Saving only has one function: to prepare for a future expense, planned or unplanned. That means you need to have some goal in mind when you put money away in a savings account. Is it to build or rebuild your emergency fund? Are you saving for your next car, a down payment on a house, or for a vacation?

Determine the costs involved with each purpose and the time you have to save for them if applicable. You can then use that information to establish realistic expectations for achieving those goals. Or you may find you can’t achieve your goals without carving out additional money from your budget. Maybe you find that if you cut out $50 per month on going out to eat (plus what you can already put toward savings) you can have enough saved for your vacation next year.

Building up an emergency fund is the best way to start saving. This is your “oh crap” fund for the times you have a big medical bill, an expensive car or home repair, when you have to move for that new job, or to pay the bills while you’re unemployed. The typical advice says you should have enough for 4-6 months of comfortable living expenses. But let’s be honest, that’s a lot of cash to save up. Do what you think is reasonable – you should at least consider having enough to fix the roof, replace a car transmission, or get by for a month or two.  If you get to the point that your emergency fund is built up you can move on to planning for a future car replacement or a vacation or whatever.  Just make sure you have a goal in mind when you are saving. Saving for it’s own sake is hoarding.

It’s entirely possible you will struggle to stay above water when it comes to saving; that is, you may find you’re always rebuilding your emergency fund. There’s absolutely nothing wrong with that. Keep at it. The goal of saving isn’t to get rich, it’s just to stay ahead of your expenses.  And that brings me to my last point. If you have somehow fully established an emergency fund, saved forward on a car, planned for vacation, etc, and have nothing else to save for, what should or could you do with that money?  My recommendation is to temporarily add that to your giving until you need to apply it to savings goals again.  Don’t just absorb it into your budget because you’re going to eventually need it to rebuild your emergency fund once your car finally dies or the roof starts leaking or whatever else life throws at you.

I can’t guarantee that your finances will magically work out if you start saving as I have suggested, but I can say with certainty that not planning guarantees failure.