For anybody thinking seriously about building up their savings, it is essential to begin with a plan. Having a financial plan will not only help you better manage your money to set aside funds for savings, it will also give you guidance for what will be a long-term action plan.

Financial planning does not need to be too intimidating. By following these three simple steps, you can start off on your financial planning journey.

1. Examine your finances and set your goals

Start out by writing a list of your current monthly expenses in terms of housing costs, transportation costs, food, entertainment, clothing, education and all your essential spending. Then, deduct this from your income - this tells you how much you are able to save.

Once you have this, write down your life goals – what do you want to achieve? Are you saving for a car? Your wedding? Your children’s education? Or maybe you want to save for your retirement? Set a financial target for each one of just how much you will need to save to reach each goal.

2. Organise Your Budget

Before you can think about how to save for the future, you need to first organize your income. Start by dividing your income into what you want to spend and what you want to save. A useful rule of thumb is the "50-30-20" formula, which breaks your budget down into three categories:

50% - The Things You Need

Budget half your income for the essentials you cannot do without – for example costs for housing, healthcare, transport, groceries and utilities. Here you can also include your minimum debt payments – for example credit card fees.

30% - The Things You Want

Budget 30% of your income for things that are nice to have, but not essential. This can include dining out, entertainment, hobbies, fancy clothes, holidays and shopping.

20% - Savings

Finally, the remaining 20% can be budgeted for savings. This includes bank savings of course but can also cover investments and insurance premiums.

3. Have A Savings Strategy

Once you have set your financial goals and organized your budget you need to make sure you are planning your savings. It helps to prioritise your savings according to needs. Depending on the amount you must save, these can be done one at a time or all at once.

Emergency Money

Save enough money to support you and your family for three months in case of emergencies such as loss of a job or if you fall ill.  You should remember that emergency savings cannot always pay for serious health issues and accidents.  Therefore, you should consider supplementing your emergency money with protection in the form of life insurance.

Debt Repayment

Once you have emergency savings, or even as you are building it, think about paying off your debts. High interest rates can very quickly reduce your savings.

Short Term Savings

Once you can afford to start putting money aside for those short- to medium-term goals, as set out earlier.

 

 

Retirement

Even if retirement is not your primary goal today, always try to save and invest a portion of your savings for retirement needs. The earlier you start saving for your retirement, the better your lifestyle will be later in life.

One more thing… protect your finances

Insurance is an essential part of your financial planning. Protect yourself and your family against the financial damage that can be brought about by unforeseen events and circumstances. As a minimum, you should consider life and health insurance options. Speak with a Chubb Life Financial Advisor who can recommend the right insurance solution for your needs.

 

With all these elements in place, you are set to begin your savings journey, safe in the knowledge that you have a plan in place to guide you. A financial plan does not need to take too long to create, but its value will stay with you for many years.

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