How do you save money for your financial goals?

This date of the month gets every employee excited. The end month is the most exciting and motivating time of the month. It’s this date that everyone looks up to and they can’t stop checking their account balances until they confirm that indeed the salary has been released to their accounts. There is so much excitement that comes along with this. Someone has already adjusted their lunch menu and wants to treat themselves to something they like, another one is looking forward to passing by their favorite joint for a bite or a drink they’ve not had for the entire month. Back at home, electricity, water, rent, school fees, and other bills are still looking up for a share of that same salary. By the time you get started with the bills, you have already slashed more than half of the salary. Remember this is the money that you still should set some amount aside for emergencies and other financial goals and that should take you for the next period before the next payday. At this point, you may forego savings due to the abrupt shrinkage of your account. Now here is a solution, even with your shoestring budget, you can still squeeze some money and set it aside every month as your savings by following these guidelines.

Fundamental steps to building a successful savings plan

Determine and set up your financial goals

Financial goals are monetary targets or objectives that a person wishes to accomplish in the future. These targets can be things one wishes to accomplish either in the short term or in the long term. These might include creating an emergency fund, starting a business, buying a home, buying a car, going on a vacation, and saving for retirement, among others. With the goals in place, saving becomes easier because you already know what you need to achieve.

Set appropriate timelines for the goals

Once you define the goals, it is important to set the timelines within which you plan on achieving them. Some goals such as setting up an emergency fund, have a short timeline and require to be attained within a short time and are known as short-term goals. Others such as saving up for retirement have a longer timeline and are known as long-term goals.

Create a budget

With all the expenses coming up and requiring a share of this same salary, the most crucial financial tool that anyone should incorporate is a budget. If you receive your income every month, it is important to come up with a monthly budget. A budget is a financial tool that estimates expenses and income over a specified period. It helps to determine the amount of income one anticipates and lay down the expenses that this income should cover. It is important to include savings in the monthly budget by treating it as an expense and setting up the appropriate amount that should be set aside every month.

Cut down the unnecessary expenses

Cutting down unnecessary expenses will entail reviewing what you use your money on, ranging from necessities to entertainment, and reducing what does not seem so important. For instance, one might decide to lower the amount for entertainment, cancel some subscriptions that you do not use or that are not so beneficial, or lower their impulse buying.

Choose a high-yield savings account

At this point, you already have savings in your budget and now you are yet to decide where to put the funds you want to set aside every month. Some of the options will include holding the money in traditional forms such as "chamas" or opening a savings account. All these options will be dependent on your saving goals. However, if you go for a savings account, you should consider one that gives the highest interest. You might find these by enquiring options from different commercial banks.

Automate the savings

This includes setting up an automatic transfer whereby a certain amount goes directly to the savings account on every salary release date or when payments are made to the transactional account for the business people. This way, you will be assured of the expected deposits to the savings account and avoid the temptation of spending the money anticipated for saving.

Boost or increase your income

Now that you are all set, it will be important to think of additional ways of income. Depending on how flexible your schedule is, you can do other things on the side that will boost your income. These might include selling items online, freelancing, or any other income-earning activity that might fit into your schedule.

Saving is an important element of our financial goals. However, it might seem impossible given the many bills and other expenses depending on the same income. Hence, the above steps serve as important aspects that enable us to consistently adhere to our savings plan to meet our financial goals.

Next article: How can you achieve your investment goals on a tight budget