There are some truly great savings plans out there – leading to stock piles of anywhere from $1k to $5k.
Although these are great plans, and work for many of us, the way to truly live within your means and create a strong plan is to tailor it to your own needs. Creating your own plan will also allow you to adapt to changes in your budget, big expenses, or simply times when your income is low but you still want to save.
You will need only a few tools – a calculator, an overall view of your budget, and a specific savings account or “jar for cash”…if you like to do it the old-fashioned way ;)
So what’s next? Create a very easy-to-follow plan.
Begin with your overall budget, and develop a simple math problem:
Monthly Income – Monthly Expenses = Savings
At this point, it is your job to carefully analyze where your money is going each month. What categories are you over-spending in? Where can you cut back, even just $20-$50 a month?
Once you’ve identified those categories, adjust your budget to meet a lower amount.
Say you look at “eating out” and you calculate that you spend around $100/week just on eating out. Back that down to $75/week (one less fast-food outing) and you now are saving $25/a week – or $100/month.
Each month, get more and more comfortable and familiar with your budget. Reward yourself when you meet your budget goals by saving in growing increments.
Transfer that money to a “savings only” account, or put the money in your “jar of cash”.
Consistently grow your savings account by spending less each month.
Once you’ve decided on your budget categories, you will know exactly the amount that goes into savings each month. Now comes the fun part… watch the savings grow!
Let’s say, after looking at my personal budget, I’ve decided to cut back in these 4 areas:
- I can spend $30/mo less in eating out
- I can spend $50/mo less in groceries
- I can spend $20/mo less on household items
- I can spend $15/mo less on clothing
Over the course of the month, I am saving $115.
As I save, I realize I can cut back more and more and still afford everything I need.
So the next month, I get up to a savings of $135
At a growing rate of $20/month (making very small and painless changes) I can save $2700 over the course of 1 year!
Here’s the breakdown:
January – $115
February – $135
March – $155
April – $175
May – $195
June – $215
July – $235
August – $255
September – $275
October – $295
November – $315
Total Amount in Savings = $2700
Would you even miss $20/month? Maybe you would. But the sacrifice would be well worth the effort!
What are some ways that you build your savings account? Leave a comment below!
- Faithful with Finances