How to Make a Savings Plan

Where Should I Start?

Get an idea of your current financial picture. The first step to start saving money is to figure out how much you spend. Keep track of all your expenses—that means every coffee, household item and cash tip.

Once you have your data, organize the numbers by categories, such as gas, groceries and mortgage, and total each amount. Use your credit card and bank statements to make sure you’re accurate—and don’t forget any.

Once you have an idea of what you spend in a month, you can begin to organize your recorded expenses into a workable budget.

Your budget should outline how your expenses measure up to your income—so you can plan your spending and limit overspending.

Be sure to factor in expenses that occur regularly but not every month, such as car maintenance.

That will help you figure out how much you can save. For example, if you generally spend your paycheck before the next payday, it probably doesn’t make sense to plan you’ll start saving $1,000 monthly.

Instead, look for ways to deposit a smaller amount, say $50 a month, in your savings account. When you follow the plan, you give yourself a series of small wins to build on.

Organizing Your Finances

How much money do you earn each month after taxes are taken out? How much do you spend on groceries every week?

If you don’t know the answers to these questions, then organizing your finances could help you get a handle on things.

When people don’t know how much they spend and when, it can be difficult to stick to a savings plan.

If you don’t know how much money hits the bank account each month and how much you spend, how do you know what’s a realistic amount to save?

Before creating savings strategies, many people find it helpful to track their spending and expenses, organized by week, month, or year.

Simple Ways to Start Saving Money

For retirement savings, most experts agree that about 15% of your gross annual income is about right.

If you waited until 45 to start, you may want to up that. Starting at 23? That’s awesome! You can get away with less if you need to.

Not sure where to start at all? Start with your employer and see if they offer a 401(K) retirement plan. Many do and often they will match a certain number of dollars that you put in. So make sure you put in at least what they will match.

If they don’t offer a retirement plan, then you’ll want to open a Roth IRA. You can do that quickly and easily online at places like Fidelity or E-Trade.

A Roth IRA is simply an investment account where you put money in (most often investing in mutual funds which are simply groups of company stocks). You put money in each month and the investment grows over time.

Automate Savings

Almost all banks offer automated transfers between your checking and savings accounts. You can choose when, how much and where to transfer money or even split your direct deposit so a portion of every paycheck goes directly into your savings account.

Your bank’s mobile app and website are your friends when it comes to savings, since you can use them to automate transactions. About 54% of bank customers who are online say their institutions’ mobile apps make it easier to deal with banks.

You can set up automatic transfers so that on each payday, for example, a specific amount of money is moved from your checking to savings. Over time, you’ll be able to watch your savings balance grow with little extra effort.

Keep Your Goal in Mind

After you’ve put away a chunk of change, you may be tempted to dip into it from time to time for an unplanned splurge. But if the splurge keeps you from your goal, it’s better to resist that temptation.

One way to avoid a lapse is to keep the goal top of mind. Are you saving for a vacation? Put a picture of the locale near your computer or in your wallet to help you stay on track. Building an emergency fund? Put weekly messages in your calendar to remind you that the fund is there for unexpected major expenses.

You could also share your goals with close friends and family, so they can celebrate with you. You don’t have to share specifics. Saying something as simple as, “I made a plan to put away money this month, and I did it!” can help you stay accountable and give a boost.

Tips To Develop a Savings Plan

Use these strategies to help you get started saving:

• Pay yourself first. List savings as a fixed item in your spending plan. You are less likely to spend money you already have earmarked for savings.
• Use automatic savings methods. Set up an automatic transfer from your checking account to a savings account each month.
• Save all or part of a certain type of income. Designate your tax refund, annual bonus, tip money or proceeds from garage sales to savings.
• Establish savings buckets and watch these goals get closer as savings grow:
  • Things you want
  • Holiday shopping
  • Vacation
  • Retirement
• Create an emergency fund. 
  • Start with a goal of $500 (then build it up to the recommended guideline of three to six months’ expenses).
  • Keep it separate from other savings.
  • Use it only for emergencies, and replenish it after you get back on your feet.

Conclusion

Those with a savings plan are twice as likely to save successfully.  There are lots of little things you can do to fund your savings. As long as you have a plan and manage your finances, you will be on your way to saving lots.

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