Building a Simple Savings Plan You Can Stick To

Saving money is like trying to get healthy.

You have the best intentions. Maybe you even have a few savings strategies in place.

But before long, you lose control. You eat the entire large pepperoni pizza or, in the case of a savings plan, go wild and buy six house plants and ornate pots from the garden store.

After that binge, you’re filled with self-loathing and wonder how you’ll recover.

Savings plans, like diets and workout plans, can be difficult to stick to. There’s so much room for error.

You might be able to simplify the process, though. Just as people don’t have to join a CrossFit gym or go on a Paleo diet to be healthy, they don’t necessarily have to set aside 50% of their income, cut out all alcohol and shop exclusively at dollar stores to save money.

Here are seven not-so-intimidating savings strategies that might help create an attainable and sustainable savings plan.

1. Identifying Your Savings Goals

Having trouble staying motivated to save? There could be numerous reasons why.

Maybe you’re overwhelmed. You might feel like you’ll have to save for months to get anywhere. Or perhaps the entire idea of savings seems too abstract.

Setting goals can help offset those discouraging feelings that send savers spiraling.

First, you could try identifying one or two short-term goals. How about setting aside enough money for an emergency fund? Maybe you want to take a trip to Italy next summer or save for a down payment on a new car.

Then, you might consider one or two long-term goals, such as saving for retirement, buying a house, or putting money away for a child’s college education.

For short-term goals, think about how much money you’d need to attain those objectives and how long you have to save for them. Maybe the goal is to create an emergency fund by setting aside the equivalent of six months of expenses, and you want to do so within a year or 18 months.

Or you may want to have enough cash squirreled away to be able to pounce on airline tickets to Italy that will go on sale in two months.

Now think about long-term goals. For example, to be in a position to buy a house by the year 2022, it’s simple enough to set a time goal and work out the math.

Just decide how much money you want to put down, research the extra expenses of buying a home (closing costs, property taxes, homeowners’ insurance, etc.), decide how much money you want left over after buying the house, and voilà! That’s a monetary goal before 2022.

Let’s say you have the goal to retire by age 67 or even to retire early. Calculate how much money you want to have stashed away before retirement.

Everyone is different, but when it comes to two or more savings goals, sometimes creating separate accounts for each goal is helpful. For instance, you could have a short-term account, an account for the future house, and a Roth IRA for retirement.

Setting concrete goals can give you something to look forward to as you save, which helps keep spirits high. Having separate goals is also a way to organize savings so that you can keep track of your progress.

2. Organizing Your Finances

How much money do you earn each month after taxes are taken out?

What is the balance on each of your credit cards right now?

How much do you spend on groceries every week?

If you don’t know the answers to these questions, then organizing your finances could help you get a handle on things.

When people don’t know how much they spend and when, it can be difficult to stick to a savings plan. If you don’t know how much money hits the bank account each month and how much you spend, how do you know what’s a realistic amount to save?

Before creating savings strategies, many people find it helpful to track their spending and expenses, organized by week, month, or year.

Some finance blogs advise readers to track every single penny they spend in one week or month to determine how much they realistically spend. If you have the focus and organization to do this, then by all means, go for it! A lot of us forget, though.

We’re great for the first day or two, but then we tell ourselves, “Oh, I forgot to write down the cost of that sandwich. It’s fine, I’ll remember when I get home.” Or, “It’s okay if I just round that $27.35 down to $25.”

So if you’re struggling with that age-old mandate to record every cent, consider a simpler approach. You can find an online template to track everything you spend, including things like rent, groceries, student loan payments, drinks with friends, and pet food.

Keep this document on your computer for easy access, print it out and display it on the fridge, or just store it in a nearby drawer. Having it on hand will provide you with a visible reminder to keep up with your income, spending habits, and goals.

3. Pinpointing Unnecessary Spending

Now that you’ve organized your finances, it can become much easier to answer the all-consuming question, “Where can I save money in my budget?”

Your problem might not be blowing your wad of cash on a new car or flat-screen TV. It could be buying small, unnecessary items every day.

Have you ever heard of David Bach’s
concept of the “latte factor?” The idea is that people spend money buying a drink at a cafe every day because spending a couple dollars at a time doesn’t seem like a big deal. But if they cut out that $5 purchase completely, they would save $35 per week, $140 per month, $1,820 per year.

Buying coffee may not be your Achilles’ heel, but there’s probably something out there to cut back on. That budget spreadsheet could lead you straight to the answer.

