To successfully reach savings goals, you need to build a plan that keeps you motivated and focused. Here are the 5 steps I take to crush my savings goals.
I don’t know about you, but I need to setup a plan if I want to reach a savings goal. It’s easy to get distracted and not set aside money from each paycheck. I follow the same approach for debt too. Let’s talk about a simple to follow process to help you crush your savings goals.
Here are the 5 steps that I use to reach savings goals successfully
Let’s walk through 5 simple steps that you can follow to plan and reach your savings goals.
1. Set your saving goal
First things first, you need to set a goal with a purpose and a timeframe. Maybe you want to go on a big vacation, renovate your house, or build an emergency fund. Usually these goals are huge and take more than a paycheck or two to accumulated all the money you need.
As part of this goal you also need to set a timeframe by which you need the money. Setting the timeframe is important otherwise it will always get put off. I did that with my emergency fund. I didn’t make much progress on fully funding it, because I didn’t have a timeframe to prioritize it. It was always easier to say I’d do it later.
2. Find existing money to put towards your goal
One of the first things I do when I want to work on a savings goal is check if I have money hiding in other accounts that I can repurpose for this goal. This helps chip away at the total, and puts less stress on your regular budget.
For example, when I decided to reprioritize building my emergency fund over investing, I had money waiting to buy stock. Instead of investing it, I decided to transfer the money into my emergency fund account.
Not all savings should be routed to your new goal. Taking money from your emergency fund to pay for a vacation would not be a good use of that money.
One other place I sometimes find extra money is in the extra paycheck I receive in a month twice a year.
Are you paid every 2 weeks or bimonthly? If you’re paid every 2 weeks, there are 2 months in the year that you receive 3 paychecks. If your budget is based on 2 checks a month, you may be able to put some or all of the extra money towards your savings goal. Check your calendar and budget to see if you can use some of that extra money.
Other potential sources of extra available cash to put towards your savings goal may be a bonus from your employer or a tax refund.
3. Determine how much you need to save per paycheck
First, check the calendar and figure out how many paychecks you have within your goal timeframe.
Next, you’ll dividend your savings goal by the number of paychecks to calculate how much you need to save per paycheck.
For example, if you want to save $1,000 in 4 month, you will need to save $125 per check. $1,000 dividend by 8 paychecks equals $125 per check..
Now take a deep breath. The number you need to per paycheck may leave you with sticker shock. I know that feeling.
4. Check your budget, and see how your per-check savings amount fits
Next check your budget, and see if how you can rearrange it to fit in your per-check savings goal. Maybe it’s as simple as bringing lunch to work instead of buying it. Or maybe you need to cut your coffee trips or limit your extra spending for a while.
See if you can pause on some other activities in the short term. I decided to use the money was going to set aside for investing to save towards my emergency fund instead. As mentioned above, be sure to keep on track with financial health goals (emergency fund building vs a vacation fund).
5. Start saving and track your progress
To help me both plan and track my progress towards reaching a savings goal, I setup a relatively simple spreadsheet. It shows me how much I plan to save each paycheck, and how much progress I’ve made towards my goal. By pre-planning each savings deposit, you take all the thought out of process. It’s easier to reach your goal if you make the individual steps simple.
Or make this even easier. Take yourself out the process and setup direct deposit from your paycheck into savings goal account. This way you won’t forget and use that money for something else.
And one quick additional thought about reaching savings goals.
While you should do your best to keep on track, sometimes life happens. A larger than expected bill (that’s not quite emergency status) may eat up your contribution for the month.
It’s ok. Do what you can and get back on track as soon as possible. Life happens and we can’t control everything. The only thing we can control is our response.
Over to you, what else do you do to plan and reach your savings goals?
I use the same approach to crush my debt goals. Setting up your plan makes the process much easier to stay on track to reach savings goals. Do the preplanning to take the decision making out of the process as you go. Automating the savings deposits also helps keep you on track.
What else do you to crush your savings goals?
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