Having a Savings Plan is often seen as a luxury. We sometimes ask ourselves whether we do not have enough immediate demands on our cash without having to worry about putting some aside for the future. But saving should be a priority for two reasons:

Firstly, you need emergency cash for those “what ifs”:

• WHAT IF the washing machine breaks down?
• WHAT IF you lose your job?

Secondly, you need a nest egg for life’s big expenses such as an investment into your first home or purchasing a car. Once you get into the savings habit, its surprising how quickly your funds build up and how secure it makes you feel.

As Woody Allen remarked: “MONEY IS BETTER THAN POVERTY”

If you are saving for something specific, work out how much you need to put away each month to be able to afford it. Then save a little extra. This will ensure you can cope with inflation if the cost of the car, home or holiday rises.  

If you are saving for emergencies you should aim to have a minimum of three months’ net salary put aside. Six months would be better. If you can’t afford this much, then save as much as you can afford.

Financial planners recommend putting aside at least 10% of your income when you’re single. The younger you begin to save, the longer your money will have time to grow. This means you’ll need to set aside a lot less to reach the same goal than if you waited just a few more years to get started.

One way of making sure you maintain your savings discipline – and reducing the pain – is by using monthly direct debits or standing orders for your payments. It is surprising how quickly people hardly notice money automatically taken out of their pay packets or accounts.

To increase your success with your Savings Plan, follow these principles:

1. Set realistic goals: Goals that are set too high may frustrate you and cause you to give up your plans. Maybe it is impossible to save $100 a month right now, try for $25.00. If a new car is beyond your means, would a used model meet your needs?
2. Be specific: State your objectives in details. If goals are vague, they may never be achieved. An example:” if we save $100.00 a month for the next 12 months, we would have $1,200 for the emergency funds.
3. Be flexible: Plans may require adjustments as your income and life cycle changes. Don’t be so rigid that you have to start over with an entirely new savings plan. Example: An unexpected expense comes up. You can’t save the entire $100 this month. Don’t let that get you off track. Continue to set aside something towards your goals, no matter how little it might be.

The secret lies in knowing where you are now, where you want to go in the future, and making a plan to get there. Its similar to charting your route to a new and unfamiliar vacation spot. You just have to figure out which roads take you to your final destination; in this case, your financial goals. Think of it as directing your dollars to reach your dreams.

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