We all know saving is something we’re supposed to do — like eating kale, going to spin class or drinking less coffee. But it can be hard to hold yourself accountable. Here are a few tips for how to build a successful savings plan and stick to it.
- Figure out what you’re saving for. People with specific goals tend to have more success growing their savings. Don’t just plan to save more. Have an exact number in mind and decide what it’s going toward. Retirement and an emergency fund should be at the top of the list.
- How much can you afford to set aside? Whatever the goal is, assess how much you currently have in those categories and what’s needed to achieve your goal. Keep in mind that a healthy retirement fund should include enough to sustain you for 15 or 20 years after you quit working. For your emergency fund, plan on putting aside three to six months of living expenses in case you find yourself confronting major medical bills, unexpected job loss or a sudden need to replace your home’s roof.
- Make a budget. A budget is a plan to manage your spending and help you keep making progress toward your goals. It should outline all of your expenses – including rent or mortgage payments, utilities, food, entertainment, insurance payments and car payments. Look at where your money has been going in the last few months and where you can cut costs. At financial institutions such as Alliance Credit Union, you can earmark certain savings accounts for different purposes such as holidays or a vacation.
- Stick to it. When it comes to savings, your worst enemy is a lack of discipline. If you don’t trust yourself to stick to a budget, you can set up automatic transfers each month into a retirement account or another high-yield savings account, such as a share certificate.
Keep checking your budget to make sure you’re on target. And don’t be shy about telling friends and family about your savings goals. When more people are on board, they can help keep you accountable.
The next time you head out for a soy chai latte, a friend may remind you that that money should be destined for savings instead. Once you get a budget in place, cut back on nonessential spending and make saving a habit, you’ll find that you’re on your way to accomplishing big financial goals — and that it doesn’t hurt a bit.
Cait Klein, NerdWallet