It’s not simply enough to say that you want to “save money”. The first thing you need to do is set your goal!
When my husband and I were working with a broker/Realtor to purchase our first house, he told us the minimum we’d need in cash for a down payment/closing costs. We set our monetary goal, figured out the timeline and made a savings plan. Within four months, we had more than enough set aside in our savings account. We’ve continued putting money aside in our savings account, though not as aggressively as when we had that particular goal. What a great feeling to have cash in the bank to fall back on when brakes on the car need repair, your husband is laid off for six weeks or your ceiling has a leak (all things that happened to us last year!)
Get out your note pad and make it real by answering these 5 basic money saving questions —
1. What is your monetary goal?
Write down a number. Best to overshoot and make the number higher than you think you’ll need.
2. What are you saving for?
Keep your savings on track by pinpointing what the money is earmarked for. Whether it be you’re saving up for something grand like a home down payment or you just want to buy that gorgeous Dooney & Bourke handbag, make the goal real by writing it down. Maybe even print a photo that you put in a prominent place to keep you on track!
3. How long will it take you to reach your goal?
Set a deadline for yourself that’s within the foreseeable future. If your ultimate goal number is really big, break it up into quarters and set a date that is close at hand to help keep your savings spirits up!
4. What are you willing to give up to make saving possible?
Make sure you know your True Budget first and see where the extra savings money is going to come from to make your goal savings a reality. Try using this helpful worksheet. What’s in your budget that you’re willing to sacrifice to meet that goal? I’ve covered this topic in my articles Learning to Live Without and Realistic Ways of Cutting Back in Your Budget.
5. Is your savings plan reasonable?
The last thing you want to do is crash and burn on your goal because it’s too stressful or unrealistic. Make sure your budget has flexibility to continue to allow for fun things or emergencies.
Once you’ve answered all these questions, figure out exactly how much you’ll be setting aside each month to meet your goal. Simple formula: Total amount you want to save divided by the months that it will take you to reach the goal = How much you need to save each month
There is still time to get those resolutions in for the year. It’s never too late as you know, to make meaningful changes! Please read up on the other topics in my Resolution Series –