How to Create a Savings Plan
We are living in times where money isn’t worth it as it used to be. Life expenses are bigger than ever and that definitely brings big challenges when it comes to savings. It’s not enough to just determine the sum you want to put aside anymore. Savings in today’s world require pretty complex logistics.
After reading the first paragraph, you probably wonder if you’ll be able to make a saving plan, considering all the modern-day challenges. Things may be more complicated than before, but they still aren’t that hard. All you need is to organize yourself well. In other words, you need to create a savings plan.
Creating a savings plan isn’t that complicated at all. Still, you have to do a few things. Of course, the first move would be to figure out where your money is going. The second step would be to create a plan based on this spending. The third and last step would be to automate things.
Step 1: Figure Out Your Spendings
As we’ve just mentioned, the first step would be to figure out where your money is going. To do this, you will need some effort but don’t be afraid, it’s not that hard.
A good start would be to get a list of transactions from your bank for the last month, or the last couple of months if you want to get a clearer picture. What you need to do is to break down your spending into different categories. For example, one of the first categories would be one that includes all kinds of bills, such as a mortgage, power, medical insurance etc. The next category could be groceries, while the third one could be gas.
The rest of the categories depends on your lifestyle. Some of them could be named as entertainment, sports activities, pet supplies etc.
After determining all categories, the next step would be to rank them by priority. Obviously, you can’t save money on bills or mortgage, but entertainment will probably be at the bottom of this rank. In that category, you can probably find a couple of little things that don’t seem that necessary. For example, you can cut the number of dining outs per week and start preparing your lunch at home. We’ll get on this in a moment.
Step 2: Make Adjustments
Once you’ve figured out where your money is going, you probably have some feelings now. You may feel bad because of the fact that you are spending too much money on things you don’t necessarily have. So, it’s time for adjustments. It’s time to cut expenses in certain categories.
What’s important to know is that radical changes usually aren’t that good. So, don’t make your cuts too extreme. For example, if you’re dining out every day, don’t give up on this entirely. Find a good measure, that will keep your life quality on a high level. In other words, you could cut to three times a week, instead of kicking out this activity completely.
Of course, there are many other things where you can cut expenses. You can use your car less and save on gas, or you can learn some tricks to save on groceries.
There are so many ways you can cut your expenses. For example, one of the first things you can do is to cancel subscriptions you don’t use. Another thing that comes to mind is to look for low-cost events, which are usually organized by local communities. That’s a great way to save money without sacrificing your time for fun.
Cooling off is another great method to cut your expenses. All of us are tempted by numerous unnecessary purchases. It happens almost every day and a good way to save money is to wait a few days and let your brain decide what’s best. In most cases, you will give up on such a purchase and you will be glad that you passed it. Also, you may decide to save for that purchase, instead of encumbering your regular budget.
Step 3: Automation
Once you’ve determined how much money you can save every month, it’s time to start putting it on the side. The best way to keep this money safe from spending it is to keep it far from your hands. The best thing you can do is to automate things, to set up an auto deposit or automatic transfer to your savings. In other words, that money will go to your saving funds on paydays and won’t be included in your check. The rest of the money will go to your account, so you can use it for bills, groceries, gas and other things you’ve determined.
A Few More Things
Now when we went through these technical things, it’s time to say a few more things about savings. First of all, this is a really long process and one of the most common mistakes you can make is to lose patience. This leads you to nowhere, so it’s vastly important to use some tricks that can improve your consistency.
One of the things that come to mind first is a bucket list. Obviously, you want to save money to afford certain things. That could be a house, a vacation, a new car or something else. So, a good way to keep enthusiasm is to make a list of savings buckets and keep always in your sight, so you can watch as you are getting closer to your goals. That will definitely help you stick with the plan.
Besides watching your savings grow, you can also review your savings plan once in a while. In that way, you can see if some parts of the plan can be improved and become more efficient. In that way, you will make your funds grow even faster.
General do’s and don’ts
Saving money is one thing but then you have another responsibility: not using the saved money. Its tempting to choose an online casino at Foxbonus, or to book a trip from Skyscanner when you got the funds. If you have a weakness for spending, just put your funds in a savings account and perhaps you will even get some interest instead. Make sure to choose a bank with an official license and that your saving funds are insured.
What About Emergency Funds?
This is another very important thing about your budget. It’s always great when you have some money on the side, which can help you during hard times. However, it’s important to separate this fund from savings. This fund should be big enough to last a couple of months. After you get back on your feet, it’s vastly important to replenish it.
