How To Create and Execute a Savings Plan
Written by
Jamela Adam
Edited by
Amen Oyiboke
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If you’re trying to build an emergency fund, save for a vacation, or put money aside for a new laptop, having a savings plan can make it much easier to hit your goal without feeling overwhelmed.
Here’s how to create a savings plan that works and how to follow through until you reach your savings goal.
Step 1: Know Exactly What You’re Saving For
First, get clear on your goal. The more specific you are, the better. Instead of saying “I want to save money,” say “I want to save $2,000 for a trip to Italy next summer” or “I want $1,500 for a new computer by the end of the year.” Giving your savings a purpose helps keep you motivated.
You’ll also want to decide when you need the money. Your timeline plays a big role in how much you’ll need to set aside each week or month. A short-term goal may require tighter contributions, while a longer timeline gives you more flexibility.
Step 2: Break It Down Into Monthly or Weekly Targets
Once you know your goal and timeline, it’s time to do some math. Take your total savings goal and divide it by the number of weeks or months until your deadline. That’s your savings target for each period.
For example, if you want to save $1,200 in six months, you’ll need to save $200 a month or $50 a week. Breaking it down like this makes it feel more doable since it’s easier to commit to $50 a week than to come up with a lump sum at the last minute.
Step 3: Open a Separate Savings Account
Keeping your savings in a separate account makes it easier to track your progress and harder to spend the money on something else. You can open a free high-yield savings account online or use one through your current bank.
If possible, nickname the account based on your goal, like “Mexico Trip” or “Emergency Fund.” That visual reminder can give you a little extra push when you’re tempted to dip into the money for something else.
Step 4: Automate Your Savings
The easiest way to stick to your savings plan is to remove the decision-making. Set up automatic transfers from your checking account to your savings account right after payday. That way, you’re paying yourself first before your money gets eaten up by everyday expenses.
Even if you can only start with a small amount, you’ll see a pretty big difference in your savings if you stay consistent. For example, saving just $25 every week can still add up to $1,300 in a year. And you can always increase the amount later when you have extra cash to contribute.
Step 5: Look for Extra Opportunities to Save
There isn’t only one way to reach your savings goal. You can also boost your savings with windfalls or extra income like tax refunds, birthday money, or side hustle money.
You can also look at your spending and see where you can cut back temporarily. For example, you could consider canceling a subscription for a service that you barely use or cooking at home more often.
Step 6: Track Your Progress and Celebrate Milestones
Saving money is a long game, and it helps to see how far you’ve come. Use a tracker app, spreadsheet, or even a printable savings chart you can color in as you go. Watching your savings grow is motivating, especially when you hit key milestones.
If your goal is $1,000, you could treat yourself to a $10 coffee when you reach the halfway point. These small rewards keep the process enjoyable and make you more likely to stick with it.
The Cost of Not Having Savings
According to the Federal Reserve’s recent report on the economic well-being of U.S. households, 30% of adults indicated they could not cover three months of expenses by any means. That’s why having a clear savings plan is so important. It helps you afford a future expense and gives you space to breathe when things go wrong. So if you haven’t already, follow the above-mentioned steps to create and execute your savings plan. And if you need help with it, contact a financial advisor to help you map out the best course of action.
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Sources:Board of Governors of the Federal Reserve System, “Report on the Economic Well-Being of U.S. Households in 2022 – May 2023“
