How to Build a Savings Plan

Sarah Ritchie |

What is your savings plan? Everyone knows you need a plan, but few of us actually have one.  We let life just pass us by. We make plans for vacations, social gatherings, plans for our career and even a plan of what to make for dinner or watch on TV, but very rarely for saving for the inevitable rainy day.  If this sounds like you, don’t despair.  Keep reading for some simple tips to get started. 

A simple plan is to save 10% of your gross income each paycheck. Gross income is what you make before all those wonderful deductions come out.  This is called the “90-10 Savings Plan”.  You are living off 90% of your paycheck and saving 10%. I would not recommend waiting until the end of the year and trying to put away 10% of your income all at once. For most of us, that would be an overwhelming number and we’d just give up. Pay yourself first.  Don’t wait until you pay all your bills, buy groceries, and put gas in your car to see what is left over.  Get in the habit of paying yourself first. After all, this is about your future and building wealth.

The best way to begin saving is to set up an automatic transfer to a savings or investment account each pay period.  Out of sight, out of mind.  Let’s face it, most of us wouldn’t save if we waited until the end of the month to put money aside.  You’ll be much more diligent about saving if you never see the money in the first place.  You may not think it, but this is a “Wealth Building System”.  You’re not a millionaire yet, but at least you’re beginning your journey. 

As time goes by, you can start to save more.  You will certainly get raises or you might even land a nice bonus.  You may even consider putting a percentage of that birthday or Christmas money aside. Before you know it, you’ll really see that savings grow, which is a huge motivator to keep going. 

So, you’re thinking, all of this sounds great, but right now I need 100% of my paycheck just to live.  Honestly, for some of you that may be true.  Consider boosting your income by getting a better paying job, a second job or by cutting out some daily habits that are really adding up to be wealth building suckers.  I’m talking about those daily trips to Starbucks or the McDonald’s drive through. 

Even with an extra job or cutting expenses, it’s ok to start saving less than 10%.  The bottom line is that you’re saving.  You’re creating a habit by paying yourself first.  Maybe start saving 1% or 5% or your gross pay each pay period.  It may not seem like much, but you’re creating a habit and working toward wealth building and a more secure future. 

The point is becoming wealthy does not happen by accident.  It takes work over time.  It takes making the right choices for you and your family.  It takes a lot of perseverance and sometimes it’s not glamourous.  Very few of us will ever experience a financial windfall such as winning the lottery.  If you do, consider yourself fortunate.  The reality is that wealth building takes time.  Rome wasn’t built in a day.  Keep on keeping on.  Most millionaires aren’t doctors or lawyers.  They’re regular people like you and me that chose to create a plan and make savings a habit.  Start now, don’t wait.  Don’t wish you had started earlier.