If you avoid debt, or only consider it for true necessities and investments (go you!), you might feel like you never have the money to do the things you love. Take heart. A smart savings plan will help you achieve those dreams. Plus, you’ll know you’re thinking about your financial future holistically.
These tips are for saving about $1,000-$5,000: enough that coming up with the money is a challenge, but not so much that you’ll be scrimping for years. If your dream has a higher price tag, hang tight—we’ll share more tips, soon, on saving up for something really huge.
Make a budget
To get started, take the time to price out your dream. It might cost more or less than you think, so roughing out a budget in advance is essential to creating a successful plan. We’ve already budgeted out the costs for a lot of hobbies, trips, and projects. If we haven’t created a budget for your dream yet, do a little research to see if someone else you trust has, or make a working estimate on your own.
Decide on a savings rate
Next, figure out how much you can realistically save per day, per week, or per pay period. This step has two key parts: tracking your spending, and figuring out where you can cut back (or earn more). If you’ve never tracked your spending before, here’s a guide to getting started. It’s a good idea to track your spending for about a month to get an accurate idea of your expenses. If you’re in a hurry, you can estimate by listing out regular bills (weekly, monthly, or yearly) and then tracking discretionary expenses for a week or two.
Once you’ve got a good idea of where your money is going, look for ways to spend less. Saving doesn’t have to mean constant scrimping and sacrifice, so don’t start by ruthlessly cutting things out. Rather, take a moment to think about the things you’re spending money on, and then try and find an equally satisfying alternative that costs less. Small savings add up quickly; setting aside just $50 a week will add up to $2,500 per year.
- A great place to start is routine bills. How much do you spend on your phone plan, internet, cable, and car insurance? And how much could you save by negotiating, shopping around, or picking a less expensive plan? The work you do to find savings here will pay off month after month.
- Once you’ve looked at routine expenses, consider discretionary purchases. Small, frequent purchases can be especially insidious: here’s a list of things to watch out for. Once you’ve identified where your money is going, decide if you can cut down or go with a cheaper alternative. If you’re having a hard time finding a good, frugal substitute, take a moment to think about why the purchase is important to you. Maybe your daily afternoon trip to the coffee shop isn’t about the caffeine rush—it’s about getting out of the office or chatting with the friendly barista. If that’s the case, then making your own coffee isn’t going to cut it, but a walk with a friend might.
- If spending less isn’t feasible, or you want to accelerate your savings rate, look for ways to earn more. Consider picking up a little freelance work, or selling something you’ve made. Just like with spending less, little sums add up quickly—just an hour or two of work per week can make a big difference.
Calculate when you’ll be finished saving
Once you’ve figured out how much you need, and how quickly you can save, it’s easy to calculate when you’ll be done. Create a Goal (saving over time, rather than all at once), and punch in the amount you can save per day plus the amount you need. We’ll do the math for you.
Save on autopilot
You’ve already done the hard part, by creating a plan and making all the tough decisions. All you need to do now is go about your daily life (cutting back or earning more where you decided to do so). Money will be slowly, incrementally moved out of your Safe-to-Spend and into the Goal, so you know it’s earmarked for a specific, important purpose.
We highly recommend taking the time every few weeks (or days, if you’re Goal-obsessed like us) to check your progress. Saving can mean sacrifices, especially if you’re changing your spending habits or there are other temptations you’d like to spend money on. Taking a few moments to think about why you’re saving and watching yourself get closer to that goal will keep you focused on the bigger picture.
Adjust, as needed
You might be able stick exactly to the original plan. Or, you might run into unexpected expenses. Sometimes, you can adjust by changing your behavior. If groceries cost a little more than expected, it’s easy to spend a little less on restaurants. But what if your car breaks down and it costs $400 to fix?
If you fall behind on a Goal, you’d like to pause it, or you need to pull money out to pay for an emergency expense, don’t worry—it’s easy to make an adjustment. If you stick to the original completion date, we’ll automatically show you how your savings rate needs to change. If you decide you need more time, you can edit the goal to choose a new end date.
One day, after a few months, a year, or a little longer, you’ll be done! Take a moment to think about what you’ve just achieved. Saving takes persistence and sometimes, sacrifice. We build tools to show how little changes can add up to amazing things—while you put those changes in action. You should be proud (and even if you’re not, we’re proud of you!). And now? It’s time for you to do that thing you’ve been dreaming about.
Disclaimer: Hey! Welcome to our disclaimer. Here’s what you need to know to safely consume this blog post: Any outbound links in this post will take you away from Simple.com, to external sites in the wilds of the internet; neither Simple nor our partner banks, The Bancorp Bank and BBVA Compass, endorse any linked-to websites; and we didn’t pay/barter with/bribe anyone to appear in this post. And as much as we wish we could control the cost of things, any prices in this article are just estimates. Actual prices are up to retailers, manufacturers, and other people who’ve been granted magical powers over digits and dollar signs.