Setting Up Your Savings Plan
Now that you’ve identified your financial goals, you’ll need to develop a plan for spending and for saving. This plan should serve as a blueprint to help you understand what you need to do with your money in order to achieve your financial goals.
Spending Guidelines
Your spending plan will provide you with some guidelines on how much money to spend each month on different things. Some things are absolutely necessary — “needs” like shelter (ex. paying rent), food, medical bills and transportation. Some things are nice to have but not absolutely necessary — “wants” like new clothes every month, music, the latest cell phone, buying coffee at work instead of making coffee at home, watching movies at the theatre instead of renting a DVD, and having a new car every 2-3 years.
Needs and Wants
When creating a spending plan, it’s important to consider your needs and wants. You might have to make some tough decisions about eliminating some “wants” to free up more money for “needs.” As you make these decisions, remember your financial goals. It’s easier to give up some “wants” when you know it will help you achieve your goals.
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Heard on the Street: Do you save money? If so, how and why? |
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Carla, Age 22
“I recently graduated from college, and I wasn’t financially prepared for the “real world”! I had to relocate to a new area, find a place to live and buy a car. With so many expenses, it’s impossible for me to save. I know it’s important, but I just don’t see how I can right now.”
Anita, Age 32
“Yes, I’m very serious about saving money. For the past year I’ve followed an aggressive savings plan so that I can own my own home. I created a monthly budget, cut back on spending and even set up a payment plan where some of my monthly salary goes into a savings account. Wanting to own a home helps me to say “no” to buying those extra pair of shoes or eating at restaurants every week. Didn’t expect that answer, did you?!”
Darrell, Age 46
“When I lost my job a few years ago, I had accumulated a lot of debt trying to manage my bills and support my family. Saving money is hard because most of my money goes to paying past-due bills. Right now, I’m trying to reduce debt by first paying off credit cards and following a tight budget. Pretty soon, I’ll start saving for future emergencies to keep me from going further into debt.”
George, Age 41
"Sure … my company offers me a 401(k) plan that I contribute to. I just have it drawn from my paycheck, and they’ll even match it up to a certain point. But you know … I don’t really know how much I’ve saved. I get statements, but I don’t look at them. I think I don’t want to know because I don’t want the temptation. [laughs] It’s for my retirement."
Responses are not real-life accounts and are provided for illustrative purposes only. | | |