When you hear “Savings Plan” many of us think of a diet, and we all know how hard it is to stay on a diet.  However, creating an automatic savings plan can be very easy.  In four easy steps you can be on your way to the best savings plan ever.  This is a guaranteed way of saving money no matter how much you make.

Four Easy Steps to the Best Savings Plan Around

Personal Savings Plan Step 1

Experts recommend saving at least 6 month worth of your current bills/expenses.  Add up all your bills and expenses for the month and times the total by six.  Use CashTrackerPro Access add-on to help you add up your expenses (It’s Free).   

$1000 (current monthly bills and expenses)
x 6 (recommended reserved or emergency cash)
$6000 

Personal Savings Plan Step 2

Open a checking account or use your existing checking account.  Put 1 month worth of your emergency cash into the checking account.  From the example above that would be $1000.

Personal Savings Plan Step 3

Open a savings account or use your existing savings account.  Put 1 month worth of your emergency cash into the saving account.  From the example above that would be $1000.  At the end of every month, calculate 15% of the total deposits menus the total withdrawals in your checking account and transfer the total into this savings account.

Automatic Savings Plan - Deposited $1100 - Expenses $1000 = $100 times .15% = $15.00

Personal Savings Plan Step 4

Open a money market account or use your existing money market account. Put 4 months worth of your emergency cash into the money market account.  From the example above that would be $4000.  At the end of every month, calculate 15% of the total deposits menus the total withdrawals (included the 15% we transferred to the saving account) in your checking account and transfer the total into this money market account.

Automatic Savings Plan - Deposited $1100 - Expenses $1000 - Saving Account transfer $15.00 = $85 times .15% = $12.75

Most money market account have withdrawal restriction, but pay a higher interest rate.  If you feel comfortable with putting your emergency cash in a money market account you will earn more interest, but you will be limited to how many checks you will be able to write.

Automatic Savings Plan - As you can see $27.75 has been transfer to various accounts, and $72.25 will remain in your checking account.  At the end of the year transfer all but your beginning balance from your checking account to the highest interest rate account.  Using the savings plan calculator at the end of the year your checking account balance will be $1867.00.  Therefore $867 should be transferred to your money market account.

Take a look at your account balances over a period of three months, based on the following monthly totals:
Monthly Savings Deposit of $1100
Monthly Expenses of $1000 (leaving $100)
Saving Account Interest of 2.96% (ING Saving Account Interest Rate as of 7/3/08)
Money Market Account Interest of 3.35% (Ing Orange Electric Account Interest Rate as of 7/3/08)

Use the Savings Plan Calculator below to tailor your Personal Savings Plan

Beginning Balances:
Checking Account $1000.00, Saving Account $1000.00, Money Market Account $4000.00

    Checking    Saving       Money Market
1  $1072.25   $1017.50   $4023.95
2  $1144.50   $1032.55   $4036.77
3  $1216.75   $1047.58   $4049.55

You can download the Cashtrackerpro Excel Spreadsheet to create your own personal savings plan (FREE CashtrackerPro Excel Spreadsheet).  Also use the CashTrackerPro Access add-on to calculate your monthly expenses (FREE CashTrackerPro Access Add-on).

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Other Resources

• The Best Ways to Save Money