5 Steps To Developing A Practical Savings Plan

Here are 5 practical steps for developing a practical savings plan:

Step 1: Set Up your Financial Goals

The best way to work out how much you want to save is to set specific financial goals. If there is a specific thing that you are saving up for, start by calculating how much you will need to save in order to pay for it. Then, figure out how much money you will have to set aside each month in order to reach that goal in a reasonable amount of time.

For example if you want to buy a house, determine how much of a down payment you’ll need. If it’s retirement, you’ll need to figure out how much money you’ll need to live comfortably for 20 or 30 years after you stop working.

One important thing: if you are in debt, consider clearing up your debts first. Eliminating debt is the fastest way to free up money. Once the money is freed from debt payment, it can easily be directed to implementing your savings plan.

Step 2: Set Up a Budget

Once you have set up your financial goals, next you need to make a budget. Treat the amount you have come up for savings as an expense if at all you are serious about saving.

Step 3: Open a Savings Account

If you don't have a savings account, it's time you set up one! If you already have one, Good! Savings accounts provide a safe, secure and convenient place for you to keep the money you're saving and can also, in certain instances, even help build your savings.

Things to Consider When Choosing a Savings Account

  • Minimum Operating Balance: Some savings accounts require you to keep a minimum balance in your account at all times. If the amount in the accounts falls below the minimum operating balance required, you will be penalized. Therefore make sure you can afford to operate that account with that balance on a continuous basis.
  • Monthly Operating Fees: Know how much you will be charged for operating that account. The fees include withdrawals, transfers, standing orders, fees you will be charged when the account is below and above the minimum operating balance. Some banks offer free banking if the account is above a certain amount. You will also want to find out if they charge any extra fees for or other transactions.
  • Interest Rates: How much interest does the savings account earn? Make sure to research different banks to find the best interest rates.

Step 4: Pay Yourself First

Let me guess...Your strategy was to try to save whatever remained at the end of the month. But I know for sure you never did it. Infact you know why...NOTHING REMAINED AT THE END OF THE MONTH!

Now this is how you should do it. Savings should be your priority, so don’t just say that you’ll save whatever is left over at the end of the month. Deposit your savings into a savings account as soon as you get paid.

An easy and effective way to start saving is to simply deposit the amount into a savings account. You can set up an automatic transfer from your checking or current account to your savings account. Or if you are employed, tell your employer to deduct the savings from your paycheck and the money be directly deposited in your savings account so you never even see it on your paycheck. Infact you can do this when saving for retirement. Let the money be taken directly out of your pay to your retirement accounts.

Step 5: Control Your Expenses

The easiest and quickest way to start and continue saving money is to control your spending. Watch out for impulse buying and stick to your budget.

Follow these five steps and you will be on your way to establishing a savings plan to achieve your goals and dreams.

If you need assistance on a subject shared on this site, Join Money Smarts (if you are not yet a member) and when you receive my first introductory email, you can then get intouch with me.

Has this page helped you? Then please "pay it forward" by linking, liking, and tweeting. It is a nice way to help your friends and this site at the same time...

Protected by Copyscape Plagiarism Checker