Saving for your next big purchase or financial goal is an exciting milestone. But let’s be honest—setting money aside isn’t always easy. After bills, groceries, and a little fun, there is often not much left over at the end of the month. If this sounds familiar, it’s time to try a new savings strategy that puts your financial goals first.
Here are three simple steps to create a strong budgeting plan, pay yourself first, and work towards financial success.
Step 1: Understand Your Spending Habits
Before you can save effectively, you need to know exactly where your money is going each month. Start by tracking your spending habits to see exactly where your money goes each month. Split your spending into two categories, fixed and discretionary expenses. Fixed expenses are consistent monthly expenses such as your rent or mortgage, loan payments, or utilities. While discretionary expenses cover non-essential items like dining out, shopping, or entertainment. This exercise can also reveal any “leaks” in your budget, such as recurring subscriptions that you no longer use, or daily coffee purchases that add up over time.
Fortunately, there are plenty of tools to help you get started. You can use a simple spreadsheet, an expense tracker app, or even jot down your purchases in a notebook. The goal is to gain clarity and see the full picture of your spending habits. Once you do, you might be surprised by how small changes—like cutting back on unused subscriptions or setting a limit on takeout meals—can free up extra funds for savings. This first step lays the foundation for building better financial habits and learning how to save money more effectively.
Step 2: Define Your Financial Goals
Having clear financial goals gives purpose and direction to your saving efforts. Think about what you want to achieve, it could be early retirement, buying a home, creating an emergency fund, or even saving for a new car. Write down your financial goals and assign them a timeline. This not only keeps you focused and accountable but also provides motivation and a tangible target you can work toward.
To turn your aspirations into actionable plans, make sure your goals follow the SMART framework: Specific, Measurable, Achievable, Realistic, and Timely. For example, instead of saying, “I want to save for a vacation,” set a goal like, “I want to save $5,000 for my vacation in 6 months.” This way, you can break down your savings target into manageable monthly contributions and see progress along the way. By defining clear SMART goals, you’re not just saving – you’re investing in yourself. This method helps you stay focused on taking meaningful steps as you work towards achieving your financial goals.
Step 3: Pay Yourself First
Once you understand your spending habits and clear financial goals, it is time to implement a “pay yourself first” strategy. This savings strategy treats your savings like a top priority, almost like a bill that must be paid each month. Instead of setting aside whatever’s left at the end of the month after paying bills, buying groceries, and treating yourself, prioritize your savings first by moving a set amount into savings at the beginning of each month or pay period – just like you would any other important bill.
For example, if your monthly income is $4,000, automatically set aside 15% (or $600) for savings at the beginning of the month. This will leave you $3,400 for your bills and daily expenses. This approach simplifies saving because you no longer need to decide how much to save or when. It becomes a habit, allowing you to consistently build towards your financial goals. If you want to level up your savings game, you can even automate this process by setting up an automatic transfer to a dedicated savings account to simplify the process and stay consistent.
How much of your income you save is entirely up to you. If saving a full 15% feels like a big leap, start with a more manageable percentage, like 5-10%, and gradually increase it as you get more comfortable. Starting, no matter how small, and consistently paying yourself first ensures that you’re taking control of your finances and giving yourself the best chance to grow your wealth.
Support and Resources from Mainstreet
We understand that adopting a new saving strategy can feel like a daunting task. That is why our Mainstreet and Aviso Wealth Wealth Advisors are here to support you. We can work with you to develop a personalized savings and investment plan tailored to your goals, lifestyle, and budget. Our advisors can help you find the right savings and investment account, set up automatic transfers, and talk about how to save money to ensure that you are on track to achieve your financial goals.
It is also important to review your savings plan and budget regularly and adjust as needed. Life changes, and so should your savings plan. Mainstreet’s team is here to guide you through any adjustments to make sure you stay on track.
If you’re ready to get started or want tailored advice for your specific situation, reach out to a Wealth Advisor at Mainstreet Credit Union today by visiting a branch, calling, or booking a meeting online. Together, let’s pay yourself first and reach your financial goals!
Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc. The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This material is for informational and educational purposes and it is not intended to provide specific advice including, without limitation, investment, financial, tax, or similar matters.