Saving money comes more naturally to some than others.
Whilst there are those people who can seemingly stash away a shed-load of cash without any effort at all, in fact it always takes a certain level of planning, commitment and determination to make a savings plan work.
Even for those who struggle to save money, there is plenty of potential – all you need is a firm foundation and the will to succeed.
The most important ingredient in the recipe to successful savings is a well thought-out savings plan… luckily; this can be reduced to a simple formula.
Follow these steps below, and you too can put your money woes behind you and look forward to a more affluent and comfortable tomorrow.
Your Savings Plan Needs Clear, Achievable Goals
To get what you want, firstly you must know what that is.
What exactly are you saving for?
Is it a holiday, a new car, or your children’s education?
Set yourself a clear goal on what it is that you want to achieve, right down to the exact monetary value. Once you have it clear in your mind what it is you want, you are better equipped to achieve it.
Having set the goals, you should next set a timescale to achieve them. When do you want to have x amount of money by?
Be careful here and be realistic with your expectations; if you set unattainable goals, when you inevitably fail it will only dishearten you and weaken your enthusiasm and your resolve to save. That being said, the goals should also represent a challenge so that you can enjoy a sense of achievement when you accomplish them.
Analyse your Incomings and Outgoings
Sit down with a pen and paper and make a detailed list of all of your monthly sources of income: wages, investments, tax rebates, income support; everything. Total up all of these and you will have a final figure for all of the money you can expect to make each month.
List of all your expected expenses for the coming month, and include rent, travel, food, entertainment, and luxuries. Be thorough. If you can look back at over the last month to give yourself an accurate picture of how much you are spending, that’s ideal. It is vital that you are as honest and as accurate with your estimates as you can be.
Hopefully, when compared to your total income, the total expenses will be smaller. The difference between the two is the starting point for saving – the very minimum amount you want to put away each month. If your expenses are greater than your income, fear not; you will just have to be even more ruthless in the next step.
Trim off the Fat to Make your Budget
Rank the items on your list of expenses in terms of importance. Obviously, essentials like rent and food will be near the top of the list, while luxury items like new clothing or concert tickets should be near the bottom.
Next, look at the bottom of the list and see which items you can do without. Be firm with yourself – you don’t really need a new accessory every week and alcohol is most certainly a luxury. Get rid of as much of as possible, although be careful not to overdo it.
Remember too that many things that seem like essentials can be trimmed down instead of disregarded entirely. For example, food is of course a priority, but which food you choose can make a big difference to your budget. Eating lunch out five days a week can be costly – making sandwiches or a salad at home and taking it with you will save you no end of cash.
Similarly, transport to and from work is important, but public transport, car pooling or cycling is more cost effective than driving or taking a cab. Even rent, the most basic essential, can be diminished if you look for somewhere cheaper or take on a lodger.
Select your Account
Take your time when choosing the right savings account for your savings plan. There are a variety of accounts out there which offer different rates of interest – do your research and don’t rush into agreeing to one.
Many offer preferential deals to new customers, so doing your homework will pay off in the long run. If you select a higher interest rate account which allows better access now, you will avoid the hassle of potentially having to change in the future.
Make it Automatic
Using your previously defined goals (which may or may not require altering after reviewing your budget), decide how much you wish to put away each month. Then, set up a weekly or monthly transfer from your current account to the savings account.
By automatically depositing the money into your savings, you are reducing your access to it, and money you don’t see is money you don’t spend. You are much more likely to consistently reach your savings goal if you don’t have the opportunity to spend it beforehand.
Monitor, Assess, Reward
Keeping tabs on the progress of your savings is imperative to sustained progress and success. Each week, set aside ten minutes or so to go over your budget and see if you are meeting your expectations. Perhaps unforeseen circumstances demanded you to pay expenses you didn’t expect and as a result your savings were thrown off for a week or two. Compensate for such shortcomings by redoubling your efforts the next week.
Contrastingly, your personal circumstances may change. Got a raise at work? Don’t see it as extra pocket money; revise the figures in your budget and use it to save even more each month. Other unexpected, one-off incomes like birthday presents, additional work or, fingers crossed, lottery wins should also be taken into account and given their rightful place in the grand scheme of your savings.
If you are consistently underachieving and not reaching your goals but still sticking to all of the promises you made yourself, it may be that you set the bar too high. Don’t be afraid to re-evaluate your targets.
On the other hand, if you are consistently achieving your goals, by all means reward yourself with a luxury purchase… just make sure you do it infrequently and only when the situation merits, and also ensure that doing so won’t undo all of your good saving work.
Do you have any tips that have helped you develop a rock-solid savings plan?
We want to hear from you in the comments section!