With money you can either ‘Spend It’ or ‘Save It’, Spending is an activity of your current self, saving is providing choices to your future self. A good savings plan will have 5 steps :
i) You must have a ‘Why’
ii) You must have a way of keeping score – ideally in an account named appropriately for the specific ‘Why’
iii) You need a contribution schedule
iv) You must choose a sensible place to deposit the funds and
v) You need to review progress and work on the ‘saving habit’
- Emergency Funds – For the inevitable events – An ‘Oh No’ fund
- Treat Funds – Reward systems are essential for budgeting – An ‘Oh Yeah’ fund
- Specific Objectives – School fees, birthdays, holidays, weddings etc.
- Generic Objectives – A ‘Nest Egg’ fund.