Whether you’re aiming to save money for an emergency fund, your retirement, or a luxury item, a savings plan will help you to be successful in putting aside the funds you need.
To create a money saving plan, you need to work out a method of saving that works for you, based on your income, expenses, and saving goals.
In this post, we explain the key steps for creating a solid savings plan – so that the nest egg is there when you need it.
Work Out Your Expenses
The first step towards making a savings plan is to take a frank look at your income and expenditure. How much do you spend on particular things and how might you cut down?
For example, could you switch energy suppliers for a better deal? Are there any unused subscriptions that you could cancel? Even small changes like taking your own coffee on the train can add up and make more cash available for savings.
The Revolut budget planner is great for helping you to establish a budget and stick to it. Using the Revolut banking app you can easily set budgets for different categories of expenses, so it’s simple to keep track of your spending.
You could also try using the 50/30/20 rule: is it possible to organise your finances so that 50% of your income goes on essentials, 30% on “optional extras”, and 20% into savings?
Deal With Debts
If you have any outstanding debt, such as a large credit card bill or car finance, it’s important to prioritise repaying these loans – even if that means saving a bit less in the meantime.
That’s because you’ll be losing money through the interest accumulating on these loans, meaning that you will have less money to save in the long-run if you don’t repay promptly.
Build up an Emergency Fund
Once you’ve worked out how much money you can afford to save, the next step in building your savings plan is to consider what you are actually saving for. Savings plans tend to be more successful when they have a definite goal.
It’s good practice to make your first savings goal an emergency fund. This is a pot of money that should cover your living expenses for 3-6 months if your income is interrupted: for example, if you lose your job or become ill.
Separate Your Savings “Pots”
It’s best to keep your savings in a different account from your usual expense account, as this will help you to “forget” the money is there and not treat it as available for spending.
And you might even consider having different savings accounts for different purposes. For example, you could even label a separate account “Barbados Holiday” and set yourself a savings goal of £2,000, and create another one called “iPad” with a personal goal of £500.
This separation keeps you in a clear mindset about what your savings are for, and keeps you on track.
Make a Regular Payment
When you’ve decided on what you want to save for and how much you’ll need to save, you can plan regular payments into your savings account. Ideally, you should schedule these payments as direct debits to be taken just after you receive your income, so that there’s no temptation to spend that money.
The size and frequency of payments will depend on your circumstances: how much you can afford to save and how quickly you want to reach your savings goal. If you’re new to saving, a weekly savings plan can feel more manageable, as individual payments will be smaller.
You could even try the 52-week challenge, where you start by saving £1 in the first week, going up to £2 in the second week, and so on... If you complete the challenge, you’ll have £1378 by the end of the year!
Note: It’s easy to use Vaults to help you set aside money for different goals. Vaults are easy to set up via your Revolut app, and you can make regular recurring payments or allow the spare change feature to do the work for you by rounding up spending to the nearest whole number and setting aside the difference.
A monthly savings plan is another popular option, as most people budget on a month-by-month basis. Say you want to save £2,000 for that Barbados holiday in 8 months’ time. That would mean putting £250 per month into your savings account.
For larger purchases, a savings plan might need a longer timeframe. For example, a new car could require a 5 year savings plan, while for a house you may need a more substantial 10 year savings plan.
Creating a Savings Plan: Key Takeaways…
Ultimately, the best saving plan is the one that works for you and allows you to achieve your financial goals. Keep track of your budget, make specific saving goals, and organise regular payments into your savings account – sorted!
If you want to learn more about saving, check out more of our blog posts:
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