You opened a savings account months ago, yet the original amount you opened it with is still sitting there. No additional deposits have been made and you’re becoming discouraged staring at the same account balance month after month. Your heart is in the right place and you desperately want to save enough for a small emergency fund, but you know you need a new plan to achieve that goal.
Having a goal is a great start, but without a set strategy or plan, that goal just becomes an unrealized dream. One of the biggest challenges to setting aside money for a savings fund is not having a clear view of your budget. Until you know how much you make and how much you spend each month, allocating a set portion of your income for savings is challenging – it’s like trying to dock a boat in thick fog without knowing of the location of the harbor.
- Goals become dreams – without a concrete plan and strategies in place, goals become dreams. And dreams sometimes don’t materialize.
- Nothing’s left over at the end of the month - trying to save the money left over at the end of the month makes saving almost impossible. Instead of the extra money ending up in a savings account, it often gets spent on eating out, small purchases, and trivial items – then there’s nothing left to save.
- I don’t make enough to save – Many people believe they just don’t make enough to save anything. However, if most people tracked their expenses and set a budget, a person can usually find something to save even if it is $25 – $50 a month.
The Solution – How to Save
One solution that I’ve found helpful is including a savings amount in my budget. Working on a set income makes this strategy a piece of cake. However, if you live on an erratic income, this can still be a bit challenging since every month your take-home pay fluctuates. I’ve used two strategies in the past that seem to work well for erratic incomes: auto-debiting a set amount from my paycheck and saving a percentage, like 10%, of each check I receive (this might work well if your income comes from various sources).
- Create a budget -I’ve mentioned this numerous times and am beginning to sound like a broken record. But without a budget, you don’t know how much you could be saving each month.
- Set aside a portion of your income for savings – You can allocate a percent of your income towards savings or a set amount. Ideally, you should try to save 15% of your income. (Although this percentage is subjective).
- Auto debit savings from your pay check – If you receive a steady paycheck, set up auto-debiting from your pay check to your savings account. That way you won’t “accidentally” spend the funds on something else.
- Set aside a percentage from each income source - For those who receive various income sources, allocating a set percent from each source makes savings more attainable. For instance, I often allocate 10% from each income source to savings. As soon as I deposit a check, I transfer 10% of that check amount into savings. It’s takes a little more work since it’s difficult to automate, but it pays off in the end.
These strategies are a good starting point for those that need a concrete plan. Once you realize your savings goal, the more motivated you become.
What savings strategies do you use -percent or set amount? Do you think you save enough?
Be sure to check out my other series posts.