creating a savings plan and reaching your savings goals

As with reaching any goal, saving money takes a little planning and a little work in order to achieve savings success.

Despite this, saving money doesn’t have to be hard. In fact, by taking a few moments to create a savings plan, you can set your savings on autopilot and get on with all the good things in life.

In order to create a savings plan, you need to spend a few moments deciding what your savings goals are and how much you will put away each pay day in order to reach your savings goals.

1. Decide why you’re saving and what you’re saving for

It helps to have a fixed and specific goal to work towards. A fixed goal will keep you motivated by giving you a good reason to keep saving when you don’t feel like it. Having a specific goal will also give you a destination and sense of satisfaction at having ‘arrived’ / saved a set amount.

An example of a specific savings goals might be to save $5,000 towards a car in 12 months.

2. Decide how much you can save

The arbitrary rule of thumb that many personal finance gurus will tell you is to save 10% of your gross income.

Don’t get fixed on this number, depending on your personal circumstances, 10% may be way too high, or way too low. Having a budget makes it easier to decide how much you can easily put away every pay day. Pick a number that’s right for you and that you can commit to on a regular basis.

3. Decide how much you want to save

You may find that by careful budgeting you can save 40% of your income but you don’t want to. Or alternatively, you may find you can only save $40 a fortnight, but realise that this isn’t enough to meet your goals in the timeframe you want, so you aim to tighten the budget in order to meet those goals.

To decide how much you need to be saving to reach a certain goal, use an online savings calculator. Below is a table from the understanding money website that shows exactly how much you would have to save per month to reach a savings goal in a given amount of time at a given interest rate. So if you want to save $10,000 in 2 years at 3.2% interest, you would have to be saving $404 per month.

Don’t let the fact that you aren’t saving as much as you would want stop you from saving at all. Don’t wait until you’ve got more money to start saving otherwise you may never start. Every little bit counts.

3. Commit, automate and pay yourself first

Once you’ve decided on a savings amount, automate your savings plan by setting up an automatic transfer to your savings account every pay day. That way, you don’t see the cash and you don’t miss what you don’t see.

4. Pay yourself last

At the end of the pay cycle, transfer any leftover funds into your savings account.

5. Every little bit counts

Boost your savings with any extra money that comes your way or any extra savings you make on your everyday expenses. It’s amazing how small amounts can add up.

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Have you read these posts?

1. how to save towards multiple savings goals
2. how to give your savings plan a quick boost
3. tutorial: tracking your savings goals using excel
4. taking your small savings and making them bigger
5. snowballing your savings