January 6, 2016
We’re only days into the New Year, but you must act now if you want to save 2016!
I don’t mean the whole year is about to be lost. What I am saying is that there is no better time than now to start your savings plan!
You may be thinking, “I’m just not very good at saving money. I’ve tried saving and never get anywhere before I have to spend what I’ve saved. Where do I start?”
Here’s the easiest way: If you received a pay increase at the start of the year, continue living on your 2015 pay, and save the extra. For those who will be earning the same amount as they did in 2015, it may take a little more work and sacrifice to make a savings plan happen. But it can happen with a plan. The key word is “plan.” The most important part of saving is having a plan. (See the “My Savings Plan” worksheet I created to get you started.)
Zig Ziglar said, “If you aim at nothing, you’ll hit it every time.” That is especially true when we’re talking about things that take a lot of discipline, like saving. The first thing required with any plan is commitment. This is your plan. Own it.
Next, determine how much you want to save. Be specific. Do you want to go on cruise this summer? Great! How much will the cruise cost (and don’t forget airfare and excursions)? Want to save enough to buy the most awesome Christmas presents your family has ever seen? They’ll love that! Make a shopping list and add it up. Want to create an emergency fund? That’s smart. It’s wise to plan for unexpected life events. Experts recommend that the less “stable” your job situation, the more you need in your emergency fund. For example, a salaried employee who has a stable job with an established company can probably get by with three or four months worth of expenses set aside, while someone working on 100 percent commission should probably have at least six months of expenses in reserve. Add up your bills over the last three to six months to come up with a number, and don’t forget things like groceries, school tuition, daycare, and gas.
Now that you know how much you want to save, decide when you’ll need it. Obviously, you’ll need money for a summer vacation much sooner than you’ll need money for Christmas gifts, and you need an emergency fund yesterday. Be as specific as you can, and think about any lead time you may need.
Now, write out your purpose for saving. Be thoughtful and specific. Use language that will keep you motivated to stay on track when things get tough, because they will. For instance, if you’re saving for a cruise, don’t write “cruise” as your purpose; it’s way too bland and not motivating enough to get you through the rough patches. Instead, think about why you want to go on the cruise and/or what you want to experience. Write something like, “To take a Caribbean cruise and snorkel around a coral reef and enjoy discovering marine life I’ve only seen on TV.” For your Christmas purpose, this might motivate you: “To see the joy on Katie’s face and hear her squeal with delight when she realizes that I bought her the ‘it’ toy for Christmas.” And for the emergency fund: “To create a financial security blanket that will act as a lifestyle insurance policy for my family should any financial hardship come our way.”
The next step is the most important, and it’s the hardest one. You have to start. Decide on when you will start and set it in stone. Starting may involve more than making a deposit, so think about what it will take for you to begin. Do you need to open a savings account? If so, how soon can you make it your nearest First United Bank to do so? (Can’t make it during business hours? Open an account online here.)
Next, create a monthly budget so you know how much money you have to save. (Please check out our useful budgeting tool here.) This step is going to be especially important for those people who did not see their pay increase at the turn of the calendar. If you want to save more in 2016 than you did in 2015, you need to plan how you will spend your money differently. Take some time and think through a monthly spending plan. Repeat this exercise at least once each month.
Now that you know how much you have to save and how much you need to regularly deposit to achieve your goal, determine precisely how you are going to do it. Notice, I said “regularly deposit.” You need to commit to making regular deposits on a schedule. My advice is to automate your savings plan to the greatest extent possible. An easy way to do this is to set up a regular transfer from your checking account into your savings account. First United Bank’s online banking makes this very easy. Another way is to ask your employer to split the direct deposit of your payroll into more than one account.
Up to this point, we’ve been talking about saving for a purchase or an emergency fund, but retirement is another very worthwhile goal. Why not take this opportunity to either start contributing to a retirement account or increase your contributions? And don’t think this has to be an either/or situation. If you adjust your goals and your budget, you may have enough money to save for all of your goals.
Again, regularly contributing funds toward your goal is the only way to ensure you’re going to succeed in achieving it. Determine your savings schedule AND STICK TO IT! Keep yourself motivated throughout the year by creating milestones and measuring your progress at those times. I suggest four milestones: a quarter-way point, a halfway point, a three-quarter-way point, and a target date.
When you reach your goal, reward yourself! Yes, reaching the goal will be a reward in itself, and maybe the goal is to make a rewarding purchase, but treat yourself to a more immediate reward. It can be small, but make it meaningful to you. Take yourself out for ice cream or a movie on the day you reach your goal. After all, you worked hard to get there and you deserve it!
If you’ve read this far and you still don’t think you have any money to save, maybe you just need to look at saving in a different way. Check out this article about my friend Hannah, then come back and read this post again with new perspective.
Now is the time to take action and save in 2016 before it’s too late!