Building Up A Savings Plan


Featured Loan: 0% Interest up to 10,000! No Need App!


Building Up A Savings Plan

A savings plan is a plan which involves safe, secure and proper allocation of your savings whether in your own supervision or through the help of banks and other financial entities who will keep track in order to meet your short term or long term financial goals.



Here are the ten simple steps in making a savings plan that will help you ensure a strategic way in handling your own finances:

  1. Educate Yourself
  2. Know Your Monthly Expenses
  3. Allocate a Buffer Fund From Your Monthly Expenses
  4. Subtract  your buffer fund and monthly expenses and your Income and it becomes your savings
  5. Decide where to put an remnant buffer funds at the next payroll
  6. Compartmentalize your savings based on your goals and priorities
  7. Divide your savings and your expenses and buffer into two separate banks
  8. Invest your savings into different instruments depending in volatility, risks and their terms
  9. Draw the outline for your savings allocation before another payroll or the end of the month and draw potential scenarios and its re-allocations for flexibility.
  10. For an extra income, always divide it into a regular savings and the other into higher yield investments.

1. Educate yourself

Better know your background,   work environment, and your current financial situation and the economics of your household. An effective and efficient long term savings plan is only possible if you know the nature and economics of your life and your short- mid and long term goals.

2. Know your Monthly Expenses

The monthly expenses are those costs or the short term expenditures used in meeting our immediate needs in a month. Things like food, electricity, water and other services essential in our life but in short term in its utilization and demands. Keeping track of your expenses will allow you to identify the trend in your cash flow.

3. Allocate a buffer fund from your monthly expenses

The buffer fund is a term used for semi-savings money allocated if there is an excess expenditures or unmet needs that are not part of your monthly financial plan. The buffer’s other purpose lies on preserving your main savings account from further expenditures.

4. Subtract  your buffer fund and monthly expenses and your Income and it becomes your savings

To determine your savings, here is a simple formula:

Let e for expenditures,  b for buffer and I for income and s for your savings shall we?

I-(b+e) =s  , s then becomes your savings

5. Decide where to put any remnant buffer fund at the next payroll

If the buffer money is unused for the month, you have to decide whether to add the existing buffer to your savings account or other savings instruments? Or to add the existing buffer to the buffer you will allocate the next payroll or month. These are two simple options that are driven by your needs, another option will be to have it allocate a half to your savings and another to your buffer next month for addition.

6. Compartmentalize your savings based on your goals and priorities

Many people often associate savings with savings account in banks. Fair enough but in life you have lots of goals, they could be short-term, mid-term or long term. Make a list of those and categorize it into 3 based on time periods.  That is just one scheme. Other schemes are based on your mid to long terms goals as short terms goals can be handled by the accumulated buffer money

7. Divide your savings and your expenses and buffer into two separate banks

It is important to save your money in banks. It prevents compulsive expending behaviour that plagues people who saves money in their home as they are easier to access. It will give time for the handler to assess and re-evaluate his/her priorities. But just as important is to know what is the right bank for you. There are several useful factors and categories to consider of which were but this only simplified into two based on utility:

Availability and Accessibility- used mainly for expenditure and buffering purposes and also for commercial purposes and passive incomes and online transactions here.

Security and Diversity – Banks focused mainly savings and on many high yielding instruments. You put all your savings here.

8. Invest your savings into different instruments depending in volatility, risks and their terms

It is not only about saving but growing your money that maximizes and complements your goals that are just as important. It is important to delve and know more about your banks. Banks do not just store money. They have high potential to earn high yields than regular savings account to meet your mid-to long terms goals. I’ll only introduce 2 sure ways of getting higher returns. I am talking about investments here because we are maximizing our savings here. Money is not easy to get so therefore it is necessary to maximize it by growing it.

Stock Market – Some banks have trading platforms that allow users to engage in stock market. Stock market provides income for people by 2 ways. First is dividend yield and the other is on capital appreciation. Invest in high dividend yield and stable corporation and diversify your investments into other companies. Once in a while they will give high dividends based on the number of shares present that you bought. This is recommended for your long term growth. Buying stocks in lower prices and Selling them in higher prices will ensure you will have a high returns from your investment.  They have higher returns than regular savings account. This is handy in long term goals. It is important to keep tract on the stock market and its trends.

Mutual Funds (in particular Money Market Funds)-  It is also possible to engage in this instrument .I only recommend Money Market in this article because they are rather conservative in their risk , but still able to return much higher than regular savings account and even time deposit. They are also rather resistant to stock market fluctuations.  This is very handy for low to mid-term goals. Time Deposit is also possible but it has lower returns. All of these 3 instruments essentially ‘lock’ your savings into investment for higher returns.

9. Draw the outline for your savings allocation before another payroll or the end of the month and draw potential scenarios and its re-allocations for flexibility.

Every end of the month or just before your next salary, redraw your plan and come up with different scenarios. Every month , there are expenses with higher priorities over others. Other important services may still have the same allocation and out of these you derive how much will fall into buffer and your savings. There is no guidebook in life but you can improvise and make certain amendments in your purchasing power and your savings.

10. For an extra income, always divide it into a regular savings and the other into higher yield investments.

If you have an extra income other than that of your regular salary. Divide it first into both buffer for the future and the other into your savings. And out of your the savings allocation further divide it into instruments that your savings was invested or allocated on.

The following two tabs change content below.

Sharmaine Escarian

Unstoppable, determined and very passionate. A full time HR practitioner, freelance writer, a loving daughter and a seeker of adventures, lifetime learning and improvement. And shall continue to design the life that she has always dreamed of -- inspirational, purposeful and a journey where there is contentment and genuine happiness.

Latest posts by Sharmaine Escarian (see all)


Basahin ang iba pa naming mga posts to know more!

SSS Calamity Loan

sss calamity loan during the covid-19 pandemic

Featured Loan: 0% Interest up to 10,000! No Need App! The Calamity Loan provided by SSS and PAG-IBIG has the same purpose of providing immediate financial assistance to members who…

Leave a Comment