No matter how low or lofty your savings goals are for this coming year, you won’t make much progress without a plan! Here’s our simple steps to help you set up your savings plan for 2021!
Clearly define your savings goals for the year. Use S.M.A.R.T goals to help you get them down on paper!
Johnny wants to have an emergency fund of $5,000 by the end of the year. Johnny makes $35,000 per year and lives below his means and within his budget. He can comfortably put aside 15% of each paycheck into a savings account. This will put him at $5,250 at the end of the year.
Johnny’s goal is specific ($5,000 in 12 months). It’s measurable (in 12 months he will or he won’t have the money in his savings account). It’s attainable (we ran the math, it works.) The goal is relevant and time based.
Jessica wants to have an emergency fund of $5,000 by the end of the year. Jessica makes $42,000 per year, but her rent was increased this year and she is struggling to make ends meet at the end of each month. She is only able to set aside 5% of each paycheck. She will only be able to save $2,100 by the end of the year.
Jessica’s goal is specific. It is measurable. But it is not attainable. The goal is relevant and time-based. Jessica will need to adjust her goal or make adjustments to her budget to reach her goal.
If you’ve been following along with our blog series, you may have done a yearly review for this past year. If so, keep that handy so you can add in new expense to this coming year’s budget.
Set The Budget
Set up your monthly budget. Set up automatic payments when possible for recurring bills. Use a budget app or a plain old spreadsheet to help you keep track of the budget. Make sure you add in relevant changes as they happen. Account for routine car maintenance, fluctuations in your electricity bill when the seasons change, etc.
Look ahead to identify months that you know you’ll be spending more than usual, like a month that is packed with holidays or family birthdays. This will allow you to account for those months and plan ahead.
Life is constantly throwing curve-balls. Flexibility is the key to managing those curve-balls and making sure that it doesn’t leave you in a rough spot. Your car may break down, you may lose a job or get a promotion! Be flexible but keep your sights on the goal.
It’s a good idea to reassess your goals every few months and take stock of your progress. You may find that those curve-balls call for an adjustment in your savings goal, which is perfectly fine. This isn’t a win or lose situation. It’ll be great if you meet your goal, but if you only get half-way there, you’re still miles ahead of where you started.