5 common mistakes when creating a savings plan

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savings plan

Whether it is to buy a house, pay your student loan or save for your retirement; for the sake of your finances, it is necessary to make a savings plan that can help you to achieve your financial goals.

Setting apart a portion of your money and putting it in a savings account. How hard can that be? Well, with all those monthly expenses and pending debts, sometimes managing your money correctly may not be as easy as it seems. So pay attention to these five common mistakes that you may be making while creating your savings plan.

What is a savings plan?

Before we start, we need to get clear on what a savings plan is.

A savings plan is nothing but a detailed and structured plan to improve your habit of saving money. It is a strategy that can help you be clear on the expenses you will be using your money on during the month and how much of that money you can save towards your goals.

For example, if you use a simple budgeting strategy like the 50-30-20 Rule, you’ll know that 20% of your monthly income will always go directly to your savings before anything else. So it doesn’t really matter what you spend the rest of your money on; by sticking to your savings plan, you will be able to save enough money to afford the car of your dreams, pay your mortgage or invest in a new business of your own.

Common mistakes of a savings plan

Ok, let’s see some of the most common mistakes people make when creating a savings plan.

1. Saving only what is left

The main mistake is not prioritizing your savings. Sometimes there’s no money left at the end of the month, which means a whole month without saving a single penny.

Do not save what is left after spending; instead spend what is left after saving.

Warren Buffett

As we said earlier, setting aside a random amount of money every once in a while is not ideal. You need to create a savings plan that you can stick to and plan your finances from there.

2. Saving temporarily

Many people use to save only through a period of the year, maybe when they’re facing a financial crisis or when they want to make a big purchase. It shouldn’t be that way.

It is recommended that you follow your savings plan all through the year, designating a portion of your income to your savings every single month.

3. Misinformation

Unfortunately, few are the people to inform themselves. By following a savings plan, you must know what can happen with your money by staying up to date on how the economy works, taxes, inflation, interest rates, etc. 

4. Thinking for the short term

While creating a savings plan, you should think about the long term.

Time flies, and no matter how young you are, maybe you will have your own family to provide for and want to retire one day. It is a must to plan your future to avoid having a life full of financial stress.

5. Impulse purchases

Chances are you’ll find yourself thinking: “It is not a big deal if I spend more than I should. It will only be for this month, and I will get back on track with my savings plan”. Wrong!

It can start with one month, but before you even know it, it will be the next month and the month after that until impulse buying becomes a habit. Therefore, you need to be strictly accurate while following your savings plan.

To wrap it up…

To create a savings plan that works for you, you need to set your goals and figure out how much time you have to achieve them. When you define these basics, make a monthly budget to know the amount of money you can spend and how much you will put towards your savings.

Keep in mind these common mistakes along your financial adventure and avoid making them at all costs. Soon you’ll see all the advantages of making a savings plan.

Make sure to take a look at the rest of our articles to learn more personal finance tips and simple ways to save money.

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