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4: Make Your Plan

Spend and Save Mindfully

hand dripping coins into small purseIncrease your retirement savings rate, emergency fund(s) and even your net worth using a spending plan, spending less than you earn and automating your savings.

Pay Yourself First

Think of saving as paying yourself first. Even if it’s hard to resist spending today, you need to realize that you are taking money away from the future you when you spend.

For the short-term, make it a priority to set aside a portion of your pay for savings.

Here are some ideas to get started:

  • Automatically save from your paycheck. Have your employer automatically deduct money from your paycheck and deposit it into a savings account or other interest-bearing account. What you don’t see, you won’t miss.
  • Automatically transfer savings from your checking account once a month. Set up an automated transfer to move a set amount of money from your checking account into your savings account each month.
  • Use savings apps. Choose a savings app or financial product that automatically saves every time you make a purchase. Some apps will round up to the nearest dollar of every purchase and put the remaining change into savings — for example, if your purchase is $3.55, the savings app would add $0.45 to your account.

In the mid-term, set up a spending plan and hunt down spending leaks.

arrow shot into a target with the word challenge on it
  • Use SAM’s Budget Worksheet for two months to establish your budget (spending plan) and track your actual expenditures. Modify the budget if you underestimated any spending items and then come to a budget that works and can be used for six months.
  • SAM’s Spending Detective Worksheet can help you identify where you are spending cash that could otherwise contribute to your savings and investments. If you find extra money to be saved, add it to your spending plan.

Your long-term activities should include tracking down ways for your additional savings to work for you. Money sitting in a bank is safe, but it’s not earning much for you. Put it to work in a low-risk interest-earning account and reap the rewards.

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