How to Create a Savings Plan That Works for You
The contents provided on this page are for informational purposes and do not constitute financial advice. They were not sponsored in any way.
Are you ready to start saving? Let’s kick things off with a plan that works just for you. A solid savings strategy can not only guide you toward financial stability but also help you achieve your goals.
A clear and personalised savings plan begins with setting specific financial goals and crafting a budgeting strategy that fits your lifestyle. We know it can feel overwhelming at first, so we’ve put together a straightforward guide to help you get started on your savings journey.
Assess Your Current Financial Situation
Before you can effectively set and achieve your financial goals, it can help to take a closer look at your current financial situation, such as your income, expenses and outstanding credit.
Here’s a simple breakdown about how this can help with your savings plan!
Income
By calculating your monthly income after tax from all sources, you will have an understanding of how much you earn, which will later help you estimate your spending budget.
Expenses
Essential expenses typically include housing, utilities, groceries, and health. If they can’t be categorised into those four, they are most likely non-essential expenses. However, there are special cases like transportation or school fees.
Once you’ve noted it all down, you should have a clearer view of your spending and living costs, allowing you to see what adjustments need to be made to match your monthly income.
For tips on how to cut down your essential expenses, check out our previous post on "How to cut your weekly grocery shopping costs".
Outstanding Credit
Understanding your debt obligations is crucial for creating a realistic savings plan. It allows you to prioritise debt repayments and avoid high-interest charges that can prevent or delay you from reaching your financial goals.
The government provides tools like the savings planner to help you with this. You could also try out the spending insights dashboard in the Beforepay app for a snapshot view of your finances.
Once you’ve reviewed everything, it may be useful to dive deeper into some financial resolutions you can make to help you with the next step - setting clear financial goals for your savings plan.
Set Clear Financial Goals
The next step to creating a savings plan that works for you is setting clear goals. You can create a roadmap that not only guides your spending and saving habits but also empowers you to make informed financial decisions.
Your goals can be broken down into three separate timeline categories;
Short-Term Goals
Any goals under one year would be considered short-term. Usually, the amount required for these is not high in terms of money and effort. Examples include weekend getaways, paying off credit card debt, and reducing monthly expenses.
Medium-Term Goals
These are goals that you aim to achieve in about one to five years. They are often more substantial and require more planning and commitment. Examples include saving for a house deposit, paying off student loans, and planning a home renovation.
For more inspiration on setting medium-term goals, you can read our article on "Steps you need in your life for building a budget".
Long-Term Goals
These are goals that typically span more than five years. They often involve significant financial commitments or life milestones. Examples include planning for retirement, funding children's education, and paying off your home loan.
When setting financial goals, it is important to be as clear as possible. Make sure they are measurable, achievable, relevant, time-bound, and specific. Having a roadmap helps you stay motivated as you know what you are saving for and how far you’ve come. When you can see your goals laid out in front of you, it transforms the savings journey from a daunting one to an exciting adventure!
Create Your Savings Plan
After assessing your financial situation and setting your goals, it’s finally time to create a savings plan that supports your objectives. Dividing your income into three specific categories—needs, wants, and savings—is one approach you can take to help you track your finances and ensure that your money is working for you.
Here’s a sample breakdown of how you might do this:
Needs (50%)
Allocating up to 50% of your income to essential expenses like rent, utilities, and groceries serves as a benchmark for essential spending.
The important part is to ensure it does not exceed 50%, as exceeding this percentage might indicate a need to revisit your day-to-day spending or overall lifestyle.
Wants (30%)
You can dedicate 30% of your income to non-essential expenses like entertainment and dining out.
However, it is important to keep in mind that these are non-essential expenses, so the lower the percentage for this, the faster you will reach your goals.
For tips on managing non-essential spending, you might find our blog post on "How to save money on a low income" helpful.
Savings (20%)
For the remaining 20% you can consider allocating this to your savings account or any repayment plans.
Unlike the other categories, having more than 20% allocated to savings would be beneficial as it helps you repay debts or save more, helping you reach your goals faster.
Having a savings plan is as important as being able to stick to it. Discover simple ways to stick to your plan here.
This is the first step to a brighter financial future. Embrace the journey and stay committed to your goals. Remember, it’s important to celebrate the small victories along the way—each one brings you closer to your dreams. With the right tools and strategies in place, you have the power to achieve your goals and take charge of your financial life.
Beforepay Group Ltd, ABN: 63 633 925 505. Beforepay allows eligible customers to access their pay and provides budgeting tools. Beforepay does not provide financial products, financial advice or credit products. The views provided in this article include factual information and the personal opinions of relevant Beforepay staff and do not constitute financial advice. Beforepay and its related bodies corporate make no representation or warranty, express or implied, as to the accuracy, completeness, timeliness or reliability of the contents of this blog post and do not accept any liability for any loss whatsoever arising from the use of this information. Please read our Terms of Service carefully before deciding whether to use any of our services.
