The road to financial stability is paved with a series of clever financial choices. And the sooner you make these spot-on decisions and actively pursue the goals and plans that support them, the more future-you will thank you for it.
Like by making a savings plan that will enable you to make all your short-, medium- and long-term goals a reality. Here’s a 5-step guide to help you on your way.
Step 1: Establish your financial goals
In one of our previous blog post entitled Saving: The importance of setting financial goals, we looked at differences between your short-, medium- and long-term financial goals and why having these goals are so important.
Now with that in mind, get a piece of paper and:
Write out your financial goals,
Specify a date you aim to reach each goal, and
Allocate the total amount needed to achieve each goal.
Step 2: Consult your budget: How much can you save every month?
After all your payments and deductions have been made, what is left? Can you perhaps cut back on some of these expenses? The only way to really get perspective on your finances is to create a budget. If you do not have one, follow our guide on How to make a personal budget in 7 simple steps.
After you have worked out your budget and made cutbacks, write down the amount you will be able to save every month.
Step 3: Now take out your calculator
By doing some basic math you can work out how much you should be saving every month in order for you to reach your goals over time.
Do you have enough money free every month for this to realise?
Don’t be alarmed if you don’t. By choosing saving accounts or investment plans that reward you for saving, you can still make it work. It might just take a little longer than you had hoped. Adapt the dates of your goals to fit with what is practical for you to put away.
Tip: The moment you are able to save more monthly, or receive a bonus/increase, adapt your budget, goals and savings plan according, so you can reach your goals sooner.
Step 4: Do your research: Investment Plan vs. Savings Account etc.
Your bank and various other financial institutions have a variety of plans and accounts that could help you with your savings. Do your research and find the best and most rewarding solution for your needs.
A savings account that allows you access to your money any time is perhaps a suitable place to keep your emergency savings but might not be the best account for you to save your holiday funds in. Choose a plan that requires a notice period if you are worried that you might dip into your savings.
Remember: When saving for your long-term goals like your children’s education and retirement, it is best to get a professional involved. These kinds of goals require a large pay-out and year-on-year inflation will need to be taken into account too.
Step 5: Set up your accounts and get going.
Don’t waste any time on this final step. The sooner you set up and apply for accounts the sooner you can start saving, and the sooner you can reach your goals.
Tip: Choose the option to get your money automatically withdrawn from your current account into the various saving avenues.