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You don’t need have a high income to have financial goals — with a savings plan it’s possible to go on that vacation you’ve always dreamed or put a down payment on a new home without going into debt. It may take a few months — or years, but if you follow a plan you can get on track to the financial future you want.
Once you determine what you want to save up for, you’ll need to work out how you’ll save and where. Here are six steps to help you set up a savings plan:
Whether it’s an emergency fund, a summer backpacking across Europe or a down payment on a house, you probably need a decent amount tucked away. Figure out exactly how much you need to save to meet your financial goal.
Once you’ve arrived at a lump sum, determine how long it will take to save that amount depending on your income. For example, if you plan to save $10,000 to take a vacation within the next two years, then you should save about $416 per month. This amount could be a bit less, thanks to compound interest, but it’s better to run a bit over than a bit under.
Check our compound interest calculator
To get the maximum annual percentage yield (APY), you need to set up the right account. The two main types of savings accounts are:
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Once you’ve decided which savings account type is right for you, it’s time to compare your options and choose one. If you’re looking for a high-yield savings account, look at online savings accounts as opposed to ones at traditional brick-and-mortar banks.
Reach your goals even faster by putting your savings on autopilot. Most banks let you set up recurring deposits from your checking to your savings account each month. That way your money is out of sight, out of mind. There are also money saving apps that will automatically round up your spare change and move money into savings for you.
Working out a budget helps you stay on track to savings. Start a budget with these tips:
Want to automate this process? Use a budgeting app to calculate, track and manage your expenses.
Monitor your weekly spending to see if you’re sticking to your budget, and make sure to adjust it whenever your financial situation changes. Review your budget periodically to see if you can divert more to savings than you originally thought. For example, maybe you can:
Use the table to compare your savings account options. You can compare them by traditional and online savings accounts. Sort each table by APYs, fees and minimum deposits and compare up to four accounts side-by-side by clicking the “Compare” box next to your top choices.
Many of us start out with plenty of ambition and the best of intentions, but within a couple of weeks our carefully crafted savings plan has fallen by the wayside. However, there are a few key things you can do to ensure that you stick to your plan.
A savings plan is the process of creating a financial goal — whether it’s starting an emergency fund, buying a house or going on vacation — and outlining how you’ll save enough money to make it a reality. With a savings plan in place, you nail down exactly how you’ll save enough money to reach your goals.
Keep your eye on the prize when it comes to savings. Regardless of what your goals are, remembering why you developed a savings plan in the first place will help you stay on track. Compare savings accounts to find the best way to save your money.
Picture: Shutterstock
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