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For most of us, spending comes naturally. Saving, however, can take a little practice. Saving
money is key to achieving both short- and long-term financial goals. This could include building
an emergency fund, saving for a vacation, or putting aside money toward a down payment on a

A savings plan is an excellent habit for achieving your financial goals, such as saving for
emergencies or planning for retirement. Creating a balanced budget can help with developing a
good savings plan. A good savings plan is one that takes into consideration the financial goals
which are most important to you, prioritize them, and achieve them in a timeframe that you
personally prefer. Every saving plan is different based on what you want to accomplish with
your saved money, how long you have to save it, and how much you can afford to keep for

A savings plan is a suitable method for amassing money to reach specific financial goals. It helps
you see the goals in question and the steps needed to achieve them more clearly. Such goals
may include:
• Emergency savings
• Vacation plans
• Wedding arrangements
• Buying a home
• Home repairs or improvements
• Purchasing a vehicle
• College planning
• Retirement savings

But in the end, the goals you choose to include in your savings plan will depend on your
financial situation.

How Much Should You Save?

Unless you’re already a big saver, your take-home pay is an estimate of your monthly living
expenses, and it’s easily found on your pay stubs or bank statements. Financial planners mostly recommend setting aside at least three months of living expenses. Others recommend putting
away anywhere between six months to a year’s worth of expenses.
These statistics work for retirees as well, but it’s always a good idea to make a few extra
calculations. Consider your monthly expenses and compare that with your monthly income,
including pensions, liquid assets, and investment income.

How to Create a Savings Plan

Creating a personalized savings plan isn’t very complicated. Here is a neat checklist to follow
that can help make the process easier.

Record your expenses

The first step to start saving is figuring out how much you spend. Keep track of your
expenses—that means every chai/coffee, household item, cash tips, and regular monthly bills.
Record your expenses. You can use a paper and a pencil, a simple spreadsheet, a free online
spending tracker or app, or whatever is easier for you. Once you have all the data, organize the
numbers by categories, such as gas, groceries, and rents, and total each amount. Check your
credit cards and bank statement to ensure you’ve included everything.

Include the saving plan in your budget

Now that you know how much you spend in a month, you can start making a budget. Your
budget should show your expenses so that you can plan your spending and limit overspending.
Make sure to factor in costs that occur regularly but not every month, such as car maintenance
and health care. Include a savings category in your monthly budget and aim to initially save an
amount that feels comfortable to you. Then eventually increase your savings by up to 15 to 20
percent of your income.

Find ways to cut spending.

If you can not save as much as you want, it might be time to cut back on expenses. Identify
expenses you can spend less on, such as entertainment and dining out. Look for more ways to
save on your fixed monthly costs as well, such as your car insurance or cell phone plan. Some
ideas for trimming everyday expenses include:
• Free activities
Use resources to find free or low-cost entertainment.
• Review recurring charges
Cancel subscriptions and memberships that are not in use, especially if they renew

• Examine the cost of eating out versus cooking something at home
Start eating most of your meals at home instead, and research local restaurant deals for when
you want to treat yourself.
• Wait before you buy
When tempted to make a purchase that is not essential, wait a few days. You may decide that
the item was something you wanted rather than needed—and you can work on a plan to save
for it.

Set savings goals

One of the best ways to save is to set a goal. First off, think about what you might want to save
for both in the short and long term. Once you’ve done that, calculate how much money you’ll
need and how long it will take you to save it.

• Common short-term goals: Emergency fund (3-9 months of living expenses), vacation, or
medical emergencies.
• Common long-term goals: Down payment on a car or a house renovation, your child’s
education, or retirement.

Determine your financial priorities

After your income and expenses, your goals are likely to affect how you allocate your savings.
For instance, if you know you will need to buy a car soon, you could start putting away money
for one now. But be sure not to forget long-term goals. It’s important that planning for a long-
term goal doesn’t take a back seat to shorter-term needs. Learning how to prioritize your goals
can give you a clear idea of how you should allocate your savings.

Pick the right tools

There are many savings accounts suitable for both long and short-term goals, and you don’t
necessarily have to pick just one. Look carefully at all the options and look for balance
minimums, fees, interest rates, risk, and how soon you will need the money so you can choose
the mix that will help you best save for your goals.

Short-term goals

If you’ll need the money soon or need to be able to access it quickly, consider using deposit
accounts or a savings account.

Long-term goals

If you are saving for retirement or your child’s education, consider individual retirement
accounts, which are tax-efficient savings accounts.

Make saving automatic

Almost all banks offer automated transfers between your current and savings accounts. You can
choose when, how much and where to transfer money or even split your direct deposit so that
a part of every paycheck goes directly into your savings account.

Watch your savings grow.

Review your budget and check your progress regularly. That will help you to not only stick to
your personal savings plan but also identify and fix any problems quickly. Understanding how to
save money may even motivate you to find more ways to save and hit your goals faster.