The Importance of Having Savings Goals
Saving is important for many reasons and people who have savings goals are more likely to save more money than those who do not. When you know what your goal is, you’ll be more motivated to save because you’ll be working towards something. Plus, having a goal makes it easier for you to come up with (and stick to) a plan. When you know what you’re saving for, you’ll know how much you need to save, and this helps you budget.
Even if you’re saving for something more abstract and less defined (such as an emergency fund) it can be very helpful to know what you’re working towards. Otherwise, it becomes tough to know if you’re succeeding or if you need to adjust your budget.
A big part of making savings goals is setting them properly. Here are some tips that will help you make goals you’ll be more likely to keep.
Choosing your Goals
No matter how small your goal is, you should write it down. You can have small goals like saving enough to go out for a nice dinner with your significant other, larger goals like affording a dream vacation, and long-term goals such as saving for retirement.
Most people have many different savings goals at the same time. Some of these goals are smaller ones that they can accomplish quickly while others will take significantly longer to achieve.
Try to make your goals as specific as possible. For instance, if you want to save towards a new car, think of a dollar amount that you’ll need to save. The same is true if you want to save for emergencies. Come up with an amount that you’d like to save rather than simply saying “I want to save for emergencies.” The more specific you can make your goal, the more likely you will be to achieve it.
Once you know what you’d like to work towards, write it down. Many studies have shown that the simple act of writing down your goals can help you achieve them. Consider placing the note listing your goals in a place where you can see it often. This will help you “keep your eyes on the prize” so to speak.
Have a Timeline
One of the most important aspects when setting a goal is to give yourself a timeline. When you have a date in mind for when you’d like to achieve your goal, you give yourself additional motivation and something more specific to work towards. For larger goals, such as saving for emergencies or retirement, you may wish to set several “checkpoints” along the way by breaking your goal into various smaller goals. This will make it more manageable and help keep you from feeling overwhelmed.
Reaching your Goals
Once you have your goals and dates for when you want to achieve them, you’ll need to come up with a plan for doing so. This means you’ll need to adjust your budget. For most goals, this will mean dividing the amount you want to save by the amount of time you’d like to save it. For instance, if you want to be able to save $10,000 to take a trip 18 months from now, you’ll need to save about $555 dollars each month to reach your goal ($10,000 divided by 18). Once you know the amount, you’ll need to work it into your budget.
This will likely mean making some cuts to other spending areas and redirecting that money towards your goal. You will probably need to set some priorities when you’re making cuts. Certain expenses will be more important to you than others, and those that aren’t as important should be the first ones to get cut.
It’s a good idea to put the money you’re saving into a separate bank account, so you won’t be tempted to dip into it until your goal is reached.
Reviewing your Goal
It’s important to set goals that are practical and achievable. If you set a goal that’s too extreme, you’ll have a very difficult time reaching it and you’ll probably lose motivation and be more likely to give up. This is why it’s important to review your goals and your progress regularly. If you find that you’re on track, great! Keep going! If you’re struggling, look at your spending and your budget. Is the problem that you’re not sticking to your spending plan? If that’s the case, take this opportunity to recommit to your goal. However, if the problem is that your goal isn’t realistic, you may wish to adjust your goal by reducing the amount you want to save or by giving yourself some more time to hit your target.