How to create a savings plan for your budget

While most of us have the best intentions with our cash, sometimes actually putting it away can be difficult.

The good news is that whatever your income, it is possible to save. By putting the right plan in place, you’ll be able to grow your savings — even if it’s with small amounts. It’s just a matter of figuring out a budget and sticking to it.

So how do you create the right savings plan for your situation? Here’s what you need to know.

Look at your money

The first step towards building a savings plan is busting out the calculator.

How much do you earn in a fortnight or month? And how much do you spend on the unavoidable stuff — things like rent, groceries, bills and your gym membership? Before you go any further, do the maths and work out what is left after the essentials are paid for.

If you’re not actually sure what you’re spending on things like groceries in any given month, look through your online banking accounts to get a general idea.

Or if you want a shortcut, apps like Mint or MoneyPatrol will link with your bank account and analyse your spending. They then sort it into different categories — like food, or shopping — so you can quickly see where your money is going.

Give yourself some wriggle room

Figured out how much you have left after those essentials costs are covered? Now it’s time to decide what you can save.

However, that doesn’t mean all of that ‘left over’ money will go straight into savings. Nobody saves every dollar of disposable income they have. Realistically, you need to set aside money for things like gifts, weekends away, rounds at the pub and shopping trips. Even the most diligent of savers need to buy a new pair of jeans every now and then.

The trick is to set yourself a budget for those nice-to-haves so that you don’t end up going overboard.

So with the money that is left after the essentials are paid for, allocate a portion to savings and a portion to spendings. For instance, if you have $500 left a month after your basics are covered, you might decide to spend half of that and save the rest. Figure out what feels doable to you.

Or consider the 50/30/20 method

If you’re still struggling to figure out the best way to divide up your income, try the 50/30/20 method. It’s a super simple (and popular) way of managing a budget.

The idea is that you divide your income into three chunks. 50 percent goes on essentials like rent, bills and groceries. 20 percent goes into savings. And the final 30 percent is your spendings — money for those fun things you want but don’t necessarily need. 

Of course, if you wanted to save a little harder, you could flip it and devote 30 percent to savings and 20 percent to spendings.

Dividing your income this way will only take a couple of minutes — no Excel spreadsheet required.

Set a savings goal

As well as mapping out your budget, it helps to set yourself a savings target. Having a goal will keep your eyes on the prize and make you less likely to spend money on things you don’t need.

Maybe you want to save $5000 in a year, or perhaps you’re just trying to pull together enough for a holiday or a new car. What matters is that you pick a number and keep it in the back of your mind. Better yet, write it on a post-it and stick it on your fridge as a reminder.

Get your banking right

Last but not least, there’s a couple of easy banking hacks that will keep your savings on track.

First, it will be a lot easier to squirrel away money if you keep your savings with a different banking institution to your everyday account. So if your salary goes into an ING account, for instance, you could keep your savings with Up Bank. Ideally you should look for an online-only savings account, so you won’t be sent a bankcard that tempts you to start tapping. 

The idea is to keep your savings out of sight and out of mind until it’s time to use them for the big purchase they’re intended for. 

Next, turn on automatic transfers so that every payday, the money you’ve allocated from your budget will go straight into savings — before you have a chance to think about it or spend it. It’s the set-and-forget approach to saving.

The information in this article is prepared by Super Obvious Pty Ltd (ABN 93 646 093 012). It is general in nature as it has been prepared without taking account of your objectives, financial situation or needs.