Financial experts often encourage people to pay themselves first to build savings. This means that you set aside money for a rainy day before paying your other expenses. Following this simple piece of advice can help you build a financial cushion but following through takes effort and planning. If you're ready to start saving more, developing a personal savings plan can give you the focus that you need to reach your goals.
Determine what it is you want to achieve. Do you want to save for a vacation, set aside money to purchase a home or add to your retirement nest egg? Creating a list of specific short and long-term goals can help you form the blueprint for your savings plan.
Create a budget to determine how much money you have to put toward savings each month. Make a list of all the money you have coming in each month from your job, any investments you own, alimony, child support or any other source of income. Next, make a list of all the expenses you pay each month, including fixed costs for your rent or mortgage, utilities, cable, Internet and variable costs for clothing, entertainment and transportation. If your expenses are less than your income, the difference represents your starting point for saving.
Identify what it is you need to do to achieve your savings goals. For example, one of your goals might be to save $3,000 for a vacation that's six months away. If you're paid on a biweekly basis, you would need to set aside $250 a paycheck in order to reach your goal. Creating a specific action plan detailing what you need to do in order to reach your goal can help you measure your progress and stay on track.
Go over your budget to look for expenses that can be reduced or eliminated. For example, you might consider cutting back on your cell phone or cable service or dropping your gym membership. It's helpful to keep track of the money you spend on non-essentials, such as clothing or entertainment, to look for areas where you can cut back. As you trim your budget, you free up more money to put toward your savings goals.
Regularly review your savings plan to ensure that you're on track to meet your goals.
Reward yourself with something small to celebrate your success when you reach a savings milestone.
Have money automatically transferred to your savings account when you are paid to avoid the temptation to spend.
Things You'll Need
Recent pay stubs or income statements
List of monthly expenses
List of debts and assets
Avoid setting unrealistic goals, which can leave you feeling discouraged if you come up short.