One of the things we can easily pick up from this coronavirus pandemic is that we need a savings plan. If you’re one of those people who’s having a hard time financially right now, give this 52-week savings plan a try and see if it works out for you!
52-Week Savings Plan for the Rainy Days
If we learn anything from the current coronavirus pandemic, let it be the value of having a robust savings account! Even if you are among those whose salary is unaffected by the current crisis, chances are, your stocks and investments have taken a hit. Regularly contributing to an accessible savings account is a smart practice to start if you haven’t already.
Traditional advice is to allot 20% of your earnings to savings, and that advice still holds true. However, for many people, that number is too high to achieve without sacrificing their already-established lifestyle.
Luckily, there is a multitude of savings plans you can start today that will get you on the road to financial stability.
First, Get to Know Your Budget
You won’t be able to realistically budget for savings until you know how much money you need to pay your bills in relation to how much money you’re bringing in. It’s important to write an honest budget of how much you need to earn each week or month, including subscriptions and memberships.
You will also want to include any luxuries that you would be unwilling to forego. If you are unlikely to stop taking toll roads, include tolls in your budget.
If stopping for coffee is the highlight of your morning, include your Starbucks runs in your budget. The same goes for nail and hair appointments, weekly dinners or happy hours, predictable maintenance on your car or home, and gifts.
The next step is to record what you bring in from all of your sources of income. These should be exact numbers, not estimates. What you make after taxes and withholdings is very different from what your salary is on paper.
If you earn money through a second job or rental income, be sure to include those amounts, as well. You may be treating that as extra money, but it could become an integral part of your savings.
Choose a Savings Method That Works for You
Depending on how often you get paid, setting aside savings each week may be unrealistic for you. It may be more practical to contribute to savings every two weeks or a small amount each shift if you leave your job with cash.
Treat your savings the same way you treat your rent or mortgage: it must be paid.
Figure out what method of savings will be more secure for you. If putting cash into a shoebox, envelope, or safe keeps you from spending, then keep the money at home.
If having the money in a dedicated savings account makes you less likely to touch it, be sure to keep depositing. You will earn very little interest on an accessible savings account. Don’t let the possibility of earnings influence your decision on where to keep your money.
52-Week Savings Plans That Work
A popular savings plan is a graduated approach:
- Week 1, you put $1 or $2 into an envelope.
- Each week, you double the contribution. This will get harder to maintain as you get to November and December, but if you start with $1, you will end the year with $1,378.
- If you start with $2, you will end the year with $2,756.
If the idea of saving $50+ week in December is a turn-off, stick to a set savings amount each week instead.
- Starting with $5/week or $10/week will ease the pain but also leave you with much less at the end of the year.
- If you save $5 each week, you will end the year with $260.
- If you save $10 each week, you will end the year with $520.
Another option is to save a larger amount each month. When you are paying your monthly bills, you can schedule your savings deposit to come out at the same time.
- If you save $100 each month, you will have $1,200 at the end of the year.
- If you are able to save $200 each month, you will have $2,400.
For many people, the most realistic approach is to save each payday. If you have direct deposit, it is easy to transfer funds as soon as your money is deposited.
- Let’s say you get paid $1,000 every 2 weeks.
- You can start by saving $50 each pay period (5% of your earnings), leaving you with $1,300 at the end of the year.
Don’t Minimize the Importance of Savings
If you have been throwing extra money at your mortgage or into your retirement fund and skipping contributing to an accessible savings account, consider changing your ways. Having a cushion that you can use at any time can be a lifesaver in the event of a health emergency, a sudden layoff, or an unexpected event.
Don’t wait for a new year – prioritize your savings starting today!