Saving for a big goal, from a down payment to a project

Start with what you're saving for, how much and by when. Then turn that into an amount to save each month and check it against your budget.

What you need

• Three months of pay stubs or deposit records
• Three months of bank and card statements
• A savings account, at the same bank or credit union as your checking or another one

Steps

1. 1

   Name the goal, the amount and the date

   The goal might be a down payment, a car or a kitchen project. Write down the amount and the date you want it by.

   5 min

2. 2

   Work out the monthly figure

   Divide the goal amount by the number of months until the date. A goal two years away is the amount divided by twenty-four.

   5 min

3. 3

   Average three months of income

   Income often varies from month to month, so list three months and average them.

   10 min

4. 4

   Average three months of spending

   Do the same for each kind of expense, from housing and food to transportation and subscriptions. Income minus spending is what's free for the goal.

   15 min

5. 5

   Set up the recurring transfer

   Set up a recurring transfer through your bank or credit union, so money moves from checking to savings on its own. You decide how much and how often.

   4 min

6. 6

   Confirm the plan holds

   Check that the monthly figure fits inside what's free each month and that the first transfer is scheduled.

   1 min

If the figure doesn't fit

If the monthly figure is more than what's free, two numbers can move. The date can go later, so the amount spreads over more months. Or the goal can get smaller. Run the division again with each change until the figure fits. Once it does, check your progress now and then, with a balance alert or a running total of what you've put in.

Other ways to make it automatic

Some employers can split a direct-deposited paycheck so part goes straight to savings. If you're paid by direct deposit, ask your employer whether the paycheck can be divided between two accounts. Money that arrives once, such as a tax refund or a cash gift, can go in too.

Watching the checking balance

Know your monthly income and expenses before the first transfer, because a transfer your checking account can't cover may bring an overdraft fee. An automatic balance notification or a calendar reminder helps you check the balance before each transfer.