Ideally, setting up a savings plan is just a simple thing to do. But in reality, it is not. The real score is that many people can hardly plan, or if they can make a plan, the more difficult move is to execute and stick with such plan. Saving money is essential for every one of us. Why? The main reason is that you can use your savings as a financial buffer when you have some urgent matters to address.
Start with This!
First, changing our attitude and transforming our understanding towards money serve as the primary principle to succeed in coming up with an effective savings plan. With more than 75% of national population having less than $1,000 bank savings, there’s a better idea for them to have a strong foundation on financial security.
Start with proper calculation.
You have to determine your monthly cost of living. You have to prioritize the basic necessities such as housing, food, clothing, medicines, insurance, and transportation. No leisure or entertainment as much as possible if your budget can’t meet it. The basic needs are categorized as the “core” expenses. The next thing to do is to determine the first rung in the financial ladder, or spending, by multiplying a minimum of three months to the core needs. This is the very first step in coming up with a plan.
For instance, if you have core monthly expenditures amounting to $2,800, then you need to have a maximum monetary goal of at least $8,400. This is an effective step in establishing a financial security. This habit must be developed so that a financial safety net will be achieved. By this, you’ll not fall short.
Three Important Stages to Set
Let’s now assume that we have a target time of at least a year to have $8,400. We have to remember that there are 52 weeks in a year, and if our job is paid bi-monthly; then, we have 24 payouts in one whole year. Back to the target goal of having $8,400, just divide the amount by 52 weeks. You should have a minimum of $162 per week and just multiple it again by 2, because you’re paid bi-monthly, then you can save $323 every payout day. Now, the main thing you need to do is to reach 30% of your target goal.
You can have $2,520, in the example given above, and then take $100 a day, multiply it by 26 salary payouts; eventually, you can achieve the first level goal. The second level objective is to reduce the unnecessary expenditures throughout the year. This is to come up with another 70%. How to achieve this goal? Just stop spending on the unnecessary things, like having a cup of coffee from Starbucks every day. This is just an example of a wasteful spending.
You can as well make adjustment with your payroll withholding. Instead of a tax refund, you can break it through your paycheck every payout day. This can augment the process of having another 70% to meet the target amount of $8,400 in one year time.
The third level goal is to add the total goal amounts so that reaching the main target goal can easily be achieved. In some instances, people would tend to sell their personal property, like the IT equipment they no longer need. They will just use e-commerce sites, like eBay, to sell, let’s say, an unused computer unit. By doing so, an extra fund is generated.
Effective Tools to Support Your Effort
There are effective tools you can use. First, you need to have a tool to track all your income and expenditures every month. Make sure that you keep all receipts. Have an envelope where you can keep the organized receipts of expenditures every month. At the end of each month, review them and you have to organize them by categories. Review also your paycheck statement. Always assess your tax expenses as well. For instance, you received an IRS tax refund of $5,600 last year; then, there are no changes with your present income or expenses deductions. You can then ask for a refund of $5,600 divided by 26 payout periods. You can have $215 every payout period; multiply it by 70% for you to have $150. You further adjust your W4 withholding certificate and add the two considered exemptions. You can have at least $150 additional take home pay every time you receive your earning or salary.
Why wait at least 16 months to have your money back?
Here it is. Many people would say they really like having a big paycheck. However, if you’ll just spend your money entirely, your huge paycheck is nothing. In other words, your money does not really work for you. You need to be disciplined when spending your money. You need to let your money work for you.
You can still have a tax refund but not as big as in the previous refund. And you can have the money to be set aside for your savings plan. This is the ultimate way to have a strong financial foundation and to achieve success.
I have some points here you need to consider to achieve success. You need to treat your savings plan as an obligation or a must-do thing. Write the amount of your check and deposit it to a certain account under your name. Reduce the balance by using the amount you’ve paid for your savings. Track the results easily. When this becomes a habit, you can start having a strong financial foundation. In just a matter of 30 to 45 days, you’ll notice the positive impact of this spending habits.
The second conclusive point here is that you need to review your progress. Each day, week and month, you need to assess the progress of your plans
My day is Sunday afternoon before shooting videos I review my progress for the week and set my smaller goals to what I can do this week, and sometimes even what I can do each day. Break it down as small as you can and it becomes easy. Lastly, visit the Coaching Center and watch my video on Taking 100% Responsibility and The Science of Goal Setting. This will truly help kick start your progress in meeting your target goal.
If you start today, you’ll reap the fruits of your labor and perseverance after a month or so. Wealthy people have a good habit towards money. What are they doing? They reject spending for any unnecessary things. They set financial goals wisely. They achieve such goals in a timely manner — with discipline and proper execution.
I am sure you can do this. My confidence is high that if you write your goal down (start answering the question, “what”); then go to the next question (the ‘how”), you can surely attain financial success by doing one thing at a time.