Step 1: Set a goal, create a plan

Saving money can be hard, especially if finances are already tight. But, like any journey, saving money is easier if you have a goal in mind.

Before you chart your course, you’ll need to know what resources you have at your disposal. To start your savings journey, begin by tracking your income and expenditures – in other words, how much money you make, versus how much money you’re spending. Pay particular attention to how much money you need for necessities: groceries, rent, utilities, medication, etc.

Then, set limits on how much you’ll spend on non-necessities: eating out, movies, non-necessary clothing, or toiletries, and other “wants.” By setting limits, you can not only wrestle your spending back under control, but you can free up extra money to divert to your emergency savings.

Now, it’s time to set a goal. How much can you commit to your emergency savings each week or month? Remember, no amount is too small – you can start with $10, $5, or even $1. What matters is that you begin building the habit.

In fact, it’s often best to not be too ambitious. A savings goal should be realistic, achievable, and have a time limit. For example, let’s say you want to save $5,000 within six months – do you make enough to put that amount in savings without compromising your ability to pay for necessities? If not, you may want to extend your timeline or reduce your goal amount.

If your goal is too high, or your timeline too short, you may not achieve it, which can be discouraging and make future saving difficult. Set a goal you are certain you can reach so that you are able to build your confidence along with your savings.

Remember that an emergency savings account should ideally contain enough money to cover three-to-six months of living expenses, or enough to cover your most common “unexpected” emergency; so if you start by saving a small amount of money each month, you may want to gradually increase that amount as time goes on and you gain confidence in saving.

Want to know more about how to create a budget? Check out our Budgeting Tips and Tricks! Or, use our Household Cash Flow Tracker to analyze your finances.

Ready to get started? Our Savings Account Calculator can inspire you to set your goal today!