Setting Up a Weekly Savings Plan in 4 Steps
It’s probably no surprise that Americans struggle with saving for their future. Prioritizing their weekly savings plan seems to be a bit of a struggle for the majority of our country’s citizens. Here are three pretty staggering statistics that illustrate how bad we are as a country at squirreling away money for a rainy day.
- 40% of Americans couldn’t afford a $400 unexpected expense without selling something or borrowing money, according to a recent Federal Reserve report.
- Over 78% of Americans are living paycheck to paycheck to make ends meet according to a new CareerBuilder survey.
- NerdWallet suggests that Americans save somewhere south of 5% of their disposable income on a regular basis.
These statistics may be a little depressing, but you have the power to take control of your own financial well-being. It’s time to stop feeling bad about your paltry savings rate and start taking action toward a secure financial future.
In addition to simply being a good idea to have money available in emergency scenarios, there are plenty of life-changing events that will happen during your time here on Earth.
You might want to go to college, marry that special someone, have a baby or stop working someday. These life events tend to cost money. The good news is that saving money is easy, and if money is tight, you can probably cut back on a few things for the greater good. Here’s how to set up a weekly savings plan that will get you well on your way to reaching your financial goals.
Step 1 – Identify a Purpose
Whether it’s something long-term like retirement, or short-term and immediate like a vacation you’d like to take, the first step to creating a weekly savings plan is to identify your goals. While babies, diplomas and weddings are great things to save for, you also need to make sure your household has a nice rainy day fund.
Just think – if you lost your job tomorrow, would you be able to absorb the financial stress of having less money come in? Identifying your purpose will help you establish a proper weekly savings plan. Your purpose will help you stay on course to achieving all of your financial goals.
Step 2 – Set Goals and Establish a Method
When setting a savings goal, you need to keep two factors in mind: time and amount. These factors will obviously dictate how much you’ll have to save each week in order to reach your goal. It will also influence what tools you might be able to use in order to reach it.
For the purposes of this example, let’s use a household rainy day fund as our savings purpose. After taking a look at your income and bills, you need to land on a goal amount that is both meaningful and attainable. It’s recommended that you build an emergency fund of 3 – 6 months of your monthly expenses.
A savings plan is a lot like a workout plan. Set the bar too low and you may not be changing your behavior in a meaningful way. Sure, every little bit helps, but you want to teach yourself the importance of financial fitness. Throwing your loose change into a jar doesn’t really do that.
Set the bar too high, and you’ll almost always burn out too quickly. If you try to save too much, too soon, you could end up frustrated with the concept and quit altogether.
Say you want to save $2,500 in the next year to have in case of an emergency. This means you’ll have to save approximately $50 a week for the next 52 weeks.
This begs the question, how can you accomplish this?
First, take time to review your budget. You will need to assess your expenses and income. If it seems as though you are spending your entire paycheck upon deposit, you may need to determine areas you can cut back on. Consider reducing your cable bill or freezing a monthly subscription to increase your cash flow.
Get creative and find unique ways you can cut back on your monthly bills. This will give you more cash to start contributing to your weekly saving plan.
Step 3 – Contribute to Your Weekly Savings Plan
Here’s where the proverbial rubber hits the road. By now you know what you’re saving for, what your goal amount is, and how much you need to save on a weekly basis to reach your goal.
The next thing you’ll want to do is create a new bank or investment account for your goal. Keep it separate from your everyday banking or brokerages so you can keep better records and resist the temptation to dip into it.
Step 4 – Automate Your Weekly Savings Plan
The best way to save is to not think about it at all. If you have to physically deposit money every week or remember to log in to your bank’s website or app, there’s a lot of opportunity to get distracted.
Set up automatic transfers from your checking account to the savings or brokerage account you opened for your goal. Consider a payroll deduction if you have automatic deposit of your paychecks.
Additionally, you can use new budgeting tools such as Digit, Chime and Acorns, to help you save some extra cash. These apps round up all of your debit or credit card purchases to the nearest $1 and deposits the difference into an investment or savings account automatically. Using budgeting apps can help you stick to your weekly savings plan and monitor your progress toward your financial goals. Automating your savings can help you avoid the temptation to use your contributions in another capacity.
The Bottom Line
Armed with these four weekly saving plan steps, a few tools and the discipline to make a positive change to your financial habits, you can be on your way to saving for anything life throws at you.
What creative tactics have you used to develop a weekly savings plan? Did these tactics help you achieve your goals? We want to hear from you. Please leave your tips in the comments below.