Every big plan you and your partner have for the near and distant future requires money. Whether it’s a new house, vacation, marriage, or even a child, you both have to save enough money for it, which is quite challenging. However, there are well-thought-out steps you can follow to help you stretch enough dollars to meet your financial goals. If you make a good savings plan and actually follow it, your financial life will be a success.
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What is a Savings Plan?
A savings plan is an investment you make by regularly putting money over a specific time in order to meet your financial goal. It can be a short or long term plan. Such a strategic, measurable, and consistent plan and process depend on your income and the amount of money you need to raise for the life goal you’ve targeted.
Does it feel overpowering thinking about the huge amount of money you’ve to save to reach there? Well, a savings plan shouldn’t be difficult. It requires commitment. Here are simple steps you need to follow today to make a solid one.
How to Make a Savings Plan in 10 Simple Steps
As a couple, you may find that it’s much easier to talk about other things than about your finances and savings. Single people usually avoid thinking about savings, as well. The process of saving is easy if you follow the steps below carefully:
1. List All Your Income and Expenses
First, begin by understanding your current financial situation. Get a paper and make a list of your income and expenses per month. You can use this format:
Then calculate how much you’ve been spending individually and as a couple before the next payday. With that, you can figure out the amount you can begin saving before eventually increasing gradually.
2. Examine Your Spending
To examine your spending, go through a few months of your bank statements. Then, you can make a list of other additional expenses you make each month.
Holding back on your spending doesn’t mean giving up your favorite avocado snack. But you can limit some snack orders you make from 4 days a week to 2. As part of our monthly expenses, Let’s just add your avocado snack ($6 each per week).
3. Plan Inexpensive Outings/Dates
In a romantic relationship, dates are nearly inevitable. However, you’ve to understand that choosing classy restaurants, sports games and concerts are heavy on your bank account.
The ideal way to save money is to device inexpensive date ideas. They include having a movie night in, a free event featuring a local band, and fun stuff like that which allow you to maximize your savings plan.
In our example, it looks like we’re paying about $300 on average in our date nights. Imagine if we can reduce it by half. That’s already $150 in savings!
4. Determine Your Potential Savings
In order to determine your potential savings, you can use this simple formula:
Potential Savings = Income – Expenses
Let’s get back to our example, shall we?
After deducting all your total expenses to your total income, you’re left with $1,126. This could be your potential savings per month!
5. Make A Debt Plan
Your savings plan is also a great way to get out of debt. If you and your partner are currently in debt, you can both come up with a debt-relief plan. You simply have to sit down and assess your debts as a couple and determine the best and quick repayment plan that works for you.
Let’s say you have a student loan of $10,000 and you could potentially pay $1,126 per month from your savings. You can use a portion of it to pay your balance slowly.
In our example, let’s use $300 as our monthly payment. Doing the math, you should be able to pay it within 3 years. If you want to shorten the length of your payment, you can always increase your monthly contribution.
P.S.
Now that you know how much you’re going to spend, you can add it to your list so you’ll know your exact savings!
6. Set Up a “SMART” Savings Goal
With a little effort and discipline, your savings account should grow over time. BUT, there’s more to it! If you really want to be financially independent, you have to set up a goal.
And your financial goal should be S.M.A.R.T
“By 12/01/25, I will have $10,000 in my checking account. I will get this by saving $200 from my paycheck every month for the next 5 years.”
The key to defining a SMART Goal is asking these questions: “Is my goal specific?”, “Is it measurable?”, “Is it attainable?” and so forth.
If your answer to everything is YES then you’re on the right track!
Start doing this by setting a specific dollar amount and date. In order to see if it’s doable, you can then divide that dollar amount by your monthly contribution to know if it’s achievable.
For Example $10,000/$400 per month = 25 months (it will take you 25 months or 2 years and 1 month to get your goal).
7. Level Up
There are always ways to save more once your savings plan is functional. For example, when you’re working and receive a pay raise, don’t hesitate to send the additional amount on your salary to your savings account.
Also, try making side hustles. What about putting some of your unused items for sale, or looking for jobs that pay higher? Great idea!
8. Automate Savings
Automatic savings makes your savings plan fun. You just have to go to your account online and automate transfers of a specific amount as savings every payday. This specific amount of money will always move from your checking to savings. And each month, your savings balance will grow towards your financial goal accordingly.
What’s the benefit? It’s SET AND FORGET – It’s a less hassle way to transfer money.
9. Save in the Right Place
As a couple, you may as well agree to open a joint savings account. Such an account gives you where to keep your money. You may as well have a chance to earn interest on the savings you make, which helps it grow even quicker.
Nerd Wallet has a great savings goal calculator to find out the amount you should set aside as your monthly savings to reach your financial goals.
If both of you have a plan to save the same amount every month, setting up a standing order from either your joint or individual bank account is the ideal thing to do.
10. Create an Emergency Fund
The final step on how to make a savings plan is creating an emergency fund. Save at least $1,000 then, keep building it to reach the recommended standard of 3 to 6 months’ expenses. The idea is to get you and your partner covered in case an unexpected event happens like losing your job.
Such savings should be separate from other savings. Designate it for emergency needs only. And make sure to restart it once you get back on your feet.
You can put a portion of your monthly income to your emergency fund until you can save at least $1,000 or 3 months worth of expense. In our case, let’s put $200 every month in our safety funds.
What is a Personal Savings Plan?
When you save for yourself, the process is known as a personal savings plan. Simply put, it’s saving a part of your income for future use. It can be a plan to finance a specific goal or reserve money for emergencies.
Financial experts advise everyone to create a personal savings plan. And you can do it by paying yourself first. It’s a simple piece of advice to follow and create for yourself financial well-being.
What is an Automatic Savings Plan?
An automatic savings plan refers to a personal savings system that involves you transferring a fixed amount of money into your account by automation. It’s set up to make automatic transfers at specified intervals from your bank account into your savings or investment account.
Benefits of an Automatic Savings Plan
Provides Peace-of-Mind:
Making your savings transfer automatic means you don’t have to bother about the usual forgetfulness. It can be very demanding to remember when to save into your account regularly. An automatic savings system features a financial savings tool which you “set and forget.”
Restriction of the urge to spend:
When you program automatic deposits into your account, you’re less tempted when it comes to spending it.
Potential for Better Rates:
Based on its terms, an automatic account can generate higher interests once you reach a specific financial threshold.
What is a Financial Service Planner?
A financial planner is like a financial advisor who assists you in putting together a personalized plan for your future, especially on how you manage your funds and achieve your financial goals.
In addition, when you hire a financial planner, you put an expert beside you. He will provide you with excellent advice on the best ways to assess and handle your current financial situation.
Conclusion
A savings plan is a road map to your financial well-being. Doing everything possible to implement the plan is all you need to build a bank balance large enough to cater to your short and long-term needs.
It can sometimes feel like an impossible challenge saving money. However, whether you’re a couple or single, making simple changes to how you spend and save, can grow your savings at a satisfactorily faster rate.
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