Maybe you subscribe to Netflix®, Hulu®, and Amazon Prime®. You watch the latest episode of “The Bachelor™” every Tuesday when it comes out on Hulu and binge watch “Stranger Things™” on Netflix®, but you really only take advantage of Amazon Prime® once every month or so. Could you cancel that Amazon Prime® subscription and save some money?

When buying groceries, maybe you always buy name-brand products, because $3.75 for a box of cereal doesn’t seem like that much more than $2.99 for off-brand cereal. How much would you save if you bought more off-brand items at the store?

Almost everyone spends more than they need to on something. It’s nothing to be ashamed of. The trick is figuring out where your weakness lies.

No, cutting back on a couple frivolous expenses isn’t the be-all and end-all of strategies for saving money. But it is an important step that can shift your mindset and get the ball rolling.

4. Spotting Spending Sprees

You may not struggle with consistently buying superfluous things. In fact, you may be downright frugal—until you slip up. Financial binging may be a struggle for some people.

If a person’s income level is barely enough to live on, skimping on everyday purchases, perhaps eating a lot of peanut butter and jelly, and declining invitations to go out with friends might feel necessary. But binge spending after skimping may negate those attempts at frugality.

Depriving oneself of enjoyment isn’t necessarily the answer, but putting limitations on how that enjoyment is obtained can be a key factor in limiting binge spending.

Clothes, books, beer, food. Everyone has a different kryptonite. Identifying the thing that stands in the way of saving money may help bring awareness and help rein in spending in that area.

5. Tackling Your Debt

Student loans. Bank loans. Credit cards. There are numerous ways to accrue debt.

Worst of all, debt can accumulate interest. For instance, the longer you go without paying off your outstanding credit card interest in full, the more interest builds on your card.

This means that even if you’re putting money into a savings account bit by bit, you could actually be losing money if you aren’t whittling away at existing debt. For this reason, many financial pundits suggest paying off debt before saving, particularly if you have high interest rates on cards or loans.

There are always exceptions to this rule, though. For example, you may decide to start saving toward an emergency fund before paying off all that debt.

Or if you have a retirement fund set up through a company that matches your contributions, it may make more sense to you to take advantage of that. As another example, if you’re enrolled in a student loan forgiveness program, it may not be as important to you to pay all those loans off right now.

There’s no clear winner in the great debate between debt payoff and saving. If you have a large amount of debt, for example, it may not be a good idea to spend years paying it off before ever saving a dime. The trick is striking a balance between high-interest debt and putting away enough money for your savings goals, whatever those may be.

Pro tip: Interest rates on credit cards are notoriously high, but it’s possible to contact credit card companies to negotiate a lower rate. There’s no way to guarantee that asking will yield results, but for borrowers in good standing, a company may consider lowering their rate. This could help speed up your debt payoff process.

6. Setting up Automatic Savings

It’s far too easy to say you’ll work out five days per week; actually changing clothes and driving to the gym is a whole other ball game. Similarly, it’s easy to promise to save a certain amount of money every month, only to either forget or find a way to spend that cash before depositing it in savings.

To help set yourself up for success, you might want to consider creating an automatic savings plan.

If saving is automatic, it can be easier to stay strong. The money put into savings can just become part of your budget, like paying rent or car insurance. In fact, you may forget you’re saving that money, because you don’t have to consciously deposit it every month.

The process of setting up automatic savings varies depending on which type of account you have. If you have basic checking and savings accounts, it’s typically possible to arrange an automatic transfer of money from your checking account to your savings account on the same day each month.

7. Setting up a Reward System

Saving money can sound boring and restrictive. Sure, you’re saving for that big trip to Italy, but that day is so far away. Do you really have to eliminate all fun purchases until then?

Not necessarily.

If you need a little encouragement to keep from falling off the savings bandwagon, rewards might keep you in check. You may want to consider rewarding yourself every month that you save or every time you hit a numeric milestone.

You may choose a reward that will cost money, like a pedicure, trip to the thrift store, or dinner at that restaurant you’ve been meaning to try for months. Or you could brainstorm free rewards, like an afternoon at the pool or a visit to a local attraction.

Rewarding yourself with items or events you genuinely look forward to can be a great motivational tool.

Making This Savings Plan a Reality

These seven saving strategies may seem simple enough, but how do you keep your savings plan from once again falling by the wayside?

Enter SoFi Checking and Savings® account where you can easily create vaults within your account, each for its own purpose.

Plus, you can name each of the vaults and give them a savings target based on a certain dollar amount and/or date goal. You’ll be able to easily keep track of progress on each of your vaults.

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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet..

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