I’ll be honest, before we started budgeting, we had no savings. Well, we had maybe $600 to $1,000 in a savings account, but it wasn’t anything that would realistically and responsibly get us through an emergency. Any “emergency” we did have {like car repairs or large medical bills}, went on a credit card. In the end, our final car repair bill was well beyond the worth of our cars, and resulted in us trading in for a shiny new car, complete with a very pricey car loan. Sound familiar?
The same happened when we had expenses come around that weren’t part of our monthly expenses. Annual expenses and quarterly bills would come from our already stressed monthly budget. Then there were birthdays, holidays and so on. There was no way for us to know how much money was going where. We were just real lax about it.
It certainly wasn’t a way to go on with our finances. Especially since we wanted to become debt free.
When we bought our house in 2014, we had some goals behind the switch. First and foremost, we wanted to reduce our expenses. We had a wonderful head start when we went from paying $805 in monthly rent to $500 on our mortgage. The savings in that expense alone was enough to jump start a fire of determination, and to begin getting serious about paying off our debt.
But we needed to be accountable for not only how we were spending our money, but also how we were saving our money. In order for that to happen, we needed to increase the amount of money in our savings accounts.
We wanted to have some realistic safety net that could cover any expense that may come up throughout the year. Since we never had much of a savings account before, we needed a way to know how much we would save for, as well as a way to be accountable for what we were saving for.
Bottom line, we needed a concrete savings goal and a plan of action.
In order to help you reach your savings goals, I’ve decided to share with you the exact method that I use to reach our savings goals!
Know Exactly What You’re Saving For
Before we could say that we saved anything, we had to know what we were saving for. A few of our examples included Christmas & birthday gifts, average annual medical expenses, along with any quarterly and annual bills. Maybe you have a room that needs renovated, a savings goal for a vacation, or just saving up for a new car. Whatever your saving up for, you need to write it down.
Have an Estimate of How Much You Need To Save
You also need to know how much you’re saving for it. For our gifting fund, we put aside roughly $2,000 each year. For the remainder of what we save for {medical, quarterly & annual bills}, I lump them all into our annual savings fund, which I save about $6,000 a year for. Make sure to write all the amounts you want to be saving up for.
Time to Divide and Conquer
To make these savings goals more attainable, I break down our huge goal into smaller chunks. Rather than state “I’m going to save $2.000 this year”, I divide our goal by the number of paychecks we have within a year, and say “I’m going to save $40 from each paycheck.
For example, Hubs is paid weekly. If I’m saving $2,000 a year for one of our goals, I divide the total savings amount by 52, and know that I need to save $38.46 each paycheck. By writing down “I will save $38.46 each paycheck”, I’ve taken a large sum of money and made it more attainable and within reach. If he was paid every 2 weeks, I would adjust the savings amount and have to save $76.92 each pay period. Realistically, I would round both of these numbers to the nearest multiple of 5 to make the numbers easier to remember, and the math much nicer.
To read more about how I reach our annual savings goals, check out my 52 week savings tracker!
Tweak Where Needed
Sometimes a savings goal was too large and would cut into our already tight monthly budget. A few years ago, saving in our annual savings fund was one example of this. This fund {which I still have today} I consider a lump sum sinking fund. It contains money necessary for medical, dental and vision expenses, bills that come quarterly or annually, and so on.
Rather than going through the month with less money for our usual budget each month, I would tweak our weekly savings amount to not strain our monthly budget, but also so that I’m able to reach our savings goals.
Keep in mind, this only worked because some months we have a 5th paycheck. That 5th paycheck is always higher than normal since benefits such as health insurance are taken out for 48 weeks out of the year. With this check, I take our normal weekly food and household cash, and the rest of the income would be put into savings, allowing us to keep up with the savings goal over the course of the year, but not strain our budget on months with only 4 paychecks.
Make Savings A Priority
In order for any savings to occur, it needs to become a priority in your budget. Whether you transfer the amount yourself or an automatic transfer is up to you. No matter which way you go about it, saving money for your goals needs to be a priority and occur before any other expenses happen.
Watch Your Savings Grow
Each week, or month, continue to monitor how you’re coming on your savings goals. While I transfer our savings each week, I prefer to update my tracker each month. I found that if I was updating the tracker each week, two things would happen. First, I would feel bogged down at the beginning of the year since I still had a long way to go towards the goal. Second, once the summers came, I wouldn’t be able to keep up with updating our tracker weekly.
In order to help you reach your savings goals, I’ve created 3 free printables!
One is blank, you fill it in based on your savings goals. The other two are designed to help you jump start your savings account, with a $500 goal, or a $1,000 goal, both over 6 months. To get access to these free printables, and the rest of my resource library, simply click here!
So there you go! Six simple steps to reach your savings goals! Have any other savings tips? I’d love to hear them in the comments below!
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