Now it’s time to talk about how to save money and create a life-changing savings plan. In our last installment of this series on your new financial plan, we looked at how to use credit wisely.
This knowledge combined with the previous module on creating, adjusting, and managing your budget, will create the best foundation for you to build your savings.
What is a savings plan?
I’m pretty sure we all know what the word saving means. We have an idea of someone being rescued or brought to safety. In the financial, you can think of savings as a surplus.
A fancy way of saying extra. A savings is a pool of extra money that’s left over after you pay your expenses. This money isn’t spent. It’s preserved (saved) or kept back.
Let’s imagine a person has $1,000 in their paycheck. They’re expenses come up to $600. How much money will be left after? $400. This money is normally called their profit.
It means the money that’s left over after they pay their expenses. This is money that’s free for you to spend on anything you want. If you choose not to spend it but to save it, then it becomes your savings.
Why savings plans are so important?
Having a savings plan is important for many different reasons. Continuing with this simple example where we secure it a $400 savings, we will show why having a savings is so important. The main reason for savings is to create a buffer for financial emergencies.
BUFFER = lessen or moderate the impact of (something).
One thing we all know, just by living long enough, is that life happens. No one can predict when an emergency arises or how the emergency will impact you. Being able to absorb Financial emergencies is the key to shielding yourself and your family from the impact of struggle and survival.
Did you know that over 39% of Americans have $0 in savings? It truly hurts my heart when I see people all around this country, and even in my own City suffering from the effects of having no savings. Of course, there are a whole host of psychological and mindset changes that need to take place. More than I can address in this blog post on savings.
Dealing with an emergency
An example with the $400 saved, we can clearly see that this individual would be able to absorb a $400 emergency. Let’s say their car breaks down and it cost $350 for them to fix it.
They didn’t spend their money on that luxury Cruise around this city, buying drinks for every one of their friends, they were able to get it fixed with an extra $50 left over.
Was this just worth $350? No. Their car takes them to and from work, having it fixed that they didn’t have to take a taxi or train to work. That’s an extra cost there.
The extra time it would have taken them to prepare to take public transportation. There’s an extra cost associated with that. Let’s not forget the potential to be late due to issues in the transportation system.
So having the $400 in savings did more than pay for a $350 repair. It preserved peace of mind. And at the very most prevented a job from being in jeopardy.
Buying your life back
Not only can a savings plan shield you from Financial emergencies. A savings plan can also buy your time. I learned this principle from Robert Kiyosaki in Rich Dad Poor Dad.
He was the first one to introduce me to the concept of time being infinitely more valuable than money. This led to me understanding that true wealth was defined not in terms of dollars but in terms of hours days and years.
This being the time that you buy back for yourself. Able to do what you want whenever you want without having to answer to a boss or a system. This is true wealth. This is true freedom.
Find out what your time is worth.
Then go to work to buy your time back.
Putting the example to work
In our example above we have a $600 monthly expense. This person makes a thousand dollars a month. Having $400 left over every month, it took him 9 months to save $3,600.00.
Don’t cry for him. Yeah it may have taken a while to get to the point where he can save up only 6 months of his expenses. The beauty in that is he bought 6 months of his life back. He could not work for 6 months and he would be okay.
Did you catch that?
Do you see how this could change someone’s life?
I don’t want you to miss what just happened. This person, God bless him, Just went from Financial struggle, To Financial Security and is now on his way to financial Independence.
Although he doesn’t own his entire life outright, he bought 6 months of his life back. What do you think the next mission is? You guessed it: to grow that number and buy more of his time back. That is what investing is all about.
A savings plan helps you transition
This next benefit of savings plan might get you really excited. Especially for those of you who may recognize you’re not exactly in the career that feeds you so. You may have been looking for a change.
Perhaps you always dreamed of pursuing a career that aligns with your passion. Did you know that having a savings can help you make that switch? Let me explain.
You may not be as free as our friend in our financial example. The good news is you have your sights set on that type of Independence. Here’s the trick. If you buy enough of your time back, you can decide what you want to do with that time.
If you saved your money and bought three seven nine or even 12 months of your life back, you can use that time to strategically choose the opportunity and career that you do want to grow into.
Did you know that even if you do not have a degree in a specific field, you can still get close enough to what you want to do, plan your flag and grow?
Jim’s Savings Plan helps him transition
The scenario
Jim works at a car wash. He has dreams of being in the medical field. He has no experience and no degree. Does that mean he has to go to school before he can work in the medical field?
