Wouldn't it be nice if we could afford everything we need and want, right when we need it?
Unfortunately, this is rarely the case. We often have to save up for the things we need by putting away some money each month. For a lot of people, creating a savings plan can be difficult. We start off with good intentions, but somewhere down the line we end up dipping into our savings because we didn't budget right for a week, and now we need to pay off a bill. Luckily, there are a few simple steps we can all follow to create a savings plan that actually works.
Step 1: The first step is simple – figure out why you are starting a savings plan. Are you saving up for college? For your child's college education? For a vacation? For retirement? Knowing what you are saving up for is important. If you don't know the reason, you are likely to stray off path and end up using your savings elsewhere.
Step 2: Once you know why you are saving up, it's time to figure out how much you need. Set a reasonable goal for yourself. Know how much you need exactly for your goal. Again, it is important to know where you are going or you might get lost along the way.
Step 3: Now you need to decide how much time you are giving yourself to save up this much money. Do you need it next year? In a month? In ten years? Knowing how long you have to save up will help you with the next step.
Step 4: Once you know how much you need, and how long you have to get there, the rest is simple math. Simply divide the amount you need by the number of months you have given yourself to get there. This is the amount you will need to put away each month.
Step 5: You know how much you need to save each month, now you actually have to do it. The best way to do this is to create a separate bank account to store your savings in. This will stop you from getting tempted to touch it. If you can, have your bank automatically withdraw the amount from your paycheck each month and put it right into your savings account. Then you won't have to worry about remembering each time you get paid.
Step 6: The rest is is easy. You have your money going into a savings account, so just don't touch it. Your savings will accumulate over time and when you reach the date you set for yourself, your savings will be there waiting for you.
Having a savings plan is essential for a lot of things we need in life. To make sure your savings plan is successful, you also need to keep to a tight budget each month. If you don't manage your money properly, you'll end up needing to dip into your savings at some point, and your schedule will derail. Also be sure to create a separate savings plan for each thing you want to save up for. Combining savings plans will make things confusing. Try to keep everything separate for the best success.