It can be tough to create a savings plan that actually works. Whenever you get ahead, it seems like something comes along and disrupts what you are trying to do. Things that feel like emergencies or priorities drain your savings account.
Yet nearly anyone who gives you budget advice will tell you how important savings is. From emergency planning to retirement, having the right amount of money in savings is key to your financial health. So how do you create a savings plan that actually works?
There’s an App for That
It used to be when you got home from shopping, you would throw your change in a jar, and then eventually you would count the change in that jar and spend it on something special, or you would only dip into the change in that jar when you really needed it. However, today we use a lot less cash than we used to.
However, there are apps like Smart Pig and Acorn that will round up your purchases to the nearest dollar and save that money automatically for you. This is similar to throwing your change in a jar, but you are doing so electronically instead.
Most of these savings plans also have limits on how often you can make withdrawals, a good incentive on your part to keep that money in the bank unless you absolutely need it. This is one easy way to make sure you are putting at least some money in the bank.
Put Away What You Save with Coupons
Along with that same line, you should also put away money that you save by using coupons. If you get a Xarelto coupon or a coupon for any other prescription that you need, take the money or the percentage that you saved and put it in your savings account.
The key to doing this is to do it right away. As you are shopping or ordering online, put that money directly into savings. Don’t count on yourself to remember later, or even start a list. The list can look long and expensive later on, where if you make the transfer right away, you will be less likely to second guess yourself down the road.
Think of it this way: you were going to spend that money anyway, so putting it in savings for later needs only makes sense. The more you can stick with this plan, the more you will save.
Have More Than One Savings Account
Where does your savings go? Well, if you want a long-term savings plan that works, you need to have more than one account, and in fact more than one type of account. Savings, just like spending, should be designated for a specific reason.
- Emergency Savings: This is more of a short-term savings account, one that you can use if the water heater breaks or the washer needs to be replaced. The purpose of this account is to keep you from going into debt over things you should not.
- Health or Flex Savings Accounts: Depending on your health insurance plan, you may be eligible for a health savings account. Even if not, you can use flex savings account much the same way. This account is to pay for medical expenses or prescriptions and can even earn you a tax deduction.
- Vacation and Christmas Funds: These accounts are for specific reasons: your annual vacation or to purchase Christmas gifts. Usually, if you have a savings goal, you can break these up into weekly or bi-weekly segments.
- Long-term and retirement savings: These accounts should usually be invested in a 401K, mutual funds, or other stocks. They are for your retirement, and you should never pull from these accounts except in extreme circumstances.
Having more than one type of savings accounts means you know what that money is really for, and you can stick with using it for only that purpose. This is another key to creating a savings plan that actually works.
Pay Yourself First
The other key to savings is to pay yourself first. If you have multiple savings accounts, you can arrange for percentages of your paycheck to be directly deposited into them so you never really see the money before it gets put in the bank. This is a sure way to keep yourself from touching it.
You should set up that account at a different bank than your regular one. This makes it harder and less convenient for you to pull money from those accounts. Online banking is one way to do this, keeping your home money and your spending money separate.
Remind Yourself of Your Purpose
Remember, you need savings for a reason or a variety of reasons. When you are tempted to not save or to take money from your savings for a purpose it was not intended for, remind yourself of why you are saving and how important it is. This will help keep you focused, and actually sticking to a savings plan that actually works.
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