With the new year just around the corner, you might find yourself thinking about resolutions. Is financial freedom part of those resolutions? If so, having a well-defined savings plan is one of the surest ways for you to reach your short or long-term financial goals.
Even with the best intentions, saving money is not as easy as it sounds. How many times have unexpected expenses popped up and depleted your savings? Having a solid savings plan and sticking to it, will enable you to realize your goals effortlessly. Here are some expert tips to help you create a savings plan for the new year.
Set Your Goals
It is hard to succeed without a goal. Knowing your destination before embarking on a journey helps you avoid distractions and arrive on time. This is also the case with saving. The first and major step towards saving is knowing what you are saving for.
Maybe it’s the latest TV, tropical vacation or that gourmet kitchen you have been dreaming about. Perhaps you need to save for retirement or your child’s college education. Clearly stating these goals, will give you the vision and motivation to save.
When defining your goals, it’s possible to end up with a long list of things you want to save for. No worries, just go over the list and prioritize them. The best way to do this, is to categorize them according to their urgency. Then, separate long-term goals from short-term goals. When this is done, it will be easy to know what to start saving for first.
Set the Amount and Deadline for Your Goals
You already know what you are saving for, but that’s not all you need to get started. If you are not sure of the cost of your goal or fail to set a timeline, you may be setting yourself up to fail.
Imagine saving money for your dream vacation only to find out you underestimated the cost. What a huge disappointment that would be to learn you now have to wait months or more longer.
Eliminate any unpleasant surprises by finding out what your goal will cost right after you set it. Having this information will enable you to come up with a specific amount of money that needs to be deposited in your savings account weekly or monthly to reach your goal.
For example, let’s say you want to purchase a car that cost $23,000 by the end of the year. If you want to save monthly, you would need to save about $1,917 per month for the next 12 months to reach your goal and get your car. Knowing the cost of your goals and setting a deadline helps you plan and save more efficiently.
Evaluate Your Current Financial Position
You can’t save what you don’t have. Doing a through analysis of your income and expenses will give you a clear picture of what you are able to save each month. If you have a substantial amount of money left after you pay your necessary expenses, saving will be almost effortless. However, if you are living paycheck to paycheck, saving will be almost impossible.
If you find yourself discouraged due to the fact, you have little to no surplus money to save, there are some things you can try.
- Reduce the cost of your target goal; take the car for example, you will need to find a different vehicle , one that will fit your budget.
- Extend the deadline of your goal; if you are set on that car, you will have to extend your deadline. If you increase your timeline to 2 years, the amount you need to set aside each month, is cut in half.
- Change your spending habits; do away with unnecessary expenses.
Have an Emergency Fund
You never know when an urgent and unavoidable financial need might arise. Setting aside some money to deal with such issues will help you stick to your savings plan.
Sometimes when people are faced with emergency financial needs, they prefer to dip into their savings rather than take out a loan. They will argue that loans from high interest short-term companies like lend up, net credit , cash net USA or nation21loans.com will result in more expenses, unlike the savings. When this becomes routine every time an emergency arises, it ends up depleting their savings and forces them to abandon their savings plan.
To avoid this pitfall, try setting aside some funds that are to be used specifically for financial emergencies, so you can stay on track with saving for your goal.
Automate Your Savings Deposits
It is unlikely for you to spend what you do not have in hand. “Pay yourself first” is an idiom that you might have heard before. It means that you should deposit money in your savings before you spend it on anything else. However, you might find it is harder to do when you have that money in your hand.
A great solution is to set up direct deposit of funds into your savings account. When you do this, you put your savings plan on auto pilot and ensure you stay on track to reach your goal.
The tips above will let you create a SMART new year’s savings plan (Specific Measurable Attainable Realistic and Timely).
- Specific: You have set a goal and know what you are saving towards.
- Measurable: You have determined and know how much your goal will cost
- Attainable/Realistic: An evaluation of your current financial status confirms you can save for the goal.
- Timely: You have set a deadline for your goal.
With a solid savings plan, you are on your way to achieving your financial goals and attaining financial freedom.
This is a collaborative guest post. The views and ideas do not necessarily represent those of Mommy Ramblings.