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One-Year Savings Plan to Build Your Emergency Fund
Do you have an emergency fund for unexpected expenses? Or even just a small savings account that you make regular deposits to? If you are like most of America, the answer is no. Most people spend everything they make each month (sometimes more on credit) and don’t even think about their savings.
But if you suddenly find yourself with an unexpected repair bill, you’ll be wishing that you had put some money aside. With the New Year approaching, it’s a good time to get serious about saving before you actually need it.
Committing to a weekly savings plan may sound easy in the beginning, but can you actually stick with it? That’s the key to making it work. And trying to make a drastic change in your spending and saving habits may be too hard to maintain over an entire year. Starting small will help you maintain your momentum and ultimately reach your goal.
You just need to manage a slight increase in your savings plan each week. A small, incremental increase each week for one year will help you reach your goal.
Here’s how it works:
On Week One, start by saving just $1; then $2 on Week Two; Week Three is $3, and so on. The most difficult week of the year will be Week 52 when you’ll need to set aside $52. But, if you can manage to do this, your savings will add up to $1,378 in just one year. That will be enough to provide you a comfortable emergency fund.
The key to the challenge is to create and stick to a schedule. This will help you to make small adjustments to your savings habit over time, which is perfect if you are just starting out and you’re not used to setting anything aside.
If you have trouble keeping up with the plan, try automating your savings. Set up automatic transfers from your checking to your savings account and move the money on a scheduled date.
Automation is just part of the solution though. You also need to make sure that you can’t access your savings account on a whim. Don’t link your account directly to your debit card or use it for overdraft on your checking account. You should only be able to access your money by going to the bank or making an online transfer that will take a few days to complete. This will make you think twice about using your savings and keep you from making impulse purchases with it.
If making a weekly deposit doesn’t work for you, change the transfers to bi-weekly or monthly depending on your pay schedule. Just be sure that you are adding in the amount for the missed weeks when you schedule the transfer. For instance, if you want to make your January deposit in one payment, you will need to transfer $10 to cover the first four weeks of the year.
If you think you may find it difficult to deposit larger amounts toward the end of the year, especially when the holiday season approaches, try reversing the plan and deposit $52 on Week 1 and $1 on Week 52. That may make it easier on your holiday budget.