Not necessarily. This path would obviously take years and lots of money to accomplish. It’s not impossible, but just not within reach for Jim.
What Jim does have is the will to learn and fiery determination. He manages to save 8 months of expenses. Jim didn’t have a strategy. He just had a wise mother that told him to save his money.
Taking his Shot
His love of the medical field had him making his rounds keeping his eyes open for any opportunities. He saw a company that was doing a 6-month internship with the possibility of full-time employment.
- He didn’t have a degree
- He did have the willingness to learn
- He had to determination to prove himself to his superiors
The most important resource he had was the freedom to use his 8 months however he pleased. Did anyone catch the key word in the opportunity that he would ultimately sign up for?
Floating himself
It was an internship, which means he wasn’t being paid for it. Some people don’t have the freedom to do what they want because they have to maintain their responsibilities. Thankfully Jim was able To both:
- Take 6 months off from his job freeing him up to devote fully to studying and growing
- Give himself an income for these 6 months that this internship would not pay him for
Because he was free to give 100% of his wit and passion, they decide to keep him. And guess what happens when he gets the job?
They have relationships with specific schools to make getting your degree fit around your work schedule.
Would he be able to move to his career of passion if you didn’t have a savings? Absolutely not. Stories like this could be happening all around this country every single day.
Yet, it only takes one Financial issue to interrupt a beautiful transition like this.
Why is it so hard to save money?
In the previous example, we saw a $400 profit become a $400 savings with just one decision. Choosing not to spend that money but to save it. This is such a simple concept to understand.
I promise you it is much harder to do. Why is that? We have so many Financial Temptations. Millions of dollars are being spent on psyop ad campaigns to part you with your money.
The War for your dollar
So although the decision to save that money was a simple one, the act of saving your profits requires you to be both determined and strategic. The tragedy is that saving isn’t hard because something’s wrong with you. Saving money is hard because you’re being targeted.
Businesses Market to different demographics of people. They give their advertising based on what class you’re in.
The affluent want to have what no one else has. They have the money. They can drop $20,000 on a dress or watch.
The non-affluent want to “look” or “act” like the affluent. They will use their limited resources to create the image of affluence.
I am not the passing judgment nor making this up. This is human nature. Obviously the full spectrum of demographics is much more sophisticated. This is just the general overview of the two main groups that advertisers target.
For the purpose of this series, I’m obviously going to focus on the non-affluent. If I offended you with this phrase just take a moment to get over it because we need to get to the nuts and bolts of this thing here.
Savings plan enemy: Spending by design
Let’s consider this the middle to low class. Because of the constant messages flooding our devices and senses telling us to buy, the moment we get any money in our hands, we feel the need to pursue the image of affluence.
This pursuit of affluence usually comes in the form of some type of purchase. Understand me clearly here. This is by Design.
- Do you really need 50 pairs of shoes?
- Pay your cell phone bill first.
- Do you really need to eat at a Michelin star restaurant?
- Make sure your fridge has groceries for the week.
What I’m trying to say is that you are probably spending money that you did not plan to spend. You probably don’t even feel good when you look back at your closet or your garage and realize you could have done without a purchase.
Don’t feel so bad. You’re embroiled in the middle of a financial War. Companies and brands spend a lot of money to skillfully take yours.
How to win the battle
So now that we know what is going on behind your wallet, let’s talk about how you can defend yourself. I mean, I think we can all see from the example above how simple saving is.
You literally have to put your armor on when you have a mind to save your money. Honestly, you can’t wait until the moment you have to pull out your wallet. If you’re trying to fight the battle in that moment, you’ve already lost.
The place to really win the battle is before you even think about buying anything. Take some time to learn about how these businesses Market. Research advertising.
This one little exercise will go such a long way. Why is that? It will reveal to you how much of a statistic and a number you really are. I believe if you have any sense of self-worth, you will refuse to be a casualty of their cunning Financial Slaughterhouses. They heard the masses in and slaughter them one by one.
Beyond this, following the budget that you will have already created, you will already have prescribed place to send every dollar. So a random purchase shouldn’t be a part of your plans unless, you want to treat yourself and you can justify it in your budget.
Spend more money
The third thing that I would offer as resource to fight for your savings is educating yourself financially. Learn the financial principles. Figure out what you need to do to put those financial principles to work for you.
The words of my mentor, Myron Golden, The person who spends the most money on your mind gets it. Brains are already spending millions of dollars to capture your spending habits. Invest money into your brain to recapture your spending habits.
