Saving money is a basic concept of personal financial planning, and it is the key to your financial success. Without such a plan, the chances of ever saving enough money to meet your long-term financial goals or achieve financial security are very slim.

It seems simple. In order to save money, you need to have “extra” cash, right? This is a common misconception. Having a spending plan (aka “budget”), will help you create money for savings. Most of us, by setting spending goals, can manage to save regularly, so if you’re tempted to hit your back button because you simply don’t have enough money to have a formal savings plan, STOP!

First, set a few short-term and long-term financial goals to work towards, like a down payment on a car or home – or a vacation or a big ticket item that you want to buy. Include the dollar amount and a time frame for achieving the goal. It’s much more motivating to save when you know what you’re saving for.

And remember, a goal that isn’t written down is only a dream!


Set up separate savings accounts. If you mingle your savings with your regular checking account, I guarantee you’ll dip into your savings and may never pay them back. Having your savings in a separate account is a constant reminder that these funds are earmarked for your future, and watching the balance grow is not only rewarding and motivating – it’s out-and-out exciting!

If you don’t already have a written budget that includes tracking your expenditures each month, begin one now. Whether you make thousands of dollars or hundreds of thousands of dollars a year, you need a budget. Budgeting can be relatively simple and entirely guilt-free.

Decide on a percentage of your gross income to designate as savings. 10% is a good starting point, but if you’ve developed a budget and have analyzed your spending and you honestly can’t find a way to set aside 10% for your future, then start out with 8%, or 5%, or whatever you’re able to do with perhaps a little bit of discomfort but without great sacrifice.

Another way that you can save is if possible, have your employer or your spouse’s employer deduct a set amount from your paycheck each pay period and deposit it into your savings account automatically. The old adage “out of sight, out of mind” works well here. Having to transfer money to your savings account is a little like giving someone who is trying to quit smoking a cigarette to carry around in his pocket and expecting him not to light up. Why tempt yourself? Make it easy and increase your chances of success with automatic deposits or transfers.

Whenever unexpected money comes your way, put all or most of it into your savings account. Bonuses, salary increases, tax refunds, rebates, overtime pay, income from hobbies or yard sales and other windfalls can pump up your savings account nicely without requiring additional cutbacks. It was money you had not budgeted for your bills – spend it on you!

If you’re forced to dip into your savings for an emergency, consider it a loan which must be paid back in a reasonable period of time, and set up a repayment schedule.

That’s all there is to it! The “secret” is that there’s no magic involved. The key is to start now and stick to it.

Next time I will talk a little more about budgeting….

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