8 steps to create a savings plan for 2010

Eat less. Exercise regularly. Why not add “save more” to your list of New Year’s Resolutions? Follow our step-by-step guide to create your 2010 personal savings plan.

1. Track your spending
For one month, record everything you spend. That includes every latte, every magazine. Divide your expenses into categories (dining out, rent, utilities, etc.) and figure out a total for each section. This is a critical first step to creating a good savings plan.

2. Create an annual budget
Your budget should include all your expenses. Make sure you don’t leave out irregular expenses, such as dental appointments.

3. Decide how much you can save
Calculate how much of your income is going to savings. You should be saving 10-15%, so if your expenses don’t allow that, look for ways to cut back. Trim non-essentials (e.g., clothing budget) before considering cuts to essentials (e.g., selling your vehicle and using public transit).

4. Set savings goals
Having goals helps you stick to your savings plan. Figure out how long it will take you to reach each of your goals. Short-term goals can be reached within the next 1-3 years, such as:

  • Emergency fund to cover 3-6 months of expenses
  • Travel and vacation
  • Car
  • Taxes (if not deducted by your employer)

Long-term goals are years to decades down the road, and may include:

Some goals, such as a down payment for a house, could be either long-term or short-term depending on how long it will take to save for them.

5. Allocate your savings
For each goal, figure out how long you have to save for it, and your monthly target. Next, prioritize your goals, and set aside savings for each. You’ll have some choices to make. If retirement is your main goal, then you may have to postpone others to give yourself more time to save.

6. Investment strategies for different goals
For short-term goals, save your money in a low-risk savings or money market deposit account or CD. For long-term goals, consider securities such as stocks or mutual funds. Keep in mind that stocks and mutual funds are not FDIC-insured and fluctuate in value, but a long investment window gives you time for them to bounce back. Get professional advice on how to match your investment strategy to your goals.

7. Set up automatic transfers
Stick to your savings plan by setting up automatic transfers to your savings account and other investments—you won’t spend the money if it’s not piling up in your checking account.

8. Track your savings growth
Get in the habit of checking your progress each month. This keeps you on target, helps you spot and correct problems quickly, and may inspire you to cut your spending so you reach your goals even faster.


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Posted by on Mar 13 2010. Filed under Save money. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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