The New Year is a great opportunity to start saving on a regular basis. This past summer, a Bankrate.com report showed that almost three quarters of Americans live paycheck-to-paycheck, with little or no savings. That’s an alarming trend, and if it describes you, it’s one you can change starting on January 1st.
A regular savings schedule ensures that some of your income, even if it’s just a few dollars, gets put away every week or month. When you need it for an emergency or even just to cover next month’s rent before your paycheck comes in, that money will be there for you, because you’ve slowly added to it every week or month of the year.
Of course, when you’re struggling with your budget, finding the room to put some of your money away can be tricky — there’s always some pressing need that takes priority over savings. Thankfully, you can start small, even just a dollar or two a week. I want to show you four different savings schedules that each result in an account balance of over $1000 by the end of the year, but none of them require particularly large savings contributions.
The Original 52 Week Savings Plan
This savings plan was all over the Internet last year, and I expect it will be a popular one again this year. The idea is simple. Every week in 2014, you deposit a small amount of money into your savings account. Start with one dollar the first week, then two dollars the next week, and so on, until you’re depositing $52 the last week of December 2014. At the end of the year, you will have saved $1378.00.
This is a pretty neat plan because it starts small and painless. Everyone can scrounge up a dollar for their first week, and even ten weeks in, you’re only committing $10. But because the contribution amount keeps increasing every week, it soon forces you to think of what you can cut and save (or how you can increase your income) to find that $40-50 you need each week for the last few weeks of the year.
Since it’s dealing with such small amounts of money, this is a great plan for people who don’t have a lot of excess cash in their budget. Of course, the trade-off is that at the end of the year, you’ve only put away a little over a grand. Not a small amount, necessarily — it’s a great start to an emergency fund or a Roth IRA if you don’t have one yet — but not a lot either. If you have the income to support it, consider throwing a multiplier into the mix. Contributing double or triple the amount called for by the plan will greatly increase the amount you have saved at the end of the year.
Reverse 52 Week Savings Plan
This plan is almost identical to the plan above, except you work backwards, starting with the largest contribution to your savings account and decreasing your contribution from there. The first week of January, put $52 into your savings account. The next week, put $51 in, and so on, until you’re just adding a single dollar the last week of December 2014. There’s some advantages to this — it gets your biggest contributions out of the way early on, and it just gets easier from there. Money can be tight during the weeks leading up to Christmas, so by the time you get there, you’re only responsible for contributing a few dollars a week to your plan.
On the other hand, it requires you to find that extra money right after Christmas, which isn’t necessarily a bad thing. If you received any cash for Christmas, it’s readily available to fund your early contributions instead of getting blown on yet another gadget, or maybe you could sell or return some gifts you don’t care for to raise the extra cash.
The $25 Savings Plan
This is one is simple. Just put $25 into your savings account every week for all 52 weeks of 2014. Why $25? It’s a nice round number that happens to be just a dollar or two off from the $26.70 average contribution in the standard 52 Week Savings Plan. The total saved is a tad less ($1300.00 at the end of the year), but this plan has the benefit of simplicity and stability.
Since your contribution doesn’t change every week, it’s a cinch to incorporate it into your budget. $25 every week is automatically earmarked for savings, and you don’t have to worry about that amount changing throughout the year. Since the number stays the same, you can even set up some sort of automatic transfer through your bank that takes that $25 out of your checking account every week. It streamlines the savings process and ensures you’ll never forget to make a contribution.
Again, if that amount seems too small, consider doubling or tripling that contribution, up to whatever your income can support. Likewise, if your budget is so tight you aren’t sure where you’ll find an extra $25 each week, it’s okay to go for a smaller amount — say $10 a week.
The $100+10 Monthly Savings Plan
This plan throws the weekly contribution out the window in favor of a monthly savings contribution. Starting in January, make a single deposit of $100. In February, increase your deposit to $110. Increase your contribution by $10 every month, until December 2014 when you make a final deposit of $210.
This plan preserves the increasing-contribution idea from the original 52 Week Savings Plan. That’s an important aspect, because the increasing contribution is a great catalyst to encourage you to look for ways to save money throughout the year or to increase your income.
Since it’s dealing with higher amounts, this savings plan results in a larger total savings of $1860.00. It can also be a little easier to manage, since you’re only responsible for 12 separate deposits instead of 52, which makes it useful for people who only get paid once a month. Since you don’t have to make a deposit every week, this plan gives you some flexibility week to week, so long as you still meet your contribution amount.
You could even do a reverse version of this plan, starting with a large contribution in January and decreasing your contribution each month, if that’s a little easier for you to manage.
Do you have any sort of savings schedule? Do you automate your savings or prefer to make deposits manually?
Photo by Andrea Travillian.