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Making a Savings Plan 101

More than half of Americans are living paycheck to paycheck, with little or no money left by the end of each pay period, according to a new study. While the problem is widespread and affects people across income levels and demographics, the solution isn’t that difficult. By saving money, even a small amount from each paycheck, people can gradually build a stash of extra money to keep them afloat when funds get low.

Developing a habit and a discipline of saving money can keep you from turning to credit in emergencies. It can also help you reach financial goals and be prepared to make large purchases. But getting disciplined about saving won’t happen without focused planning.

Whether you're saving for a big investment like a home, or just want to start putting money away and free yourself of the paycheck-to-paycheck cycle, having a plan is essential. Here’s a step-by-step guide of how to get started.

Plan Your Savings 

The first step is to answer these questions: How much do I need to save? And for how long do I need to save?

Your answers will depend on your goals for saving money. If you have very little or no savings, building an emergency fund is an important goal to start with. You may also have other savings goals, such as saving for a car, home or for a child’s college education.

For each goal, determine the amount you’ll need to save. Most financial experts recommend building an emergency fund that includes at least three months’ worth of expenses. So if your bills total $3,000 each month, you should aim to save $9,000 in an emergency fund.

When you have a total in mind, divide that amount by the number of months until you want to reach that goal. If you want to fund your emergency account with $9,000 in three years, you’ll divide 9,000 by 36. The result, $250, is the amount you’ll need to save each month to meet your goal.

Repeat the process for each savings goal. In some cases, you may need to adjust your timelines or savings amounts to make sure it’s doable for your budget. For example, if you don’t think you can save $250 each month for an emergency fund, give yourself a longer timeline to reach that savings goal. Even if it will take you a long time to reach your goals, committing to saving a little bit each week or month is an important start.

Analyze and Organize Your Finances

The next step is to take a look at where you’re currently spending your money. Go through at least 60 days’ worth of bank and credit card statements and divide all your expenses into categories, such as housing, entertainment, food and healthcare. List how much you’re spending in each category, and carefully review each expense to find opportunities to cut back and free up more money to save.

For example, cancel any streaming subscriptions you don’t use regularly, eat out less often, and call your utilities and cell phone provider to see if you qualify for any discounts.

You may need to adjust your timeline for your goals if you can’t save the full amount needed each month. Play with the numbers and figure out an amount you can live with and commit to saving each month.

Finally, create a written budget or spending plan, using the categories and expense list you developed from your last few months of spending. Be sure to include savings as a line item in your budget—and make a commitment to stick to it.

Find a Home for Your Savings

Once you’ve committed a certain amount to savings each month, the last step is to decide where you will put those funds. There are a number of different places to keep your savings, such as a regular savings account, a money market account, a CD, or even an envelope under your mattress. The one that will work best for you will depend on your savings goals and timeline.

For example, if you’re working to build an emergency fund, you should keep it in an account that is accessible if you need it, but not so convenient that you’ll dip into it even when you have no emergency. Consider a high-yield savings account or money market account. For goals with a timeline of more than one year, you may consider opening a CD, which will keep your money safe and pay a guaranteed amount of interest when the CD matures. You can purchase CDs with various terms, such as six months, 12 months, 24 months or longer. For some savings goals, there are tax-advantaged accounts you can choose, such as 529 accounts for college savings or IRAs for retirement savings.

To keep your goals separate, you might consider using a separate bank account for different types of savings. For example, you might open a money market account for your emergency fund, a regular savings account for your upcoming vacation, and another account for that car you’re saving for.

Implementing savings into your budget and your lifestyle may represent a major shift in your typical money management strategy, but over time, you will become accustomed to saving—and you’ll thank yourself later.

Ready to review your options? Connect with an Old National banker to discuss your options today or visit

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