We all know the importance of saving money, but how often to we actually do something about it? Every day that you aren’t saving pushes you further and further from your long-term financial goals.
Here is a step by step process for setting up an effective savings plan to get you headed in the right direction.
Step 1 – Decide How Much You Can Actually Save
The first step in setting up an ultra effective savings plan is to decide how much money you are actually able to save at the moment. This can actually be done fairly simply.
First identify what revenue you bring in every month. This might be from your paycheck or other streams of income. Add up all this income to identify your net revenue per month.
Now, identify what costs you have per month. This might be rent, bills, food gas, etc.
Subtract your revenue per month from your monthly costs to get your extra income. Of course, you do want to have a little fun with the leftover money and spend it on luxury stuff like eating out and going to the movies. However, it is important to set a dedicated percentage of the income that you are going to save. This might be 30% or it might be 60% depending on what your target retirement and financial goals are.
Here is an example:
Let’s say you make $2,500 per month in income. Your expenses ring up a total of $1,500 per month leaving you with an extra $1,000 of additional income.
If you are setting a 60% savings rate you should be putting aside $600 of this income in your savings account per month. The other $400 can be spent on fun and luxury activities.
Step 2 – Pick A Savings Account That Actually Pays Interest
It is important to put your savings into an account that is actually going to generate interest. It is also important to pick something that is low risk. After all, you don’t want to risk your financial future.
A great way to go is through a low risk CD. If you pick something like a 5 year CD you can command close to 2% interest. While this is not a whole lot, it is very low risk and is at least generating some interest on your money.
The other benefit of placing your money in a CD is that it is harder withdraw the cash. This means you won’t be tempted to take money out the next time you see something new that you would like to purchase.
Step 3 – Stick To The Plan!
This is MUCH easier said than done. However, if you don’t stick with a plan that you set up, you will never truly be saving. Here are a few ways to increase your chances of success.
One – Visualize what your life would be like if you stuck to the savings plan. Would you feel more secure? Would you be able to buy that house you have always dreamed of? Whatever your motivation for saving is, be sure to actually visualize what that success would be like. See yourself in that new house or see yourself stress free.
Two – Write down your savings plan and repeat it every day – Be sure to record your savings plan and refer to it daily (at least for the first 30 days). This will ingrain into your mind your goals and ambitions. Repetition is a great way to create good habits.
Three – Tell other people about your savings plan. Let your significant other or family members know about your plan to save. Tell them your saving goals and encourage them to hold you to it. Accountability will always make you perform better.
Step 4 – Create Extra Streams Of Income
One of the best ways to increase your savings is actually quite obvious – increase your income. There are numerous ways to make extra cash on the side of your job or profession. The more income streams you create, the quicker you can increase your savings.
The biggest hurdle to setting up a great savings plan is actually getting started. Once you create a plan and commit to it you will find that saving money is actually quite easy.
Go out and set up your saving plan today!
This was a guest contribution from Jason from Survey Examiner, a site devoted to providing useful reviews and info on paid survey panels online. Check it out now to learn how you can get paid for surveys, whether you are a stay at home mom or looking for an online job for your 14 year old.