Starting a Savings Plan You Can Stick With

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Are you starting a savings plan?

Maybe for retirement? Or college? Or a wedding? Maybe even just for the holidays so you don’t have to put Christmas gifts on your credit card.

No matter what you’re saving for, the best savings plan is the one you’re actually going to use. So that’s what we’re talking about today: starting a savings plan you can stick with!

The Hardest Savings Plans in the World

You’ve seen plans like this all over Pinterest, right?

Have you ever tried them? They are impossible! Ok, impossible might be too strong a word. But, no joke, those savings plans are the hardest plans in the world to stick with.

Why?

Because they require constant thought and action.

First, the amounts are almost always varied (and widely, I might add!). Why would you save $20 the first week, $65 the second, and $30 the third? It’s totally arbitrary! And it makes budgeting harder than it should be. What if you have a larger-than-normal expense during a week with a high savings goal?

Second, you have to remember to save. Are you really going to consult your chart each week to see what amount you need to save, then move the money from checking to savings?

And then some of these plans tell you to save in cash so you can physically watch your savings grow. What?! No!

You want that money out of sight and out of mind so you aren’t tempted to dip into it for non-goal-related purchases. You also want your money making more money (i.e. earning interest). And to make that happen, you need your money in a bank account of some sort (more on that coming up!).

The Easiest Savings Plans in the World

So how do we fix this? How do we start a savings plan we’ll be able to stick with?

We have 3 tricks to help you build a savings plan you can stick with at every stage of your life, no matter how big or small your savings goals.

1. Stop with the Varying Amounts

Saving a different amount each week is a totally unnecessary step. It needlessly complicates your savings plan.

Instead, figure out how much you’ll need to meet your goal, and divide that amount by the number of paychecks you’ll receive between now and your goal date.

Example:

You’re planning a Vegas weekend in 6 months. You figure you’ll need $1,000 saved by then. If you’re paid twice/month, you’ll get 12 paychecks over the next year. $1,000 divided by 12 = $83.33. So, you need to save $83.33 out of every paycheck to meet your goal.

No need to consult an arbitrary savings schedule every payday!

And you can make this work for any savings plan. The amounts will just be higher or lower depending on your savings goal and time frame.

Special Note for Giant Goals

If your savings goal is big and long-term (like retirement or a down payment on a house), you might be looking at your per-paycheck savings goal and think there’s no way I have that kind of money right now!

No worries. Start saving what you can spare. And every time you get a raise, pay off a debt, or bring in some side hustle money, add that to your savings. You’re already used to living without that money, so it won’t feel like a pinch. And it’ll help you get to your giant goal faster.

2. Save as You Spend 

Yep, it’s entirely possible to save, even when you are spending money. Indeed, one of the best ways of doing this is by choosing to use a cashback service. Cashback services let you sign up and then you use their platform to shop online, usually, this just means adding an extension to your browser. The cashback provider gets money from the retailers you use and then they share this with you. You can even earn crypto instead of cash in this way, which means it’s super easy to build up your crypto investments even as you spend!

3. Pick the Best Account Type for Your Money

Now, where do you keep this money you’re saving? Not in a jar on the counter!

The answer actually depends on your time frame.

See, if you need your money soon, you don’t want to risk it on investments that could temporarily dip in value.

But if you have more time, you can risk the temporary dip because you have time for the investment to go back up in value before you need your money back. And these riskier investments often provide the best returns, so your money can be making more money for you while it’s just sitting there.

If you need the money fairly soon, like in the next 2-3 years, keep it in a high-yield savings account or money market account (not to be confused with a money market fund). It’ll be perfectly safe there, guaranteed by the Federal Government up to $100K, in fact, but it’ll be out of sight so you’re less likely to “borrow” from it. And you won’t earn much interest, but you’ll get some.

If you have more like 3-7 years, you can invest the money in CD’s or bond-based index funds to earn better returns than a savings or money market account.

And if you have over 7 years, consider investing in stock-based index funds. Your retirement savings is a good example of a long-term savings goal. You might even be decades from retirement, but if you want an extra $831,751 in your retirement account, you need to start saving now. You can open a retirement account (like a 401(k), IRA, or Roth IRA), then invest the money in that account in stock-based index funds.

4. Automate

The final trick to starting a savings plan you can stick with is to automate your contributions.

Meaning?…

Meaning you have your checking account automatically transfer the money to your savings account(s) every payday.

The brilliance of automation is that it removes potential pitfalls. You don’t have to worry about forgetting to transfer the money. You don’t have to worry about spending the money on something else before you get a chance to save it. So you can go about your life, giving almost no thought to your finances while you build the savings you need to live the life you want.

Here’s to you and your successful new savings plan!