GOBankingRates recently conducted a survey and asked people, “What are your 2016 resolutions?”
Of the top six answers, which included weight loss, better health and living life to the fullest, over 30% of people wanted to save more and spend less, while nearly the same amount said they wanted to pay off debt.
Read more: 10 tips to become debt free in 2016
So if you’re one of those people who want to save more money this year, check out these savings tips on how to set your plan and avoid getting off track!
7 tips to a successful savings plan
1. Have a goal.
The people who are the most successful at something have a strong ‘why’ behind what they are doing. So, why do you want to save money? Is it because you want to live comfortably in retirement? Or maybe you want to travel and see the world. Perhaps you want to prepare in case something unexpected happens in your life. Maybe you want to save for your children’s college education. Regardless of the end goal, what is your why? Write this down, then put it in a visible place to remind yourself daily!
2. Know where you stand.
It might be scary at first, but looking at where you are is key to where you’re going. Take a look at all of your bank statements, credit card statements, debts and savings you have — and then take a step back to see the big picture. Pay special attention to anything that stands out to you and take note of what things you might be spending money on that don’t align with your values. Is there anything that needs changing? Where do you want your money to go?
If there is anything that you don’t want to spend money on, cut it! And if you want to stick to that decision, figure out how much you were previously spending on that unnecessary expense, and then set up your paycheck’s direct deposit feature to send that amount directly to a savings account (just make sure you are still leaving enough money to cover necessary monthly bills etc.). And that way, the money goes into savings before you have a chance to spend it.
In addition, if you don’t yet have a budget, now would be a good time to create one. The best way to do this is to create categories based on previous months’ expenses, then tweak a bit if you had any expenses in your statements that didn’t align with your values.
3. Create a plan.
Based on your overall goals, knowing where you are and how much you can devote to saving, create a plan around it.
Many financial experts say to ‘pay yourself first,’ meaning every time you get paid, save a percentage of your income before you do anything else. It is recommended to save at least a dime of every dollar you make, but if you can’t do a dime, start with penny and work up from there. If you feel that you’re behind on saving, you may decide to save $.15 or $.20 out of ever dollar you make. Whatever the amount, start with something — and you’ll likely figure out pretty quickly that you won’t even miss that money anyway.
Sometimes a good way to devise a plan is to work backwards from your end goal.
Let’s say you want to build up a $1,000 emergency fund — money you can tap into in case an unexpected expense comes up (like a car repair or medical bill).
If you make $2,500 a month in take-home pay (about $50,000 annual salary) and save 10% each month, you’d be able to put away $250 each month. So in order to reach that $1,000 emergency fund goal, it would take you about four months.
But — and this is a key step — you want to make sure your goals are realistic — otherwise it will be easy for you to get discouraged and give up. This is why taking a look at your past spending habits is a good first step. From there, you can create a plan but also be realistic about what will really work for your budget. Anything you can give up in terms of unnecessary expenses is found money!
Read more: 16 ways to save more money this year
Use automated savings
Automated savings — or lack thereof — could end up being what makes or breaks your plan.
Think about all the taxes you pay to the government in the form of automated payments from your paycheck. You know why you’re never late paying them? They do you the service of automatically taking the payments out for you before you ever see the money. And while no one likes the idea of the government’s hands in their pockets, the concept makes for a good analogy.
You can do the same thing for savings — except these payments will be to yourself. If you have direct deposit with your employer, you can often request that your company take a percentage or a dollar amount and put it into a separate account — like a savings account. You can even set up different accounts for different purposes, such as emergency savings, vacation, retirement and so on.
Budgeting your paycheck and putting money aside for specific purposes is a great way to stick to a monthly plan — and ultimately, reach your goals. You can do this by separating cash into different envelopes — or by having specific amounts of your paycheck sent directly to separate accounts.
You could also use an app like Digit that will automatically save for you every time you make a purchase.
4. Monitor your spending.
Online banking and all types of apps make it super easy to monitor your spending.
It’s also a good idea to spend a little time each week managing your money – planning for anything new that may be coming up or new ways you can reduce expenses. The groundbreaking book The Millionaire Next Door revealed the strong correlation between time spent planning and considering personal finance and the accumulation of wealth.
Read more: 7 easy ways to cut your monthly bills
5. Refine your spending habits.
Credit cards can run wild if not kept in check. One recent found that people spend 12% to 18% more at fast-food restaurants when they use plastic instead of cash. So whether you’re paying with cash or plastic, figure out what items you’re spending money on that don’t fit your values, then make adjustments and dump the rest into a savings account! You might also want to use the old-fashioned envelope method to reinvent your spending habits.
It can be difficult to change our choices once they become ingrained as habits, but realizing that you might have a habit that needs changing is half the battle. You can change your habits if your ‘why’ is strong enough — but don’t beat yourself up if you don’t get your spending habits the way you want them the first time around.
6. Bounce back quickly & learn from mistakes.
If you mess up, don’t worry too much about it! Just resolve to get back on the horse as quickly as possible. All isn’t lost if you happen to make one bad move — just fix it as quickly as you can, and make it a priority to get back on track.
Learning second hand from other people’s financial mistakes is definitely a preferred option when it comes to anything in life. But if you happen to make some financial mistakes yourself, just take it in stride and commit to doing better — now that you know better — for the future.
Read more: 11 ways to make an extra $1,000 (or more)
7. Leave room for fun & rewards.
Fun doesn’t have to be expensive, but having just a little bit of it built into your budget can definitely help you enjoy the journey!
For example, if you hit a savings goal, reward yourself with something fun that you want to do that fits within your budget. If you have weekly or monthly goals that lead up to a larger savings goal, reward yourself with something budget-friendly when you hit that weekly or monthly goal. This could be anything from going to the movies to budget-friendly dinner out to buying yourself something small to reward and remind yourself of the milestone you’ve hit.
As long you don’t go crazy, you can have your cake and eat it to by having fun built into your savings plan.
Read more: 9 ways to find free money