savings plan can definitely help you enjoy the journey. Just be sure to budget for it, and find the type of fun that doesn’t break the bank!
Small rewards can also help motivate you to stay on track. If you hit a savings goal, go ahead and reward yourself with something you’ve budgeted for. As long you don’t outspend what you’ve allotted for, you can have fun and stay on track toward achieving your goals.
The information in this article is provided for educational and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial, legal or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.