How To Establish Your Personal Savings Goals

If you are just getting out from under debt, it is a crucial time for you to take what you have learned about your personal finance and use it for the good of your future. While many people have difficulties finding a way to save as they dig out of debt, after you have become relatively debt free, a savings plan should be foremost in your mind to prevent debt disaster down the road.

Establishing new habits and routines for savings early in the game can give way to a life-long commitment to putting money away and for better managing the money you have. Here are some tips to make your savings more effective and keep you on the right financial path:

Set Up Goal Accounts
If you traditionally only have one checking account and one savings account, make a trip to your bank and expand your savings plan. You should start by setting up separate savings accounts with goals in mind. To start, establish an emergency fund where you stash cash for unexpected situations like job loss or health issues.  A second fund for expenses can be set up to save for bigger, non-routine bills like taxes, home or car repairs. Take your savings plan once step further by establishing an account for investments. Save money that you can use to improve or start a portfolio of investments for the future.

Divide with Savings Goals
Make sure that you connect your bank card to all of the accounts to make transferring funds easier to do and means it is more likely you will stick with the plan. Determine by your budget how much to contribute to each fund and set an end-goal to work towards in a year’s time. If possible, have your money direct-deposited from your paycheck each time to make savings even easier. Your emergency fund ultimately should total 6-12 months of living expenses. Even if you only have a few dollars to spare when starting out, continue to put it away and leave it alone unless an actual emergency arises. This money can be used in the event you lose your job or other life-altering situations arise. Your expense account should shoot for a goal of 1-3 months of living expenses to prevent you having to use a credit card to meet unexpected or larger bills that are not typical. The investment account can include left over money until you are able to reach your other savings goals at a later time. When your other goals have been met, you can add more cash to your investments.

Manage Your Pay
Manage your income by months. Deposit your living expenses for one month into your checking account and divvy up the rest into savings accounts. If you just dump most of your money into you checking account with each pay, you will likely spend more and not save much.

Save Unexpected Money
Win a bet, win the lottery, get a card from Grandma for your birthday? Get in the habit of depositing such monies into your savings accounts when you get other monies from gifts or raises. If you are set on your other savings goals, start a fun account that can motivate your continued savings. Perhaps you can earmark money for family vacations, new furniture, or other more short-term savings goals.