Do you need a plan to accomplish your goals? I know I need to set up a series to steps to help me reach my savings goals. Distractions can keep you from setting aside money from each paycheck. You can also use a similar approach for your debt.
Let’s walk through an easy to follow a step-by-step process to help you crush your savings goals.
Crush your savings goals in 5 steps
Let’s walk through 5 simple steps you can follow to plan and reach your savings goals.
1. Set your saving goal
First things first, you need to set a goal with a purpose and a timeframe.
Do you want to go on a big vacation? Renovate your house? Build an emergency fund?
Usually, these goals are huge and take more than a paycheck or two to save all the money you need.
You also need to decide when you need the money by, set the timeframe. Setting the timeframe is important to help you focus on getting it done, rather than procrastinating.
Confession. I didn’t really progress on fully funding my 6-month emergency fund because I didn’t have a timeframe to prioritize it. It was always easier to say I’d do it later instead of being focused on completing it.
2. Find existing money to put towards your goal
Depending on how you manage your bank accounts, you may have money hiding in other accounts that you can repurpose to your goal. You can chip away at the total you plan to save, putting less stress on your regular budget.,
For example, when I decided to prioritize my 6-month emergency fund, I decided to stop buying additional stock. Each paycheck I transferred money into my emergency fund account rather than my brokerage account.
Make sure you reroute money between accounts wisely. Don’t take money from your emergency fund to pay for a vacation. Saving for a vacation is a different goal.
Are you paid biweekly or bimonthly?
If you’re paid every 2 weeks, there are 2 months in the year that you receive 3 paychecks. If your budget based on 2 checks a month, you may be able to put some or all of the extra paycheck towards your savings goal. Check your calendar and budget to see if you can use some of that extra money.
Other potential sources of extra available cash to put towards your savings goal may be a bonus from your employer or a tax refund. You could also consider selling a few things you no longer use to free up both space in your house and add extra money to your account.
3. Calculate how much you need to save per paycheck
Each paycheck you’ll plan to set aside the same amount of money towards your savings goal. If you can find additional money that’s great. At a minimum calculating how much you need to save per check will help keep you on track.
First, check the calendar to see how many paychecks you should receive before your goal due date.
Next, you’ll divide your savings goal by the number of paychecks to calculate how much you need to save per paycheck.
For example, if you want to save $1,000 in 4 months, you will need to save $125 per check. $1,000 divided by 8 paychecks equals $125 per check.
Let’s take a moment for a deep breath.
You may have just set a per check savings amount that gives you a bit of sticker shock. Trust me, I know that feeling. Let’s check your budget next to see what’s really possible.
4. Check your budget, and see how your per paycheck goal fits
Next, check your budget, and see how well it will fit into your regular paycheck. You may need to rearrange things to make it fit.
Bringing lunch to work is a simple way to save money and free up cash to contribute to your goal. Or can you limit your coffee trips or limit your extra spending for a while?
Also, check to see if you can pause some other activities in the short term. For example, I used the money I was going add to my brokerage account to save in my emergency fund instead.
As mentioned above, be sure to keep on track with financial health goals (emergency fund building vs a vacation fund).
5. Start saving and track your progress
Setup a simple grid on a piece of paper or in a spreadsheet to track your progress towards your savings goal. By pre-planning each savings deposit, you take all the thought out of the process. It’s easier to reach your goal if you make the individual steps simple.
In the spreadsheet I set up, I listed out all of my future paychecks and the amount I planned to save each payday.
If you’re concerned that you’ll miss putting money aside each paycheck, take yourself out of the process. Set up a direct deposit from your paycheck into a savings goal account. Now you don’t have to worry about accidentally using the money for something else.
What happens if life gets in the way of reaching savings goals?
Do your best to keep on track with your savings goal, but sometimes life happens. Maybe a larger than expected expense eats up your contribution for the month.
It’s ok. It happens to all of us from time to time! Take a breath and don’t stress over it.
As soon as you can, get yourself back on track with your paycheck contributions.
Life happens and we can’t control everything. The only thing we can control is our response.
Wrapping up. What additional tips do you have to help you plan and reach your savings goals?
Don’t stop at your savings goals. You can use the same approach to crush your debt. Setting up your plan makes the process much easier to stay on track to reach savings goals. The preplanning takes the decision making out of the process. Automating the savings deposits also helps keep you on track.
What else do you do to crush your savings goals?
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