Read Financial books, visit webinars, register for seminars. Spend more money on your brain than they are spending on it.
Best Savings Plan
Let’s take a moment to look at how to save money. Let me address this. When you look at how to save money, there two different ideas.
One is how do you cut back on your spending getting discounts to help you make the most of your money. The second is how you actually build a savings by systematically adding more money to a pool of money that you have in reserve.
In this section we will talk about the second. One of my favorite ways to teach people to save money is to make it Fun by gauging in a challenge.
Top 4 Savings Challenges
52-Week Savings Challenge
This is a simple, year-long savings plan that gradually builds your savings without overwhelming your budget. You start by saving $1 in the first week, $2 in the second week, and continue increasing your weekly contribution by $1. By week 52, you’ll have saved a total of $1,378.
This challenge is perfect for people who appreciate slow and steady progress and want to build a strong savings habit over time.
No-Spend Challenge
It’s all about cutting unnecessary expenses for a set period of time. You commit to spending only on essentials—like rent, bills, and groceries—while avoiding things like dining out, entertainment, or impulse purchases.
This challenge can be done for a day, a weekend, a week, or even an entire month. It’s ideal for anyone who feels their spending has gotten out of control and wants to hit the reset button on their finances.
$5 Bill Challenge
If you enjoy saving in a more casual and spontaneous way, try the $5 Bill Challenge. The rules are simple: every time you receive a $5 bill, you tuck it away and don’t spend it. It’s a low-pressure method that adds an element of surprise and fun to saving.
This challenge works best for people who still use cash regularly. Also for those want a savings strategy that doesn’t feel like a chore.
30-Day Savings Challenge
This is great for those who want quick results. You start by saving $1 on day one, $2 on day two, and continue increasing the amount by $1 each day. By day 30, you’ll have saved $465.
This short-term challenge is excellent for jumpstarting an emergency fund or reaching a specific savings goal fast. It’s especially appealing to those who thrive on momentum and like seeing progress quickly.
How much should I save?
After taking this journey with me through the benefits of a savings, you may wonder, “How much am I supposed to save?” I hate to seem like I’m click baiting you by not giving you a direct answer right here.
The truth is that your budget dictates all of this. That’s why it’s so important. That’s why it comes before the stage in the series on your new financial plan.
If you hadn’t created one, now is definitely the time. Once you create it you will see, like I’m saying that a lot of these questions will become clear to you.
Budget & Savings Plan
In the meantime, let me explain. Your budget shows you a financial snapshot of where you are right now. Many people don’t even know how much money is coming in or going out.
We take gases and we have General numbers. When we do the work to find out what we actually spend, it surprises many of us.
A budget:
- Helps you figure out where your money is going
- Reveals how much money you have after expenses to build wealth
- Shows you where you can cut spending to etch out more profit
- Determine how much your monthly expenses are
So, these benefits help you to figure out how much your spending every month. This number is the basis for your savings. It shows you essentially how much your time costs.
We can use the example of the $400 savings.
$1,000 income
$600 expenses
$400 profit
I usually advise saving half a year of expenses. 6 months is right down the middle. This lines up with the phrase that I usually, share “A lot can happen in 6 months.”
Depending on how much risk tolerance you have, You may want to save three to 12 months worth of expenses. The choice is totally up to you. Like I said I recommend 6 months.
In this example that 6 months savings would be $3,600. Again at $400 left over each month, it would take 9 months to save.
What happens after your savings plan?
Well once you have that savings, what do you do next? Do you keep saving money? Or do you start spending it? Neither. Once you have your savings, you don’t want to keep saving.
I know that sounds crazy. It sounds like a contradiction doesn’t it? Well, let me say this. I’m not telling you to stop applying your finances strategically. I’m only telling you to stop saving.
What should you do instead? This is where investing comes in. Saving money has a flaw. It’s sad because saving is such a powerful Habit to develop.
However if you save all your money, a secret and me called inflation will slowly eat it up. Inflation is the consistent and systemic erosion of our money.
Because of inflation what you could buy for $1 today, will only by $0.96 worth next year. So if your money just sits in a savings account, you will actually be losing money.
Conclusion
With everything we learned about building a savings, I’m sure you can have a new appreciation for hiding some coins under your mattress. Let’s master the art of saving money, and once we buy that security, we will go to the next module in your new financial plan which is investing.
What is the most money you’ve ever saved?
