Savings plan - how to plan your savings
Do you wish you could save more money? With a savings plan, it is easier to reach your goal. Here are our best tips for creating a thriving savings account.
Many people think that saving is difficult, but when you have control over your income and expenses, it should be possible to put away small amounts.
Get an overview of your spending
To save more, you need to spend less. Therefore, the first thing you should do is to get an overview of what you spend your money on. Most people know what comes into their account each month, but many forget to check where the money goes afterwards. Take a look at your bank statement for a normal month and see where your money is going. Once you have an overview of your spending, you are ready to try to reduce it.
Set up a budget
It's no secret that saving money requires good insight into your finances. To help you manage your money, it is important to set up a budget. In the budget you should have an overview of:
Separate your expenses into different categories so that you get a clearer picture of your spending, and where you can possibly tighten up a bit. Work out how much you want to save per month, and set up your budget accordingly.
Tip: Keep your budget available on your mobile, so that you can check your money at any time.
Change the way you think about money
Good financial management means avoiding spending more than you earn. Reducing spending can be difficult for many. If you have an overview of your spending and know where you could cut back then you are on the right track.
There are several exercises that can help you change the way you think about money and avoid temptation to spend. A key tactic is delaying a decision. You may find you change your mind.
Another useful tactic is to view a purchase in the context of your hourly wage. Work out how many hours you’ll need to work to pay for something. Is it worth it? You can also try just using cash to pay for things. Then you can only spend the money you have already decided you can afford.
Have realistic savings goals
Along with a budget, you should set goals for your savings. These goals should be realistic in relation to the income and expenses you have.
Whether the goal is to get onto the property ladder or install a new kitchen, it is wise to set a savings target for a given period of time, for example, a year. You can also set up a long-term savings goal of five years. As you see the amount grow month by month, it will motivate you to save more.
Compound interest means your money will grow more the more you save. If you save in a high-interest account or share account, the results will be even more positive. Use a savings calculator to check how much you will get in interest and compound interest, and decide on a savings target that suits your finances.
You can save in different ways, such as a regular savings account, high-interest account, shares and funds. Ask your bank for tips and advice on saving in a variety of ways.
Tip: Compare the interest you get from different banks.
Create a savings plan
Savings goals do not work well without a plan for the actual saving. Look at the savings as a long-term process instead of being rigid month to month. Some months of the year it is easier to put a little extra in a savings account than others. The savings plan can be flexible to take account of holidays and other irregular expenses as long as you work towards the total amount at the end of the year.
5 tips that make it easier to stick to a savings plan
1. Pay yourself first
Instead of seeing what you have left at the end of the month, prioritise paying your savings first when you get paid.
2. Set up an automatic transfer
Set up a direct debit to transfer money to your savings account on the day you get paid. This helps avoid the temptation to spend money on things you don't need.
3. Save all or part of any extra income
When you get a pay rise or an unexpected financial bonus it might be tempting to increase your spending. Instead, make it a habit to put all or part of your extra income into a savings account.
4. Create different savings accounts
As you set up different types of savings goals, you should also create savings accounts for different purposes. Most online banks allow you to do this easily. A motivating tip is to give the savings accounts names such as ‘dream home’, ‘travel to Thailand’ or ‘new kitchen’. Other accounts you should have are a current account and a buffer/ emergency expenses account. In addition, it is advisable to start early with pension savings.
5. Be faithful to your savings plan and budget
In order to reach your savings goals, it is important to be faithful to the savings plan. Sometimes there are months where you have unexpected expenses, which make it difficult to save. Try to save more in other months so that you reach your savings target for the year. With a realistic savings plan, budget and common sense, you will be able to fill the piggy bank.
